Document:

Exhibit 10.3

 

SHUTTERSTOCK, INC.

 

2012 EMPLOYEE STOCK PURCHASE PLAN

 

1.                                       Purpose.  The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock through accumulated payroll deductions (or through other means as set forth below).  The Company’s intention is to have the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code.  The provisions of the Plan, accordingly, will be construed so as to extend and limit Plan participation in a uniform and nondiscriminatory basis consistent with the requirements of Section 423 of the Code.  Notwithstanding the forgoing, the Company may make offerings under the Plan that are not intended to qualify under Section 423 of the Code to the extent deemed advisable for Designated Subsidiaries outside the United States (“Non-423 Component”).  Furthermore, the Company may make separate offerings under the Plan, each of which may have different terms, but each separate offering will be intended to comply with the requirements of Section 423 of the Code.

 

2.                                       Definitions.

 

(a)                                  “Administrator” means the Board or any Committee designated by the Board to administer the Plan pursuant to Section 15.

 

(b)                                 “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

 

(c)                                  “Board” means the Board of Directors of the Company.

 

(d)                                 “Change in Control” except as may otherwise be provided in a Stock Option Agreement, Restricted Stock Agreement or other applicable agreement, means the occurrence of any of the following:

 

(i)                                The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if the Company’s shareholders  immediately prior to such merger, consolidation or reorganization cease to directly or indirectly own immediately after such merger, consolidation or reorganization at least a majority of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such merger, consolidation or other reorganization;

 

(ii)                             The consummation of the sale, transfer or other disposition of all or substantially all of the Company’s assets (other than (x) to a corporation or other entity of which at least a majority of its combined voting power is owned directly or indirectly by the Company, (y) to a corporation or other entity owned directly or indirectly by the shareholders  of the Company in substantially the same proportions as their ownership of the common stock of the Company or (z) to a continuing or surviving entity described in Section 2(d)(i) in connection with a merger,

 

 

consolidation or corporate reorganization which does not result in a Change in Control under Section 2(d)(i));

 

(iii)                          A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.  For purposes of this clause, if any Person (as defined below in Section 2(d)(iv)) is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control;

 

(iv)                         The consummation of any transaction as a result of which any Person becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities.  For purposes of this Paragraph (iv), the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude:

 

(1)                                  a trustee or other fiduciary holding securities under an employee benefit plan of the Company or an affiliate of the Company;

 

(2)                                  a corporation or other entity owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of the common stock of the Company;

 

(3)                                  the Company; and

 

(4)                                  a corporation or other entity of which at least a majority of its combined voting power is owned directly or indirectly by the Company; or

 

(v)                            A complete winding up, liquidation or dissolution of the Company.

 

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transactions.

 

(e)                                  “Code” means the Internal Revenue Code of 1986, as amended.  Reference to a specific section of the Code or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.

 

(f)                                    “Committee” means a committee of the Board appointed in accordance with Section 15 hereof.

 

(g)                                 “Common Stock” means the common stock of the Company.

 

(h)                                 “Company” means Shutterstock, Inc., a Delaware corporation.

 

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(i)                                     “Compensation” means an Eligible Employee’s regular and recurring straight time gross earnings, payments for overtime and shift premium, but exclusive of payments for incentive compensation, bonuses and other similar compensation.  The Administrator, in its discretion, may, on a uniform and nondiscriminatory basis, establish a different definition of Compensation for a subsequent Offering Period.  In addition, the Administrator has the authority to make decisions about how Compensation should be interpreted for Eligible Employees outside the United States to the extent there are items of compensation or remuneration not specifically addressed above.

 

(j)                                     “Designated Subsidiary” means any Subsidiary that has been designated by the Administrator from time to time in its sole discretion as eligible to participate in the Plan.  Unless the Administrator expressly states otherwise, each Designated Subsidiary will be designated to be participating in the portion of the Plan that qualifies under Section 423 of the Code.

 

(k)                                  “Director” means a member of the Board.

 

(l)                                     “Eligible Employee” means any individual who is a common law employee of an Employer and is customarily employed for more than twenty (20) hours per week and more than five (5) months in any calendar year by the Employer.  For purposes of the Plan, the employment relationship will be treated as continuing intact while the individual is on sick leave or other leave of absence that the Employer approves.  Where the period of leave exceeds three (3) months and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship will be deemed to have terminated three (3) months and one (1) day following the commencement of such leave.  The Administrator, in its discretion, from time to time may, prior to an Offering Date determine (to the extent compliant with the Section 423 of the Code rules regarding equal rights and privileges) that the definition of Eligible Employee will or will not include an individual if he or she: (i) has not completed at least two (2) years of service since his or her last hire date (or such lesser period of time as may be determined by the Administrator in its discretion), (ii) customarily works not more than twenty (20) hours per week (or such lesser period of time as may be determined by the Administrator in its discretion), (iii) customarily works not more than five (5) months per calendar year (or such lesser period of time as may be determined by the Administrator in its discretion), (iv) is an executive, officer or other manager, or (v) is a highly compensated employee under Section 414(q) of the Code.  With respect to offerings made under the Non-423 Component of the Plan, the Administrator may limit eligibility further.

 

(m)                               “Employer” means any one or all of the Company and its Designated Subsidiaries.  With respect to a particular Eligible Employee, Employer means the Company or Designated Subsidiary, as the case may be, that directly employs the Eligible Employee.

 

(n)                                 “Exchange Act” means the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.

 

(o)                                 “Exercise Date” means the first Trading Day on or after June 1 and December 1 of each year.  The first Exercise Date under the Plan will be June 3, 2013.

 

(p)                                 “Fair Market Value” means, as of any date and unless the Administrator determines otherwise, the value of Common Stock determined as follows:

 

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(i)                                If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

(ii)                             If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value will be the mean of the closing bid and asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

(iii)                          In the absence of an established market for the Common Stock, the Fair Market Value thereof will be determined in good faith by the Administrator; or

 

(iv)                         For purposes of the Offering Date of the first Offering Period under the Plan, the Fair Market Value will be the initial price to the public as set forth in the final prospectus included within the registration statement on Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Common Stock (the “Registration Statement”).

 

(q)                                 “Fiscal Year” means the fiscal year of the Company.

 

(r)                                    “New Exercise Date” means a new Exercise Date set by shortening any Offering Period then in progress.

 

(s)                                  “Offering Date” means the first Trading Day of each Offering Period.

 

(t)                                    “Offering Periods” means the periods of approximately six (6) months during which an option granted pursuant to the Plan may be exercised, (i) commencing on the first Trading Day on or after June 1 of each year and terminating on the first Trading Day on or following December 1, approximately six (6) months later, and (ii) commencing on the first Trading Day on or after December 1 of each year and terminating on the first Trading Day on or following June 1, approximately six (6) months later; provided, however, that the first Offering Period under the Plan will commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Company’s Registration Statement effective and will end on June 3, 2013.  The duration and timing of Offering Periods may be changed pursuant to Sections 4 and 21.

 

(u)                                 “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.  A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

 

(v)                                 “Participant” means an Eligible Employee who participates in the Plan.

 

(w)                               “Plan” means this Shutterstock, Inc. 2012 Employee Stock Purchase Plan.

 

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(x)                                   “Purchase Price” means an amount equal to eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Offering Date or on the Exercise Date, whichever is lower; provided however, that the Purchase Price may be determined for subsequent Offering Periods by the Administrator, in its discretion, subject to compliance with Section 423 of the Code or pursuant to Section 21.

 

(y)                                 “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.  A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

 

(z)                                   “Trading Day” means a day on which the national stock exchange upon which the Common Stock is listed is open for trading.

 

3.                                       Eligibility.

 

(a)                                  First Offering Period.  Any individual who is an Eligible Employee immediately prior to the first Offering Period will be automatically enrolled in the first Offering Period, but may elect not to participate at any time.

 

(b)                                 Subsequent Offering Periods.  Any Eligible Employee on a given Offering Date subsequent to the first Offering Period will be eligible to participate in the Plan, subject to the requirements of Section 5.

 

(c)                                  Limitations.  Any provisions of the Plan to the contrary notwithstanding, no Eligible Employee will be granted an option under the Plan (i) to the extent that, immediately after the grant, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company or any Parent or Subsidiary of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Parent or Subsidiary of the Company, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company or any Parent or Subsidiary of the Company accrues at a rate which exceeds twenty-five thousand dollars ($25,000) worth of stock (determined at the Fair Market Value of the stock at the time such option is granted) for each calendar year in which such option is outstanding at any time.

 

4.                                       Offering Periods.  The Plan will be implemented by consecutive Offering Periods with a new Offering Period commencing on the first Trading Day on or after June 1 and December 1 each year, or on such other date as the Administrator will determine; provided, however, that the first Offering Period under the Plan will commence with the first Trading Day on or after the date upon which the Company’s Registration Statement is declared effective by the Securities and Exchange Commission and end on June 3, 2013.  The Administrator will have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future

 

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offerings without stockholder approval if such change is announced prior to the scheduled beginning of the first Offering Period to be affected thereafter.

 

5.                                       Participation.

 

(a)                                  First Offering Period.  An Eligible Employee will be entitled to continue to participate in the first Offering Period pursuant to Section 3(a) only if such individual submits a subscription agreement authorizing payroll deductions in a form determined by the Administrator (which may be similar to the form attached hereto as Exhibit A) to the Company’s designated plan administrator (i) no earlier than the effective date of the Form S-8 registration statement with respect to the issuance of Common Stock under this Plan and (ii) no later than ten (10) business days following the effective date of such S-8 registration statement or such other period of time as the Administrator may determine (the “Enrollment Window”).  An Eligible Employee’s failure to submit the subscription agreement during the Enrollment Window will result in the automatic termination of such individual’s participation in the first Offering Period.

 

(b)                                 Subsequent Offering Periods.  An Eligible Employee may participate in the Plan pursuant to Section 3(b) by (i) submitting to the Company’s payroll office (or its designee), on or before a date prescribed by the Administrator prior to an applicable Offering Date, a properly completed subscription agreement authorizing payroll deductions in the form provided by the Administrator for such purpose, or (ii) following an electronic or other enrollment procedure prescribed by the Administrator.

 

6.                                       Payroll Deductions.

 

(a)                                  At the time a Participant enrolls in the Plan pursuant to Section 5, he or she will elect to have payroll deductions made on each pay day during the Offering Period in an amount not exceeding fifteen percent (15%) of the Compensation which he or she receives on each pay day during the Offering Period; provided, however, that should a pay day occur on an Exercise Date, a Participant will have the payroll deductions made on such day applied to his or her account under the subsequent Offering Period.  A Participant’s subscription agreement will remain in effect for successive Offering Periods unless terminated as provided in Section 11 hereof.

 

(b)                                 Payroll deductions for a Participant will commence on the first pay day following the Offering Date and will end on the last pay day prior to the Exercise Date of such Offering Period to which such authorization is applicable, unless sooner terminated by the Participant as provided in Section 11 hereof; provided, however, that for the first Offering Period, payroll deductions will commence on the first pay day on or following the end of the Enrollment Window.

 

(c)                                  All payroll deductions made for a Participant will be credited to his or her account under the Plan (which will be recorded by the Company or Designated Subsidiary on its books, but not be an externally held account unless required under Applicable Law) and will be withheld in whole percentages only.  A Participant may not make any additional payments into such account, subject to the exception set forth below in Section 6(f) below.

 

(d)                                 A Participant may discontinue his or her participation in the Plan as provided in Section 11.  If permitted by the Administrator, as determined in its sole discretion, for an Offering

 

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Period, a Participant may increase or decrease the rate of his or her payroll deductions during the Offering Period by (i) properly completing and submitting to the Company’s payroll office (or its designee), on or before a date prescribed by the Administrator prior to an applicable Exercise Date, a new subscription agreement authorizing the change in payroll deduction rate in the form provided by the Administrator for such purpose, or (ii) following an electronic or other procedure prescribed by the Administrator.  If a Participant has not followed such procedures to change the rate of payroll deductions, the rate of his or her payroll deductions will continue at the originally elected rate throughout the Offering Period and future Offering Periods (unless terminated as provided in Section 11).  The Administrator may, in its sole discretion, limit the nature and/or number of payroll deduction rate changes that may be made by Participants during any Offering Period.  Any change in payroll deduction rate made pursuant to this Section 6(d) will be effective as of the first full payroll period following five (5) business days after the date on which the change is made by the Participant (unless the Administrator, in its sole discretion, elects to process a given change in payroll deduction rate more quickly).

 

(e)                                  Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(c), a Participant’s payroll deductions may be decreased to zero percent (0%) at any time during an Offering Period.  Subject to Section 423(b)(8) of the Code and Section 3(c) hereof, payroll deductions will recommence at the rate originally elected by the Participant effective as of the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the Participant as provided in Section 11.

 

(f)                                    If there are countries outside the United States in which payroll deductions for Plan participation are not permitted under Applicable Law, the Administrator may allow Eligible Employees to participate by remitting payment to the Company or Designated Subsidiary by check, wire transfer or other feasible means, and shall determine procedures for facilitating participation in the Plan.

 

7.                                       Tax Withholding.  At the time the option is exercised, in whole or in part, or at the time some or all of the Common Stock issued under the Plan is disposed of, the Participant must make adequate provision for the Company’s or Employer’s federal, state, foreign or any other tax or social insurance contribution liability payable to any authority, national insurance, social security or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock.  At any time, the Company or the Employer may, but will not be obligated to, withhold from the Participant’s compensation the amount necessary for the Company or the Employer to meet applicable withholding obligations, including any withholding required to make available to the Company or the Employer any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Eligible Employee.  Alternatively, the Company may refuse to release Shares purchased until the Eligible Employee satisfies the required tax withholding obligations.

 

8.                                       Grant of Option.  On the Offering Date of each Offering Period, each Eligible Employee participating in such Offering Period will be granted an option to purchase on each Exercise Date with respect to an Offering Period (at the applicable Purchase Price) up to a number of shares of Common Stock determined by dividing such Eligible Employee’s payroll deductions accumulated prior to such Exercise Date and retained in the Eligible Employee’s account as of the Exercise Date by the applicable Purchase Price; provided that in no event will an Eligible Employee

 

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be permitted to purchase during each Offering Period more than one thousand (1,000) shares of the Common Stock (subject to any adjustment pursuant to Section 20), and provided further that such purchase will be subject to the limitations set forth in Sections 3(c) and 14.  The Eligible Employee may accept the grant of such option with respect to the first Offering Period by submitting a properly completed subscription agreement in accordance with the requirements of Section 5(a) on or before the last day of the Enrollment Window, and (ii) with respect to any future Offering Period under the Plan, by electing to participate in the Plan in accordance with the requirements of Section 5(b).  The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion (but in accordance with Section 423 of the Code), the maximum number of shares of Common Stock that an Eligible Employee may purchase during each Offering Period.  Exercise of the option will occur as provided in Section 9, unless the Participant has withdrawn pursuant to Section 11.  The option will expire on the last day of the Offering Period.

 

9.                                       Exercise of Option.

 

(a)                                  Unless a Participant withdraws from the Plan as provided in Section 11, his or her option for the purchase of shares of Common Stock will be exercised automatically on the Exercise Date, and the maximum number of full shares subject to the option will be purchased for such Participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account.  No fractional shares of Common Stock will be purchased; any payroll deductions accumulated in a Participant’s account, which are not sufficient to purchase a full share will be retained in the Participant’s account for the subsequent Offering Period, subject to earlier withdrawal by the Participant as provided in Section 11.  Any other funds left over in a Participant’s account after the Exercise Date will be returned to the Participant.  During a Participant’s lifetime, a Participant’s option to purchase shares hereunder is exercisable only by him or her.

 

(b)                                 If the Administrator determines that, on a given Exercise Date, the number of shares of Common Stock with respect to which options are to be exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on the Offering Date of the applicable Offering Period, or (ii) the number of shares of Common Stock available for sale under the Plan on such Exercise Date, the Administrator may in its sole discretion provide that the Company will make a pro rata allocation of the shares of Common Stock available for purchase on such Offering Date or Exercise Date, as applicable, in as uniform a manner as will be practicable and as it will determine in its sole discretion to be equitable among all Participants exercising options to purchase Common Stock on such Exercise Date, and continue all Offering Periods then in effect or terminate all Offering Periods then in effect pursuant to Section 21.  The Company may make a pro rata allocation of the shares available on the Offering Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares for issuance under the Plan by the Company’s stockholders subsequent to such Offering Date.

 

10.                                 Delivery.  As soon as reasonably practicable after each Exercise Date on which a purchase of shares of Common Stock occurs, the Company will arrange the delivery to each Participant of the shares purchased upon exercise of his or her option in a form determined by the Administrator (in its sole discretion) and pursuant to rules established by the Administrator.  The Company may permit or require that shares be deposited directly with a broker designated by the Company or to a designated agent of the Company, and the Company may utilize electronic or automated methods of share transfer.  The Company may require that shares be retained with such

 

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broker or agent for a designated period of time and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares.  No Participant will have any voting, dividend, or other stockholder rights with respect to shares of Common Stock subject to any option granted under the Plan until such shares have been purchased and delivered to the Participant as provided in this Section 10.

 

11.                                 Withdrawal.

 

(a)                                  A Participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by (i) submitting to the Company’s payroll office (or its designee) a written notice of withdrawal in the form prescribed by the Administrator for such purpose (which may be similar to the form attached hereto as Exhibit B), or (ii) following an electronic or other withdrawal procedure prescribed by the Administrator.  All of the Participant’s payroll deductions credited to his or her account will be paid to such Participant promptly after receipt of notice of withdrawal and such Participant’s option for the Offering Period will be automatically terminated, and no further payroll deductions for the purchase of shares will be made for such Offering Period.  If a Participant withdraws from an Offering Period, payroll deductions will not resume at the beginning of the succeeding Offering Period, unless the Participant re-enrolls in the Plan in accordance with the provisions of Section 5.

 

(b)                                 A Participant’s withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods, which commence after the termination of the Offering Period from which the Participant withdraws.

 

12.                                 Termination of Employment.  Upon a Participant’s ceasing to be an Eligible Employee, for any reason, he or she will be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such Participant’s account during the Offering Period but not yet used to purchase shares of Common Stock under the Plan will be returned to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 16, and such Participant’s option will be automatically terminated.

 

13.                                 Interest.  No interest will accrue on the payroll deductions of a Participant in the Plan, unless legally required in any foreign country in which the Plan is offered and such term does not violate the requirements of Section 423 of the Code.

 

14.                                 Stock.

 

(a)                                  Subject to adjustment upon changes in capitalization of the Company as provided in Section 20 hereof, the maximum number of shares of Common Stock which will be made available for sale under the Plan will be two million (2,000,000) shares, plus an annual increase to be added on the first day of each Fiscal Year beginning with the 2013 Fiscal Year, equal to the least of (i) one million (1,000,000) shares of Common Stock, (ii) three percent (3%) of the outstanding shares of Common Stock on such date, or (iii) an amount determined by the Administrator.  All of these Shares may be issued under the offerings made under the Plan that comply with the requirements of Section 423 of the Code.

 

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(b)                                 Until the shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), a Participant will only have the rights of an unsecured creditor with respect to such shares, and no right to vote or receive dividends or any other rights as a stockholder will exist with respect to such shares.

 

(c)                                  Shares of Common Stock to be delivered to a Participant under the Plan will be registered in the name of the Participant or in the name of the Participant and his or her spouse.

 

15.                                 Administration.  The Plan will be administered by the Board or a Committee appointed by the Board, which Committee will be constituted to comply with Applicable Laws.  The Administrator will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan.  Every finding, decision and determination made by the Administrator will, to the full extent permitted by law, be final and binding upon all parties.  Notwithstanding any provision to the contrary in this Plan, the Administrator may adopt rules or procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures for jurisdictions outside of the United States.  Without limiting the generality of the foregoing, the Administrator is specifically authorized to adopt rules and procedures regarding eligibility to participate, the definition of Compensation, handling of payroll deductions, making of contributions to the Plan (including, without limitation, in forms other than payroll deductions), establishment of bank or trust accounts to hold payroll deductions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of stock certificates which vary with local requirements.

 

16.                                 Designation of Beneficiary.

 

(a)                                  The Administrator may allow a Participant to file a designation of a beneficiary who is to receive any shares of Common Stock and cash, if any, from the Participant’s account under the Plan in the event of such Participant’s death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such Participant of such shares and cash.  In addition, the Administrator may allow a Participant to file a designation of a beneficiary who is to receive any cash from the Participant’s account under the Plan in the event of such Participant’s death prior to exercise of the option.  If a Participant is married and the designated beneficiary is not the spouse, spousal consent will be required for such designation to be effective in the United States or to the extent required by Applicable Law.

 

(b)                                 If made, such designation of beneficiary may be changed by the Participant at any time by notice in a form determined by the Administrator.  In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company will deliver such shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

 

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(c)                                  All beneficiary designations will be in such form and manner as the Administrator may designate from time to time.

 

17.                                 Transferability.  Neither payroll deductions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares of Common Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 16 hereof) by the Participant.  Any such attempt at assignment, transfer, pledge or other disposition will be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 11 hereof.

 

18.                                 Use of Funds.  The Company may use all payroll deductions received or held by it under the Plan for any corporate purpose, and the Company will not be obligated to segregate such payroll deductions, unless and to the extent legally required in any foreign country in which the Plan is offered.  Until shares of Common Stock are issued, Participants will only have the rights of an unsecured creditor with respect to such shares.

 

19.                                 Reports.  Individual accounts will be maintained for each Participant in the Plan.  Statements of account will be given to participating Eligible Employees at least annually, which statements will set forth the amounts of payroll deductions, the Purchase Price, the number of shares of Common Stock purchased and the remaining cash balance, if any.

 

20.                                 Adjustments, Dissolution, Liquidation, Merger or Change in Control.

 

(a)                                  Adjustments.  In the event of a stock split, reverse stock split, stock dividend, combination, consolidation, recapitalization (including a recapitalization through a large nonrecurring cash dividend) or reclassification of the Shares, subdivision of the Shares, a rights offering, a reorganization, merger, spin-off, split-up, repurchase, or exchange of Common Stock or other securities of the Company or other significant corporate transaction, or other change affecting the Common Stock occurs, the Administrator, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will, in such manner as it may deem equitable, adjust the number, kind and class of Common Stock that may be delivered under the Plan, the Purchase Price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Sections 8 and 14.  Notwithstanding the forgoing, all adjustments under this Section 20 shall be made in a manner that does not result in taxation under Code Section 409A.

 

(b)                                 Dissolution or Liquidation.  In the event of the proposed winding up, dissolution or liquidation of the Company, any Offering Period then in progress will be shortened by setting a New Exercise Date, and will terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Administrator.  The New Exercise Date will be before the date of the Company’s proposed dissolution or liquidation.  The Administrator will notify each Participant in writing, prior to the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and that the Participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 11 hereof.

 

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(c)                                  Merger or Change in Control.  In the event of a merger or Change in Control (other than a winding up, dissolution or liquidation), each outstanding option will be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation.  In the event that the successor corporation refuses to assume or substitute for the option, the Offering Period with respect to which such option relates will be shortened by setting a New Exercise Date and will end on the New Exercise Date.  The New Exercise Date will occur before the date of the Company’s proposed merger or Change in Control.  The Administrator will notify each Participant in writing prior to the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and that the Participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 11 hereof.

 

21.                                 Amendment or Termination.

 

(a)                                  The Administrator, in its sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason.  If the Plan is terminated, the Administrator, in its discretion, may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of shares of Common Stock on the next Exercise Date (which may be sooner than originally scheduled, if determined by the Administrator in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 20).  If the Offering Periods are terminated prior to expiration, all amounts then credited to Participants’ accounts which have not been used to purchase shares of Common Stock will be returned to the Participants (without interest thereon, except as otherwise required under local laws) as soon as administratively practicable.

 

(b)                                 Without stockholder consent and without limiting Section 21(a), the Administrator will be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Administrator determines in its sole discretion advisable which are consistent with the Plan and Section 423 of the Code.

 

(c)                                  In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequence including, but not limited to:

 

(i)                                amending the Plan to conform with the safe harbor definition under Financial Accounting Standards Board Accounting Standards Codification Topic 718, including with respect to an Offering Period underway at the time;

 

12

 

(ii)                             altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;

 

(iii)                          shortening any Offering Period by setting a New Exercise Date, including an Offering Period underway at the time of the Administrator action;

 

(iv)                         reducing the maximum percentage of Compensation a Participant may elect to set aside as payroll deductions; and

 

(v)                            reducing the maximum number of Shares a Participant may purchase during any Offering Period.

 

Such modifications or amendments will not require stockholder approval or the consent of any Plan Participants.

 

22.                                 Notices.  All notices or other communications by a Participant to the Company under or in connection with the Plan will be deemed to have been duly given when received in the form and manner specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

 

23.                                 Conditions Upon Issuance of Shares.  Shares of Common Stock will not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto will comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and will be further subject to the approval of counsel for the Company with respect to such compliance.

 

As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

 

24.                                 Term of Plan.  The Plan will become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company.  It will continue in effect for a term of ten (10) years, unless sooner terminated under Section 21.

 

25.                                 Stockholder Approval.  The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board.  Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.

 

26.                                 Governing Law.  The Plan and all Awards hereunder shall be construed in accordance with and governed by the laws of the State of New York, but without regard to its conflict of law provisions.

 

13

 

EXHIBIT A

 

SHUTTERSTOCK, INC.

 

2012 EMPLOYEE STOCK PURCHASE PLAN

 

SUBSCRIPTION AGREEMENT

 

 

SHUTTERSTOCK, INC.

 

2012 EMPLOYEE STOCK PURCHASE PLAN

 

SUBSCRIPTION AGREEMENT

 

	
              Original   Application
    	
Offering   Date:
    
	
              Change   in Payroll Deduction Rate
    	
 
    
	
              Change   of Beneficiary(ies)
    	
 
    

 

1.                                                    hereby elects to participate in the Shutterstock, Inc. 2012 Employee Stock Purchase Plan (the “Plan”) and subscribes to purchase shares of the Company’s Common Stock in accordance with this Subscription Agreement and the Plan.

 

2.             I hereby authorize payroll deductions from each paycheck in the amount of         % of my Compensation on each payday (from 0 to 15%) during the Offering Period in accordance with the Plan.  (Please note that no fractional percentages are permitted and will be rounded down to the nearest whole percent.)

 

3.             I understand that such payroll deductions will be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Plan.  I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option and purchase Common Stock under the Plan.

 

4.             I have received a copy of the complete Plan and its accompanying prospectus.  I understand that my participation in the Plan is in all respects subject to the terms of the Plan.  Any conflict between this Subscription Agreement and the Plan will be resolved in favor of the Plan.

 

5.             Shares of Common Stock purchased for me under the Plan should be issued in the name(s) of                                    (Eligible Employee or Eligible Employee and Spouse only).

 

6.             I understand that if I dispose of any shares received by me pursuant to the Plan either within two (2) years after the Offering Date (the first day of the Offering Period during which I purchased such shares) or one (1) year after the Exercise Date, I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the excess of the fair market value of the shares at the time such shares were purchased by me over the price which I paid for the shares.  I hereby agree to notify the Company in writing within thirty (30) days after the date of any disposition of my shares and I will make adequate provision for federal, state or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock.  The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me.  If I dispose of such shares at any time after the expiration of both the two (2)-year and one (1)-year holding periods, I understand that I will be treated for federal income tax purposes as having

 

 

received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equal to the lesser of (a) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or (b) fifteen percent (15%) of the fair market value of the shares on the first trading day of the Offering Period.  The remainder of the gain, if any, recognized on such disposition will be taxed as capital gain.

 

7.             I hereby agree to be bound by the terms of the Plan.  The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Plan.

 

8.             In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Plan:

 

NAME: (Please print)

 

	
 
    	
 
    
	
(First)          (Middle)           (Last)
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Relationship
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
(Address)
    	
 
    
	
 
    	
 
    
	
Employee’s Social
    	
 
    
	
Security Number:
    	
 
    
	
 
    	
 
    
	
Employee’s Address:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    

 

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

 

	
Dated:
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Signature of Employee
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Spouse’s Signature (If beneficiary other than   spouse)
    	
 
    

 

 

EXHIBIT B

 

SHUTTERSTOCK, INC.

 

2012 EMPLOYEE STOCK PURCHASE PLAN

 

NOTICE OF WITHDRAWAL

 

The undersigned Participant in the Offering Period of the Shutterstock, Inc. 2012 Employee Stock Purchase Plan that began on                         ,              (the “Offering Date”) hereby notifies the Company that he or she hereby withdraws from the Offering Period.  He or she hereby directs the Company to pay to the undersigned as promptly as practicable all the payroll deductions credited to his or her account with respect to such Offering Period.  The undersigned understands and agrees that his or her option for such Offering Period will be automatically terminated.  The undersigned understands further that no further payroll deductions will be made for the purchase of shares in the current Offering Period and the undersigned will be eligible to participate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement.

 

	
 
    	
Name and Address of Participant:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signature:
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Date:Passport Potash Inc.: Exhibit 4.1 - Filed by newsfilecorp.com

PASSPORT POTASH INC. 
(the “Company”) 

 

SHARE OPTION PLAN 

 

Dated for Reference August 25, 2011 

 

ARTICLE 1 
PURPOSE AND INTERPRETATION 

Purpose 

1.1                    The
purpose of this Plan is to advance the interests of the Company by encouraging
equity participation in the Company through the acquisition of Common Shares of
the Company. It is the intention of the Company that this Plan will at all times
be in compliance with TSX Venture Policies (or, if applicable, NEX Policies) and
any inconsistencies between this Plan and TSX Venture Policies (or, if
applicable, NEX Policies) will be resolved in favour of the latter. 

Definitions 

1.2                    In
this Plan 

(a)        Affiliate
means a company that is a parent or subsidiary of the Company, or that is
controlled by the same entity as the Company; 

(b)        Associate has
the meaning set out in the Securities Act; 

(c)        Black-out
Period means an interval of time during which the Company has determined
that one or more Participants may not trade any securities of the Company
because they may be in possession of undisclosed material information pertaining
to the Company, or when in anticipation of the release of quarterly or annual
financials, to avoid potential conflicts associated with a company’s
insider-trading policy or applicable securities legislation, (which, for greater
certainty, does not include the period during which a cease trade order is in
effect to which the Company or in respect of an Insider, that Insider, is
subject); 

(d)        Board means
the board of directors of the Company or any committee thereof duly empowered or
authorized to grant Options under this Plan; 

(e)        Change of
Control includes situations where after giving effect to the contemplated
transaction and as a result of such transaction:

- 2 - 

(i)        any one Person holds
a sufficient number of voting shares of the Company or resulting company to
affect materially the control of the Company or resulting company, or, 

(ii)       any combination of
Persons, acting in concert by virtue of an agreement, arrangement, commitment or
understanding, holds in total a sufficient number of voting shares of the
Company or its successor to affect materially the control of the Company or its
successor,

where such Person or combination of
Persons did not previously hold a sufficient number of voting shares to
materially affect control of the Company or its successor and, in the absence of
evidence to the contrary, any Person or combination of Persons acting in concert
by virtue of an agreement, arrangement, commitment or understanding, holding
more than 20% of the voting shares of the Company or resulting company is deemed
to materially affect control of the Company or resulting company; 

(f)        Common Shares
means the common shares without par value in the capital of the Company
providing such class is listed on the TSX Venture (or, NEX, as the case may be);

(g)        Company means
the company named at the top hereof and includes, unless the context otherwise
requires, all of its Affiliates and successors according to law; 

(h)        Consultant
means an individual or Consultant Company, other than an Employee, Officer or
Director that:

(i)        provides on an
ongoing bona fide basis, consulting, technical, managerial or like services to
the Company or 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 and the
individual 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 business and affairs 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
individual or Consultant Company to be knowledgeable about the business and
affairs of the Company; 

(i)        Consultant
Company means for an individual consultant, a company or partnership of
which the individual is an employee, shareholder or partner; 

(j)        Directors
means the directors of the Company as may be elected from time to time; 

(k)        Discounted
Market Price has the meaning assigned by Policy 1.1 of the TSX Venture
Policies; 

- 3 - 

(l)        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 Common Shares beneficially owned by Insiders who are
Service Providers or their Associates; 

(m)        Distribution
has the meaning assigned by the Securities Act, and generally refers to a
distribution of securities by the Company from treasury; 

(n)        Effective
Date for an Option means the date of grant thereof by the Board; 

(o)        Employee
means:

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

(ii)       an individual who works
full-time for the Company or a subsidiary thereof 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)      an individual 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 need not be made at source; 

(p)        Exchange Hold
Period has the meaning assigned by Policy 1.1 of the TSX Venture
Policies;

(q)        Exercise
Price means the amount payable per Common Share on the exercise of an
Option, as determined in accordance with the terms hereof;

(r)        Expiry Date
means the day on which an Option lapses as specified in the Option
Commitment therefor or in accordance with the terms of this Plan; 

(s)        Insider means
an insider as defined in the TSX Venture Policies or as defined in securities
legislation applicable to the Company; 

(t)        Investor
Relations Activities has the meaning assigned by Policy 1.1 of the TSX
Venture Policies; 

(u)        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; 

- 4 - 

(v)        Market Price
has the meaning assigned by Policy 1.1 of the TSX Venture Policies; 

(w)        NEX means a
separate board of the TSX Venture for companies previously listed on the TSX
Venture or the Toronto Stock Exchange which have failed to maintain compliance
with the ongoing financial listing standards of those markets; 

(x)        NEX Issuer
means a company listed on NEX; 

(y)        NEX Policies
means the rules and policies of NEX as amended from time to time; 

(z)        Officer means
a Board appointed officer of the Company; 

(aa)      Option means the
right to purchase Common Shares granted hereunder to a Service Provider; 

(bb)     
Option Commitment means the notice of grant of an Option delivered by the
Company hereunder to a Service Provider and substantially in the form of
Schedule A attached hereto; 

(cc)     
Optioned Shares means Common Shares that may be issued in the future to a
Service Provider upon the exercise of an Option; 

(dd)     
Optionee means the recipient of an Option hereunder; 

(ee)    
 Outstanding Shares means at the relevant time, the number of issued
and outstanding Common Shares of the Company from time to time; 

(ff)     
Participant means a Service Provider that becomes an Optionee; 

(gg)     
Person includes a company, any unincorporated entity, or an individual;

(hh)     
Plan means this share option plan, the terms of which are set out herein
or as may be amended; 

(ii)       Plan Shares means
the total number of Common Shares which may be reserved for issuance as Optioned
Shares under the Plan as provided in §2.2; 

(jj)       Regulatory Approval
means the approval of the TSX Venture and any other securities regulatory
authority that has lawful jurisdiction over the Plan and any Options issued
hereunder; 

(kk)     
Securities Act means the Securities Act, R.S.B.C. 1996, c. 418, or any
successor legislation; 

(ll)       Service Provider
means a Person who is a bona fide Director, Officer, Employee, Management
Company Employee, Consultant or Company Consultant, and also includes a company,
100% of the share capital of which is beneficially owned by one or more Service
Providers; 

- 5 - 

(mm)     
Share Compensation Arrangement means any Option under this Plan but also
includes any other stock option, stock option plan, employee stock purchase plan
or any other compensation or incentive mechanism involving the issuance or
potential issuance of Common Shares to a Service Provider; 

(nn)     
Shareholder Approval means approval by a majority of the votes cast by
eligible shareholders of the Company at a duly constituted shareholders’
meeting; 

(oo)     
Take Over Bid means a take over bid as defined in Multilateral Instrument
62-104 (Take-over Bids and Issuer Bids) or the analogous provisions of
securities legislation applicable to the Company; 

(pp)    
 TSX Venture means the TSX Venture Exchange and any successor
thereto; and 

(qq)     
TSX Venture Policies means the rules and policies of the TSX Venture as
amended from time to time. 

Other Words and Phrases 

1.3                   
Words and phrases used in this Plan but which are not defined in the Plan, but
are defined in the TSX Venture Policies (and, if applicable, the NEX Policies),
will have the meaning assigned to them in the TSX Venture Policies (and, if
applicable, NEX Policies). 

Gender 

1.4                    Words
importing the masculine gender include the feminine or neuter, words in the
singular include the plural, words importing a corporate entity include
individuals, and vice versa. 

ARTICLE 2 
SHARE OPTION PLAN 

Establishment of Share Option Plan 

2.1                    The
Plan is hereby established to recognize contributions made by Service Providers
and to create an incentive for their continuing assistance to the Company and
its Affiliates.

Maximum Plan Shares 

2.2                   
The maximum aggregate number of Plan Shares that may be reserved for issuance
under the Plan at any point in time is 10% of the Outstanding Shares at the time
Plan Shares are reserved for issuance as a result of the grant of an Option,
less any Common Shares reserved for issuance under share options granted under
Share Compensation Arrangements other than this Plan, unless this Plan is
amended pursuant to the requirements of the TSX Venture Policies (and, if
applicable, NEX Policies). 

- 6 - 

Eligibility 

2.3                   
Options to purchase Common Shares may be granted hereunder to Service Providers
of the Company, or its affiliates, from time to time by the Board. Service
Providers that are not individuals will be required to undertake in writing not
to effect or permit any transfer of ownership or option of any of its
securities, or to issue more of its securities (so as to indirectly transfer the
benefits of an Option), as long as such Option remains outstanding, unless the
written permission of the TSX Venture and the Company is obtained. 

Options Granted Under the Plan 

2.4                   
All Options granted under the Plan will be evidenced by an Option Commitment in
the form attached as Schedule A, showing the number of Optioned Shares, the term
of the Option, a reference to vesting terms, if any, and the Exercise Price.

2.5                   
Subject to specific variations approved by the Board, all terms and conditions
set out herein will be deemed to be incorporated into and form part of an Option
Commitment made hereunder. 

Limitations on Issue 

2.6                    Subject
to §2.10, the following restrictions on issuances of Options are applicable
under the Plan: 

(a)        no Service Provider
can be granted an Option if that Option would result in the total number of
Options, together with all other Share Compensation Arrangements granted to such
Service Provider in the previous 12 months, exceeding 5% of the Outstanding
Shares, unless the Company has obtained Disinterested Shareholder Approval to do
so; 

(b)        the aggregate number
of Options granted to all Service Providers conducting Investor Relations
Activities in any 12-month period cannot exceed 2% of the Outstanding Shares,
calculated at the time of grant, without the prior consent of the TSX Venture
(or NEX, as the case may be); and 

(c)        the aggregate number
of Options granted to any one Consultant in any 12 month period cannot exceed 2%
of the Outstanding Shares, calculated at the time of grant, without the prior
consent of the TSX Venture. 

Options Not Exercised 

2.7                    In
the event an Option granted under the Plan expires unexercised or is terminated
by reason of dismissal of the Optionee for cause or is otherwise lawfully
cancelled prior to exercise of the Option, the Optioned Shares that were
issuable thereunder will be returned to the Plan and will be eligible for
re-issuance. 

- 7 - 

Powers of the Board 

2.8                  
 The Board will be responsible for the general administration of the Plan
and the proper execution of its provisions, the interpretation of the Plan and
the determination of all questions arising hereunder. Without limiting the
generality of the foregoing, the Board has the power to 

	 	(a) 	
      allot Common Shares for issuance in connection with the
      exercise of Options;

	 	 	 
	 	(b) 	
      grant Options hereunder;

(c)        subject to any
necessary Regulatory Approval, amend, suspend, terminate or discontinue the
Plan, or revoke or alter any action taken in connection therewith, except that
no general amendment or suspension of the Plan will, without the prior written
consent of all Optionees, alter or impair any Option previously granted under
the Plan unless the alteration or impairment occurred as a result of a change in
the TSX Venture Policies or the Company’s tier classification thereunder; and

(d)        delegate all or such
portion of its powers hereunder as it may determine to one or more committees of
the Board, either indefinitely or for such period of time as it may specify, and
thereafter each such committee may exercise the powers and discharge the duties
of the Board in respect of the Plan so delegated to the same extent as the Board
is hereby authorized so to do. 

Amendment of the Plan by the Board of Directors 

2.9                    Subject
to the requirements of the TSX Venture Policies and the prior receipt of any
necessary Regulatory Approval, the Board may in its absolute discretion, amend
or modify the Plan or any Option granted as follows: 

(a)        it may make
amendments which are of a typographical, grammatical or clerical nature only;

(b)        it may change the
vesting provisions of an Option granted hereunder, subject to prior written
approval of the TSX Venture, if applicable; 

(c)        it may change the
termination provision of an Option granted hereunder which does not entail an
extension beyond the original Expiry Date of such Option; 

(d)        it may make
amendments necessary as a result in changes in securities laws applicable to the
Company; 

(e)        if the Company
becomes listed or quoted on a stock exchange or stock market senior to the TSX
Venture, it may make such amendments as may be required by the policies of such
senior stock exchange or stock market; and 

(f)        it may make such
amendments as reduce, and do not increase, the benefits of this Plan to Service
Providers. 

- 8 - 

Amendments Requiring Disinterested Shareholder Approval

2.10                  The
Company will be required to obtain Disinterested Shareholder Approval prior to
any of the following actions becoming effective: 

(a)        the Plan, together
with all of the Company’s other previous Share Compensation Arrangements, could
result at any time in: 

(i)        the aggregate number
of Common Shares reserved for issuance under Options granted to Insiders
exceeding 10% of the Outstanding Shares in the event that this Plan is amended
to reserve for issuance more than 10% of the Outstanding Shares;

(ii)       the number of Optioned
Shares issued to Insiders within a one-year period exceeding 10% of the
Outstanding Shares in the event that this Plan is amended to reserve for
issuance more than 10% of the Outstanding Shares; or,

(iii)    
 the issuance to any one Optionee, within a 12-month period, of a number of
Common Shares exceeding 5% of the Outstanding Shares; or 

(b)        any reduction in the
Exercise Price of an Option previously granted to an Insider. 

Options Granted Under the Company’s Previous Share Option
Plans 

2.11                  Any
option granted pursuant to a stock option plan previously adopted by the Board
which is outstanding at the time this Plan comes into effect shall be deemed to
have been issued under this Plan and shall, as of the date this Plan comes into
effect, be governed by the terms and conditions hereof. 

ARTICLE 3 
TERMS AND CONDITIONS OF OPTIONS 

Exercise Price 

3.1                    The
Exercise Price of an Option will be set by the Board at the time such Option is
allocated under the Plan, and cannot be less than the Discounted Market Price.

Term of Option 

3.2                    An
Option can be exercisable for a maximum of 10 years from the Effective Date.

Option Amendment 

3.3                   
Subject to §2.10(b), the Exercise Price of an Option may be amended only if at
least six (6) months have elapsed since the later of the date of commencement of
the term of the Option, the date the Common Shares commenced trading on the TSX
Venture, or the date of the last amendment of the Exercise Price. 

- 9 - 

3.4                    An
Option must be outstanding for at least one year before the Company may extend
its term, subject to the limits contained in §3.2. 

3.5                    Any
proposed amendment to the terms of an Option must be approved by the TSX Venture
prior to the exercise of such Option. 

Vesting of Options 

3.6                   
Subject to §3.7, vesting of Options shall be at the discretion of the Board and,
with respect to any particular Options granted under the Plan, in the absence of
a vesting schedule being specified at the time of grant, all such Options shall
vest immediately. Where applicable, vesting of Options will generally be subject
to: 

(a)        the Service Provider
remaining employed by or continuing to provide services to the Company or any of
its Affiliates as well as, at the discretion of the Board, achieving certain
milestones which may be defined by the Board from time to time or receiving a
satisfactory performance review by the Company or any of its Affiliates during
the vesting period; or 

(b)        the Service Provider
remaining as a Director of the Company or any of its Affiliates during the
vesting period. 

Vesting of Options Granted to Consultants Conducting
Investor Relations Activities 

3.7                   
Notwithstanding §3.6, Options granted to Consultants conducting Investor
Relations Activities will vest: 

(a)        over a period of not
less than 12 months as to 25% on the date that is three months from the date of
grant, and a further 25% on each successive date that is three months from the
date of the previous vesting; or 

(b)        such longer vesting
period as the Board may determine. 

Effect of Take Over Bid 

3.8                    If
a Take Over Bid is made to the shareholders generally then the Company shall
immediately upon receipt of notice of the Take Over Bid, notify each Optionee
currently holding an Option of the Take Over Bid, with full particulars thereof
whereupon such Option may, notwithstanding §3.6 and §3.7 or any vesting
requirements set out in the Option Commitment, be immediately exercised in whole
or in part by the Optionee, subject to approval of the TSX Venture (or the NEX,
as the case may be) for vesting requirements imposed by the TSX Venture
Policies. 

Extension of Options Expiring During Blackout Period

3.9                    Should
the Expiry Date for an Option fall within a Blackout Period, or within nine (9)
Business Days following the expiration of a Blackout Period, such Expiry Date
shall, subject to approval of the TSX Venture (or the NEX, as the case may be),
be automatically extended without any further act or formality to that day which
is the tenth (10th) Business Day after the end of the Blackout Period, such tenth Business Day to be
considered the Expiry Date for such Option for all purposes under the Plan.
Notwithstanding §2.8, the tenth Business Day period referred to in this §3.9 may
not be extended by the Board. 

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Optionee Ceasing to be Director, Employee or Service
Provider 

3.10                  Options
may be exercised after the Service Provider has left his/her employ/office or
has been advised by the Company that his/her services are no longer required or
his/her service contract has expired, until the term applicable to such Options
expires, except as follows: 

(a)        in the case of the
death of an Optionee, any vested Option held by him at the date of death will
become exercisable by the Optionee’s lawful personal representatives, heirs or
executors until the earlier of one year after the date of death of such Optionee
and the date of expiration of the term otherwise applicable to such Option; 

(b)        an Option granted to
any Service Provider will expire 90 days (or such other time, not to exceed one
year, as shall be determined by the Board as at the date of grant or agreed to
by the Board and the Optionee at any time prior to expiry of the Option) after
the date the Optionee ceases to be employed by or provide services to the
Company, and only to the extent that such Option was vested at the date the
Optionee ceased to be so employed by or to provide services to the Company; and

(c)        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 same. 

Non Assignable 

3.11                  Subject
to §3.10, all Options will be exercisable only by the Optionee to whom they are
granted and will not be assignable or transferable. 

Adjustment of the Number of Optioned Shares 

3.12                  The
number of Common Shares subject to an Option will be subject to adjustment in
the events and in the manner following: 

(a)        in the event of a
subdivision of Common Shares as constituted on the date hereof, at any time
while an Option is in effect, into a greater number of Common Shares, the
Company will thereafter deliver at the time of purchase of Optioned Shares
hereunder, in addition to the number of Optioned Shares in respect of which the
right to purchase is then being exercised, such additional number of Common
Shares as result from the subdivision without an Optionee making any additional
payment or giving any other consideration therefor; 

(b)        in the event of a
consolidation of the Common Shares as constituted on the date hereof, at any
time while an Option is in effect, into a lesser number of Common Shares, the
Company will thereafter deliver and an Optionee will accept, at the time of
purchase of Optioned Shares hereunder, in lieu of the number of Optioned Shares
in respect of which the right to purchase is then being
exercised, the lesser number of Common Shares as result from the consolidation;

- 11 - 

(c)        in the event of any
change of the Common Shares as constituted on the date hereof, at any time while
an Option is in effect, the Company will thereafter deliver at the time of
purchase of Optioned Shares hereunder the number of shares of the appropriate
class resulting from the said change as an Optionee would have been entitled to
receive in respect of the number of Common Shares so purchased had the right to
purchase been exercised before such change; 

(d)        in the event of a
capital reorganization, reclassification or change of outstanding equity shares
(other than a change in the par value thereof) of the Company, a consolidation,
merger or amalgamation of the Company with or into any other company or a sale
of the property of the Company as or substantially as an entirety at any time
while an Option is in effect, an Optionee will thereafter have the right to
purchase and receive, in lieu of the Optioned Shares immediately theretofore
purchasable and receivable upon the exercise of the Option, the kind and amount
of shares and other securities and property receivable upon such capital
reorganization, reclassification, change, consolidation, merger, amalgamation or
sale which the holder of a number of Common Shares equal to the number of
Optioned Shares immediately theretofore purchasable and receivable upon the
exercise of the Option would have received as a result thereof. The subdivision
or consolidation of Common Shares at any time outstanding (whether with or
without par value) will not be deemed to be a capital reorganization or a
reclassification of the capital of the Company for the purposes of this §3.12;

(e)        an adjustment will
take effect at the time of the event giving rise to the adjustment, and the
adjustments provided for in this section are cumulative; 

(f)        the Company will not
be required to issue fractional shares in satisfaction of its obligations
hereunder. Any fractional interest in a Common Share that would, except for the
provisions of this §3.12, be deliverable upon the exercise of an Option will be
cancelled and not be deliverable by the Company; and 

(g)        if any questions
arise at any time with respect to the Exercise Price or number of Optioned
Shares deliverable upon exercise of an Option in any of the events set out in
this §3.12, such questions will be conclusively determined by the Company’s
auditors, or, if they decline to so act, any other firm of Chartered
Accountants, in Vancouver, British Columbia (or in the city of the Company’s
principal executive office) that the Company may designate and who will be
granted access to all appropriate records and such determination will be binding
upon the Company and all Optionees. 

ARTICLE 4 
COMMITMENT AND EXERCISE PROCEDURES

Option Commitment 

4.1                    Upon
grant of an Option hereunder, an authorized officer of the Company will deliver
to the Optionee an Option Commitment detailing the terms of such Options and
upon such delivery the Optionee will be subject to the Plan and have
the right to purchase the Optioned Shares at the Exercise Price set out therein
subject to the terms and conditions hereof, including any additional
requirements contemplated with respect to the payment of required withholding
taxes on behalf of Optionees. 

- 12 - 

Manner of Exercise 

4.2                    An
Optionee who wishes to exercise his Option may do so by delivering 

(a)        a written notice to
the Company specifying the number of Optioned Shares being acquired pursuant to
the Option; and 

(b)        a certified cheque,
wire transfer or bank draft payable to the Company for the aggregate Exercise
Price for the Optioned Shares being acquired, plus any required withholding tax
amount subject to §4.3. 

Tax Withholding and Procedures 

4.3                    Notwithstanding
anything else contained in this Plan, the Company may, from time to time,
implement such procedures and conditions as it determines appropriate with
respect to the withholding and remittance of taxes imposed under applicable law,
or the funding of related amounts for which liability may arise under such
applicable law. Without limiting the generality of the foregoing, an Optionee
who wishes to exercise an Option must, in addition to following the procedures
set out in§4.2 and elsewhere in this Plan, and as a condition of exercise: 

(a)        deliver a certified
cheque, wire transfer or bank draft payable to the Company for the amount
determined by the Company to be the appropriate amount on account of such taxes
or related amounts; or 

(b)        otherwise ensure, in
a manner acceptable to the Company (if at all) in its sole and unfettered
discretion, that the amount will be securely funded; 

and must in all other respects follow any related procedures
and conditions imposed by the Company. 

Delivery of Optioned Shares and Hold Periods 

4.4                   
As soon as practicable after receipt of the notice of exercise described in §4.2
and payment in full for the Optioned Shares being acquired, the Company will
direct its transfer agent to issue to the Optionee the appropriate number of
Optioned Shares. If the Exercise Price is set below the then current market
price of the Common Shares on the TSX Venture at the time of grant, the
certificate representing the Optioned Shares or written notice in the case of
uncertificated shares will include a legend stipulating that the Optioned Shares
issued are subject to a four-month Exchange Hold Period commencing the date of
the Option Commitment. 

- 13 - 

ARTICLE 5 
GENERAL 

Employment and Services 

5.1                   
Nothing contained in the Plan will confer upon or imply in favour of any
Optionee any right with respect to office, employment or provision of services
with the Company, or interfere in any way with the right of the Company to
lawfully terminate the Optionee’s office, employment or service at any time
pursuant to the arrangements pertaining to same. Participation in the Plan by an
Optionee is voluntary. 

No Representation or Warranty 

5.2                    The
Company makes no representation or warranty as to the future market value of
Common Shares issued in accordance with the provisions of the Plan or to the
effect of the Income Tax Act (Canada) or any other taxing statute
governing the Options or the Common Shares issuable thereunder or the tax
consequences to a Service Provider. Compliance with applicable securities laws
as to the disclosure and resale obligations of each Participant is the
responsibility of each Participant and not the Company. 

Interpretation 

5.3                    The
Plan will be governed and construed in accordance with the laws of the Province
of British Columbia. 

Continuation of Plan 

5.4                    The
Plan will become effective from and after August 25, 2011, and will remain
effective provided that the Plan, or any amended version thereof receives
Shareholder Approval at each annual general meeting of the holders of Common
Shares of the Company subsequent to August 25, 2011.

Amendment of the Plan 

5.5                   
The Board reserves the right, in its absolute discretion, to at any time amend,
modify or terminate the Plan with respect to all Common Shares in respect of
Options which have not yet been granted hereunder. Any amendment to any
provision of the Plan will be subject to any necessary Regulatory Approvals
unless the effect of such amendment is intended to reduce (but not to increase)
the benefits of this Plan to Service Providers. 

SCHEDULE A 

SHARE OPTION PLAN 

OPTION COMMITMENT 

Notice is hereby given that, effective this ________day of
________________, __________ (the “Effective Date”) PASSPORT POTASH INC.
(the “Company”) has granted to ___________________________________________ (the
“Optionee”), an Option to acquire ______________ Common Shares (“Optioned
Shares”) up to 5:00 p.m. Vancouver Time on the __________ day of
____________________, __________ (the “Expiry Date”) at an Exercise Price of
Cdn$____________ per share. 

Optioned Shares are to vest immediately. 

OR 

Optioned Shares will vest [INSERT VESTING SCHEDULE AND TERMS]

The Option shall expire days after the Optionee ceases to be
employed by or provide services to the Company. 

The grant of the Option evidenced hereby is made subject to the
terms and conditions of the Plan, which are hereby incorporated herein and form
part hereof. 

To exercise your Option, deliver a written notice specifying
the number of Optioned Shares you wish to acquire, together with a certified
cheque, wire transfer or bank draft payable to the Company for the aggregate
Exercise Price. A certificate or written notice in the case of uncertificated
shares for the Optioned Shares so acquired will be issued by the transfer agent
as soon as practicable thereafter and may bear a minimum four month
non-transferability legend from the date of this Option Commitment, the text of
which is as follows. [Note: A Company may grant stock options without a hold
period, provided the exercise price of the options is set at or above the market
price of the Company’s shares. If a four month hold period is applicable, the
following legend must be placed on the certificate or the written notice in the
case of uncertificated shares.] 

  
    "WITHOUT PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE
      AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES
      REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED
      OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE
      OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL
      12:00 A.M. (MIDNIGHT) ON [insert date 4 months from the date of grant]”.
    

  

The Company and the Optionee represent that the Optionee under
the terms and conditions of the Plan is a bona fide Service Provider (as defined
in the Plan), entitled to receive Options under TSX Venture Policies. 

- 2 - 

The Optionee also acknowledges and consents to the collection
and use of Personal Information (as defined in the Policies of the TSX Venture
Exchange) by both the Company and the TSX Venture (or the NEX, as the case may
be) as more particularly set out in the Acknowledgement - Personal Information
in use by the TSX Venture (or the NEX, as the case may be) on the date of this
Option Commitment. 

PASSPORT POTASH INC. 

	 	 
	Authorized Signatory 	 
	 	 
	 	 
	[insert name of optionee] 	 
	 	 
	 	 
	Signature of Optionee

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