Document:

New Gold Inc.: Exhibit 4.2 - Prepared by TNT Filings Inc.

  

Exhibit 4.2

METALLICA RESOURCES INC.

STOCK OPTION PLAN

AMENDED AND RESTATED AS OF MAY 23, 2006

1.

PURPOSE

The purpose of this stock option plan (the "Plan") is to authorize the grant to service providers for Metallica Resources Inc. (the "Corporation") of options to purchase common shares ("shares") of the Corporation's capital and thus benefit the Corporation by enabling it to attract, retain and motivate service providers by providing them with the opportunity, through share options, to acquire an increased proprietary interest in the Corporation.

2.

ADMINISTRATION

The Plan shall be administered by a committee established for such purpose by the board of directors of the Corporation (the "Committee"), or in the event the board of directors does not establish the Committee, by the board of directors of the Corporation.  Subject to approval of the granting of options by the Committee or the board of directors, as applicable, the Corporation shall grant options under the Plan.

3.

SHARES SUBJECT TO PLAN

Subject to adjustment under the provisions of paragraph 12 hereof, the aggregate number of shares of the Corporation which may be issued and sold under the Plan after April 19, 2006 shall not exceed 7,500,000 shares.  The total number of shares which may be reserved for issuance to any one individual under the Plan, together with all other outstanding stock options granted to such individual shall not exceed 5% of the outstanding issue.  The Corporation shall not, upon the exercise of any option, be required to issue or deliver any shares prior to (a) the admission of such shares to listing on any stock exchange on which the Corporation's shares may then be listed, and (b) the completion of such registration or other qualification of such shares under any law, rules or regulation as the Corporation shall determine to be necessary or advisable.  If any shares cannot be issued to any optionee for whatever reason, the obligation of the Corporation to issue such shares shall terminate and any option exercise price paid to the Corporation shall be returned to the optionee.

4.

ELIGIBILITY

Options shall be granted only to service providers for the Corporation, or to personal holding companies controlled by a service provider, or to a registered retirement savings plan established by a service provider.  The term "service providers for the Corporation" means (a) any employee or insider of the Corporation or any of its subsidiaries, and (b) any other person or company engaged to provide ongoing management or consulting services for the Corporation or any entity controlled by the Corporation.  The terms "insider", "controlled" and "subsidiary" shall have the meanings ascribed thereto in the Securities Act (Ontario) from time to time.  Subject to the foregoing, the Committee or the board of directors, as applicable, shall have full and final authority to determine the persons who are to be granted options under the Plan and the number of shares subject to each option.

5.

PRICE

The purchase price (the "Price") for the shares of the Corporation under each option shall be determined by the Committee or the board of directors on the basis of the market price at the time of granting of each option, where "market price" shall mean the prior trading day closing price of the shares of the Corporation on any stock exchange on which the shares are listed or any other market on which the shares are quoted, and where there is no such closing price, "market price" shall mean the average of the most recent bid and ask of the shares of the Corporation on any stock exchange or market on which the shares are listed or quoted.  In no event shall the Price be less than the market price on The Toronto Stock Exchange, if the shares of the Corporation are then listed on such exchange.

6.

PERIOD OF OPTION AND RIGHTS TO EXERCISE

Subject to the provisions of this paragraph 6 and paragraphs 7, 8 and 9 below, options will be exercisable in whole or in part, and from time to time, during the currency thereof.  Options shall not be granted for a term exceeding ten years.  The shares to be purchased upon each exercise of an option (the "optioned shares") shall be paid for in full at the time of such exercise.  Except as provided in paragraphs 8 and 9 below, no option which is held by a service provider may be exercised unless the optionee is then a service provider for the Corporation.

7.

VESTING RESTRICTIONS

Options may, at the discretion of the Committee or the board of directors, as applicable, provide that the number of shares which may be acquired pursuant to the option shall not exceed a specified number or percentage each year during the term of the option (a "Vesting Restriction").  Provided, however, that notwithstanding any Vesting Restriction specified in respect of any particular option, options shall become fully vested, and each optionee shall be entitled to exercise his or her option in respect of the full number of optioned shares, upon the occurrence of an Acceleration Event.  For these purposes, an Acceleration Event means

(a)

the acquisition by any "offeror" (as defined in Part XX of the Securities Act (Ontario)) of beneficial ownership of more than 50% of the outstanding voting securities of the Corporation, by means of a takeover bid or otherwise; and

(b)

any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation would be converted into cash, securities or other property, other than a merger of the Corporation in which shareholders immediately prior to the merger have the same proportionate ownership of stock of the surviving corporation immediately after the merger;
 

(c)

any sale, lease exchange or other transfer (in one transaction or a series or related transaction) of all or substantially all of the assets of the Corporation;
 

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(d)

the approval by the shareholders of the Corporation of any plan of liquidation or dissolution of the Company.

8.

CESSATION OF PROVISION OF SERVICES

If any optionee who is a service provider shall cease to be a service provider for the Corporation for any reason (except as otherwise provided in paragraph 9) the optionee may, but only within the period of ninety days next succeeding such cessation and in no event after the expiry date of the optionee's option, exercise the optionee's option.

9.

DEATH OF OPTIONEE

In the event of the death of an optionee during the currency of the optionee's  option, the option theretofore granted to the optionee shall be exercisable within, but only within, the period of one year next succeeding the optionee's death, and in no event after the expiry date of the option.  Before expiry of an option under this paragraph 9, the Corporation shall notify the optionee's representative in writing of such expiry.

10.

EXTENSION OF OPTION

In addition to the provisions of paragraphs 8 and 9, the Committee or the board of directors may extend the period of time within which an option held by a deceased optionee may be exercised or within which an option may be exercised by an optionee who has ceased to be a service provider for the Corporation, but such an extension shall not be granted beyond the original expiry date of the option.  Any extensions of options granted under this Plan are subject to applicable regulatory approval.

11.

NON-TRANSFERABILITY OF OPTION

No option granted under the Plan shall be transferrable by an optionee otherwise than by will or by the laws of descent and distribution, and such option shall be exercisable, during an optionee's lifetime, only by the optionee.

12.

ADJUSTMENTS IN SHARES SUBJECT TO PLAN

The aggregate number and kind of shares available under the Plan shall be appropriately adjusted in the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering or any other change in the corporate structure or shares of the Corporation.  The options granted under the Plan may contain such provisions as the Committee or the board of directors may determine with respect to adjustments to be made in the number and kind of shares covered by such options and in the option price in the event of any such change.

13.

AMENDMENT AND TERMINATION OF THE PLAN

The board of directors may at any time amend or terminate the Plan, but where amended, such amendment is subject to regulatory approval.

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14.

EFFECTIVE DATE OF THE PLAN

The Plan becomes effective on the date of its approval by the shareholders of the Corporation.

15.

EVIDENCE OF OPTIONS

Each option granted under the Plan shall be embodied in a written option agreement between the Corporation and the optionee which shall give effect to the provisions of the Plan.

16.

EXERCISE OF OPTION

Subject to the provisions of the Plan and the particular option, an option may be exercised from time to time by delivering to the Corporation at its registered office a written notice of exercise specifying the number of shares with respect to which the option is being exercised and accompanied by payment in cash or certified cheque for the full amount of the purchase price of the shares then being purchased.

Upon receipt of a certificate of an authorized officer directing the issue of shares purchased under the Plan, the transfer agent is authorized and directed to issue and countersign share certificates for the optioned shares in the name of such optionee or the optionee's legal personal representative or as may be directed in writing by the optionee's legal personal representative.

17.

NOTICE OF SALE OF ALL OR SUBSTANTIALLY ALL SHARES OR ASSETS

If at any time when an option granted under this Plan remains unexercised with respect to any optioned shares, (a) the Corporation seeks approval from its shareholders for a transaction which, if completed, would constitute an Acceleration Event, or (b) a third party makes a formal offer or proposal to the Corporation or its shareholders which, if accepted, would constitute an Acceleration Event, the Corporation shall use its best efforts to bring such offer or proposal to the attention of the optionee as soon as practicable and (i) the option granted under this Plan may be exercised, as to all or any of the optioned shares in respect of which such option has not previously been exercised, by the optionee at any time up to and including, (but not after) a date thirty (30) days following the date of the completion of such Acceleration Event or prior to the close of business on the expiry date of the option, whichever is the earlier; and (ii) the Corporation may require the acceleration of the time for the exercise of the said option and of the time for the fulfillment of any conditions or restrictions on such exercise.

18.

RIGHTS PRIOR TO EXERCISE

An optionee shall have no rights whatsoever as a shareholder in respect of any of the optioned shares (including any right to receive dividends or other distributions therefrom or thereon) other than in respect of optioned shares in respect of which the optionee shall have exercised the option to purchase hereunder and which the optionee shall have actually taken up and paid for.

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19.

GOVERNING LAW

This Plan shall be construed in accordance with and be governed by the laws of the Province of Ontario and shall be deemed to have been made in said Province, and shall be in accordance with all applicable securities laws.

20.

EXPIRY OF OPTION

On the expiry date of any option granted under the Plan, and subject to any extension of such expiry date permitted in accordance with the Plan, such option hereby granted shall forthwith expire and terminate and be of no further force or effect whatsoever as to such of the optioned shares in respect of which the option has not been exercised.

21.

APPROVAL

The original Stock Option Plan was approved by the board of directors of the Corporation on September 25, 1996 and by the shareholders of the Corporation on June 24, 1997, as amended by the shareholders on June 3, 2003.  The Amended Stock Option Plan was approved by the board of directors of the Corporation on April 20, 2006 and by the shareholders of the Corporation on May 23, 2006.

 

 

- 5 -New Gold Inc.: Exhibit 4.3 - Prepared by TNT Filings Inc.

  

Exhibit 4.3

NEW GOLD INC.        
 

STOCK OPTION PLAN (2005) (AS AMENDED ON MAY 3, 2007)

1. PURPOSE OF THE PLAN  

The Company hereby establishes a stock option plan for directors, officers and Service Providers (as defined below) of the Company and its subsidiaries, to be known as the “New Gold Inc. Stock Option Plan (2005)” (herein “the Plan”). The purpose of the Plan is to give to directors, officers and Service Providers, as additional compensation, the opportunity to participate in the profitability of the Company by granting to such individuals options, exercisable over periods of up to ten years as determined by the board of directors of the Company, to buy shares of the Company at a price equal to the Market Price prevailing on the date the option is granted.
 

2. DEFINITIONS  

In the Plan, the following terms shall have the following meanings:
 

2.1 “Associate” means an associate as defined in the Securities Act.
 

2.2 “Board” means the Board of Directors of the Company.
 

2.3 “Change of Control” means the acquisition by any person or by any person and a Joint Actor, whether directly or indirectly, of voting securities (as defined in the Securities Act) of the Company, which, when added to all other voting securities of the Company at the time held by such person or by such person and a Joint Actor, totals for the first time not less than fifty percent (50%) of the outstanding voting securities of the Company or the votes attached to those securities are sufficient, if exercised, to elect a majority of the Board of Directors of the Company.
 

2.4 “Company” means New Gold Inc. and its successors.
 

2.5 “Disability” means any disability with respect to an Optionee which the Board, in its sole and unfettered discretion, considers likely to prevent permanently the Optionee from:
 

(a)

 being employed or engaged by the Company, its subsidiaries or another employer, in a position the same as or similar to that in which he was last employed or engaged by the Company or its subsidiaries; or
 

(b)  

acting as a director or officer of the Company or its subsidiaries.
 

2.6 “Exchange” and “Exchanges” means the Toronto Stock Exchange and any other stock exchange on which the Shares are listed.
 

2.7 “Expiry Date” means either : (a) the date set by the Board under section 3.1 of the Plan, as the last date on which an Option may be exercised; or (b) if the date referred to in subsection 2.7 (a) falls within a blackout period imposed on the Optionee by the Company, or within 10 business days thereafter,  then that date which is the 10th
business day after the end of such blackout period.

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2.8 “Grant Date” means the date specified in an Option Agreement as the date on which an Option is granted.
 

2.9 “Insider” means:  

(a) an insider as defined in the Securities Act, other than a person who is an insider solely by virtue of being a director or senior officer of a subsidiary of the Company; and
 

(b) an Associate of any person who is an insider under subsection (a).
 

2.10 “Market Price” of Shares at any Grant Date means, if the Shares are listed on the Toronto Stock Exchange, the closing price per Share on the Toronto Stock Exchange or, for the last day Shares were traded prior to the Grant Date (in accordance with the policies of the Toronto Stock Exchange as may from time to time apply) or if the Shares are not listed on any stock exchange, “Market Price” of Shares means the price per Share on the over-the-counter market determined by dividing the aggregate sale price of the Shares sold by the total number of such Shares so sold on the applicable market for the last day prior to the Grant Date.
 

2.11 “Option” means an option to purchase Shares granted pursuant to this Plan.
 

2.12 “Option Agreement” means an agreement, in the form attached hereto as Schedule “A”, whereby the Company grants to an Optionee an Option.
 

2.13 “Optionee” means each of the directors, officers and Service Providers granted an Option pursuant to this Plan and their heirs, executors and administrators and, subject to the policies of the Exchange, an Optionee may also be a corporation wholly-owned by an individual eligible for an Option grant pursuant to this Plan.
 

2.14 “Option Price” means the price per Share specified in an Option Agreement, adjusted from time to time in accordance with the provisions of section 5.
 

2.15 “Option Shares” means the aggregate number of Shares which an Optionee may purchase under an Option.
 

2.16 “Plan” means this New Gold Inc. Stock Option Plan.
 

2.17 “Shares” means the common shares in the capital of the Company as constituted on the Grant Date provided that, in the event of any adjustment pursuant to section 5, “Shares” shall thereafter mean the shares or other property resulting from the events giving rise to the adjustment.
 

2.18 “Securities Act” means and includes the Securities Act (British Columbia) R.S.B.C. 1996, c.418, as amended as at the date hereof, the Securities Act (Alberta), the Securities Act (Ontario) R.S.O. 1990 c.5, as amended as at the date hereof and all other applicable securities acts and regulations of each jurisdiction to which the Company is subject as a reporting issuer.
 

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2.19 “Service Provider” means:  

(a) an employee or Insider of the Company or any of its subsidiaries;
 

(b) any other person or company engaged to provide ongoing management or consulting services for the Company or for any entity controlled by the Company; and
 

(c) any person who is providing ongoing management or consulting services to the Company or to any entity controlled by the Company indirectly through a company that is a Service Provider under subsection 2.2 (b).
 

2.20 “Unissued Option Shares” means the number of Shares, at a particular time, which have been allotted for issuance upon the exercise of an Option but which have not been issued, as adjusted from time to time in accordance with the provisions of section 5, such adjustments to be cumulative.
 

2.21 “Vested” means that an Option has become exercisable in respect of a number of Option Shares by the Optionee pursuant to the terms of the Option Agreement.
 

3. GRANT OF OPTIONS  

3.1  Option Terms  

The Board may from time to time authorize the issue of Options to directors, officers and Service Providers of the Company and its subsidiaries. The Option Price under each Option shall be not less than the Market Price on the Grant Date. The Expiry Date for each Option shall be set by the Board at the time of issue of the Option and shall not be more than ten years after the Grant Date. Options shall not be assignable (or transferable) by the Optionee.
 

3.2  Limits on Shares Issuable on Exercise of Options
 

The maximum number of Shares to be reserved for issuance and which may in the aggregate be issuable pursuant to options granted under the Plan shall not exceed 10 % of the outstanding issued capital of the Company on an “evergreen” (reloading) basis pursuant to the policies of the Toronto Stock Exchange (TSX) or such additional amount as may be approved from time to time by the shareholders of the Company. The number of Shares issuable to any one Optionee under the Plan, together with all of the Company’s other previously established or proposed share compensation arrangements, shall not exceed 5% of the total number of issued and outstanding shares on a non-diluted basis. The number of Shares which may be issuable under the Plan, together with all of the Company’s other previously established or proposed share compensation arrangements, to any one Optionee who is an Insider and any Associates of such Insider, shall not exceed 5% of the outstanding issue within a one-year period,
 

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For the purposes of subsection above, “outstanding issue” is determined on the basis of the number of Shares that are outstanding immediately prior to the Share issuance in question, including Shares issued pursuant to Share compensation arrangements over the preceding one-year period.
 

3.3  Option Agreements  

Each Option shall be confirmed by the execution of an Option Agreement. Each Optionee shall have the option to purchase from the Company the Option Shares at the time and in the manner set out in the Plan and in the Option Agreement applicable to that Optionee. The execution of an Option Agreement shall constitute conclusive evidence that it has been completed in compliance with this Plan.
 

4. EXERCISE OF OPTION  

4.1  When Options May be Exercised
 

Subject to sections 4.3 and 4.4, an Option may be exercised to purchase any number of Shares up to the number of Vested Unissued Option Shares at any time after the Grant Date up to 5:00 p.m. local time on the Expiry Date and shall not be exercisable thereafter.
 

4.2  Manner of Exercise  

The Option shall be exercisable by delivering to the Company a notice specifying the number of Shares in respect of which the Option is exercised together with payment in full of the Option Price for each such Share. Upon notice and payment there will be a binding contract for the issue of the Shares in respect of which the Option is exercised, upon and subject to the provisions of the Plan. Delivery of the Optionee’s cheque payable to the Company in the amount of the Option Price shall constitute payment of the Option Price unless the cheque is not honoured upon presentation in which case the Option shall not have been validly exercised.
 

4.3  Vesting of Option Shares  

Subject to the policies of the Exchanges, the Directors may determine and impose terms upon which each Option shall become Vested in respect of Option Shares.
 

4.4  Termination of Employment  

If an Optionee ceases to be a director, officer or Service Provider of the Company or one of the Company’s subsidiaries, his or her Option shall be exercisable as follows:
 

(a)  Death or Disability

If the Optionee ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company, due to his or her death or Disability or, in the case of an Optionee that is a company, the death or Disability of the person who provides management or consulting services to the Company or to any entity controlled by the Company, the Option then held by the Optionee shall be exercisable to acquire Vested Unissued Option Shares at any time up to but not after the Expiry Date or such earlier date as may be prescribed by (i) the Board on the Grant Date; or (ii) the policies of the Exchanges;

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(b)  Termination For Cause

If the Optionee, or in the case of an Option granted to an Optionee who falls under the definition of Service Provider set out in subsection 2.19 (c), the Optionee's employer, ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company as a result of termination for cause, as that term is interpreted by the courts of the jurisdiction in which the Optionee, or, in the case of the Optionee who satisfies the definition of Service Provider set out in subparagraph 2.19 (c), of the Optionee’s employer, is employed or engaged; any outstanding Option held by such Optionee on the date of such termination, whether in respect of Option Shares that are Vested or not, shall be cancelled as of that date.
 

(c)  Early Retirement, Voluntary Resignation or Termination Other than For Cause

If the Optionee or, in the case of an Option granted to an Optionee who falls under the definition of Service Provider set out in subparagraph 2.19 (c), the Optionee’s employer, ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company due to his or her retirement at the request of his or her employer earlier than the normal retirement date under the Company’s retirement policy then in force, or due to his or her termination by the Company other than for cause, or due to his or her voluntary resignation, the Option then held by the Optionee shall be exercisable to acquire Vested Unissued Option Shares at any time up to but not after the Expiry Date or such shorter period as may be prescribed by (i) the Board on the Grant Date; or (ii) the policies of the Exchanges after the Optionee or, in the case of an Option granted to an Optionee who falls under the definition of Service Provider set out in subparagraph 2.19 (c), the Optionee’s employer, ceases to be a director, officer or Service Provider of the Company or a subsidiary of the Company.
 

For greater certainty, an Option that had not become Vested in respect of certain Unissued Option Shares at the time that the relevant event referred to in this paragraph 4.4 occurred, shall not be or become exercisable in respect of such Unissued Option Shares and shall be cancelled.
 

4.5  Effect of a Take-Over Bid  

If a bona fide offer (an “Offer”) for Shares is made to the Optionee or to shareholders of the Company generally or to a class of shareholders which includes the Optionee, which Offer, if accepted in whole or in part, would result in the offeror becoming a control person of the Company, within the meaning of subsection 1 (1) of the Securities Act, the Company shall, immediately upon receipt of notice of the Offer, notify each Optionee of full particulars of the Offer, whereupon all Option Shares subject to such Option will become Vested and the Option may be exercised in whole or in part by the Optionee so as to permit the Optionee to tender the Option Shares received upon such exercise, pursuant to the Offer. However, if:
 

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(a) the Offer is not completed within the time specified therein; or
 

(b) all of the Option Shares tendered by the Optionee pursuant to the Offer are not taken up or paid for by the offeror in respect thereof,
 

then the Option Shares received upon such exercise, or in the case of clause (b) above, the Option Shares that are not taken up and paid for, may be returned by the Optionee to the Company and reinstated as authorized but unissued Shares and with respect to such returned Option Shares, the Option shall be reinstated as if it had not been exercised and the terms upon which such Option Shares were to become Vested pursuant to paragraph 4.3 shall be reinstated. If any Option Shares are returned to the Company under this paragraph 4.5, the Company shall immediately refund the exercise price to the Optionee for such Option Shares

4.6  Acceleration of Expiry Date  

If at any time when an Option granted under the Plan remains unexercised with respect to any Unissued Option Shares, an Offer is made by an offeror, the Directors may, upon notifying each Optionee of full particulars of the Offer, declare all Option Shares issuable upon the exercise of Options granted under the Plan, Vested, and declare that the Expiry Date for the exercise of all unexercised Options granted under the Plan is accelerated so that all Options will either be exercised or will expire prior to the date upon which Shares must be tendered pursuant to the Offer.
 

4.7  Effect of a Change of Control
 

If a Change of Control occurs, all Option Shares subject to each outstanding Option will become Vested, whereupon such Option may be exercised in whole or in part by the Optionee.
 

4.8 Exclusion From Severance Allowance, Retirement  

Allowance or Termination Settlement  

If the Optionee, or, in the case of an Option granted to an Optionee who falls under the definition of Service Provider set out in subsection 2.19 (c), the Optionee’s employer, retires, resigns or is terminated from employment or engagement with the Company or any subsidiary of the Company, the loss or limitation, if any, pursuant to the Option Agreement with respect to the right to purchase Option Shares which were not Vested at that time or which, if Vested, were cancelled, shall not give rise to any right to damages and shall not be included in the calculation of nor form any part of any severance allowance, retiring allowance or termination settlement of any kind whatsoever in respect of such Optionee.
 

4.9  Shares Not Acquired  

Any Unissued Option Shares not acquired by an Optionee under an Option which has expired may be made the subject of a further Option pursuant to the provisions of the Plan.
 

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5. ADJUSTMENT OF OPTION PRICE AND NUMBER OF OPTION SHARES  

5.1  Share Reorganization  

Whenever the Company issues Shares to all or substantially all holders of Shares by way of a stock dividend or other distribution, or subdivides all outstanding Shares into a greater number of Shares, or combines or consolidates all outstanding Shares into a lesser number of Shares (each of such events being herein called a “Share Reorganization”) then effective immediately after the record date for such dividend or other distribution or the effective date of such subdivision, combination or consolidation, for each Option:
 

(a) the Option Price will be adjusted to a price per Share which is the product of:
 

(i) the Option Price in effect immediately before that effective date or record date; and
 

(ii) a fraction, the numerator of which is the total number of Shares outstanding on that effective date or record date before giving effect to the Share Reorganization, and the denominator of which is the total number of Shares that are or would be outstanding immediately after such effective date or record date after giving effect to the Share Reorganization; and
 

(b) the number of Unissued Option Shares will be adjusted by multiplying (i) the number of Unissued Option Shares immediately before such effective date or record date by (ii) a fraction which is the reciprocal of the fraction described in subsection (a)(ii).
 

5.2  Special Distribution  

Subject to the prior approval of the Exchanges, whenever the Company issues by way of a dividend or otherwise distributes to all or substantially all holders of Shares;
 

(a) shares of the Company, other than the Shares;  

(b) evidences of indebtedness;  

(c) any cash or other assets, excluding cash dividends (other than cash dividends which the Board of Directors of the Company has determined to be outside the normal course); or
 

(d) rights, options or warrants;  

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then to the extent that such dividend or distribution does not constitute a Share Reorganization (any of such non-excluded events being herein called a “Special Distribution”), and effective immediately after the record date at which holders of Shares are determined for purposes of the Special Distribution, for each Option the Option Price will be reduced, and the number of Unissued Option Shares will be correspondingly increased, by such amount, if any, as is determined by the Board in its sole and unfettered discretion to be appropriate in order to properly reflect any diminution in value of the Option Shares as a result of such Special Distribution.
 

5.3  Corporate Organization  

Whenever there is:  

(a) a reclassification of outstanding Shares, a change of Shares into other shares or securities, or any other capital reorganization of the Company, other than as described in sections 5.1 or 5.2;
 

(b) a consolidation, merger or amalgamation of the Company with or into another corporation resulting in a reclassification of outstanding Shares into other shares or securities or a change of Shares into other shares or securities; or
 

(c) a transaction whereby all or substantially all of the Company's undertaking and assets become the property of another corporation;
 

(any such event being herein called a “Corporate Reorganization”) the Optionee will have an option to purchase (at the times, for the consideration, and subject to the terms and conditions set out in the Plan) and will accept on the exercise of such option, in lieu of the Unissued Option Shares which he would otherwise have been entitled to purchase, the kind and amount of shares or other securities or property that he would have been entitled to receive as a result of the Corporate Reorganization if, on the effective date thereof, he had been the holder of all Unissued Option Shares or if appropriate, as otherwise determined by the Directors.

5.4  Determination of Option Price and Number of Unissued Option Shares
 

If any questions arise at any time with respect to the Option Price or number of Unissued Option Shares deliverable upon exercise of an Option following a Share Reorganization, Special Distribution or Corporate Reorganization, such questions shall be conclusively determined by the Company’s auditor, or, if they decline to so act, any other firm of Chartered Accountants in Vancouver, British Columbia, that the Directors may designate and who will have access to all appropriate records and such determination will be binding upon the Company and all Optionees.
 

5.5  Regulatory Approval  

Any adjustment to the Option Price or the number of Unissued Option Shares purchasable under the Plan pursuant to the operation of any one of paragraphs 5.1, 5.2 or 5.3 is subject to the approval of the Exchanges and any other governmental authority having jurisdiction.
 

6. MISCELLANEOUS  

6.1  Right to Employment  

Neither this Plan nor any of the provisions hereof shall confer upon any Optionee any right with respect to employment or continued employment with the Company or any subsidiary of the Company or interfere in any way with the right of the Company or any subsidiary of the Company to terminate such employment.
 

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6.2  Necessary Approvals  

The Plan shall be effective only upon the approval of the shareholders of the Company given by way of an ordinary resolution, and subsequent approval or the Plan is required to be obtained on or before the third (3rd) anniversary of the adoption of the Plan and thereafter on or before each successive three year period. Options granted under this Plan prior to such approval shall only be exercised upon the receipt of such approval. The obligation of the Company to sell and deliver Shares in accordance with the Plan is subject to the approval of the Exchanges and any governmental authority having jurisdiction. If any Shares cannot be issued to any Optionee for any reason, including, without limitation, the failure to obtain such approval, then the obligation of the Company to issue such Shares shall terminate and any Option Price paid by an Optionee to the Company shall be immediately refunded to the Optionee by the Company.
 

6.3  Administration of the Plan  

The Directors shall, without limitation, have full and final authority in their discretion, but subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and to make all other determinations deemed necessary or advisable in respect of the Plan. Except as set forth in section 5.4, the interpretation and construction of any provision of the Plan by the Directors shall be final and conclusive. Administration of the Plan shall be the responsibility of the appropriate officers of the Company and all costs in respect thereof shall be paid by the Company.
 

6.4  Amendments to the Plan  

The Directors may from time to time, subject to applicable law and to the prior approval, if required, of the Exchanges or any other regulatory body having authority over the Company or the Plan, suspend, terminate or discontinue the Plan at any time, or amend or revise the terms of the Plan or of any Option granted under the Plan and the Option Agreement relating thereto in such respects as they may consider advisable, provided that no such amendment, revision, suspension, termination or discontinuance shall in any manner adversely affect any Option previously granted to an Optionee under the Plan without the consent of that Optionee.   Except as otherwise stated below, in this Section 6.4, any amendments to the Plan or options granted thereunder will be subject to the approval of the shareholders.

Notwithstanding any other provision of the Plan and this Section 6.4, subject to applicable law and to the prior approval, if required, of the Exchanges or any other regulatory body having authority over the Company or the Plan, the Board (or any committee thereof) may, at any time, amend or revise the terms of the Plan or any Option granted hereunder and the Option Agreement relating thereto, without further action by its shareholders, so as to:
 

(a)

ensure that the Options granted hereunder will comply with any provisions respecting stock options in the income tax and other laws in force in any country or jurisdiction of which an Optionee to whom an Option has been granted may from time to time be resident or a citizen;

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(b)

change vesting provisions of an Option or the Plan;

(c)

make a change in the termination provisions of an Option or the Plan or a change to the date on which an Option may be exercised which does not entail an extension beyond the original Expiry Date; and

(d)

make amendments to correct typographical or clerical errors or to add clarifying statements to ensure the intent and meaning of an Option or the Plan is properly expressed.

6.5  Form of Notice  

A notice given to the Company shall be in writing, signed by the Optionee and delivered to the head business office of the Company.
 

6.6  No Representation or Warranty
 

The Company makes no representation or warranty as to the future market value of any Shares issued in accordance with the provisions of the Plan.
 

6.7  Compliance with Applicable Law
 

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

6.8  No Assignment  

Options are not assignable, nor may an Optionee assign any of his or her rights under the Plan.
 

6.9  Rights of Optionees  

An Optionee shall have no rights whatsoever as a shareholder of the Company in respect of any of the Unissued Option Shares (including, without limitation, voting rights or any right to receive dividends, warrants or rights under any rights offering).
 

6.10  Conflict  

In the event of any conflict between the provisions of this Plan and an Option Agreement, the provisions of this Plan shall govern.
 

6.11  Governing Law, Rules & Regulatory Policies
 

The Plan and each Option Agreement issued pursuant to the Plan shall be governed by the laws of the Province of British Columbia and, in any action concerning the rights of an Optionee and the obligations of the Company under the Plan, each Optionee attorns to the exclusive jurisdiction of courts therein. In addition to the laws of the Province of British Columbia, each Option Agreement is subject to the rules and regulation of the Exchanges and all applicable securities laws and regulations of each jurisdiction in which the Company is a reporting issuer.
 

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6.12  Time of Essence  

Time is of the essence of this Plan and of each Option Agreement. No extension of time will be deemed to be or to operate as a waiver of the essentiality of time.
 

6.13  Entire Agreement  

This Plan and the Option Agreement sets out the entire agreement between the Company and the Optionees relative to the subject matter hereof and supersedes all prior agreements, undertakings and understandings, whether oral or written.
 

 

 

 

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SCHEDULE “A”

NEW GOLD INC. - STOCK OPTION PLAN  

OPTION AGREEMENT  

This Option Agreement is entered into between New Gold Inc. (“the Company”) and the Optionee named below pursuant to the Company Stock Option Plan (the “Plan”), a copy of which is attached hereto, and confirms that:
 

1. on ______________(the “Grant Date”);  

2. ________________________ (the “Optionee”);  

3. was granted the option (the “Option”) to purchase _______ Common Shares (the “Option Shares”) of the Company;
 

4. for the price (the “Option Price”) of $_______ per share;
 

5. which shall be exercisable (“Vested”) in whole or in part in the following amounts and in compliance with the following conditions:
 

______________________________________________________________________________

6. terminating on the _____________ (the “Expiry Date”);
 

all on the terms and subject to the conditions set out in the Plan. For greater certainty, once Option Shares have become Vested, they continue to be exercisable until the termination or cancellation thereof as provided in this Option Agreement and the Plan.
 

By signing this Option Agreement, the Optionee acknowledges that the Optionee has read and understands the Plan and agrees to the terms and conditions of the Plan and this Option Agreement.
 

IN WITNESS WHEREOF the parties hereto have executed this Option Agreement as of the
 

______ day of __________, 20__.  

	
 

     
	NEW GOLD INC.
    
	__________________________________
    	 
	SIGNATURE OF OPTIONEE  
    	By: 

        Authorized Signatory

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