Document:

ex10-1_280451.htm

EXHIBIT 10.1

 

FORM OF

RESTRICTED STOCK AGREEMENT

(Performance Share Award)

 

This Restricted Stock Agreement (this “Agreement”) is entered into as of ________________ (the “Grant Date”) between Comstock Mining Inc. (the “Corporation”) and __________ (the “Participant”) under the Comstock Mining Inc. 2011 Equity Incentive Plan (the “Plan”).

 

BACKGROUND

 

The Plan allows the Corporation to grant stock-based incentives to employees and other persons. The Committee has determined that it would be in the best interest of the Corporation and its stockholders to make the grant set forth herein to the Participant.

 

In consideration of the covenants contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1           Whenever capitalized terms are used in this Agreement, they shall have the meanings set forth in this Agreement or, if not defined in this Agreement, as set forth in the Plan. A copy of the Plan has been made available to the Participant, and the terms of the Plan are incorporated herein.

 

ARTICLE II

 

GRANT OF RESTRICTED SHARES

AS A PERFORMANCE SHARE AWARD

 

2.1           Grant of Restricted Shares. The Participant is hereby granted __________ shares of Common Stock subject to the restrictions and conditions set forth in this Agreement. References in this Agreement to “Restricted Shares” mean the shares of Common Stock granted hereby and any cash, securities, rights or property distributed in respect thereof or issued in exchange therefor (which shall be subject to the same restrictions and provisions as such shares).

 

2.2           Value of Restricted Shares. The Fair Market Value of the Restricted Shares at the close of trading on the Grant Date was $             per share.  The Committee authorized the grant of the Restricted Shares on the Grant Date.

 

2.3           Additional Documents.  In connection with this Agreement, the Participant shall deliver to the Corporation: (i) the representation letter in the form attached, duly executed by the Participant, (ii) if the Participant desires to make an election under Code Section 83(b) (a “Section 83(b) Election”) with respect to the Restricted Shares (which, if it is made, must be made within 30 days following the Grant Date), such documents related thereto as the Corporation may request to be made, including a copy of the Section 83(b) Election in the form

 

  

  

  

provided by the Corporation and (iii) the attached stock powers as to each tranche of Restricted Shares subject to vesting under this Agreement, duly executed by the Participant.

 

2.4           Employment Agreement.  The Participant agrees that the Award evidenced by this Agreement constitutes full satisfaction of any promises or commitments, whether under an employment agreement or otherwise, by the Company to provide equity awards to the Participant.

 

ARTICLE III

 

VESTING OF RESTRICTED SHARES

 

3.1           General.  All of the Restricted Shares are unvested. Restricted Shares shall vest at such times as described in, and to the extent provided in, Section 3.2 or 3.3, in each case subject to the limitations set forth in Section 3.4.  All unvested Restricted Shares shall be forfeited as set forth in Section 3.4 and shall be non-Transferable as set forth in Section 4.2. All vested Restricted Shares shall become Transferable at the time they first vest, although:

 

(i)           Transferability may be subject to pre-clearance, blackout, registration and other restrictions under the Company’s insider trading and other compliance policies and procedures;

 

(ii)           Transferability may be restricted under Section 4.3 until all Withholding Requirements (as defined herein) are satisfied; and

 

(iii)           Transfers by executive officers should be reviewed in advance to determine if there would be any potential liability for short-swing profits under Section 16(b) of the Exchange Act.

 

3.2           Vesting.  Unvested Restricted Shares shall vest upon the occurrence of the events and in the amounts described below, so long as you are employed by the Company on the date set forth below with respect to such occurrence:

 

(i)           one-fifth (1/5) of the Restricted Shares shall vest on the date of certification by the Committee of the attainment of both (A) the validation through an independent external report (that is, a National Instrument 43-101 Report or its successor (an “NI 43-101”)) of qualified resources (at least measured and indicated) and reserves (probable and proven) of the Company aggregating 1,000,000 ounces of gold equivalent and (B) the completion of the first metal pour from the mining operations (that is, the mine and heap leach are operational by the Company);

 

(ii)           one-fifth (1/5) of the Restricted Shares shall vest on the date of certification by the Committee of the attainment of both (A) the validation through an NI 43-101 of qualified resources (at least measured and indicated) and reserves (probable and proven) of the Company aggregating 1,500,000 ounces of gold equivalent and (B) the completion of three months (that is, ninety (90) days) of consecutive mining operations (that is, the mine and heap leach are operational) at an annual production rate of 15,000 ounces of gold equivalent;

 

  

  

  

(iii)           one-fifth (1/5) of the Restricted Shares shall vest on the date of certification by the Committee of the attainment of both (A) the validation through an NI 43-101 of qualified resources (at least measured and indicated) and reserves (probable and proven), in each case including those previously validated, of the Company aggregating 2,000,000 ounces of gold equivalent and (B) the completion of three months (that is, ninety (90) days) of consecutive mining operations at an annual production rate of 17,500 ounces of gold equivalent; and

 

(iv)           two-fifths (2/5) of the Restricted Shares shall vest on the date certification by the Committee of the attainment of both (A) the validation through an NI 43-101 of qualified resources (at least measured and indicated) and reserves (probable and proven), in each case including those previously validated, of the Company aggregating 3,250,000 ounces of gold equivalent and (B) the completion of three months (that is, ninety (90) days) of consecutive mining operations at an annual production rate of 20,000 ounces of gold equivalent.

 

3.3           Change in Control.  Unvested Restricted Shares (including Restricted Shares forfeited pursuant to Section 3.4(ii) or 3.4(iii)) shall vest upon the occurrence of a Change in Control if (i) the Participant is employed on the date of the Change in Control or (ii) the Participant’s employment with the Company shall have been terminated by the Company (other than due to Cause or Detrimental Conduct or due to the Participant’s death) within 6 months prior to a Change in Control and circumstances clearly demonstrate that the termination was in connection with or in anticipation of a Change in Control.

 

3.4           Effect of Termination of Employment and Other Events on Vesting; Forfeiture of Unvested Restricted Shares. Unless otherwise determined by the Committee and subject to Section 6.2:

 

(i)           all unvested Restricted Shares shall cease to vest and shall be forfeited upon the time of notification of termination of the Participant’s employment by the Company for Cause or Detrimental Conduct or the date of the Participant’s death, if not earlier forfeited;

 

(ii)           on the thirtieth day following the date on which the Participant’s employment is terminated by the Company other than for Cause or Detrimental Conduct, including due to the Participant’s Disability, the portion of the Restricted Shares that would vest if the next objective to be achieved for vesting had been achieved shall vest (as long as the Participant has executed a release in favor of the Company by such thirtieth day) and all other unvested Restricted Shares shall cease to vest and be forfeited on such thirtieth day (including those that would vest but for the Participant’s failure to timely execute a release), but subject to the application of Section 3.3, if not earlier forfeited;

 

(iii)           all unvested Restricted Shares shall cease to vest and shall be forfeited upon the date on which the Participant terminates his employment with the Company for any reason other than Disability, but subject to the application of Section 3.3, if not earlier forfeited; or

 

(iv)           all unvested Restricted Shares shall cease to vest and shall be forfeited upon the 5th anniversary of the Grant Date, if not earlier forfeited.

 

  

  

  

3.5           Effective Date of Termination of Employment or Retirement. For purposes hereof, the date of termination of employment means the last date of actual employment, even if a different date is used for administrative convenience in connection with employee retirement, benefit or welfare plans, except that, in the case of the termination of the Participant’s employment by the Company for Cause or Detrimental Conduct, the date of termination means the time of notification of termination.

 

3.6           Certification.  The Committee shall certify that goals described in any clause of Section 3.2 (other than the occurrence of a Change in Control, which need not be certified) have been attained within 45 days following the attainment thereof.

 

ARTICLE IV

 

PROCEDURES AFFECTING RESTRICTED SHARES

 

4.1           Delivery of Restricted Shares.  The Restricted Shares will be delivered to the Participant, at the Corporation’s election, either (A) in certificated form or (B) in book entry or other electronic form by causing the Restricted Shares to be credited to an account for the Participant maintained by the transfer agent for the Common Stock or by a brokerage firm or other agent designated by the Corporation to assist in the administration of the Plan (the “Participant’s Account”) and, if delivered in certificated form, will be delivered subject to such escrow or similar arrangements as may be designated by the Corporation.  The escrow or other agent, if any, in connection therewith shall be designated by the Corporation and may, but need not be, the Corporation, its transfer agent or counsel.  The Restricted Shares will be delivered promptly after the Grant Date and, in any event, no later than the date on which the Restricted Shares vest.  Upon forfeiture of any Restricted Shares, such transfer agent, brokerage firm, escrow agent or other agent will be instructed to remove such Restricted Shares from Participant’s Account, or such escrow or other account as the case may be, and return them to the Corporation.  Each book entry, escrow or other arrangement relating to Restricted Shares may include such restrictive instructions and arrangements as the Corporation may deem convenient, expedient, necessary or appropriate relating to the restrictions under this Agreement and the Plan, applicable securities, tax or other laws, compliance policies and procedures, or rules of any securities exchange or market.

 

4.2           Transfer of Restricted Shares.  Unvested Restricted Shares cannot be Transferred to any Person without the prior written consent of the Corporation. Any attempt to effect a Transfer of unvested Restricted Shares without such consent shall be null and void.  Unless the issuance thereof shall have been previously registered or such resale shall be permissible under Rule 144 (subject to any volume limitations thereunder), the Corporation will use reasonable efforts to register the resale of the vested Restricted Shares under the Securities Act, so long as the Corporation is permitted to do so on Form S-3 or S-8 or a similar abbreviated form and subject to the terms and conditions set forth in the Plan and such other reasonable or customary terms and conditions as be may be imposed by the Corporation (including those relating to indemnification by the Participant for errors in or omissions from information provided by the Participant).

 

4.3           Withholding of Taxes.

 

  

  

  

(i)           The Company shall withhold or deduct from any or all payments or amounts due to or held for the Participant, whether due from the Company or held in the Participant’s Account or otherwise, an amount (the “Withholding Amount”) equal to all taxes (including social security and medicare, and other governmental charges of any kind as well as income and other taxes) required to be withheld or deducted with respect to any and all taxable income and other amounts attributable to the Restricted Shares (the “Withholding Requirement”).

 

(ii)           The Withholding Amount shall be determined by the Company.

 

(iii)           The timing of withholding or deduction shall be determined by the Company; provided, however, that, if such taxes are required to be paid to a tax or other governmental authority before such withholding or deduction is made, then the Company shall pay such taxes when due as agent for the Participant and shall be entitled to reimbursement therefor from the Participant, including reimbursement through the direct withholding of payments due to the Participant.

 

(iv)           The Corporation may restrict Transfer of any or all vested Restricted Shares until all Withholding Requirements are satisfied.

 

(v)           Unless the Participant has made or makes a timely Section 83(b) Election, the Participant authorizes the Corporation, directly or indirectly through one or more brokerage firms or other agents, to: sell, on his or her behalf and for his or her account, from time to time and at any time as the Corporation or such brokerage firm or agent may deem necessary, appropriate, convenient or expedient to satisfy each Withholding Requirement or to reimburse the Company in respect thereof, a sufficient number of Restricted Shares (as determined by the Corporation or such brokerage firm or agent) so that the net proceeds from such sale equal or exceed the applicable Withholding Amount; and use the net proceeds to satisfy such Withholding Requirement (with any excess net proceeds to be paid to or deposited in an account of the Participant).

 

(vi)           In connection with any sale of Restricted Shares pursuant to this Section 4.3, the Participant agrees that:

 

(A)           such sale may be aggregated with sales of restricted stock granted to other participants under the Plan or other plans of the Company;

 

(B)           such aggregated sales may be made from time to time in one or more installments at any time;

 

(C)           such aggregated sales may be made over time as the Corporation or such brokerage firm or agent may deem necessary, appropriate, convenient or expedient with a view toward avoidance or minimization of disruption of the market for the Common Stock, administrative convenience, minimization of costs and expenses or other factors; and

 

(D)           the net proceeds from such aggregated sales and the sale prices of the shares sold may be allocated among such Restricted Shares and other securities and the

 

  

  

  

Participant and such other participants as the Corporation or such brokerage firm or agent may deem reasonable.

 

(vii)           The Participant understands that:

 

(A)           different Withholding Requirements may arise at different times based on time of delivery or vesting of Restricted Shares, tax elections or other factors;

 

(B)           different Withholding Requirements may be based on different values attributable to the Restricted Shares at such times or otherwise based on applicable tax laws, changes in the financial performance or prospects of the Corporation, changes in market or economic conditions or other factors;

 

(C)           it may not be practicable or permissible to sell Restricted Shares to satisfy each Withholding Requirement at the time due because of rules and requirements of such brokerage firm or agent, administrative rules and requirements of the Company, restrictions under insider trading and other compliance policies and procedures, potential liability for short-swing profits under Section 16(b) of the Exchange Act, applicable securities, tax or other laws, applicable rules of any securities exchange or market, or other factors; and

 

(D)           as a result, Restricted Shares may be sold at times and values that differ, potentially significantly, from those applicable to such Withholding Requirement and that such differences can result in gains or losses, potentially significant, relative to those values and capital gains and losses for tax purposes in addition to the taxes described in Section 4.3(i).

 

(viii)           The Participant hereby appoints each officer and assistant officer of the Corporation to be the Participant’s true and lawful agent, proxy and attorney-in-fact, with full power of substitution and re-substitution (each, an “attorney-in-fact” and, together, the “attorneys-in-fact”), to take, cause to be taken and authorize the taking of any and all actions (including the giving of instructions to sell and the approval of confirmations), to incur, cause to be incurred and authorize the incurrence of any and all costs and expenses (including escrow fees and brokerage commissions), to undertake, cause to be undertaken and authorize the undertaking of any and all obligations and to execute, acknowledge, file, publish and deliver, cause to be executed, acknowledged, filed, published and delivered and authorize the execution, acknowledgement, filing, publication and delivery of any and all agreements, instruments and documents (including stock powers, account agreements and related documents, and wire transfer instructions) which any such attorney-in-fact may deem necessary, appropriate, convenient or expedient to hold and keep safe the Restricted Shares and to sell Restricted Shares, on behalf and for the account of the Participant, to generate net proceeds to satisfy any and all Withholding Requirements, to use net proceeds in satisfaction thereof and to otherwise give effect to the intent and purposes of this Article IV, all in the name of the Participant, any such attorney-in-fact, the Corporation, any Subsidiary  and such brokerage firm or agent and all at such times, in such manners, in such amounts, on such exchanges or markets, on such terms, through such brokers, dealers and accounts and otherwise as any such attorney-in-fact may determine in his or her sole and absolute discretion, and hereby grants to each attorney-in-fact

 

  

  

  

the full power and authority to do any and all things necessary, convenient, expedient or appropriate in connection therewith. This power of attorney shall not be affected in any manner by reason of the execution, at any time, of other powers of attorney by the Participant in favor of persons other than the attorneys-in-fact named herein and shall not be affected by the subsequent death, Disability or incompetence of the Participant. This power of attorney is irrevocable and coupled with an interest and shall remain in effect until all Withholding Requirements have been fully and unconditionally satisfied. All persons dealing with any of the attorneys-in-fact may assume that this power of attorney has not been revoked and may be relied upon.

 

(ix)           The Participant acknowledges and agrees that neither the Company, such brokerage firm or agent nor any of their respective affiliates, control persons, partners, directors, officers, employees, representatives or agents shall have any liability or obligation for any losses, damages, costs or expenses of any kind or under any theory arising out of or in connection with any action taken or omitted to be taken or any delay in taking any action pursuant to or contemplated by this Article IV (including the determination of any Withholding Amount or the time when any Withholding Requirement is required to be satisfied or any sale of or delay in selling or failure to sell or the price, terms or conditions of sale of any or all of the Restricted Shares), including any liability for any claim that the Participant could have made more or lost less in connection therewith or for any capital gain or loss due to the difference in time between the triggering of a Withholding Requirement and the resale of Restricted Shares in respect thereof or for violations of insider trading or other laws or for incurrence of liability for short-swing profits under Section 16(b) of the Exchange Act, except to the extent that a court of competent jurisdiction determines by final and nonappealable judgment that any such losses, damages, costs or expenses resulted from actions taken or omitted to be taken by them in bad faith or from their gross negligence or willful misconduct. References in this Section 4.3 to “selling” and correlative terms include all activities related thereto, including placement and execution of sell orders, selection of brokers and dealers, delivery of share certificates, receipt of proceeds and payment of fees and commissions.

 

(x)           The provisions hereof regarding sale of Restricted Shares to satisfy Withholding Requirements are also intended to constitute a trading plan within the meaning of Rule 10b5-1 under Securities Act.

 

(xi)           The Participant accepts this Agreement and the Restricted Shares subject to, and agrees to assume, the limitations, risks and responsibilities inherent with respect to the Restricted Shares, including those mentioned in this Agreement.

 

ARTICLE V

 

FORFEITURE

 

5.1           Forfeiture.  Notwithstanding anything contained herein to the contrary, if the Participant engages in Detrimental Conduct, then the Committee shall have the right, in its sole and good faith judgment, to require the forfeiture or return of any or all of the unvested and vested Restricted Shares then held by the Participant or his affiliates or related parties, the payment to the Company of any or all proceeds from any sale or other disposition of vested Restricted Shares or take any other actions in respect of any or all of the Restricted Shares or this

 

  

  

  

Agreement, so long as such action does not cause the Restricted Shares to be subject to Section 409A.

 

ARTICLE VI

 

MISCELLANEOUS

 

6.1           Notices. All notices required or permitted to be given pursuant to this Agreement shall be given by written notice, shall be transmitted by personal delivery, registered or certified mail (return receipt requested, postage prepaid), nationally recognized courier service, email or facsimile, and shall be addressed to the intended recipient at its address set forth herein.  Each notice transmitted in the manner described herein shall be deemed to have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), the mailing label (if transmitted by courier service), the affidavit of the messenger (if transmitted by personal delivery) or the answerback, call back or other receipt (if transmitted by email or facsimile) or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason.  A party may designate a new address to which such notices shall thereafter be transmitted by giving written notice to that effect to the other party.  The current addresses for providing notice to a party hereunder are:

 

(i)           If to the Company, to the following address:

 

 

	
  

	
Comstock Mining Inc.

	
  

	
PO Box 1118

	
  

	
1200 American Flat Road

	
  

	
Virginia City, NV 89440

	
  

	
Attn: [_______________]

Telecopy: [_______________]

Email: [_______________]

 

(ii)           If to the Participant, to his or her most recent primary residential or business address as shown on the records of the Company.

 

6.2           Entire Agreement, Amendments and Conflicting Agreements. This Agreement, together with the Plan and the attachments hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and cancels and supersedes all of the previous or contemporaneous contracts, representations, warranties and commitments of any kind (whether oral or written) by or between the parties with respect to the subject matter hereof. This Agreement may be amended by a written instrument executed by the parties which specifically states that it is amending this Agreement or by a written instrument executed by the Corporation (i) in accordance with the Plan or (ii) if such amendment is not materially adverse to the Participant. Subject to the next sentence, if there is a conflict or inconsistency between this Agreement and the Plan, the Plan shall govern.

 

6.3           Governing Law and Jury Trial.  THE VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED

 

  

  

  

BY THE LAWS OF THE STATE OF NEVADA (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE INTERNAL LAWS OF THE STATE OF NEVADA).    EACH PARTY HERETO, ON BEHALF OF ITSELF, ITS AFFILIATES AND ITS AND THEIR REPRESENTATIVES, WAIVES TRIAL BY JURY IN ANY SUCH CLAIM OR PROCEEDING.

 

6.4           Internal Revenue Code Section 409A.  The parties recognize that certain provisions of this Agreement may be affected by Section 409A and, to the extent there are ambiguities in the Agreement or the Plan, any such ambiguities shall be construed in a manner that complies with Section 409A.

 

6.5           Counterparts. This Agreement may be executed in any number of counterparts and shall become effective at such time as counterparts shall have been executed and delivered by both parties, regardless of whether both parties have executed the same counterpart.  It shall not be necessary when making proof of this Agreement to account for any counterparts other than a sufficient number of counterparts which, when taken together, contain signatures of both parties.  A facsimile or PDF of a signed original shall be as effective as delivery of such original.

 

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties.

	
PARTICIPANT

	
COMSTOCK MINING INC.

	
 

 

By:_______________________________

Name:

 

	
 

 

_____________________________

Name:

Title:

  

  

  

Representation Letter

Comstock Mining Inc.

PO Box 1118

1200 American Flat Road

Virginia City, NV 89440

I hereby represent and warrant to Comstock Mining Inc. (the “Corporation”) as follows:

(a)       I understand that the acquisition of the Restricted Shares granted to me pursuant to that Restricted Stock Agreement (Performance Award Version) as of _________________ has not been approved or disapproved by the Securities and Exchange Commission or any administrative agency charged with the administration of the securities laws of any state.  I have had access to all material information about the Corporation, its business, opportunities, risks and uncertainties and an investment therein.  All documents, records and books pertaining to this investment have been made available upon reasonable notice for inspection by me or my representative, counsel, accountant or business advisor.

 

(b)       I am able to bear the economic risks of this investment, am able to hold this investment for an indefinite period of time, am presently able to afford a complete loss of this investment and have no need for liquidity in this investment.

 

(c)       The Restricted Shares will be acquired in good faith solely for my own account and are not being acquired with a view to or for the resale, distribution, subdivision or fractionalization thereof.  I have no contract, undertaking, understanding, agreement or arrangement, formal or informal, with any person to sell, transfer or pledge to any person any of the Restricted Shares or any part thereof and have no present plans to enter into any such contract, undertaking, understanding, agreement or arrangement.

 

(d)       I understand that the legal consequences of the representations set forth herein are that I must bear the economic risks of this investment for an indefinite period of time because the Restricted Shares have not been registered under the Securities Act or the securities law of any state and, therefore, cannot be sold unless they are subsequently so registered or an exemption from such registration is available.

 

(e)       I understand that no federal or state agency has passed on or made any recommendation or endorsement of the Restricted Shares and that the Corporation is relying on the truth and accuracy of the representations and warranties made by me in offering the Restricted Shares to me without having first registered the Restricted Shares under the Securities Act and any applicable state securities laws.

 

(f)       No representations or guarantees have been made to me as to the returns or performance of the Corporation, or with respect to any other matter, by any of the members of the board of directors of the Corporation or any other person affiliated with the Corporation.

 

	
 

 

___________________________

Date

	
 

_______________________________

Participant Signature

	
_______________________________

Print Participant Name

  

  

  

STOCK POWER

 

	
FOR VALUE RECEIVED,

	  

PLEASE INSERT SOCIAL SECURITY OR OTHER

    IDENTIFYING NUMBER OF ASSIGNEE

	
hereby sells, assigns and transfers unto Comstock Mining Inc.

	  

 

	 	 Shares of the Common Stock of	 

 

standing in his name on the books of said Corporation and represented by Certificate No(s).

 

	 	 herewith and does hereby irrevocably constitute and appoint

 

	 

 

attorney to transfer the said stock on the books of said Corporation with full power of

substitution in the premises.

 

 

 

	 Date:	 

 

 

	 	 	 
	 	 Participant Signature	 
	 	 	 
	 	 	 
	 	 Participant Signature	 

  

  

  

STOCK POWER

 

	
FOR VALUE RECEIVED,

	  

PLEASE INSERT SOCIAL SECURITY OR OTHER

    IDENTIFYING NUMBER OF ASSIGNEE

	
hereby sells, assigns and transfers unto Comstock Mining Inc.

	  

 

	 	 Shares of the Common Stock of	 

 

standing in his name on the books of said Corporation and represented by Certificate No(s).

 

	 	 herewith and does hereby irrevocably constitute and appoint

 

	 

 

attorney to transfer the said stock on the books of said Corporation with full power of

substitution in the premises.

 

 

  

 

	 Date:	 

 

 

	 	 	 
	 	 Participant Signature	 
	 	 	 
	 	 	 
	 	 Participant Signature	 

  

  

  

STOCK POWER

 

	
FOR VALUE RECEIVED,

	  

PLEASE INSERT SOCIAL SECURITY OR OTHER

    IDENTIFYING NUMBER OF ASSIGNEE

	
hereby sells, assigns and transfers unto Comstock Mining Inc.

	  

 

	 	 Shares of the Common Stock of	 

 

standing in his name on the books of said Corporation and represented by Certificate No(s).

 

	 	 herewith and does hereby irrevocably constitute and appoint

 

	 

 

attorney to transfer the said stock on the books of said Corporation with full power of

substitution in the premises.

 

 

  

 

	 Date:	 

 

 

	 	 	 
	 	 Participant Signature	 
	 	 	 
	 	 	 
	 	 Participant Signature	 

  

  

  

STOCK POWER

 

	
FOR VALUE RECEIVED,

	  

PLEASE INSERT SOCIAL SECURITY OR OTHER

    IDENTIFYING NUMBER OF ASSIGNEE

	
hereby sells, assigns and transfers unto Comstock Mining Inc.

	  

 

	 	 Shares of the Common Stock of	 

 

standing in his name on the books of said Corporation and represented by Certificate No(s).

 

	 	 herewith and does hereby irrevocably constitute and appoint

 

	 

 

attorney to transfer the said stock on the books of said Corporation with full power of

substitution in the premises.

 

 

  

 

	 Date:	 

 

 

	 	 	 
	 	 Participant Signature	 
	 	 	 
	 	 	 
	 	 Participant Signaturecps_s1a-ex1005.htm

 

 Exhibit 10.5

 

CPS 2006 LONG-TERM EQUITY INCENTIVE PLAN

 

PART I - PURPOSE, ADMINISTRATION AND RESERVATION OF SHARES

 

      SECTION 1.  Purpose of the Plan. The purposes of this Plan are (a) to attract and retain the most talented Employees, officers and Directors available, and (b) to promote the growth and success of the Company’s business, (i) by aligning the long-term interests of Employees, officers and Directors with those of the shareholders by providing an opportunity to acquire an interest in the Company and (ii) by providing both rewards for exceptional performance and long term incentives for future contributions to the success of the Company and its Subsidiaries.

 

      The Plan permits the grant of Incentive Stock Options, Nonqualified Stock Options, Restricted Stock, Restricted Stock Units, or SARs, at the discretion of the Committee and as reflected in the terms of the Award Agreement. Each Award will be subject to conditions specified in the Plan, such as continued employment or satisfaction of performance criteria.

 

      This Plan will serve as a framework for the Committee to establish sub-plans or procedures governing the grants to employees, officers, directors and consultants. The awards granted under the Former Plan shall continue to be administered under the Former Plan until such time as those options are exercised, expire or become unexercisable for any reason.

 

      SECTION 2.  Definitions. As used herein, the following definitions shall apply:

 

      (a) “Active Status” shall mean (i) for employees, the absence of any interruption or termination of service as an employee, (ii) for Directors, that the Director has not been removed from the Board for cause (as determined by the Company’s shareholders), and (iii) for Consultants, the absence of any interruption, expiration, or termination of such person’s consulting or advisory relationship with the Company or any Subsidiary or the occurrence of any termination event as set forth in such person’s Award Agreement. Active Status shall not be considered
interrupted (A) for an employee in the case of sick leave, maternity leave, infant care leave, medical emergency leave, military leave, or any other leave of absence properly taken in accordance with the policies of the Company or any applicable Subsidiary as may be in effect from time to time, and (B) for a Consultant, in the case of any temporary interruption in such person’s availability to provide services to the Company or any Subsidiary which has been granted in writing by an authorized officer of the Company. Whenever a mandatory severance period applies under applicable law with respect to a termination of service as an employee, Active Status shall be considered terminated upon such Employee’s receipt of notice of termination in whatever form prescribed by applicable law.

 

      (b) “Award” shall mean any award or benefits granted under the Plan, including Options, Restricted Stock, Restricted Stock Units, and SARs.

 

      (c) “Award Agreement” shall mean a written or electronic agreement between the Company and the Participant setting forth the terms of the Award.

 

      (d) “Beneficial Ownership” shall have the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.

 

      (e) “Board” shall mean the Board of Directors of the Company.

 

      (f) “Change of Control” shall mean the first day that any one or more of the following conditions shall have been satisfied:

 

	  	
      (i) the sale, liquidation or other disposition of all or substantially all of the Company’s assets in one or a series of related transactions;

	  	
      (ii) an acquisition (other than directly from the Company) of any outstanding voting securities by any person, after which such person (as the term is used for purposes of Section 13(d) or 14(d) of the Exchange Act) has Beneficial Ownership of twenty-five percent (25%) or more of the then outstanding voting securities of the Company, other than a Board approved transaction;

	  	
      (iii) during any 36-consecutive month period, the individuals who, at the beginning of such period, constitute the Board (“Incumbent Directors”) cease for any reason other than death to constitute at least a majority of the members of the Board; provided however that except as set forth in this Section 2(f)(iii), an individual who becomes a member of the Board subsequent to the beginning of the 36-month period, shall be deemed to have satisfied such 36-month requirement and shall be deemed an Incumbent Director if such Director was elected by or on the recommendation of or with the approval of at least two-thirds of the Directors who then
qualified as Incumbent Directors either actually (because they were Directors at the beginning of such period) or by operation of the provisions of this section; if any such individual initially assumes office as a result of or in connection with either an actual or threatened solicitation with respect to the election of Directors (as such terms are used in Rule 14a-12(c) of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitations of proxies or consents by or on behalf of a person other than the Board, then such individual shall not be considered an Incumbent Director; or

  

 

  

	  	
      (iv) a merger, consolidation or reorganization of the Company, as a result of which the shareholders of the Company immediately prior to such merger, consolidation or reorganization own directly or indirectly immediately following such merger, consolidation or reorganization less than fifty percent (50%) of the combined voting power of the outstanding voting securities of the entity resulting from such merger, consolidation or reorganization.

      

      (g) “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

      (h) “Committee” shall mean the Compensation Committee appointed by the Board.

 

      (i) “Common Stock” shall mean the common stock of the Company, no par value per share.

 

      (j) “Company” shall mean CPS, a California corporation, and any successor thereto.

 

      (k) “Consultant” shall mean any person, except an employee, engaged by the Company or any Subsidiary of the Company, to render personal services to such entity, including as an advisor, pursuant to the terms of a written agreement.

 

      (l) “Director” shall mean a member of the Board.

 

      (m) “Disability” shall mean (i) in the case of a Participant whose employment with the Company or a Subsidiary is subject to the terms of an employment or consulting agreement that includes a definition of “Disability” as used in this Plan shall have the meaning set forth in such employment or consulting agreement during the period that such employment or consulting agreement remains in effect; and (ii) in all other cases, the term “Disability” as used in this Plan shall have the same meaning as set forth under the Company’s long-term disability plan
applicable to the Participant as may be amended from time to time, and in the event the Company does not maintain any such plan with respect to a Participant, a physical or mental condition resulting from bodily injury, disease or mental disorder which renders the Participant incapable of continuing his or her usual and customary employment with the Company or a Subsidiary, as the case may be, for a period of not less than 120 days or such other period as may be required by applicable law.

 

      (n) “Effective Date” shall mean the date on which the Company’s shareholders have approved this Plan in accordance with applicable Nasdaq rules.

 

      (o) “Employee” shall mean any person, including an officer, who is a common law employee of, receives remuneration for personal services to, is reflected on the official human resources database as an employee of, and is on the payroll of the Company or any Subsidiary of the Company. A person is on the payroll if he or she is paid from or at the direction of the payroll department of the Company, or any Subsidiary of the Company. Persons providing services to the Company, or to any Subsidiary of the Company, pursuant to an agreement with a staff leasing organization, temporary workers engaged
through or employed by temporary or leasing agencies, and workers who hold themselves out to the Company, or a Subsidiary to which they are providing services as being independent contractors, or as being employed by or engaged through another company while providing the services, and persons covered by a collective bargaining agreement (unless the collective bargaining agreement applicable to the person specifically provides for participation in this Plan) are not employees for purposes of this Plan and do not and cannot participate in this Plan, whether or not such persons are, or may be reclassified by the courts, the Internal Revenue Service, the U.S. Department of Labor, or other person or entity as, common law employees of the Company, or any Subsidiary, either solely or jointly with another person or entity.

 

  (p) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

      (q) “Executive Officers” shall mean the officers of the Company as such term is defined in Rule 16a-1 under the Exchange Act.

 

  

2

  

      (r) “Fair Market Value” shall mean the closing price per share of the Common Stock on Nasdaq as to the date specified (or the previous trading day if the date specified is a day on which no trading occurred), or if Nasdaq shall cease to be the principal exchange or quotation system upon which the shares of Common Stock are listed or quoted, then such exchange or quotation system as the Company elects to list or quote its shares of Common Stock and that the Committee designates as the Company’s principal exchange or quotation system.

 

      (s) “FAS 123” shall mean Statements of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, as promulgated by the Financial Accounting Standards Board.

 

      (t) “FLSA” shall mean the Fair Labor Standards Act of 1938, as amended.

 

      (u) “Former Plan” shall mean the CPS 1997 Long-Term Incentive Plan, as amended.

 

      (v) “Incentive Stock Option” shall mean any Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

 

      (w) “Independent Director” shall mean a Director who: (1) meets the independence requirements of Nasdaq, or if Nasdaq shall cease to be the principal exchange or quotation system upon which the shares of Common Stock are listed or quoted, then such exchange or quotation system as the Company elects to list or quote its shares of Common Stock and that the Committee designates as the Company’s principal exchange or quotation system; (2) qualifies as an “outside director” under Section 162(m) of the Code; (3) qualifies as a “non-employee
director” under Rule 16b-3 promulgated under the Exchange Act; and (4) satisfies independence criteria under any other applicable laws or regulations relating to the issuance of Shares to Employees.

 

      (x) “Maximum Annual Participant Award” shall have the meaning set forth in Section 6(b).

 

      (y) “Misconduct” shall mean any of the following; provided, however, that with respect to Non-Employee Directors “Misconduct” shall mean subsection (viii) only:

 

	  	
      (i) any material breach of an agreement between the Participant and the Company or any Subsidiary which, if curable, has not been cured within twenty (20) days after the Participant has been given written notice of the need to cure such breach, or which breach, if previously cured, recurs;

	  	
      (ii) willful unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary by the Participant;

	  	
      (iii) the Participant’s continued willful and intentional failure to satisfactorily perform Participant’s essential responsibilities, provided that the Participant has been given at least thirty (30) days’ written notice of the need to cure the failure and cure has not been effected within that time period, or which failure, if previously cured, recurs;

	  	
      (iv) material failure of the Participant to comply with rules, policies or procedures of the Company or any Subsidiary as they may be amended from time to time, provided that the Participant has been given at least thirty (30) days’ written notice of the need to cure the failure, if such failure is curable, and cure has not been effected within that time period, or which failure, if previously cured, recurs;

	  	
      (v) Participant’s dishonesty, fraud or gross negligence related to the business or property of the Company or any Subsidiary;

	  	
      (vi) personal conduct that is materially detrimental to the business of the Company or any Subsidiary;

	  	
      (vii) conviction of or plea of nolo contendere to a felony; or

	  	
      (viii) in the case of Non-Employee Directors, the removal from the Board for cause (as determined by the Company’s shareholders).

 

      (z) “Nasdaq” shall mean The Nasdaq Stock Market, Inc.

 

      (aa) “Non-Employee Director” shall mean a Director who is not an employee.

 

      (bb) “Nonqualified Stock Option” shall mean an Option that does not qualify or is not intended to qualify as an Incentive Stock Option.

 

      (cc) “Option” shall mean a stock option granted pursuant to Section 10 of the Plan.

 

  

3

  

      (dd) “Optionee” shall mean a Participant who has been granted an Option.

 

      (ee) “Parent” shall mean a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

      (ff) “Participant” shall mean an employee, Director or Consultant granted an Award.

 

     (gg) “Performance Criteria” shall have the meaning set forth in Section 11(b).

 

      (hh) “Plan” shall mean this CPS 2006 Long-Term Equity Incentive Plan, including any amendments thereto.

 

      (ii) “Reprice” shall mean the adjustment or amendment of the exercise price of Options or SARs previously awarded whether through amendment, cancellation, replacement of grants or any other means.

 

      (jj) “Resignation (or Resign) for Good Reason” shall mean any voluntary termination by written resignation of the Active Status of any employee after a Change of Control because of: (1) a material reduction in the employee’s authority, responsibilities or scope of employment; (2) an assignment of duties to the Employee inconsistent with the employee’s role at the Company (including its Subsidiaries) prior to the Change of Control, (3) a reduction in the employee’s base salary or total incentive compensation; (4) a material reduction in the
Employee’s benefits unless such reduction applies to all employees of comparable rank; or (5) the relocation of the employee’s primary work location more than fifty (50) miles from the employee’s primary work location prior to the Change of Control; provided that the employee’s written notice of voluntary resignation must be tendered within one (1) year after the Change of Control, and shall specify which of the events described in (1) through (5) resulted in the resignation.

 

      (kk) “Restricted Stock” shall mean a grant of Shares pursuant to Section 11 of the Plan.

 

      (ll) “Restricted Stock Units” shall mean a grant of the right to receive Shares in the future or their cash equivalent (or both) pursuant to Section 11 of the Plan.

 

      (mm) “Retirement” shall mean, (i) with respect to any employee, voluntary termination of employment after age 55 and at least ten (10) years of credited service with the Company or any Subsidiary (but only during the time the Subsidiary was a Subsidiary), as determined by the Committee in its sole discretion, and (ii) with respect to any Non-Employee Director, ceasing to be a Director pursuant to election by the Company’s shareholders or by voluntary resignation with the approval of the Board’s chair after having attained the age of 55 years and served
continuously on the Board for at least six years.

 

      (nn) “SAR” shall mean a stock appreciation right awarded pursuant to Section 12 of the Plan.

 

      (oo) “SEC” shall mean the Securities and Exchange Commission.

 

      (pp) “Share” shall mean one share of Common Stock, as adjusted in accordance with Section 5 of the Plan.

 

      (qq) “Stand-Alone SARs” shall have the meaning set forth in Section 12(c) of the Plan.

 

      (rr) “Subcommittee” shall have the meaning set forth in Section 3(d).

 

      (ss) “Subsidiary” shall mean (1) in the case of an Incentive Stock Option a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code, and (2) in the case of a Nonqualified Stock Option, Restricted Stock, a Restricted Stock Unit or a SAR, in addition to a subsidiary corporation as defined in (1), (A) a limited liability company, employeeship or other entity in which the Company controls fifty percent (50%) or more of the voting power or equity interests, or (B) an entity with respect to which the Company
possesses the power, directly or indirectly, to direct or cause the direction of the management and policies of that entity, whether through the Company’s ownership of voting securities, by contract or otherwise.

 

      (tt) “Tandem SARs” shall have the meaning set forth in Section 12(b) of the Plan.

 

      SECTION 3.  Administration of the Plan.

 

      (a) Authority. The Plan shall be administered by the Committee. The Committee shall have full and exclusive power to administer the Plan on behalf of the Board, subject to such terms and conditions as the Committee may prescribe. Notwithstanding anything herein to the contrary, the Committee’s power to administer the Plan, and actions the Committee takes under the Plan, shall be limited by the provisions set forth in the Committee’s charter, as such charter may be amended from time to time, and the further limitation that certain actions may be subject to review and approval by either the
full Board or a panel consisting of all of the Independent Directors of the Company.

 

  

4

  

 

      (b) Powers of the Committee. Subject to the other provisions of this Plan, the Committee shall have the authority, in its discretion:

 

	  	
      (i) to grant Incentive Stock Options, Nonqualified Stock Options, Restricted Stock, Restricted Stock Units, and SARs to Participants and to determine the terms and conditions of such Awards, including the determination of the Fair Market Value of the Shares and the exercise price, and to modify or amend each Award, with the consent of the Participant when required;

	  	
      (ii) to determine the Participants, to whom Awards, if any, will be granted hereunder, the timing of such Awards, and the number of Shares to be represented by each Award;

	  	
      (iii) to construe and interpret the Plan and the Awards granted hereunder;

	  	
      (iv) to prescribe, amend, and rescind rules and regulations relating to the Plan, including the form of Award Agreement, and manner of acceptance of an Award, such as correcting a defect or supplying any omission, or reconciling any inconsistency so that the Plan or any Award Agreement complies with applicable law, regulations and listing requirements and to avoid unanticipated consequences deemed by the Committee to be inconsistent with the purposes of the Plan or any Award Agreement;

	  	
      (v) to establish performance criteria for Awards made pursuant to the Plan in accordance with a methodology established by the Committee, and to determine whether performance goals have been attained;

	  	
      (vi) to accelerate or defer (with the consent of the Participant) the exercise or vested date of any Award;

	  	
      (vii) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Award previously granted by the Committee;

	  	
      (viii) to establish sub-plans, procedures or guidelines for the grant of Awards to Directors, Consultants and Employees working outside of the United States; and

	  	
      (ix) to make all other determinations deemed necessary or advisable for the administration of the Plan;

 

      Provided that, no consent of a Participant is necessary under clauses (i) or (vi) if a modification, amendment, acceleration, or deferral, in the reasonable judgment of the Committee confers a benefit on the Participant or is made pursuant to an adjustment in accordance with Section 5.

 

      (c) Effect of Committee’s Decision. All decisions, determinations, and interpretations of the Committee shall be final and binding on all Participants, the Company (including its Subsidiaries), any shareholder and all other persons.

 

      (d) Delegation. Consistent with the Committee’s charter, as such charter may be amended from time to time, the Committee may delegate (i) to one or more separate committees consisting of members of the Committee or other Directors who are Independent Directors (any such committee a “Subcommittee”), or (ii) to an Executive Officer of the Company, the ability to grant Awards and take the other actions described in Section 3(b) with respect to Participants who are not Executive Officers, and such actions shall be treated for all purposes as if taken by the Committee;
provided that the grant of Awards shall be made in accordance with parameters established by the Committee. Any action by any such Subcommittee or Executive Officer within the scope of such delegation shall be deemed for all purposes to have been taken by the Committee.

 

      (e) Administration. The Committee may delegate the administration of the Plan to an officer or officers of the Company, and such administrator(s) may have the authority to directly, or under their supervision, execute and distribute agreements or other documents evidencing or relating to Awards granted by the Committee under this Plan, to maintain records relating to the grant, vesting, exercise, forfeiture or expiration of Awards, to process or oversee the issuance of Shares upon the exercise, vesting and/or settlement of an Award, to interpret the terms of Awards and to take such other actions as the
Committee may specify. Any action by any such administrator within the scope of its delegation shall be deemed for all purposes to have been taken by the Committee and references in this Plan to the Committee shall include any such administrator, provided that the actions and interpretations of any such administrator shall be subject to review and approval, disapproval or modification by the Committee.

 

  

5

  

 

      SECTION 4.  Shares Subject to the Plan.

 

      (a) Reservation of Shares. The shares of Common Stock reserved under this Plan will include reserved shares of Common Stock that are not subject to a grant or as to which the option award granted has been forfeited under the Former Plan, and an additional 5,000,000 shares of Common Stock. The aggregate number of Shares available for issuance under the Plan will be reduced by one Share for each Share delivered in settlement of any award of Restricted Stock, Restricted Stock Unit, or SAR and one Share for each Share delivered in settlement of an Option. If an Award expires, is forfeited or becomes
unexercisable for any reason without having been exercised in full, the undelivered Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future Awards under the Plan. Without limiting the foregoing, unless the Plan shall have been terminated, Shares underlying an Award that has been exercised, either in part or in full, including any Shares that would otherwise be issued to a Participant that are used to satisfy any withholding tax obligations that arise with respect to any Award, shall become available for future Awards under the Plan except to the extent Shares were issued in settlement of the Award. Shares available for issuance under the Plan shall be increased by any shares of Common Stock subject to outstanding awards under the Former Plans on the date of shareholder approval of the Plan that later cease to be subject to such
awards for any reason other than such awards having been exercised, subject to adjustment from time to time as provided in Section 5, which shares of Common Stock shall, as of the date such shares cease to be subject to such awards, cease to be available for grant and issuance under the Former Plans, but shall be available for issuance under the Plan. The Shares may be authorized but unissued, or reacquired shares of Common Stock. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

      (b) Time of Granting Awards. The date of grant of an Award shall, for all purposes, be the date on which the Company completes the corporate action relating to the grant of such Award and all conditions to the grant have been satisfied, provided that conditions to the exercise of an Award shall not defer the date of grant. Notice of a grant shall be given to each Participant to whom an Award is so granted within a reasonable time after the determination has been made.

 

      (c) Securities Law Compliance. Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated under either such Act, and the requirements of any stock exchange or quotation system upon which the Shares may then be listed or quoted, and shall be further subject to the approval of counsel for the Company with respect to such
compliance.

 

      (d) Substitutions and Assumptions. The Board or the Committee shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies, provided such substitutions and assumptions are permitted by Section 424 of the Code and the regulations promulgated thereunder. The number of Shares reserved pursuant to Section 4(a) may be increased by the corresponding number of Awards assumed and, in the case of a substitution, by the net increase in the number of Shares subject to Awards before and
after the substitution.

 

      SECTION 5.  Adjustments to Shares Subject to the Plan. If any change is made to the Shares by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Shares as a class without the Company’s receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities and/or the price per Share covered by outstanding Awards under the Plan and (iii) the Maximum Annual Participant
Award. The Committee may also make adjustments described in (i)-(iii) of the previous sentence in the event of any distribution of assets to shareholders other than a normal cash dividend. In determining adjustments to be made under this Section 5, the Committee may take into account such factors as it deems appropriate, including the restrictions of applicable law and the potential tax consequences of an adjustment, and in light of such factors may make adjustments that are not uniform or proportionate among outstanding Awards. Adjustments, if any, and any determinations or interpretations, including any determination of whether a distribution is other than a normal cash dividend, made by the Committee shall be final, binding and conclusive. For purposes of this Section 5, conversion of any convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.”

 

      Except as expressly provided herein, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award.

 

  

6

  

PART II - TERMS APPLICABLE TO ALL AWARDS

 

      SECTION 6.  General Eligibility.

 

      (a) Awards. Awards may be granted to Participants who are Employees, Directors or Consultants; provided however that Incentive Stock Options may only be granted to Employees.

 

      (b) Maximum Annual Participant Award. The aggregate number of Shares with respect to which an Award or Awards may be granted to any one Participant over the life of the Plan (the “Maximum Participant Award”) shall not exceed 1,000,000 shares of Common Stock (increased, proportionately, in the event of any stock split or stock dividend with respect to the Shares). If an Option is in tandem with a SAR, such that the exercise of the Option or SAR with respect to a Share cancels the tandem SAR or Option right, respectively, with respect to each Share, the tandem Option and SAR rights with
respect to each Share shall be counted as covering but one Share for purposes of the Maximum Annual Participant Award.

 

      (c) No Employment/ Service Rights. Nothing in the Plan shall confer upon any Participant the right to an Award or to continue in service as an employee or Consultant for any period of specific duration, or interfere with or otherwise restrict in any way the rights of the Company (or any Subsidiary employing or retaining such person), or of any Participant, which rights are hereby expressly reserved by each, to terminate such person’s services at any time for any reason, with or without cause.

 

      SECTION 7.  Procedure for Exercise of Awards; Rights as a Shareholder.

 

      (a) Procedure. An Award shall be exercised when written, electronic or verbal notice of exercise has been given to the Company, or the brokerage firm or firms approved by the Company to facilitate exercises and sales under this Plan, in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been received by the Company or the brokerage firm or firms, as applicable. The notification to the brokerage firm shall be made in accordance with procedures of such brokerage firm approved by the Company.
Full payment may, as authorized by the Committee, consist of any consideration and method of payment allowable under Section 7(b) of the Plan. The Company shall issue (or cause to be issued) such share certificate promptly upon exercise of the Award. In the event that the exercise of an Award is treated in part as the exercise of an Incentive Stock Option and in part as the exercise of a Nonqualified Stock Option pursuant to Section 10(a), the Company shall issue a share certificate evidencing the Shares treated as acquired upon the exercise of an Incentive Stock Option and a separate share certificate evidencing the Shares treated as acquired upon the exercise of a Nonqualified Stock Option, and shall identify each such certificate accordingly in its share transfer records. No adjustment will be made for a dividend or other right for which the record date is prior to the date
the share certificate is issued, except as provided in Section 5 of the Plan.

 

      (b) Method of Payment. The consideration to be paid for any Shares to be issued upon exercise or other required settlement of an Award, including the method of payment, shall be determined by the Committee at the time of settlement and which forms may include: (i) with respect to an Option, a request that the Company or the designated brokerage firm conduct a cashless exercise of the Option; (ii) cash; and (iii) tender of shares of Common Stock owned by the Participant in accordance with rules established by the Committee from time to time. Shares used to pay the exercise price shall be
valued at their Fair Market Value on the exercise date. Payment of the aggregate exercise price by means of tendering previously-owned shares of Common Stock shall not be permitted when the same may, in the reasonable opinion of the Company, cause the Company to record a loss or expense as a result thereof.

 

      (c) Withholding Obligations. To the extent required by applicable federal, state, local or foreign law, the Committee may and/or a Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise with respect to any Incentive Stock Option, Nonqualified Stock Option, SAR, Restricted Stock or Restricted Stock Units, or any sale of Shares. The Company shall not be required to issue Shares or to recognize the disposition of such Shares until such obligations are satisfied. These obligations may be satisfied by having the Company withhold a
portion of the Shares that otherwise would be issued to a Participant under such Award or by tendering Shares previously acquired by the Participant in accordance with rules established by the Committee from time to time.

 

      (d) Shareholder Rights. Except as otherwise provided in this Plan, until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the share certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares subject to the Award, notwithstanding the exercise of the Award.

 

  

7

  

      (e) Non-Transferability of Awards. An Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in exchange for consideration, except that an Award may be transferred by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant; unless the Committee permits further transferability, on a general or specific basis, in which case the Committee may impose conditions and limitations on any permitted transferability.

 

      SECTION 8.  Expiration of Awards.

 

      (a) Expiration, Termination or Forfeiture of Awards. Unless otherwise provided in the applicable Award Agreement or any severance agreement, vested Awards granted under this Plan shall expire, terminate, or otherwise be forfeited as follows:

 

	  	
      (i) three (3) months after the date the Company delivers a notice of termination of a Participant’s Active Status, other than in circumstances covered by (ii), (iii), (iv) or (v) below;

	  	
      (ii) immediately upon termination of a Participant’s Active Status for Misconduct;

	  	
      (iii) twelve (12) months after the date on which a Participant other than a Non-Employee Director ceased performing services as a result of his or her total and permanent Disability;

	  	
      (iv) twelve (12) months months after the date on which the Participant ceased performing services as a result of Retirement, or after his death.

 

      (b) Extension of Term. Notwithstanding subsection (a) above, the Committee shall have the authority to extend the expiration date of any outstanding Option, other than an Incentive Stock Option, or SAR in circumstances in which it deems such action to be appropriate (provided that no such extension shall extend the term of an Option or SAR beyond the date on which the Option or SAR would have expired if no termination of the Employee’s Active Status had occurred).

 

      SECTION 9.  Effect of Change of Control. Notwithstanding any other provision in the Plan to the contrary, the following provisions shall apply unless otherwise provided in the most recently executed agreement between the Participant and the Company, or specifically prohibited under applicable laws, or by the rules and regulations of any applicable governmental agencies or national securities exchanges or quotation systems.

 

      (a) Acceleration. Awards of a Participant shall be Accelerated (as defined in Section 9(b) below) as follows:

 

	  	
      (i) With respect to Non-Employee Directors, upon the occurrence of a Change of Control;

	  	
      (ii) With respect to any employee, upon the occurrence of a Change of Control described in Section 2(f)(i);

	  	
      (iii) With respect to any employee who Resigns for Good Reason or whose Active Status is terminated within one year after a Change of Control described in Section 2(f)(ii) or (iii);

	  	
      (iv) With respect to any employee, upon the occurrence of a Change of Control described in Section 2(f)(iv) in connection with which each Award is not assumed or an equivalent award substituted by such successor entity or a parent or subsidiary of such successor entity; and

	  	
      (v) With respect to any employee who Resigns for Good Reason or whose Active Status is terminated within one year after a Change of Control described in Section 2(f)(iv) in connection with which each Award is assumed or an equivalent award substituted by the successor entity or a parent or subsidiary of such successor entity.

      (b) Definition. For purposes of this Section 9, Awards of a Participant being “Accelerated” means, with respect to such Participant:

 

	  	
      (i) any and all Options and SARs shall become fully vested and immediately exercisable, and shall remain exercisable throughout their entire term;

	  	
      (ii) any restriction periods and restrictions imposed on Restricted Stock or Restricted Stock Units that are not performance-based shall lapse; and

	  	
      (iii) the restrictions and deferral limitations and other conditions applicable to any other Awards shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant.

 

  

8

  

PART III  - SPECIFIC TERMS APPLICABLE TO OPTIONS, STOCK AWARDS AND SARS

 

      SECTION 10.  Grant, Terms and Conditions of Options.

 

      (a) Designation. Each Option shall be designated in an Award Agreement as either an Incentive Stock Option or a Nonqualified Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any employee during any calendar year (under all plans of the Company) exceeds $100,000, such excess Options shall be treated as Nonqualified Stock Options. Options shall be taken into account in the order in which they were granted.

 

      (b) Terms of Options. The term of each Incentive Stock Option shall be no more than ten (10) years from the date of grant. However, in the case of an Incentive Stock Option granted to a Participant who, at the time the Option is granted, owns Shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the term of the Option shall be no more than five (5) years from the date of grant. The terms of all Nonqualified Stock Options shall be at the discretion of the Committee.

 

      (c) Option Exercise Prices.

 

	 	
(i) 

	
The per Share exercise price under an Incentive Stock Option shall be as follows:

	 	
(A) 

	
If granted to an employee who, at the time of the grant of such Incentive Stock Option, owns shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

	 	
(B) 

	
If granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

	 	
(ii) 

	
The per Share exercise price under a Nonqualified Stock Option or SAR shall be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

	 	
 (iii) 

	
In no event shall the Board or the Committee be permitted to Reprice an Option after the date of grant without shareholder approval.

 

      (d) Vesting. To the extent Options vest and become exercisable in increments, such Options shall cease vesting as of the date of the Optionee’s Disability or termination of such Optionee’s Active Status for reasons other than Retirement or death, in each of which cases such Options shall immediately vest in full.

 

      (e) Substitution of Stock SARs for Options. Notwithstanding anything in this Plan to the contrary, if the Company is required to or elects to record as an expense in its consolidated statements of earnings the cost of Options pursuant to FAS 123 or a similar accounting requirement, the Committee shall have the sole discretion to substitute, without receiving Participants’ permission, SARs paid only in stock for outstanding Options; provided, the terms of the substituted stock SARs are the same as the terms of the Options, the number of shares underlying the number of stock SARs equals the
number of shares underlying the Options and the difference between the Fair Market Value of the underlying Shares and the grant price of the SARs is equivalent to the difference between the Fair Market Value of the underlying shares and the exercise price of the Options.

 

      (f) Exercise. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Committee at the time of grant, and as are permissible under the terms of the Plan. An Option may not be exercised for a fraction of a Share.

 

      (g) One-time Exchange Program.  Notwithstanding this Plan's prohibition on Repricing of Options, and notwithstanding anything else in this Plan to the contrary, the Board or Committee may provide for, and the Company may implement, a one-time-only exchange offer ("Exchange Offer"), under which the Company may issue Options under this Plan in exchange for Options previously issued and then outstanding under this Plan or the Former Plan. The Exchange Offer is permitted only subject to the conditions described in the Company's definitive proxy statement filed in connection with its 2009 annual meeting
of shareholders. To give full effect to such exchange, the Maximum Participant Award applicable to each Participant is increased above the limit specified in section 6(b) hereof, up to but not beyond an adjusted maximum of 1,666,667 shares, to the extent such Participant in the Exchange Offer surrenders awards issued and outstanding under the Former Plan.

 

  

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      SECTION 11. Grant, Terms and Conditions of Stock Awards.

 

      (a) Designation. Restricted Stock or Restricted Stock Units may be granted either alone, in addition to, or in tandem with other Awards granted under the Plan. Restricted Stock or Restricted Stock Units may include a dividend equivalent right, as permitted by Section 5. After the Committee determines that it will offer Restricted Stock or Restricted Stock Units, it will advise the Participant in writing or electronically, by means of an Award Agreement, of the terms, conditions and restrictions, including vesting, if any, related to the offer, including the number of Shares that the Participant
shall be entitled to receive or purchase, the price to be paid, if any, and, if applicable, the time within which the Participant must accept the offer. The offer shall be accepted by execution of an Award Agreement or as otherwise directed by the Committee. Restricted Stock Units may be paid as permitted by Section 7(b). The term of each award of Restricted Stock or Restricted Stock Units shall be at the discretion of the Committee.

 

      (b) Performance Criteria. Restricted Stock and Restricted Stock Units granted pursuant to the Plan that are intended to qualify as “performance based compensation” under Section 162(m) of the Code shall be subject to the fulfillment of performance goals relating to the Performance Criteria selected by the Committee and specified at the time such Restricted Stock and Restricted Stock Units are granted. For purposes of this Plan, “Performance Criteria” means one or more of the following (as selected by the
Committee): (i) earnings per share, including earnings per share as adjusted (a) to exclude the effect of any (1) significant acquisitions or dispositions of businesses by the Company, (2) one-time, non-operating charges and (3) accounting changes (including but not limited to any accounting changes that alter the recognition of stock option expense and any accounting changes the Company adopts early); and (b) for any stock split, stock dividend or other recapitalization; (ii) earnings per share before taxes, subject to any of the adjustments described above; (iii) earnings; (iv) earnings before interest, taxes and amortization; (v) total shareholder return; (vi) share price performance; (vii) return on equity; (viii) return on managed assets; (ix) revenue;
(x) operating expenses; (xi) operating income; (xii) originations volume; (xiii) originations growth; (xiv) net charge-offs; (xv) net charge-off percentage; (xvi) portfolio growth; (xvii) net interest margin; or (xviii) cash flow.

 

      (c) Vesting. Unless the Committee determines otherwise, the Award Agreement shall provide for the forfeiture of the non-vested Shares underlying Restricted Stock or Restricted Stock Units upon the termination of a Participant’s Active Status. To the extent that the Participant purchased the Shares granted under such Restricted Stock or Restricted Stock Units and any such Shares remain non-vested at the time the Participant’s Active Status terminates, the termination of Active Status shall cause an immediate sale of such non-vested Shares to the Company at the original price per Share paid by
the Participant.

 

      SECTION 12. Grant, Terms and Conditions of SARs.

 

      (a) Grants. The Committee shall have the full power and authority, exercisable in its sole discretion, to grant SARs to selected Participants. The Committee is authorized to grant both tandem stock appreciation rights, consisting of SARs with underlying Options (“Tandem SARs”), and stand-alone stock appreciation rights (“Stand-Alone SARs”) as described below. The terms of SARs shall be at the discretion of the Committee. In no event shall the Board or the Committee be permitted to Reprice a SAR after the date of grant without shareholder approval.

 

      (b) Tandem SARs.

 

      (i) Participants may be granted a Tandem SAR, exercisable upon such terms and conditions as the Committee shall establish, to elect between the exercise of the underlying Option for Shares or the surrender of the Option in exchange for a distribution from the Company in an amount equal to the excess of (A) the Fair Market Value (on the Option surrender date) of the number of Shares in which the Participant is at the time vested under the surrendered Option (or surrendered portion thereof) over (B) the aggregate exercise price payable for such vested Shares.

 

      (ii) No such Option surrender shall be effective unless it is approved by the Committee, either at the time of the actual Option surrender or at any earlier time. If the surrender is so approved, then the distributions to which the Participant shall become entitled under this Section 12(b) may be made in Shares valued at Fair Market Value (on the Option surrender date), in cash, or partly in Shares and partly in cash, as the Committee shall deem appropriate.

 

      (iii) If the surrender of an Option is not approved by the Committee, then the Participant shall retain whatever rights he or she had under the surrendered Option (or surrendered portion thereof) on the Option surrender date and may exercise such rights at any time prior to the later of (A) five (5) business days after the receipt of the rejection notice or (B) the last day on which the Option is otherwise exercisable in accordance with the terms of the instrument evidencing such Option, but in no event may such rights be exercised more than ten (10) years after the date of the Option grant.

 

      (c) Stand-Alone SARs.

 

  

10

  

      (i) A Participant may be granted a Stand-Alone SAR not tied to any underlying Option under Section 10 of the Plan. The Stand-Alone SAR shall cover a specified number of Shares and shall be exercisable upon such terms and conditions as the Committee shall establish. Upon exercise of the Stand-Alone SAR, the holder shall be entitled to receive a distribution from the Company in an amount equal to the excess of (A) the aggregate Fair Market Value (on the exercise date) of the Shares underlying the exercised right over (B) the aggregate base price in effect for those Shares.

 

      (ii) The number of Shares underlying each Stand-Alone SAR and the base price in effect for those Shares shall be determined by the Committee at the time the Stand-Alone SAR is granted. In no event, however, may the base price per Share be less than the Fair Market Value per underlying Share on the grant date.

 

      (iii) The distribution with respect to an exercised Stand-Alone SAR may be made in Shares valued at Fair Market Value on the exercise date, in cash, or partly in Shares and partly in cash, as the Committee shall deem appropriate.

 

      (d) Exercised SARs. The Shares issued in settlement of any SARs exercised under this Section 12 shall not be available for subsequent issuance under the Plan. In accordance with Section 4, Shares underlying any exercised SARs that were not issued in settlement of the SAR shall become available for future issuance under the Plan.

 

PART IV - TERM OF PLAN AND SHAREHOLDER APPROVAL

 

      SECTION 13.  Term of Plan. The Plan shall become effective as of the Effective Date. It shall continue in effect until the tenth anniversary of the Effective Date or until terminated under Section 14 of the Plan or extended by an amendment approved by the shareholders of the Company pursuant to Section 14(a).

 

      SECTION 14.  Amendment and Termination of the Plan.

 

      (a) Amendment and Termination. The Board or the Committee may amend or terminate the Plan from time to time in such respects as the Board may deem advisable (including, but not limited to amendments which the Board deems appropriate to enhance the Company’s ability to claim deductions related to stock option exercises); provided that to the extent required by the Code or the rules of Nasdaq, of any national stock exchange on which the Company’s common shares are listed, or of the SEC, shareholder approval shall be required for any amendment of the Plan. Subject to the foregoing, it is
specifically intended that the Board or Committee may amend the Plan without shareholder approval to comply with legal, regulatory and listing requirements and to avoid unanticipated consequences deemed by the Committee to be inconsistent with the purpose of the Plan or any Award Agreement.

 

      (b) Participants in Foreign Countries. The Committee shall have the authority to adopt such modifications, procedures, and sub-plans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Subsidiaries may operate to assure the viability of the benefits from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan.

 

      (c) Effect of Amendment or Termination. Any amendment or termination of the Plan shall not affect Awards already granted and such Awards shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Participant and the Committee, which agreement must be in writing and signed by the Participant and the Company.

 

      SECTION 15.  Shareholder Approval. The effectiveness of the Plan is subject to approval by the shareholders of the Company in accordance with applicable Nasdaq rules.

 

 

 

 

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