Document:

ex4_1.htm

Exhibit 4.1

 

DISCOVERY LABORATORIES, INC.

2011 LONG-TERM INCENTIVE PLAN

SECTION 1.                         PURPOSE

 

The purposes of this 2011 Long-Term Incentive Plan (the “Plan”) are to encourage selected Employees, Directors and Consultants of Discovery Laboratories, Inc. (together with any successor thereto, the “Company”) and its Subsidiaries to acquire a proprietary interest in the growth and performance of the Company, to generate an increased incentive to contribute to the Company’s future success and prosperity, thus enhancing the value of the Company for the benefit of its shareholders, and to enhance the ability of the Company and its Subsidiaries to attract and retain exceptionally qualified individuals upon whom, in large measure, the sustained progress, growth and profitability of the Company depend.  This Plan shall be effective on the Effective Date (as defined in Section 16 below).

 

SECTION 2.                         DEFINITIONS

 

As used in the Plan, the following terms shall have the meanings set forth below:

 

	
  

	
(a)

	
“Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent, Other Stock-Based Award, or cash granted under the Plan.

 

	
  

	
(b)

	
“Award Agreement” shall mean any written agreement, contract, or other instrument or document, including an electronic communication, as may from time to time be designated by the Company as evidencing any Award granted under the Plan.

 

	
  

	
(c)

	
“Board” shall mean the Board of Directors of the Company.

 

	
  

	
(d)

	
“Cause”, with respect to any Employee or Consultant of the Company or a Subsidiary, shall have the meaning set forth in such person’s employment, consulting or other applicable agreement, or, in the absence of any such agreement or if such term is not defined in any such agreement, shall mean any one or more of the following, as determined by the Committee:

 

	
  

	
(i)

	
willful misconduct or gross negligence in the performance of such person’s duties;

 

	
  

	
(ii)

	
willful and continued failure or refusal to perform satisfactorily any duties reasonably requested in the course of such person’s employment by, or service to, the Company (other than a failure resulting from such person’s disability); or

 

	
  

	
(iii)

	
fraudulent, dishonest or other improper conduct engaged in by such person that causes, or has the potential to cause, harm to the Company or any of its Subsidiaries, or its or their business or reputation, including, without limitation, such person’s violation of any policies of the Company applicable to such person, such person’s violation of laws, rules or regulations applicable to such person, criminal activity, habitual drunkenness or use of illegal drugs.

 

	
  

	
(e)

	
“Change in Control” shall have the meaning, if any, set forth in a Participant’s employment, consulting or other applicable agreement, or, if such term is not defined in any such agreement, shall mean either a “Change in Control” as defined in subsection (e)(i) or a “409A Change in Control” as defined in subsection (e)(ii), as specified in the applicable Award Agreement.  If no definition is specified, the term shall mean a 409A Change in Control.

 

  

  

  

	
  

	
(i)

	
A “Change in Control” shall mean the occurrence of any of the following events:

 

 

	
  

	
(A)

	
the acquisition, directly or indirectly by any Person (other than the Company, any trustee or other fiduciary under an employee benefit plan of the Company, or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than thirty-five percent (35%) of the total combined voting power of the Company’s outstanding securities;

 

 

	
  

	
(B)

	
a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board ceases to consist of Incumbent Members, which term means members of the Board on the first day of such period and any person becoming a member of the Board subsequent to such date whose election or nomination for election was approved by not less than two-thirds of the members of the Board who then comprised the Incumbent Directors;

 

 

	
  

	
(C)

	
the Company combines with another company and is the surviving corporation but, immediately after the combination, the shareholders of the Company immediately prior to the combination hold, directly or indirectly, by reason of their being stockholders of the Company, fifty percent (50%) or less of the voting stock of the combined entity; or

 

 

	
  

	
(D)

	
a liquidation of the Company, a sale of all or substantially all of the Company’s assets, or a merger, consolidation or similar transaction in which the Company is not the surviving entity or survives as a wholly-owned or majority-owned subsidiary of another entity.

 

	
  

	
(ii)

	
“409A Change in Control” shall mean the occurrence of any of the following events:

 

(A)any Person (other than (1) the Company, or (2) any trustee or other fiduciary under an employee benefit plan of the Company), is or becomes the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Grantee’s Employer (as defined below) by reason of having acquired such securities during the 12-month period ending on the date of the most recent acquisition (not including any securities acquired directly from the Company or its Affiliates) representing thirty percent (30%) or more of the total voting power of the Grantee’s Employer’s then outstanding voting securities;

 

	
  

	
(B)

	
the majority of members of the Board of the Grantee’s Employer is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of the Grantee’s Employer before the date of the appointment;

 

  

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(C)

	
there is consummated a merger or consolidation of the Grantee’s Employer or any subsidiary thereof with any other corporation or other entity, resulting in a change described in clauses (A), (B), (D), or  (E) of this definition, other than (1) a merger or consolidation that would result in the voting securities of the Grantee’s Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than sixty percent (60%) of the total voting power of the voting securities of the Grantee’s Employer or such surviving or parent entity outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Company or the Grantee’s Employer (or similar transaction) in which no Person, directly or indirectly, acquired forty percent (40%) or more of the total voting power of the then outstanding securities of the Grantee’s Employer (not including any securities acquired directly from the Company or its Affiliates);

 

 

	
  

	
(D)

	
a liquidation of the Grantee’s Employer involving the sale to any Person of at least forty percent (40%) of the total gross fair market value of all of the assets of the Grantee’s Employer immediately before the liquidation; or

 

 

	
  

	
(E)

	
the sale or disposition by the Grantee’s Employer or any direct or indirect subsidiary of the Grantee’s Employer to any Person (other than any Subsidiary) of assets that have a total fair market value equal to forty percent (40%) or more of the total gross fair market value of all of the assets of the Grantee’s Employer and its subsidiaries (taken as a whole) immediately before such sale or disposition (or any transaction or related series of transactions having a similar effect), other than a sale or disposition by the Company or the Grantee’s Employer or any direct or indirect subsidiary of either to an entity at least sixty percent (60%) of the total voting power of the voting securities of which is beneficially owned by shareholders of the Company or the Grantee’s Employer in substantially the same proportions as their beneficial ownership of the Company or the Grantee’s Employer immediately prior to such sale.

 

	
  

	
For purposes of this subsection 2(e)(ii), “Grantee’s Employer” shall mean (1) the corporation for which the Grantee directly provides services or (2) the corporation that is liable for payments of deferred compensation to Grantee (if any) hereunder, or (3) a corporation that is a majority shareholder of either such corporation, or any corporation in a chain of corporations each of which is a majority shareholder of another corporation in the chain, ending with the corporation described in (A) or (B).

 

	
  

	
(f)

	
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

	
  

	
(g)

	
“Committee” shall mean a committee of the Board, acting in accordance with the provisions of Section 3, designated by the Board to administer the Plan and composed of not less than two Directors.  Each member of the Committee shall qualify as an “outside director” as defined under Section 162(m) of the Code and the regulations promulgated thereunder and as a “non-employee director” under Rule 16b-3 promulgated under the 1934 Act, and shall satisfy any other requirements designated by the Board.  To the extent the Committee has delegated authority (including as described in Section 3(b)) the term “Committee” shall refer to such delegate.

 

	
  

	
(h)

	
“Consultant” shall mean any person, including a Director, who is not an Employee and who is engaged by the Company or any Subsidiary thereof, to render services to or for the benefit of the Company or any Subsidiary and is compensated for such services.

 

	
  

	
(i)

	
“Director” shall mean a member of the Board.

 

	
  

	
(j)

	
“Disability” for each respective Participant shall have the meaning set forth in the Participant’s employment agreement, Award Agreement or other similar agreement with the Company; provided, that if such term is not defined in any such agreement to which the Participant is a party or if Participant is not a party to any such agreement, then “Disability” shall mean (i) with respect to any ISO, a permanent and total disability, within the meaning of Section 22(e)(3) of the Code, and (ii) with respect to any deferred compensation subject to Code Section 409A such term as defined in Treasury Regulation Section 1.409A-3(i)(4)(i)(A) or (B) or 1.409A-3(i)(4)(iii), or (iii) for any other purpose, “disability” as defined in the Company’s long term disability program applicable to the Grantee (or that would be applicable to the Grantee if the Grantee elected coverage).

 

  

3

  

 

	
  

	
(k)

	
“Dividend Equivalent” shall mean any right granted under Section 10 of the Plan.

 

	
  

	
(l)

	
“Eligible Person” shall mean an Employee, Director or Consultant.

 

	
  

	
(m)

	
“Employee” shall mean any person treated as an employee (including officers and directors) in the records of the Company or any Subsidiary and who is subject to the control and direction of the Company or any Subsidiary with regard to both the work to be performed and the manner and method of performance.  For purposes of the Plan, the payment of a director’s fee by the Company to a Director shall not be sufficient to constitute “employment” of the Director by the Company.

 

	
  

	
(n)

	
“Fair Market Value” of a Share on any date of reference shall be determined by the Committee, in its sole discretion, and may be different for different purposes.  For this purpose, the Fair Market Value of a Share on any trading day shall be (i) if the Shares are listed or admitted for trading on any United States national securities exchange, or if actual transactions are otherwise reported on a consolidated transaction reporting system, the price of the last sale before or the first sale after the grant, the closing price on the trading day before or the trading day of the grant, the arithmetic mean of the high and low prices on the trading day before or the trading day of the grant, or shall be determined by any other reasonable method using actual transactions in the Shares as reported on such market.  The determination of fair market value for purposes of setting the exercise price or strike price of an award also may be determined using an average selling price during a specified period that is written 30 days before or 30 days after the applicable valuation date, provided the Committee irrevocably commits to grant the Award with an exercise or strike price set using such an average selling price before the beginning of the specified period, or (ii) if clause (i) is not applicable, the mean of the high bid and low asked quotations for a Share as reported by the National Quotation Bureau, Incorporated if at least two securities dealers have inserted both bid and asked quotations for the Shares on at least five of the 10 preceding trading days.  If the information set forth in clauses (i) and (ii) above is unavailable or inapplicable to the Company (e.g., if the Shares are not then publicly traded or quoted), then the “Fair Market Value” of a Share shall be the value as determined by the Committee by the reasonable application of a reasonable valuation method.

 

	
  

	
(o)

	
“Incentive Stock Option” and “ISO” shall mean an option granted under Section 6 of the Plan that is intended to meet the requirements of Section 422 of the Code, or any successor provision thereto.

 

	
  

	
(p)

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

 

	
  

	
(q)

	
“Non-Qualified Stock Option” shall mean an option granted under Section 6 of the Plan that is not intended to be an Incentive Stock Option.

 

	
  

	
(r)

	
“Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option.

 

	
  

	
(s)

	
“Other Stock-Based Award” shall mean any right granted under Section 11 of the Plan.

 

	
  

	
(t)

	
“Participant” shall mean an Eligible Person granted an Award under the Plan.

 

	
  

	
(u)

	
“Performance Award” shall mean any right granted under Section 9 of the Plan.

 

  

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(v)

	
“Performance Criteria” shall mean any quantitative and/or qualitative measures, as determined by the Committee, which may be used to measure the level of performance of the Company or any individual Participant during a Performance Period, including any Qualifying Performance Criteria.

 

	
  

	
(w)

	
“Performance Period” shall mean any period as determined by the Committee in its sole discretion.

 

	
  

	
(x)

	
“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the 1934 Act and used in Sections 13(d) and 14(d) thereof, including “group” as defined in Section 13(d) thereof.

 

	
  

	
(y)

	
“Qualifying Performance Criteria” shall mean one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or related Subsidiary, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to a previous year’s results or to a designated comparison group, in each case as specified by the Committee in the Award: achieving specified milestones in the discovery and development, commercialization or manufacturing of one or more of the Company product candidates, obtaining debt or equity financing, achieving personal management objectives, achieving sales, revenue, net income (before or after taxes), net earnings, earnings per share, return on total capital, return on equity, cash flow, cash flow from operations, operating profit and/or margin rate targets, subject to adjustment by the Committee to remove the effect of charges for restructurings, discontinued operations, extraordinary items and all items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence, related to the disposal of a segment or a business, or related to a change in accounting principle or otherwise.

 

	
  

	
(z)

	
“Restricted Securities” shall mean Awards of Restricted Stock or other Awards under which issued and outstanding Shares are held subject to certain restrictions.

 

	
  

	
(aa)

	
“Restricted Stock” shall mean any award of Shares granted under Section 8 of the Plan.

 

	
  

	
(bb)

	
“Restricted Stock Unit” shall mean any right granted under Section 8 of the Plan that is denominated in Shares.

 

	
  

	
(cc)

	
“Shares” shall mean the common shares of the Company par value $0.001 per share, and such other securities as may become the subject of Awards, or become subject to Awards, pursuant to an adjustment made under Section 4(b) of the Plan.

 

	
  

	
(dd)

	
“Stock Appreciation Right” shall mean any right granted under Section 7 of the Plan.

 

	
  

	
(ee)

	
“Subsidiary” shall mean a subsidiary company as defined in Section 424(f) of the Code (with the Company being treated as the employer corporation for purposes of this definition).

 

	
  

	
(ff)

	
“2007 Plan” shall mean the Company’s 2007 Long-Term Incentive Plan as amended from time to time.

 

  

5

  

SECTION 3.                         ADMINISTRATION

 

Except as otherwise provided herein, the Plan shall be administered by the Committee, which shall have the power to interpret the Plan and to adopt such rules and guidelines for implementing the terms of the Plan as it may deem appropriate. The Committee shall have the ability to modify the Plan provisions, to the extent necessary, or delegate such authority, to accommodate any changes in law and regulations in jurisdictions in which Participants will receive Awards.

 

	
  

	
(a)

	
Subject to the terms of the Plan and applicable law, the Committee shall have full power and authority to:

 

	
  

	
(i)

	
designate Participants and grant Awards under the Plan;

 

	
  

	
(ii)

	
determine the size and type or types of Awards to be granted to each Participant under the Plan;

 

	
  

	
(iii)

	
determine the number of Shares to be covered by (or with respect to which payments, rights, or other matters are to be calculated in connection with) Awards;

 

	
  

	
(iv)

	
determine the terms and conditions of any Award, and to prescribe Award Agreements evidencing or setting terms thereof, which need not be the same for each Participant;

 

	
  

	
(v)

	
determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, or other Awards, or canceled, forfeited, or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended;

 

	
  

	
(vi)

	
determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee;

 

	
  

	
(vii)

	
interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan;

 

	
  

	
(viii)

	

establish, amend, suspend, or waive such rules and guidelines;

 

	
  

	
(ix)

	
appoint such agents as it shall deem appropriate for the proper administration of the Plan;

 

	
  

	
(x)

	
make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan; and

 

	
  

	
(xi)

	
correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect.

 

	
  

	
(b)

	
Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time, and shall be final, conclusive, and binding upon all Persons, including the Company, any Subsidiary, any Participant, any holder or beneficiary of any Award, any shareholder, and any employee of the Company or of any Subsidiary. Subject to the requirements of applicable law and regulations, actions of the Committee may be taken by:

 

  

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(i)

	
a subcommittee, designated in writing by the Committee;

 

	
  

	
(ii)

	
the Committee but with one or more members abstaining or recusing himself or herself from acting on the matter, so long as two or more members remain to act on the matter. Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of such members, shall be the action of the Committee for purposes of the Plan; or

 

	
  

	
(iii)

	
one or more officers or managers of the Company or any Subsidiary, or a committee of such officers or managers, to whom authority to perform such functions as the Committee may determine, to the fullest extent permitted under Section 157 and other applicable provisions of the Delaware General Corporation Law and the Company’s bylaws, have been delegated and whose authority is subject to such terms and limitations set forth by the Committee in writing, and whose authority shall not extend to any matter relating to Participants who are officers or directors of the Company for purposes of Section 16 of the 1934 Act.

 

SECTION 4.                         SHARES AVAILABLE FOR AWARDS

 

	
  

	
(a)

	
Shares Available.

 

	
  

	
(i)

	
Subject to adjustment as provided in Section 4(b) and to the terms of this Section 4, the total number of Shares reserved and available for delivery pursuant to Awards granted under the Plan shall be (A) three million, seven hundred-thousand (3,700,000), plus (B) the number of shares that, immediately prior to the Effective Date, remain available for issuance or delivery under the 2007 Plan; plus (C) the number of shares subject to awards under the 2007 Plan which become available for grant under the Plan in accordance with Section 4(c) after the Effective Date.

 

	
  

	
(ii)

	
The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of Shares actually delivered differs from the number of Shares previously counted in connection with an Award.  Shares subject to an Award or an award under the 2007 Plan that is canceled, expired, forfeited, settled in cash or otherwise terminated or settled without delivery of the full number of Shares subject to such Award to the Participant will again be available for Awards.  In addition, in the case of any Award granted in substitution for an award of a company or business acquired by the Company or an Affiliate, shares delivered or to be delivered in connection with such substitute Award shall not be counted against the number of shares reserved under the Plan, but shall be available under the Plan by virtue of the Company’s assumption of the plan or arrangement of the acquired company or business.  This Section 4(a)(ii) shall apply to the number of Shares reserved and available for ISOs only to the extent consistent with applicable regulations relating to ISOs under the Code.  Because Shares will count against the number reserved upon delivery (or later vesting) and subject to these share counting rules, the Committee may determine that Awards may be outstanding that relate to more Shares than the aggregate remaining available under the Plan, so long as Awards will not result in delivery and vesting of Shares in excess of the number then available under the Plan.  The Company shall at all times during the term of the Plan retain as authorized and unissued Shares or treasury Shares at least the number of Shares from time to time required under the provisions of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder.

 

  

7

  

 

	
  

	
(iii)

	
Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares.

 

	
  

	
(iv)

	
Upon the Effective Date, no further Awards shall be granted under the 2007 Plan.

 

	
  

	
(b)

	
Adjustments.

 

	
  

	
(i)

	
In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, or other securities), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event constitutes an equity restructuring transaction, as that term is defined in Statement of Financial Accounting Standards No. 123 (revised) or otherwise affects the Shares, then the Committee shall adjust the following in a manner that is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan:

 

 

	
  

	
(A)

	
the number and type of Shares or other securities which thereafter may be made the subject of Awards;

 

 

	
  

	
(B)

	
the number and type of Shares or other securities subject to outstanding Awards;

 

 

	
  

	
(C)

	
the number and type of Shares or other securities specified as the annual per-participant limitation under Sections 14(e), (f), and (g);

 

 

	
  

	
(D)

	
the grant, purchase, or exercise price with respect to any Award, or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; and

 

 

	
  

	
(E)

	
other value determinations applicable to outstanding awards;

 

 

provided, however, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code or any successor provision thereto; and provided further, however, that the number of Shares subject to any Award denominated in Shares shall always be a whole number.

 

	
  

	
(ii)

	
In the event the Company or any Subsidiary shall assume outstanding employee awards or the right or obligation to make future such awards in connection with the acquisition of another business or another corporation or business entity, the Committee may make such adjustments, not inconsistent with the terms of the Plan, in the terms of Awards as it shall deem appropriate in order to achieve reasonable comparability or other equitable relationship between the assumed awards and the Awards granted under the Plan as so adjusted.

 

	
  

	
(iii)

	
The Committee shall be authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company, any Subsidiary, or the financial statements of the Company or any Subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits to be made available under the Plan.

 

  

8

  

 

	
  

	
(c)

	
Prior Plans. Except as otherwise provided herein, (i) any award made under the Company’s Amended and Restated 1998 Stock Incentive Plan, as amended before the expiration of such plan, shall continue to be subject to the terms and conditions of such plan and the applicable award agreement, and (ii) any award made under the 2007 Plan before the Effective Date shall continue to be subject to the terms and conditions of the 2007 Plan and the applicable award agreement.

 

SECTION 5.                         ELIGIBILITY

 

Any Eligible Person shall be eligible to be designated a Participant.

 

SECTION 6.                         OPTIONS

 

The Committee is authorized to grant Options to Eligible Persons with the following terms and conditions and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine:

 

	
  

	
(a)

	
Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee no later than the date of grant of such Option; provided, however, and except as provided in Section 4(b), that such purchase price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option.

 

	
  

	
(b)

	
Option Term. The term of each Option shall be specified in the applicable Award Agreement and shall not exceed ten (10) years from its date of grant.

 

	
  

	
(c)

	
Time and Method of Exercise. The Committee shall establish in the applicable Award Agreement the time or times at which and the circumstances under which (including based on achievement of performance goals and/or future service requirements) an Option may be exercised in whole or in part, and the method or methods by which, and the form or forms, including, without limitation, cash, Shares (including Shares deliverable on exercise), other Awards, or other property that does not have a deferral feature, (including through “net exercise” or “cashless exercise” arrangements to the extent permitted by applicable law), or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price, in which, payment of the exercise price with respect thereto may be made or deemed to have been made, and the method or forms in which Shares will be delivered or deemed delivered in satisfaction of Options.  In addition, the Committee may allow a Participant to exercise any Option by delivering to the Company or its designated agent an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell Shares and deliver the sale proceeds directly to the Company to the extent required to pay the Option exercise price.

 

	
  

	
(d)

	
Incentive Stock Options. Only employees (as determined in accordance with Section 3401(c) of the Code) of the Company or a Subsidiary may be granted Incentive Stock Options.  The terms of any Incentive Stock Option granted under the Plan shall be designed to comply in all respects with the provisions of Section 422 of the Code, or any successor provision thereto, and any regulations promulgated thereunder.  In addition, Options designated as Incentive Stock Options shall not be eligible for treatment under the Code as Incentive Stock Options (and will be deemed to be Non-Qualified Stock Options) to the extent that either (1) the aggregate Fair Market Value of Shares (determined as of the time of grant) with respect to which such Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Subsidiary) exceeds $100,000, taking Options into account in the order in which they were granted, or (2) such Options otherwise remain exercisable but are not exercised within three (3) months of termination of employment (or such other period of time provided in Section 422 of the Code).

 

  

9

  

 

SECTION 7.                         STOCK APPRECIATION RIGHTS

 

The Committee is authorized to grant Stock Appreciation Rights to Eligible Persons.  Subject to the terms of the Plan and any applicable Award Agreement, a Stock Appreciation Right granted under the Plan shall confer on the Participant a right to receive, upon exercise thereof, the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right as specified by the Committee.

 

	
  

	
(a)

	
Grant Price. The grant price of any Stock Appreciation Right shall be determined by the Committee no later than the date of grant, provided, however, that such price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right, and if a Stock Appreciation Right is granted in tandem to an Option, the grant price of the Stock Appreciation Right shall not be less than the exercise price of such Option.

 

	
  

	
(b)

	
Term. The term of each Stock Appreciation Right shall be specified in the applicable Award Agreement and shall not exceed ten (10) years from the date of grant.

 

	
  

	
(c)

	
Time and Method of Exercise. The Committee shall establish in the applicable Award Agreement the time or times at which and the circumstances under which a Stock Appreciation Right may be exercised in whole or in part (including achievement of performance goals and/or future service requirements, and the method of exercise, method of settlement, form of consideration payable in settlement (whether cash, Shares or other property) and the methods or forms in which Shares will be delivered or deemed to be delivered, and whether or not a Stock Appreciation Right shall be freestanding or in tandem or combination with any other Award).

 

SECTION 8.                         RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

	
  

	
(a)

	
Grant. The Committee is authorized to grant Awards of Restricted Stock and Restricted Stock Units to Eligible Persons.

 

	
  

	
(b)

	
Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may establish in the applicable Award Agreement (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right), which restrictions may lapse separately or in combination at such time or times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee may deem appropriate.  Unrestricted Shares, evidenced in such manner as the Committee shall deem appropriate, shall be delivered to the holder of Restricted Stock or Restricted Stock Unit promptly after such restrictions have lapsed.

 

	
  

	
(c)

	
Registration. Any Restricted Stock or Restricted Stock Units granted under the Plan may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Shares of Restricted Stock granted under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.

 

  

10

  

	
  

	
(d)

	
Consideration.  A Participant shall pay such consideration for Restricted Stock as the Committee may require; provided that the minimum consideration for shares of Restricted Stock (other than treasury shares) shall be the par value of such Shares.

 

	
  

	
(e)

	
Forfeiture. Upon termination of service during the applicable restriction period, except as set forth herein or in the applicable Award Agreement or as otherwise determined by the Committee, all Shares of Restricted Stock and all Restricted Stock Units still, in either case, subject to restriction shall automatically be forfeited and reacquired for no additional consideration by the Company.

 

	
  

	
(f)

	
Dividend Equivalents.  Unless otherwise determined by the Committee, and subject to Section 10, Dividend Equivalents on Restricted Stock Units shall be either (A) paid with respect to such Restricted Stock Units at the dividend payment date in cash or unrestricted Shares having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Restricted Stock Units, either as a cash deferral or with the amount or value thereof automatically deemed reinvested in Restricted Stock Units, other Awards or other investment vehicles having a Fair Market Value equal to the amount of such dividends, as the Committee shall determine or permit a Participant to elect, and shall be paid when the Restricted Stock Units to which they relate are settled.  Notwithstanding the foregoing, Dividend Equivalents (whether in the form of Restricted Stock Units or otherwise) on Restricted Stock Units that are contingent on satisfying performance criteria shall be forfeited if the Restricted Stock Units to which they relate are forfeited or otherwise not earned.  Unless otherwise determined by the Committee, cash, Shares or other property distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock and Restricted Stock Units with respect to which such Shares or other property has been distributed.

 

SECTION 9.                         PERFORMANCE AWARDS

 

The Committee is hereby authorized to grant Performance Awards to Participants. Performance Awards include arrangements under which the grant, issuance, retention, vesting and/or transferability of any Award is subject to such Performance Criteria and such additional conditions or terms as the Committee may designate.  Performance Awards may be made in cash.  Subject to the terms of the Plan and any applicable Award Agreement, a Performance Award granted under the Plan:

 

	
  

	
(a)

	
may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, or other Awards; and

 

	
  

	
(b)

	
shall confer on the holder thereof rights valued as determined by the Committee and payable to, or exercisable by, the holder of the Performance Award, in whole or in part, upon the achievement of such performance goals during such Performance Periods as the Committee shall establish.

 

SECTION 10.                         DIVIDEND EQUIVALENTS

 

The Committee is hereby authorized to grant to Participants Awards under which the holders thereof shall be entitled to receive payments equivalent to dividends or interest with respect to a number of Shares determined by the Committee, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested. Subject to the terms of the Plan and any applicable Award Agreement, such Awards may have such terms and conditions as the Committee shall determine.

 

  

11

  

 

SECTION 11.                         OTHER STOCK-BASED AWARDS

The Committee is hereby authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purposes of the Plan, provided, however, that such grants must comply with applicable law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this Section 11 shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms, including, without limitation, cash, Shares, other securities, or other Awards, or any combination thereof, as the Committee shall determine, the value of which consideration, as established by the Committee, and except as provided in Section 4(b), shall not be less than the Fair Market Value of such Shares or other securities as of the date such purchase right is granted.

 

SECTION 12.                         TERMINATION OF EMPLOYMENT OR SERVICE

 

	
  

	
(a)

	
For Cause.  Except as otherwise provided by the Committee in an Award Agreement, if a Participant’s employment or service is terminated for Cause (i) the Participant’s Restricted Stock or Restricted Stock Units that are then forfeitable shall thereupon be forfeited, and (ii) any unexercised Option, Stock Appreciation Right, Performance Award, Other Stock-Based Award or cash Award shall terminate effective immediately upon such termination of employment or service.

 

	
  

	
(b)

	
On Account of Death.  Except as otherwise provided by the Committee in an Award Agreement, if a Participant’s employment or service terminates on account of death (or if a Participant dies within ninety (90) days following termination of employment due to Disability), then:

 

	
  

	
(i)

	
the Participant’s Restricted Stock and Restricted Stock Units that were forfeitable shall thereupon become nonforfeitable;

 

	
  

	
(ii)

	
any unexercised Option or Stock Appreciation Right, to the extent exercisable on the date of such termination of employment or service, may be exercised, in whole or in part, within the first twelve (12) months after such termination of employment or service (but only during the term of such Award) after the death of the Participant by (A) his or her personal representative or by the person to whom an Option or Stock Appreciation Right, as applicable, is transferred by will or the applicable laws of descent and distribution or (B) the Participant’s designated beneficiary; and, to the extent that any such Option or Stock Appreciation Right was not exercisable on the date of such termination of employment or service, it will immediately terminate; and

 

	
  

	
(iii)

	
the Participant’s rights with respect to any unexercised Performance Shares, Other Stock-Based Awards or cash Awards shall be as set forth in the applicable Award Agreement.

 

	
  

	
(c)

	
On Account of Disability.  Except as otherwise provided by the Committee in an Award Agreement, if a Participant’s employment or service terminates on account of Disability, then:

 

	
  

	
(i)

	
the Participant’s Restricted Stock and Restricted Stock Units that were forfeitable shall thereupon become nonforfeitable;

 

	
  

	
(ii)

	
any unexercised Option or Stock Appreciation Right, to the extent exercisable on the date of such termination of employment or service, may be exercised in whole or in part, within the first ninety (90) days after such termination of employment or service (but only during the term of such Award) by the Participant, or by (A) his or her personal representative or by the person to whom an Option or Stock Appreciation Right, as applicable, is transferred by will or the applicable laws of descent and distribution or (B) the Participant’s designated beneficiary; and, to the extent that any such Option or Stock Appreciation Right was not exercisable on the date of such termination of employment, it will immediately terminate; and

 

  

12

  

 

	
  

	
(iii)

	
the Participant’s rights with respect to any unexercised Performance Shares, Other Stock-Based Awards or cash Awards shall be as set forth in the applicable Award Agreement.

 

	
  

	
(d)

	
Any Other Reason.  Except as otherwise provided by the Committee in an Award Agreement, if a Participant’s employment or service terminates for any reason other than for Cause, death, or Disability, then:

 

	
  

	
(i)

	
the Participant’s Restricted Stock and Restricted Stock Units, to the extent forfeitable on the date of the Participant’s termination of employment or service, shall be forfeited on such date;

 

	
  

	
(ii)

	
any unexercised Option or Stock Appreciation Right, to the extent exercisable immediately before the Participant’s termination of employment or service, may be exercised in whole or in part, not later than three (3) months after such termination of employment or service (but only during the term of such Award); and, to the extent that any such Option or Stock Appreciation Right was not exercisable on the date of such termination of employment or service, it will immediately terminate; and

 

	
  

	
(iii)

	
the Participant’s rights with respect to any unexercised Performance Shares, Other Stock-Based Awards or cash Awards shall be as set forth in the applicable Award Agreement.

 

	
  

	
(e)

	
Repurchase Rights.  Except as otherwise provided by the Committee in an Award Agreement, if at any time a Participant’s employment or service with the Company is terminated for Cause or a Participant breaches any post-termination covenants set forth in any written agreement between the Participant and the Company, the Company may, in its discretion, for a period of one year after the termination for Cause or the actual discovery by the Company of the breach, as applicable, and upon 10 (ten) days’ notice to the Participant, (i) repurchase all or any portion of any Shares acquired by the Participant upon the Participant’s exercise of an Award, and/or (ii) require any such Participant to repay to the Company the amount of any profits derived by such Participant upon the sale or other disposition of any Shares underlying an Award during the preceding three years.  The purchase price for any Shares repurchased by the Company pursuant to clause (i) of this Section 12(e) shall be the lesser of the price paid to acquire such Share and the Fair Market Value thereof on the date of such purchase by the Company.

 

SECTION 13.                         CHANGE IN CONTROL

 

Except as otherwise expressly provided in a Participant’s employment or consulting agreement, Award Agreement, or other applicable agreement:

	
  

	
(a)

	
In the event of any Change in Control, the vesting of each outstanding Option and Stock Appreciation Right shall automatically accelerate so that each such Option and Stock Appreciation Right shall, immediately prior to the effective date of the Change in Control, become fully exercisable with respect to the total number of Shares at the time subject to such Option or Stock Appreciation Right and may be exercised for any or all of those Shares as fully-vested Shares. However, an outstanding Option or Stock Appreciation Right shall not so accelerate if and to the extent: (i) such Option or Stock Appreciation Right is, in connection with the Change in Control, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable Option to purchase shares of the capital stock of the successor corporation (or parent thereof) or stock appreciation right, (ii) such Option or Stock Appreciation Right is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested Option Shares or Stock Appreciation Right at the time of the Change in Control and provides for subsequent payout in accordance with the same vesting schedule applicable to the Option or Stock Appreciation Right or (iii) the acceleration of such Option or Stock Appreciation Right is subject to other limitations under the applicable Award Agreement. The determination of comparability under clause (i) above shall be made by the Committee, and its determination shall be final, binding and conclusive.

 

  

13

  

 

	
  

	
(b)

	
All outstanding restrictions with respect to any Restricted Stock or Restricted Stock Units shall also terminate automatically, and the Shares subject to those restrictions shall immediately vest in full, in the event of any Change in Control, except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) in connection with such Change in Control or (ii) such accelerated vesting is precluded by other limitations imposed under the applicable Award Agreement or would trigger additional taxes under Section 409A of the Code.

 

	
  

	
(c)

	
The Committee shall have the discretion, exercisable either at the time an Award is granted or at any time while the Award remains outstanding, to provide for the automatic acceleration of one or more outstanding Awards upon the occurrence of a Change in Control, whether or not those Awards are to be assumed or replaced in the Change in Control.

 

	
  

	
(d)

	
The outstanding Options or other Awards shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

SECTION 14.                         GENERAL

 

	
  

	
(a)

	
No Cash Consideration for Awards. Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law.

 

	
  

	
(b)

	
Awards May be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for any other Award or any award granted under any other plan of the Company or any Subsidiary. Awards granted in addition to or in tandem with other Awards, or in addition to or in tandem with awards granted under any other plan of the Company or any Subsidiary, may be granted either at the same time as or at a different time from the grant of such other Awards or awards.

 

	
  

	
(c)

	
Forms of Payment Under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or a Subsidiary upon the grant, exercise, or payment of an Award may be made in such form or forms as the Committee shall determine, including, without limitation, cash, Shares, rights in or to Shares issuable under the Award or other Awards, other securities, or other Awards, or any combination thereof, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents in respect of installment or deferred payments.

 

	
  

	
(d)

	
Limits on Transfer of Awards. Except as provided by the Committee, no Award and no right under any such Award, shall be assignable, alienable, saleable, or transferable by a Participant otherwise than by will or by the laws of descent and distribution provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant with respect to any Award upon the death of the Participant. Each Award, and each right under any Award, shall be exercisable, during the Participant’s lifetime, only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative. No Award and no right under any such Award, may be pledged, alienated, attached, or otherwise encumbered, and any purported pledge, alienation, attachment, or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate.

 

  

14

  

 

	
  

	
(e)

	
Per-Person Limitation on Options and SARs. The number of Shares with respect to which Options and Stock Appreciation Rights may be granted under the Plan during any year to an individual Participant shall not exceed 1,500,000 Shares, subject to adjustment as provided in Section 4(b).

 

	
  

	
(f)

	
Per-Person Limitation on Certain Awards. Other than Options and Stock Appreciation Rights, the aggregate number of Shares with respect to which Restricted Stock, Restricted Stock Units, Performance Awards and Other Stock-Based Awards may be granted under the Plan during any year to an individual Participant shall not exceed 750,000 Shares, subject to adjustment as provided in Section 4(b).

 

	
  

	
(g)

	
Per-Person Limit on Performance-Based Awards.  Subject to Section 4, the aggregate number of Shares subject to Awards that are intended to qualify as “performance-based compensation” under Code Section 162(m) granted during any calendar year to any one Eligible Person (taking into account the maximum number payable based on performance exceeding target objectives) shall not exceed three (3) million Shares.  The maximum amount payable as a cash Award for any performance period to an Eligible Person that is intended to satisfy the requirements for “performance-based compensation” under Code Section 162(m) shall be five (5) million dollars per calendar year.  In the case of an award with a multi-year performance period, these limits shall apply to each calendar year (or portion thereof) in the performance period.  The limitation on cash Awards is separate from and not affected by the limitation on Awards denominated in Shares.

 

	
  

	
(h)

	
Conditions and Restrictions Upon Securities Subject to Awards. The Committee may provide that the Shares issued upon exercise of an Option or Stock Appreciation Right or otherwise subject to or issued under an Award shall be subject to such further agreements, restrictions, conditions or limitations as the Committee in its discretion may specify prior to the exercise of such Option or Stock Appreciation Right or the grant, vesting or settlement of such Award, including without limitation, conditions on vesting or transferability and forfeiture or repurchase provisions or provisions on payment of taxes arising in connection with an Award. Without limiting the foregoing, such restrictions may address the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any Shares issued under an Award, including without limitation: (A) restrictions under an insider trading policy or pursuant to applicable law, (B) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and holders of other Company equity compensation arrangements, (C) restrictions as to the use of a specified brokerage firm for such resales or other transfers and (D) provisions requiring Shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations.

 

	
  

	
(i)

	
Share Certificates. All Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares or other securities are then listed, and any applicable Federal, state, or local securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

  

15

  

	
  

	
(j)

	
No Rights to Awards. No Participant or other Person shall have any claim to be granted any Award under the Plan, or, having been selected to receive an Award under this Plan, to be selected to receive a future Award, and further there is no obligation for uniformity of treatment of Employees, Directors, Consultants, Participants, or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to each recipient.

 

	
  

	
(k)

	
Tax Provisions.

 

	
  

	
(i)

	
Withholding.  The Company and any Subsidiary is authorized to withhold, at the time of grant or settlement or other time as appropriate, from any Award, any payment relating to an Award, including from a distribution of Shares, or any payroll or other payment to a Participant, amounts of withholding and other taxes required to be withheld.  This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of the Company’s (or a Subsidiary’s) withholding obligations, either on a mandatory or elective basis in the discretion of the Committee.  The Committee is specifically authorized to allow Participants to satisfy withholding tax amounts by electing to have the Company (or a Subsidiary) withhold from the Shares to be delivered upon exercise of an Option or vesting or settlement of a Stock Award that number of Shares having a Fair Market Value equal to the amount required to be withheld.

 

	
  

	
(ii)

	
Required Consent to and Notification of Code Section 83(b) Election.  No election under Code Section 83(b) (to include in gross income in the year of transfer the amounts specified in Code Section 83(b)) or under a similar provision of the laws of a jurisdiction outside the United States may be made unless expressly permitted by the terms of the Award Agreement or by action of the Committee in writing prior to the making of such election.  In any case in which a Participant is permitted to make such an election in connection with an Award, the Participant shall notify the Committee of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Code Section 83(b) or other applicable provision.

 

	
  

	
(iii)

	
Requirement of Notification Upon Disqualifying Disposition Under Code Section 421(b).  If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Committee of such disposition within ten days thereof.

 

	
  

	
(iv)

	
Payment of Tax Amount.  Notwithstanding anything herein to the contrary, in the event the Internal Revenue Service should finally determine that part or all of an Award that has not been settled is nevertheless required to be included in the Participant’s gross income for federal income tax purposes, then an amount necessary to pay applicable federal, state or local income taxes on such includible value shall be distributed with respect to the Award in a lump sum cash payment within sixty (60) days after such determination, without the requirement of separate approval by the Committee.  A “final determination” of the Internal Revenue Service is a determination in writing ordering the payment of additional tax, reporting of additional gross income or otherwise requiring an Award or portion thereof to be included in gross income, which is not appealable or which the Participant does not appeal within the time prescribed for appeals.

 

  

16

  

	
  

	
(v)

	
Construction in Compliance with Code Section 409A.  The Company intends that none of the grant, exercise, settlement or amendment or termination of any Award under the Plan will cause the Participant to be liable for payment of interest or a tax penalty under Code Section 409A.  The provisions of the Plan and any Award Agreement shall be construed consistent with that intent.

 

	
  

	
(vi)

	
“Termination of service,” “resignation” or words of similar import, as used in this Plan shall mean, with respect to any payments of deferred compensation subject to Section 409A of the Code, the Participant’s “separation from service” as defined in Section 409A of the Code.  For this purpose, a “separation from service” is deemed to occur on the date that the Company and the Participant reasonably anticipate that the level of bona fide  services the Participant would perform after the date (whether as an employee or independent contractor) would permanently decrease to a level that, based on the facts and circumstances would constitute a separation from service; provided that a decrease to a level that is 50% or more of the average level of bona fide services provided over the prior 36 months shall not be a separation from service, and a decrease to a level that is 20% or less of the average level of such bona fide services shall be a separation from service.  The bona fide services taken into account for purposes of determining whether there has been a separation from service shall be services performed for the Company and any person or entity that would be considered a single employer with the Company under Section 414(b) or 414(c) of the code; provided that, in applying Section 1563(a)(1), (2), and (3) of the Code, the language “at least 50 percent” shall be used instead of “at least 80 percent;” and further provided that “at least 20 percent” shall be used instead of “at least 50 percent” where based on legitimate business criteria.

 

	
  

	
(vii)

	
Six-Month Delay.  Any distribution or settlement of an Award triggered by the separation from service of a Specified Employee that would otherwise be made prior to the Deferred Distribution Date (as defined below) shall not occur earlier than the Deferred Distribution Date.  The “Deferred Distribution Date” is the day that is six (6) month and one (1) day after a Participant’s separation from service.

 

	
  

	
(l)

	
No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Subsidiary from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases.

 

	
  

	
(m)

	
No Right to Employment. The grant of an Award shall not constitute an employment contract nor be construed as giving a Participant the right to be retained in the employ or service of the Company or any Subsidiary. Further, the Company or a Subsidiary may at any time dismiss a Participant from employment, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.

 

	
  

	
(n)

	
Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware and applicable Federal law without regard to conflict of laws.

 

	
  

	
(o)

	
Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person, or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.

 

  

17

  

 

	
  

	
(p)

	
No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Subsidiary and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Subsidiary pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Subsidiary.

 

	
  

	
(q)

	
No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, or other securities shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated.

 

	
  

	
(r)

	
Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

 

	
  

	
(s)

	
No Representations or Covenants With Respect to Tax Qualification. Although the Company may endeavor to (i) qualify an Award for favorable U.S. or foreign tax treatment (e.g., incentive stock options under Section 422 of the Code) or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on holders of Awards under the Plan.

 

	
  

	
(t)

	
Compliance With Laws. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or stock exchanges on which the Company is listed as may be required. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to:

 

	
  

	
(i)

	
obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and

 

	
  

	
(ii)

	
completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable or at a time when any such registration or qualification is not current, has been suspended or otherwise has ceased to be effective.

 

The inability or impracticability of the Company to obtain or maintain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

SECTION 15.                         AMENDMENT AND TERMINATION

 

Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan:

 

  

18

  

 

	
  

	
(a)

	
Amendments to the Plan. The Board of Directors of the Company may amend, alter, suspend, discontinue, or terminate the Plan, in whole or in part; provided, however, that without the prior approval of the Company’s shareowners, no material amendment shall be made if shareholder approval is required by law, regulation, or stock exchange, and; provided, further, that, notwithstanding any other provision of the Plan or any Award Agreement, no such amendment, alteration, suspension, discontinuation, or termination shall be made without the approval of the shareholders of the Company that would:

 

	
  

	
(i)

	
increase the total number of Shares available for Awards under the Plan, except as provided in Section 4 hereof; or

 

	
  

	
(ii)

	
except as provided in Section 4(b), permit Options, Stock Appreciation Rights, or Other Stock-Based Awards encompassing rights to purchase Shares to be repriced, replaced, or regranted through cancellation, or by lowering the exercise price of a previously granted Option or the grant price of a previously granted Stock Appreciation Right, or the purchase price of a previously granted Other Stock-Based Award.

 

	
  

	
(b)

	
Amendments to Awards. The Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue, or terminate, any Awards theretofore granted, prospectively or retroactively. Except for amendments authorized under Section 13, no such amendment or alteration shall be made which would impair the rights of any Participant, without such Participant’s consent, under any Award theretofore granted, provided that no such consent shall be required with respect to any amendment or alteration if the Committee determines in its sole discretion that such amendment or alteration either (i) is required or advisable in order for the Company, the Plan or the Award to satisfy or conform to any law or regulation or to meet the requirements of any accounting standard, or (ii) is not reasonably likely to significantly diminish the benefits provided under such Award.

 

SECTION 16.                         EFFECTIVE DATE OF THE PLAN

 

The Plan shall be effective on the date that it is approved by the Company’s shareholders (the “Effective Date”).

 

SECTION 17.                         TERM OF THE PLAN

 

Unless earlier terminated by action of the Board of Directors, the Plan will remain in effect until such time as no Shares remain available for delivery under the Plan and the Company has no further rights or obligations under the Plan with respect to outstanding Awards under the Plan.  No incentive stock option shall be granted under the Plan after the tenth anniversary of the adoption of the Plan by the Board.  However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond the termination of the Plan, and the authority of the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award, or to waive any conditions or rights under any such Award, and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond such date.

 

 

19ex10_1.htm

Exhibit 10.1

 

Name of Investor:_____________________

SUBSCRIPTION AGREEMENT

____________________________

THIS SUBSCRIPTION AGREEMENT (the “Agreement”) by and between Paramount Gold and Silver Corp., a Delaware corporation (the “Company”), and the undersigned individual, corporation, limited liability company, partnership, trust or employee benefit plan executing this Agreement as the investor (the “Investor”), provides as follows:

Recitals

A.            This Agreement is made in connection with the Company’s offering (the “Offering”) consisting of shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) pursuant to that certain Confidential Private Placement Memorandum dated March 19, 2012 (the “Memorandum”).

B.            The Company wishes to sell to the Investor and the Investor wishes to purchase from the Company the number of Shares specified on the signature page hereof at the price per Share set forth in Section 2 hereof, subject to the terms, conditions, and requirements contained in this Agreement. As used herein, the term “Shares” shall mean the Common Stock purchased by the Investor pursuant to this Agreement.

C.            The Investor understands that the Company has the right, in its sole discretion, to refuse to accept the Investor’s subscription in whole or in part at any time and for any reason, including without limitation the Company’s belief that the Investor does not meet the applicable suitability requirements for participation in the Offering or that the investment is otherwise unsuitable for the Investor.

NOW, THEREFORE, in consideration of the foregoing and the promises and covenants contained in this Agreement, the Company and the Investor hereby agree as follows:

1.            Sale of Shares. In accordance with the terms and conditions of this Agreement, the Company hereby agrees to sell to the Investor, and the Investor hereby agrees to purchase from the Company, on or before March 23, 2012, or such later date on or before April 13, 2012, that the President and Chief Executive Officer of the Company in his sole discretion chooses (the “Closing Date”), the number of Shares indicated on the signature page hereof. Unless the Company, in its sole discretion, agrees otherwise with the Investor, the Investor may not subscribe for less than 75,000 Shares. The obligation of the Company to sell the Shares to the Investor is subject to, among other things, the conditions that: (i) the Company receives approval (conditional approval in the case of the Toronto Stock Exchange (the “TSX”)) for the listing of the Shares on the TSX and the NYSE Amex LLC (collectively, the “Stock Exchanges”); and (ii) all other necessary regulatory approvals are obtained prior to the Closing Date.

2.            Purchase Price. The purchase price (“Purchase Price”) for each Share shall be $2.05. The Investor shall pay such purchase price certified check or bank draft payable to the Company (or by wire transfer, per instructions to be provided upon request) and delivered with this executed Agreement, a completed Investor Questionnaire (the “Investor Questionnaire”) attached hereto as Exhibit “A” and, if the Investor is a resident of Canada and the acquisition cost of the Shares to such Investor is less than Cdn$150,000 paid in cash on the Closing Date, a duly completed and executed Canadian Accredited Investor Certificate (the “Canadian Accredited Investor Certificate”) attached hereto as Exhibit “B”, and any other further documentation as required under the applicable securities laws or Stock Exchanges or other regulatory authority. Subscriptions for Shares may be accepted or rejected by the Company for any or no reason in its sole discretion.

  

  

  

3.            Representations and Warranties of Investor. The Investor represents and warrants to the Company as follows (which representations and warranties shall survive the Closing Date):

	
  

	
3.1

	
He, she or it has answered the questions contained in the Investor Questionnaire and, if applicable, the Canadian Accredited Investor Certificate, and made a part hereof to the best of his, her or its knowledge and the answers thereto are complete and accurate. The Investor understands and agrees that, although such answers will be kept strictly confidential, the Company may present such Investor Questionnaire and, if applicable, the Canadian Accredited Investor Certificate, to such parties as it deems advisable if called upon to establish the availability under applicable securities laws of an exemption from registration. The Investor agrees to indemnify the Company, its agents, officers, directors and shareholders, for any and all losses (including without limitation attorneys' fees and other costs of investigating, prosecuting, or defending any litigation claim) incurred by the Company as a result of its reliance on the representations and warranties of Investor made in this Agreement or any answers contained in the Investor Questionnaire and, if applicable, the Canadian Accredited Investor Certificate.

	
  

	
3.2

	
If the Investor is a corporation, limited liability company, partnership, trust, or employee benefit plan, it is authorized to make the investment contemplated herein, and the person signing this Agreement on behalf of such entity has been duly authorized by such entity to do so.

	
  

	
3.3

	
This Agreement has been duly authorized, executed and delivered by the Investor and constitutes the Investor’s legal, valid and binding obligation enforceable in accordance with its terms.

	
  

	
3.4

	
The Investor is acquiring the Shares as principal for the Investor’s own account for investment and not with a view to resale or distribution. The Investor understands that the Shares, have not been, and will not be, registered under the Securities Act of 1933, as amended (the “1933 Act”), or applicable securities laws by reason of specific exemptions from the registration provisions of the 1933 Act and applicable state securities laws that depend upon, among other things, the bona fide nature of the investment intent and the accuracy of the Investor’s representations and warranties as expressed in this Agreement and in the Investor Questionnaire.

	
  

	
3.5

	
The Company has advised the Investor, if the Investor is a resident of Canada, that the Company is relying on an exemption from the requirements under applicable Canadian securities laws to provide the Investor with a prospectus and that no prospectus has been filed by the Company with any securities commission in Canada in connection with the Offering, and as a consequence:

  

2

  

	
  

	
(i)

	
the Investor is restricted from using most of the civil remedies available under applicable Canadian securities laws and certain protections, rights and remedies provided by applicable Canadian securities laws, including statutory rights of rescission or damages, will not be available to the Investor;

	
  

	
(ii)

	
the Investor may not receive information that would otherwise be required to be provided to the Investor under the applicable Canadian securities laws; and

	
  

	
(iii)

	
the Investor is relieved from certain obligations that would otherwise apply under the applicable Canadian securities laws.

	
  

	
3.6

	
The Investor: (i) has been furnished, has carefully read, understands and has relied solely on (except as indicated in subsection (ii) below) the terms and conditions of, and the information contained in, the Memorandum and this Agreement (including all exhibits and all amendments thereto and hereto); (ii) has been given the opportunity to ask questions of, and receive answers from, the Company concerning the terms and conditions of this Agreement, the Shares, the Company and its business; and (iii) has not been furnished any literature or written material relating to the Shares, the Company or its business other than the Memorandum and this Agreement (including all exhibits and amendments thereto and hereto).

	
  

	
3.7

	
The Investor recognizes that (i) the purchase of the Shares involves a high degree of risk and has taken full cognizance of and understands such risks, (ii) that all information provided, if any, by the Company relating to its use of proceeds, financial forecasts, and other information which is not of an historical nature (“Forward-looking Information”), represents only the Company’s good faith assessment of such Forward-looking Information, and is based upon assumptions which the Company believes are reasonable, although no assurance exists that such Forward-looking Information is accurate or will be fulfilled, and (iii) that the Company has relied on the representations of the Investor as set forth in this Agreement, in the Investor Questionnaire and, if applicable, the Canadian Accredited Investor Certificate, in determining materiality for purposes of satisfying the disclosure obligations of the Company and in determining the availability of exemptions from (a) registration requirements under applicable United States federal and state securities laws; and (b) prospectus requirements under applicable Canadian securities laws.

	
  

	
3.8

	
The Investor is resident in the jurisdiction set out on the execution page of the Investor Questionnaire, which address is the Investor’s residence or principal place of business, and such address was not obtained or used solely for the purpose of acquiring the Shares.

  

3

  

	
  

	
3.9

	
The Investor fully understands and agrees that the Investor must bear the economic risk of the purchase of the Shares for an indefinite period of time because, among other reasons, the Shares have not been registered under the 1933 Act, or the securities laws of any state, and therefore cannot be sold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the 1933 Act and applicable state securities laws or exemptions from such registration requirements are available. The Investor further understands and agrees that the Company will not honor any attempt by the Investor to sell, pledge, transfer, or otherwise dispose of all or any portion of the Shares in the absence of an effective registration statement under the 1933 Act and applicable state securities laws or an unqualified opinion of counsel, satisfactory in form and substance to the Company and its counsel, and obtained at the expense of the Investor, that exemptions are available therefrom with respect to such attempted disposition.

	
  

	
3.10

	
The Investor, if a resident of Canada, acknowledges that the certificates representing the Shares will bear legends as of the Closing Date substantially in the following forms (and with the necessary information inserted):

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE n“ [THE DATE WHICH IS FOUR MONTHS AND ONE DAY AFTER THE CLOSING DATE WILL BE INSERTED]

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.”

 

provided that subsequent to the date which is four months and one day after the Closing Date, the certificates representing the Shares may be exchanged for certificates bearing no such legends. The Investor acknowledges that it has been advised to consult its own independent legal advisor with respect to the applicable resale restrictions; that it is solely responsible for complying with such restrictions and that the Company is not responsible for ensuring compliance by the Investor of the applicable resale restrictions.

	
  

	
3.11

	
The Investor (i) can bear the risk of losing the entire investment in the Shares; (ii) has overall commitments to other investments which are not readily marketable that are not disproportionate to his, her or its net worth and the investment in the Shares will not cause such overall commitments to become excessive; (iii) has adequate means of providing for current needs and personal contingencies and has no need for liquidity in the investment in the Shares; and (iv) has sufficient knowledge and experience in financial and business matters such that he, she or it is capable, either alone, or together with one or more advisors, of evaluating the risks and merits of investing in the Shares.

  

4

  

	
  

	
3.12

	
The Investor has not incurred, and will not incur, directly or indirectly, as a result of any action taken by the Investor, any liability for brokerage or finder’s fees or agent’s commissions or any similar charges in connection with this Agreement.

	
  

	
3.13

	
The Investor acknowledges that he, she or it must depend entirely upon his, her or its own personal advisors for tax advice concerning an investment in the Company, that the Company has not provided any information on tax matters, and that any information provided to Investor by, or on behalf of, the Company is not to be construed as tax advice to Investor from the Company or counsel to the Company. The Investor will rely solely on his, her or its own personal advisors and not on any statements or representations of the Company or any of its agents and understands that the Investor (and not the Company) shall be responsible for the Investor’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

	
  

	
3.14

	
The Investor understands and agrees that the Company is issuing the Shares to him, her or it pursuant to the exemptions from federal and state securities registration requirements under the 1933 Act. In connection therewith, the Investor represents and warrants that the Investor qualifies as an “Accredited Investor” as such term is defined under Rule 501 of the 1933 Act and has confirmed that on the Investor Questionnaire attached hereto as Exhibit “A”. The Investor, if a resident of Canada who is not purchasing sufficient Shares so that the subscription proceeds are equal to or greater than Cdn$150,000 paid in cash at the Closing , also represents and warrants that the Investor qualifies as an “Accredited Investor” as such term is defined in National Instrument 45-106 Prospectus and Registration Exemptions of the Canadian Securities Administrators (“NI 45-106”), and has confirmed that on the Canadian Accredited Investor Certificate attached hereto as Exhibit “B” and that the Investor was not created or used solely to purchase or hold securities as an Accredited Investor as described in paragraph (m) of the definition of Accredited Investor set out in Exhibit “B. In addition, the Investor, if a resident of Canada who is not an individual, represents and warrants that the Investor was not created solely to purchase or hold securities in reliance on section 2.10 of NI 45-106.

	
  

	
3.15

	
The Investor agrees to comply with all securities laws and with the policies of the Stock Exchanges concerning the purchase of, the holding of, and the resale restrictions applicable to, the Shares. The Investor recognizes that the securities laws and regulations of certain jurisdictions, which may include the jurisdiction of which the Investor is a resident, may impose additional requirements relating to this Offering and the Investor’s purchase of Shares. The Investor hereby agrees to execute and to comply with the terms of any additions, supplements or amendments to this Agreement which are required by the Company.

  

5

  

	
  

	
3.16

	
The funds representing the aggregate purchase price in respect of the Shares which will be advanced by the Investor to the Company hereunder will not represent proceeds of crime for the purpose of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the “PCMLTF Act”) and the Investor acknowledges that the Company may in the future be required by law to disclose the Investor’s name and other information relating to this Agreement and the Investor’s subscription hereunder, on a confidential basis, pursuant to the PCMLTF Act; to the best of the Investor’s knowledge, none of the subscription funds to be provided hereunder (i) have been or will be obtained or derived, directly or indirectly, from or related to any activity that is deemed illegal under the laws of Canada or the United States or any other jurisdiction, or (ii) are being tendered on behalf of a person or entity who has not been identified to the Investor; the Investor shall promptly notify the Company if he discovers that any such representation ceases to be true, and shall provide the Company with appropriate information in connection therewith.

	
  

	
3.17

	
The Investor acknowledges that no agency, stock exchange or governmental agency, securities commission or similar regulatory authority or other entity has reviewed or passed on or made any finding or determination as to the merits of or made any recommendation or endorsement with respect to the Shares.

	
  

	
3.18

	
There is no government or other insurance covering the Shares.

	
  

	
3.19

	
The representations and warranties made in this Agreement, the Investor Questionnaire and, if applicable, the Canadian Accredited Investor Certificate, as well as all other information that the Investor has provided to the Company, either directly or indirectly, concerning the Investor’s financial position and knowledge of financial and business matters, is correct and complete as of the date hereof, and if there should be any material change in such information prior to the issuance to Investor of the Shares, Investor will immediately notify the Company.

4.            Registration. The Company covenants to use its commercially reasonable efforts to file and have declared effective by the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-1 registering the resale in the United States by the Investor of the Shares. Investors who are residents of Canada acknowledge that the Shares will be subject to a 4 month hold period in Canada under applicable Canadian securities laws, regardless of whether or not the Company has filed and have declared effective by the SEC a registration statement on Form S-1 registering the resale in the United States by the Investor of the Shares.

5.            Personal Information. If the Investor is a resident of Ontario, he, she or it authorizes the indirect collection of personal information by the Ontario Securities Commission and confirms that the Investor has been notified by the Company: (i) that the Company will be delivering personal information of the Investor (“Personal Information”) to the Ontario Securities Commission; (ii) that such Personal Information is being collected indirectly by the Ontario Securities Commission under the authority granted to it in applicable securities laws; (iii) that such Personal Information is being collected for the purpose of the administration and enforcement of applicable Securities Laws; and (iv) that the title, business address and business telephone number of the public official in the Province of Ontario, who can answer questions about the Ontario Securities Commission’s indirect collection of the Personal Information is as follows:

  

6

  

Administrative Assistant to the Director of Corporate Finance

Ontario Securities Commission

Suite 1903, Box 55, 20 Queen Street West

Toronto, Ontario M5H 3S8

Telephone: (416) 593-8314

6.            Applicable Law; Venue. This Agreement shall be construed in accordance with and governed by the laws of the State of New York without reference to the choice of law principles of any jurisdiction. THE INVESTOR IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES LOCATED IN THE CITY OF NEW YORK, NEW YORK, IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE OFFERING AND AGREES NOT TO COMMENCE ANY SUIT, ACTION, OR PROCEEDING RELATING THERETO EXCEPT IN SUCH COURTS.

7.            Binding Effect. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, executors, administrators, successors, legal representatives and assigns.

8.            Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given three business days after the date mailed when mailed by registered or certified mail, postage prepaid, or the next business day if sent by special courier such as FedEx (except that notice of change of address shall be deemed given only when received), to the address shown on the Company's records, in the case of the Investor, and of the Company's registered office, in the case of the Company, or to such other names or addresses as the Company or the Investor, as the case may be, shall designate by notice to the other party in the manner specified in this Section.

9.            Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement that can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable the invalid or unenforceable provision in any other jurisdiction or under any other circumstance.

10.            Entire Agreement. This Agreement, and the Shares purchased hereunder constitute the entire agreement by and between the parties pertaining to the subject matter hereof and supersede all prior and contemporaneous understandings of the parties.

11.            Counterparts. This Agreement may be executed in any number of counterparts, and any party hereto may execute such counterpart, each of which when so executed and delivered shall be deemed an original and all of which taken together shall constitute one and the same instrument. This Agreement shall become binding when either this Agreement or two or more counterparts hereto shall have been executed and delivered by the parties hereto.

  

7

  

12.            Variation in Pronouns. All pronouns shall be deemed to refer to masculine, feminine, neuter, singular, or plural, as the identity of the person or persons may require.

13.            Counsel. This Agreement and all other agreements related to the Offering (the “Offering Agreements”) have been prepared by LeClairRyan, A Professional Corporation, as U.S. counsel to the Company (“Counsel”), after full disclosure of its representation of the Company and with the consent and direction of the Company and the Investor. The Investor has reviewed the contents of the Offering Agreements and fully understands their terms. The Investor acknowledges that he, she or it is fully aware of his, her or its right to the advice of counsel independent from that of the Company, that Counsel has advised the Investor of such right and disclosed to the Investor the risks in not seeking such independent advice, and that he, she or it understands the potentially adverse interests of the parties with respect to the Offering Agreements. The Investor further acknowledges that no representations have been made with respect to the tax or other consequences of the Offering Agreements to the Investor and that he, she or it has been advised of the importance of seeking independent counsel with respect to such consequences. By executing this Agreement, the Investor represents that he, she or it has, after being advised of the potential conflicts between the Investor and the Company with respect to the future consequences of the Offering Agreements, either consulted independent legal counsel or elected, notwithstanding the advisability of seeking such independent legal counsel, not to consult such independent legal counsel.

[SIGNATURES APPEAR ON THE FOLLOWING PAGES]

  

8

  

IN WITNESS WHEREOF, this Agreement has been duly executed by the duly authorized officer of the Company and the undersigned Investor or its duly authorized officer, as the case may be, as of the date first written beneath the signature of such officer of the Company below.

INVESTOR SIGNATURE:

[If Investor is an Individual or Individuals]

	  	  	  	  	  
	
Individual

	  	
Social Security Number

	  	
Date

	  	  	  	  	  
	  	  	  	  	  
	
(Print Name)

	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	
Individual Co-Investor, if any

	  	
Social Security Number

	  	
Date

	  	  	  	  	  
	  	  	  	  	  
	
(Print Name)

	  	  	  	  

OR

[If Investor is not an Individual or Individuals]

	  	  	  	  
	
Name of Corporation, Company,

Trust or Benefit Plan

	  	
Taxpayer Identification Number

	  

	
By:

	 	  	  
	
(Signature of Person Making Investment Decision)

	  
	  	  
	
Print Name: 

	 	  
	  	  	  
	
Its:

	 	  	  
	
(describe office or position held)

	
Date:

	  	 

  

9

  

Print Investor's Full Name(s):

_______________________________________________________

	
Number of Shares subscribed for by Investor

	
______________

	  	  
	
Purchase Price for Investor’s Shares in Company

	  
	
($2.05 per Share)

	
$_____________

	
ACCEPTED BY THE COMPANY:

	
PARAMOUNT GOLD AND SILVER CORP.

	  	
By (Signature): 

	  
	  	  	  
	  	
Print Name:

	  

	  	
Title: 

	  
	  	  	  
	  	
Date:

	  

  

10

  

EXHIBIT “A”

INVESTOR QUESTIONNAIRE

(See Attached.)

  

 

  

INVESTOR QUESTIONNAIRE

____________________________

THIS QUESTIONNAIRE DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY A SECURITY. The sole purpose of this questionnaire is to establish whether the individual or entity on whose behalf this questionnaire is completed (the “Investor”) is a qualified investor to whom securities of Paramount Gold and Silver Corp., a Delaware corporation (the “Company”), may be offered and sold under applicable federal and state securities laws. The completed statement should indicate whether the Investor has or can be attributed with such knowledge and experience in financial and business matters as to be able to evaluate the merits and risks of an investment and whether the Investor has the financial means to bear the economic risks involved.

IMPORTANT: This form of Investor Questionnaire has been prepared for use by individuals and by entities such as partnerships, corporations and trusts. If the Investor is an entity, when completed this questionnaire should provide information regarding the entity and not particular partners, officers, directors, trustees or beneficiaries of the entity, unless specifically requested. Notwithstanding the foregoing, in the case of partnerships, corporations and trusts formed specifically for the purpose of participating in this investment, a questionnaire must be completed by each partner, shareholder, and beneficiary.

	
1.

	
IF THE INVESTOR IS ONE OR MORE INDIVIDUALS:

	
a.   

	
Name(s) of individual(s):

	  
	  	  	  
	  	  	  
	  	  	  
	
b.   

	
Address(es) of individual(s):

	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  

	
c.   

	
Telephone number(s) of individual(s): ( _____ ) 

	  

	
d.   

	
Fax number(s) of individual(s): (_____) 

	  

	
e.   

	
Occupation(s) of individual(s): 

	  

	
f.   

	
Name(s) of employer(s): 

	  

	
g.   

	
Address(es) of employer(s):

	  

A-

  

2

  

2.           IF THE INVESTOR IS AN ENTITY

	
a.   

	
Name of entity:

	  
	  	  	  
	
b.   

	
Form of entity:

	  
	  	
(partnership, corporation, trust, etc.)

	
c.   

	
Date of organization of entity:

	  

	
d.   

	
Address of entity:

	  

  

	
e.   

	
Telephone number of entity: ( _____ )

	 

	
f.   

	
Fax number of entity: (______)

	 

	
  

	
g.   

	
Please name the authorized representative(s) of the entity who will be acting for the entity in connection with its potential investment in the Company:

  

	
h.   

	
Type of business entity is engaged in:

	  

	
3.

	
Please state the amount, in United States dollars, of the Investor's potential investment in the Company:

$ _______________________________.

A-

  

3

  

	
4.

	
The Investor is one or more of the following:

	
  

	
_________

	
a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with a spouse in excess of $300,000 in each of those years and who reasonably expects to reach the same income level in the current year;

	
  

	
_________

	
a natural person whose individual net worth, or joint net worth with that person's spouse, at the time of purchase exceeds $1,000,000, excluding the value of the primary residence of such natural person, calculated by subtracting from the estimated fair market value of the property the amount of debt secured by the property, up to the estimated fair market value of the property;

	
  

	
_________

	
a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment;

	
  

	
_________

	
a bank as defined in Section 3(a)(2) of the Securities Act of 1933 (the “Act”) or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity;

	
  

	
_________

	
a broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934;

	
  

	
_________

	
an insurance company as defined in Section 2(13) of the Act;

	
  

	
_________

	
an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940;

	
  

	
_________

	
a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958;

	
  

	
_________

	
a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, where such plan has total assets in excess of $5,000,000.

	
  

	
_________

	
an employee benefit plan within the meaning of Title 1 of the Employee Retirement Income Security Act of 1974, where the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or an employee benefit plan that has total assets in excess of $5,000,000, or if a self-directed plan the investment decisions are made solely by persons that are accredited investors;

A-

  

4

  

	
  

	
_________

	
a private business development company, as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;

	
  

	
_________

	
an organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

	
  

	
_________

	
a director or executive officer of the Company;

	
  

	
_________

	
an entity in which all of the equity investors is a person described above.

	
5.

	
In furnishing the above information, the Investor, and if the Investor is an entity, the individual executing and delivering this questionnaire on behalf of the entity, acknowledge that the Company will be relying thereon in determining, among other things, whether there is reasonable grounds to believe that the Investor qualifies as a purchaser of shares of the Company's securities. To the best of the Investor's information and belief, the above information supplied by the Investor is true and correct in all respects and the Investor represents and warrants to the Company as follows:

	
  

	
(a)

	
The answers to the above questions may be relied upon by the Company in determining whether the offering in which the Investor proposes to participate is exempt from registration under the Act and from registration or qualification under the securities laws of various states.

	
  

	
(b)

	
The Investor will notify the Company immediately of any material change in any statement made herein occurring prior to the closing of any purchase by the Investor of securities of the Company.

	
6.

	
The Investor is able to bear the economic risk of the proposed investment and at the present time could afford a complete loss of such investment.

IN WITNESS WHEREOF, the undersigned has executed this Investor Questionnaire as of ____________ ___ , 2011.

A-

  

5

  

	  	
IF INVESTOR IS AN ENTITY:

	  	  
	  	  
	  	
(Name of Entity - Please Print)

	  	
By:

	  
	  	  	  
	  	
Name 

	  
	  	  	  
	  	
Title

	  

	  	
IF INVESTOR IS ONE OR MORE

	  	
INDIVIDUALS (all individuals must sign)

	  	  
	  	  
	  	
(Name - Please Print)

	  	  
	  	  
	  	
Signature

	  	  
	  	  
	  	  
	  	  

A-

  

6

  

EXHIBIT “B”

CANADIAN ACCREDITED INVESTOR CERTIFICATE

TO BE COMPLETED ONLY IF (1) THE INVESTOR IS RESIDENT IN CANADA AND (2) AND THE ACQUISITION COST OF THE SHARES TO SUCH INVESTOR IS LESS THAN CDN$150,000 PAID IN CASH ON THE CLOSING DATE.

(See Attached.)

  

 

  

ACCREDITED INVESTOR CERTIFICATE

	
TO:

	
Paramount Gold and Silver Corp. (the “Company”)

In connection with the issuance by the Corporation of common shares to the undersigned, the undersigned hereby represents, warrants and certifies to the Corporation that the undersigned is an “Accredited Investor” as defined in subsection 1.1 of National Instrument 45-106. The undersigned has indicated below the categories which the undersigned satisfies in order to qualify as an “Accredited Investor” [Please initial or place a checkmark above the line to the left of each applicable item].

	
_____

	
(a)

	
a Canadian financial institution, or a Schedule III bank;

	
_____

	
(b)

	
the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);

	
_____

	
(c)

	
a subsidiary of any person referred to in paragraphs (a) to (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;

	
_____

	
(d)

	
a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, other than a person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);

	
_____

	
(e)

	
an individual registered or formerly registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d);

	
_____

	
(f)

	
the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;

	
_____

	
(g)

	
a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec;

	
_____

	
(h)

	
any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;

	
_____

	
(i)

	
a pension fund that is regulated by the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a jurisdiction of Canada;

	
_____

	
(j)

	
an individual who, either alone or with a spouse, beneficially owns, financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000;

	
_____

	
(k)

	
an individual whose net income before taxes exceeded $200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;

	
_____

	
(l)

	
an individual who, either alone or with a spouse, has net assets of at least $5,000,000;

	
_____

	
(m)

	
a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements;

	
_____

	
(n)

	
an investment fund that distributes or has distributed its securities only to:

	
  

	
(i)

	
a person that is or was an accredited investor at the time of the distribution,

	
  

	
(ii)

	
a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [Minimum amount investment] or 2.19 [Additional investment in investment funds] of NI 45-106; or

  

 

  

	
  

	
(iii)

	
a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment fund reinvestment] of NI 45-106;

	
_____

	
(o)

	
an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;

	
_____

	
(p)

	
a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully-managed account managed by the trust company or trust corporation, as the case may be;

	
_____

	
(q)

	
a person acting on behalf of a fully-managed account managed by that person, if that person:

	
  

	
(i)

	
is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction; and

	
  

	
(ii)

	
in Ontario, is purchasing a security that is not a security of an investment fund;

	
_____

	
(r)

	
a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;

	
_____

	
(s)

	
an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function;

	
_____

	
(t)

	
a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors;

	
_____

	
(u)

	
an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser; or

	
_____

	
(v)

	
a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as an accredited investor.

Dated this _________ day of ________________, 2012.

	
If a trust, partnership or other entity:

	  	
If an individual:

	  	  	  
	  	  	  
	
Name of Entity

	  	
Signature

	  	  	  
	  	  	  
	
Type of Entity

	  	
Name of Individual

	  	  	  
	  	  	  
	
Signature of Person Signing

	  	  
	  	  	  
	  	  	  
	
Title of Person Signing

	  	  

As used in this certificate, the following terms have the following meanings:

An issuer is an “affiliate” of another issuer if:

	
  

	
(a)

	
one of them is the subsidiary of the other, or

	
  

	
(b)

	
each of them is controlled by the same person;

  

 

  

“Canadian financial institution” means:

	
  

	
(a)

	
an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act; or

	
  

	
(b)

	
a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada;

“control person” has the meaning ascribed to that term in securities legislation except in Ontario, Québec and Nova Scotia where “control person” means any person that holds or is one of a combination of persons that holds:

	
  

	
(a)

	
a sufficient number of any of the securities of an issuer so as to affect materially the control of the issuer, or

	
  

	
(b)

	
more than 20% of the outstanding voting securities of an issuer except where there is evidence showing that the holding of those securities does not affect materially the control of the issuer;

“eligibility adviser” means:

	
  

	
(a)

	
a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed; and

	
  

	
(b)

	
in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not:

	
  

	
(i)

	
have a professional business or personal relationship with the issuer, or any of its directors, executive officers, founders or control persons, and

	
  

	
(ii)

	
have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months;

“financial assets” means cash, securities, or a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

“foreign jurisdiction” means a country other than Canada or a political subdivision of a country other than Canada;

“fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction;

  

 

  

“investment fund” has the same meaning as in National Instrument 81-106 Investment Fund Continuous Disclosure and means a mutual fund or a non-redeemable investment fund;

“jurisdiction” means a province or territory of Canada except when used in the term foreign jurisdiction;

“local jurisdiction” means the jurisdiction in which the Canadian securities regulatory authority is situated;

“non-redeemable investment fund” has the same meaning as in National Instrument 81-106 Investment Fund Continuous Disclosure and means an issuer:

	
  

	
(a)

	
whose primary purpose is to invest money provided by its securityholders;

	
  

	
(b)

	
that does not invest;

	
  

	
(i)

	
for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non-redeemable investment fund; or

	
  

	
(ii)

	
for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non-redeemable investment fund; and

	
  

	
(c)

	
that is not a mutual fund;

“person” includes an individual, a corporation, a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not; and an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative;

“regulator” means, for the local jurisdiction, the Executive Director as defined under securities legislation of the local jurisdiction;

“related liabilities” means:

	
  

	
(a)

	
liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets; or

	
  

	
(b)

	
liabilities that are secured by financial assets;

“securities legislation” means securities legislation as such term is defined in National Instrument 14-101 Definitions;

“spouse” means, an individual who:

	
  

	
(a)

	
is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual;

	
  

	
(b)

	
is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender; or

  

 

  

	
  

	
(c)

	
in Alberta, is an individual referred to in paragraph (a) or (b), or is an adult interdependent partner within the meaning of the Audit Interdependent Relationships Act (Alberta); and

“subsidiary” means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary.

Calculation of individual’s net assets: To calculate a individual’s net assets under paragraphs (l) and (m) of the “Accredited Investor” definition, subtract the individual’s total liabilities from the individual’s total assets. The value attributed to assets should reasonably reflect their estimated fair value. Income tax should be considered a liability if the obligation to pay it is outstanding at the time of the trade.

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