2009 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
(a) Eligible Option Recipients. The persons eligible to receive Options (as defined
herein) under the Plan are the Non-Employee Directors (as defined herein) of the Company (as
(b) Available Options. The purpose of the Plan is to provide a means by which Non-Employee
Directors may be given an opportunity to benefit from increases in value of the Common Stock
through the granting of Nonstatutory Stock Options (as defined herein).
(c) General Purpose. Vuzix Corporation, by means of the Plan, seeks to retain the services
of its Non-Employee Directors, to secure and retain the services of new Non-Employee Directors and
to provide incentives for such persons to exert maximum efforts for the success of Vuzix
Corporation and its Affiliates (as defined herein).
(a) Accountant means the independent public accountants of the Company.
(b) Affiliate means any parent corporation or subsidiary corporation of the Company,
whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f),
respectively, of the Code.
(c) Annual Grant means an Option granted annually to a Non Employee Director who meets
the specified criteria pursuant to subsection 6(b) of the Plan.
(d) Annual Meeting means the annual meeting of the stockholders of the Company.
(e) Board means the board of directors of the Company.
(f) Change in Control means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events after the IPO Date:
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power of the Companys
then outstanding securities other than by virtue of a merger, consolidation or similar transaction;
(ii) there is consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such merger, consolidation or
similar transaction, the stockholders of the Company immediately prior thereto
do not Own, directly or indirectly, outstanding voting securities representing more than fifty
percent (50%) of the combined outstanding voting power of the surviving Entity in such merger,
consolidation or similar transaction or more than fifty percent (50%) of the combined outstanding
voting power of the parent of the surviving Entity in such merger, consolidation or similar
(iii) there is consummated a sale, lease, license or other disposition of all or substantially
all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease,
license or other disposition of all or substantially all of the consolidated assets of the Company
and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of
the voting securities of which are Owned by stockholders of the Company in substantially the same
proportions as their Ownership of the Company immediately prior to such sale, lease, license or
other disposition; or
(iv) notwithstanding the foregoing or any other provision of this Plan, the definition of
Change in Control (or any analogous term) in an individual written agreement between the Company or
any Affiliate and the Optionholder shall supersede the foregoing definition with respect to Options
subject to such agreement (it being understood, however, that if no definition of Change in Control
or any analogous term is set forth in such an individual written agreement, the foregoing
definition shall apply).
(g) Common Stock means the common stock, par value $0.01 per share, of the Company.
(h) Code means the Internal Revenue Code of 1986, as amended.
(i) Company means Vuzix Corporation, a Delaware corporation.
(j) Consultant means, in relation to the Company, an individual or Consultant Company,
other than an Employee or a Director, that: (i) is engaged to provide on a ongoing bona fide basis,
consulting, technical, management or other services to the Company or to an Affiliate of the
Company, other than services provided in relation to a distribution of securities of the Company;
(ii) provides the services under a written contract between the Company or the Affiliate and the
individual or the Consultant Company; (iii) in the reasonable opinion of the Company, spends or
will spend a significant amount of time and attention on the affairs and business of the Company or
an Affiliate of the Company; and (iv) has a relationship with the Company or an Affiliate of the
Company that enables the individual to be knowledgeable about the business and affairs of the
(k) Consultant Company means for an individual consultant, a company or partnership
of which the individual is an employee, stockholder or partner.
(l) Continuous Service means that the Optionholders service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The
Optionholders Continuous Service shall not be deemed to have terminated merely because of a change
in the capacity in which the Optionholder renders service to the Company or an Affiliate as a
Director or a change in the entity for which the Optionholder renders such service, provided
that there is no interruption or termination of the Optionholders Continuous Service. For example,
a change in status from a Non-Employee Director of the Company to a Consultant of an Affiliate or
an Employee of the Company will not constitute an interruption of Continuous Service. The Board,
in its sole discretion, may determine whether Continuous Service shall be considered interrupted in
the case of any leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(m) Director means a member of the Board.
(n) Disability means the inability of a person, in the opinion of a qualified physician
acceptable to the Company, to perform the major duties of that persons position with the Company
or an Affiliate because of the sickness or injury of the person.
(o) Discounted Market Price means the market price less the following maximum discounts
based on closing price (and subject, not withstanding the application of any such maximum discount,
to a minimum price per share of $0.05 and a minimum exercise price per warrant or incentive stock
option, as the case may be, of $0.10): (i) up to $0.50
25%; (iii) $0.51 to $2.00 20%; and
(iii) above $2.00 15%.
(p) Effective Date means the date effective as of which the Plan is adopted by the Board.
(q) Employee means any person employed by the Company or an Affiliate. Mere service as a
Director or payment of a directors fee by the Company or an Affiliate shall not be sufficient to
constitute employment by the Company or an Affiliate.
(r) Entity means a corporation, partnership or other entity.
(s) Exchange Act means the Securities Exchange Act of 1934, as amended.
(t) Exchange Act Person means any natural person, Entity or group (within the meaning
of Section 13(d) or 14(d) of the Exchange Act), except that Exchange Act Person shall not include
(A) the Company or any Subsidiary of the Company, (B) any employee benefit plan of the Company or
any Subsidiary of the Company or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the Company, (C) an underwriter
temporarily holding securities pursuant to an offering of such securities, or (D) an Entity Owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their Ownership of stock of the Company.
(u) Fair Market Value means, as of any date, the value of the Common Stock determined as
(i) If the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the TSX Venture Exchange, the Nasdaq Global Market, the Nasdaq
Global Select Market, or The Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system immediately prior to the time of
determination, as reported in The Wall Street Journal or such other source as the Administrator
(ii) If the Common Stock is not listed on a stock exchange referred to in subsection (i)
immediately above and is regularly quoted by a recognized securities dealer but selling prices are
not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for
the Common Stock on the day of determination; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value
thereof shall be determined in good faith by the Administrator.
(v) Initial Grant means an Option granted to a Non-Employee Director who meets the
specified criteria pursuant to subsection 6(a) of the Plan.
(w) Insider means:
(i) a Director or senior Officer of the Company;
(ii) a Director or senior Officer of a company that is an Insider or Subsidiary of the
(iii) a Person that beneficially owns or controls, directly or indirectly, shares of Common
Stock carrying more than 10% of the voting rights attached to all outstanding shares of Common
Stock of the Company; or
(iv) the Company itself if it holds any of its own securities.
(x) IPO Date means the date the Common Stock is first offered to the public under a
registration statement declared effective under the Securities Act.
(y) Non-Employee Director means a Director who is not an Employee or Consultant of the
Company or an Affiliate.
(z) Nonstatutory Stock Option means an Option not intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations promulgated
(aa) Officer means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(bb) Option means a Nonstatutory Stock Option granted pursuant to the Plan.
(cc) Option Agreement means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be
subject to the terms and conditions of the Plan.
(dd) Optionholder means a person to whom an Option is granted pursuant to the Plan or,
if applicable, such other person who holds an outstanding Option.
(ee) Own, Owned, Owner, Ownership A person or Entity shall
be deemed to Own, to have Owned, to be the Owner of, or to have acquired/ Ownership of
securities if such person or Entity, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares voting power, which includes the power to
vote or to direct the voting, with respect to such securities.
(ff) Plan means this Vuzix Corporation 2009 Non-Employee Directors Stock Option Plan.
(gg) Rule 16n-3 means Rule 16b-3 promulgated under the Exchange Act or any successor to
Rule 16b-3, as in effect from time to time.
(hh) Securities Act means the Securities Act of 1933, as amended.
(ii) Stock 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 securities of the Company to one or more service providers, including a
purchase of shares of Common Stock from treasury which is financially assisted by the Company by
way of a loan, guarantee or otherwise.
(jj) Subsidiary means, with respect to the Company, (i) any corporation of which more
than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership in which the Company has a direct or indirect interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent
(a) Administration by Board. The Board shall administer the Plan. The Board may not
delegate administration of the Plan to a committee.
(b) Powers of the Board. The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine the provisions of each Option to the extent not specified in the Plan.
(ii) To construe and interpret the Plan and Options granted under it, and to establish, amend
and revoke rules and regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan or an Option as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company that are not in conflict with the
provisions of the Plan.
(c) Effect of Boards Decision. All determinations, interpretations and constructions
made by the Board in good faith shall not be subject to review by/ any person and shall be final,
binding and conclusive on all persons.
4. SHARES SUBJECT TO THE PLAN.
(a) Share Reserve. Subject to the provisions of Section 11 relating to adjustments upon
changes in the Common Stock, the Common Stock that may be issued pursuant to Options shall not
exceed in the aggregate 8,000,000 shares of Common Stock.
(b) Reversion of Shares to the Share Reserve. If any Option shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in full, or if any
shares of Common Stock issued to a Non-Employee Director pursuant to an Option are forfeited back
to or repurchased by the Company because of or in connection with the failure to meet a contingency
or condition required to vest such shares in the Non-Employee Director, the shares of Common Stock
not acquired, forfeited or repurchased under such Stock Award shall revert to and again become
available for issuance under the Plan.
(c) Source of Shares. The shares of Common Stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise. If the aggregate number of shares
of Common Stock issuable pursuant to Section 6(a) or (b) would exceed the number of shares
remaining in the share reserve under Section 4(a) at such time of grant, then, in the absence of
any Board action otherwise, a pro rata allocation of the shares of Common Stock available shall be
made in as nearly a uniform manner as
shall be practicable and equitable.
(a) The Options as set forth in Section 6 automatically shall be granted under the Plan to all
6. NON-DISCRETIONARY GRANTS.
(a) Initial Grants. Without any further action of the Board, (i) each person who is or
becomes a Non-Employee Director as of the Effective Date, and (ii) each person who, after the
Effective Date, is elected or appointed for the first time to be a Non-Employee Director
automatically shall, upon the Effective Date or the date of his or her initial election or
appointment to be a Non-Employee Director, as applicable, be granted an Initial Grant to purchase
300,000 shares of Common Stock on the terms and conditions set forth herein.
(b) Annual Grants. Without any further action of the Board, on each January 1 (the
Annual Grant Date), commencing on January 1, 2010, each person who is then a Non-Employee
Director, automatically shall be granted an Annual Grant to purchase 150,000 shares of Common Stock
on the terms and conditions set forth herein, provided, however, that the number of shares subject
to an Annual Grant for a particular Non-Employee Director shall be reduced, on a pro rata basis,
for each month such person did not serve as a Non-Employee Director during the twelve-month period
from the prior Annual Grant Date (or from the Effective Date with respect to the first Annual Grant
hereunder) until the current Annual Grant Date.
(c) Limits on Option Grants. Notwithstanding the foregoing paragraphs, unless the Company
obtains approval of disinterested holders of shares of Common Stock in the manner prescribed by TSX
Venture Exchange Policy 2.4 and any successor rule, policy or instrument thereto or the rules of
the applicable stock exchange on which the shares of Common Stock are then listed,
(i) the number of shares of Common Stock reserved for issuance pursuant to Options granted to
Insiders under the Plan, together with shares of Common Stock issuable to Insiders or Participants
under any other Stock Compensation Arrangement of the Company, shall at no time exceed 10% of the
issued and outstanding shares of Common Stock of the Company;
(ii) the Company shall not grant to Insiders under the Plan, together with stock options
granted to Insiders under any other Stock Compensation Arrangement of the Company, in aggregate,
within a 12 month period, a number of Options exceeding 10% of the issued and outstanding shares of
Common Stock of the Company pursuant to the exercise of Awards;
(iii) the Company shall not issue to any one individual, within a 12 month period, a number
of shares exceeding 5% of the issued and outstanding shares of Common Stock of the Company pursuant
to the exercise of Options granted under the Plan, together with shares of Common Stock issuable to
any individuals under any other Stock Compensation Arrangement of the Company; and
(iv) no amendment which reduces the exercise price of an Option that is held by an Insider.
7. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and conditions as required by
the Plan. Each Option shall contain such additional terms and conditions, not inconsistent with the
Plan, as the Board shall deem appropriate. Each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each of the following
(a) Term. The Option term shall be a maximum of ten (10) years from the date the Option
is granted, provided that the Option term shall be reduced with respect to any Option as provided
in Section 7(g), (i), and (j), covering cessation of Continuous Service by the Optionholder,
disability of the Optionholder or death of the Optionholder.
(b) Exercise Price. The exercise price of each Option shall be one hundred percent (100%)
of the Fair Market Value of the shares. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence if such Option is
granted pursuant to an assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code. Notwithstanding any provision to the contrary, the
exercise price of any Option shall not be less than the Discounted Market Price as of the date of
(c) Consideration. The purchase price of stock acquired pursuant to an Option may be
paid, to the extent permitted by applicable statutes and regulations, in any combination of (i)
cash or check, or (ii) pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds.
(d) Transferability. All benefits, rights and Options accruing to any Non-Employee
Director in accordance with the terms and conditions of the Plan shall not be transferable or
assignable unless specifically provided for herein. An Option is transferable by will or by the
laws of descent and distribution. In addition, the Optionholder may, by delivering written notice
to the Company, in a form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionholder, shall thereafter be entitled to exercise the Option.
(e) Vesting. Options shall vest as determined by the Board follows:
(i) Initial Grants: 1/2 of the shares of Common Stock covered by an Initial Grant shall be
immediately vested upon grant and the remaining shares shall vest in equal monthly installments
over twelve (12) months.
(ii) Annual Grants: 1/12th of the shares of Common Stock covered by an Annual Grant shall
vest monthly over twelve (12) months.
(f) Early Exercise. The Option may, but need not, include a provision whereby the
Optionholder may elect at any time before the Optionholders Continuous Service terminates to
exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior
to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject
to a repurchase option in favor of the Company or to any other restriction the Board determines to
(g) Termination of Continuous Service. In the event an Optionholders Continuous Service
terminates (other than upon the Optionholders death or Disability), the Optionholder may exercise
his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date
of termination) but only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholders Continuous Service, or (ii) the expiration
of the term of the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate.
(h) Extension of Termination Date. If the exercise of the Option following the
termination of the Optionholders Continuous Service (other than upon the Optionholders death or
Disability) would be prohibited at any time solely because the issuance of shares would violate the
registration requirements under the Securities Act, then the Option shall terminate on the earlier
of (i) the expiration of the term of the Option set forth in subsection 7(a) or (ii) the expiration
of a period of three (3) months after the termination of the Optionholders Continuous Service
during which the exercise of the Option would not be in violation of such registration
(i) Disability of Optionholder. In the event an Optionholders Continuous Service
terminates as a result of the Optionholders Disability, the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of (i) the date six (6)
months following such termination or (ii) the expiration of the term of the Option as set forth in
the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option
within the time specified herein, the Option shall terminate.
(j) Death of Optionholder. In the event (i) an Optionholders Continuous Service
terminates as a result of the Optionholders death or (ii) the Optionholder dies within the
three-month period after the termination of the Optionholders Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the Optionholder was entitled to
exercise the Option as of the date of death) by the Optionholders estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person designated to exercise
the Option upon the Optionholders death, but only within the period ending on the earlier of (i)
one (1) year from the date of the Optionholders death, or (ii) the expiration of the term of such
Option as set forth in the Option Agreement. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate.
8. COVENANTS OF THE COMPANY.
(a) Availability of Shares. During the terms of the Options, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy such Options.
(b) Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant
Options and to issue and sell shares of Common Stock upon exercise of the Options; provided,
however, that this undertaking shall not require the Company to register under the Securities Act
the Plan, any Option or any stock issued or issuable pursuant to any such Option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Options unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
(a) Proceeds from the sale of stock pursuant to Options shall constitute general funds of the
(a) Stockholder Rights. No Optionholder shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares subject to such Option unless and until
such Optionholder has satisfied all requirements for exercise of the Option pursuant to its terms.
(b) No Service Rights. Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Optionholder any right to continue to serve the Company as a
Non-Employee Director or shall affect the right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultants agreement with the Company or an Affiliate or
(iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(c) Investment Assurances. The Company may require an Optionholder, as a condition of
exercising or acquiring stock under any Option, (i) to give written assurances satisfactory to the
Company as to the Optionholders knowledge and experience in financial and business matters and/or
to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable
and experienced in financial and business matters and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of exercising the Option;
and (ii) to give written assurances satisfactory to the Company stating that the Optionholder is
acquiring the stock subject to the Option for the Optionholders own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the
shares upon the exercise or acquisition of stock under the Option has been registered under a then
currently effective registration statement under the Securities Act or (2) as to any particular
requirement, a determination is made by counsel for the Company that such requirement need not be
met in the circumstances under the then applicable securities laws. The Company may, upon advice of
counsel to the Company, place legends on stock certificates issued under the Plan as such counsel
deems necessary or appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(d) Withholding Obligations. The Optionholder may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under an Option by any of
the following means (in addition to the Companys right to withhold from any compensation paid to
the Optionholder by the Company) or by a combination of such means: (i) tendering a cash payment;
(ii) authorizing the Company to withhold shares from the shares of the Common Stock otherwise
issuable to the Optionholder as a result of the exercise or acquisition of stock under the Option,
provided, however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the
Company owned and unencumbered shares of Common Stock.
(e) Lock-Up Period. Upon exercise of any Option, an Optionholder may not sell, dispose
of, transfer, make any short sale of, grant any option for the purchase of, or enter into any
hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock
or other securities of the Company held by the Optionholder, for a period of time specified by the
managing underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date
of a registration statement of the Company filed under the Securities Act, other than a Form S-8
registration statement, (the Lock Up Period); provided, however, that nothing contained in this
section shall prevent the exercise of a repurchase option, if any, in favor of the Company during
the Lock Up Period. An Optionholder may be required to execute and deliver such other agreements
as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with
the foregoing or that are necessary to give further effect thereto. In order to enforce the
foregoing, the Company may impose stop-transfer instructions with respect to such shares of Common
Stock until the end of such period. The underwriters of the Companys stock are intended third
party beneficiaries of this Section 10(e) and shall have the right, power and authority to enforce
the provisions hereof as though they were a party hereto.
11. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.
(a) Capitalization Adjustments. If any change is made in the stock subject to the Plan, or
subject to any Option, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the nature, class(es) and
maximum number of securities subject both to the Plan pursuant to Section 4 and to the
nondiscretionary Options specified in Section 6, and the outstanding Options will be appropriately
adjusted in the nature, class(es) and number of securities and price per share of stock subject to
such outstanding Options. The Board shall make such adjustments, and its determination shall be
final, binding and conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction without receipt of consideration by the Company.)
(b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the
Company, then all outstanding Options shall terminate immediately prior to such event.
(c) Change in Control. If a Change in Control occurs and as of, or within twelve (12)
months after, the effective time of such Change in Control, an Optionholders Continuous Service
terminates, then his or her options will accelerate and become fully vested and immediately
exercisable, unless the termination was a result of the Optionholders resignation (other than any
resignation contemplated by the terms of the Change in Control or required by the Company or the
acquiring entity pursuant to the Change in Control).
(d) Parachute Payments. In the event that the acceleration of the vesting and
exercisability of the Options provided for in subsection 11(c) and benefits otherwise payable to a
Optionholder (Payment) would (i) constitute a parachute payment within the meaning of Section
280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section
4999 of the Code (the Excise Tax), then such Payment shall be equal to the Reduced Amount. The
Reduced Amount shall be either (x) the largest portion of the Payment that would result in no
portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and
including the total, of the Payment, whichever amount, after taking into account all applicable
federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the
highest applicable marginal rate), results in the Optionholders receipt, on an after-tax basis,
of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be
subject to the Excise Tax. If a reduction in payments or benefits constituting parachute
payments is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the
following order unless the Optionholder elects in writing a different order (provided, however,
that such election shall be subject to Company approval if made on or after the effective date of
the event that triggers the Payment): reduction of cash payments; cancellation of accelerated
vesting of Options; reduction of employee benefits. In the event that acceleration of vesting of
Option compensation is to be reduced, such acceleration of vesting shall be cancelled in the
reverse order of the date of grant of the Optionholders Options (i.e., earliest granted Option
cancelled last) unless the Optionholder elects in writing a different order for cancellation.
The accounting firm engaged by the Company for general audit purposes as of the day prior to the
effective date of the Change in Control shall perform the foregoing calculations. If the accounting
firm so engaged by the Company is serving as accountant or auditor for the individual, entity or
group effecting the Change in Control, the Company shall appoint a nationally recognized accounting
firm to make the determinations required hereunder. The Company shall bear all expenses with
respect to the determinations by such accounting firm required to be made hereunder.
The accounting firm engaged to make the determinations hereunder shall provide its calculations,
together with detailed supporting documentation, to the Optionholder and the Company within fifteen
(15) calendar days after the date on which the Optionholders right to a Payment is triggered (if
requested at that time by the Optionholder or the Company) or such other time as requested by the
Optionholder or the Company. If the accounting firm determines that no Excise Tax is payable with
respect to a Payment, either before or after the application of the Reduced Amount, it shall
furnish the Optionholder and the Company with an opinion reasonably acceptable to the Optionholder
that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of
the accounting firm made hereunder shall be final, binding and conclusive upon the Optionholder and
12. AMENDMENT OF THE PLAN AND OPTIONS.
(a) Amendment of Plan. Subject to any necessary approvals by the TSX Venture Exchange or
other regulatory body having jurisdiction over the securities of the Company, the Board at any
time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating
to adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval is necessary to
satisfy the requirements of Rule 16b-3 or any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit any other
amendment to the Plan for stockholder approval.
(c) No Impairment of Rights. Rights under any Option granted before amendment of the Plan
shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of
the Optionholder and (ii) the Optionholder consents in writing.
(d) Amendment of Options. The Board at any time, and from time to time, may amend the
terms of any one or more Options; provided, however, that the rights under any Option shall not be
impaired by any such amendment unless (i) the Company requests the consent of the Optionholder and
(ii) the Optionholder consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) Plan Term. Subject to any necessary approvals by the TSX Venture Exchange or other
regulatory body having jurisdiction over the securities of the Company, the Board may suspend or
terminate the Plan at any time. No Options may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall not impair
rights and obligations under any Option granted while the Plan is in effect except with the written
consent of the Optionholder.
14. EFFECTIVE DATE OF PLAN.
(a) The Plan shall become effective on the date the Plan is adopted by the Board, but no Option
shall be exercised unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the Plan is adopted by
15. CHOICE OF LAW.
(a) All questions concerning the construction, validity and interpretation of this Plan shall be
governed by the law of the State of Delaware, without regard to such states conflict of laws