exv10w1






Exhibit 10.1




EQUAL ENERGY LTD.




STOCK OPTION PLAN (2010)





	1.	 	Purpose of the Plan
	 
	1.1	 	The purpose of this stock option plan, as amended or varied from time to time, (the “Plan”)
is to provide the Participants with an opportunity to purchase common shares (“Common Shares”)
of Equal Energy Ltd. (the “Corporation”) and to benefit from the appreciation thereof. This
proprietary interest in the Corporation will provide an increased incentive for the
Participants to contribute to the future success and prosperity of the Corporation, thus
enhancing the value of the Common Shares for the benefit of all the shareholders and
increasing the ability of the Corporation and its Affiliates to attract and retain individuals
of exceptional skill.
	 
	2.	 	Defined Terms
	 
	2.1	 	Where used herein, the following terms have the following meanings:






	 	(a)	 	“Affiliate” means a corporation, partnership or trust that is affiliated with
the Corporation (within the meaning of “affiliate” in the Securities Act (Alberta));






	 	(b)	 	“Board” means the board of directors of the Corporation;






	 	(c)	 	“Exchange” means the Toronto Stock Exchange or, if the Common Shares are not
then listed and posted for trading on such exchange, then any stock exchange on which
such Common Shares are listed and posted for trading or any other regulatory body
having jurisdiction as may be selected for such purpose by the Board;






	 	(d)	 	“Exercise Price” means the price per Common Share at which Common Shares may
be purchased under the Stock Option, as the same may be adjusted in accordance with
Articles 4 and 8 hereof;






	 	(e)	 	“Participants” means the directors, officers, employees and consultants of
the Corporation or one of its Affiliates to whom a Stock Option has been granted
pursuant to the Plan of which all or a portion thereof remains unexercised.
Participants also includes directors, officers, employees and consultants who have
signed a written agreement to become a director, officer, employee or consultant of
the Corporation or one of its Affiliates within 30 days of the written agreement;






	 	(f)	 	“Stock Option” means an option to purchase Common Shares from treasury
granted by the Board to a Participant, subject to the provisions contained herein; and






	3.	 	Administration of the Plan






	3.1	 	The Board shall administer this Plan. Stock Options granted under the Plan shall be granted
in accordance with determinations made by the Board pursuant to the provisions of the Plan as
to: the Participants to whom, and the time or times at which, the Stock Options will be
granted; the number of Common Shares which shall be the subject of each Stock Option; the
exercise period of the Stock Option, any vesting provisions attaching to the Stock Option; and
the terms and provisions of the respective stock option agreements, provided, however, that
each director, officer, employee or consultant shall have the right not to participate in the
Plan and any decision not to participate shall not affect such person’s employment by or
engagement with the Corporation. The Board shall ensure that Participants are eligible to
participate under the Plan, and, if required by the Exchange, shall represent, confirm and
provide evidence of such eligibility.






	3.2	 	The exercise period of a Stock Option will not exceed 10 years.




 









 








	3.3	 	Subject to the provisions of the Plan, the Board shall have the authority to construe and
interpret the Plan and all stock option agreements entered into thereunder and may, from time
to time, adopt such rules and regulations for administering this Plan as it may deem proper
and in the best interests of the Corporation.
	 
	4.	 	Granting of Stock Options
	 
	4.1	 	The Board may, from time to time, grant Stock Options to the Participants. The grant of
Stock Options will be subject to the conditions contained herein and may be subject to
additional conditions determined by the Board for time to time. Each Stock Option granted
hereunder shall be evidenced by an agreement in writing, signed on behalf of the Corporation
and by the Participant, in such form as the Board shall approve. Each such agreement shall
recite that it is subject to the provisions of this Plan.
	 
	4.2	 	Subject to adjustment as provided in Section 8 hereof, the number of Common Shares reserved
for issuance from treasury to Participants under this Plan, together with any other security
based compensation plan, will not exceed 10% of the issued and outstanding Common Shares
calculated on an undiluted basis at the time of the grant.
	 
	4.3	 	Any grant of Stock Options under the Plan shall be subject to the following restrictions:






	 	(a)	 	the aggregate number of Common Shares reserved for issuance pursuant to Stock
Options granted to any one person may not exceed 5% of the outstanding Common Shares
(on a non-diluted basis);






	 	(b)	 	the aggregate number of Common Shares reserved for issuance pursuant to Stock
Options granted to “insiders” (as defined in the TSX Company Manual) granted pursuant
to the Plan and other security based compensation arrangements issued from treasury
may not exceed 10% of the outstanding Common Shares (on a non-diluted basis);






	 	(c)	 	the issuance of Common Shares to “insiders” pursuant to the Plan and other
share compensation arrangements within a one year period may not exceed 10% of the
outstanding Common Shares (on a non-diluted basis);






	 	(d)	 	the issuance of Common Shares to any one “insider” pursuant to the Plan and
other security based compensation arrangements within a one year period may not exceed
5% of the outstanding Common Shares (on a non-diluted basis); and






	 	 	The aforementioned limits of Common Shares reserved for issuance may be formulated on
a diluted basis with the consent of the Exchange.






	4.4	 	The Corporation shall at all times during the term of the Plan reserve and keep available
such number of Common Shares as will be sufficient to satisfy the requirements of the Plan.






	4.5	 	All Stock Options granted pursuant to this Plan shall be subject to the applicable rules and
policies of the Exchange and any regulatory body having jurisdiction.






	4.6	 	A Participant who has been granted a Stock Option may, if otherwise eligible, be granted an
additional Stock Option if the Board so determines.






	5.	 	Exercise Price






	5.1	 	The Board shall fix the Exercise Price at the time the Stock Option is granted to a
Participant. In no event shall the price be less than the Market Price, which shall mean the
closing trading price per Common Share on the Exchange on the last trading day preceding the
date of the grant on which there was a closing price (the “Closing Price”) or, if the Common
Shares are not listed on any stock exchange, the price determined by the Board in accordance
with appropriate valuation




 









 








	 	 	methodology to be the fair market value thereof; provided that if the Board, in its sole
discretion, determines that such Closing Price would not be representative of the market
price of the Common Shares, then the Market Price shall mean the greater of the Closing
Price and the weighted average price per Common Share for the Common Shares for five (5)
consecutive trading days ending on the last day preceding the date of grant on which there
was a closing price on the Exchange. The weighted average price shall be determined by
dividing the aggregate sale price of all Common Shares sold on the Exchange during the said
five (5) consecutive trading days by the total number of Common Shares so sold.






	5.2	 	Once the Exercise Price has been determined by the Board and the Stock Option has been
granted to an “insider”, the Exercise Price of such Stock Option may only be reduced if
“disinterested” shareholder approval is obtained; provided that such “disinterested”
shareholder approval is then a requirement of the Exchange or other regulatory body having
jurisdiction.






	6.	 	Term of Stock Option






	6.1	 	The term of the Stock Option shall be a period of time fixed by the Board, not to exceed the
maximum period of time permitted by the Exchange and, unless the Board determines otherwise,
Stock Options shall be exercisable in whole or in part at any time during this period in
accordance with such vesting provisions, conditions or limitations as are herein contained or
as the Board may from time to time impose or as may be required by the Exchange.






	6.2	 	Each Stock Option and all rights thereunder shall be expressed to expire at the end of the
Stock Option term (“Expiry Time”), but shall be subject to earlier termination in accordance
with Section 10 hereof.






	6.3	 	Subject to any specific requirements of the Exchange, the vesting period or periods within
the Stock Option term during which a Participant may exercise Stock Options or a portion
thereof shall be determined by the Board.






	6.4	 	In the event that the date determined by the Board of Directors on which a Stock Option will
expire (the “Fixed Expiry Date”) falls within a period of time imposed by the Corporation upon
certain designated persons during which those persons may not trade in any securities of the
Corporation (a “Black-Out Period”), the expiry date of the Stock Option shall be the Fixed
Expiry Date plus ten (10) business days from the date any Black-Out Period ends (the
“Black-Out Expiration Term”). In the event that the Fixed Expiry Date falls within five (5)
business days immediately after a Black-Out Period ends, the Black-Out Expiration Term shall
be reduced by the number of days between the Fixed Expiry Date and the date the Black-Out
Period ends.






	7.	 	Exercise of Stock Option






	7.1	 	Subject to the provisions of the Plan and the terms of any stock option agreement, a Stock
Option or a portion thereof may be exercised, from time to time, by delivery to the
Corporation’s principal office in Calgary, Alberta of notice in writing signed by the
Participant or the Participant’s legal personal representative and addressed to the
Corporation (the “Exercise Notice”). The Exercise Notice shall state the intention of the
Participant or the Participant’s legal personal representative to exercise the said Stock
Option or a portion thereof and the number of Common Shares in respect of which the Stock
Option is then being exercised. The Exercise Notice shall contain the Participant’s
undertaking to comply, to the satisfaction of the Corporation, with all applicable
requirements of the Exchange and any applicable regulatory authorities.






	7.2	 	The Exercise Notice shall be accompanied by the full purchase price of the Common Shares
which are the subject of the exercise. Alternatively, the Participant may exercise his or her
Stock Option through any “cashless exercise” programme which the Corporation may offer at the
relevant time through a licensed investment dealer.




 









 








	8.	 	Adjustments in Common Shares






	8.1	 	If the outstanding Common Shares of the Corporation are increased, decreased, changed into or
exchanged for a different number or kind of common shares of the Corporation through
re-organization, merger, re-capitalization, re-classification, share distribution, subdivision
or consolidation, an appropriate and proportionate adjustment shall be made by the Board, in
its discretion, in the number or kind of common shares optioned and the exercise price per
common share, as regards to previously granted and unexercised Stock Options or portions
thereof, and as regards to Stock Options which may be granted subsequent to any such change in
the Corporation’s equity.






	8.2	 	Upon the liquidation, dissolution or termination of the Corporation or upon a
re-organization, merger or consolidation of the Corporation with one or more trusts or
corporations as a result of which the Corporation is not the surviving entity, or upon the
sale of all or substantially all of the assets of the Corporation to another person, the
Common Shares subject to any Stock Option granted hereunder shall immediately vest and all
Participants then entitled to exercise an unexercised portion of Stock Options then
outstanding shall have the right at such time to exercise their Stock Options to the full
extent not theretofore exercised. Notwithstanding the provisions of this subsection 8.2,
Stock Options granted hereunder shall not immediately vest, and Participants shall not be
entitled to exercise an unexercised portion of Stock Options if: (i) a re-organization, merger
or consolidation of the Corporation, whereby the Corporation is not the surviving entity, is
with one or more trusts or corporations, all of which are wholly-owned subsidiaries of the
Corporation; (ii) if, following such re-organization, merger or consolidation, the
shareholders of the Corporation continue to hold more than 50% of the voting securities of the
surviving entity; or (iii) if the sale of all or substantially all of the assets of the
Corporation to another person or persons who are wholly-owned subsidiaries of the Corporation.






	8.3	 	A Stock Option may provide that whenever the Corporation’s shareholders receive a “take-over
bid” as defined in the Securities Act (Alberta), as amended from time to time, or any
successor legislation thereto, pursuant to which the “offeror” would, as a result of such
take-over bid if successful, beneficially own in excess of 50% of the outstanding Common
Shares of the Corporation (a “Control Bid”), the Board may, at its option, require the
acceleration of the vesting time for the exercise of such Stock Option to allow the
Participant to exercise such Stock Option (including in respect of Common Shares not otherwise
vested at such time) for the purpose of tendering the Common Shares received thereon to the
Control Bid.






	8.4	 	Determinations by the Board as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. The Corporation shall not be obligated to issue
fractional securities in satisfaction of any of its obligations hereunder.






	9.	 	Decisions of the Board






	9.1	 	All decisions and interpretations of the Board respecting the Plan or Stock Options granted
thereunder shall be conclusive and binding on the Corporation, the Affiliates and the
Participants and their legal personal representatives and on all directors, officers,
employees and consultants of the Corporation and of the Affiliates who are eligible to
participate under the Plan.






	10.	 	Ceasing to be a Director, Officer, Employee or Consultant






	10.1	 	In the event the Participant ceases to be a director, officer, employee or consultant of the
Corporation or any Affiliate for any reason other than death, including the resignation or
retirement of the Participant as a director, officer, employee or consultant of the
Corporation or an Affiliate, the termination by the Corporation or an Affiliate of the
employment of the Participant, or the removal of the Participant as a director of the
Corporation or an Affiliate prior to the Expiry Time, all Stock Options held by such
Participant shall cease and terminate within thirty (30) days following the effective date of
such resignation, retirement or removal or within thirty (30) days




 









 








	 	 	following the date notice of termination of employment is given by the Corporation or an
Affiliate, subject to such shorter period as may be otherwise specified in the stock option
agreement, whether such termination is with or without reasonable notice, and shall be of
no further force or effect whatsoever as to the Common Shares in respect of which such
Stock Options have not previously been exercised.






	10.2	 	Notwithstanding the foregoing, in the event of termination of a Participant for cause, all
Stock Options held by such Participant shall cease and terminate immediately upon the date
notice of termination of employment for cause is given to the Participant by the Corporation
or an Affiliate and shall be of no further effect whatsoever as to the Common Shares in
respect of which such Stock Options have not previously been exercised.






	10.3	 	In the event of the death of a Participant prior to the Expiry Time, Stock Options held by
such Participant may be exercised as to the Common Shares in respect of which such Stock
Options have not previously been exercised (and as the Participant would have been entitled
to purchase), by the legal personal representatives of the Participant at any time up to and
including (but not after) a date one (1) year from the date of death of the Participant,
unless a shorter time is specifically set out in the Participant’s stock option agreement, or
the Expiry Time, whichever occurs first, after which date such Stock Options shall forthwith
expire and terminate and be of no further force or effect whatsoever.






	10.4	 	Stock Options shall not be affected by any change in status of the Participant where the
Participant continues to be employed by or serves as a director or officer of or consultant to
the Corporation or any of its Affiliates.






	11.	 	Transferability






	11.1	 	All benefits, rights and Stock Options accruing to any Participant in accordance with the
terms and conditions of the Plan are non-transferable, non-assignable and are exercisable only
by the Participant to whom the Stock Option was granted unless specifically provided herein or
to the extent, if any, permitted by the Exchange.






	12.	 	Amendment or Discontinuance of Plan






	12.1	 	The Board may amend, suspend or terminate the Plan, or any portion thereof or any Stock
Option, at any time, and may do so without shareholder approval, subject to those provisions
of applicable law, if any, that require the approval of shareholders or any governmental or
regulatory body (including without limitation the Exchange). Without limiting the generality
of the foregoing, the Board may make the following types of amendments to the Plan without
seeking shareholder approval (any amendment to this Plan will take effect only with respect to
Stock Options granted after the effective date of the amendment, provided that it may apply to
any outstanding Stock Options with the mutual consent of the Corporation and the Service
Providers to whom the Stock Options have been granted):






	 	(a)	 	amendments of a “housekeeping” nature, including curing ambiguities, errors
or omission in the Plan or to correct or supplement any provision of the Plan that is
inconsistent with any other provisions of the Plan;






	 	(b)	 	amendments necessary to comply with the provisions of applicable law;






	 	(c)	 	amendments respecting administration of the Plan;






	 	(d)	 	any amendment to the vesting provisions;






	 	(e)	 	any amendment to the termination provisions which does not entail an
extension beyond the original expiry date;




 









 








	 	(f)	 	the addition of any form of financial assistance including an amendment to a
financial assistance provision which is more favourable to eligible participants; and






	 	(g)	 	any other amendment, whether fundamental or otherwise, not requiring
Shareholder approval under applicable law.






	13.	 	Participants’ Rights






	13.1	 	Until the Common Shares granted pursuant to any Stock Option have been issued in accordance
with the terms of this Plan, the Participant to whom the Stock Options have been granted will
not possess any incidents of ownership of the Common Shares and the right to exercise voting
rights in respect of the Common Shares. The Participant will only be considered a shareholder
in respect of the Common Shares when the issuance has been entered upon the records of the
duly authorized transfer agent of the Corporation.






	13.2	 	Nothing in the Plan or any Stock Option shall confer upon any Participant any rights to
continue in the employ of the Corporation or any Affiliate or affect in any way the right of
the Corporation or any such Affiliate to terminate the employment of the Participant at any
time; nor shall anything in the Plan or any Stock Option be deemed or construed to constitute
an agreement, or an expression of intent, on the part of the Corporation or any such Affiliate
to extend the employment of any Participant beyond the time such Participant would normally
retire pursuant to the provisions of any present or future retirement plan of the Corporation
or any Affiliate, or beyond the time at which he would otherwise be retired pursuant to the
provisions of any contract of employment with the Corporation or any Affiliate.






	14.	 	Approvals






	14.1	 	This Plan shall be subject to approval by the shareholders and to acceptance by the Exchange.






	14.2	 	Any Stock Options granted prior to such approval and acceptance shall be conditional upon
such approval and acceptance being given and no such Stock Options may be exercised unless and
until such approval and acceptance is given.






	15.	 	Government Regulation






	15.1	 	The Corporation’s obligation to issue and deliver Common Shares under any Stock Option is
subject to:






	 	(a)	 	the satisfaction of all requirements under applicable securities laws in
respect thereof and obtaining all regulatory approvals as the Board shall determine to
be necessary or advisable in connection with the authorization, issuance or sale
thereof;






	 	(b)	 	the admission of such Common Shares to listing on any stock exchange on which
such Common Shares may then be listed; and






	 	(c)	 	the receipt from the Participant of such representation, warranties,
agreements and undertakings as to future dealings in such Common Shares as the
Corporation determines to be necessary or advisable in order to safeguard against the
violation of the securities laws of any jurisdiction.






	 	 	In this regard, the Corporation shall take all reasonable steps to obtain such
approvals and registrations as may be necessary for the issuance of such Common Shares and
for the listing of such Common Shares on the Exchange, in compliance with applicable
securities laws. If any Common Shares cannot be issued to any Participant for whatever
reason, the obligation of the Corporation to
issue such Common Shares shall terminate and the Exercise Price paid to the Corporation
will be returned to the Participant.





 









 






	16.	 	Costs






	16.1	 	The Corporation shall pay all costs of administering the Plan.






	17.	 	Interpretation






	17.1	 	This Plan shall be governed by and construed in accordance with the laws of the Province of
Alberta and the federal laws of Canada applicable therein.






	18.	 	Compliance with Applicable Law






	18.1	 	If any provision of the Plan or any Stock Option contravenes any law or any order, policy,
by-law or regulation of any regulatory body or the Exchange, then such provision shall be
deemed to be amended to the extent required to bring such provision into compliance therewith.






	19.	 	Effective Date of Plan






	19.1	 	The Plan will take effect on May 31, 2010 subject to acceptance of the Plan by the
Exchange and any other relevant regulatory authority.