EXHIBIT 4.1
SAND TECHNOLOGY INC.
1996 STOCK INCENTIVE PLAN
ARTICLE 1 -- PURPOSE
1.1 PURPOSE
The purpose of this 1996 Stock lncentive Plan (the "Plan") is to further
the growth, development and financial success of Sand Technology Inc. (the
"Corporation") and its Subsidiaries by aligning the personal interests of
employees, through the ownership of Class A Common Shares without par value
of the Corporation and related incentives, to those of the Corporation. The
Plan is further intended to provide flexibility to the Corporation in its
ability to compensate employees and to motivate, attract and retain the
services of such employees who have the ability to enhance the value of the
Corporation and its Subsidiaries. The Plan permits the granting of
Incentive Stock Options on terms designed to gain certain advantages under
U.S. Federal income tax law as provided for in the Plan.
ARTICLE 2 -- DEFINITIONS
2.1 "Award" means an Option grant under the Plan.
2.2 "Board" means the Board of Directors of the Corporation.
2.3 "Change in Control" means (a) a merger or consolidation to which the
Corporation is a party and following which the shareholders of the
Corporation prior to such merger or consolidation do not have the voting
power to elect a majority of the members of the Board of Directors of the
resulting entity; (b) any person (as such term is used in Sections 13 (d)
and 14(d) (2) of the Exchange Act of 1934, as amended), becoming the
beneficial owner, directly or indirectly, of more than 50% of any class of
the share capital of the Corporation or of shares having more than 50% of
the aggregate voting power of the share capital of the Corporation; (c) a
sale or transfer of substantially all of the assets of the Corporation (in
one transaction or a series of related transactions) to an entity that is
not a Subsidiary; (d) a liquidation or reorganization of the Corporation in
which the Corporation is not the surviving corporation other than a
liquidation or reorganization in which the holders of the Class A Common
Shares of the Corporation immediately prior to the liquidation or
reorganization have the same proportionate ownership of the surviving
corporation after the liquidation or reorganization; or (e) during any
period of two consecutive years or less beginning after adoption of the
Plan, individuals who at the beginning of such period are members of the
Board and any new director (s) (other than directors designated by a
person who has entered into an agreement with the Corporation
to effect a transaction of the type described in clauses (a) through (d)
above) whose election by the Board or nomination for election by the
shareholders was approved by a vote of at least two-thirds of the directors
stilI in office who satisfy this test, cease for any reason to constitute a
majority of the Board.
2.4 "Code" means the Internal Revenue Code of 1986 as amended from time to
time.
2.5 "Committee" means the committee appointed by the Board to administer the
Plan at all times and consisting of not less than two members of the Board
each of whom is a "disinterested person" as defined in Rule 16b-3
promulgated under the Securities and Exchange Act of 1934, as amended (the
"1934 Act") and an "outside director" as defined for purposes of Section
162(m) of the Code.
2.6 "Corporation" means Sand Technology Inc., a corporation existing under the
Canada Business Corporations Act, or its successor.
2.7 "Employee" means any person who is a regular full-time employee of the
Corporation or a Subsidiary as may be selected by the Committee from time
to time.
2.8 "Incentive Option" means an option granted under the Plan which is
designated by the Committee as an `lncentive Stock Option" as defined in
the Code.
2.9 "Option" means an lncentive Option and means an Award granted under the
Plan by the Committee to an Employee in the form of a right to purchase
Shares evidenced by an option contract containing such provisions as the
Committee may establish.
2.10 "Permanent Disability" shall mean a physical or mental condition of an
Employee that (i) in the judgment of the Committee, permanently prevents
such Employee from being able to continue to serve as an active Employee in
a capacity comparable to that in which the Employee served prior to the
disability, or (ii) causes the Employee to become eligible for long-term
disability benefits under any long-term disability insurance plan then in
effect with the Corporation or a Subsidiary that at such time is his or her
employer.
2.11 "Plan" means this 1996 Stock Incentive Plan.
2.12 "Retirement" shall mean the cessation of employment of an Employee by
reason of retirement, provided that the Employee has reached the age of 65
years, or the Committee, in its sole and absolute discretion, deems the
Employee to have retired.
2.13 "Shares" or "Stock" means the Class A Common Shares without par value of
the Corporation or any successor, including any adjustments in the event of
changes in capital structure of the type described in the Plan.
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2.14 "Subsidiary" means any corporate entity, of which a majority of the voting
common or capital stock is owned directly or indirectly by the Corporation.
ARTICLE 3 -- ADMINISTRATION 0F THE PLAN
3.1 ADMINISTRATION BY THE COMMITTEE
The Plan shall be administered by the Committee. Members of the Committee
are not eligible for Awards under the Plan. Unless otherwise required by
law or rules it may establish, the Committee may act through written
consent of aIl its members, or vote of a majority comprised of at least two
of its members, and may hold telephonic meetings where aIl participating
members can hear each other. A majority comprised of at least two members
shall constitute a quorum of the Committee. The Board may in its discretion
at any time and from time to time alter the membership of the Committee
consistent with the requirements set forth in the Plan.
3.2 POWERS
The Committee shall have full and final authority in its discretion to
operate, interpret, manage, administer and make determinations under or
relevant to the Plan on behalf of the Corporation. This authority includes,
but is not limited to:
(a) the power to select Employees to receive Awards from time to time and
determine the type and terms and conditions of Awards;
(b) the power to grant Awards conditionally or unconditionally, on such
terms, conditions and restrictions not inconsistent with the
provisions of the Plan as it prescribes from time to time, including
the power to determine the option exercise or purchase price of the
Shares subject to each Award and the time or times when the benefits
of each Award shall become vested, exercisable, or free of
restrictions, as the case may be, and the duration of any exercise,
vesting or restricted period;
(c) the power to determine the number of Shares subject to each Award, and
the time or times when Awards are made;
(d) the power to prescribe the form or forms of the instruments evidencing
Awards granted under the Plan, to construe and interpret the Plan and
the provisions of said instruments, and to make determinations of fact
relevant to the administration of the Plan and the benefits under the
Plan;
(e) the power to adopt, amend and rescind regulations consistent with the
provisions of the Plan for the operation, interpretation, management
and administration of the Plan;
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(f) the power to delegate responsibility for the operation, management and
administration of the Plan, subject to the oversight and control of
the Committee, on such terms, consistent with the Plan, as the
Committee may establish;
(g) the power to delegate to other persons the responsibility for
performing appropriate functions in furtherance of the purpose of the
Plan;
(h) the power to engage or authorize the engagement of the services of
persons, companies or organizations in furtherance of the purpose of
the Plan, including but not limited to, banks, insurance companies,
brokerage firms and consultants; and
(i) the power to waive or modify terms, conditions, restrictions and
forfeitures of Awards, in whole or in part, for such periods and for
such Employees, and on such terms as it shall determine.
ARTICLE 4 -- ELIGIBILITY AND SHARES SUBJECT TO THE PLAN
4.1 ELIGIBLE EMPLOYEES
Awards may be granted only to Employees selected or approved by the
Committee in its sole and absolute discretion. Employees who serve on the
Board will be eligible for Awards, but they will not be eligible to
participate in the administration of the Plan or to be a member of the
Committee. No Employee may be granted Awards for more than 5% of the Shares
of the Corporation.
4.2 RELEVANT FACTORS
In selecting Employees to whom Awards shall be granted, the Committee shall
weigh such factors as are relevant to accomplish the purpose of the Plan.
An Employee who has been granted an Award may be granted additional Awards,
if the Committee so determines.
4.3 NUMBER OF SHARES SUBJECT TO THE PLAN
Subject to the provisions of Article 9 of the Plan, the aggregate number of
Shares for which Awards may be granted under the Plan shall not exceed
1,100,000 Shares. The Committee has the authority to grant all Shares under
the Plan as lncentive Options. The Shares to be delivered upon exercise of
Options under the Plan shall be made available from the authorized but
unissued Shares of the share capital of the Corporation. The grant of an
Option under the Plan shall reduce the number of Shares which thereafter
may be available for future grants under the Plan, provided that if an
Option under the Plan shall expire or terminate unexercised as to any
Shares covered by such Option, such Shares shall thereafter be available
for the granting of other Awards under the Plan.
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4.4 NON-TRANSFERABILITY OF AWARDS
No Award granted under the Plan shall be transferable by the Employee
otherwise than by will or the laws of descent and distribution, or pursuant
to a qualified domestic relations order, and such Award may be exercised
during the lifetime of the Employee only by the Employee.
ARTICLE 5 -- INCENTIVE OPTION AWARDS
5.1 TERM AND OTHER PROVISION OF INCENTIVE OPTION AWARDS
Subject to the provisions of Section 6.1, the term of each Incentive Option
granted under the Plan shall be for such period as the Committee shall
determine, but not for any longer period than the limit for lncentive
Options provided from time to time under the Code. Each Incentive Option be
subject to earlier termination as provided in the Plan. Provisions relating
to waiting period, vesting and such other terms and conditions not
inconsistent with the Plan shall also be set from time to time by the
Committee so as to achieve the tax advantages provided for Incentive
Options under the Code.
5.2 INCENTIVE OPTION PRICE
The exercise price for an Incentive Option shall be determined by the
Committee at the time such Option is granted, and shall be not less than
the market value of the Shares covered thereby at the time the Incentive
Option is granted. The market value per share shall be the dosing price of
the Shares on the principal stock exchange or quotation system on which the
Shares are trading on the day of the grant, or if there were no sales
reported as of such day, then the last day preceding such day on which a
sale was reported, or if any such exchange or quotation system is closed on
that day, then on the last preceding day on which the stock exchange or
quotation system was open for trading.
ARTICLE 6 -- MATTERS RELATIVE TO ALL INCENTIVE OPTIONS
6.1 VESTING OF OPTIONS
Each Option granted under the Plan shall provide that it is to be exercised
within a period of ten (10) years after the date on which the Option is
granted.
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6.2 EXERCISE
Each Option granted under the Plan shall be exercisable on such date or
dates, during such period, for such number of Shares, and upon such terms
as shall be provided in the option contract evidencing such Option, which
shall be approved by the Committee.
6.3 NOTICE OF EXERCISE
A person electing to exercise an Option shall give written notice of
exercise to the person at the Corporation designated to receive such
notice. The exercise notice shall specify the number of Shares the optionee
has elected to purchase and be accompanied by payment in full of the
aggregate purchase price of the Shares. Payment shall be made by certified
cheque or such other form of payment as the Committee may accept. Until an
optionee has been issued a certificate or certificates for the Shares so
purchased, he or she shall possess no rights of a record holder with
respect to any of such Shares.
6.4 PARTICULAR CIRCUMSTANCES EFFECT ON OPTIONS
No Option shall be affected by any change of duties or position of the
optionee (including transfer to or from a Subsidiary), so long as he or she
continues to be an Employee. Except in cases of death, Permanent
Disability, Retirement or other circumstances specified by the Committee in
its discretion (including, but not limited to, a 30-day extension for
exercise following termination of employment), if an optionee shall cease
to be an Employee, all Options held by such person will terminate on the
date of termination of the person's employment, and up to such date shall
be exercisable only to the extent of the purchase rights, if any, which
have accrued as of such date. Nevertheless, the Committee, in its sole and
absolute discretion, upon any such cessation of employment, may determine
(but be under no obligation to determine) that such accrued purchase rights
shall be deemed to include additional Shares covered by such Option and may
be extended for an additional period of time. In case of dismissal for
cause, the Corporation may revoke all rights of the Employee to purchase
Shares that have not previously been issued to the Employee. In the event
of any Change in Control, all Options outstanding shall become immediately
exercisable for the full number of Shares subject to option regardless of
any vesting or exercise schedule otherwise specified in such Options, and
optionees shall be entitled to at least a 2O-day prior written notice, and
the opportunity to exercise such rights, before any transaction in
connection with the Change in Control may defeat or nullify the economic
benefit of such Options.
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6.5 RETIREMENT OF OPTIONEE
Should an optionee begin Retirement while in possession of an Option under
the Plan, vesting and exercisability of such Option shall continue as if
the optionee were still an employee.
6.6 DISABILITY OF OPTIONEE
Should an optionee be determined by the Committee to have suffered a
Permanent Disability while in possession of an Option under the Plan,
vesting will forthwith accelerate, such that the Option immediately becomes
100% vested, and the optionee or his or her legal representative will have
one year from the date of determination of the Permanent Disability to
exercise such Option, at which time the Option will expire and no longer be
exercisable, provided that in any case the Option shall expire no later
than the last day of its original term.
6.7 DEATH OF OPTIONEE
Should an optionee (including one determined to have suffered a Permanent
Disability under Section 6.6 above) die while in possession of the right to
exercise an Option under the Plan, vesting will forthwith accelerate, such
that the Option immediately becomes 100% vested. Thereafter, such person(s)
who shall have been designated as beneficiary by the optionee, or in the
absence of such designation, such person as shall be responsible for the
administration of the will or estate of the optionee or, in the absence of
the appointment of such person within six months of the date the optionee
died, the person(s) who shall be entitled to acquire the property of the
optionee, by will or by the laws of descent and distribution (the
"beneficiary"), may exercise such Option. This exercise may occur at any
time within two years from the date of death if such Option is an Incentive
Option. Nevertheless, any such Option shall expire no later than the last
day of the original term of such Option.
6.8 MINIMUM SIX-MONTH HOLDING PERIOD
Subject to Section 6.4 of the Plan, if an Option is exercised within the
six-month period commencing on the date of grant, no Shares purchased upon
such exercise may be sold until such period has elapsed. The Corporation
may establish such rules and procedures as it deems appropriate to enforce
this restriction.
ARTICLE 7 -- RIGHTS AS AN EMPLOYEE
7.1 NO IMPLIED RIGHTS
Awards under the Plan are discretionary and are not a part of regular
salary. Awards may not be used in determining the amount of compensation
for any
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purpose under any benefit plan of the Corporation or any Subsidiary, except
as the Committee may from time to time expressly provide. Neither the Plan
nor any action taken under the Plan shall be construed as giving an
Employee the right to any Award, and an Award under the Plan shall not be
construed as giving an Employee any right to be retained in the employ or
service of the Corporation or any of its Subsidiaries for any period of
time, regardless of the terms or conditions of the Award or the manner in
which such terms or conditions are described in the applicable Award
instrument.
7.2 BENEFICIARY DESIGNATION
If allowed by the Committee from time to time, an Employee may designate a
person or persons to receive, in the event of his or her death, any rights
to which he or she would be entitled under the Plan. Such a designation
shall be made in writing and filed with the Committee or such person as it
may designate. A beneficiary designation may be changed or revoked by an
Employee at any time by filing a written statement of such change or
revocation with the Committee. If an Employee dies having failed to
designate a beneficiary or if the beneficiary of the Employee does not
survive the Employee, then the estate of the Employee shall be deemed to be
his or her beneficiary.
7.3 OPTIONS NOT INCLUDED FOR BENEFIT PURPOSES
Income recognized by an Employee pursuant to the provisions of the Plan
shall not be included in the determination of benefits under any employee
pension benefit plan (as such term is defined in Section 3 (2) of ERISA or
the rules thereunder) or group insurance or other benefit plans applicable
to the Employee that are maintained by the Corporation or any of its
Subsidiaries, except as may be provided under the terms of such plans or
determined by resolution of the Board.
ARTICLE 8 -- AMENDMENT 0F THE PLAN
8.1 AMENDMENT OF PLAN
The Board (excluding any members entitled to an Award under the Plan) may
amend the Plan from time to time, except that amendments must be approved
by shareholders of the Corporation to the extent required under Section 16
(b) of the Securities Exchange Act of 1934 and other applicable
legislation.
8.2 EFFECT ON AWARDS
Awards granted prior to suspension or termination of the Plan may not be
amended or cancelled except with the consent of the Employee recipient of
the Award. Any dispute or disagreement that may arise under or as a result
of, relating to or pursuant to, any Award or contract evidencing the same
shall be
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determined by the Committee, which determination shall be conclusive,
binding and final for all purposes with respect to all persons.
ARTICLE 9 -- CHANGES IN CAPITAL STRUCTURE
9.1 ADJUSTMENTS DUE TO CHANGES IN CAPITAL STRUCTURE
The option contracts evidencing Awards granted under the Plan shall be
subject to adjustment in the event of changes in the outstanding share
capital of the Corporation by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the
date of an Award to the same extent as such occurrence would affect an
actual share issued and outstanding on the effective date of such change.
In the event of any such change, the aggregate number and classes of shares
for which Awards may thereafter be granted under the Plan shall be
appropriately adjusted as determined by the Committee so as to reflect such
change.
ARTICLE 10 -- WITHHOLDING 0F TAXES
10.1 COLLECTION OF TAXES DUE
The Corporation and its Subsidiaries shall have the right, before a
certificate for any Share is delivered, to deduct or withhold from any
payment owed to an Employee, any amount that is necessary in order to
satisfy any withholding requirement that the Corporation or the Subsidiary
in good faith believes is imposed upon it in connection with Federal,
state, provincial or local taxes, including transfer taxes, as a result of
the issuance of, or lapse of restrictions on, such Shares, or otherwise
require such Employee to make provision for payment of any such withholding
amount.
10.2 PAYMENT AND DELIVERY OF SHARES
Unless otherwise provided by the Committee and subject to the provisions of
Section 6.3, the Corporation, in its discretion and subject to such rules
and restrictions as it may establish from time to time, may:
(a) accept payment for the Shares related to an Award by any manner of
lawful consideration permitted by applicable statute;
(b) issue the Shares registered in the name of the Employee to the custody
of his or her broker when requested in writing by the Employee with
his or her exercise notice and when preceded by full payment or the
irrevocable commitment of a stockbroker on behalf of the Employee to
pay the Corporation any balance due on the purchase price for such
Shares
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following their issuance, whereupon such issuance and payment will be
viewed as contemporaneous.
ARTICLE 11 -- GOVERNMENTAL AND OTHER REGULATIONS
11.1 EFFECT OF APPLICABLE LAWS
The Plan and any Award under the Plan shall comply with all applicable
Federal, Provincial and state laws, rules and regulations of Canada and the
United States, including the Securities Act (Quebec), the Securities Act of
1933 and the Securities Exchange Act of 1934, and to such approvals by any
regulatory or governmental agency of Canada and the United States as may be
required. The issuance or delivery of any Award or of any Shares under an
Award, may be postponed by the Corporation for such period as may be
required to comply with any applicable requirements under securities laws,
any applicable listing requirements of any national securities exchange or
automated quotation system where the Shares are listed, and requirements
under any other law or regulation applicable to the issuance or delivery of
such Shares. The Corporation shall not be obligated to issue or deliver any
Share if its issuance or delivery shall constitute a violation of any
provision of any law or of any regulation of any governmental authority or
any national securities exchange or automated quotation system where the
Shares are listed.
ARTICLE 12 -- EFFECTIVE DATE AND TERM 0F THE PLAN
12.1 EFFECTIVE DATE AND TERM
The Plan shall become effective upon its adoption by the Board and its
approval by the shareholders of the Corporation, and shall continue until
such time as it may be terminated by action of the Board or the
Shareholders of the Corporation. All Options granted prior to shareholder
approval are granted conditional upon shareholder approval of the Plan.
ARTICLE 13 -- MISCELLANEOUS PROVISIONS
13.1 OPTION AGREEMENT
Options shall be evidenced by written option contracts in the form approved
by the Committee.
13.2 INDEMNIFICATION
In addition to such other rights of indemnification as they may have as
Directors or as members of the Board, the members of the Board and the
Committee shall be indemnified by the Corporation against the reasonable
expenses, including attorneys' fees actually and necessarily incurred in
connection with the defense
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of any action, suit or proceeding, or in connection with any appeal, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any option granted
under it, and against all amounts paid by them in settlement (provided such
settlement is approved by independent legal counsel selected by the
Corporation) or paid by them in satisfaction for a judgment in any such
action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Board member
is liable for gross negligence or wilful misconduct in the performance of
his duties. Within ten (10) days after institution of any such action, suit
or proceeding a Board member shall notify the Corporation of the
institution of the suit and grant the Corporation the opportunity, at its
own expense, to handle and defend the same. Failure to provide such notice
shall, at the option of the Corporation, relieve the Corporation of the
indemnification obligations set forth in this Section 14.2.
13.3 NO OBLIGATION TO EXERCISE OPTION
The grant of an Option shall impose no obligation upon the optionee to
exercise such Option.
13.4 SINGULAR, PLURAL, GENDER
The singular shall include the plural and the masculine pronoun shall
include the feminine gender.
13.5 HEADINGS
Headings of Articles and Sections are inserted for convenience and
reference only; they constitute no part of the Plan.
13.6 COMPLIANCE WITH RULE 16B-3
It is the intent of the Corporation that the Plan comply in all respects
with Rule 16b-3 of the Securities Exchange Act of 1934 in connection with
any Option granted to a person who is subject to Section 16 of the said
Act. Accordingly, any provision of the Plan or any option contract that
does not comply with the requirements of such Rule 16b-3 as then applicable
to any such person shall be construed or deemed amended to the extent
necessary to conform to such requirements, except that such automatic
amendment shall not apply to any other participant in the Plan who is not
(at the time of such application) subject to Section 16 of the Act. Any
action taken by the Committee pursuant to the Plan that does not comply
with the requirements of such Rule 16b-3 shall be null and void.
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13.7 GOVERNING LAW
The Plan and all determinations made and actions taken pursuant to the Plan
shall be governed by the laws of the State of Delaware.
13.8 SEVERABILITY
Whenever possible, each provision of the Plan and every Option at any time
granted under the Plan shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of the Plan
or any Option at any time granted under the Plan shall be held to be
prohibited by or invalid under applicable law, then (a) such provision
shall be deemed amended to accomplish the objectives of the provision as
originally written to the fullest extent permitted by law and (b) aIl other
provisions of the Plan and every other Option at any time granted under the
Plan shall remain in full force and effect.
AS AMENDED TO REFLECT (I) THE SHARE SUBDIVISION ON A TWO-FOR-ONE BASIS ON
DECEMBER 31, 1996, (II) THE RESOLUTION OF THE DIRECTORS OF NOVEMBER 9, 1999
WHICH WAS RATIFIED BY THE SHAREHOLDERS ON DECEMBER 17, 1999 TO INCREASE THE
MAXIMUM AGGREGATE NUMBER OF SHARES AVAILABLE BY 300,000, (III) THE CHANGE OF
NAME OF THE CORPORATION EFFECTIVE JANUARY 1, 2000, AND (IV) THE EXTENSION OF THE
LIFE OF THE PLAN FOR AN ADDITIONAL TEN YEARS.
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