Attached files
Exhibit 10.29
GILLA INC.
STOCK OPTION PLAN
Approved by the board of directors on June 16, 2017.
TABLE OF CONTENTS
Page
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Section 1
DEFINITIONS AND INTERPRETATION
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1
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1.1
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Definitions
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1
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1.2
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Choice
of Law
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7
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1.3
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Headings
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7
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Section 2
GRANT OF OPTIONS
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7
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2.1
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Grant
of Options
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7
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2.2
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Record
of Option Grants
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7
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2.3
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Effect
of Plan
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8
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Section 3
PURPOSE AND PARTICIPATION
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8
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3.1
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Purpose of
Plan
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8
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3.2
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Participation in
Plan
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8
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3.3
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Limits
on Option Grants
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8
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3.4
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Incentive Stock
Options
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9
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3.5
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Notification of
Grant
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9
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3.6
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Copy
of Plan
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10
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3.7
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Limitation on
Service
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10
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3.8
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No
Obligation to Exercise
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10
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3.9
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Agreement
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10
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3.1
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Notice
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10
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3.11
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Representation
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10
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Section 4
NUMBER OF SHARES UNDER PLAN
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11
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4.1
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Board
to Approve Issuance of Shares
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11
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4.2
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Number
of Shares
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11
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4.3
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Fractional
Shares
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11
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Section 5
TERMS AND CONDITIONS OF OPTIONS
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11
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5.1
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Exercise Period of
Option
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11
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5.2
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Number
of Shares Under Option
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12
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5.3
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Exercise Price of
Option
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12
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5.4
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CASHLESS EXCERSISE
PROCEDURE
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12
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5.5
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Termination of
Option
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12
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5.6
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Vesting of Option
and Acceleration
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14
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5.7
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Additional
Terms
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14
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Section 6
TRANSFERABILITY OF OPTIONS
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15
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6.1
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Non-transferable
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15
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6.2
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Death
of Option Holder
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15
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6.3
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Disability of
Option Holder
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15
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6.4
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Disability and
Death of Option Holder
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15
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6.5
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Vesting
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15
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6.6
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Deemed
Non-Interruption of Engagement
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15
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i
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Section 7
EXERCISE OF OPTION
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16
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7.1
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Exercise of
Option
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16
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7.2
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Issue
of Share Certificates
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16
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7.3
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No
Rights as Shareholder
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16
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7.4
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Tax
Withholding and Procedures
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16
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Section 8
ADMINISTRATION
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17
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8.1
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Board
or Committee
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17
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8.2
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Powers
of Committee
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17
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8.3
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Administration by
Committee
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18
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8.4
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Interpretation
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18
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Section 9
APPROVALS AND AMENDMENT
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18
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9.1
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Shareholder
Approval of Plan
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18
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9.2
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Amendment of
Option or Plan
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19
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Section 10
CONDITIONS PRECEDENT TO ISSUANCE OF OPTIONS AND SHARES
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19
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10.1
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Compliance with
Laws
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19
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10.2
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Regulatory
Approvals
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19
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10.3
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Inability to
Obtain Regulatory Approvals
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19
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10.4
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US
Securities Law Compliance
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20
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Section 11
ADJUSTMENTS AND TERMINATION
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20
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11.1
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Termination of
Plan
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20
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11.2
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No
Grant During Suspension of Plan
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20
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11.3
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Alteration in
Capital Structure
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20
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11.4
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Triggering
Events
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21
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11.5
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Notice
of Termination by Triggering Event
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21
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11.6
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Determinations to
be Made By Committee
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21
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ii
STOCK OPTION PLAN
SECTION 1
As used
herein, unless there is something in the subject matter or context
inconsistent therewith, the following terms shall have the meanings
set forth below:
(a)
“1933
Act” means the Securities Act of 1933 of the United States of
America, as amended.
(b)
“Administrator”
means such Executive or Employee of the Company as may be
designated as Administrator by the Committee from time to time, or,
if no such person is appointed, the Committee itself.
(c)
“Associate”
means, where used to indicate a relationship with any
person:
(i)
any relative,
including the spouse of that person or a relative of that person's
spouse, where the relative has the same home as the
person;
(ii)
any partner, other
than a limited partner, of that person;
(iii)
any trust or estate
in which such person has a substantial beneficial interest or as to
which such person serves as trustee or in a similar capacity;
and
(iv)
any corporation of
which such person beneficially owns or controls, directly or
indirectly, voting securities carrying more than 10% of the voting
rights attached to all outstanding voting securities of the
corporation.
(d)
“Black-Out”
means a restriction imposed by the Company on all or any of its
directors, officers, employees, insiders or persons in a special
relationship whereby they are to refrain from trading in the
Company's securities until the restriction has been lifted by the
Company.
(e)
“Board”
means the board of directors of the Company.
(f)
“Cashless
Exercise Procedure” has the meaning ascribed thereto in
section 5.4
(g)
“Cashless
Exercise Right” means the right of the Option Holder to
surrender to the Company any exercisable but unexercised portion of
the Option in lieu of the payment required in an amount equal to
the aggregate Exercise Price of the Shares in respect of any Option
being exercised in accordance to section 5.4.
(h)
“Change of
Control” means an occurrence when either:
1
(i)
a Person or Entity,
other than the current “control person” of the Company
(as that term is defined in the Securities Act), becomes a
“control person” of the Company; or
(ii)
a majority of the
directors elected at any annual or extraordinary general meeting of
shareholders of the Company are not individuals nominated by the
Company's then-incumbent Board.
(i)
“Code”
means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder.
(j)
“Committee”
means a committee of the Board to which the responsibility of
approving the grant of stock options has been delegated, or if no
such committee is appointed, the Board itself.
(k)
“Company”
means Gilla Inc.
(l)
“Consultant”
means an individual who:
(i)
is engaged to
provide, on an ongoing bona fide basis, consulting, technical,
management or other services to the Company or any Subsidiary other
than services provided in relation to a “distribution”
(as that term is described in the Securities Act);
(ii)
provides the
services under a written contract between the Company or any
Subsidiary and the individual or a Consultant Entity (as defined in
clause (h)(v) below);
(iii)
in the reasonable
opinion of the Company, spends or will spend a significant amount
of time and attention on the affairs and business of the Company or
any Subsidiary; and
(iv)
has a relationship
with the Company or any Subsidiary that enables the individual to
be knowledgeable about the business and affairs of the Company or
is otherwise permitted by applicable Regulatory Rules to be granted
Options as a Consultant or as an equivalent thereof,
and
includes:
(i)
a corporation of
which the individual is an employee or shareholder or a partnership
of which the individual is an employee or partner (a
“Consultant Entity”); or
(ii)
an RRSP, RRIF or
other form of registered accounts acceptable to the Company
established by or for the individual under which he or she is the
beneficiary.
2
(iii)
“Disability”
means a medically determinable physical or mental impairment
expected to result in death or to last for a continuous period of
not less than 12 months, and which causes an individual to be
unable to engage in any substantial gainful activity, or any other
condition of impairment that the Committee, acting reasonably,
determines constitutes a disability.
(m)
“Employee”
means:
(i)
an individual who
works full-time or part-time for the Company or any Subsidiary and
such other individual as may, from time to time, be permitted by
applicable Regulatory Rules to be granted Options as an employee or
as an equivalent thereto; or
(ii)
an individual who
works for the Company or any Subsidiary either full-time or on a
continuing and regular basis for a minimum amount of time per week
providing services normally provided by an employee and who is
subject to the same control and direction by the Company or any
Subsidiary over the details and methods of work as an employee of
the Company or any Subsidiary, but for whom income tax deductions
are not made at source,
and
includes:
(i)
a corporation
wholly-owned by such individual; and
(ii)
any RRSP, RRIF or
other form of registered accounts acceptable to the Company
established by or for such individual under which he or she is the
beneficiary.
(n)
“Exchange”
means the stock exchange upon which the Company’s shares
principally trade.
(o)
“Executive”
means an individual who is a director or officer of the Company or
a Subsidiary, and includes:
(i)
a corporation
wholly-owned by such individual; and
(ii)
any RRSP or RRIF
established by or for such individual under which he or she is the
beneficiary.
(p)
“Exercise
Notice” means the written notice of the exercise of an
Option, in the form set out as Schedule B hereto, or by written
notice in the case of uncertificated Shares, duly executed by the
Option Holder.
(q)
“Exercise
Period” means the period during which a particular Option may
be exercised and is the period from and including the Grant Date
through to and including the Expiry Time on the Expiry Date
provided, however, that no Option can be exercised unless and until
all necessary Regulatory Approvals have been obtained.
3
(r)
“Exercise
Price” means the price at which an Option is exercisable as
determined in accordance with section 5.3.
(s)
“Exercise
Value” means the value of the Shares as determined in
accordance with section 5.4.
(t)
“Expiry
Date” means the date the Option expires as set out in the
Option Certificate or as otherwise determined in accordance with
sections 5.5, 6.2, 6.3, 6.4 or 11.4.
(u)
“Expiry
Time” means the time the Option expires on the Expiry Date,
which is 4:00 p.m. local time in Toronto, Ontario on the Expiry
Date.
(v)
“Grant
Date” means the date on which the Committee grants a
particular Option, which is the date the Option comes into effect
provided however that no Option can be exercised unless and until
all necessary Regulatory Approvals have been obtained.
(w)
“Insider”
means an insider as that term is defined in the Securities Act.
(x)
“Market
Value” means the market value of the Shares as determined in
accordance with section 5.3.
(y)
“Non-statutory
Stock Option” means an Option that does not qualify or is not
intended to qualify as an Incentive Stock Option.
(z)
“Option”
means an incentive share purchase option granted pursuant to this
Plan entitling the Option Holder to purchase Shares of the
Company.
(aa)
“Incentive
Stock Option” means an Option intended to qualify as an
incentive stock option under Section 422 of the Code.
(bb)
“Option
Certificate” means the certificate, in substantially the form
set out as Schedule A hereto, evidencing the Option.
(cc)
“Option
Holder” means a Person or Entity who holds an unexercised and
unexpired Option or, where applicable, the Personal Representative
of such person.
(dd)
“Outstanding
Issue” means the number of Shares that are outstanding (on a
non-diluted basis) immediately prior to the Share issuance or grant
of Option in question.
(ee)
“Person or
Entity” means an individual, natural person, corporation,
government or political subdivision or agency of a government, and
where two or more persons act as a partnership, limited
partnership, syndicate or other group for the purpose of acquiring,
holding or disposing of securities of an issuer, such partnership,
limited partnership, syndicate or group shall be deemed to be a
Person or Entity.
(ff)
“Personal
Representative” means:
4
(i)
in the case of a
deceased Option Holder, the executor or administrator of the
deceased duly appointed by a court or public authority having
jurisdiction to do so; and
(ii)
in the case of an
Option Holder who for any reason is unable to manage his or her
affairs, the person entitled by law to act on behalf of such Option
Holder.
(gg)
“Plan”
means this stock option plan as from time to time
amended.
(hh)
“Pre-Existing
Options” has the meaning ascribed thereto in section
4.1.
(ii)
“Regulatory
Approvals” means any necessary approvals of the Regulatory
Authorities as may be required from time to time for the
implementation, operation or amendment of this Plan or for the
Options granted from time to time hereunder.
(jj)
“Regulatory
Authorities” means all organized trading facilities on which
the Shares are listed, and all securities commissions or similar
securities regulatory bodies having jurisdiction over the Company,
this Plan or the Options granted from time to time
hereunder.
(kk)
“Regulatory
Rules” means all corporate and securities laws, regulations,
rules, policies, notices, instruments and other orders of any kind
whatsoever which may, from time to time, apply to the
implementation, operation or amendment of this Plan or the Options
granted from time to time hereunder including, without limitation,
those of the applicable Regulatory Authorities.
(ll)
“Securities Act” means the
Securities Act (Ontario),
R.S.O. 1990, c. S.5
(mm)
“Share”
or “Shares” means, as the case may be, one or more
common shares without par value in the capital stock of the
Company.
(nn)
“Subsidiary”
means a wholly-owned or controlled subsidiary corporation of the
Company.
(oo)
“Triggering
Event” means:
(i)
the proposed
dissolution, liquidation or wind-up of the Company;
(ii)
a proposed merger,
amalgamation, arrangement or reorganization of the Company with one
or more corporations as a result of which, immediately following
such event, the shareholders of the Company as a group, as they
were immediately prior to such event, are expected to hold less
than a majority of the outstanding capital stock of the surviving
corporation;
(iii)
the proposed
acquisition of all or substantially all of the issued and
outstanding shares of the Company by one or more Persons or
Entities;
5
(iv)
a proposed Change
of Control of the Company;
(v)
the proposed sale
or other disposition of all or substantially all of the assets of
the Company; or
(vi)
a proposed material
alteration of the capital structure of the Company which, in the
opinion of the Committee, is of such a nature that it is not
practical or feasible to make adjustments to this Plan or to the
Options granted hereunder to permit the Plan and Options granted
hereunder to stay in effect.
(pp)
“Vest”
or “Vesting” means that a portion of the Option granted
to the Option Holder which is available to be exercised by the
Option Holder at any time and from time to time.
(qq)
“U.S.
Person”
(i) Any
natural person resident in the United States,
(ii)
Any partnership or corporation organized or incorporated under the
laws of the United States,
(iii)
Any estate of which any executor or administrator is a U.S.
person;
(iv)
Any trust of which any trustee is a U.S. person;
(v) Any
agency or branch of a foreign entity located in the United
States;
(vi)
Any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person;
(vii)
Any discretionary account or similar account (other than an estate
or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States;
and
(viii)
Any partnership or corporation if:
(A)
Organized or incorporated under the laws of any foreign
jurisdiction; and
(B)
Formed by a U.S. person principally for the purpose of investing in
securities not registered under the 1933 Act, as amended, unless it
is organized or incorporated, and owned, by accredited investors
(as defined in Rule 501(a) promulgated under the 1933 Act) who are
not natural persons, estates or trusts.
6
The
Plan is established under, and the provisions of the Plan shall be
subject to and interpreted and construed solely in accordance with,
the laws of the Province of Ontario and the laws of Canada
applicable therein without giving effect to the conflicts of laws
principles thereof and without reference to the laws of any other
jurisdiction. The Company and each Option Holder hereby attorn to
the jurisdiction of the courts of the Province of
Ontario.
The
headings used herein are for convenience only and are not to affect
the interpretation of the Plan.
SECTION 2
The
Committee shall, from time to time in its sole discretion, grant
Options to such Persons or Entities and on such terms and
conditions as are permitted under this Plan.
The
Committee shall be responsible to maintain a record of all Options
granted under this Plan and such record shall contain, in respect
of each Option:
(a)
the name and
address of the Option Holder;
(b)
the category
(Executive, Employee or Consultant) under which the Option was
granted to him, her or it;
(c)
the Grant Date and
Expiry Date of the Option;
(d)
the number of
Shares which may be acquired on the exercise of the Option and the
Exercise Price of the Option;
(e)
the vesting and
other additional terms, if any, attached to the
Option;
(f)
the particulars of
each and every time the Option is exercised; and
(g)
the classification
as an Incentive Stock Option or a Nonstatutory Stock
Option.
All
Options granted pursuant to the Plan shall be subject to the terms
and conditions of the Plan notwithstanding the fact that the Option
Certificates issued in respect thereof do not expressly contain
such terms and conditions but instead incorporate them by reference
to the Plan. The Option Certificates will be issued for convenience
only and in the case of a dispute with regard to any matter in
respect thereof, the provisions of the Plan and the records of the
Company shall prevail over the terms and conditions in the Option
Certificate, save and except as noted below. Each Option will also
be subject to, in addition to the provisions of the Plan, the terms
and conditions contained in the schedules, if any, attached to the
Option Certificate for such Option. Should the terms and conditions
contained in such schedules be inconsistent with the provisions of
the Plan, such terms and conditions will supersede the provisions
of the Plan.
7
SECTION 3
The
purpose of the Plan is to provide the Company with a share-related
mechanism to attract, retain and motivate qualified Executives,
Employees and Consultants to contribute toward the long term goals
of the Company, and to encourage such individuals to acquire Shares
of the Company as long term investments.
The
Committee shall, from time to time and in its sole discretion,
determine those Executives, Employees and Consultants to whom
Options are to be granted, provided however that Incentive Stock
Options may be granted only to Employees. All other Options may be
granted to Employees, Consultants, members of the Board and/or any
such Persons or Entities as permitted under this Plan.
The
following limitations shall apply to the Plan and all Options
thereunder:
(a)
the maximum number
of Options which may be granted to any one Option Holder under the
Plan within any 12 month period shall be 5% of the Outstanding
Issue (unless the Company has obtained disinterested shareholder
approval if required by Regulatory Rules);
(b)
if required by
Regulatory Rules, disinterested shareholder approval is required to
the grant to Insiders, within a 12 month period, of a number of
Options which, when added to the number of outstanding incentive
stock options granted to Insiders within the previous 12 months,
exceed 10% of the issued Shares;
(c)
with respect to
section 5.1, the Expiry Date of an Option shall be no later than
the tenth anniversary of the Grant Date of such
Option;
(d)
the maximum number
of Options which may be granted to any one Consultant within any 12
month period must not exceed 2% of the Outstanding Issue;
and
(e)
the maximum number
of Options which may be granted within any 12 month period to
Employees or Consultants engaged in investor relations activities
must not exceed 2% of the Outstanding Issue and such options must
vest in stages over 12 months with no more than 25% of the Options
vesting in any three month period, and such limitation will not be
an amendment to this Plan requiring the Option Holders consent
under section 9.2 of this Plan.
8
(a)
Each Option will be
designated in the Option Certificate as either an Incentive Stock
Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Market Value of
the Shares underlying Incentive Stock Options exercisable for the
first time by the Option Holder during any calendar year (including
all plans of the Company and any Subsidiary) exceeds one hundred
thousand U.S. dollars (US $100,000), all such Options will be
construed as Nonstatutory Stock Options. Incentive Stock Options
will be taken into account in the order in which they were granted.
The Market Value of the Shares will be determined as of the date
the Option for such Shares is granted. If for any reason any Option
(or portion thereof) does not qualify as an Incentive Stock Option,
then, to the extent of such nonqualification, the Option (or
portion thereof) shall be treated as a Nonstatutory Option granted
under the Plan. In no event will the Administrator, the Company or
any parent or subsidiary of the Company or any of their respective
Employees or member of the Board have any liability to any Option
Holder (or any other Person or Entity) due to the failure of the
Option to qualify for any reason as an Incentive Stock
Option.
(b)
Any
Option Holder who shall make a “disposition” (as
defined in Section 424 of the Code) of all or any portion of Shares
acquired upon exercise of an Incentive Stock Option within two
years from the Grant Date of such Incentive Stock Option or within
one year after the issuance of the Shares acquired upon exercise of
such Incentive Stock Option shall be required to immediately advise
the Company in writing as to the occurrence of the sale and the
price realized upon the sale of such Shares.
(c)
To the extent that
an Option does not qualify or cease to qualify as an Incentive
Stock Option it shall not affect the validity of such Option and
shall constitute a Non-qualified Stock Option. In the event that
the Participant disposes of the Shares acquired upon
Following
the granting of an Option, the Administrator shall, within a
reasonable period of time, notify the Option Holder in writing of
the grant and shall enclose with such notice the Option Certificate
representing the Option so granted. In no case will the Company be
required to deliver an Option Certificate to an Option Holder until
such time as the Company has obtained all necessary Regulatory
Approvals for the grant of the Option.
Each
Option Holder, concurrently with the notice of the grant of the
Option, shall be provided with a copy of the Plan. A copy of any
amendment to the Plan shall be promptly provided by the
Administrator to each Option Holder.
The
Plan does not give any Option Holder that is an Executive the right
to serve or continue to serve as an Executive of the Company or any
Subsidiary, nor does it give any Option Holder that is an Employee
or Consultant the right to be or to continue to be employed or
engaged by the Company or any Subsidiary.
9
Option
Holders shall be under no obligation to exercise
Options.
The
Company and every Option Holder granted an Option hereunder shall
be bound by and subject to the terms and conditions of this Plan.
By accepting an Option granted hereunder, the Option Holder has
expressly agreed with the Company to be bound by the terms and
conditions of this Plan. In the event that the Option Holder
receives his, her or its Options pursuant to an oral or written
agreement with the Company or a Subsidiary, whether such agreement
is an employment agreement, consulting agreement or any other kind
of agreement of any kind whatsoever, the Option Holder acknowledges
that in the event of any inconsistency between the terms relating
to the grant of such Options in that agreement and the terms
attaching to the Options as provided for in this Plan, the terms
provided for in this Plan shall prevail and the other agreement
shall be deemed to have been amended accordingly.
Any
notice, delivery or other correspondence of any kind whatsoever to
be provided by the Company to an Option Holder will be deemed to
have been provided if provided to the last home address, fax number
or email address of the Option Holder in the records of the Company
and the Company shall be under no obligation to confirm receipt or
delivery.
As a
condition precedent to the issuance of an Option, the Company must
be able to represent to the Exchange as of the Grant Date that the
Option Holder is a bona
fide Executive, Employee or Consultant of the Company or any
Subsidiary.
SECTION 4
The
Committee shall approve by resolution the issuance of all Shares to
be issued to Option Holders upon the exercise of Options, such
authorization to be deemed effective as of the Grant Date of such
Options regardless of when it is actually done. The Committee shall
be entitled to approve the issuance of Shares in advance of the
Grant Date, retroactively after the Grant Date, or by a general
approval of this Plan.
Subject
to adjustment as provided for herein, the number of Shares which
will be available for purchase pursuant to Options granted pursuant
to this Plan, plus any other outstanding incentive stock options of
the Company granted pursuant to a previous stock option plan or
agreement, will not exceed 10% of the Outstanding Issue. If any
Option expires or otherwise terminates for any reason without
having been exercised in full, the number of Shares in respect of
such expired or terminated Option shall again be available for the
purposes of granting Options pursuant to this Plan.
10
No
fractional shares shall be issued upon the exercise of any Option
and, if as a result of any adjustment, an Option Holder would
become entitled to a fractional share, such Option Holder shall
have the right to purchase only the next lowest whole number of
Shares and no payment or other adjustment will be made for the
fractional interest.
SECTION 5
(a)
Subject to sections
5.5, 6.2, 6.3, 6.4 and 11.4, the Grant Date and the Expiry Date of
an Option shall be the dates fixed by the Committee at the time the
Option is granted and shall be set out in the Option Certificate
issued in respect of such Option.
(b)
In the case of an
Incentive Stock Options the Expiry Date will be ten (10) years from
the date of Grant Date or such shorter term as specified in the
respective Option Certificate. Incentive Stock Options granted to
an Option Holder who, at the time the Incentive Stock Option is
granted, owns ten percent (10%) or more of the total combined
voting power of all classes of stock of the Company or any parent
or subsidiary of the Company will be subject to a five (5) year
term from the date of grant or such shorter term as specified in
the Option Certificate.
The
number of Shares which may be purchased pursuant to an Option shall
be determined by the Committee and shall be set out in the Option
Certificate issued in respect of the Option.
The
Exercise Price at which an Option Holder may purchase a Share upon
the exercise of an Option shall be determined by the Committee and
shall be set out in the Option Certificate issued in respect of the
Option, provided that: (i) the Exercise Price shall not be less
than one hundred percent (100%) of the Market Value of the Shares
as of the Grant Date, and (ii) the Exercise Price of any Incentive
Stock Option granted to a ten percent shareholder of the Company
will not be less than one hundred ten percent (110%) of the Market
Value of the Shares on the Grant Date. The Market Value of the
Shares for a particular Grant Date shall be determined as
follows:
(a)
for each organized
trading facility on which the Shares are listed, Market Value will
be the closing trading price of the Shares on the day immediately
preceding the Grant Date, and may be less than this price if it is
within the discounts permitted by the applicable Regulatory
Authorities;
(b)
if the Company's
Shares are listed on more than one organized trading facility, the
Market Value shall be the Market Value as determined in accordance
with subparagraph (a) above for the primary organized trading
facility on which the Shares are listed, as determined by the
Committee, subject to any adjustments as may be required to secure
all necessary Regulatory Approvals;
11
(c)
if the Company's
Shares are listed on one or more organized trading facilities but
have not traded during the ten trading days immediately preceding
the Grant Date, then the Market Value will be, subject to any
adjustments as may be required to secure all necessary Regulatory
Approvals, such value as is determined by the Committee;
and
(d)
if the Company's
Shares are not listed on any organized trading facility, then the
Market Value will be, subject to any adjustments as may be required
to secure all necessary Regulatory Approvals, such value as is
determined by the Committee to be the fair value of the Shares,
taking into consideration all factors that the Committee deems
appropriate, including, without limitation, recent sale and offer
prices of the Shares in private transactions negotiated at arms'
length. Notwithstanding anything else contained herein, in no case
will the Market Value be less than the minimum prescribed by each
of the organized trading facilities that would apply to the Company
on the Grant Date in question.
In lieu
of the payment required in an amount equal to the aggregate
Exercise Price of the Shares in respect of any Option being
exercised, the Option Holder shall have a Cashless Exercise Right
(but not the obligation) to pay the aggregate Exercise Price of the
Shares with the Option upon exercise by surrendering to the Company
any exercisable but unexercised portion of the Option having an
Exercise Value, at the close of trading on the day immediately
preceding any particular exercise date of an Option, equal to the
Exercise Price multiplied by the number of Shares being purchased
upon exercise. The sum of (a) the number of Shares being purchased
upon exercise of the non-surrendered portion of an Option pursuant
to the Cashless Exercise Right and (b) the number of Shares
underlying the portion of an Option being surrendered, shall not in
any event be greater than the total number of Shares purchasable
upon the complete exercise of any Option if the Exercise Price were
paid in cash. Upon exercise of a Cashless Exercise Right, the
Company shall deliver to the Option Holder (without payment by the
Option Holder of any of the Exercise Price if so desired) that
number of Shares equal to the quotient obtained by dividing (x) the
Exercise Value of the portion of the Option being converted at the
time which the Cashless Exercise Right is exercised by (y) the
Exercise Price. The Exercise Value of the portion of the Options
being surrendered shall equal the remainder derived from
subtracting (a) the Exercise Price multiplied by the number of
Shares underlying the portion of the Option being surrendered from
(b) the Market Value, at the close of trading on the day
immediately preceding any particular exercise date of an Option,
multiplied by the number of Shares underlying the portion of the
Option being surrendered.
5.5
Termination of Option
Subject
to such other terms or conditions that may be attached to Options
granted hereunder, an Option Holder may exercise an Option in whole
or in part at any time and from time to time during the Exercise
Period. Any Option or part thereof not exercised within the
Exercise Period shall terminate and become null, void and of no
effect as of the Expiry Time on the Expiry Date. The Expiry Date of
an Option shall be the earlier of the date so fixed by the
Committee at the time the Option is granted as set out in the
Option Certificate and the date established, if applicable, in
paragraphs (a) or (b) below or sections 6.2, 6.3, 6.4, or 11.4 of
this Plan:
12
(a)
Ceasing to Hold Office - In the event
that the Option Holder holds his or her Option as an Executive and
such Option Holder ceases to hold such position other than by
reason of death or Disability, the Expiry Date of the Option shall
be, unless otherwise determined by the Committee and expressly
provided for in the Option Certificate, up to 18 months following
the date the Option Holder ceases to hold such position unless the
Option Holder ceases to hold such position as a result
of:
(i)
ceasing to meet the
qualifications set forth in the corporate legislation applicable to
the Company;
(ii)
a special
resolution having been passed by the shareholders of the Company
removing the Option Holder as a director of the Company or any
Subsidiary; or
(iii)
an order made by
any Regulatory Authority having jurisdiction to so
order,
in
which case the Expiry Date shall be the date the Option Holder
ceases to hold such position; OR
(b)
Ceasing to be Employed or Engaged - In
the event that the Option Holder holds his or her Option as an
Employee or Consultant and such Option Holder ceases to hold such
position other than by reason of death or Disability, the Expiry
Date of the Option shall be, unless otherwise determined by the
Committee and expressly provided for in the Option Certificate, up
to 18 months following the date the Option Holder ceases to hold
such position, unless the Option Holder ceases to hold such
position as a result of:
(i)
termination for
cause; or
(ii)
an order made by
any Regulatory Authority having jurisdiction to so
order,
in
which case the Expiry Date shall be the date the Option Holder
ceases to hold such position.
In the
event that the Option Holder ceases to hold the position of
Executive, Employee or Consultant for which the Option was
originally granted, but comes to hold a different position as an
Executive, Employee or Consultant prior to the expiry of the
Option, the Committee may, in its sole discretion, choose to permit
the Option to stay in place for that Option Holder with such Option
then to be treated as being held by that Option Holder in his or
her new position and such will not be considered to be an amendment
to the Option in question requiring the consent of the Option
Holder under section 9.2 of this Plan. Notwithstanding anything
else contained herein, in no case will an Option be exercisable
later than the Expiry Date of the Option.
The
vesting schedule for an Option, if any, shall be determined by the
Committee and shall be set out in the Option Certificate issued in
respect of the Option. The Committee may elect, at any time, to
accelerate the vesting schedule of one or more Options including,
without limitation, on a Triggering Event, and such acceleration
will not be considered an amendment to the Option in question
requiring the consent of the Option Holder under section 9.2 of
this Plan.
13
Subject
to all applicable Regulatory Rules and all necessary Regulatory
Approvals, the Committee may attach additional terms and conditions
to the grant of a particular Option, such terms and conditions to
be set out in a schedule attached to the Option Certificate. The
Option Certificates will be issued for convenience only, and in the
case of a dispute with regard to any matter in respect thereof, the
provisions of this Plan and the records of the Company shall
prevail over the terms and conditions in the Option Certificate,
save and except as noted below. Each Option will also be subject
to, in addition to the provisions of the Plan, the terms and
conditions contained in the schedules, if any, attached to the
Option Certificate for such Option. Should the terms and conditions
contained in such schedules be inconsistent with the provisions of
the Plan, such terms and conditions will supersede the provisions
of the Plan.
SECTION 6
Except
as provided otherwise in this section 6, Options are non-assignable
and non-transferable.
In the
event of the Option Holder's death, any Options held by such Option
Holder shall pass to the Personal Representative of the Option
Holder and shall be exercisable by the Personal Representative on
or before the date which is the earlier of one year following the
date of death and the applicable Expiry Date.
If the
employment or engagement of an Option Holder as an Employee or
Consultant or the position of an Option Holder as a director or
officer of the Company or a Subsidiary is terminated by the Company
by reason of such Option Holder's Disability, any Options held by
such Option Holder shall be exercisable by such Option Holder or by
the Personal Representative on or before the date which is the
earlier of one year following the termination of employment,
engagement or appointment as a director or officer and the
applicable Expiry Date.
If an
Option Holder has ceased to be employed, engaged or appointed as a
director or officer of the Company or a Subsidiary by reason of
such Option Holder's Disability and such Option Holder dies within
one year after the termination of such engagement, any Options held
by such Option Holder that could have been exercised immediately
prior to his or her death shall pass to the Personal Representative
of such Option Holder and shall be exercisable by the Personal
Representative on or before the date which is the earlier of one
year following the death of such Option Holder and the applicable
Expiry Date.
14
Unless
the Committee determines otherwise, Options held by or exercisable
by a Personal Representative shall, during the period prior to
their termination, continue to vest in accordance with any vesting
schedule to which such Options are subject.
Employment
or engagement by the Company shall be deemed to continue intact
during any military or sick leave or other bona fide leave of absence if the
period of such leave does not exceed 90 days or, if longer, for so
long as the Option Holder's right to re-employment or re-engagement
by the Company is guaranteed either by statute or by contract. If
the period of such leave exceeds 90 days and the Option Holder's
re-employment or re-engagement is not so guaranteed, then his or
her employment or engagement shall be deemed to have terminated on
the ninety-first day of such leave.
SECTION 7
An
Option may be exercised only by the Option Holder or the Personal
Representative of any Option Holder. In the case of an Incentive
Stock Option, the Option shall be
exercisable during the lifetime of the Option Holder only by the
Option Holder. Notwithstanding the foregoing, the Option Holder
may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the
event of the death of the Option Holder, shall thereafter be
entitled to exercise the Option. An Option Holder or the
Personal Representative of any Option Holder may exercise an Option
in whole or in part at any time and from time to time during the
Exercise Period up to the Expiry Time on the Expiry Date by
delivering to the Administrator the required Exercise Notice, or by
written notice in the case of uncertificated Shares, the applicable
Option Certificate and a certified cheque or bank draft or wire
transfer payable to the Company or its legal counsel in an amount
equal to the aggregate Exercise Price of the Shares then being
purchased pursuant to the exercise of the Option (unless a Cashless
Exercise is chosen in which case the Cashless Exercise Procedure
will prevail). Notwithstanding anything else contained herein,
Options may not be exercised during a Black-Out unless the
Committee determines otherwise.
As soon
as reasonably practicable following the receipt of the notice of
exercise as described in section 7.1 and payment in full for the
Optioned Shares being acquired (unless a Cashless Exercise is
chosen in which case the Cashless Exercise Procedure will prevail),
the Administrator will direct its transfer agent to issue to the
Option Holder the appropriate number of Shares in either
certificate form or at the election of the Option Holder, on an
uncertificated basis pursuant to the instructions given by the
Option Holder to the Administrator. If the number of Shares so
purchased is less than the number of Shares subject to the Option
Certificate surrendered, the Administrator shall also provide a new
Option Certificate for the balance of Shares available under the
Option to the Option Holder concurrent with delivery of the
Shares.
15
Until
the date of the issuance of the certificate for the Shares
purchased pursuant to the exercise of an Option, no right to vote
or receive dividends or any other rights as a shareholder shall
exist with respect to such Shares, notwithstanding the exercise of
the Option, unless the Committee determines otherwise. In the event
of any dispute over the date of the issuance of the Shares, the
decision of the Committee shall be final, conclusive and
binding.
Notwithstanding
anything else contained in this Plan, the Company may, from time to
time, implement such procedures and conditions as it determines
appropriate with respect to the withholding and remittance of taxes
imposed under applicable law, or the funding of related amounts for
which liability may arise under such applicable law. Without
limiting the generality of the foregoing, an Option Holder who
wishes to exercise an Option must, in addition to following the
procedures set out in section 7.1 and elsewhere in this Plan, and
as a condition of exercise:
(a)
deliver a certified
cheque, wire transfer or bank draft payable to the Company for the
amount determined by the Company to be the appropriate amount on
account of such taxes or related amounts; or
(b)
otherwise ensure,
in a manner acceptable to the Company (if at all) in its sole and
unfettered discretion, that the amount will be securely
funded;
(c)
and must in all
other respects follow any related procedures and conditions imposed
by the Company.
SECTION 8
The
Plan shall be administered by the Administrator with oversight by
the Committee.
The
Committee shall have the authority to do the
following:
(a)
oversee the
administration of the Plan in accordance with its
terms;
(b)
appoint or replace
the Administrator from time to time;
(c)
determine all
questions arising in connection with the administration,
interpretation and application of the Plan, including all questions
relating to the Market Value;
(d)
correct any defect,
supply any information or reconcile any inconsistency in the Plan
in such manner and to such extent as shall be deemed necessary or
advisable to carry out the purposes of the Plan;
16
(e)
prescribe, amend,
and rescind rules and regulations relating to the administration of
the Plan;
(f)
determine the
duration and purposes of leaves of absence from employment or
engagement by the Company which may be granted to Option Holders
without constituting a termination of employment or engagement for
purposes of the Plan;
(g)
do the following
with respect to the granting of Options:
(i)
determine the
Executives, Employees or Consultants to whom Options shall be
granted, based on the eligibility criteria set out in this
Plan;
(ii)
determine the terms
of the Option to be granted to an Option Holder including, without
limitation, the Grant Date, Expiry Date, Exercise Price and vesting
schedule (which need not be identical with the terms of any other
Option);
(iii)
subject to any
necessary Regulatory Approvals and section 9.2, amend the terms of
any Options;
(iv)
determine when
Options shall be granted; and
(v)
determine the
number of Shares subject to each Option;
(h)
accelerate the
vesting schedule of any Option previously granted;
(i)
add or amend any
terms relating to the Cashless Exercise and Cashless Exercise
Procedures; and
(j)
make all other
determinations necessary or advisable, in its sole discretion, for
the administration of the Plan.
All
determinations made by the Committee in good faith shall be final,
conclusive and binding upon all persons. The Committee shall have
all powers necessary or appropriate to accomplish its duties under
this Plan.
The
interpretation by the Committee of any of the provisions of the
Plan and any determination by it pursuant thereto shall be final,
conclusive and binding and shall not be subject to dispute by any
Option Holder. No member of the Committee or any person acting
pursuant to authority delegated by it hereunder shall be personally
liable for any action or determination in connection with the Plan
made or taken in good faith and each member of the Committee and
each such person shall be entitled to indemnification with respect
to any such action or determination in the
manner
provided for by the Company.
17
SECTION 9
(a)
If required by a
Regulatory Authority or by the Committee, this Plan may be made
subject to the approval of the shareholders of the Company as
prescribed by the Regulatory Authority. If shareholder approval is
required, any Options granted under this Plan prior to such time
will not be exercisable or binding on the Company unless and until
such shareholder approval is obtained.
(b)
Incentive Stock
Options can only be granted under this Plan if this Plan is
submitted for the approval of the Company’s shareholders
within twelve (12) months before or after the date this Plan is
adopted by the Board.
Subject
to any required Regulatory Approvals, the Committee may from time
to time amend any existing Option or the Plan or the terms and
conditions of any Option thereafter to be granted provided that
where such amendment relates to an existing Option and it
would:
(a)
materially decrease
the rights or benefits accruing to an Option Holder;
or
(b)
materially increase
the obligations of an Option Holder; then, unless otherwise
excepted out by a provision of this Plan, the Committee must also
obtain the written consent of the Option Holder in question to such
amendment. If at the time the Exercise Price of an Option is
reduced the Option Holder is an Insider of the Company, the Insider
must not exercise the option at the reduced Exercise Price until
the reduction in Exercise Price has been approved by the
disinterested shareholders of the Company, if required by the
Exchange.
SECTION 10
An
Option shall not be granted or exercised, and Shares shall not be
issued pursuant to the exercise of any Option, unless the grant and
exercise of such Option and the issuance and delivery of such
Shares comply with all applicable Regulatory Rules, and such
Options and Shares will be subject to all applicable trading
restrictions in effect pursuant to such Regulatory Rules and the
Company shall be entitled to legend the Option Certificates and the
certificates for the Shares or the written notice in the case of
uncertificated Shares representing such Shares
accordingly.
In
administering this Plan, the Committee will seek any Regulatory
Approvals which may be required. The Committee will not permit any
Options to be granted without first obtaining the necessary
Regulatory Approvals unless such Options are granted conditional
upon such Regulatory Approvals being obtained. The Committee will
make all filings required with the Regulatory Authorities in
respect of the Plan and each grant of Options hereunder. No Option
granted will be exercisable or binding on the Company unless and
until all necessary Regulatory Approvals have been obtained. The
Committee shall be entitled to amend this Plan and the Options
granted hereunder in order to secure any necessary Regulatory
Approvals and such amendments will not require the consent of the
Option Holders under section 9.2 of this Plan.
18
The
Company's inability to obtain Regulatory Approval from any
applicable Regulatory Authority, which Regulatory Approval is
deemed by the Committee to be necessary to complete the grant of
Options hereunder, the exercise of those Options or the lawful
issuance and sale of any Shares pursuant to such Options, shall
relieve the Company of any liability with respect to the failure to
complete such transaction.
Securities Registration. No
Awards shall be granted to a U.S. Person under the Plan and no
Shares shall be issued and delivered upon the exercise of Options
granted under the Plan unless and until the Company and/or the
Option Holder have complied with all applicable U.S. federal and
state registration, listing and/or qualification requirements and
all other requirements of law or of any regulatory agencies having
jurisdiction.
SECTION 11
Subject
to any necessary Regulatory Approvals, the Committee may terminate
or suspend the Plan. Unless earlier terminated as provided in this
section 11, the Plan shall terminate on, and no more Options shall
be granted under the Plan after, the tenth anniversary of the date
of the Exchange’s acceptance of the Plan.
No
Option may be granted during any suspension, or after termination,
of the Plan. Suspension or termination of the Plan shall not,
without the consent of the Option Holder, alter or impair any
rights or obligations under any Option previously
granted.
If
there is a material alteration in the capital structure of the
Company and the Shares are consolidated, subdivided, converted,
exchanged, reclassified or in any way substituted for, the
Committee shall make such adjustments to this Plan and to the
Options then outstanding under this Plan as the Committee
determines to be appropriate and equitable under the circumstances,
so that the proportionate interest of each Option Holder shall, to
the extent practicable, be maintained as before the occurrence of
such event. Such adjustments may include, without
limitation:
(a)
a change in the
number or kind of shares of the Company covered by such Options;
and
(b)
a change in the
Exercise Price payable per Share provided, however, that the
aggregate Exercise Price applicable to the unexercised portion of
existing Options shall not be altered, it being intended that any
adjustments made with respect to such Options shall apply only to
the Exercise Price per Share and the number of Shares subject
thereto.
19
For
purposes of this section 11.3, and without limitation,
neither:
(c)
the issuance of
additional securities of the Company in exchange for adequate
consideration (including services); nor
(d)
the conversion of
outstanding securities of the Company into Shares shall be deemed
to be material alterations of the capital structure of the Company.
Any adjustment made to any Options pursuant to this section 11.3
shall not be considered an amendment requiring the Option Holder's
consent for the purposes of section 9.2 of this Plan.
Subject
to the Company complying with section 11.5 and any necessary
Regulatory Approvals and notwithstanding any other provisions of
this Plan or any Option Certificate, the Committee may, without the
consent of the Option Holder or Holders in question:
(a)
cause all or a
portion of any of the Options granted under the Plan to terminate
upon the occurrence of a Triggering Event; or
(b)
cause all or a
portion of any of the Options granted under the Plan to be
exchanged for incentive stock options of another corporation upon
the occurrence of a Triggering Event in such ratio and at such
exercise price as the Committee deems appropriate, acting
reasonably.
Such
termination or exchange shall not be considered an amendment
requiring the Option Holder's consent for the purpose of section
9.2 of the Plan.
In the
event that the Committee wishes to cause all or a portion of any of
the Options granted under this Plan to terminate on the occurrence
of a Triggering Event, it must give written notice to the Option
Holders in question not less than 10 days prior to the consummation
of a Triggering Event so as to permit the Option Holder the
opportunity to exercise the vested portion of the Options prior to
such termination. Upon the giving of such notice and subject to any
necessary Regulatory Approvals, all Options or portions thereof
granted under the Plan which the Company proposes to terminate
shall become immediately exercisable notwithstanding any contingent
vesting provision to which such Options may have otherwise been
subject.
Adjustments
and determinations under this section 11 shall be made by the
Committee, whose decisions as to what adjustments or determination
shall be made, and the extent thereof, shall be final, binding, and
conclusive.
20
SCHEDULE A
[Include legends prescribed by Regulatory Authorities, if
required.]
GILLA INC.
STOCK OPTION PLAN - OPTION CERTIFICATE
This
Option Certificate is issued pursuant to the provisions of the
Stock Option Plan (the “Plan”) of Gilla Inc. (the
“Company”) and
evidences that ● [Name of Option Holder] is the holder (the
“Option Holder”)
of an option (the “Option”) to purchase up to ●
common shares (the “Shares”) in the capital stock of
the Company at a purchase price of US$____________ per Share (the
“Exercise
Price”). This Option may be exercised at any time and
from time to time from and including the following Grant Date
through to and including up to 4:00 p.m. local time in Toronto,
Ontario (the “Expiry
Time”) on the following Expiry Date:
(a)
the Grant Date of
this Option is ●, 20●; and
(b)
subject to sections
5.5, 6.2, 6.3, 6.4 and 11.4 of the Plan, the Expiry Date of this
Option is ●,20●.
To
exercise this Option, the Option Holder must deliver to the
Administrator of the Plan, prior to the Expiry Time on the Expiry
Date, an Exercise Notice, in the form provided in the Plan, or
written notice in the case of uncertificated Shares, which is
incorporated by reference herein, together with the original of
this Option Certificate and a certified cheque or bank draft
payable to the Company or its legal counsel in an amount equal to
the aggregate of the Exercise Price of the Shares in respect of
which this Option is being exercised.
This
Option Certificate and the Option evidenced hereby is not
assignable, transferable or negotiable and is subject to the
detailed terms and conditions contained in the Plan. This Option
Certificate is issued for convenience only and in the case of any
dispute with regard to any matter in respect hereof, the provisions
of the Plan and the records of the Company shall prevail. This
Option is also subject to the terms and conditions contained in the
schedules, if any, attached hereto.
[Include legends on the certificate or the written notice in the
case of uncertificated shares prescribed by Regulatory Authorities,
if required.]
21
If the
Option Holder is a resident or citizen of the United States of
America at the time of the exercise of the Option, the
certificate(s) representing the Shares will be endorsed with the
following or a similar legend:
“The
securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, of the United States
of America (the “Act”) or the securities laws of any
state (“State”) of the United States of America and may
not be sold, transferred, pledged, hypothecated or distributed,
directly or indirectly, to a U.S. person (as defined in Regulation
S adopted by the U.S. Securities and Exchange Commission under the
Act) or within the United States unless such securities are (i)
registered under the Act and any applicable State securities act (a
“State Act”), or (ii) exempt from registration under
the Act and any applicable State Act and the Company has received
an opinion of counsel to such effect reasonably satisfactory to it,
or (iii) sold in accordance with Regulation S and the Company has
received an opinion of counsel to such effect reasonably
satisfactory to it.”
GILLA INC.
by its authorized signatory:
_______________________________________
The
Option Holder acknowledges receipt of a copy of the Plan and
represents to the Company that the Option Holder is familiar with
the terms and conditions of the Plan, and hereby accepts this
Option subject to all of the terms and conditions of the Plan. The
Option Holder agrees to execute, deliver, file and otherwise assist
the Company in filing any report, undertaking or document with
respect to the awarding of the Option and exercise of the Option,
as may be required by the Regulatory Authorities. The Option Holder
further acknowledges that if the Plan has not been approved by the
shareholders of the Company on the Grant Date, this Option is not
exercisable until such approval has been obtained.
Signature
of Option Holder:
__________________________________
________________________________
Signature
Date
signed
__________________________________
Print
Name
__________________________________
Address
__________________________________
22
OPTION CERTIFICATE – SCHEDULE
[Complete the following additional terms and any other special
terms, if applicable, or remove the inapplicable terms or this
schedule entirely.]
The
additional terms and conditions attached to the Option represented
by this Option Certificate are as follows:
1.
The Options will
not be exercisable unless and until they have vested and then only
to the extent that they have vested. The Options will vest in
accordance with the following:
(a)
● Shares
(●%) will vest and be exercisable on or after the Grant
Date;
(b)
● additional
Shares (●%) will vest and be exercisable on or after ●
[date];
(c)
● additional
Shares (●%) will vest and be exercisable on or after ●
[date];
(d)
● additional
Shares (●%) will vest and be exercisable on or after ●
[date];
2.
Upon the Option
Holder ceasing to hold a position with the Company, other than as a
result of the events set out in paragraphs 5.5(a) or 5.5(b) of the
Plan, the Expiry Date of the Option shall be ⬤ [Insert date desired that is longer or shorter than the standard 30
days as set out in the Plan] following the date the Option
Holder ceases to hold such position.
23
SCHEDULE B
GILLA INC.
STOCK OPTION PLAN
NOTICE OF EXERCISE OF OPTION
TO:
The Administrator,
Stock Option Plan
●
●
[ Address]
(or
such other address as the Company may advise)
The
undersigned hereby irrevocably gives notice, pursuant to the Stock
Option Plan (the “Plan”) of Gilla Inc. (the
“Company”), of
the exercise of the Option to acquire and hereby subscribes for
(cross out inapplicable
item):
(a)
all of the Shares;
or
(b)
____________of the
Shares;
which
are the subject of the Option Certificate attached hereto
(attach your original Option
Certificate). The undersigned tenders herewith a certified
cheque or bank draft (circle
one) payable to the Company in an amount equal to the
aggregate Exercise Price of the aforesaid Shares (unless a Cashless
Exercise is chosen in which case the Cashless Exercise Procedure
will prevail) and directs the Company to issue a certificate OR a
written notice in the case of uncertificated Shares evidencing said
Shares in the name of the undersigned to be issued to the
undersigned [in the case of issuance of a share certificate, at the
following address (provide full
complete address)]:
___________________________________
___________________________________
___________________________________
The
undersigned elects to exercise the Options electing for a Cashless
Exercise (circle
here)
The
undersigned acknowledges the Option is not validly exercised unless
this Notice is completed in strict compliance with this form and
delivered to the required address with the required payment (unless
a Cashless Exercise is chosen in which case the Cashless Exercise
Procedure will prevail) prior to 4:00 p.m. local time in Toronto,
ON on the Expiry Date of the Option.
DATED the day
of
20
______________________________________
Signature
of Option Holder
24