Document:

Exhibit 10.4

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [ ], 2013.

 

THIS WARRANT AND THE SECURITIES DELIVERABLE UPON EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON UNLESS THIS WARRANT AND THE SECURITIES DELIVERABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY SUCH STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. THIS WARRANT MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS OR (C) TO AN “ACCREDITED INVESTOR” (AS DEFINED IN RULE

 

501(a) UNDER THE U.S. SECURITIES ACT) IN A TRANSACTION THAT IS EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.

 

WARRANT CERTIFICATE Warrants to 

 

Purchase Common Shares of

 

METHYLGENE INC.

 

	
WARRANT

CERTIFICATE   NO. 2012-[     ]
    	
[     ]   WARRANTS entitling the holder to acquire, subject to adjustment, one common   share for each whole Warrant represented hereby.
    

 

This certifies that, for value received, [ ] (the “Holder”) has acquired and is the registered holder of [ ] warrants (the “Warrants”) of MethylGene Inc. (the “Corporation”), giving the Holder the right to purchase, upon and subject to the terms and conditions hereinafter referred to, [ ] common shares of the Corporation (the “Common Shares”) at a price equal to $0.174 per share (the “Exercise Price Per Warrant”) on or before 5:00 P.M. (Eastern time) on [ ] (the “Exercise Period”).

 

1.                               The aforesaid right to purchase Common Shares may only be exercised by the Holder within the time required hereinbefore set out, in whole or in part, by (a) surrendering to the Corporation at the address for notice to the Corporation set out in Section 11, or at any other

 

 

address which from time to time is the principal place of business of the Corporation, the Warrant Certificate, (b) duly completing in the manner indicated and executing the exercise notice in substantially the form attached hereto (the “Exercise Notice”), and (c) paying the appropriate purchase price in Canadian dollars for the Common Shares subscribed for together with requisite share transfer tax, if any, either by certified cheque or bank draft payable at par to the order of the Corporation. Upon compliance by the Holder with the exercise procedures in respect of a Warrant Certificate set forth above in items (a), (b) and (c) (the “Exercise Date”), the number of Common Shares subscribed for shall be deemed to have been issued and the person to whom such Common Shares are to be issued shall be deemed to have become the holder of record of such Common Shares on the Exercise Date. Within five days of the Exercise Date, the Corporation shall direct Computershare Investor Services Inc. (or any substitute transfer agent) to deliver, or shall itself deliver, to the Holder a share certificate for the appropriate number of Common Shares to which the Holder is entitled.

 

Notwithstanding anything contained herein to the contrary, the Holder may, in its sole discretion, exercise the Warrants in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Corporation upon such exercise in payment of the aggregate Exercise Price Per Warrant (and in exchange for the surrender of the right to receive upon such exercise the Common Shares in excess of the “Net Number” of Common Shares, as described below), elect instead to receive upon such exercise the “Net Number” of Common Shares determined according to the following formula:

 

	
Net   Number =
    	
(A x B) - (A x C)
    
	
 
    	
B
    

 

For purposes of the foregoing formula:

 

A= the total number of Common Shares with respect to which this Warrant

 

Certificate is then being exercised.

 

B= the volume-weighted average of the closing price of the Common Shares on the TSX during the five trading days immediately preceding the date of the Exercise Notice.

 

C= the Exercise Price then in effect for the applicable Common Shares at the time of such exercise.

 

If the Holder of this Warrant Certificate subscribes for a lesser number of Common Shares than the number of Common Shares referred to in this Warrant Certificate, the said Holder will be entitled to receive a further Warrant Certificate in respect of Common Shares referred to in this Warrant Certificate not subscribed for.

 

To the extent these Warrants have not previously been exercised as to all of the Common Shares subject hereto, and if the volume-weighted average of the closing price of the Common Shares on the TSX during the five trading days immediately preceding the last day of the Exercise Period is greater than the Exercise Price Per Warrant, these Warrants shall be deemed automatically exercised pursuant to this Section 1 (even if not surrendered) immediately

 

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prior the expiry of the Exercise Period. To the extent these Warrants or any portion thereof are deemed automatically exercised pursuant to this paragraph, the Corporation agrees to promptly notify the Holder of the number of Common Shares, if any, that the Holder is to receive by reason of such automatic exercise.

 

[INSERT BLOCKER RIDER, IF APPLICABLE]

 

2.                               (a) Any certificate representing the Holder’s Common Shares issued upon the exercise of these Warrants prior to [ ], 2013 will bear the following legend:

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [ ], 2013.”

 

(b) Any certificate representing Common Shares issued to an Original U.S. Purchaser (as defined in Exhibit “B” hereto) or any other Holder in the United States, or, if the Corporation is not a “foreign issuer” within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended, (the “U.S. Securities Act”), at the time these Warrants are exercised, any certificate representing Common Shares issued to any other Holder, will bear the following additional legend:

 

“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR UNDER ANY U.S. STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF METHYLGENE INC. (THE “CORPORATION”) THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE SALE OF SUCH SECURITIES ONLY, WHETHER DIRECTLY OR INDIRECTLY: (A) TO THE CORPORATION; (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT; OR (C) PURSUANT TO (I) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE OR (II) ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT, PROVIDED THAT A LEGAL OPINION SATISFACTORY TO THE CORPORATION MUST FIRST BE PROVIDED AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR SECURITIES LAW OF ANY APPLICABLE JURISDICTION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

 

(c) If at the time these Warrants are exercised the Corporation is not a “foreign issuer”, within the meaning of Regulation S under the U.S. Securities Act, any certificate representing the Common Shares issued upon exercise of these Warrants, other than Common Shares issued to an Original U.S. Purchaser or another Holder in the United States, will bear the following additional legend:

 

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“HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE U.S. SECURITIES ACT.”

 

3.                               The holding of a Warrant does not constitute the Holder a shareholder of the Corporation, nor entitle the holder to any right or interest in respect thereof except as expressly provided in this Warrant Certificate.

 

4.                               The Holder of this Warrant Certificate upon surrender hereof to the Corporation at its principal place of business, may exchange this Warrant Certificate for other Warrant Certificates entitling the bearer to purchase in the aggregate the same number of Common Shares referred to in this Warrant Certificate.

 

5.                               The Holder hereof, by acceptance of this Warrant Certificate, agrees that this Warrant Certificate and all rights hereunder are not transferable or assignable, in whole or in part, except: (a) to the Corporation, (b) outside the United States in accordance with Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations, or (c) to an “accredited investor” (as defined in Rule 501(a) under the U.S. Securities Act) pursuant to an available exemption from registration under the U.S. Securities Act, subject to such procedures, including provision of a legal opinion of seller’s counsel, as either the Holder or the Corporation reasonably deems necessary to document compliance with the U.S. Securities Act. The Warrants evidenced by this Warrant Certificate may only be transferred on the register to be kept at the address for notice to the Corporation set out in Section 11, or at any other address which from time to time is the principal place of business of the Corporation, by delivery of a duly executed notice transfer form in the form attached hereto as Exhibit A by the Holder or its attorney to be appointed by an instrument in writing in form and execution satisfactory to the Corporation in compliance with such reasonable requirements as the Corporation may prescribe.

 

6.                               Subject in all cases to the TSX’s approval, the number of Common Shares to which the Holder is entitled upon exercise of the Warrants and the Exercise Price Per Warrant shall be subject to adjustment from time to time as follows:

 

(a) if and whenever at any time from the date hereof and prior to the expiry of the

 

Exercise Period, the Corporation shall:

 

(i)                                     subdivide its outstanding Common Shares into a greater number of shares;

 

(ii)                                  consolidate its outstanding Common Shares into a smaller number of shares; or

 

(iii)          fix a record date for the issuance of Common Shares or securities convertible into Common Shares by way of stock dividend or other distribution;

 

the number of Common Shares to which the Holder is entitled upon exercise of the Warrants shall be adjusted, at no cost to the Holder, immediately after such record date or the effective date of such subdivision, consolidation, stock dividend or other distribution by

 

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multiplying the number of Common Shares theretofore obtainable on the exercise thereof by the fraction of which:

 

(A)                             the numerator shall be the total number of Common Shares outstanding, including the Common Shares issuable from convertible securities that are distributed, immediately after such date, and

 

(B)                               the denominator shall be the total number of Common Shares outstanding immediately prior to such date,

 

and the Exercise Price Per Warrant shall be proportionately adjusted such that the aggregate Exercise Price Per Warrant of this Warrant Certificate shall remain unchanged and such adjustments shall be made successively whenever any event referred to in this Subsection shall occur (and all adjustments in this Subsection are cumulative). Any such issuance of Common Shares by way of stock dividend shall be deemed to have been made on the record date for such stock dividend;

 

(b) if and whenever at any time from the date hereof and ending at the expiry of the Exercise Period, the Corporation shall fix a record date for the issue of rights, options or warrants to all or substantially all of the holders of Common Shares entitling the holders thereof, within a period expiring not more than 45 days after the record date for such issue, to subscribe for or purchase Common Shares (or securities convertible into or exchangeable for Common Shares) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price (as defined below) on such record date, then the Exercise Price Per Warrant will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exercise Price Per Warrant in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date plus the number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares so offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares so offered for subscription or purchase (or into or for which the convertible or exchangeable securities so offered are convertible or exchangeable). Any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this paragraph are fixed within a period of 25 trading days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates. To the extent that any such rights, options or warrants are not exercised prior to the expiration thereof, the Exercise Price Per Warrant will then be readjusted to the Exercise Price Per Warrant which would then be in effect based upon the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights, options or warrants, as the case may be. For the purposes of this Subsection, “Current Market Price” shall mean the volume weighted average trading price of the

 

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Common Shares on the TSX (or such other exchange on which the Common Shares are traded) for the five trading days immediately preceding the relevant date;

 

(c) if and whenever at any time from the date hereof and prior to the expiry of the Exercise Period, the Corporation shall issue or distribute to the holders of all or substantially all of the outstanding Common Shares or set a record date for the issuance or distribution to such holders of any securities of the Corporation including rights, options or warrants to acquire Common Shares or securities convertible into or exchangeable for Common Shares or property or assets including evidences of indebtedness, the holder of any Warrant who thereafter shall exercise his right to subscribe for Common Shares hereunder shall be entitled to receive, at no cost to such holder, and shall accept for the same aggregate consideration, in addition to the Common Shares to which he was theretofore entitled upon such exercise, the kind and amount of shares or other securities or property which such holder would have been entitled to receive as a result of such issue or distribution as if, on the effective date thereof, he had been the registered holder of the number of Common Shares to which he was theretofore entitled upon such exercise;

 

(d) if and whenever at any time from the date hereof and ending on the expiry of the Exercise Period, there is (i) any reclassification of or amendment to the outstanding Common Shares, any change of the Common Shares into other shares or any other reorganization of the Corporation (other than as described above); (ii) any consolidation, amalgamation, arrangement, merger or other form of business combination of the Corporation with or into any other corporation resulting in any reclassification of the outstanding Common Shares, any change of the Common Shares into other shares or any other reorganization of the Corporation; or (iii) any sale, lease, exchange or transfer of the undertaking or assets of the Corporation as an entirety or substantially as an entirety to another corporation or entity, then, in each such event, each holder of any Warrant which is thereafter exercised will be entitled to receive, and shall accept, in lieu of the number of Common Shares to which such holder was theretofore entitled upon such exercise, the kind and number or amount of shares or other securities or property which such holder would have been entitled to receive as a result of such event if, on the effective date thereof, such holder had been the registered holder of the number of Common Shares to which such holder was theretofore entitled upon such exercise;

 

(e)           if and whenever at any time after the date hereof and prior to the Expiry Time, the Corporation takes any action affecting its Common Shares to which the foregoing provisions of this Section, in the opinion of the board of directors of the Corporation, acting reasonably and in good faith, are not strictly applicable, or if strictly applicable would not fairly adjust the rights of the Holder against dilution in accordance with the intent and purposes thereof, or would otherwise materially affect the rights of the Holder hereunder, then the Corporation shall execute and deliver to the Holder an amendment hereto providing for an adjustment in the application of such provisions so as to adjust such rights as aforesaid in such a manner as the board of directors of the Corporation may determine to be equitable in the circumstances, acting reasonably and in good faith;

 

(f) appropriate adjustments shall be made as a result of any such subdivision, consolidation, issue or distribution to the rights and interests of the Holder thereafter so that the provisions of this Article shall thereafter apply correspondingly to any shares, other securities or

 

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other property thereafter deliverable upon the exercise of any Warrant and any such adjustments shall be made by and set forth in an agreement supplemental hereto approved by the directors and shall for all purposes be conclusively deemed to be an appropriate adjustment;

 

(g) in any case in which this Section shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the holder of any Warrant exercising his subscription rights after such record date the additional Common Shares or other securities or property issuable upon such exercise by reason of the adjustment required by such event; provided, however, that the Corporation shall deliver to such holder an appropriate instrument evidencing such holder’s right to receive such additional Common Shares, other securities or property, as the case may be, upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares, other securities or property, as the case may be, declared in favour of holders of record of Common Shares, other securities or property, as the case may be, on and after the date of exercise or such later date as such holder would but for the provisions of this Subsection, have become the holder of record of such additional Common Shares, other securities or property, as the case may be, pursuant to the due exercise of the Warrants held by such holder;

 

(h) at least ten (10) business days prior to the effective date or record date, as the case may be, of any event which requires or might require adjustment in any of the subscription rights pursuant to this Warrant Certificate, including the Exercise Price Per Warrant and the number of Common Shares which are purchasable upon the exercise thereof, or such longer period of notice as the Corporation shall be required to provide holders of Common Shares in respect of any such event, the Corporation shall notify the holder of this Warrant of the particulars of such event and, if determinable, the required adjustment and the computation of such adjustment. In case any adjustment for which such notice has been given is not then determinable, the Corporation shall promptly after such adjustment is determinable notify the holder of the Warrant of the adjustment and the computation of such adjustment;

 

(i) all shares of any class or other securities or property which the Holder is at the time in question entitled to receive on the full exercise of his Warrant, whether or not as a result of adjustments made pursuant to this Section shall, for the purposes of the interpretation of this Agreement, be deemed to be Common Shares which the Holder is entitled to subscribe for pursuant to the exercise of such Warrant;

 

(j) the adjustments provided for in this Section 6 are cumulative and shall, in the case of adjustments to the Exercise Price Per Warrant, be computed to the nearest one-tenth of one cent and shall be made successively whenever an event referred to therein shall occur, subject to the following: (i) no adjustments in the Exercise Price Per Warrant shall be required unless such adjustment would result in a change of at least 1% in the then prevailing Exercise Price Per Warrant and no adjustment shall be made in the number of Common Shares purchasable upon exercise of Warrants unless it would result in a change of at least one one-hundredth of a share; provided, however, that any adjustments which by reason of this Section 6 are not required to be made shall be carried forward and taken into account in any subsequent adjustment; and (ii) if a dispute shall at any time arise with respect to adjustments provided for in this Section 6, such dispute shall be conclusively determined by the Corporation’s

 

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auditors, or if they are unable or unwilling to act, by such other firm of independent chartered or public accountants as may be selected by action by the board of directors of the Corporation, and any such determination shall be binding upon the Corporation, the Holder and shareholders of the Corporation. In the event that any such determination is made, the Corporation shall deliver a certificate to the Holder signed by such auditors or accountants describing such determination.

 

7.                               The Corporation hereby represents and warrants that it is authorized to create and issue the Warrants and covenants and agrees that it will cause the Common Shares from time to time subscribed for and purchased in the manner provided in this Warrant Certificate and the certificate or certificates representing such Common Shares to be issued and that, at all times prior to the expiry of the Exercise Period, there will remain unissued a sufficient number of Common Shares to satisfy the right of purchase provided for in this Warrant Certificate. All Common Shares which are issued upon the exercise of the right of purchase provided in this Warrant Certificate, upon payment therefor of the amount at which such Common Shares may be purchased pursuant to the provisions of this Warrant Certificate, shall be and be deemed to be fully paid and non-assessable shares and free from all taxes, liens, charges and encumbrances with respect to the issue thereof. The Corporation hereby represents and warrants that this Warrant Certificate is a valid and enforceable obligation of the Corporation, enforceable in accordance with the provisions of this Warrant Certificate.

 

8.                               Forthwith following the issuance of this Warrant Certificate, the Corporation will apply for the listing of the Common Shares issuable pursuant to this Warrant Certificate on each securities exchange on which the Common Shares are then listed.

 

9.                               The Corporation will not be obligated to issue any fraction of a share on the exercise of Warrants. If the Holder would, on the exercise of Warrants, otherwise have acquired a total number of shares that includes a fraction of a share, the Corporation will pay to the Holder, by cheque, in lieu of and in satisfaction for any right to such fractional share, an amount equal to the equivalent fraction of the market value of such share on the business day immediately preceding the date of such payment.

 

10.                             Upon receipt of evidence satisfactory to the Corporation of the loss, theft, destruction or mutilation of this Warrant Certificate and, if requested by the Corporation, upon delivery of a bond of indemnity satisfactory to the Corporation (or, in the case of mutilation, upon surrender of this Warrant Certificate), the Corporation will issue to the Holder a replacement certificate (containing the same terms and conditions as this Warrant Certificate).

 

11.                             All notices or other communications to be given under this Warrant Certificate shall be delivered by hand or by telecopier and, if delivered by hand, shall be deemed to have been given on the delivery date and, if sent by telecopier, on the date of transmission if sent before 5:00 p.m. on a business day or, if such day is not a business day, on the first business day following the date of transmission.

 

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Notices to the Corporation shall be addressed to:

 

7150 Frederick-Banting

Suite 200

Montreal, Québec H4S 2A1

Canada

 

Attention: Chief Financial Officer

Facsimile: (514) 337-0550

 

Notices to the Holder shall be addressed to the address of the Holder set out in the register kept at the address for notice to the Corporation set out in this Section 11, or at any other address which from time to time is the principal place of business of the Corporation.

 

The Corporation and the Holder may change its address for service by notice in writing to the other of them specifying its new address for service under this Warrant Certificate.

 

12.                             Time will be of the essence hereof.

 

13.                             All monies quoted in this Warrant Certificate shall be stated and paid in lawful money of Canada unless otherwise stated.

 

14.                             This Warrant Certificate shall be construed in accordance with the laws of the Province of Québec and the federal laws of Canada applicable therein.

 

15.                             The parties hereto acknowledge and confirm that they have requested that this Warrant Certificate as well as all notices and other documents contemplated hereby be drawn up in the English language. Les parties aux présentes reconnaissent et confirment qu’elles ont exigé que la présente convention ainsi que tous les avis et documents qui s’y rattachent soient rédigés en langue anglaise.

 

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IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be signed by its duly authorized officer as of the            day of [ ].

 

 

	
 
    	
METHYLGENE INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:Exhibit 10.5

 

METHYLGENE INC.

 

Amended and Restated Stock Option Plan

 

SECTION 1 – DEFINITIONS

 

The following terms when used herein shall have the meaning hereinafter ascribed:

 

1.1                               “Blackout Expiration Term” shall have meaning ascribed thereto in Section 7.1.2;

 

1.2                               “Blackout Period” shall have the meaning ascribed thereto in Section 7.1.2;

 

1.3                               “Board” shall have the meaning ascribed thereto in Section 3.1;

 

1.4                               “Cause” shall mean:

 

1.4.1                     the neglect or failure to fulfill conscientiously and diligently obligations assigned by the board or to carry out lawful orders relating to employment with any one of the Companies; or

 

1.4.2                     wanting in adequate capacity or qualification to fulfill senior executive functions; or

 

1.4.3                     habitual inability to carry out functions of employment due to alcohol or drug related causes; or

 

1.4.4                     the commission of any indictable offense or act which denotes moral turpitude, whether relating or not to the course of employment; or

 

1.4.5                     any dishonest or fraudulent act relating directly or indirectly to the course of employment;

 

1.5                               “Code” shall have the meaning ascribed thereto in Section 5.1;

 

1.6                               “Common Shares” shall mean the common shares of the Company;

 

1.7                               “Companies” shall mean the Company and its subsidiary bodies corporate, present and future;

 

1.8                               “Company” shall mean MethylGene Inc.;

 

1.9                               Consultant” shall mean a person engaged to provide ongoing management or consulting services;

 

1.10                        “Designated Exchange” shall mean The Toronto Stock Exchange or the stock exchange as may be designated from time to time by the Board;

 

1.11                        “Event” shall have the meaning ascribed thereto in Section 9.2.1;

 

1.12                        “Fair Market Price” on any particular day means the market price for one Common Share and shall be calculated by reference to the reported closing sale price for the Common Shares on the Designated Exchange on the last trading day before the day on which the option is granted, or, if no sale is reported on that day on such exchange, the reported closing sale price for the Common Shares on the secondary exchange designated by the Board on the last trading day

 

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before the day on which the option is granted, or, if no sale is reported on any securities exchange on that day, the “Market Price” shall be deemed to be the volume weighted average trading price for the Common Shares for the five days preceding the date of grant during which the Common Shares were traded on such securities exchange on which such Common Shares are listed;

 

1.13                        “Optionee” shall have the meaning ascribed thereto in Section 4.1;

 

1.14                        “Plan” shall mean this stock option plan of the Company, as the same may be amended and supplemented from time to time;

 

1.15                        “Share Compensation Arrangement” means a stock option, stock option plan, employee stock purchase plan or any other compensation or incentive mechanism involving the issuance or potential issuance of shares to one or more employees or directors, including a share purchase from treasury which is financially assisted by the Company by way of a loan, guarantee or otherwise;

 

1.16                        “Successor Corporation” shall mean any company resulting or continuing from a consolidation, merger, amalgamation, reorganization or arrangement of the Company;

 

1.17                        “U.S. Optionee” shall have the meaning ascribed thereto in Section 10.1;

 

1.18                        “U.S. Securities Act” shall have the meaning ascribed thereto in Section 11.1; and

 

1.19                        “Withholding Tax Amount” shall have the meaning ascribed thereto in Section 7.1.9.

 

SECTION 2 – PURPOSE OF THE PLAN

 

2.1                               The purpose of this Plan is to provide employees, directors, officers and Consultants of the Companies with a proprietary interest through the granting of options to purchase shares of the Company, subject to certain conditions as hereinafter set forth, for the following purposes:

 

2.1.1                     to increase the interest in the Companies’ welfare of those employees, directors, officers and Consultants who share primary responsibility for the management, growth and protection of the business of the Companies;

 

2.1.2                     to furnish an incentive to such employees, directors, officers and Consultants to continue their services for the Companies; and

 

2.1.3                     to provide a means through which the Companies may attract able persons to enter their employment.

 

2.2                               For the purposes of the Plan, a subsidiary of the Company shall be any company in an unbroken chain of companies beginning with the Company if, at the time of the granting of the option hereunder, each of the companies other than the last company in the unbroken chain owns stock to which are attached more than 50% of the aggregate number of votes attached to the outstanding shares of all classes of stock in the company directly below that company in such chain.

 

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SECTION 3 – ADMINISTRATION OF THE PLAN

 

3.1                               The Plan shall be administered by the Board or if the Board by resolution so decides by a committee of the Board (the Board or, as the case may be, such committee being hereinafter referred to as the “Board”).

 

3.2                               The Board may, from time to time, as it may deem expedient, adopt, amend and rescind rules and regulations for carrying out the provisions and purposes of the Plan. The interpretation, construction and application of the Plan and any provisions thereof made by the Board shall be final and binding on all holders of options granted under the Plan and all persons eligible under the provisions of the Plan to participate therein. No member of the Board shall be liable for any action taken or for any determination made in good faith in the administration, interpretation, construction or application of the Plan.

 

SECTION 4 – GRANTING OF OPTIONS

 

4.1                               The Board may, from time to time by resolution, designate employees, directors, officers or Consultants of any of the Companies to whom options to purchase Common Shares may be granted (an “Optionee”) and the number of Common Shares to be optioned to each of them, provided that:

 

4.1.1                     the total number of Common Shares to be optioned under this Plan shall not exceed the number provided for in Section 5 hereof;

 

4.1.2                     the aggregate number of Common Shares reserved for issuance to any one Optionee under the Plan or any other Share Compensation Arrangement of the Company, if any, shall not exceed 5% of the total of the issued and outstanding Common Shares;

 

4.1.3                     the aggregate number of Common Shares which may be issued to any one insider of the Company and such insider’s associates under the Plan or any other Share Compensation Arrangement of the Company, if any, within one-year period, is limited to 5% of the total of the issued and outstanding Common Shares;

 

4.1.4                     the aggregate number of Common Shares reserved for issuance at any time to insiders of the Company under the Plan and any other Share Compensation Arrangement of the Company, if any, is limited to 10% of the total of the issued and outstanding Common Shares; and

 

4.1.5                     the aggregate number of Common Shares issued to insiders of the Company under the Plan and any other Share Compensation Arrangement of the Company, if any, within any one-year period, is limited to 10% of the total of the issued and outstanding Common Shares.

 

For the purposes of this Section 4, the terms “insider” and “associate” shall have the respective meanings ascribed thereto in the policy of The Toronto Stock Exchange governing share compensation arrangements set forth at Sections 626 and following of the Toronto Stock Exchange Company Manual.

 

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4.2                               Options may only be granted by the Company pursuant to resolutions of the Board. No option shall be granted to any person who is not an employee, director, officer or Consultant of any of the Companies.

 

4.3                               Any option granted under this Plan shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the Common Shares subject to such option upon any securities exchange or under any law or regulation of any jurisdiction, or the consent or approval of any securities exchange or any governmental or regulatory body, is necessary as a condition of, or in connection with, the grant or exercise of such option or the issuance or purchase of Common Shares hereunder, such option may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration, qualification, consent or approval.

 

SECTION 5 – SHARES SUBJECT TO THE PLAN

 

5.1                               The maximum number of Common Shares which may be issued under this Plan shall not exceed 35,000,000 Common Shares subject to adjustment pursuant to the provisions of Section 8 hereof. In accordance with the foregoing, a total of 35,000,000 Common Shares shall be and they are hereby set aside and reserved for allotment for the purpose of this Plan.  All of the aforementioned Common Shares shall be available for issue under “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, of the United States (the “Code”).

 

5.2                               Common Shares in respect of which options are not exercised, due to the expiration, termination or lapse of such options, shall be available for options to be granted thereafter pursuant to the provisions of this Plan.

 

SECTION 6 – OPTION PRICE

 

6.1                               The purchase price for Common Shares under each option granted by the Board pursuant to this Plan shall not be less than the Fair Market Price (as provided in Section 1.12 of this Plan) of such Common Shares at the time the option is granted.

 

SECTION 7 – CONDITIONS GOVERNING OPTION

 

7.1                              Each option shall be subject to the following conditions:

 

7.1.1                     Employment

 

The granting of an option to an employee, director, officer or Consultant shall not impose upon any of the Companies any obligation to retain the Optionee in its employ or as a director or officer thereof or to continue to use the services of such Consultant.

 

7.1.2                     Option Term

 

The period during which an option is exercisable shall not, subject to the provisions of this Plan, exceed 10 years from the date the option is granted. The vesting period of

 

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options granted hereunder will be determined by the Board at the time of the granting of the options.

 

If the term of an option expires during, or within ten business days after the expiration of, a Blackout Period, then the term of such option or the unexercised portion thereof, shall be extended by ten business days after the expiration of the Blackout Period (the “Blackout Expiration Term”), provided that the Blackout Expiration Term will be reduced by the number of days between the date of the expiration of the term of the option and the end of the Blackout Period (for illustrative purposes only, an option whose term expires two days after the Blackout Period ends will only have an additional eight days to exercise). For the purposes of this Plan, “Blackout Period” means a period when the Optionee is prohibited from trading in the Company’s securities pursuant to a blackout or restricted period imposed or recommended by the Company;

 

7.1.3                     Exercise of Options

 

Prior to its expiration or earlier termination in accordance with this Plan, each option shall be exercisable as to all or such part or parts of the optioned Common Shares and at such time or times as the Board, at the time of granting the particular option, may determine in its sole discretion.

 

7.1.4                     Non-assignability of Option Rights

 

Each option granted hereunder is personal to the Optionee and shall not be assignable or transferable by the Optionee, whether voluntarily or by operation of law, except by will or by the laws of succession of the domicile of the deceased Optionee. No option granted hereunder shall be pledged, hypothecated, charged, transferred, assigned or otherwise encumbered or disposed of on pain of nullity.

 

7.1.5                     Effect of Termination of Employment or Death

 

7.1.5.1           Upon an Optionee’s employment or a Consultant’s consultation agreement with the Companies being terminated for Cause or resignation or termination at a time at which grounds for dismissal or termination for Cause exist, or upon an Optionee being removed from office as a director for Cause, any option or the unexercised portion thereof granted to him shall terminate forthwith.

 

7.1.5.2           Upon an Optionee’s employment with the Companies being terminated otherwise than by reason of death, termination for Cause or retirement at normal retirement age, or upon an Optionee ceasing to be a director other than by reason of death or removal, any option or unexercised part thereof granted to such Optionee may be exercised by him for that number of Common Shares only which he was entitled to acquire under the option pursuant to Section 7.1.3 hereof at the time of such termination or cessation. Such option shall be exercisable for a period of not more than 90 days after such termination or cessation (as determined by the Board at the time of such termination or cessation and advised to the Optionee) or prior to the expiration of the term of the option, whichever occurs earlier.

 

7.1.5.3           If an Optionee dies while employed by the Companies or while serving as a director or Consultant of the Companies, any option or unexercised part thereof

 

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granted to such Optionee may be exercised by the person to whom the option is transferred by will or the laws of descent and distribution for that number of Common Shares only which he was entitled to acquire under the option pursuant to Section 7.1.3 hereof at the time of his death. Such option shall only be exercisable within 180 days after the Optionee’s death or prior to the expiration of the term of the option, whichever occurs earlier.

 

7.1.6                     Rights as a Shareholder

 

The Optionee (or his personal representatives or legatees) shall have no rights whatsoever as a shareholder in respect of any shares covered by his option until the date of issuance of a share certificate to him (or his personal representatives or legatees) for such shares.  Without in any way limiting the generality of the foregoing, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such share certificate is issued.

 

7.1.7                     Exercise and Payment

 

Subject to the provisions of this Plan, an option granted under this Plan shall be exercisable (from time to time as provided in Section 7.1.3 hereinabove) by the Optionee (or his personal representatives or legatees) by delivery to the Company at its registered office (or by any other method as directed by the Company) of:

 

7.1.7.1           a written notice of exercise addressed to its Chief Executive Office or Chief Financial Officer substantially in the form of Schedule A to this Plan, or such other form of notice of exercise as may be approved by the Board from time to time:

 

(i)                                     specifying the number of Common Shares with respect to which the option is being exercised, and

 

(ii)                                  specifying the Optionee’s election that the Company satisfy such exercise by:

 

(A)                               Cash Payment – making (or causing to be made) a cash payment in an amount calculated as the excess of (X) the product of the Fair Market Price as at the date of such exercise (if such Fair Market Price is greater than the applicable option price) and the number of Common Shares subject to the option exercise over (Y) the product of the applicable option price and the number of such Common Shares, less any applicable withholding tax that may be required in accordance with Section 7.1.9 and any applicable fees;

 

provided, however, that if the Optionee has elected to exercise an option pursuant to this Section 7.1.7.1(ii)(A), the Company may determine in its sole discretion to satisfy such exercise by requiring the Optionee to elect that the Company either: (I) issue to such Optionee from treasury the specified number of Common Shares subject to the option exercise in lieu of a cash payment,

 

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or (II) issue to such Optionee from treasury the number of Common Shares determined in accordance with Section 7.1.8 in lieu of a cash payment; or

 

(B)                               Issuance of Common Shares from Treasury – issuing to the Optionee from treasury the specified number of Common Shares subject to the option exercise; or

 

(C)                               Cashless Exercise – issuing to the Optionee from treasury the number of Common Shares determined in accordance with Section 7.1.8; and

 

7.1.7.2           if the Optionee elects to exercise such option in accordance with Section 7.1.7.1(ii)(A) and the Company determines to satisfy such exercise by requiring the Optionee to elect that the Company issue Common Shares from treasury in lieu of a cash payment and the Optionee elects that the Company issue Common Shares from treasury as set out in Section 7.1.7.1(ii)(A)(I) or if the Company elects to exercise such option in accordance with Section 7.1.7.1(ii)(B), the Optionee must provide (i) full payment, by certified cheque, of the purchase price for the number of Shares specified therein and, (ii) where required by the Company in accordance with Section 7.1.9, payment in full of the amount of tax the Company is required to remit on behalf of the Optionee as a result of the exercise of the option.

 

If the Optionee elects to exercise his or her option in accordance with Section 7.1.7.1(ii)(A) (and the Company does not determine to satisfy such exercise by issuing Common Shares from treasury in lieu of a cash payment as set out in Section 7.1.7.1(ii)(A)), the Company shall following its acceptance of such election, satisfy such exercise by issuing (or causing to be issued) a cheque payable to the Optionee in an amount calculated as the excess of (X) the product of the Fair Market Price as at the date of such exercise and the number of Common Shares subject to the option exercise over (Y) the product of the applicable option price and the number of such Common Shares, less any applicable withholding tax that may be required in accordance with Section 7.1.9 and any applicable fees.

 

If required by the Board by notification to the Optionee at the time of granting of the option, it shall be a condition of such exercise that the Optionee shall represent that he is purchasing the Common Shares in respect of which the option is being exercised for investment only and not with a view to resale or distribution.

 

7.1.8                     Cashless Exercise

 

In lieu of paying the aggregate option price to purchase Common Shares as set forth in Section 7.1.7 but subject to Section 7.1.9, the Optionee may elect to receive, without payment of cash or other consideration, upon surrender of the applicable portion of a then vested and exercisable option to the Company at the address set out in Section 7.1.7, a number of Common Shares determined in accordance with the following formula:

 

A = B (C - D)/C,

 

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where:

 

A = the number of Common Shares be issued to the Optionee pursuant to this Section 7.1.8;

 

B = the number of Common Shares otherwise issuable upon the exercise of the option or portion of the option being exercised;

 

C = the Market Price of one Common Share determined as of the date of delivery of the written notice referred to in Section 7.1.7; and

 

D = the option price.

 

7.1.9                     Taxes

 

Upon the exercise of an option, the Optionee shall make arrangements satisfactory to the Company regarding payment of any federal, state, provincial, local or other taxes of any kind required by law to be paid in connection with the exercise of the option.  In order to satisfy the Company’s obligation, if any, to remit an amount to a taxation authority on account of the Optionee’s taxes in respect of the exercise, transfer or other disposition of an option (the “Withholding Tax Amount”), the Company shall have the right, at its sole discretion, to:

 

7.1.9.1           withhold amounts from any amount or amounts owing to the Optionee, whether under this Plan or otherwise;

 

7.1.9.2           require the Optionee to pay to the company the Withholding Tax Amount as a condition of exercise of the option by an Optionee; or

 

7.1.9.3           withhold from the Common Shares otherwise deliverable to the Optionee on exercise of the option such number of Common Shares as have a market value not less than the Withholding Tax Amount and cause such withheld Common Shares to be sold on the Optionee’s behalf to fund the Withholding Tax Amount, provided that any proceeds from such sale in excess of the Withholding Tax Amount shall be promptly paid over to the Optionee.

 

Notwithstanding the foregoing, nothing shall preclude the Company and the Optionee from agreeing to use a combination of the methods described in this Section 7.1.9 or some other method to fund the Withholding Tax Amount.

 

SECTION 8 – ADJUSTMENT TO SHARES SUBJECT TO THE OPTION

 

8.1                               In the event of any subdivision or redivision of the Common Shares into a greater number of Common Shares at any time after the grant of an option to any Optionee and prior to the expiration of the term of such option, the Company shall deliver to such Optionee at the time of any subsequent exercise of his option in accordance with the terms hereof in lieu of the number of Common Shares to which he was theretofore entitled upon such exercise, but for the same aggregate consideration payable therefor, such number of Common Shares as such Optionee would have held as a result of such subdivision or redivision if on the record date thereof

 

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the Optionee had been the registered holder of the number of Common Shares to which he was theretofore entitled upon such exercise.

 

8.2                               In the event of any consolidation of the Common Shares into a lesser number of Common Shares at any time after the grant of an option to any Optionee and prior to the expiration of the term of such option, the Company shall deliver to such Optionee at the time of any subsequent exercise of his option in accordance with the terms hereof in lieu of the number of Common Shares to which he was theretofore entitled upon such exercise, but for the same aggregate consideration payable therefore, such number of Common Shares as such Optionee would have held as a result of such consolidation if on the record date thereof the Optionee had been the registered holder of the number of Shares to which he was theretofore entitled upon such exercise.

 

8.3                               If at any time after the grant of an option to any Optionee and prior to the expiration of the term of such option, the Common Shares shall be reclassified, reorganized or otherwise changed, otherwise than as specified in Sections 8.1 and 8.2 or, subject to the provisions of Section 9.2.1 hereof, the Company shall consolidate, merge amalgamate, reorganize or be arranged, the  Optionee shall be entitled to receive upon the subsequent exercise of his option in accordance with the terms hereof and shall accept in lieu of the number of Shares then subscribed for but for the same aggregate consideration payable therefor, the aggregate number of shares of the appropriate class and/or other securities Company or the Successor Corporation (as the case may be) and/or other consideration from the Company or the Successor Corporation (as the case may be) that the Optionee would have been entitled to receive as a result of such reclassification, reorganization or other change of shares or, subject to the provisions of Section 9.2.1 hereof, as a result of such consolidation, merger, amalgamation, reorganization or arrangement if on the record date of such reclassification, reorganization or other change of shares or the effective date of such consolidation, merger, amalgamation, reorganization or arrangement, as the case may be, he had been the registered holder of the number of Common Shares to which he was immediately theretofore entitled upon such exercise.

 

SECTION 9 – AMENDMENT OR CONTINUANCE OF THE PLAN

 

9.1                               The Board may amend or discontinue the Plan at any time without notice or approval from the shareholders of the Company or any Optionee, for any purpose whatsoever, including, without limitation for the purpose of:

 

9.1.1                     amendments of a “housekeeping” nature, which include, without limitation, amendments to ensure continued compliance with applicable laws, regulations, rules or policies of any regulatory authority and amendments to remove any ambiguity or to correct or supplement any provision contained in the Plan which may be incorrect or incompatible with any other provision of the Plan;

 

9.1.2                     a change to the vesting provisions of an option of the Plan;

 

9.1.3                     a change to the termination provisions of an option or the Plan which does not entail an extension beyond the original expiration date;

 

9.1.4                     the addition of a cashless exercise feature payable in cash or securities; and

 

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9.1.5                     the addition of any form of financial assistance under the Plan.

 

provided, however, that no such amendment may: (i) increase the maximum number of Common Shares issuable pursuant to the Plan; (ii) change the manner of determining the minimum option price (as determined in accordance with Section 6.1 hereof); (iii) alter the Blackout Expiration Term; (iv) reduce the option price per Common Share for options granted to insiders of the Company under the Plan; (v) extend the term of an option granted to insiders of the Company under the Plan (subject to the Blackout Expiration Term); (vi) remove or exceed the insider participation limit under the Plan; (vii) amend the amending provision of the Plan; or (viii) without the consent of the Optionee, adversely alter or impair any option previously granted to an Optionee under the Plan, without the consent of the shareholders, except to the extent required by law or by the regulations, rules, by-laws or policies of any regulatory authority or stock exchange.

 

9.2                               Notwithstanding anything contained to the contrary in this Plan or in any resolution of the Board in implementation thereof:

 

9.2.1                     in the event the Company proposes to consolidate, merge, amalgamate, reorganize, be arranged or undergo an internal reorganization (other than with a wholly-owned subsidiary of the Company) or to liquidate, dissolve or wind-up, or in the event an offer to purchase the Common Shares of the Company or any part thereof shall be made to all holders of Common Shares of the Company (hereinafter individually referred to as an “Event”), the Company shall have the right, upon written notice thereof to each Optionee holding options under this Plan, to permit the exercise of all such options within the 30-day period next following the date of such notice and to determine that upon the expiration of such 30-day period, all rights of Optionees to such options or to exercise same (to the extent not theretofore exercised) shall ipso facto terminate and cease to have further force or effect whatsover, provided, however, that if any Event results in a party or parties acting in concert obtaining Control of the Company, notice shall be given by the Company to each Optionee of the acquisition of Control and all unexercised options, including all options which have not yet vested, will immediately become exercisable at the option price for the 30-day period following the date of the Event, at the expiration of which period all unexercised options will be deemed to have vesting periods and vesting conditions originally applicable prior to such Event;

 

9.2.2                     for the purposes of this Section 9.2, “Control” is obtained by a person or persons acting in concert if (i) securities of the Company to which are attached more than 50% of the votes that may be cast to elect directors of the Company are held, other than by way of security only, by or for the benefit of that person or by or for the benefit of those persons and (ii) the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the Company, in all circumstances;

 

9.2.3                     the Board may, by resolution, advance the date on which any option may be exercised or, subject to applicable law, extend the expiration date of any option, in the manner to be set forth in such resolution, provided, however, that the period during which an option is exercisable does not exceed 10 years from the date the option is granted, provided further, however, that if the vesting of any option held by a U.S. Optionee (as defined below) who is a specified employee as defined in the Section 409A(a)(2)(B)(i) of the Code is accelerated, and the U.S. Optionee is terminated, no payments shall be made to such U.S. Optionee on account of such accelerated vesting until such time as permitted

 

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by Section 409A of the Code. The Board shall not, in the event of any such advancement or extension, be under any obligation to advance or extend the date on or by which any option may be exercised by any other Optionee; and

 

9.2.4    the Board may, by resolution, but subject to applicable law, decide that any of the provisions hereof concerning the effect of termination of the Optionee’s employment or cessation of the Optionee’s directorship, shall not apply for any reason acceptable to the Board.

 

SECTION 10 – INCENTIVE STOCK OPTIONS UNDER U.S. INTERNAL REVENUE CODE

 

10.1     Subject to Section 10.3.3 of this Plan, any option granted under this Plan to an Optionee who is a resident of the United States (including its territories, possessions and all areas subject to its jurisdiction) and who, at the time of grant, is an officer, key employee, Consultant or director of one of the Companies (provided, for purposes of this Section 10 only, an Optionee who is a Consultant or director is then also an officer or key employee of one of the Companies) (a “U.S. Optionee”) shall have an “incentive stock option” within the meaning of Section 422 of the Code.

 

10.2     No provisions of this Plan, as it may be applied to a U.S. Optionee, shall be construed so as to be inconsistent with any provision of Section 409A of the Code and Section 422 of the Code; and to the extent that any provision of the Plan does not comply with the provisions of Section 409A of the Code or Section 422 of the Code, the terms of this Plan shall be construed or deemed amended to conform to the provisions of Section 409A of the Code or Section 422 of the Code, as applicable.

 

10.3     Notwithstanding anything in this Plan contained to the contrary, the following provisions shall apply to each U.S. Optionee:

 

10.3.1   any director of the Company who is a U.S. Optionee shall be ineligible to vote upon the granting of such option to themselves.

 

10.3.2   any option granted under this Plan to a U.S. Optionee shall be an incentive stock option within the meaning of Section 422 of the Code, provided, however, that the aggregate fair market value (determined as of the time the option is granted) of the Common Shares with respect to which options are exercisable for the first time by such U.S. Optionee during any calendar year under this Plan and all other incentive stock option plans, within the meaning of Section 422 of the Code, of any of the Companies does not exceed $100,000 in U.S. funds;

 

10.3.3   to the extent that the aggregate fair market value (determined as of the time the option is granted) of the Common Shares with respect to which incentive stock options (determined without reference to this Section 10.3.3) are exercisable for the first time by such U.S. Optionee during any calendar year under this Plan and all other incentive stock option plans, within the meaning of Section 422 of the Code, of any of the Companies exceeds $100,000 in U.S. funds, such options shall be treated as nonqualified stock options (i.e., options which fail to qualify as incentive stock options within the meaning of Section 422 of the Code) in accordance with Section 422(d) of the Code;

 

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10.3.4              the purchase price for Common Shares under each option granted to a U.S. Optionee pursuant to this Plan shall not be less than the fair market value of such Common Shares at the time the option is granted, as determined in good faith by the Board at such time, provided, however, that if the Common Shares (or any shares into which the Common Shares are converted or exchanged as described in Section 8 hereof) are listed on a Designated Exchange, the purchase price for such Common Shares shall in no event be lower than the Market Price of the Common Shares at the time of grant;

 

10.3.5              if any U.S. Optionee to whom an option is to be granted under this Plan is at the time of the grant of such option the owner of shares possessing more than 10% of the total combined voting power of all classes of stock of any of the Companies, then the following special provisions shall be applicable to options granted to such individual:

 

10.3.5.1                       the purchase price for Common Shares under each option granted to such U.S. Optionee pursuant to this Plan shall not be less than 110% of the fair market value of such Common Shares at the time the option is granted, as determined in good faith by the Board at such time, provided, however, that if the Common Shares (or any shares into which the Common Shares are converted or exchanged as described in Section 8 hereof) are listed on a Designated Exchange, the purchase price for such Common Shares shall in no event be lower than 110% of the Fair Market Price of the Common Shares at the time of grant, and

 

10.3.5.2                       for the purpose of this Section 10.3.5 only, the exercise period shall not exceed five years from the date of grant;

 

10.3.6              no option may be granted hereunder to a U.S. Optionee following the expiry of 10 years after the date on which this Plan is adopted by the Board or the date this Plan is approved by the shareholders of the Company, whichever is earlier; and

 

10.3.7              no option granted to a U.S. Optionee under this Plan shall become exercisable unless (and until) this Plan shall have been approved by the shareholders of the Company within 12 months before or after the date on which the Plan is adopted by the Board.

 

SECTION 11 – ADDITIONAL RESTRICTIONS UNDER THE UNITED STATES SECURITIES LAWS

 

11.1                        Neither the options being issued pursuant to the Plan nor the Common Shares issuable upon exercise of such options have been or will be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws. The Company is issuing the options and offering the Common Shares issuable upon exercise of the options in the United States in reliance on the exemption from the registration requirements of the U.S. Securities Act afforded by Rule 701 thereunder. Outside of the United States, the offering of options and Common Shares issuable upon exercise of the options is being made pursuant to Regulation S under the U.S. Securities Act.

 

11.2                        The options and Common Shares issuable upon exercise of the options are and will be subject to restrictions on transferability and resale and may not be transferred or resold except (i) as permitted under the terms of the Plan and (ii) pursuant to registration under the U.S. Securities Act and the applicable state securities laws or pursuant to an exemption from, or in a transaction that is not required to be registered under, such registration requirements. Each Optionee that is

 

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resident in the United States will be required to sign an acknowledgement in the form of Schedule B to this Plan acknowledging the foregoing, including the transfer restrictions imposed by the U.S. Securities Act and applicable state securities laws. In addition, the certificates evidencing the options issued to Optionees resident in the United States and the certificates evidencing the Common Shares issuable upon exercise of the options issued to Optionees resident in the United States will bear a legend to the foregoing effect. Because of the foregoing restrictions, purchasers are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of the options or Common Shares issuable upon exercise of the Options.

 

SECTION 12 – MISCELLANEOUS PROVISIONS

 

12.1                        The Company’s obligation to issue options or Common Shares under the Plan is subject to all of the applicable laws, regulations or rules of any government agency or other competent authority in respect to the issuance or distribution of securities and to the rules of any stock exchange on which Common Shares of the Company are listed, if applicable. Each Optionee shall agree to comply with such laws, regulations and rules.

 

12.2                        The Participation in the Plan of a director, officer or employee of any of the Companies shall be optional and shall be entirely optional and shall not be interpreted as conferring upon a director, officer or employee of the Companies any rights or privileges whatsoever, except for the rights and privileges set out in the Plan.  Neither the Plan or any act that is done under the terms of the Plan shall be interpreted as restricting the right of any of the Companies to terminate the employment of an officer or employee at any time. Any notice of dismissal given to an officer or employee at the time his or her employment terminates, or any payment instead of such notice, or any combination of the two, shall not have the effect of extending the duration of the employment for purposes of the Plan.

 

12.3                        The Plan and any options granted under the terms of the Plan shall be governed and interpreted in accordance with the laws of the Province of Quebec and the federal laws of Canada applicable therein.

 

The Plan does not provide for any guarantee in respect of any loss or profit which may result from fluctuation in the price of the Common Shares.

 

SECTION 13 – EFFECTIVE DATE OF PLAN

 

13.1                        Should any further changes be required in this Plan by any securities commission or other governmental body of any province of Canada to which this Plan has been submitted or by any stock exchange on which the Common Shares may from time to time be listed, such changes shall be made in this Plan as are necessary to conform with such requests and, if such changes are approved by the Board, this Plan, as amended, shall remain in full force and effect in its amended and restated form as of and from June 27, 2012.

 

By order of the Board of Directors

 

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Schedule A

 

Form of Notice of Exercise

 

NOTICE OF EXERCISE

 

TO:                                                                         MethylGene Inc.

ATTENTION:              Chief Executive Officer or Chief Financial Officer

 

Pursuant to the Amended and Restated Stock Option Plan (the “Plan”) of MethylGene Inc. (the “Company”) dated September 21, 2011, the undersigned hereby irrevocably elects to exercise his or her option to purchase                        common shares of the Company (the “Common Shares) which are subject to an option (the “Option”) granted on                         , 20     (the “Grant Date”) in accordance with the elections indicated below.

 

The undersigned elects that the Company satisfy the exercise indicated above by (note: to validly exercise the Option, the undersigned must select one (but not more than one) of the three options listed below.)

 

o                                    Cash Payment – making (or causing to be made) a cash payment in an amount calculated as the excess of (X) the product of the Fair Market Price as at the date hereof (if such Fair Market Price is greater than the applicable Option price) and the number of Common Shares first noted above over (Y) the product of the Option price and the number of such Common Shares, less any applicable withholding tax and any applicable fees (provided, however, that if the Optionee has elected to exercise an Option as a “Cash Payment”, the Company may determine in its sole discretion to satisfy such exercise by requiring the Optionee to elect that the Company either (a) issue to such Optionee from treasury the specified number of Common Shares subject to the Option exercise in lieu of a cash payment, or (b) issue to such Optionee from treasury the number of Common Shares determined in accordance with Section 7.1.8 of the Plan (a Cashless Exercise) in lieu of a cash payment); or

 

o                                    Issuance of Common Shares from Treasury – issuing to the Optionee from treasury the number of Common Shares first noted above; or

 

o                                    Cashless Exercise – issuing to the Optionee from treasury the number of Common Shares determined in accordance with Section 7.1.8 of the Plan.

 

If any Common Shares are to be issued by the Company in accordance with the exercise made pursuant to this Notice of Exercise, the undersigned requests that such Common Shares be issued in his or her name (or his or her personal representatives or legatees) as follows in accordance with the terms of the Plan:

 

	
 
    	
 
    	
 
    
	
 
    	
(Print   Name as Name is to Appear on Share Certificate)
    	
 
    

 

If the undersigned has elected to exercise the Option as a “Cash Payment” and the Company has determined to satisfy such exercise by requiring the undersigned to elect that the Company issue

 

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Common Shares from treasury in lieu of such cash payment and the undersigned has elected that the Company issue Common Shares in accordance with paragraph (a) under “Cash Payment” above or the undersigned has elected to exercise the option as an “Issuance of Common Shares from Treasury”, the undersigned confirms that enclosed is a certified cheque payable to the Company in the aggregate amount of $                           (being $                   per Common Share) in full payment of the aggregate exercise price for the total number of Common Shares acquired pursuant to the Option so exercised under this Notice of Exercise and any applicable withholding tax.

 

If the undersigned has elected to exercise the Option as a “Cash Payment”, the undersigned requests that the cheque the Company will issue (or cause to be issued), subject to the Company’s right to satisfy such exercise by issuing Common Shares from treasury in lieu of such cash payment as described above and in accordance with the terms of the Plan, be made payable in his or her name (or his or her personal representatives or legatees) as follows in accordance with the terms of the Plan:

 

	
 
    	
 
    	
 
    
	
 
    	
(Print   Name as Name is to Appear on the Cheque)
    	
 
    

 

The undersigned acknowledges that he or she has not been induced to purchase the Common Shares or to otherwise exercise Options by expectation of employment or continued employment with the Company.

 

Capitalized terms used and not otherwise defined herein have the meaning ascribed to those terms in the Plan.

 

DATED this            day of                         , 20

 

 

	
 
    	
 
    
	
 
    	
Optionee
    

 

15

 

Schedule B

Form of Letter to be Signed by Optionees participating in the Employee Stock Option Plan who

are resident in the United States

 

	
 
    	
[DATE]
    

 

METHYLGENE INC.

7210 Frederick-Banting Street

Suite 100 Montreal, Quebec H4S 2A1

 

Dear Sirs:

 

In connection with my proposed participation in the Stock Option Plan (the “Plan”) of MethylGene Inc. (the “Company”) I confirm that:

 

1.                                      I understand that the options issued under the Plan (the “Options”) and the common shares issuable upon exercise of the Options (the “Common Shares”) have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), or applicable state securities laws, and may not be sold except as permitted in the following sentence. I understand and agree, (x) that the Options and Common Shares are being offered only in transactions exempt from the registration requirements of the U.S. Securities Act pursuant to the exception from such registration requirements afforded by Rule 701 under this Securities Act, and (y) that if I should decide to offer, sell or otherwise transfer any of the Options or Common Shares issued upon exercise of the Options, I will not do so unless (i) the sale is permitted by the terms of the Plan and (ii)(A) the sale is to the Company; or (B) the sale is made outside the United States in compliance with the requirements of Rule 904 of Regulation S of the U.S. Securities Act; or (C) the sale is made pursuant to an exemption from registration under the U.S. Securities Act provided by Rule 144 thereunder, if available; or (D) the Options or Common Shares are sold in another transaction that does not require registration under the U.S. Securities Act; or (E) the sale is made pursuant to an effective registration statement under the U.S. Securities Act and, in each case, in accordance with any applicable securities laws of any state in the United States or any other applicable jurisdiction.  If the proposed sale or other transfer is being made pursuant to clause (ii )(C) or (ii)(D) of the preceding sentence, I shall furnish to the Company an opinion of counsel of recognized standing reasonably satisfactory to the Company to the effect that such registration is not required. Finally, I further undertake and agree that in any case I will not directly or indirectly engage in any hedging transactions with regard to the Options or the Common Shares except as permitted by the U.S. Securities Act;

 

2.                                      I understand that the Company will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements, and I agree that if any of the acknowledgments, representations and agreements made by me in connection with my participation in the Plan or the exercise of Options for Common Shares are no longer accurate, I shall promptly notify the Company;

 

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3.                                      I understand that, upon the original issuance of the Options and the Common Shares issued upon exercise of the Options, and until such time as is no longer required under applicable requirements of the U.S. Securities Act or applicable state laws, all certificates representing the Options and the Common Shares issuable upon exercise of the Options, and all certificates issued in exchange therefor or in substitution thereof, shall bear, on the face of such certificates, the following legend:

 

THE [SHARES][OPTIONS] REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY [ACQUIRING][PURCHASING] SUCH [OPTIONS][SHARES], AGREES FOR THE BENEFIT OF METHYLGENE INC. (THE “COMPANY”) THAT SUCH [OPTIONS][SHARES] MAY, BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (X) IN ACCORDANCE WITH THE TERMS OF THE STOCK OPTION PLAN OF THE COMPANY AND (Y)(I) TO THE COMPANY, OR (II) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (III) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (IV) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OF ANY STATE IN THE UNITED STATES OR OTHER APPLICABLE JURISDICTION DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE “GOOD DELIVERY”, MAY BE OBTAINED FROM THE TRUST COMPANY UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO COMPUTERSHARE TRUST COMPANY OF CANADA AND THE COMPANY, TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY MADE IS BEING IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT.

 

Provided, that if the Common Shares are being sold outside the United States in compliance with the requirements of Rule 904 of ReguIation S, the legend may be removed by providing a declaration to Computershare Trust Company of Canada as registrar and transfer agent for the Common Shares, to the effect set forth in Appendix 1 hereto (or as the Company may prescribe from time to time); provided, further, that if any such Common Shares are being sold under clause (Y)(III) or (Y)(IV) of the foregoing paragraph, the legend may be removed by delivery to Computershare Trust Company of Canada of an opinion of counsel, of recognized standing reasonably satisfactory to the Company, to the effect that such legend is no longer required under applicable requirements of the U.S. Securities Act or state securities laws;

 

4.                                      I consent to the Company making a notation on its records of giving instructions to any transfer agent of the Options and the Common Shares in order to implement the restrictions on transfer set forth and described above; and

 

5.                                      You are entitled to rely on this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.

 

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Very   truly yours,
    
	
 
    	
 
    	
[Name   of U.S. Employee Participant]
    

 

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Appendix 1

 

Form of Declaration for Removal of Legend

 

To:                             COMPUTERSHARE TRUST COMPANY OF CANADA

as registrar and transfer agent

for the [Options to Acquire Common Shares]

[Common Shares] (the “Securities”)

of MethylGene Inc.

7210 Frederick-Banting Street

Suite 100

Montreal, Quebec H4S 2A1

 

The undersigned (A) acknowledges that the sale of [Options to Acquire Common Shares][Common Shares] of MethylGene Inc., represented by certificate number[s]                           , to which this declaration relates is being made in reliance on Rule 904 of Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and (B) certifies that (1) [he] is not an “affiliate” (as defined in Rule 405 under the U.S. Securities Act) MethylGene Inc. (2) the offer of such securities was not made to a person in the United States and either (a) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believe that the buyer was outside the United States, or (b) the transaction was executed on or through the facilities of The Toronto Stock Exchange and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States and (3) neither the seller nor any person acting on its behalf engaged in any direct selling efforts in connection with the offer and sale of such securities.  Terms used herein have the meanings given to them by Regulation S under the U.S. Securities Act.

 

	
Dated:
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    
	
Title:
    	
 
    
			

 

1

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