Document:

Exhibit 10.2.3

 

[EXECUTION COPY]

 

THIRD AMENDMENT TO CREDIT AGREEMENT

 

This THIRD AMENDMENT TO CREDIT
AGREEMENT, dated as of December 12, 2008 (this “Amendment”),
among (i) WHITE MOUNTAINS INSURANCE
GROUP, LTD., a company existing under the laws of Bermuda (the “Borrower”),
(ii) the undersigned Lenders, and (iii) BANK OF AMERICA, N.A., as administrative agent for the Lenders
(in such capacity, the “Administrative Agent”), amends certain
provisions of the Credit Agreement, dated as of June 19, 2007 (as amended,
the “Credit Agreement”), among the Borrower, the Lenders, Bank of
America, N.A., as Administrative Agent, Swing Line Lender and the Issuing
Lender, and Lehman Brothers Inc., as Syndication Agent.  Capitalized terms used herein without definition
shall have the meanings assigned to such terms in the Credit Agreement.

 

RECITALS

 

WHEREAS, the
Borrower has requested that the undersigned Lenders and the Administrative
Agent agree to amend certain of the terms and provisions of the Credit
Agreement, as specifically set forth in this Amendment; and

 

WHEREAS, the
undersigned Lenders and the Administrative Agent are prepared to amend the
Credit Agreement on the terms, subject to the conditions and in reliance on the
representations set forth herein;

 

NOW THEREFORE, in
consideration of the mutual agreements contained in the Credit Agreement and
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

 

Section 1.                                          Amendment to Credit Agreement.

 

(a)                                  Amendments
to Section 1.1 (Defined Terms). 
Section 1.1 of the Credit Agreement is hereby amended by restating
the following definitions contained in such Section in their entirety as
follows:

 

“Applicable Margin” means the applicable percentage per annum
set forth below corresponding to the Total Consolidated Debt to Total
Consolidated Capitalization Ratio as of the most recent fiscal quarter of the
Borrower for which a Compliance Certificate has been or is required to have
been delivered pursuant to Section 6.2(b):

 

	
  Pricing

  Level

  	
   

  	
  Total Consolidated Debt

  to Total Consolidated

  Capitalization Ratio

  	
   

  	
  Applicable Margin

  for

  Eurodollar Loans

  	
   

  	
  Applicable Margin

  for

  Base Rate Loans

  	
   

  
	
  I

  	
   

  	
  < 10.0%

  	
   

  	
  1.320

  	
  %

  	
  0.320

  	
  %

  
	
  II

  	
   

  	
  > 10.0% < 15.0%

  	
   

  	
  1.550

  	
  %

  	
  0.550

  	
  %

  

 

 

	
  III

  	
   

  	
  > 15.0% < 22.5%

  	
   

  	
  1.775

  	
  %

  	
  0.775

  	
  %

  
	
  IV

  	
   

  	
  > 22.5% < 30.0%

  	
   

  	
  2.075

  	
  %

  	
  1.075

  	
  %

  
	
  V

  	
   

  	
  > 30.0%

  	
   

  	
  2.600

  	
  %

  	
  1.600

  	
  %

  

 

The Applicable Margin in effect from the Third Amendment Effective Date
through the first Business Day immediately following the date the first
Compliance Certificate is delivered to the Administrative Agent pursuant to Section 6.2(b),
shall be the Applicable Margin set forth in pricing level III.  Any increase or decrease in the Applicable
Margin resulting from a change in the Total Consolidated Debt to Total
Consolidated Capitalization Ratio, as set forth on a Compliance Certificate
delivered pursuant to Section 6.2(b), shall become effective as of
the first Business Day immediately following delivery of such Compliance Certificate;
provided, however, that if a Compliance Certificate is not
delivered when due in accordance with Section 6.2(b), then the
level V Applicable Margin shall apply as of the first Business Day after the
date on which such Compliance Certificate was required to have been delivered
until the first Business Day after the date on which such Compliance
Certificate is delivered.

 

“Base Rate” means, for any day, a fluctuating rate per annum
equal to the highest of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the
rate of interest in effect for such day as publicly announced from time to time
by Bank of America, N.A. as its “prime rate,” and (c) the Eurodollar Rate
for a one-month Interest Period in effect for such day (or if such day is not a
Business Day, the immediately preceding Business Day) plus 1%.  The “prime rate” is a rate set by Bank of
America, N.A. based upon various factors including Bank of America, N.A.’s
costs and desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be priced at,
above, or below such announced rate.  Any
change in the Base Rate due to a change in any of the foregoing shall take
effect at the opening of business on the day specified in the public announcement
of such change.

 

“Consolidated Net Income” means, (a) for any period ending
on or before December 31, 2007, the consolidated net income (or loss) of
the Borrower and its consolidated Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; provided, however,
that in calculating Consolidated Net Income for any period ending on or before December 31,
2007, there shall be excluded for purposes of the calculation of Consolidated
Net Income (x) the income (or deficit) of any Person accrued prior to the
date it becomes a Subsidiary of the Borrower or is merged into or consolidated
with the Borrower or any of its Subsidiaries and (y) any effects resulting from the application of
FIN 46R, and (b) for any period ending after December 31,
2007, the consolidated net income (or loss) of the Borrower and its
consolidated Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP; provided, however, that in calculating
Consolidated Net Income for any period ending after December 31, 2007,
there shall be excluded for purposes of the calculation of Consolidated Net
Income (x) the income (or deficit) of any Person accrued prior to the date
it becomes a Subsidiary of the Borrower or is merged into or consolidated with
the Borrower or any of its Subsidiaries, (y) any effects resulting from
the application of FIN

 

2

 

46R, and (z) the
net unrealized investment gain (or loss), less applicable related income tax
provisions (or plus applicable related income tax benefits), included in the
consolidated net income (or loss) of the Borrower.

 

“Consolidated Net Worth” means, (a) as at any date
occurring on or before December 31, 2007, the sum of all amounts that
would, in conformity with GAAP be included on a consolidated balance sheet of
the Borrower and its consolidated Subsidiaries under stockholders’ equity at
such date, plus minority interests in Subsidiaries, as determined in accordance
with GAAP; provided, however, that in calculating Consolidated
Net Worth as at any date occurring on or before December 31, 2007, there shall be excluded for purposes of the
calculation of Consolidated Net Worth any effects resulting from (x) SFAS
115 or (y) the application of FIN
46R, and (b) as at any date occurring after December 31, 2007,
the sum of all amounts that would, in
conformity with GAAP be included on a consolidated balance sheet of the
Borrower and its consolidated Subsidiaries under the stockholders’ equity at
such date, plus minority interest in Subsidiaries, as determined in accordance
with GAAP; provided, however, that in calculating Consolidated
Net Worth as of any date occurring after December 31, 2007, there shall be excluded for purposes of the
calculation of Consolidated Net Worth any effects resulting from (x) the
accumulated net unrealized gain on investments as of December 31, 2007, (y) the
net unrealized investment gain (or loss), less the net unrealized foreign
exchange gains (or losses) on investments, less applicable related income tax
provisions (or plus applicable related income tax benefits), included in the
consolidated net income (or loss) of the Borrower and (z) equity in
unrealized losses from investments in unconsolidated affiliates.

 

“Facility Fee Rate” means the applicable
percentage per annum set forth below corresponding to the Total Consolidated
Debt to Total Consolidated Capitalization Ratio as of the most recent fiscal
quarter of the Borrower for which a Compliance Certificate has been or is required
to have been delivered pursuant to Section 6.2(b):

 

	
  Pricing

  Level

  	
   

  	
  Total Consolidated Debt to Total

  Consolidated Capitalization Ratio

  	
   

  	
  Facility Fee Rate

  	
   

  
	
  I

  	
   

  	
  < 10.0%

  	
   

  	
  0.180

  	
  %

  
	
  II

  	
   

  	
  > 10.0% < 15.0%

  	
   

  	
  0.200

  	
  %

  
	
  III

  	
   

  	
  > 15.0% < 22.5%

  	
   

  	
  0.225

  	
  %

  
	
  IV

  	
   

  	
  > 22.5% < 30.0%

  	
   

  	
  0.300

  	
  %

  
	
  V

  	
   

  	
  > 30.0%

  	
   

  	
  0.400

  	
  %

  

 

The Facility Fee Rate in effect from the Third Amendment Effective Date
through the first Business Day immediately following the date the first
Compliance Certificate is delivered to the Administrative Agent pursuant to Section 6.2(b),
shall be the Facility Fee Rate set forth in pricing level III.  Any increase or decrease in the Facility Fee
Rate resulting from a change in the Total Consolidated Debt to Total
Consolidated

 

3

 

Capitalization
Ratio, as set forth on a Compliance Certificate delivered pursuant to Section 6.2(b),
shall become effective as of the first Business Day immediately following
delivery of such Compliance Certificate; provided, however, that
if a Compliance Certificate is not delivered when due in accordance with Section 6.2(b),
then the level V Facility Fee Rate shall apply as of the first Business Day
after the date on which such Compliance Certificate was required to have been
delivered until the first Business Day after the date on which such Compliance
Certificate is delivered.

 

“GAAP” means generally accepted accounting principles in the
United States of America as in effect from time to time and set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or such other principles as may be
approved by a significant segment of the accounting profession in the United
States, except that for purposes of Section 7.1, GAAP shall be
determined on the basis of such principles in effect on the date hereof; provided,
that, for the purpose of determining Consolidated Net Income and
Consolidated Net Worth, for any period ending after December 31, 2007 or
for any date after December 31, 2007, as applicable, GAAP shall be
determined on the basis of such principles in effect on January 1, 2008.

 

(b)                                 Amendments
to Section 1.1 (Defined Terms). 
Section 1.1 of the Credit Agreement is hereby further amended by
inserting the following new definitions in such Section 1.1 in the
appropriate alphabetical order:

 

“Common Stock Exchange Amount” means $515,100,000, which amount
is an amount equal to sixty-five percent (65%) of the aggregate amount of
consideration exchanged by the Borrower for Capital Stock of the Borrower owned
by Berkshire Hathaway pursuant that certain  Exchange
Agreement, dated as of March 8, 2008 (as amended and otherwise modified
from time to time), between the Borrower, Berkshire Hathaway, and the other
parties thereto.

 

“Impacted Lender” means a Defaulting Lender or a Lender (a) as
to which an entity that controls such Lender has become insolvent or become
subject to a bankruptcy or other similar proceeding or (b) which has
defaulted in fulfilling, and continues to remain in default in fulfilling, its
obligations under one or more other credit facilities.

 

“Lehman Commitment Reduction Amount” means, as of any date, an
amount equal to (x) $57,500,000 minus (y) the Revolving Credit
Commitment of Lehman Brothers Bank, FSB on such date.

 

“Risk Participation Cash Collateral” means, with respect to any
Letter of Credit, the pledge and deposit with or delivery to the Administrative
Agent of, for the benefit of the Issuing Lender, as collateral, cash or deposit
account balances in an amount equal to (x) the Revolving Credit Percentage
of each Impacted Lender times (y) the amount available to be drawn under
such Letter of Credit, pursuant to documentation in

 

4

 

form and
substance reasonably satisfactory to the Administrative Agent and the Issuing
Lender (which documents are hereby consented to by the Lenders).

 

“Third Amendment Effective Date” means December 12, 2008.

 

(c)                                  Amendments
to Section 2.3 (Swing Line Commitment).  Paragraph (a) of Section 2.3 of the
Credit Agreement is hereby amended by restating the proviso contained in such
paragraph (a) in its entirety as follows:

 

provided that (i) all Swing Line Loans shall
be made at the sole and absolute discretion of the Swing Line Lender, (ii) the
aggregate principal amount of Swing Line Loans outstanding at any time shall
not exceed the Swing Line Commitment then in effect (notwithstanding that the
Swing Line Loans outstanding at any time, when aggregated with the Swing Line
Lender’s other outstanding Revolving Credit Loans hereunder, may exceed the
Swing Line Commitment then in effect or such Swing Line Lender’s Revolving
Credit Commitment then in effect), and (iii) the Borrower shall not
request, and the Swing Line Lender shall not make, any Swing Line Loan if,
after giving effect to the making of such Swing Line Loan, the aggregate amount
of the Available Revolving Credit Commitments would be less than zero.

 

(d)                                 Amendments
to Section 2.4 (Procedure for Swing Line Borrowing; Refunding of Swing
Line Loans).  Paragraph (a) of Section 2.4
of the Credit Agreement is hereby amended by:

 

(i)                                     restating
the third sentence contained in such paragraph (a) in its entirety as follows:

 

If the Swing
Line Lender shall elect to fund a requested Swing Line Loan, not later than
3:00 P.M., New York City time, on the Borrowing Date specified in the
borrowing notice in respect of such Swing Line Loan, the Swing Line Lender
shall make available to the Administrative Agent at the Administrative Agent’s
Office an amount in immediately available funds equal to the amount of such
Swing Line Loan.

 

(ii)                                  inserting
the following new sentence immediately following the last sentence contained in
such paragraph (a):

 

Notwithstanding
the foregoing, if the Swing Line Lender shall elect not to fund a requested
Swing Line Loan for any reason, the Swing Line Lender shall promptly, and in
any event not later than 3:00 P.M., New York City time, on the date that
the borrowing notice in respect of such Swing Line Loan is received, notify the
Borrower and the Administrative Agent of such election.

 

(e)                                  Amendments
to Section 2.11 (Interest Rates and Payment Dates).  Paragraphs (a) and (b) of Section 2.11
of the Credit Agreement are hereby amended by restating such paragraphs (a) and
(b) in their entirety as follows:

 

5

 

(a)                                  Subject
to the provisions of paragraph (c) below, each Eurodollar Loan
shall bear interest on the outstanding principal amount thereof for each day
during each Interest Period with respect thereto at a rate per annum equal to
the Eurodollar Rate determined for such day plus the Applicable Margin for
Eurodollar Loans.

 

(b)                                 Each
Base Rate Loan, including Swing Line Loans, shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date at a
rate per annum equal to the Base Rate plus the Applicable Margin for Base Rate
Loans.

 

(f)                                    Amendments
to Section 2.22(a) (Request for Increase).  Section 2.22(a) of the Credit
Agreement is hereby amended by restating such Section 2.22(a) in its
entirety as follows:

 

(a)                                  Request
for Increase.  Upon notice to the
Administrative Agent (which shall promptly notify the Lenders), the Borrower
may from time to time, increase the Total Revolving Credit Commitments by an
amount not to exceed (x) $25,000,000, plus (y) the Lehman Commitment
Reduction Amount, minus (z) the aggregate amount of all prior increases of
the Total Revolving Credit Commitment pursuant to this Section 2.22.  Such increase in the Total Revolving Credit
Commitments may be provided by the Lenders or Eligible Assignees designated by
the Borrower to become Lenders (pursuant to an instrument of accession in the
form of Exhibit I hereto, an “Instrument of Accession”) that are willing
to provide such increase; provided that (i) any such increase shall be in
a minimum amount of $10,000,000 and (ii) the aggregate amount of the Total
Revolving Credit Commitments after giving effect to any such increase shall not
at any time exceed $500,000,000.  Nothing
contained herein shall constitute, or otherwise be deemed to be, a commitment
on the part of any Lender to increase its Revolving Credit Commitment
hereunder.

 

(g)                                 Amendments
to Section 3.1 (L/C Commitment). 
Paragraph (b) of Section 3.1 of the Credit Agreement is hereby
amended by restating such paragraph (b) in its entirety as follows:

 

(b)                                 No Issuing Lender shall at any time
be obligated to issue any Letter of Credit hereunder if (i) such issuance
would conflict with, or cause the Issuing Lender or any L/C Participant to
exceed any limits imposed by, any applicable Requirement of Law, (ii) such
issuance would violate one or more policies of the Issuing Lender applicable to
letters of credit generally, (iii) any order, judgment or decree of any
Governmental Authority or arbitrator shall by its terms purport to enjoin or
restrain the Issuing Lender from issuing such Letter of Credit, or any Law
applicable to the Issuing Lender or any request or directive (whether or not
having the force of Law) from any Governmental Authority with jurisdiction over
the Issuing Lender shall prohibit, or request that the Issuing Lender refrain
from, the issuance of letters of credit generally, or such Letter of Credit in
particular, or (iv) any Lender is at such time an Impacted Lender, unless
such Issuing Lender has entered into arrangements (including, without
limitation, arrangements for the provision of Risk Participation Cash
Collateral) with the Borrower

 

6

 

or such Impacted Lender which are
satisfactory to such Issuing Lender to eliminate the Issuing Lender’s risk with
respect to such Impacted Lender; provided, that, if the Borrower
provides Risk Participation Cash Collateral with respect to a Letter of Credit
requested to be issued hereunder, the Issuing Lender shall not be entitled to
rely upon the preceding clause (iv) as justification for not issuing such
Letter of Credit.  To the extent that the
Borrower provides Risk Participation Cash Collateral, the Borrower hereby
grants to the Administrative Agent, for the benefit of the Issuing Lender, a
security interest in all cash, deposit accounts and all balances therein and
all proceeds of the foregoing solely as security for the purposes described
under Section 3.3(b) hereof. 
Such Risk Participation Cash Collateral shall be maintained in blocked,
interest bearing deposit accounts with the Administrative Agent (with interest
on such amounts so deposited accruing for the account of the Borrower); provided
that (1) in the event that any Lender, on account of whom such Risk
Participation Cash Collateral was delivered, shall no longer be an Impacted
Lender, the Administrative Agent shall return to the Borrower such portion of
Risk Participation Cash Collateral attributable to such Lender together with
accrued and unpaid interest thereon, (2) in the event that any Lender, on
account of whom such Risk Participation Cash Collateral was delivered, shall
have its Revolving Credit Commitment reduced, the Administrative Agent shall
return to the Borrower such portion of the Risk Participation Cash Collateral
attributable to such Lender in proportion to the amount by which such Lender’s
Revolving Credit Commitment is so reduced together with accrued and unpaid
interest thereon, and (3) in the event that the applicable Letter of
Credit, on account of which such Risk Participation Cash Collateral was
delivered, expires or is drawn upon, and such drawing has been reimbursed by
the Borrower, the Administrative Agent shall return to the Borrower such
portion of the Risk Participation Cash Collateral attributable to such expired
Letter of Credit or such reimbursed drawing, as applicable, together with
accrued and unpaid interest thereon.

 

(h)                                 Amendments
to Section 3.3 (Drawings and Reimbursements; Funding of Participations).  Paragraph (b) of Section 3.3 of the
Credit Agreement is hereby amended by restating such paragraph (b) in its
entirety as follows:

 

(b)                                 Each
Lender (including the Lender acting as Issuing Lender) shall upon any notice
pursuant to Section 3.3(a) make funds available to the
Administrative Agent for the account of the Issuing Lender at the
Administrative Agent’s Office in an amount equal to its Revolving Credit
Percentage of the Unreimbursed Amount not later than 1:00 P.M., New York
City time, on the Business Day specified in such notice by the Administrative
Agent, whereupon, subject to the provisions of Section 3.3(a), each
Lender that so makes funds available shall be deemed to have made a Base Rate
Loan to the Borrower in such amount; provided, however, that if
any Impacted Lender shall fail to make such funds available, any Risk
Participation Cash Collateral delivered on account of such Impacted Lender for
the respective Letter of Credit shall be applied by the Administrative Agent to
the reimbursement of the Issuing Lender as required hereunder.  The Administrative Agent shall remit the
funds so received and any Risk Participation Cash Collateral so applied to the
Issuing Lender.

 

7

 

If at any time after the Issuing Lender has been reimbursed hereunder
for any portion of any Letter of Credit with the proceeds of Risk Participation
Cash Collateral and the Administrative Agent subsequently receives from the
relevant Impacted Lender such Impacted Lender’s L/C Advance (or any portion
thereof) in respect of such payment in accordance with this Section 3.3(b),
the Administrative Agent shall distribute to the Borrower the proceeds of such
L/C Advance (or portion thereof) in the same funds as those received by the
Administrative Agent.

 

(i)                                     Amendments
to Section 7.1(a) (Maintenance of Consolidated Net Worth).  Section 7.1(a) of the Credit
Agreement is hereby amended by restating such Section in its entirety as
follows:

 

(a)                                  Maintenance
of Consolidated Net Worth.  The
Borrower shall not permit its Consolidated Net Worth, as of the end of any
fiscal quarter, commencing with the first fiscal quarter ending after the
Closing Date, to be less than an amount equal to (i) sixty-five percent
(65%) of Consolidated Net Worth of the Borrower as at the fiscal quarter ended March 31,
2007 (provided that if OneBeacon Limited is not consolidated on a balance sheet
of the Borrower in accordance with GAAP as of the end of any such fiscal
quarter after the fiscal quarter ended March 31, 2007, the amount in this clause
(i) shall be adjusted to remove sixty-five percent (65%) of the
OneBeacon Limited minority interests at March 31, 2007), plus (ii) fifty
percent (50%) of positive Consolidated Net Income for each fiscal quarter
ending after March 31, 2007, minus (iii) the Common Stock
Exchange Amount.

 

(j)                                     Amendments
to Section 7.2 (Limitations on Indebtedness).  Section 7.2 of the Credit Agreement is
hereby amended by:

 

(i)                                     deleting
the words “(other than OneBeacon Limited and its Subsidiaries)” contained in
the first sentence of paragraph (a) of such Section 7.2;

 

(ii)                                  restating
paragraph (b) of such Section 7.2 in its entirety as follows:

 

(b)                                 [Reserved.]

 

Section 2.                                          Consent
to Non-Pro Rata Reduction in Commitments.

 

(a)                                  Initial Commitment
Reduction.  The
Borrower, each Lender and the Administrative Agent hereby agree that,
notwithstanding anything to the contrary contained in Sections 2.7 or 2.14 of
the Credit Agreement, on the Third Amendment Effective Date (x) the
aggregate Revolving Credit Commitments shall be reduced by an amount equal to
$33,289,473.69 (the “Initial Commitment Reduction Amount”), and (y) such
Initial Commitment Reduction Amount shall be applied in full, on a non-pro rata
basis, to reduce the Revolving Credit Commitment of Lehman Brothers Bank, FSB (“Lehman
FSB”) to $24,210,526.31.  As of the
Third Amendment Effective Date, Schedule 1 (Commitment Schedule) to the Credit
Agreement shall be replaced in its entirety with Schedule 1 attached
hereto.

 

8

 

(b)                                 Subsequent
Commitment Reductions.  The Borrower,
each Lender and the Administrative Agent hereby agree that, notwithstanding anything
to the contrary contained in Sections 2.7 or 2.14 of the Credit Agreement, at
any time the Revolving Credit Commitment of Lehman FSB exceeds the Revolving
Credit Loans of Lehman FSB then outstanding, the Borrower may elect, upon three
Business Days’ prior written notice to the Administrative Agent, to (x) reduce
the aggregate Revolving Credit Commitments by an amount up to the amount of
such excess (such elected reduction amount being hereinafter referred to as a “Subsequent
Lehman Reduction Amount”), and (y) apply such Subsequent Lehman
Reduction Amount in full, on a non-pro rata basis, to reduce the Revolving
Credit Commitment of Lehman FSB; provided that (i) no Default
exists or would result therefrom, (ii) Lehman FSB is then a Defaulting
Lender and (iii) such reduction would not violate applicable Law
(including, without limitation, any stay or moratorium imposed under any Debtor
Relief Law or proceeding instituted by the Federal Deposit Insurance
Corporation).  The Borrowers and the
Lenders hereby agree that the Administrative Agent shall be permitted to update
Schedule 1 (Commitment Schedule) to the Credit Agreement (as amended pursuant
to paragraph (a) above) from time to time to reflect any reduction in the
Revolving Credit Commitments pursuant to this paragraph (b).

 

Section 3.                                          Conditions
Precedent.  This Amendment shall
become effective as of the date first written above upon (a) execution
hereof by the Borrower, the Guarantors, the Administrative Agent and the
Majority Lenders (other than each Defaulting Lender), (b) the
Administrative Agent’s receipt, for the account of each Lender (other than each
Defaulting Lender) which provides written consent to this Amendment on or prior
to 5:00 p.m. (New York City time) on December 12, 2008, a fee in the
amount of 15 basis points times the Revolving Credit Commitment of such Lender,
which fee shall be deemed fully earned and non-refundable upon receipt thereof,
(c) the Administrative Agent’s receipt of evidence (including, without
limitation, any notice for the termination of commitments and any payoff
letters), reasonably satisfactory to the Administrative Agent, that the Credit
Agreement, dated as of November 14, 2006 (as amended), among OneBeacon
U.S. Holdings, Inc. (f/k/a Fund American Companies, Inc.), OneBeacon
Insurance Group, Ltd., the lenders party thereto, Bank of America, N.A., as
administrative agent, swing line lender and the issuing lender, and Lehman
Brothers Inc., as syndication agent, has been, or is being, terminated
concurrently with the effectiveness of this Amendment, and (c) the
Administrative Agent’s receipt, for the account of each Person entitled
thereto, of all other fees and expenses that are due and payable on or prior to
the effective date hereof.

 

Section 4.                                          Continued
Validity of Loan Documents. 
Except for the amendments to the Credit Agreement set forth in Section 1
hereof, this Amendment shall not, by implication or otherwise, limit, impair,
constitute a waiver of or otherwise affect any rights or remedies of the
Administrative Agent or any Lender under any of the Loan Documents, nor alter,
modify, amend or in any way affect any of the rights, remedies, obligations or
any covenants of the Borrower or any Guarantor contained in any of the other
Loan Documents, all of which are ratified and confirmed in all respects and
shall continue in full force and effect.

 

Section 5.                                          Representations
and Warranties.  Each of the
Borrower and the Guarantors (each, a “Loan Party”) hereby represents and
warrants to the Administrative Agent and the Lenders as follows:

 

9

 

(a)                                  Due
Execution and Authorization; Legal, Valid and Binding Obligation.  This Amendment has been duly executed and
delivered by such Loan Party.  The
execution and delivery and performance by such Loan Party of this Amendment is
within such Person’s corporate powers and has been duly authorized by all
necessary action on its part.  This
Amendment, the Credit Agreement as amended hereby and all other Loan Documents
to which such Person is a party constitute the legal, valid and binding
obligations of such Person, enforceable against such Person in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws affecting the
enforcement of creditors’ rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).

 

(b)                                 No
Legal Bar.  The execution and
delivery by such Loan Party of this Amendment and the performance by such
Person of this Amendment and the Credit Agreement as amended hereby, will not
violate any Requirement of Law or any Contractual Obligation of such Loan Party
or any of its Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation, except
to the extent such violation or Lien could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

(c)                                  Representations
and Warranties in Loan Documents. 
All representations and warranties of each Loan Party set forth in the
Credit Agreement and in any other Loan Document are true and correct in all
material respects on and as of the date hereof to the same extent as though
made on and as of such date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true and correct in all material
respects on and as of such earlier date.

 

(d)                                 No
Default.  No Default or Event of
Default has occurred and is continuing.

 

Section 6.                                          Ratification.  Except as expressly amended or waived hereby,
the Credit Agreement, the other Loan Documents and all documents, instruments
and agreements related thereto, are hereby ratified and confirmed in all
respects and shall continue in full force and effect.  The Credit Agreement, together with this
Amendment, shall be read and construed as a single agreement.  All references in the Loan Documents to the
Credit Agreement or any other Loan Document shall hereafter refer to the Credit
Agreement or any other Loan Document as amended hereby.

 

Section 7.                                          Counterparts;
Integration; Effectiveness.  This
Amendment may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a
signature page to this Amendment by telecopier (or electronic mail (in PDF
format)) shall be effective as delivery of a manually executed counterpart of
this Amendment.

 

Section 8.                                          Miscellaneous.  This
Amendment constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersedes any prior understandings or agreements
which may have existed with respect thereto. 
Except as expressly provided

 

10

 

herein,
this Amendment shall not, by implication or otherwise, limit, impair,
constitute a waiver of or otherwise affect any rights or remedies of the
Administrative Agent or any Lender under the Credit Agreement or the other Loan
Documents, nor alter, modify, amend or in any way affect any of the obligations
or covenants contained in the Credit Agreement or any of the other Loan
Documents, all of which are ratified and confirmed in all respects and shall
continue in full force and effect.  To the
extent there is any inconsistency between the terms and provisions of any Loan
Document and the terms and provisions of this Amendment, the terms and
provisions of this Amendment shall govern. 
The headings used in this Amendment are for convenience of reference
only and shall not in any way be deemed to limit, define or describe the scope
and intent of this Amendment or any provision hereof.  This Amendment shall be binding upon and
inure to the benefit of the Administrative Agent, each of the Lenders and each
of the Loan Parties, and to each of their respective successors in title and
assigns.  This Amendment may not be
modified or amended except in a manner permitted by Section 10.1 of the
Credit Agreement.  In making proof of
this Amendment, it shall not be necessary to produce or account for more than
one such counterpart.

 

Section 9.                                          Costs
and Expenses.  Pursuant to Section 10.5
of the Credit Agreement, all reasonable out-of-pocket costs and expenses
incurred or sustained by the Administrative Agent in connection with this
Amendment, including all Attorney Costs of the Administrative Agent in
producing, reproducing and negotiating this Amendment, will be for the account
of the Borrower whether or not this Amendment is consummated.

 

Section 10.                                   Governing
Law.  THIS AMENDMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY).

 

11

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first above written.

 

	
   

  	
  Borrower:

  
	
   

  	
   

  
	
   

  	
  WHITE MOUNTAINS INSURANCE GROUP,

  
	
   

  	
  LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  BANK OF AMERICA, N.A.,
  as

  
	
   

  	
  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  BANK OF AMERICA, N.A.,
  as

  
	
   

  	
  a Lender, Issuing Lender and Swing Line Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  BNP PARIBAS, as

  
	
   

  	
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  THE BANK OF NEW YORK MELLON,
  as

  
	
   

  	
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  THE BANK OF TOKYO-MITSUBISHI UFJ.

  
	
   

  	
  LTD., NEW YORK BRANCH,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  DEUTSCHE BANK AG NEW YORK 

  
	
   

  	
  BRANCH, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  HSBC BANK USA, N.A.,
  as

  
	
   

  	
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  JP MORGAN CHASE BANK, N.A.,
  as

  
	
   

  	
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  PNC BANK, as

  
	
   

  	
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  THE ROYAL BANK OF SCOTLAND,

  
	
   

  	
  PLC, as a Lender

  
	
   

  	
   

  
	
   

  	
  By: GREENWICH CAPITAL MARKETS,

  
	
   

  	
  INC., as agent for The Royal Bank of

  
	
   

  	
  Scotland plc

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  STATE STREET BANK AND TRUST

  
	
   

  	
  COMPANY, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

	
   

  	
  WELLS FARGO BANK, NATIONAL

  
	
   

  	
  ASSOCIATION, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

RATIFICATION OF GUARANTY

 

Each of the
undersigned Guarantors hereby (a) acknowledges and consents to the
foregoing Amendment and the Borrower’s execution thereof, (b) joins the foregoing Amendment for the sole purpose of consenting to and
being bound by the provisions of Sections 5 and 6 thereof and (c) ratifies
and confirms all of their respective obligations and liabilities under the Loan
Documents to which any of them is a party and ratifies and confirms that such
obligations and liabilities extend to and continue in effect with respect to,
and continue to guarantee the obligations of the Borrower under the Loan
Documents.

 

	
   

  	
  LONE TREE INSURANCE GROUP LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LONE TREE HOLDINGS LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

Third Amendment to Credit Agreement

 

 

SCHEDULE 1

 

(Commitment Schedule)

 

	
  Lender

  	
   

  	
  Revolving Credit

  Commitment

  	
   

  	
  Revolving Credit

  Commitment Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  57,500,000.00

  	
   

  	
  13.017575216

  	
  %

  
	
  1000 W. Temple Street

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mail Code: CA9-705-07-05

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Los Angeles, CA 90012-1514

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Bank of New York Mellon

  	
   

  	
  $

  	
  60,000,000.00

  	
   

  	
  13.583556748

  	
  %

  
	
  One Wall Street

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New York, NY 10286

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bank of Tokyo — Mitsubishi UFJ. Ltd., NY
  Branch

  	
   

  	
  $

  	
  50,000,000.00

  	
   

  	
  11.319630623

  	
  %

  
	
  1251 Avenue of the Americas

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New York, NY 10020-1104

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deutsche Bank AG, New York Branch

  	
   

  	
  $

  	
  50,000,000.00

  	
   

  	
  11.319630623

  	
  %

  
	
  60 Wall Street

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New York, NY 10005

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JPMorgan Chase Bank, N.A.

  	
   

  	
  $

  	
  50,000,000.00

  	
   

  	
  11.319630623

  	
  %

  
	
  270 Park Avenue

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4th Floor

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New York, NY 10017

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HSBC Bank USA, N.A.

  	
   

  	
  $

  	
  35,000,000.00

  	
   

  	
  7.923741436

  	
  %

  
	
  452 Fifth Avenue

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5th Floor

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New York, NY 10018

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Royal Bank of Scotland plc

  	
   

  	
  $

  	
  35,000,000.00

  	
   

  	
  7.923741436

  	
  %

  
	
  101 Park Avenue

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New York, NY 10178

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Lehman Brothers Bank, FSB

  	
   

  	
  $

  	
  24,210,526.31

  	
   

  	
  5.481084300

  	
  %

  
	
  745 7th Avenue

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5th Floor

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New York, NY 10019

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BNP Paribas

  	
   

  	
  $

  	
  20,000,000.00

  	
   

  	
  4.527852249

  	
  %

  
	
  787 7th Avenue

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New York, NY 10019

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PNC Bank

  	
   

  	
  $

  	
  20,000,000.00

  	
   

  	
  4.527852249

  	
  %

  
	
  249 Fifth Avenue

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  One PNC Plaza

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pittsburgh, PA 15222

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  State Street Bank and Trust Company

  	
   

  	
  $

  	
  20,000,000.00

  	
   

  	
  4.527852249

  	
  %

  
	
  225 Franklin Street

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Boston, MA 02110

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wells Fargo Bank, N.A.

  	
   

  	
  $

  	
  20,000,000.00

  	
   

  	
  4.527852249

  	
  %

  
	
  90 South 7th Street

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minneapolis, MN 55401

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  441,710,526.31

  	
   

  	
  100.000000000

  	
  %United State Securities and Exchange Commission Edgar Filing

EXHIBIT 10.1

PARAMOUNT GOLD AND SILVER CORP .

2008/09 STOCK INCENTIVE AND EQUITY COMPENSATION PLAN

ARTICLE I

PURPOSE

The purpose of this Paramount Gold and Silver Corp. 2008/09 Stock Incentive and Compensation Plan (the “Plan”) is to enhance the profitability and value of Paramount Gold and Silver Corp. (the “Company”) for the benefit of its stockholders by enabling the Company (i) to offer employees and consultants of the Company and its Affiliates stock based incentives and other equity interests in the Company, thereby creating a means to raise the level of stock ownership by employees and consultants in order to attract, retain and reward such employees and consultants and strengthen the mutuality of interests between employees or consultants and the Company's stockholders and (ii) to offer equity based awards to non-employee directors thereby attracting, retaining and rewarding such non-employee directors and strengthening the mutuality of interests between non-employee directors and the Company's stockholders.

ARTICLE II

DEFINITIONS

For purposes of this Plan, the following terms shall have the following meanings:

2.1 “Affiliate” shall mean, other than the Company, each of the following: (i) any Subsidiary; (ii) any Parent; (iii) any corporation, trade or business (including, without limitation, a partnership or limited liability company) which is directly or indirectly controlled fifty percent (50%) or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company or one of its Affiliates; and (iv) any other entity, approved by the Committee as an Affiliate under the Plan, in which the Company or any of its Affiliates has a material equity interest. 

2.2 “Award” shall mean any award under this Plan of any Stock Option, Stock Appreciation Right or Restricted Stock. All Awards shall be confirmed by, and subject to the terms of, a written agreement executed by the Company and the Participant. 

2.3 “Black-out Period” means any black-out period self-imposed by the Company that restricts the purchase and sale of the Company’s securities by designated persons for a period of time; for greater certainty a “Black-out Period” includes any quarterly or special black-out period self-imposed by the Company but excludes any cease trade order imposed against the Company or an Insider.

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

2.5 “Cause” shall mean, with respect to a Participant's Termination of Employment or Termination of Consultancy, unless otherwise determined by the Committee at grant, or, if no rights of the Participant are reduced, thereafter: (i) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award (or where there is such an agreement but it does not define “cause” (or words of like import)), termination due to a Participant's dishonesty, fraud, insubordination, willful misconduct, refusal to perform services (for any reason other than illness or incapacity) or materially unsatisfactory performance of his or her duties for the Company as determined by the Committee in its sole discretion; or (ii) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award that defines “cause” (or words of like import), as defined under such agreement; provided, however, that with regard to any agreement that conditions “cause” on occurrence of a change in control, such definition of “cause” shall not apply until a change in control actually takes place and then only with regard to a termination thereafter. With respect to a Participant's Termination of Directorship, Cause shall mean an act or failure to act that constitutes “cause” for removal of a director under applicable state corporate law.

2.6”Change in Control” shall have the meaning set forth in Article XI.

2.7 “Code” shall mean the Internal Revenue Code as amended. Any reference to any section of the Code shall also be a reference to any successor provision and any Treasury regulation thereunder. 

2.8 “Committee” shall mean a committee of the Board that may be appointed from time to time by the Board. To the extent determined appropriate by the Board, or to the extent required under Rule 16b-3 and Section 162(m) of the Code, such committee shall consist of one or more non-employee directors, each of whom shall be a non-employee director as defined in Rule 16b-3 and an outside director as defined under Section 162(m) of the Code. To the extent that no Committee exists which has the authority to administer the Plan, the functions of the Committee shall be exercised by the Board. If for any reason the appointed Committee does not meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance with the requirements of Rule 16b-3 or Section 162(m) of the Code shall not affect the validity of the awards, grants, interpretations or other actions of the Committee. Notwithstanding the foregoing, with respect to the application of the Plan to non-employee directors, Committee shall mean the Board. 

2.9 “Common Stock” shall mean the Company's common stock, $0.001 par value per share, of the Company.

2.10 “Company” shall mean Paramount Gold and Silver Corp., a Delaware corporation.

2.11 “Consultant” shall mean any advisor or consultant to the Company or an Affiliate who is eligible pursuant to Article V to be granted Awards under this Plan. 

2.12 “Disability” shall mean total and permanent disability, as defined in Section 22(e)(3) of the Code.

2.13 “Eligible Employees” shall mean the employees or Consultants of the Company and its Affiliates who are eligible pursuant to Article V to be granted Awards under this Plan. Notwithstanding the foregoing, with respect to the grant of Incentive Stock Options, Eligible Employees shall mean the employees of the Company, its directors, whether employee directors or non employee directors, its Subsidiaries and its Parents who are eligible pursuant to Article V to be granted Stock Options under the Plan.

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

2.15 “Fair Market Value” for purposes of this Plan, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, shall mean, as of any given date: (i) if the Common Stock is listed on a national securities exchange, foreign stock exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, the closing price of the Common Stock on the trading market for the Common Stock, as selected by the Committee, on the trading date preceding the given date, as reported by the exchange or Nasdaq, as the case may be, (ii) if the Common Stock is not listed on a national securities exchange, foreign stock exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but is traded in the over-the-counter market, the closing bid price for the Common Stock on such date, as reported by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations; and (iii) if the fair market value of the Common Stock cannot be determined pursuant to clause (i) or (ii) above, such price as the Committee shall determine, in good faith, based on reasonable methods set forth under Section 422 of the Code and the regulations thereunder including. For purposes of the grant of any Award, the applicable date shall be the date on which the Award is granted or, in the case of a Stock Appreciation Right, the date a notice of exercise is received by the Committee or, if the sale of Common Stock shall not have been reported or quoted on such date, the first day prior thereto on which the sale of Common Stock was reported or quoted. If the Fair Market Value is determined by a closing price on a foreign stock exchange that reports in a currency other than US dollars, the Fair Market Value shall be converted into US dollars at the most recently published applicable noon exchange rate of the Federal Reserve Bank of New York at the time of the conversion.

2.16 “Good Reason” with respect to a Participant's Termination of Employment or Termination of Consultancy shall mean (i) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award (or where there is such an agreement but it does not define “Good Reason” (or words of like import)), or where “Good Reason” is not otherwise determined by the Committee at grant, or, if no rights of the Participant are reduced, thereafter, a voluntary termination due to “good reason,” as the Committee, in its sole discretion, decides to treat as a Good Reason termination, or (ii) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company 

or an Affiliate and the Participant at the time of the grant of the Award that defines “good reason” (or words of like import), as defined under such agreement; provided, however, that with regard to any agreement that conditions “good reason” on occurrence of a change in control, such definition of “good reason” shall not apply until a change in control actually takes place and then only with regard to a termination thereafter. 

2.17 “Incentive Stock Option” shall mean any Stock Option awarded under this Plan intended to be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code.

2.18 “Insider” means an insider, as such term is defined in The Toronto Stock Exchange Company Manual, as amended, of the Company.

2.19 “Limited Stock Appreciation Right” shall mean an Award of a limited Tandem Stock Appreciation Right or a Non-Tandem Stock Appreciation Right made pursuant to Section 8.5 of this Plan.

2.20 “Non-Qualified Stock Option” shall mean any Stock Option awarded under this Plan that is not an Incentive Stock Option.

2.21 “Non-Tandem Stock Appreciation Right” shall mean a Stock Appreciation Right entitling a Participant to receive an amount in cash or Common Stock (as determined by the Committee in its sole discretion) equal to the excess of: (i) the Fair Market Value of a share of Common Stock as of the date such right is exercised, over (ii) the aggregate exercise price of such right. 

2.22 “Parent” shall mean any parent corporation of the Company within the meaning of Section 424(e) of the Code. 

2.23 “Participant” shall mean the following persons to whom an Award has been made pursuant to this Plan: Eligible Employees of, and Consultants to, the Company and its Affiliates and non-employee directors of the Company; provided, however, that non-employee directors shall be Participants for purposes of the Plan solely with respect to Awards pursuant to Article IX. 

2.24 “Restricted Stock” shall mean an award of shares of Common Stock under the Plan that is subject to restrictions under Article VII.

2.25 “Restriction Period” shall have the meaning set forth in Subsection 7.3(a) with respect to Restricted Stock for Eligible Employees.

2.26 “Retirement” with respect to a Participant's Termination of Employment or Termination of Consultancy, shall mean a Termination of Employment or Termination of Consultancy without Cause from the Company by a Participant who has attained (i) at least age eighty (80). With respect to a Participant's Termination of Directorship, Retirement shall mean the failure to stand for reelection or the failure to be reelected after a Participant has attained age eighty (80). 

2.27 “Rule 16b-3” shall mean Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provisions.

2.28 “Section 162(m) of the Code” shall mean the exception for performance-based compensation under Section 162(m) of the Code and any Treasury regulations thereunder. 

2.29 “Stock Appreciation Right” shall mean the right pursuant to an Award granted under Article VIII. A Tandem Stock Appreciation Right shall mean the right to surrender to the Company all (or a portion) of a Stock Option in exchange for an amount in cash or stock equal to the excess of (i) the Fair Market Value, on the date such Stock Option (or such portion thereof) is surrendered, of the Common Stock covered by such Stock Option (or such portion thereof), over (ii) the aggregate exercise price of such Stock Option (or such portion thereof). A Non-Tandem Stock Appreciation Right shall mean the right to receive an amount in cash or stock equal to the excess of (x) the Fair Market Value of a share of Common Stock on the date such right is exercised, over (y) the aggregate exercise price of such right, other than on surrender of a Stock Option.

2.30 “Stock Option” or “Option” shall mean any Option to purchase shares of Common Stock granted to Eligible Employees or Consultants pursuant to Article VI. 

2.31 “Subsidiary” shall mean any corporation that is defined as a subsidiary corporation in Section 424(f) of the Code.

2.32 “Ten Percent Stockholder” shall mean a person owning Common Stock of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, its Subsidiaries and/or its Parents in the manner provided under Section 422 of the Code.

2.33 “Termination of Consultancy” shall mean, with respect to an individual, that the individual is no longer acting as a Consultant to the Company or an Affiliate. In the event an entity shall cease to be an Affiliate, there shall be deemed a Termination of Consultancy of any individual who is not otherwise a Consultant of the Company or another Affiliate at the time the entity ceases to be an Affiliate. In the event that a Consultant becomes an Eligible Employee upon the termination of his consultancy, the Committee, in its sole and absolute discretion, may determine that no Termination of Consultancy shall be deemed to occur until such time as such Consultant is no longer a Consultant or an Eligible Employee. 

2.34 “Termination of Directorship” shall mean, with respect to a non-employee director, that the non-employee director has ceased to be a director of the Company. 

2.35 “Termination of Employment,” except as provided in the next sentence, shall mean (i) a termination of service (for reasons other than a military or personal leave of absence granted by the Company) of a Participant from the Company and its Affiliates; or (ii) when an entity which is employing a Participant ceases to be an Affiliate, unless the Participant thereupon becomes employed by the Company or another Affiliate. In the event that an Eligible Employee becomes a Consultant upon the termination of his employment, the Committee, in its sole and absolute discretion, may determine that no Termination of Employment shall be deemed to occur until such time as such Eligible Employee is no longer an Eligible Employee or a Consultant. The Committee may otherwise define Termination of Employment in the Option grant or, if no rights of the Participant are reduced, may otherwise define Termination of Employment thereafter, including, but not limited to, defining Termination of Employment with regard to entities controlling, under common control with or controlled by the Company rather than just the Company and its Affiliates and/or entities that provide substantial services to the Company or its Affiliates to which the Participant has transferred directly from the Company or its Affiliates at the request of the Company. 

2.36 “Transfer” or “Transferred” shall mean anticipate, alienate, attach, sell, assign, pledge, encumber, charge or otherwise transfer.

ARTICLE III

ADMINISTRATION

3.1 THE COMMITTEE. The Plan shall be administered and interpreted by the Committee or if no Committee, by the Board of Directors.

3.2 AWARDS. The Committee shall have full authority to: 

(a) to select the Eligible Employees and Consultants to whom Stock Options, Stock Appreciation Rights, Restricted Stock or Registered Stock may from time to time be granted hereunder;

(b) to determine whether and to what extent Stock Options, Stock Appreciation Rights, Restricted Stock, Registered Stock or any combination thereof are to be granted hereunder to one or more Eligible Employees or Consultants; 

(c) to determine, in accordance with the terms of this Plan, the number of shares of Common Stock to be covered by each Award to an Eligible Employee or Consultant granted hereunder; 

(d) to determine the terms and conditions, not inconsistent with the terms of this Plan, of any Award granted hereunder to an Eligible Employee or Consultant (including, but not limited to, the exercise or purchase price (if any), any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof, regarding any Stock Option or other Award, and the shares of Common Stock relating thereto, based on such factors, if any, as the Committee shall determine, in its sole discretion);

(e) Intentionally Deleted.

(f) Intentionally Deleted. 

(g) to modify, extend or renew a Stock Option, subject to Article XII hereof, provided, however, that if a Stock Option is modified, extended or renewed and thereby deemed to be the issuance of a new Stock Option under the Code or the applicable accounting rules, the exercise price of such Stock Option may continue to be the original exercise price even if less than the Fair Market Value of the Common Stock at the time of such modification, extension or renewal;

(h) to determine whether a Stock Option is an Incentive Stock Option or Non-Qualified Stock Option, whether a Stock Appreciation Right is a Tandem Stock Appreciation Right or Non-Tandem Stock Appreciation Right or whether an Award is intended to satisfy Section 162(m) of the Code; 

(i) to determine whether to require an Eligible Employee or Consultant, as a condition of the granting of any Award, to not sell or otherwise dispose of shares acquired pursuant to the exercise of an Option or as an Award for a period of time as determined by the Committee, in its sole discretion, following the date of the acquisition of such Option or Award; and 

(j) Intentionally Deleted.

(k) to grant Awards under the Plan as a conversion from, and replacement of, comparable stock options, stock appreciation rights or restricted stock held by employees of another entity who become Eligible Employees of, or Consultants to, the Company or an Affiliate as the result of a merger or consolidation of the employing entity with the Company or an Affiliate, or as the result of the acquisition by the Company of property or stock of the employing corporation. The Company may direct that replacement Awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances, including, without limitation that Non-Qualified Stock Options shall be granted in lieu of Incentive Stock Options.

3.3 GUIDELINES. Subject to the terms and conditions of the Plan, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan and perform all acts, including the delegation of its administrative responsibilities, as it shall, from time to time, deem advisable; to construe and interpret the terms and provisions of this Plan and any Award issued under this Plan (and any agreements relating thereto); and to otherwise supervise the administration of this Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to carry this Plan into effect, but only to the extent any such action would be permitted under the applicable provisions of Rule 16b-3 (if any) and the applicable provisions of Section 162(m) of the Code (if any). The Committee may adopt special guidelines and provisions for persons who are residing in, or subject to the taxes of countries other than the United States to comply with applicable tax and securities laws. If ,or to the extent applicable, this Plan is intended to comply with Section 162(m) of the Code and the applicable requirements of Rule 16b-3 and shall be limited, construed and interpreted in a manner so as to comply therewith.

3.4 DECISIONS FINAL. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, the Board, or the Committee (or any of its members) arising out of or in connection with the Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants and their respective heirs, executors, administrators, successors and assigns. The Committee shall not be bound to any standards of uniformity or similarity of action, interpretation or conduct in the discharge of its duties hereunder, regardless of the apparent similarity of the matters coming before it. 

3.5 RELIANCE ON COUNSEL. The Company, the Board or the Committee may consult with legal counsel, who may be counsel for the Company or other counsel, with respect to its obligations or duties hereunder, or with respect to any action or proceeding or any question of law, and shall not be liable with respect to any action taken or omitted by it in good faith pursuant to the advice of such counsel. 

3.6 PROCEDURES. If the Committee is appointed, the Board may designate one of the members of the Committee as chairman and the Committee shall hold meetings, subject to the By-Laws of the Company, at such times and places as it shall deem advisable. A majority of the Committee members shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all Committee members in accordance with the By-Laws of the Company shall be 

fully effective as if it had been made by a vote at a meeting duly called and held. The Committee shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable. 

3.7 DESIGNATION OF CONSULTANTS--LIABILITY.(a) The Committee may designate employees of the Company and professional advisors to assist the Committee in the administration of the Plan and may grant authority to employees to execute agreements or other documents on behalf of the Committee.

(b) The Committee may employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion received from any such counsel or consultant and any computation received from any such consultant or agent. Expenses incurred by the Committee or Board in the engagement of any such counsel, consultant or agent shall be paid by the Company. The Committee, its members and any person designated pursuant to paragraph (a) above shall not be liable for any action or determination made in good faith with respect to the Plan. 

To the maximum extent permitted by applicable law, no officer of the Company or member or former member of the Committee or of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted under it. To the maximum extent permitted by applicable law and the Certificate of Incorporation and By-Laws of the Company and to the extent not covered by insurance, each employee of the Company and member or former member of the Committee or of the Board shall be indemnified and held harmless by the Company against any cost or expense (including reasonable fees of counsel reasonably acceptable to the Company) or liability (including any sum paid in settlement of a claim with the approval of the Company), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to act in connection with the Plan, except to the extent arising out of such officer's, member's or former member's own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the employees, officers, directors or members or former officers, directors or members may have under applicable law or under the Certificate of Incorporation or By-Laws of the Company or Affiliate. Notwithstanding anything else herein, this indemnification will not apply to the actions or determinations made by an individual with regard to Awards granted to him or her under this Plan.

ARTICLE IV

SHARE AND OTHER LIMITATIONS

4.1 SHARES.(a) GENERAL LIMITATION. The aggregate number of shares of Common Stock which may be issued or used for reference purposes under this Plan or with respect to which other Awards may be granted shall not exceed 3,000,000 (three million) shares (subject to any increase or decrease pursuant to Section 4.2) which may be either authorized and unissued Common Stock or Common Stock held in or acquired for the treasury of the Company. 

If any Option or Stock Appreciation Right granted under this Plan expires, terminates or is canceled for any reason without having been exercised in full or, with respect to Options, the Company repurchases any Option pursuant to Section 6.3(f), the number of shares of Common Stock underlying the repurchased Option, and/or the number of shares of Common Stock underlying any unexercised Stock Appreciation Right or Option shall again be available for the purposes of Awards under the Plan. If a Tandem Stock Appreciation Right or a Limited Stock Appreciation Right is granted in tandem with an Option, such grant shall only apply once against the maximum number of shares of Common Stock which may be issued under this Plan. In determining the number of shares of Common Stock available for Awards other than Awards of Incentive Stock Options, if Common Stock has been delivered or exchanged by a Participant as full or partial payment to the Company for the exercise price or for withholding taxes, in connection with the exercise of a Stock Option or the number shares of Common Stock otherwise deliverable has been reduced for full or partial payment for the exercise price or for withholding taxes, the number of shares of Common Stock delivered, exchanged or reduced shall again be available for purposes of Awards under this Plan. 

In the event Awards are granted to employees or Consultants pursuant to Section 3.2(l), the aggregate number of shares of Common Stock available under the Plan for Awards other than Incentive Stock Options shall be increased by the number of shares of Common Stock which may be issued or used for reference with respect to those Awards granted pursuant to Section 3.2(l). The maximum number of shares of Common Stock which may be 

issued under this Plan with respect to Incentive Stock Options shall not be increased (subject to any increase or decrease pursuant to Section 4.2).

Notwithstanding anything else contained herein to the contrary, the Committee shall be prohibited from granting any Award if the aggregate number of shares of Common Stock (i) issued to Insiders of the Company within any one year period, or (ii) issuable to Insiders at any time, under this Plan and any other security based compensation arrangement of the Company, could exceed 10% of the Company’s shares of Common Stock issued and outstanding, on a non-diluted basis, at the time of the grant of the Award.

4.2 CHANGES.(a) The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company or its Affiliates, any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting Common Stock, the dissolution or liquidation of the Company or its Affiliates, any sale or transfer of all or part of its assets or business or any other corporate act or proceeding.

(b) In the event of any such change in the capital structure or business of the Company by reason of any stock dividend or distribution, stock split or reverse stock split, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, distribution with respect to its outstanding Common Stock or capital stock other than Common Stock, sale or transfer of all or part of its assets or business, reclassification of its capital stock, or any similar change affecting the Company's capital structure or business and the Committee determines an adjustment is appropriate under the Plan, then the aggregate number and kind of shares which thereafter may be issued under this Plan, the number and kind of shares or other property (including cash) to be issued upon exercise of an outstanding Option or other Awards granted under this Plan and the purchase price thereof shall be appropriately adjusted consistent with such change in such manner as the Committee may deem equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, Participants under this Plan or as otherwise necessary to reflect the change, and any such adjustment determined by the Committee shall be binding and conclusive on the Company and all Participants and employees and their respective heirs, executors, administrators, successors and assigns. 

(c) Fractional shares of Common Stock resulting from any adjustment in Options or Awards pursuant to Section 4.2(a) or (b) shall be aggregated until, and eliminated at, the time of exercise by rounding-down for fractions less than one-half (1/2) and rounding-up for fractions equal to or greater than one-half (1/2). No cash settlements shall be made with respect to fractional shares eliminated by rounding. Notice of any adjustment shall be given by the Committee to each Participant whose Option or Award has been adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan.

(d) In the event of a merger or consolidation in which the Company is not the surviving entity or in the event of any transaction that results in the acquisition of substantially all of the Company's outstanding Common Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of all of the Company's assets (all of the foregoing being referred to as “Acquisition Events”), then the Committee may, in its sole discretion, terminate all outstanding Options and Stock Appreciation Rights of Eligible Employees and Consultants, effective as of the date of the Acquisition Event, by delivering notice of termination to each such Participant at least twenty (20) days prior to the date of consummation of the Acquisition Event; provided, that during the period from the date on which such notice of termination is delivered to the consummation of the Acquisition Event, each such Participant shall have the right to exercise in full all of his or her Options and Stock Appreciation Rights that are then outstanding (without regard to any limitations on exercisability otherwise contained in the Option or Award Agreements) but contingent on occurrence of the Acquisition Event, and, provided that, if the Acquisition Event does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise shall be null and void. 

(e) If an Acquisition Event occurs, to the extent the Committee does not terminate the outstanding Options and Stock Appreciation Rights pursuant to this Section 4.2(d), then the provisions of Section 4.2(b) shall apply. 

ARTICLE V

ELIGIBILITY

5.1 All employees, directors, and Consultants to the Company and its Affiliates are eligible to be granted Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock and Registered Stock, subject to any filing requirements, under this Plan. All employees of the Company, its Subsidiaries and its Parents are eligible to be granted Incentive Stock Options under the Plan. Eligibility under this Plan shall be determined by the Committee. 

ARTICLE VI

STOCK OPTION GRANTS

6.1 OPTIONS. Each Stock Option granted hereunder shall be one of two types: (i) an Incentive Stock Option intended to satisfy the requirements of Section 422 of the Code or (ii) a Non-Qualified Stock Option. 

6.2 GRANTS. The Committee shall have the authority to grant to any Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights). The Committee shall have the authority to grant to any Consultant one or more Non-Qualified Stock Options (with or without Stock Appreciation Rights). To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof which does not qualify, shall constitute a separate Non-Qualified Stock Option. Notwithstanding any other provision of this Plan to the contrary or any provision in an agreement evidencing the grant of a Stock Option to the contrary, any Stock Option granted to an Eligible Employee of an Affiliate (other than an Affiliate which is a Parent or a Subsidiary) or to any Consultant shall be a Non-Qualified Stock Option.

6.3 TERMS OF OPTIONS. Options granted under this Plan shall be subject to the following terms and conditions, shall be subject to Section 3.2 hereof and the other provisions of this Plan, and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem desirable: 

(a) OPTION PRICE. The option price per share of Common Stock purchasable under either an Incentive Stock Option or Non-Qualified Stock Option shall be determined by the Committee at the time of grant but shall not be less than 100% of the Fair Market Value of the share of Common Stock at the time of grant. Notwithstanding the foregoing, if an Option is modified, extended or renewed and, thereby, deemed to be the issuance of a new Option under the Code, the exercise price of an Option may continue to be the original exercise price even if less than the Fair Market Value of the Common Stock at the time of such modification, extension or renewal.

(b) OPTION TERM. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten (10) years after the date the Option is granted. If any Stock Options are set to expire during any Black-out Period which would prohibit the option holder from exercising the Stock Option during that Black-out Period, then in that event the option term shall be extended for an additional ten (10) business days beyond the end of any Black-out Period to permit the option holder to exercise the Stock Option (the “Black-out Expiration Term”). The Black-out Expiration Term is fixed and shall not be subject to the discretion of the Board of Directors or the Committee. 

(c) EXERCISABILITY. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at grant. If the Committee provides, in its discretion, that any Stock Option is exercisable subject to certain limitations (including, without limitation, that it is exercisable only in installments or within certain time periods), the Committee may waive such limitations on the exercisability at any time at or after grant in whole or in part (including, without limitation, that the Committee may waive the installment exercise provisions or accelerate the time at which Options may be exercised), based on such factors, if any, as the Committee shall determine, in its sole discretion.

(d) METHOD OF EXERCISE. Subject to whatever installment exercise and waiting period provisions apply under subsection (c) above, Stock Options may be exercised in whole or in part at any time during the Option term, by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased. At or after grant, payment in full or in part may be made at the election of the optionee as follows: (i) in cash or by check, bank draft or money order payable to the order of the Company; (ii) if the Common Stock is 

traded on a national securities exchange, the Nasdaq Stock Market, Inc. or quoted on a national quotation system sponsored by the National Association of Securities Dealers, through a “cashless exercise” procedure whereby the Participant delivers irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the purchase price, (iii) in the form of Common Stock owned by the Participant (and for which the Participant has good title free and clear of any liens and encumbrances) or (iv) in the form of Restricted Stock; provided, however, that in each case, such payment is equivalent to on the Fair Market Value of the Common Stock on the payment date as determined by the Committee (without regard to any forfeiture restrictions applicable to such Restricted Stock). No shares of Common Stock shall be issued until full payment, (and if payment is by installments all payments have been received), as provided herein, therefor has been made or provided for. If payment in full or in part has been made in the form of Restricted Stock, an equivalent number of shares of Common Stock issued on exercise of the Option shall be subject to the same restrictions and conditions, during the remainder of the Restriction Period, applicable to the Restricted Stock surrendered therefor. 

(e) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the aggregate Fair Market Value (determined as of the time of grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Eligible Employee during any calendar year under the Plan and/or any other stock option plan of the Company or any Subsidiary or Parent exceeds $100,000, such Options shall be treated as Options which are not Incentive Stock Options. In addition, if an Eligible Employee does not remain employed by the Company, any Subsidiary or Parent at all times from the time the Option is granted until three (3) months prior to the date of exercise (or such other period as required by applicable law), such Option shall be treated as an Option which is not a Non-Qualified Stock Option.

Should the foregoing provision not be necessary in order for the Stock Options to qualify as Incentive Stock Options, or should any additional provisions be required, the Committee may amend the Plan accordingly, without the necessity of obtaining the approval of the stockholders of the Company.

(f) BUY OUT AND SETTLEMENT PROVISIONS. The Committee may at any time on behalf of the Company offer to buy out an Option previously granted, based on such terms and conditions as the Committee shall establish and communicate to the Participant at the time that such offer is made.

(g) FORM, MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms and conditions and within the limitations of the Plan, an Option shall be evidenced by such form of agreement or grant as is approved by the Committee, and the Committee may modify, extend or renew outstanding Options granted under the Plan (provided that the rights of a Participant are not reduced without his consent), or accept the surrender of outstanding Options (up to the extent not theretofore exercised) and authorize the granting of new Options in substitution therefor (to the extent not theretofore exercised.

(h) DEFERRED DELIVERY OF COMMON SHARES. The Committee may in its discretion permit Participants to defer delivery of Common Stock acquired pursuant to a Participant's exercise of an Option in accordance with the terms and conditions established by the Committee.

6.4 TERMINATION OF EMPLOYMENT. The following rules apply with regard to Options upon the Termination of Employment or Termination of Consultancy of a Participant: 

(a) TERMINATION BY REASON OF DEATH. If a Participant's Termination of Employment or Termination of Consultancy is by reason of death, any Stock Option held by such Participant, unless otherwise determined by the Committee at grant or, if no rights of the Participant's estate are reduced, thereafter, may be exercised, to the extent exercisable at the Participant's death, by the legal representative of the estate, at any time within a period of one (1) year from the date of such death, but in no event beyond the expiration of the stated term of such Stock Option.

(b) TERMINATION BY REASON OF DISABILITY. If a Participant's Termination of Employment or Termination of Consultancy is by reason of Disability, any Stock Option held by such Participant, unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, may be exercised, to the extent exercisable at the Participant's termination, by the Participant (or the legal representative of the Participant's estate if the Participant dies after termination) at any time within a period of one (1) year from the date of such termination, but in no event beyond the expiration of the stated term of such Stock Option.

(c) TERMINATION BY REASON OF RETIREMENT. If a Participant's Termination of Employment or Termination of Consultancy is by reason of Retirement, any Stock Option held by such Participant, unless otherwise determined by the Committee at grant, or, if no rights of the Participant are reduced, thereafter, shall be fully vested and may thereafter be exercised by the Participant at any time within a period of one (1) year from the date of such termination, but in no event beyond the expiration of the stated term of such Stock Option; provided, however, that, if the Participant dies within such exercise period, any unexercised Stock Option held by such Participant shall thereafter be exercisable, to the extent to which it was exercisable at the time of death, for a period of one (1) year (or such other period as the Committee may specify at grant or, if no rights of the Participant's estate are reduced, thereafter) from the date of such death, but in no event beyond the expiration of the stated term of such Stock Option.

(d) INVOLUNTARY TERMINATION WITHOUT CAUSE OR TERMINATION FOR GOOD REASON. If a Participant's Termination of Employment or Termination of Consultancy is by involuntary termination without Cause or for Good Reason, any Stock Option held by such Participant, unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, may be exercised, to the extent exercisable at termination, by the Participant at any time within a period of ninety (90) days from the date of such termination, but in no event beyond the expiration of the stated term of such Stock Option.

(e) TERMINATION WITHOUT GOOD REASON. If a Participant's Termination of Employment or Termination of Consultancy is voluntary but without Good Reason and occurs prior to, or more than ninety (90) days after, the occurrence of an event which would be grounds for Termination of Employment or Termination of Consultancy by the Company for Cause (without regard to any notice or cure period requirements), any Stock Option held by such Participant, unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, may be exercised, to the extent exercisable at termination, by the Participant at any time within a period of thirty (30) days from the date of such termination, but in no event beyond the expiration of the stated term of such Stock Option.

(f) OTHER TERMINATION. Unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, if a Participant's Termination of Employment or Termination of Consultancy is for any reason other than death, Disability, Retirement, Good Reason, involuntary termination without Cause or voluntary termination as provided in subsection (e) above, any Stock Option held by such Participant shall thereupon terminate and expire as of the date of termination, provided that (unless the Committee determines a different period upon grant or, if no rights of the Participant are reduced, thereafter) in the event the termination is for Cause or is a voluntary termination without Good Reason within ninety (90) days after occurrence of an event which would be grounds for Termination of Employment or Termination of Consultancy by the Company for Cause (without regard to any notice or cure period requirement), any Stock Option held by the Participant at the time of occurrence of the event which would be grounds for Termination of Employment or Termination of Consultancy by the Company for Cause shall be deemed to have terminated and expired upon occurrence of the event which would be grounds for Termination of Employment or Termination of Consultancy by the Company for Cause.

ARTICLE VII

STOCK AWARDS 

7.1 STOCK AWARDS. Shares of Restricted Stock or Registered Stock may be issued to Eligible Employees or Consultants either alone or in addition to other Awards granted under the Plan. The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock or Registered Stock will be made, the number of shares to be awarded, the price (if any) to be paid by the recipient (subject to Section 7.2), the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Awards. 

7.2 AWARDS AND CERTIFICATES. The prospective Participant selected to receive a Stock Award shall not have any rights with respect to such Award, unless and until such Participant has delivered a fully executed copy of the applicable agreement evidencing the Award (the “Stock Award Agreement”) to the Company and has otherwise complied with the applicable terms and conditions of such Award. Further, such Award shall be subject to the following conditions: 

(a) PURCHASE PRICE. The purchase price of Restricted Stock shall be fixed by the Committee. 

(b) ACCEPTANCE. Stock Awards must be accepted within a period of sixty (60) days (or such shorter period as the Committee may specify at grant) after the Award date, by executing a Stock Award Agreement and by paying whatever price (if any) the Committee has designated thereunder.

(c) LEGEND. If the Company should issue to a Plan Participant restricted shares of common stock, the Company may place an appropriate restrictive legend on the Shares so issued. 

(d) CUSTODY. The Committee may require that any stock certificates evidencing restricted shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Restricted Stock Award, the Participant shall have delivered a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such Award.

7.3 RESTRICTIONS AND CONDITIONS ON RESTRICTED STOCK AWARDS. The shares of Restricted Stock awarded pursuant to this Plan shall be subject to Article X and the following restrictions and conditions:

(a) RESTRICTION PERIOD; VESTING AND ACCELERATION OF VESTING. The Participant shall not be permitted to Transfer shares of Restricted Stock awarded under this Plan during a period set by the Committee (the “Restriction Period”) commencing with the date of such Award, as set forth in the Restricted Stock Award agreement and such agreement shall set forth a vesting schedule and any events which would accelerate vesting of the shares of Restricted Stock. Within these limits, based on service, or other criteria determined by the Committee, the Committee may provide for the lapse of such restrictions in installments in whole or in part, or may accelerate the vesting of all or any part of any Restricted Stock Award. 

(b) RIGHTS AS STOCKHOLDER. Except as provided in this subsection (b) and subsection (a) above and as otherwise determined by the Committee, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company including, without limitation, the right to receive any dividends, the right to vote such shares and, subject to and conditioned upon the full vesting of shares of Restricted Stock, the right to tender such shares. Notwithstanding the foregoing, the payment of dividends shall be deferred until, and conditioned upon, the expiration of the applicable Restriction Period, unless the Committee, in its sole discretion, specifies otherwise at the time of the Award.

(c) LAPSE OF RESTRICTIONS. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, the certificates for such shares shall be delivered to the Participant. All legends shall be removed from said certificates at the time of delivery to the Participant except as otherwise required by applicable law.

(d) TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY FOR RESTRICTED STOCK. Subject to the applicable provisions of the Restricted Stock Award agreement and this Plan, upon a Participant's Termination of Employment or Termination of Consultancy for any reason during the relevant Restriction Period, all Restricted Stock still subject to restriction will vest or be forfeited in accordance with the terms and conditions established by the Committee at grant or thereafter.

ARTICLE VIII

STOCK APPRECIATION RIGHTS

8.1 TANDEM STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option (a “Reference Stock Option”) granted under this Plan (“Tandem Stock Appreciation Rights”). In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Reference Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Reference Stock Option. 

8.2 TERMS AND CONDITIONS OF TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time by the Committee, including Article X and the following: (a) TERM. A Tandem Stock Appreciation Right or applicable portion thereof granted with respect to a Reference Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the Reference Stock Option, except that, unless otherwise determined by the Committee, in its sole discretion, at the time of grant, a Tandem Stock Appreciation Right granted with respect to less than the full number of shares covered by the Reference Stock 

Option shall not be reduced until and then only to the extent the exercise or termination of the Reference Stock Option causes the number of shares covered by the Tandem Stock Appreciation Right to exceed the number of shares remaining available and unexercised under the Reference Stock Option.

(b) EXERCISABILITY. Tandem Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Reference Stock Options to which they relate shall be exercisable in accordance with the provisions of Article VI and this Article VIII. 

(c) METHOD OF EXERCISE. A Tandem Stock Appreciation Right may be exercised by an optionee by surrendering the applicable portion of the Reference Stock Option. Upon such exercise and surrender, the Participant shall be entitled to receive an amount determined in the manner prescribed in this Section 8.2. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related Tandem Stock Appreciation Rights have been exercised. 

(d) PAYMENT. Upon the exercise of a Tandem Stock Appreciation Right a Participant shall be entitled to receive up to, but no more than, an amount in cash and/or Common Stock (as chosen by the Committee in its sole discretion) equal in value to the excess of the Fair Market Value of one share of Common Stock over the option price per share specified in the Reference Stock Option multiplied by the number of shares in respect of which the Tandem Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment. If the Committee elects to pay such amount to a Participant in Common Stock, such Common Stock shall be valued at Fair Market Value on the day of exercise of the Tandem Stock Appreciation Right. 

(e) DEEMED EXERCISE OF REFERENCE STOCK OPTION. Upon the exercise of a Tandem Stock Appreciation Right, the Reference Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Article IV of the Plan on the number of shares of Common Stock to be issued under the Plan.

8.3 NON-TANDEM STOCK APPRECIATION RIGHTS. Non-Tandem Stock Appreciation Rights may also be granted without reference to any Stock Options granted under this Plan. 

8.4 TERMS AND CONDITIONS OF NON-TANDEM STOCK APPRECIATION RIGHTS. Non-Tandem Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time by the Committee, including Article X and the following: 

(a) TERM. The term of each Non-Tandem Stock Appreciation Right shall be fixed by the Committee, but shall not be greater than ten (10) years after the date the right is granted. 

(b) EXERCISABILITY. Non-Tandem Stock Appreciation Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at grant. If the Committee provides, in its discretion, that any such right is exercisable subject to certain limitations (including, without limitation, that it is exercisable only in installments or within certain time periods), the Committee may waive such limitation on the exercisability at any time at or after grant in whole or in part (including, without limitation, that the Committee may waive the installment exercise provisions or accelerate the time at which rights may be exercised), based on such factors, if any, as the Committee shall determine, in its sole discretion. 

(c) METHOD OF EXERCISE. Subject to whatever installment exercise and waiting period provisions apply under subsection (b) above, Non-Tandem Stock Appreciation Rights may be exercised in whole or in part at any time during the option term, by giving written notice of exercise to the Company specifying the number of Non-Tandem Stock Appreciation Rights to be exercised.

(d) PAYMENT. Upon the exercise of a Non-Tandem Stock Appreciation Right a Participant shall be entitled to receive, for each right exercised, up to, but no more than, an amount in cash and/or Common Stock (as chosen by the Committee in its sole discretion) equal in value to the excess of the Fair Market Value of one share of Common Stock on the date the right is exercised over the Fair Market Value of one (1) share of Common Stock on the date the right was awarded to the Participant. If the Committee elects to pay such amount to a Participant in Common Stock, such Common Stock shall be valued at Fair Market Value as the day of exercise of the Non-Tandem Stock Appreciation Right. 

8.5 LIMITED STOCK APPRECIATION RIGHTS. The Committee may, in its sole discretion, grant Tandem and Non-Tandem Stock Appreciation Rights either as a general Stock Appreciation Right or as a Limited Stock Appreciation Right. Limited Stock Appreciation Rights may be exercised only upon a Change in Control (to the extent provided in an Award agreement granting such Limited Stock Appreciation Rights) or the occurrence of such other event as the Committee may, in its sole discretion, designate at the time of grant or thereafter. Upon the exercise of Limited Stock Appreciation Rights, except as otherwise provided in an Award agreement, the Participant shall receive in cash or Common Stock, as determined by the Committee, an amount equal to the amount (1) set forth in Section 8.2(d) with respect to Tandem Stock Appreciation Rights or (2) set forth in Section 8.4(d) with respect to Non-Tandem Stock Appreciation Rights. 

8.6 TERMINATION OF EMPLOYMENT OR TERMINATION OF CONSULTANCY. The following rules apply with regard to Stock Appreciation Rights upon the Termination of Employment or Termination of Consultancy of a Participant: 

(a) TERMINATION BY DEATH. If a Participant's Termination of Employment or Termination of Consultancy is by reason of death, any Stock Appreciation Right held by such Participant, unless otherwise determined by the Committee at grant or if no rights of the Participant's estate are reduced, thereafter, may be exercised, to the extent exercisable at the Participant's death, by the legal representative of the estate, at any time within a period of one (1) year from the date of such death or until the expiration of the stated term of such Stock Appreciation Right, whichever period is the shorter.

(b) TERMINATION BY REASON OF DISABILITY. If a Participant's Termination of Employment or Termination of Consultancy is by reason of Disability, any Stock Appreciation Right held by such participant, unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, may be exercised, to the extent exercisable at the Participant's termination, by the Participant (or the legal representative of the Participant's estate if the Participant dies after termination) at any time within a period of one (1) year from the date of such termination or until the expiration of the stated term of such Stock Appreciation Right, whichever period is the shorter.

(c) TERMINATION BY REASON OF RETIREMENT. If a Participant's Termination of Employment or Termination of Consultancy is by reason of Retirement, any Stock Appreciation Right held by such Participant, unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, shall be fully vested and may thereafter be exercised by the Participant at any time within a period of one (1) year from the date of such termination or until the expiration of the stated term of such right, whichever period is the shorter; provided, however, that, if the Participant dies within such one (1) year period, any unexercised Non-Tandem Stock Appreciation Right held by such Participant shall thereafter be exercisable, to the extent to which it was exercisable at the time of death, for a period of one (1) year (or such other period as the Committee may specify at grant or if no rights of the Participant are reduced, thereafter) from the date of such death or until the expiration of the stated term of such right, whichever period is the shorter. 

(d) INVOLUNTARY TERMINATION WITHOUT CAUSE OR TERMINATION FOR GOOD REASON. If a Participant's Termination of Employment or Termination of Consultancy is by involuntary termination without Cause or for Good Reason, any Stock Appreciation Right held by such participant, unless otherwise determined by the Committee at grant or if no rights of the participant are reduced, thereafter, may be exercised, to the extent exercisable at termination, by the Participant at any time within a period of ninety (90) days from the date of such termination or until the expiration of the stated term of such right, whichever period is shorter.

(e) TERMINATION WITHOUT GOOD REASON. If a Participant's Termination of Employment or Termination of Consultancy is voluntary but without Good Reason and occurs prior to, or more than ninety (90) days after, the occurrence of an event which would be grounds for Termination of Employment or Termination of Consultancy by the Company for Cause (without regard to any notice or cure period requirements), any Stock Appreciation Right held by such Participant, unless greater or lesser exercise rights are provided by the Committee at the time of grant or, if no rights of the participant are reduced, thereafter, may be exercised, to the extent exercisable at termination, by the Participant at any time within a period of thirty (30) days from the date of such termination, but in no event beyond the expiration of the stated term of such Stock Appreciation Right. 

(f) OTHER TERMINATION. Unless otherwise determined by the Committee at grant, or, if no rights of the Participant are reduced thereafter, if a Participant's Termination of Employment or Termination of Consultancy is for any reason other than death, Disability, Retirement, Good Reason, involuntary termination without Cause or 

voluntary termination as provided in subsection (e) above, any Stock Appreciation Right held by such Participant shall thereupon terminate or expire as of the date of termination, provided, that (unless the Committee determines a different period upon grant, or, if no rights of the Participant are reduced, thereafter) in the event the termination is for Cause or is a voluntary termination as provided in subsection (e) above, within ninety (90) days after occurrence of an event which would be grounds for Termination of Employment or Termination of Consultancy by the Company for Cause (without regard to any notice or cure period requirement), any Stock Appreciation Right held by the Participant at the time of the occurrence of the event which would be grounds for Termination of Employment or Termination of Consultancy by the Company for Cause shall be deemed to have terminated and expired upon occurrence of the event which would be grounds for Termination of Employment or Termination of Consultancy by the Company for Cause.

ARTICLE IX

INTENTIONALLY DELETED

ARTICLE X

NON-TRANSFERABILITY

Except as provided in the last sentence of this Article X, no Stock Option or Stock Appreciation Right granted to an Employee or Consultant shall be Transferable by the Participant otherwise than by will or by the laws of descent and distribution. All Stock Options and all Stock Appreciation Rights granted to an Employee or Consultant shall be exercisable, during the Participant's lifetime, only by the Participant. Tandem Stock Appreciation Rights shall be Transferable, to the extent permitted above, only with the underlying Stock Option. Shares of Restricted Stock under Article VII may not be Transferred prior to the date on which shares are issued, or, if later, the date on which any applicable restriction lapses. No Award shall, except as otherwise specifically provided by law or herein, be Transferable in any manner, and any attempt to Transfer any such Award shall be void, and no such Award shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such Award, nor shall it be subject to attachment or legal process for or against such person. All Stock Options granted to non-employee directors shall be Transferable solely to such non-employee director's principal employer (other than the Company or an Affiliate) at the time of grant if the terms of such non-employee director's employment so require. Notwithstanding the foregoing, the Committee may determine at the time of grant or thereafter, that a Non-Qualified Stock Option that is otherwise not transferable pursuant to this Article X is transferable in whole or part and in such circumstances, and under such conditions, as specified by the Committee. 

ARTICLE XI

CHANGE IN CONTROL PROVISIONS

11.1 BENEFITS. In the event of a Change in Control of the Company (as defined below), except as otherwise provided by the Committee upon the grant of an Award, each Participant shall have the following benefits: (a) Unless otherwise provided in the applicable award agreement, all outstanding Options and the related Tandem Stock Appreciation Rights and Non-Tandem Stock Appreciation Rights of such Participant granted prior to the Change in Control shall be fully vested and immediately exercisable in their entirety. The Committee, in its sole discretion, may provide for the purchase of any such Stock Options by the Company for an amount of cash equal to the excess of the Change in Control Price (as defined below) of the shares of Common Stock covered by such Stock Options, over the aggregate exercise price of such Stock Options. For purposes of this Section 11.1, “Change in Control Price” shall mean the higher of (i) the highest price per share of Common Stock paid in any transaction related to a Change in Control of the Company, or (ii) the highest Fair Market Value per share of Common Stock at any time during the sixty (60) day period preceding a Change in Control. 

(b) Unless otherwise provided in the applicable award agreement, the restrictions to which any shares of Restricted Stock of such Participant granted prior to the Change in Control are subject shall lapse as if the applicable Restriction Period had ended upon such Change in Control. 

(c) Notwithstanding anything else herein, the Committee may, in its sole discretion, provide for accelerated vesting of an Award upon a Termination of Employment during the Pre-Change in Control Period. Unless otherwise determined by the Committee, the “Pre-Change in Control Period” shall mean the one hundred eighty (180) day period prior to a Change in Control.

11.2 CHANGE IN CONTROL. A “Change in Control” shall be deemed to have occurred:

(a) upon any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company, becoming the owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing forty percent (40%) or more of the combined voting power of the Company's then outstanding securities (including, without limitation, securities owned at the time of any increase in ownership); 

(b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (a), (c), or (d) of this section) or a director whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors of the Company whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors; 

(c) upon the merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in (a) above) acquires more than forty percent (40%) of the combined voting power of the Company's then outstanding securities shall not constitute a Change in Control of the Company; or

(d) upon the stockholder's of the Company approval of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets other than the sale of all or substantially all of the assets of the Company to a person or persons who beneficially own, directly or indirectly, at least fifty percent (50%) or more of the combined voting power of the outstanding voting securities of the Company at the time of the sale.

ARTICLE XII

TERMINATION OR AMENDMENT OF THE PLAN

12.1 TERMINATION OR AMENDMENT. Notwithstanding any other provision of this Plan, the Board may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely, retroactively or otherwise, without stockholder approval. By way of example and without limiting the generality of the foregoing, the Board of Directors reserves the right, without stockholder approval, to (i) make amendments of a clerical nature that clarify language or understanding of the terms of the Plan, (ii) amend the vesting provisions of a Stock Option or the Plan, (iii) amend the provisions with respect to termination or death of a Participant, including but not limited to the length of time to exercise a Stock Option upon termination or death, (iv) add a deferred or restricted share unit or any other provision which results in Participants receiving Common Stock while no cash consideration is received by the Company; (v) change the method of calculating a minimum exercise price per Common Stock for Stock Options under Section 6.3 of the Plan; and (vi) adjust accordingly the number of Common Stock available under the Plan, the Common Stock subject to any Award and the exercise price of the Common Stock subject to Stock Options as a result of the events described in Section 4.2(b) of the Plan. (c)Without limiting the generality of the foregoing, the Board of Directors reserves the right, without stockholder approval, to (i) make amendments of a clerical nature that clarify language or understanding of the terms of the Plan, (ii) amend the vesting provisions of a Stock Option or the Plan, (iii) amend the provisions with respect to termination or death of a Participant, including but not limited to the length of time to 

exercise a Stock Option upon termination or death, (iv) add a deferred or restricted share unit or any other provision which results in Participants receiving Common Stock while no cash consideration is received by the Company; (v) change the method of calculating a minimum exercise price per Common Stock for Stock Options under Section 6.3 of the Plan; and (vi) adjust accordingly the number of Common Stock available under the Plan, the Common Stock subject to any Award and the exercise price of the Common Stock subject to Stock Options as a result of the events described in Section 4.2(b) of the Plan. Notwithstanding the foregoing:

(a) unless otherwise required by law or specifically provided herein, the rights of a Participant with respect to Awards granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant; and

(b) stockholder approval shall be required, only if and to the extent required by the rules of a stock exchange on which the Company’s Common Stock is listed for trading, the applicable provisions of Rule 16b-3 or, if and to the extent required, under the applicable provisions of Section 162(m) of the Code, or with regard to Incentive Stock Options, Section 422 of the Code, for an amendment which would (i) except as permitted in Section 4.1(a), increase the aggregate number of shares of Common Stock that may be issued under this Plan; (ii) change the classification of employees, Consultants, directors and non-employee directors eligible to receive Awards under this Plan; (iii) decrease the minimum option price of any Stock Option; (iv) extend the maximum option period under Section 6.3; (v) change any rights under the Plan with regard to non-employee directors; or (vi) require stockholder approval in order for the Plan to continue to comply with the applicable provisions, if any, of Rule 16b-3, Section 162(m) of the Code, any applicable state law, or, with regard to Incentive Stock Options, Section 422 of the Code. 

The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Article IV above or as otherwise specifically provided herein, no such amendment or other action by the Committee shall impair the rights of any holder without the holder's consent.

ARTICLE XIII

UNFUNDED PLAN

This Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments as to which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.

ARTICLE XIV

GENERAL PROVISIONS

14.1 LEGEND. The Committee may require each person receiving shares pursuant to an Award under the Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution thereof. In addition to any legend required by this Plan, the certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on Transfer. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national securities association system upon whose system the Common Stock is then quoted, any applicable federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

14.2 OTHER PLANS. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. 

14.3 NO RIGHT TO EMPLOYMENT/DIRECTORSHIP. Neither this Plan nor the grant of any Award hereunder shall give any Participant or other employee any right with respect to continuance of employment by the Company or any Affiliate, nor shall there be a limitation in any way on the right of the Company or any Affiliate by which an employee is employed to terminate his employment at any time. Neither this Plan nor the grant of any 

Award hereunder shall impose any obligations on the Company to retain any Participant as a director nor shall it impose on the part of any Participant any obligation to remain as a director of the Company. 

14.4 WITHHOLDING OF TAXES. The Company shall have the right to deduct from any payment to be made to a Participant, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any Federal, state or local taxes required by law to be withheld. Upon the vesting of Restricted Stock, or upon making an election under Code Section 83(b), a Participant shall pay all required withholding to the Company. The Committee may permit any such withholding obligation with regard to any Participant to be satisfied by reducing the number of shares of Common Stock otherwise deliverable or by delivering shares of Common Stock already owned. Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant. 

14.5 LISTING AND OTHER CONDITIONS.

(a) Intentionally Deleted.

(b) If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock pursuant to an Award is or may in the circumstances be unlawful or result in the imposition of excise taxes on the Company under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act of 1933, as amended, or otherwise with respect to shares of Common Stock or Awards, and the right to exercise any Option shall be suspended until, in the opinion of said counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on the Company.

14.6 GOVERNING LAW. This Plan shall be governed and construed in accordance with the laws of the state of incorporation of the Company (regardless of the law that might otherwise govern under applicable principles of conflict of laws). 

14.7 CONSTRUCTION. Wherever any words are used in this Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply. To the extent applicable, the Plan shall be limited, construed and interpreted in a manner so as to comply with the applicable requirements of Rule 16b-3 and Section 162(m) of the Code; however, noncompliance with Rule 16b-3 or Section 162(m) of the Code shall have no impact on the effectiveness of a Stock Option granted under the Plan. 

14.8 OTHER BENEFITS. No Award payment under this Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its subsidiaries nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation. 

14.9 COSTS. The Company shall bear all expenses included in administering this Plan, including expenses of issuing Common Stock pursuant to any Awards hereunder.

14.10 NO RIGHT TO SAME BENEFITS. The provisions of Awards need not be the same with respect to each Participant, and such Awards to individual Participants need not be the same in subsequent years. 

14.11 DEATH/DISABILITY. The Committee may in its discretion require the transferee of a Participant to supply it with written notice of the Participant's death or Disability and to supply it with a copy of the will (in the case of the Participant's death) or such other evidence as the Committee deems necessary to establish the validity of the transfer of an Award. The Committee may also require the agreement of the transferee to be bound by all of the terms and conditions of the Plan. 

14.12 SECTION 16(b) OF THE EXCHANGE ACT. All elections and transactions under the Plan by persons subject to Section 16 of the Exchange Act involving shares of Common Stock are intended to comply with any applicable condition under Rule 16b-3. The Committee may establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder. 

14.13 SEVERABILITY OF PROVISIONS. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included. 

14.14 HEADINGS AND CAPTIONS. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.

ARTICLE XV

TERM OF PLAN

No Award shall be granted pursuant to the Plan on or after the tenth anniversary of the earlier of the date the Plan is adopted or the date of stockholder approval, but Awards granted prior to such tenth anniversary may extend beyond that date.

ARTICLE XVI

NAME OF PLAN

This Plan shall be known as the PARAMOUNT GOLD AND SILVER CORP. 2008/09 STOCK INCENTIVE AND EQUITY COMPENSATION PLAN. 

This Plan was duly approved by the Company’s Board of Directors on February 24, 2009. 

By Order of the Board of Directors:

/s/ Christopher Crupi

Chairman

Board of Directors

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