EXHIBIT 10.3
2006 STOCK OPTION PLAN
FOR:
NATURALLY ADVANCED TECHNOLOGIES INC.
NATURALLY ADVANCED TECHNOLOGIES INC.
1307
Venables Street, Vancouver, British Columbia, Canada, V5L 2G1
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NATURALLY ADVANCED TECHNOLOGIES INC.
2006 STOCK OPTION PLAN
ARTICLE 1
THE PLAN
1.1 TITLE
This plan is titled
the "2006 Stock
Option Plan" (the "PLAN") of
Naturally Advanced
Technologies
Inc., a British Columbia corporation (the
"COMPANY").
1.2
PURPOSE
The purpose of the Plan is to enhance the long-term stockholder value
of the Company by offering opportunities to directors, officers, employees and
eligible consultants
of the Company and any Related Company, as defined below,
to acquire and
maintain stock
ownership in the
Company in order to give these
persons the opportunity to participate in the Company's growth and
success, and
to encourage them to remain in the service of the Company or a
Related Company.
ARTICLE 2
DEFINITIONS
The following terms will have the following meanings in the
Plan:
(a) "BOARD"
means the Board of Directors of the Company;
(b) "CAUSE",
unless otherwise defined in the instrument evidencing
the award or in an
employment or services
agreement between
the Company or a Related Company and a Participant, means a
material breach
of the employment or services agreement,
dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information or trade secrets, or conviction or
confession of
a crime punishable by law (except minor
violations), in
each case as determined by the Plan
Administrator, and its
determination shall be
conclusive and
binding;
(c) "CODE"
means the United States INTERNAL REVENUE CODE OF 1986,
as amended from time to time;
(d) "COMMON
SHARES" and "SHARES"
means the common shares, no par
value, of the Company;
(e) "CONSULTANT
PARTICIPANT" means a Participant who is defined as
a Consultant Participant in Article 5 hereinbelow;
(f) "CORPORATE
TRANSACTION",
unless otherwise defined in the
instrument evidencing the Option or in a written employment or
services agreement
between the Company or
a Related Company
and a Participant, means consummation of either:
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(i)
a merger
or consolidation of the Company with or into
any other corporation, entity or person; or
(ii)
a sale, lease,
exchange or other transfer in one
transaction or a
series of related
transactions of
all or substantially
all the Company's
outstanding
securities or all or substantially all the Company's
assets;
provided, however, that a Corporate
Transaction
shall not include a Related Party
Transaction;
(g)
"DISABILITY",
unless otherwise
defined
by the Plan
Administrator, means a
mental or physical
impairment of the
Participant that is
expected to result in death or that has
lasted or is expected
to last for a
continuous period of
12
months or more and that causes the Participant to be unable,
in the opinion of the
Company, to perform his or her duties
for the Company or a Related Company and to be engaged in
any
substantial gainful activity;
(h)
"EMPLOYMENT
TERMINATION DATE"
means, with respect to a
Participant, the first
day upon which the Participant no
longer has an
employment
or service
relationship
with the
Company or any Related Company;
(i) "EXCHANGE
ACT" means the United States SECURITIES EXCHANGE ACT
OF 1934, as amended;
(j) "FAIR
MARKET VALUE" means the per share value of the
Common
Shares
determined as follows:
(i) if the
Common Shares
are listed on an established
stock exchange or
exchanges or the
NASDAQ National
Market, the
closing price per share on the last
trading day
immediately preceding
such date on the
principal exchange
on which it is traded or as
reported by NASDAQ; or
(ii)
if the Common
Shares are not then listed on an
exchange or the NASDAQ National Market, but is quoted
on the NASDAQ Small Cap Market, the NASDAQ electronic
bulletin board or the National Quotation Bureau pink
sheets, the
average of the closing bid and asked
prices per share for the Common Shares as quoted by
NASDAQ or the National
Quotation Bureau, as the case
may be, on the last trading day immediately preceding
such date; or
(iii) if
there is no such
reported market
for the Common
Shares for the
date in question, then an amount
determined in good faith by the Plan Administrator;
(k) "GRANT
DATE" means the date on which the Plan
Administrator
completes the
corporate action relating to the grant of an
Option or such later date specified by the Plan Administrator,
and on which all
conditions precedent
to the grant have been
satisfied, provided
that conditions to the
exercisability or
vesting of Options shall not defer the Grant Date;
(l) "INCENTIVE
STOCK OPTION" means an Option granted with the
intention, as
reflected in the instrument evidencing the
Option, that it qualify as an "incentive stock option" as that
term is defined in Section 422 of the Code;
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(m)
"NONQUALIFIED STOCK
OPTION" means an Option other than an
Incentive Stock Option;
(n) "OPTION"
means the right to
purchase Common
Shares granted
under Article 7 hereinbelow;
(o) "OPTION
EXPIRATION DATE" has
the meaning set forth in Article
7.6 hereinbelow;
(p) "OPTION
TERM" has the meaning set forth in Article 7.3
hereinbelow;
(q)
"PARTICIPANT" means
the person to whom an
Option is granted
and who meets the eligibility requirements imposed by
Article
5 hereinbelow, including Consultant Participants as defined in
Article 5;
(r)
"PARTICIPANT" means
the person to whom an
Option is granted
and who meets the eligibility requirements imposed by
Article
5 hereinbelow, including Consultant Participants as defined in
Article 5;
(s) "PLAN
ADMINISTRATOR" has the
meaning set forth in Article 3.1
hereinbelow;
(t) "RELATED
COMPANY"
means
any entity that, directly or
indirectly, is in control of or is controlled by the Company;
(u) "RELATED
PARTY TRANSACTION" means:
(i) a merger
or consolidation of the Company in which the
holders of Common
Shares immediately prior to the
merger hold at least a majority of the Common Shares
in the Successor
Corporation
immediately after
the
merger;
(ii)
a sale, lease,
exchange or other
transaction in one
transaction or a
series of related
transactions of
all or substantially
all the Company's
assets to a
wholly-owned subsidiary corporation;
(iii) a
mere reincorporation of the Company; or
(iv)
a transaction
undertaken
for the sole
purpose of
creating a
holding company that will be owned in
substantially the same
proportion by the persons who
held the Company's securities immediately before such
transaction;
(v)
"RETIREMENT",
unless otherwise
defined
by the Plan
Administrator from
time to time for
purposes of the Plan,
means retirement
on or after the individual's normal
retirement date
under the Company's 401(k) plan or other
similar successor plan applicable to salaried employees;
(w)
"SECURITIES ACT" means
the United States
SECURITIES
ACT OF
1933, as amended;
(x) "SUCCESSOR
CORPORATION"
has the meaning set
forth in Article
11.3.1 hereinbelow; and
(y)
"VESTING
COMMENCEMENT DATE" means the Grant Date or such other
date selected by the Plan Administrator as the date from which
the Option
begins to vest for purposes of Article 7.4
hereinbelow.
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ARTICLE 3
ADMINISTRATION
3.1 PLAN
ADMINISTRATOR
The Plan shall be
administered by the
Board or a committee
appointed
by, and consisting of two or more members of, the Board (the "PLAN
ADMINISTRATOR"). If
and so long as the
Common Shares are registered under
Section 12(b) or
12(g) of the
Exchange Act, the Board shall consider in
selecting the
members of any committee acting as Plan Administrator, with
respect to any persons
subject or likely to become subject to Section 16 of the
Exchange Act, the provisions regarding: (a) "OUTSIDE DIRECTORS", as
contemplated
by Section 162(m) of the Code and (b) "NONEMPLOYEE DIRECTORS", as contemplated
by Rule 16b-3 under the Exchange Act. Committee members shall serve for such
term as the Board may determine, subject to removal by the Board at
any time. At
any time when no committee has been appointed to administer
the Plan, then the
Board will be the Plan Administrator.
3.2
ADMINISTRATION AND INTERPRETATION BY PLAN ADMINISTRATOR
Except for the terms and conditions explicitly set forth in the
Plan,
the Plan Administrator
shall have exclusive
authority, in its
discretion, to
determine all
matters relating to Options under the Plan, including the
selection of individuals to be granted Options, the type of Options, the
number
of Common Shares subject to an Option, all terms, conditions, restrictions and
limitations, if any, of an Option and the terms of any instrument
that evidences
the Option.
The Plan Administrator shall also have exclusive authority to
interpret the Plan and the terms of any instrument evidencing the
Option and may
from time to time adopt and change rules and regulations of general
application
for the Plan's
administration. The
Plan Administrator's
interpretation of the
Plan and its rules and
regulations, and all
actions taken and
determinations
made by the Plan
Administrator pursuant
to the Plan, shall be
conclusive and
binding on all parties involved or affected. The Plan Administrator
may delegate
administrative duties to such of the Company's officers as it so
determines.
ARTICLE 4
STOCK SUBJECT TO THE PLAN
4.1 AUTHORIZED
NUMBER OF COMMON SHARES
Subject to adjustment
from time to time as
provided in Article
11.1
hereinbelow, the
number of Common Shares available for issuance under the
Plan
shall be 10,000,000 Common Shares.
4.2 REUSE OF
COMMON SHARES
Any Common Shares that
have been made subject
to an Option that cease
to be subject to the Option (other than by reason of exercise
or settlement of
the Option to the extent it is exercised for or settled in Common
Shares) shall
again be available for
issuance in
connection
with future
grants of Options
under the Plan. In the event Common Shares issued under the Plan
are reacquired
by the Company pursuant to any forfeiture provision or right of
repurchase, such
Common Shares shall again be available for the purposes of the Plan;
provided,
however, that the
maximum number of
Common Shares that may
be issued upon the
exercise of Incentive
Stock Options shall
equal the Common Share number stated
in Article 4.1 hereinabove, subject to adjustment from time to
time as provided
in Article 11.1 hereinbelow; and provided, further, that for
purposes of Article
4.3 hereinbelow, any
such Common Shares shall be counted in accordance with the
requirements of Section 162(m) of the Code.
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4.3
LIMITATIONS
Subject to adjustment
from time to time as
provided in Article
11.1
hereinbelow, not more
than an aggregate of
10,000,000 Common
Shares shall be
available for issuance pursuant to grants of Stock Options under
the Plan.
ARTICLE 5
ELIGIBILITY
An Option may be granted to any officer, director or employee of the
Company or a
Related Company that the Plan Administrator from time to time
selects. An Option
may also be granted to
any consultant,
agent, advisor or
independent contractor
who provides services to the Company or any Related
Company (a "CONSULTANT
PARTICIPANT"), so long
as such Consultant
Participant:
(a) is a natural person or an alter ego entity of the natural
person providing
the services; (b) renders BONA FIDE services that are not in
connection with the
offer and sale of the Company's securities in a capital-raising
transaction; and
(c) does not directly
or indirectly promote or maintain a market for the
Company's securities.
ARTICLE 6
OPTIONS
6.1 FORM AND
GRANT OF OPTIONS
The Plan Administrator shall have the authority, in its sole
discretion, to
determine the type or
types of Options to be granted under the
Plan. Options may be granted singly or in combination.
6.2 SETTLEMENT
OF OPTIONS
The Company may settle
Options through the
delivery of Common Shares,
the granting
of replacement Options or any combination thereof as the Plan
Administrator shall
determine.
Any Option settlement, including payment
deferrals or payments
deemed made by way of the settlement of pre-existing
indebtedness from the Company, may be subject to such conditions,
restrictions
and contingencies
as the Plan Administrator shall determine. The Plan
Administrator may permit or require the deferral of any Option
payment, subject
to such rules and procedures as it may establish, which may include provisions
for the payment or
crediting of interest,
or dividend
equivalents,
including
converting such credits into deferred stock equivalents.
ARTICLE 7
GRANTS OF OPTIONS
7.1 GRANT OF
OPTIONS
The Plan Administrator shall have the authority, in its sole
discretion, to grant Options as Incentive Stock Options or as
Nonqualified Stock
Options, which shall be appropriately designated.
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7.2 OPTION
EXERCISE PRICE
The exercise price for Common Shares purchased under an Option
shall be
as determined by the Plan Administrator.
7.3 TERM OF
OPTIONS
Subject to earlier termination in accordance with the terms of the
Plan
and the instrument
evidencing
the Option,
the maximum term of an
Option (the
"OPTION TERM") shall be as established for that Option by the Plan
Administrator
or, if not so established, shall be ten years from the Grant
Date.
7.4 EXERCISE
OF OPTIONS
The Plan Administrator shall establish and set forth in each
instrument
that evidences an Option the time at which, or the installments in which, the
Option shall vest and become exercisable, any of which provisions may be
waived
or modified by the Plan Administrator at any time.
The Plan Administrator, in its sole discretion, may adjust
the vesting
schedule of an Option held by a Participant who works less than "FULL-TIME" as
that term is defined by the Plan Administrator or who takes a
Company-approved
leave of absence.
To the extent an Option has vested and become exercisable, the Option
may be exercised
in whole or from time to time in part by
delivery to the
Company of a written stock option exercise agreement or notice, in
a form and in
accordance with procedures established by the Plan Administrator,
setting forth
the number of Common Shares with respect to which the Option is
being exercised,
the restrictions
imposed on the Common
Shares purchased under such exercise
agreement, if any, and such representations and agreements as may
be required by
the Plan
Administrator,
accompanied by payment in full as described in Article
7.5 hereinbelow. An Option may be exercised only for whole Common
Shares and may
not be exercised for
less than a reasonable
number of Common Shares at any one
time, as determined by the Plan Administrator.
7.5 PAYMENT OF
EXERCISE PRICE
The exercise price for Common Shares purchased under an Option
shall be
paid in full to the Company by delivery of consideration equal to
the product of
the Option
exercise price and the number of Common Shares purchased. Such
consideration must be
in accordance
with the requirements of the BUSINESS
CORPORATIONS ACT (British Columbia) and the Articles of
Incorporation and Bylaws
of the Company,
must be paid before
the Company will issue
the Common Shares
being purchased and
must be in a form or a combination of forms acceptable to
the Plan Administrator for that purchase. As set forth in Article 6.2
hereinabove, any
Option settlement,
including payment deferrals or payments
deemed made by way of
the settlement
of pre-existing indebtedness from the
Company, may be
subject to su
