Document:

ex102to8k04637_01112011.htm

Exhibit 10.2

 

STAND-ALONE STOCK OPTION AGREEMENT

 

THIS STAND-ALONE STOCK OPTION AGREEMENT (this “Agreement”) dated as of the 11th day of January, 2011 by and between FalconStor Software, Inc., a Delaware corporation (the “Company”), and James P. McNiel (the “Optionee”).

 

RECITALS

 

WHEREAS, the Optionee and the Company have executed that certain Employment Agreement dated January 11, 2011 (the “Employment Agreement”);

 

WHEREAS, pursuant to the terms of the Employment Agreement, on the date hereof the Compensation Committee (the “Committee”) of the Company’s Board of Directors (the “Board”) granted to the Optionee, subject to stockholder approval of this Agreement, a nonqualified stock option to purchase all or any part of 1,220,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), subject to and upon the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual promises and covenants made herein and the mutual benefits to be derived herefrom and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:

 

1. Grant of Option.  This Agreement evidences the Committee’s grant to the Optionee of the right and option to purchase, subject to and on the terms and conditions set forth herein, and subject to stockholder approval of this Agreement, all or any part of 1,220,000 shares of the Company’s Common Stock (the “Shares”) at an exercise price per Share equal to the closing price of the Common Stock on the NASDAQ Global Market on the date hereof (the “Option”), exercisable from time to time, subject to the provisions of this Agreement, prior to 5:00 p.m., New York City time, the ten (10) year anniversary of the date hereof, unless earlier terminated pursuant to Section 8.  If stockholder approval of this Agreement is not obtained on or prior to the first anniversary of the date of the Employment Agreement, this Agreement and the grant made hereunder will be deemed void ab initio.

 

2. Exercisability of Option.  Subject to Section 1 and Section 8 hereof, the Option will vest and become exercisable in accordance with the following schedule: thirty three percent (33%) on the first anniversary of the date of the Employment Agreement; thirty three percent (33%) on the second anniversary of the date of the Employment Agreement; and thirty-four percent (34%) on January 1 of the third year following the date of the Employment Agreement.  For the avoidance of doubt, assuming stockholder approval of this Agreement, the Option will vest and become exercisable as follows: thirty three percent (33%) on January 11, 2012; thirty three percent (33%) on January 11, 2013, and thirty-four percent (34%) on January 1, 2014.

 

  

  

  

 

3. Method of Exercise of Option.

 

3.1 Method of Exercise.  The Option to the extent then exercisable may be exercised in whole or in part by giving written notice to the Company specifying the number of Shares to be purchased, accompanied by payment in full of the purchase price, in cash, or by check or such other instrument as may be acceptable to the Committee.  As determined by the Committee, in its sole discretion, at or after grant, payment in full or in part may be made at the election of the Optionee (a) in the form of shares of Common Stock owned by the Optionee (based on the Fair Market Value (as defined below) of the shares) that are not the subject of any pledge or security interest, (b) in the form of shares of Common Stock withheld by the Company from the shares of Common Stock otherwise to be received with such withheld shares of Common Stock having a Fair Market Value equal to the exercise price, or (c) by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any shares surrendered to the Company is at least equal to such exercise price.  Notwithstanding the forgoing, the Optionee may not take any actions that are prohibited by the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated by the Securities and Exchange Commission or any agency thereunder.  The Optionee shall have the right to dividends and other rights of a stockholder with respect to the Shares purchased upon exercise of the Option at such time as the Optionee (a) has given written notice of exercise and has paid in full for such Shares, and (b) has satisfied such conditions that may be imposed by the Company with respect to the withholding of taxes.

 

3.2 Fair Market Value.  “Fair Market Value” means the closing price on the date of grant on the principal securities exchange on which shares of Common Stock are listed (if the shares of Common Stock are so listed), or, if not so listed or regularly quoted, the mean between the closing bid and asked prices of publicly traded shares of Common Stock in the over the counter market, or, if such bid and asked prices shall not be available, as reported by any nationally recognized quotation service selected by the Company, or as determined by the Committee in a manner consistent with the provisions of the United States Internal Revenue Code of 1986, as amended. Anything in this Section 3.2 to the contrary notwithstanding, in no event shall the purchase price of a share of Common Stock be less than the minimum price permitted under the rules and policies of any national securities exchange on which the shares of Common Stock are listed.

 

4. Tax Withholding.  Upon any exercise of the Option in whole or in part, the Company shall have the right at its option to (a) require the Optionee (or personal representative or beneficiary, as the case may be) to pay or provide for payment of the amount of any taxes which the Company may be required to withhold with respect to the Option or (b) deduct from any amount payable in cash the amount of any taxes which the Company may be required to withhold with respect to such cash payment. In any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock, the Board may in its sole discretion grant to the Optionee the right to elect, pursuant to such rules and subject to such conditions as the Board may establish, to have the Company reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares valued at their then Fair Market Value to satisfy such withholding obligation.

 

5. No Transferability; Limited Exception to Transfer Restrictions.  The Option is not transferable and may be exercised solely by the Optionee during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution.  The Committee, in its sole discretion, may permit a transfer of the Option in whole or in part to (a) a trust for the benefit of the Optionee, (b) a member of the Optionee’s immediate family (or a trust for his or her benefit) or (c) pursuant to a domestic relations order. Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject to execution, attachment or similar process, the Option in whole or in part contrary to the provisions hereof shall be void and ineffective and shall give no right to the purported transferee.

 

  

  

  

 

6. No Employment Rights.  Nothing contained in this Agreement shall confer upon the Optionee any right to continue in the employ or other service of the Company or any of its subsidiaries, nor constitute any contract or agreement of employment or other service, nor shall interfere in any way with the right of the Company to change the Optionee’s compensation or other benefits or to terminate the employment of the Optionee, with or without cause; provided, however, that nothing contained in this Agreement shall adversely affect any independent contractual right of the Optionee, including but not limited to the Optionee’s rights under the Employment Agreement, without his consent thereto.

 

7. Regulations.  This Agreement and the grant and exercise of the Option hereunder, and the obligation of the Company to sell and deliver shares under the Option shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies, national securities exchanges and interdealer quotation systems as may be required.  Additionally, notwithstanding any other provision in this Agreement, the Option may not be exercised in whole or in part unless and until the Shares to be issued upon the exercise thereof have been registered under the Securities Act of 1933, as amended, and applicable state securities laws, or are, in the opinion of counsel to the Company, exempt from such registration in the United States.  The Company shall not be under any obligation to register under applicable federal or state securities laws any Shares to be issued upon the exercise of the Option granted hereunder in order to permit the exercise of the Option in whole or in part and the issuance and sale of the Shares subject to the Option, although the Company may in its sole discretion register such Shares at such time as the Company shall determine.  If the Company chooses to comply with such an exemption from registration, the Shares to be issued upon the exercise of the Option may, at the direction of the Committee, bear an appropriate restrictive legend restricting the transfer or pledge of the Shares represented thereby, and the Committee may also give appropriate stop transfer instructions with respect to the Shares to the Company's transfer agent.  The Company undertakes that following stockholder approval of this Agreement the Company will seek to register the resale of the Shares.  Additionally, the Optionee understands and acknowledges that he is subject to the Company’s rules regarding insider trading contained in the Company’s Code of Conduct or otherwise.

 

8. Adjustment and Termination upon Certain Events.

 

8.1 Adjustments.  If there shall occur any extraordinary dividend or other extraordinary distribution in respect of the Common Stock (whether in the form of cash, Common Stock, other securities, or other property), or any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, reorganization, merger, combination, consolidation, split-up, spin-off, combination, repurchase, or exchange of Common Stock or other securities of the Company, or there shall occur any similar, unusual or extraordinary corporate transaction or event in respect of the Common Stock or a sale of substantially all the assets of the Company as an entirety, then the Board shall, in such manner and to such extent (if any) as it deems appropriate and equitable (a) proportionately adjust any or all of (i) the number and type of shares of Common Stock (or other securities) which thereafter may be made the subject of the Option, (ii) the number, amount and type of shares of Common Stock (or other securities or property) subject to the Option, (iii) the grant, purchase, or exercise price of the Option, (iv) the securities, cash or other property deliverable upon exercise of the Option, or (v) the performance standards appropriate to the Option, or (b) in the case of an extraordinary dividend or other distribution, recapitalization, reclassification, merger, reorganization, consolidation, combination, sale of assets, split up, exchange, or spin off, make provision for a cash payment or for the substitution or exchange of the Option or the cash, securities or property deliverable to the Optionee based upon the distribution or consideration payable to holders of the Common Stock of the Company upon or in respect of such event. In any of such events, the Board may take such action sufficiently prior to such event if necessary to permit the Optionee to realize the benefits intended to be conveyed with respect to the underlying shares in the same manner as is available to stockholders generally.

 

  

  

  

 

8.2 Change of Control.  In the event there is a Change of Control (as defined under the Employment Agreement), any outstanding unvested Options will automatically vest and become exercisable on the date of such Change of Control in accordance with the terms of the Employment Agreement and the 2005 Key Executive Severance Protection Plan.

 

8.3 Effect of Termination of Employment.  

 

(a) Termination by Death.  Unless otherwise determined by the Committee, if the Optionee’s employment with or service to the Company terminates by reason of death, the Option may thereafter be exercised, to the extent then exercisable (or on such accelerated basis as the Committee shall determine at or after grant), by the legal representative of the estate or by the legatee of the Optionee under the will of the Optionee, for a period of one (1) year after the date of such death or until the expiration of the stated term of the Option as provided under this Agreement, whichever period is shorter.

 

(b) Termination by Reason of Disability.  Unless otherwise determined by the Committee, if the Optionee’s employment with or service to the Company terminates by reason of total and permanent disability, the Option may thereafter be exercised, to the extent it was exercisable at the time of termination due to disability (or on such accelerated basis as the Committee shall determine at or after grant), but may not be exercised after three (3) months after the date of such termination of employment or service or the expiration of the stated term of the Option, whichever period is shorter; provided, however, that, if the Optionee dies within such three (3) month period, the Option shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of one (1) year after the date of such death or for the stated term of the Option, whichever period is shorter.

 

(c) Termination by Reason of Retirement.  Unless otherwise determined by the Committee, if the Optionee’s employment with or service to the Company terminates by reason of Normal or Early Retirement (as such terms are defined below), the Option may thereafter be exercised to the extent it was exercisable at the time of such Normal or Early Retirement (or on such accelerated basis as the Committee shall determine at or after grant), but may not be exercised after three (3) months after the date of such termination of employment or service or the expiration of the stated term of the Option, whichever date is earlier; provided, however, that, if the Optionee dies within such three (3) month period, the Option shall thereafter be exercisable, to the extent to which it was exercisable at the time of death, for a period of one (1) year after the date of such death or for the stated term of the Option, whichever period is shorter.  For purposes of this paragraph, “Normal Retirement” shall mean retirement from active employment with the Company on or after the normal retirement date specified in the applicable Company pension plan or if no such pension plan, age 65, and “Early Retirement” shall mean retirement from active employment with the Company pursuant to the early retirement provisions of the applicable Company pension plan or if no such pension plan, age 55.

 

  

  

  

 

(d) Other Termination.  Unless otherwise determined by the Committee, if the Optionee’s employment with or service to the Company for any reason other than death, disability or Normal or Early Retirement, the Option shall thereupon terminate, except that the portion of the Option that was exercisable on the date of such termination of employment or service may be exercised for the lesser of thirty (30) days after the date of termination or the balance of the Option’s term if the Optionee’s employment or service with the Company is terminated by the Company without Cause (as defined under the Employment Agreement).  The transfer of the Optionee from the employ of or service to the Company to the employ of or service to a subsidiary, or vice versa, or from one subsidiary to another, shall not be deemed to constitute a termination of employment or service for purposes of this Agreement.

 

9. Limitation of Liability.  No member of the Committee, or any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to this Agreement, and all members of the Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.

 

10. Shares to be Reserved.  The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement.

 

11. Assignment.  Except as expressly provided herein, neither this Agreement nor any of the rights or obligations hereunder may be assigned or delegated by any party hereto without the express written consent of the other party hereto, provided, however, that no consent will be required for the assignment to any successor to all or substantially all of the Company’s assets or business (whether by purchase, merger, consolidation or otherwise).

 

12. Notices.  All notices provided for in this Agreement will be in writing signed by the party giving such notice sent by (i) registered or certified mail, return receipt requested, (ii) any prepaid overnight courier delivery service then in general us, (iii) hand or (iv) facsimile transmission or similar means of communication if such transmission of such notice is confirmed immediately by any of the other means set forth above, as follows:

 

If to the Company:                               c/o FalconStor Software, Inc.

2 Quadrangle, Suite 2S01

Melville, New York 11747

Attention: Chief Financial Officer

 

  

  

  

If to the Employee:                               James P. McNiel

18 Central Drive

Melville, New York 11545

or at such other address as will be indicated to either party in writing.  Notice of change of address will be effective only upon receipt. A notice provided in the manner required herein will be deemed given : (i) if delivered personally, upon delivery; (ii) if sent by overnight courier, on the first business day after it is sent; (iii) if mailed, three business days after mailing; and (iv) if sent by fax, upon actual receipt of the fax or confirmation thereof (whichever is first).

 

13. Waiver.  The Company’s failure to enforce any provision of this Agreement will not constitute a waiver of its right to enforce such provision.  The parties reserve the right to waive by mutual written consent for a specific period and under specific conditions any provision of this Agreement, provided that such waiver shall be limited to the period and conditions specified by mutual written consent and shall in no way constitute a general waiver, or be considered as evidence of any given interpretation of any provision so waived.

 

14.  Governing Law; Jurisdiction.  This Agreement will be governed and construed in accordance with the laws of the State of New York applicable to agreements executed and to be performed wholly within such State, without regard to any principles of conflicts of law. Each party agrees that any action or proceedings relating to this Agreement seeking injunctive relief or enforcement of an arbitration award may be instituted against such party in any appropriate court in the State of New York and hereby irrevocably submits to the jurisdiction of the State and Federal courts of the State of New York and waives any claim of forum nonconveniens with respect thereto.

 

15.  Descriptive Headings.  The Section headings contained herein are for reference purposes only and will not in any way affect the meaning or interpretation of this Agreement.

 

16. Severability.  If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.

 

17. Entire Agreement.  The parties hereto acknowledge that each has read this Agreement, understands it, and agrees to be bound by its terms.  The parties further agree that this Agreement, the Employment Agreement and any modifications made pursuant hereto and thereto constitute the complete and exclusive written expression of the terms of the agreement between the parties, and supercede all prior or contemporaneous proposals, oral or written, understandings, representations, conditions, warranties, covenants, and all other communications between the parties relating to the subject matter of this Agreement.  This Agreement may not be amended, changed or modified absent a writing signed by both parties.  In the event of any conflict between the terms of this Agreement and the terms of the Employment Agreement, the terms of the Employment Agreement will prevail.

 

18. Counterparts.  This Agreement may be executed in one or more counterparts, which, together, will constitute one and the same agreement.

 

  

  

  

 

19. Compliance With Laws.  Notwithstanding anything else contained herein to the contrary, this Agreement, the granting and vesting of the Option and the offer, issuance and delivery of Shares under this Agreement are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered in respect of this Agreement will be subject to such restrictions, and to any restrictions the Company may require to preserve a pooling of interests under generally accepted accounting principles, and the person acquiring such securities will, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements.

 

[Signature Page Follows]

 

  

  

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

 

	  	
FALCONSTOR SOFTWARE, INC.

	  	  
	  	
By:

	

/s/ Eli Oxenhorn

	  	  	
Eli Oxenhorn

	  	  	
Chairman of the Board of Directors

	  	  
	  	  
	  	

/s/ James P. McNiel

	  	
James P. McNielexh4-1_stockplan.htm

 

 

 

 

 

 

EXHIBIT 4.1

 

STOCK OPTION PLAN, AS AMENDED

 

  

  

  

MILL CITY INTERNATIONAL CORPORATION

(the “Company”)

STOCK OPTION PLAN

1.           Purpose.  The purpose of this Stock Option Plan (the “Plan”) is to advance the interests of the Company and its shareholders by enhancing the ability of the Company to attract and retain the best available talent and to encourage the highest level of performance by senior officers, key employees, directors and consultants of the Company and of its subsidiaries through ownership of Common Shares in the Company.  This form of Plan supersedes and replaces the terms and conditions of previously granted stock options of the Company (other than their exercise price and expiry date).

2.           Defined Terms.  For the purposes of this Plan, the following terms shall have the following meanings:

	
  

	
(a)

	
“Applicable Laws” means all relevant provisions of law, including, without limitation, the Securities Act and the rules and regulations thereunder of Alberta, and the jurisdictions in which Optionees may reside, and all policies, notices, instruments and blanket orders in force from time to time that are applicable to the Company and the Optionees;

	
  

	
(b)

	
“Board” means the Board of Directors of the Company or any committee duly empowered or authorized to grant options under this Plan;

	
  

	
(c)

	
“Common Shares” means common shares without par value in the capital of the Company providing such class is listed on the Exchange;

	
  

	
(d)

	
“Consultant” means, in relation to the Company, a Person or Consultant Company, other than an Employee, Senior Officer or a Director of the Company, that:

	
  

	
(i)

	
is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Company or to an affiliate of the Company, other than services provided in relation to a Distribution;

	
  

	
(ii)

	
provides the services under a written contract between the Company or an affiliate of the Company and the Person or the Consultant Company;

	
  

	
(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 an affiliate of the Company; and

	
  

	
(iv)

	
has a relationship with the Company or an affiliate of the Company that enables the Person to be knowledgeable about the business and affairs of the Company;

	
  

	
(e)

	
“Consultant Company” means a company or partnership of which the Consultant is an employee, shareholder or partner;

	
  

	
(f)

	
“Director” means a director of the Company as may be elected or appointed from time to time;

	
  

	
(g)

	
“Discounted Market Price” has the meaning assigned by Exchange Policy 1.1;

	
  

	
(h)

	
“Disinterested Shareholder Approval” means approval by a majority of the votes cast by all the Company’s shareholders at a duly constituted shareholders’ meeting, excluding votes attached to shares beneficially owned by a Director, Senior Officer, Employee, Management Company Employee or Consultant, and also includes a company, of which 100% of the share capital is beneficially owned by one or more persons who is a service provider;

  

  

  

-2-

 

	
  

	
(i)

	
“Distribution” means the sale of securities from the Company’s treasury, the sale of securities by a purchaser who acquired securities pursuant to a prospectus exemption, other than in accordance with the resale restrictions of Applicable Laws or the Exchange Policies, or the sale of securities by a control person other than in accordance with the resale restrictions of Applicable Laws or the Exchange Policies;

	
  

	
(j)

	
“Employee” means:

	
  

	
(i)

	
a Person who is considered an employee of the Company or its Subsidiary under the Income Tax Act (Canada) (i.e. for whom income tax, employment insurance and CPP deductions must be made at source);

	
  

	
(ii)

	
a Person who works full-time for the Company or its Subsidiary providing services normally provided by an employee and who is subject to the same control and direction by the Company over the details and methods of work as an employee of the Company, but for whom income tax deductions are not made at source; or

	
  

	
(iii)

	
a Person who works for the Company or its Subsidiary 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 over the details and methods of work as an employee of the Company, but for whom income tax deductions are not made at source;

	
  

	
(k)

	
“Exchange” means the TSX Venture Exchange and any successor thereto;

	
  

	
(l)

	
“Exchange Policies” means the policies of the Exchange, as amended from time to time;

	
  

	
(m)

	
“Investor Relations Activities” means any activities, by or on behalf of the Company or a shareholder of the Company, that promote or reasonably could be expected to promote the purchase or sale of securities of the Company, but does not include:

	
  

	
(i)

	
the dissemination of information provided, or records prepared, in the ordinary course of business of the Company

	
  

	
A.

	
to promote the sale of products or services of the Company; or

	
  

	
B.

	
to raise public awareness of the Company,

	
  

	
that cannot reasonably be considered to promote the purchase or sale of securities of the Company;

	
  

	
(ii)

	
activities or communications necessary to comply with the requirements of

	
  

	
A.

	
applicable Laws,

	
  

	
B.

	
the Exchange Policies or the by-laws, rules or other regulatory instruments of any other self regulatory body or exchange having jurisdiction over the Company;

	
  

	
(iii)

	
communications by a publisher of, or writer for, a newspaper, magazine or business or financial publication, that is of general and regular paid circulation, distributed only to subscribers to it for value or to purchasers of it, if

	
  

	
A.

	
the communication is only through the newspaper, magazine or publication, and

  

  

  

 

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B.

	
the publisher or writer receives no commission or other consideration other than for acting in the capacity of publisher or writer; or

	
  

	
(iv)

	
activities or communications that may be otherwise specified by the Exchange;

	
  

	
(n)

	
“Management Company Employee” means an individual employed by a Person providing management services to the Company, which are required for the ongoing successful operation of the business enterprise of the Company, but excluding a Person engaged in Investor Relations Activities;

	
  

	
(o)

	
“Market Price” means the last closing price per Common Share on the Exchange prior to the Board granting the option;

	
  

	
(p)

	
“Optionee” means a Person to whom an option to acquire Common Shares has been granted under the terms of the Plan;

	
  

	
(q)

	
“Person” means company or an individual;

	
  

	
(r)

	
“Senior Officer” means a duly appointed senior officer of the Company or any Subsidiary;

	
  

	
(s)

	
“Subsidiary” means any corporation, partnership, joint venture or other entity in which the Company owns or controls, directly or indirectly, not less than 50% of the total voting power or equity interests, and includes a subsidiary of a Subsidiary;

	
  

	
(t)

	
“Tier 1 Issuer” has the same meaning ascribed thereto under the Exchange Policies; and

	
  

	
(u)

	
“Tier 2 Issuer” has the same meaning ascribed thereto under the Exchange Policies.

 

3.          Administration.  The Plan will be administered by the Board.  The Board will have authority, consistent with the Plan:

	
  

	
(a)

	
to grant options priced in accordance with this Plan;

	
  

	
(b)

	
to prescribe the form of certificate evidencing grants of options to Optionees and any other instruments required under the Plan and to change such forms from time to time;

	
  

	
(c)

	
to adopt, amend and rescind rules and regulations for the administration of the Plan, provided however, that except as specified in Section 6(c), if the Common Shares of the Company are listed on the Exchange, no amendment which would increase the maximum number of Common Shares for which options may be granted will be made by the Board without the approval of the Exchange;

	
  

	
(d)

	
to interpret and administer the Plan and to decide all questions and settle all controversies that may arise in connection with the Plan, all of which decisions of the Board will be final and conclusive;

	
  

	
(e)

	
to determine who is eligible to receive options pursuant to the eligibility criteria of Section 5; and

	
  

	
(f)

	
to make all other determinations necessary or advisable for administration of the Plan.

 

4.          Compliance with Laws.  Transactions under the Plan are intended to comply with the Applicable Laws and the Exchange Policies.  To the extent any provision of the Plan or action by the Board fails to so comply, it will be deemed null and void, to the extent permitted by law and deemed advisable by the Board.

 

5.          Eligibility.  The Board may from time to time authorize the grant of options to anyone who is at the time of such authorization:

 

 

  

  

  

-4-

 

	
  

	
(a)

	
a Director, Senior Officer, Employee or a company that is wholly-owned by a Director, Senior Officer or Employee; or

	
  

	
(b)

	
subject to the Applicable Laws and the Exchange Policies, a Consultant or a Consultant Company.

 

6.          Shares Subject to the Plan.

	
  

	
(a)

	
Subject to adjustment as provided in Section 6(d):

	
  

	
(i)

	
the total number of Common Shares to be issued or allotted and reserved for issuance from time to time upon the exercise of options granted under the Plan shall not exceed 4,900,000 Common Shares, subject to the applicable rules and regulations of all regulatory authorities to which the Corporation is subject, including the Exchange;

	
  

	
(ii)

	
no more than an aggregate of 5% of the issued and outstanding Common Shares may be granted to any one individual in any 12 month period, unless the Company is a Tier 1 Issuer and has obtained Disinterested Shareholder Approval;

	
  

	
(iii)

	
no more than an aggregate of 2% of the issued and outstanding Common Shares may be granted to any one Consultant in any 12 month period; and

	
  

	
(iv)

	
no more than an aggregate of 2% of the issued and outstanding Common Shares may be granted to Employee conducting Investor Relations Activities, in any 12 month period.

	
  

	
(b)

	
If any option granted under the Plan expires unexercised or terminates by reason of dismissal of the Optionee for cause, or otherwise is lawfully cancelled without having been exercised, the number of Common Shares that were issuable thereunder will be returned to the Plan within the limits set forth in Section 6(a) and will be eligible for re-issue.

	
  

	
(c)

	
No options can be granted under the Plan if the Company is designated “Inactive” (as defined in the Exchange Policies) by the Exchange.

	
  

	
(d)

	
In the event of a stock split, consolidation or reclassification or other change in the Company’s capital, other than an issue of Common Shares or by way of stock dividend, the number and exercise price of options will be adjusted by the Board to preserve the rights of the participants in this Plan substantially proportionate to those existing prior to such event.

 

7.          Terms and Conditions of Options.  All options granted under the Plan will be subject to the following terms and conditions:

	
  

	
(a)

	
The per-share exercise price of each option will be set by the Board at the time of grant and will be not less than the Discounted Market Price of a Common Share;

	
  

	
(b)

	
An option may be exercised no later than five years from the date it was granted, unless the Company is, at the time of the grant, a Tier 1 Issuer, in which case such option may be exercised no later than 10 years from the date it was granted;

	
  

	
(c)

	
With the exception of any options granted to a Consultant who performs Investor Relations Activities, all options granted to each Optionee under the Plan will become vested on the grant date, or at such other time as may be established by the Board at the time of the grant in compliance with the Exchange Policies.  The Board will, at the time of grant, determine the vesting date or dates of any options granted to a Consultant who performs Investor Relations Activities provided that such options must vest in stages over 12 months with no more than 1⁄4 of the options vesting in any three-month period.

 

  

  

  

-5-

	
  

	
(d)

	
Optionees will not exercise options until they have vested;

	
  

	
(e)

	
Each option granted to an Optionee will be evidenced by the stock option agreement attached as Appendix “A” to this Plan;

	
  

	
(f)

	
Any exercise of an option must be in writing, signed by the Optionee and delivered or mailed to the Company and payment in full as provided below for the number of Common Shares for which the option is exercised;

	
  

	
(g)

	
The price of Common Shares purchased on the exercise of an option must be paid in full by cash or certified cheque, payable to the Company;

	
  

	
(h)

	
No option or any interest therein will be transferable or assignable otherwise than by will or pursuant to the laws of succession;

	
  

	
(i)

	
An Optionee will have no rights as a shareholder of the Company with respect to any Common Shares covered by any option until such time as and to the extent only that such option has been exercised;

	
  

	
(j)

	
If any Optionee ceases to be eligible for a grant of options under this Plan for any reason (a “Termination”), except the death of an Optionee or by reason of retirement pursuant to an established retirement policy of the Board or dismissal from employment or service for cause, all options granted to the Optionee under the Plan and then held by the Optionee will, to the extent such options were vested and exercisable immediately prior to Termination, continue to be exercisable by the Optionee for a period of 90 days following Termination or until the expiration date of the option if earlier;

	
  

	
(k)

	
If Termination is by reason of retirement pursuant to an established retirement policy of the Board, all options held by the retiring Optionee will become vested and exercisable, to the extent no already vested and exercisable immediately prior to retirement, and they continue to be exercisable until their original expiration date;

	
  

	
(l)

	
Notwithstanding Section 7(j), any options granted to an Optionee who is engaged in Investor Relations Activities will expire within 30 days after such Optionee ceases to be employed to provide Investor Relations Activities;

	
  

	
(m)

	
In the event of the death of an Optionee, all options granted to the Optionee under the Plan and held by the Optionee immediately before death will, to the extent such options were vested and exercisable at that time, continue to be exercisable by the legal representative of the Optionee for a period of 1 year following the death of the Optionee or until the expiration date of the option if earlier;

	
  

	
(n)

	
If the Company wishes to reduce the exercise price of any outstanding options held by any person who is an “insider” as defined by the Exchange, the Company shall first obtain such disinterested shareholder approval as may be required by the Exchange; and

	
  

	
(o)

	
In the case of an Optionee being dismissed from employment or service for cause, such Optionee’s Options, whether or not vested at the date of dismissal will immediately terminate without right to exercise the same.

 

8.          Legend Requirements.

	
  

	
(a)

	
All options granted to Optionees pursuant to the Plan and any Common Shares issued on the exercise of such options will bear a legend stipulating any resale restrictions as may be prescribed by the Applicable Laws.

 

  

  

  

-6-

	
  

	
(b)

	
Further, if the Company is a Tier 2 issuer, or the exercise price is set below the Market Price of the Common Shares on the Exchange, the certificate will bear a legend stipulating that the optioned shares are subject to a 4 month Exchange hold period commencing the date of the grant.

 

9.          Tax Consequences of the Plan.  The Company does not assume responsibility for the income or other tax consequences for Optionees or persons eligible under the Plan and they are advised to consult with their own tax advisors.

 

10.          Effect of Certain Corporate Transactions.  In the event of a consolidation or merger in which the Company is not the surviving company, or in the event its outstanding shares are converted into securities of another entity or exchanged for other consideration, or in the event of an offer for Common Shares being made by a third party that constitutes a take-over bid as that term is defined in the Securities Act (Alberta) or would constitute a take-over bid as that term is defined in the Securities Act (Alberta) but for the fact that the offeree is not in British Columbia, all outstanding options will immediately vest and all options granted to the optionee under this Plan and held by the Optionee will continue to be exercisable after the Company has sent notice to each of the Optionees to exercise the options only for a period of 30 days from the date of such notice or until the expiration of the option, if earlier.  After such time, the options will terminate, provided, however, that if such transaction does not close, all such options will be deemed not to have vested nor expired.

 

11.          Bona Fide Employee or Consultant.  In respect of any options granted to Employees or Consultants pursuant to the Plan, the Board shall make a determination that such Optionee is, at the date of the grant of the options, a bona fide Employee or Consultant, as the case may be.

 

12.          Effective Date of Plan.  The Plan will become effective on the date it receives acceptance by the Exchange, including any shareholder approval required by the Exchange.

 

13.          Restrictions on Corporate Optionee.  If the Optionee is not an individual, the Optionee will not, for the duration of time that the Optionee is the holder of options granted pursuant to this Plan, effect or permit any transfer of ownership or option of shares of the Optionee or allot and issue further shares of any class of shares of the Optionee to any Person.

 

14.          Amendments to Plan.  The Board reserves the right, in its absolute discretion, to at any time amend, modify or terminate the Plan.  Subject to Section 15, amendments to the Plan, from time to time, will become effective on the later of the date of the approval of such amendments by the Board and the date of the approval of such amendments by the Exchange.

 

15.          Prior Approval.  The Plan, and any subsequent amendments thereto, are subject to the prior approval of the Exchange and ratification by the shareholders of the Company at each annual general meeting of the Company, and accordingly so long as the Common Shares are listed on the Exchange, no option granted under the Plan shall be exercised prior to these approvals having been obtained by the Company.

 

16.          Governing Law.  The Plan will be governed by and construed in accordance with the laws of the Province of British Columbia.

**************************

  

  

  

AMENDMENT NO. 1 TO THE STOCK OPTION PLAN

OF MILL CITY GOLD CORP.

(the “Company”)

 

WHEREAS the Directors of the Company previously approved a stock option plan (“Stock Option Plan”) accepted by the TSX Venture Exchange on July 28, 2004 subject to shareholder approval and was approved by the shareholders of the Company on August 23, 2004;

 

AND WHEREAS the Company is desirous of amending the Stock Option Plan, subject to shareholder and TSX Venture Exchange approval, by increasing the number of shares that may be issued under the Stock Option Plan to 5,200,000 shares;

 

NOW THEREFORE this Amendment witnesseth that:

 

1.          The Stock Option Plan is hereby amended as follows:

	
  

	
(a)

	
By deleting the reference to 4,900,000 shares in Paragraph 6(a)(i) and substituting 5,200,000 shares.

 

2.          All other terms and conditions of the Stock Option Plan shall remain in full force and effect.

 

Approved by the Board of Directors on April 6, 2005.

  

  

  

SCHEDULE “A”

To the Consent Resolutions of the Directors of

Mill City Gold Corp. dated as of February 10, 2006

AMENDMENT NO. 2 TO THE STOCK OPTION PLAN

OF MILL CITY GOLD CORP.

(the “Company”)

 

WHEREAS the Directors of the Company previously approved a stock option plan (“Stock Option Plan”) which was accepted by the TSX Venture Exchange on July 28, 2004 subject to shareholder approval which was approved by the shareholders of the Company on August 23, 2004 and subsequently amended on April 6, 2005;

 

AND WHEREAS the Company is desirous of amending the Stock Option Plan, subject to shareholder and TSX Venture Exchange approval, by increasing the number of shares that may be issued under the Stock Option Plan to 7,260,000 shares;

 

NOW THEREFORE this Amendment witnesseth that:

 

1.          The Stock Option Plan is hereby amended as follows:

	
  

	
(a)

	
By deleting the reference to 5,200,000 shares in Paragraph 6(a)(i) and substituting 7,260,000 shares.

 

2.          All other terms and conditions of the Stock Option Plan shall remain in full force and effect.

 

Approved by the Board of Directors on February 10, 2006.

  

  

  

AMENDMENT NO. 3 TO THE STOCK OPTION PLAN

OF MILL CITY GOLD CORP.

(the “Company”)

 

WHEREAS the Directors of the Company previously approved a stock option plan (“Stock Option Plan”) which was accepted by the TSX Venture Exchange on July 28, 2004 subject to shareholder approval which was approved by the shareholders of the Company on August 23, 2004 and subsequently amended on April 6, 2005 and February 10, 2006 respectively;

 

AND WHEREAS the Company is desirous of amending the Stock Option Plan, subject to shareholder and TSX Venture Exchange approval, by increasing the number of shares that may be issued under the Stock Option Plan to 7,707,841 shares;

 

NOW THEREFORE this Amendment witnesseth that:

 

1.          The Stock Option Plan is hereby amended as follows:

	
  

	
(a)

	
By deleting the reference to 7,260,000 shares in Paragraph 6(a)(i) and substituting 7,707,841 shares.

 

2.          All other terms and conditions of the Stock Option Plan shall remain in full force and effect.

 

Approved by the Board of Directors on June 18, 2007.

  

  

  

SCHEDULE “A”

To the Consent Resolutions of the Directors of

Mill City Gold Corp. dated as of January 29, 2008

AMENDMENT NO. 4 TO THE STOCK OPTION PLAN

OF MILL CITY GOLD CORP.

(the “Company”)

 

WHEREAS the Directors of the Company previously approved a stock option plan (“Stock Option Plan”) which was accepted by the TSX Venture Exchange on July 28, 2004 subject to shareholder approval which was approved by the shareholders of the Company on August 23, 2004 and subsequently amended on April 6, 2005, February 10, 2006 and June 18, 2007 respectively;

 

AND WHEREAS the Company is desirous of amending the Stock Option Plan, subject to shareholder and TSX Venture Exchange approval, by increasing the number of shares that may be issued under the Stock Option Plan to 8,534,841 shares;

 

NOW THEREFORE this Amendment witnesseth that:

 

1.          The Stock Option Plan is hereby amended as follows:

	
  

	
(a)

	
By deleting the reference to 7,707,841 shares in Paragraph 6(a)(i) and substituting 8,534,841 shares.

 

2.          All other terms and conditions of the Stock Option Plan shall remain in full force and effect.

 

Approved by the Board of Directors on January 29, 2008.

  

  

  

SCHEDULE “A”

To the Consent Resolutions of the Directors of

Mill City Gold Corp. dated as of June 10, 2008

AMENDMENT NO. 5 TO THE STOCK OPTION PLAN

OF MILL CITY GOLD CORP.

(the “Company”)

 

WHEREAS the Directors of the Company previously approved a stock option plan (“Stock Option Plan”) which was accepted by the TSX Venture Exchange on July 28, 2004 subject to shareholder approval which was approved by the shareholders of the Company on August 23, 2004 and subsequently amended on April 6, 2005, February 10, 2006 and June 18, 2007 respectively;

 

AND WHEREAS the Company amended the Stock Option Plan on January 29, 2008, subject to shareholder and TSX Venture Exchange approval, by increasing the number of shares that may be issued under the Stock Option Plan to 8,534,841 shares;

 

AND WHEREAS the Company is desirous of further amending the Stock Option Plan, subject to shareholder and TSX Venture Exchange approval, by increasing the number of shares that may be issued under the Stock Option Plan from 8,534,841 shares to 10,084,841 shares;

 

NOW THEREFORE this Amendment witnesseth that:

 

1.          The Stock Option Plan is hereby amended as follows:

	
  

	
(a)

	
By deleting the reference to 8,534,841 shares in Paragraph 6(a)(i) and substituting 10,084,841 shares.

 

2.          All other terms and conditions of the Stock Option Plan shall remain in full force and effect.

 

Approved by the Board of Directors on June 10, 2008.

  

  

  

AMENDMENT NO. 6 TO THE STOCK OPTION PLAN

OF MILL CITY GOLD CORP.

(the “Company”)

 

WHEREAS the Directors of the Company previously approved a stock option plan (“Stock Option Plan”) which was accepted by the TSX Venture Exchange on July 28, 2004 subject to shareholder approval which was approved by the shareholders of the Company on August 23, 2004 and subsequently amended on April 6, 2005, February 10, 2006, June 18, 2007, January 29, 2008 and June 10, 2008 respectively;

 

AND WHEREAS the Company is desirous of amending the Stock Option Plan, subject to shareholder and TSX Venture Exchange approval, by increasing the number of shares that may be issued under the Stock Option Plan to 13,358,841 shares;

 

NOW THEREFORE this Amendment witnesseth that:

 

1.          The Stock Option Plan is hereby amended as follows:

	
  

	
(a)

	
By deleting the reference to 10,084,841 shares in Paragraph 6(a)(i) and substituting 13,358,841 shares.

 

2.          All other terms and conditions of the Stock Option Plan shall remain in full force and effect.

 

Approved by the Board of Directors on October 29, 2010.

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