Document:

besv_ex109.htm

EXHIBIT 10.9

RESTRICTED STOCK GRANT AGREEMENT

 

THIS RESTRICTED STOCK GRANT AGREEMENT (the “Agreement”) is entered into as of __________________ (the “Grant Date”), by and between Pacific Energy Development Corp., a Nevada corporation (the “Company”), and ___________________ (“Grantee”).

 

1. Restricted Stock Grant.

 

(a) Contemporaneously with the execution of this Agreement, the Company will grant and issue to Grantee ______________ shares of Common Stock, par value $0.001 per share, of the Company (the “Restricted Stock”) for $0.00 consideration from Grantee (the “Purchase Price”).  Stock certificates evidencing the Restricted Stock will be retained by the Company for the period during which the Restricted Stock is subject to forfeiture by the Company pursuant to the terms of Section 2 hereof.

 

(b) All shares of Restricted Stock issued hereunder shall be deemed issued to Grantee as fully paid and nonassessable shares, and Grantee shall have all rights of a stockholder with respect thereto, including the right to vote, receive dividends (including stock dividends), participate in stock splits or other recapitalizations, and exchange such shares in a merger, consolidation or other reorganization.  The term “Restricted Stock,” in addition to the shares purchased pursuant to this Agreement, also refers to all securities received in replacement of the Restricted Stock, as a stock dividend or as a result of any stock split, recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties to which Grantee is entitled by reason of Grantee’s ownership of the Restricted Stock.

 

2. Vesting of Restricted Stock.

 

(a) The Restricted Stock is restricted and subject to forfeiture by the Company until vested (the “Repurchase Option”).  The Restricted Stock which has vested and is no longer subject to forfeiture is referred to as “Vested Shares.”  All Restricted Stock which has not become Vested Shares is referred to as “Nonvested Shares.”

 

(b) Restricted Stock will vest and become nonforfeitable in accordance with the following vesting schedule, in each case subject to Grantee’s continued service as an employee, officer, director or consultant with the Company on such date:

 

	
(i)  

	
50% of the shares on the six (6) month anniversary of the Grant Date;

 

	
(ii)  

	
20% on the twelve (12) month anniversary of the Grant Date;

 

	
(iii)  

	
20% on the eighteen (18) month anniversary of the Grant Date; and

 

	
(iv)  

	
the balance 10% on the twenty-four (24) month anniversary of the Grant Date.

 

(c)  Any Nonvested Shares of Grantee will automatically vest and become nonforfeitable if Grantee’s service as an employee, officer, director or consultant with the Company ceases owing to the Grantee’s death.

 

  

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(d) In the event of a Corporate Transaction, the Company, in its discretion, may accelerate the time at which all or any portion of Grantee’s Restricted Stock will vest.  A “Corporate Transaction” means (i) a liquidation or dissolution of the Company; (ii) a merger or consolidation of the Company with or into another corporation with the shareholders of the Company immediately prior to the merger or consolidation owning less than 50% of the voting securities of the surviving entity (or the parent of the surviving entity if the merger is a triangular merger); or (iii) a sale of all or substantially all of the assets of the Company in a single transaction or a series of related transactions.

 

(e) Nonvested Shares may not be sold, transferred, assigned, pledged, or otherwise disposed of, directly or indirectly, whether by operation of law or otherwise.

 

3. Forfeiture of Nonvested Shares.  Except as provided herein, if Grantee's service with the Company ceases for any reason other than Grantee’s death, any Nonvested Shares will be automatically forfeited to the Company; provided, however, that the Company may cause any Nonvested Shares immediately to vest and become nonforfeitable if Grantee’s service with the Company is terminated by the Company without cause, as determined by the Company.

 

4. Escrow of Unvested Shares.  For purposes of facilitating the enforcement of the provisions of Section 2 above, Grantee agrees, immediately upon receipt of the certificate(s) for the Shares subject to the Repurchase Option, to deliver such certificate(s), together with an Assignment Separate from Certificate in the form attached to this Agreement as Exhibit A executed by Grantee and by Grantee’s spouse (if required for transfer), in blank, to the Secretary of the Company, or the Secretary’s designee, to hold such certificate(s) and Assignment Separate from Certificate in escrow and to take all such actions and to effectuate all such transfers and/or releases as are in accordance with the terms of this Agreement.  Grantee hereby acknowledges that the Secretary of the Company, or the Secretary’s designee, is so appointed as the escrow holder with the foregoing authorities as a material inducement to make this Agreement and that said appointment is coupled with an interest and is accordingly irrevocable.  Grantee agrees that said escrow holder shall not be liable to any party hereof (or to any other party).  The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine and may resign at any time.  Grantee agrees that if the Secretary of the Company, or the Secretary’s designee, resigns as escrow holder for any or no reason, the Board of Directors of the Company shall have the power to appoint a successor to serve as escrow holder pursuant to the terms of this Agreement.

 

5. No Employment Rights.  Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a parent or subsidiary of the Company, to terminate Grantee’s employment or consulting relationship, for any reason, with or without cause.

 

6. Section 83(b) Election.  Grantee understands that Section 83(a) of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the difference between the amount paid for the Restricted Stock and the fair market value of the Restricted Stock as of the date any restrictions on the Restricted Stock lapse.  In this context, “restriction” means the right of the Company to buy back or forfeit the Restricted Stock pursuant to the Repurchase Option set forth in Section 2 of this Agreement.  Grantee understands that Grantee may elect to be taxed at the time the Restricted Stock is acquired, rather than when and as the Repurchase Option expires, by filing an election under Section 83(b) (an “83(b) Election”) of the Code with the Internal Revenue Service within 30 days from the date of acquisition.  Even if the fair market value of the Restricted Stock at the time of the execution of this Agreement equals the amount paid for the Restricted Stock, the election must be made to avoid income under Section 83(a) in the future.  Grantee understands that failure to file such an election in a timely manner may result in adverse tax consequences for Grantee.  Grantee further understands that an additional copy of such election form should be filed with his or her federal income tax return for the calendar year in which the date of this Agreement falls.  Grantee acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to purchase of the Restricted Stock hereunder, and does not purport to be complete.  Grantee further acknowledges that the Company has directed Grantee to seek independent advice regarding the applicable provisions of the Code, the income tax laws of any municipality, state or foreign country in which Grantee may reside, and the tax consequences of Grantee’s death.

 

  

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Grantee agrees that he will execute and deliver to the Company with this executed Agreement a copy of the Acknowledgment and Statement of Decision Regarding Section 83(b) Election (the “Acknowledgment”), attached hereto as Exhibit C.  Grantee further agrees that Grantee will execute and submit with the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit D, if Grantee has indicated in the Acknowledgment his or her decision to make such an election.

 

GRANTEE ACKNOWLEDGES THAT IT IS GRANTEE’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY ANY ELECTION UNDER SECTION 83(b), EVEN IF GRANTEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON GRANTEE’S BEHALF.

7. Investment Representations.

 

(a) This Agreement is made in reliance upon Grantee’s representations to the Company, which by its acceptance hereof Grantee hereby confirms, that the shares of Restricted Stock to be received by Grantee will be acquired for investment for his or her own  account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that he or she has no present intention of selling, granting participation in, or otherwise distributing the same, but subject nevertheless to any requirement of law that the disposition of his or her property shall at all times be within his or her control.

 

(b) The Grantee understands that the Restricted Stock is not registered under the Securities Act of 1933, as amended (the “1933 Act”), on the basis that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the 1933 Act pursuant to Section 4(2) thereof, and that the Company’s reliance on such exemption is predicated on Grantee’s representations set forth herein.  Grantee realizes that the basis for the exemption may not be present if, notwithstanding such representations, the Grantee has in mind merely acquiring shares of the Restricted Stock for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise.  Grantee does not have any such intention.

 

(c) Grantee understands that the Restricted Stock may not be sold, transferred, or otherwise disposed of without registration under the 1933 Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Restricted Stock or an available exemption from registration under the 1933 Act, the Restricted Stock must be held indefinitely.  In particular, Grantee is aware that the Restricted Stock may not be sold pursuant to Rule 144 or Rule 701 promulgated under the 1933 Act unless all of the conditions of the applicable Rules are met.  Among the conditions for use of Rule 144 is the availability of current information to the public about the Company.  Such information is not now available, and the Company has no present plans to make such information available.  The Grantee represents that, in the absence of an effective registration statement covering the Restricted Stock, he or she will sell, transfer, or otherwise dispose of the Restricted Stock only in a manner consistent with his or her representations set forth herein and then only in accordance with the provisions of paragraph 4(d) hereof.

 

  

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(d) Grantee agrees that in no event will he or she make a transfer or disposition of any of the Restricted Stock (other than pursuant to an effective registration statement under the 1933 Act), unless and until (i) Grantee shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the disposition, and (ii) if requested by the Company, at the expense of Grantee or his or her transferees, Grantee shall have furnished to the Company either (A) an opinion of counsel, reasonably satisfactory to the Company, to the effect that such transfer may be made without registration under the 1933 Act or (B) a “no action” letter from the Securities and Exchange Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Securities and Exchange Commission that action be taken with respect thereto.

 

(e) Grantee represents and warrants to the Company that he or she is an “accredited investor” within the meaning of Securities and Exchange Commission Rule 501 of Regulation D, as presently in effect.

 

8. Legends; Stop Transfer.

 

(a) All certificates for shares of the Restricted Stock shall bear substantially the following legends:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITONS OF A CERTAIN RESTRICTED STOCK GRANT AGREEMENT BETWEEN THE CORPORATION AND THE HOLDER OF STOCK OF THE CORPORATION REPRESENTED BY THIS CERTIFICATE.  A COPY OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.

(b) The certificates for shares of the Restricted Stock shall also bear any legends required by applicable state corporate or securities laws.

 

(c) In addition, the Company shall make a notation regarding the restrictions on transfer of the Restricted Stock in its stockbooks, and shares of the Restricted Stock shall be transferred on the books of the Company only if transferred or sold pursuant to an effective registration statement under the 1933 Act covering such shares or pursuant to and in compliance with the provisions of this Agreement.

 

9. California Law.  This Agreement is to be construed in accordance with and governed by the internal laws of the State of California as permitted by Section 1646.5 of the California Civil Code (or any similar successor provision) without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties.

 

  

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10. Notice.  Any notice required to be given under the terms of this Agreement shall be addressed to the Company in care of its Secretary at the office of the Company at 4125 Blackhawk Plaza Circle, Suite 201A, Danville, CA 94506, Attn:  General Counsel, and any notice to be given to Grantee shall be addressed to him or her at the address given by such Grantee beneath his or her signature to this Agreement, or such other address as either party to this Agreement may hereafter designate in writing to the other.  Any such notice shall be deemed to have been duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified and deposited (postage or registration or certification fee prepaid) in a post office or branch post office regularly maintained by the United States, or when sent via nationally recognized courier service.

 

11. Successors.  This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.  Where the context permits, “Grantee” as used in this Agreement shall include Grantee’s executors, administrators or other legal representatives or the person or persons to whom Grantee’s rights pass by will or the applicable laws of descent and distribution.

 

12. Spousal Consent.  Grantee shall cause his or her spouse to execute a Consent of Spouse in substantially the form of that attached hereto as Exhibit B concurrently with the execution of this Agreement or, if later, at the time Grantee becomes married.

 

13. California Securities Law.  THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE.  THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

  

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IN WITNESS WHEREOF, the parties hereto have duly executed this Restricted Stock Grant Agreement as of the date first above written.

 

	 	
COMPANY:

 

  

PACIFIC ENERGY DEVELOPMENT CORP.,

a Nevada corporation

 

  

By: __________________________________________

                                                             

GRANTEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION 2 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY.  GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH GRANTEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE GRANTEE’S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.

 

	 	GRANTEE: 

  

_____________________________________________

By: __________________________________________

Name:________________________________________ 

Title: _________________________________________

Address:______________________________________ 

 

_____________________________________________

  

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EXHIBIT A

 

ASSIGNMENT SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase Agreement between the undersigned (“Grantee”) and Pacific Energy Development Corp (the “Company”) dated _______________ (the “Agreement”), Grantee hereby sells, assigns and transfers unto the Company _________________________________ (________) shares of the Common Stock of the Company standing in Grantee’s name on the Company’s books and represented by Certificate No. _____,  and does hereby irrevocably constitute and appoint ______________________ to transfer said stock on the books of the Company with full power of substitution in the premises.  THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.

 

	Dated: ______________________	 
	 	 
	 	Signature: 

 

_____________________________________________

 

GRANTEE: ____________________________________

 

Instruction:  Please do not fill in any blanks other than the signature line.  The purpose of this assignment is to enable the Company to exercise its repurchase option set forth in the Agreement without requiring additional signatures on the part of Grantee.

 

  

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EXHIBIT B

 

CONSENT OF SPOUSE

 

I, _____________________, spouse of ____________________________, have read and approved the foregoing Agreement.  In consideration of the right of my spouse to purchase shares of Pacific Energy Development Corp as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement insofar as I may have any rights under the community property laws of the State of California or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement.

 

	Dated: ______________ 	_____________________________________________
	 	(Signature of Spouse)

 

                                                                        

 

  

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EXHIBIT C

ACKNOWLEDGMENT AND STATEMENT OF DECISION

REGARDING SECTION 83(b) ELECTION

The undersigned has entered a stock purchase agreement with Pacific Energy Development Corp, a Nevada corporation (the “Company”), pursuant to which the undersigned is purchasing ___________ shares of Common Stock of the Company (the “Shares”).  In connection with the purchase of the Shares, the undersigned hereby represents as follows:

 

1.           The undersigned has carefully reviewed the stock purchase agreement pursuant to which the undersigned is purchasing the Shares.

 

2.           The undersigned either [check and complete as applicable]:

 

	
  

	
(a) ____ has consulted, and has been fully advised by, the undersigned’s own tax advisor, __________________________, whose business address is _____________________________, regarding the federal, state and local tax consequences of purchasing the Shares, and particularly regarding the advisability of making elections pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”) and pursuant to the corresponding provisions, if any, of applicable state law; or

	
  

	
(b) ____ has knowingly chosen not to consult such a tax advisor.

3.           The undersigned hereby states that the undersigned has decided [check as applicable]:

 

	
  

	
(a) ____ to make an election pursuant to Section 83(b) of the Code, and is submitting to the Company, together with the undersigned’s executed Common Stock Purchase Agreement, an executed form entitled “Election Under Section 83(b) of the Internal Revenue Code of 1986;” or

	
  

	
(b) ____ not to make an election pursuant to Section 83(b) of the Code.

4.           Neither the Company nor any subsidiary or representative of the Company has made any warranty or representation to the undersigned with respect to the tax consequences of the undersigned’s purchase of the Shares or of the making or failure to make an election pursuant to Section 83(b) of the Code or the corresponding provisions, if any, of applicable state law.

 

 

	Dated: ______________ 	_____________________________________________
	 	GRANTEE: 

 

  

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EXHIBIT D

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code, to include in taxpayer’s gross income or alternative minimum taxable income, as applicable, for the current taxable year, the amount of any income that may be taxable to taxpayer in connection with taxpayer’s receipt of the property described below:

 

	
1.

	
The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

 

	  	
TAXPAYER:

	
SPOUSE:

	
NAME:

	  	  
	
ADDRESS:

	  	  
	
IDENTIFICATION NO.:

	  	  
	
TAXABLE YEAR:

	  	  

 

	
2.

	
The property with respect to which the election is made is described as follows:

 

__________ shares of the Common Stock of Pacific Energy Development Corp, a Nevada corporation (the “Company”).

 

	
3.

	
The date on which the property was transferred is:

 

	
4.

	
The property is subject to the following restrictions:

 

The Shares may not be transferred and are subject to forfeiture under the terms of an agreement between the taxpayer and the Company.  These restrictions lapse upon the satisfaction of certain conditions contained in such agreement.

 

	
5.

	
The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is:  $______

 

	
6.

	
The amount (if any) paid for such property:  NONE.

 

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property.  The transferee of such property is the person performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

 

	Dated: ______________________, _____ 	_____________________________________________
	 	Taxpayer
	The undersigned spouse of taxpayer joins in this election.	 
	 	 
	Dated: ______________________, _____	_____________________________________________
	 	Spouse of Taxpayer

 

                                                                                

10besv_ex1010.htm

EXHIBIT 10.10

 

PACIFIC ENERGY DEVELOPMENT CORP.

 

STOCK OPTION AGREEMENT

 

This Stock Option Agreement (this “Agreement”) is entered into as of the _____ day of ______________, between Pacific Energy Development Corp., a Nevada corporation (the “Company”), and _____________________ (“Optionee”).

 

WHEREAS, Optionee is an employee of the Company or of a parent or subsidiary corporation as defined in the applicable provisions (currently Sections 424(e) and (f), respectively) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “Code”) (an “Affiliate”), and the Company desires that Optionee remain as such and desires to secure or increase Optionee’s stock ownership of the Company in order to increase Optionee’s incentive and personal interest in the welfare of the Company.

 

NOW, THEREFORE, in consideration of the premises, covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto have agreed and do hereby agree as follows:

 

1. Administration of this Agreement.  This Agreement shall be administered by the Board of Directors of the Company (the “Board”) or by a committee (the “Committee”) to which administration of this Agreement is delegated by the Board (in either case, the “Administrator”).  The Board shall appoint and remove members of the Committee in its discretion in accordance with applicable laws.  If necessary in order to comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or Section 162(m) of the Code, or any successor statute or regulation, the Committee shall, in the Board’s discretion, be comprised solely of “non-employee directors” within the meaning of Rule 16b-3 or “outside directors” within the meaning of Section 162(m) of the Code.  The foregoing notwithstanding, the Administrator may delegate non-discretionary administrative duties to such employees of the Company as it deems proper and the Board, in its absolute discretion, may at any time and from time to time exercise any and all rights and duties of the Administrator under this Agreement.

 

2. Grant of Options.  The Company hereby grants to Optionee options (the “Options”) to purchase up to ________________________________ shares of the Common Stock of the Company at a purchase price of $_________ per share (the “Exercise Price”), on the terms and conditions hereinafter set forth.

 

3. Treatment. The Options are not intended to satisfy the requirements of Section 422 of the Code relating to the issuance of “incentive stock options”.

 

4. Term of Options.  Except as otherwise provided in Section 6 below, and subject to Optionee continuing to be an employee, officer or director of, or consultant to, the Company, the Options shall vest and become exercisable pursuant to the following vesting schedule, and shall remain exercisable until ten (10) years after the date of this Agreement, at which time the Options shall terminate and not be exercisable thereafter:

 

  

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(a) Options to purchase 50% of the shares shall vest and become exercisable on the six (6) month anniversary of the date hereof.

 

(b) Options to purchase 20% of the shares shall vest and become exercisable on the twelve (12) month anniversary hereof.

 

(c) Options to purchase 20% of the shares shall vest and become exercisable on the eighteen (18) month anniversary hereof.

 

(d) Options to purchase 10% of the shares shall vest and become exercisable on the twenty-four (24) month anniversary hereof.

 

5. Exercise of Options.  The Options or any portion thereof may be exercised by Optionee paying the purchase price of any shares with respect to which the Options are being exercised by cash, certified check, bank draft or postal or express money order.  Except as otherwise provided by the Administrator before the Option is exercised, (i) all or a portion of the Exercise Price may be paid by Optionee by delivery of shares of Common Stock owned by Optionee and acceptable to the Administrator having an aggregate fair market value (as of the date of exercise) that is equal to the amount of cash that would otherwise be required; and (ii) Optionee may pay the Exercise Price by authorizing a third party to sell shares of stock (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise.  In each case, Optionee’s payment shall be delivered with a written notice of exercise which shall:

 

(a) State the number of shares being exercised, the name, address and social security number of each person for whom the stock certificate or certificates for such shares of the Common Stock are to be registered;

 

(b) Contain any representations and agreements as to Optionee’s investment intent with respect to the shares exercised as may be necessary and satisfactory to the Company’s counsel; and

 

(c) Be signed by the person or persons entitled to exercise the Options and, if the Options are being exercised by any person or persons other than Optionee, be accompanied by proof satisfactory to counsel for the Company of the right of such person or persons to exercise the Options.

 

As a condition to the exercise of the Options, the Company may require the person exercising the Options to make any representation and warranty to the Company that may be required by any applicable law or regulation.  The Company may also condition the exercise of the Option on the Optionee’s entering into a shareholder agreement or lock-up agreement with the Company and/or other shareholders which will restrict the transferability of the shares and contain other customary provisions including rights of repurchase or first refusal on the part of the Company and may include “drag along” rights, provided that these conditions are also generally imposed on other similarly-situated holders of options granted by the Company.

 

  

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6. Termination of Employment or Consulting Relationship or Death.

 

(a) In the event Optionee’s employment or consulting relationship with the Company shall terminate on account of death, the Options held by Optionee, to the extent exercisable as of the date of death, may be exercised by a person who acquires the right to exercise the Options, provided such exercise occurs within both the remaining effective term of the Options and one year after Optionee’s death.

 

(b) In the event Optionee’s employment or consulting relationship with the Company shall terminate on account of retirement or disability, the Options held by Optionee, to the extent exercisable as of the date of such retirement or disability, may be exercised by Optionee, provided such exercise occurs within both the remaining effective term of the Options and one year from the date of termination of employment or consulting relationship with the Company.

 

(c) In the event Optionee’s employment or consulting relationship with the Company shall terminate on account of resignation, discharge not “for cause” (as defined below), or expiration of the term thereof, the Options held by Optionee, to the extent exercisable as of the date of such termination, may be exercised by Optionee provided such exercise occurs within both the remaining effective term of the Options and three months from the date of termination.

 

(d) In the event Optionee’s employment or consulting relationship with the Company shall terminate on account of discharge for cause, no exercise period shall exist and Optionee shall forfeit the Options as of the date of termination.

 

(e) To the extent not then exercisable in accordance with this Section, the Options shall terminate on the date Optionee’s employment or consulting relationship with the Company terminates with the Company.

 

(f) For purposes of this Agreement, “termination” shall be considered to occur when Optionee ceases to be employed as such by, or engaged in a consulting relationship with, the Company or any Affiliate.  Whether an authorized leave of absence or absence on military or government service shall constitute termination shall be determined by the Administrator.  Retirement shall be considered to mean retirement pursuant to any applicable retirement plan of the Company or any of its Affiliates.  For purposes of this Agreement, “cause” has the meaning ascribed to such term or words of similar import in Optionee’s written employment or service contract with the Company or its Parent or any Subsidiary and, in the absence of such agreement or definition, means Optionee’s (i) conviction of, or plea of nolo contendere to, a felony or any other crime involving moral turpitude; (ii) fraud on or misappropriation of any funds or property of the Company or its subsidiaries, or any affiliate, customer or vendor; (iii) personal dishonesty, incompetence, willful misconduct, willful violation of any law, rule or regulation (other than minor traffic violations or similar offenses), or breach of fiduciary duty which involves personal profit; (iv) willful misconduct in connection with Optionee’s duties or willful failure to perform Optionee’s responsibilities in the best interests of the Company or its subsidiaries; (v) illegal use or distribution of drugs; (vi) violation of any material rule, regulation, procedure or policy of the Company or its subsidiaries, the violation of which could have a material detriment to the Company; or (vii) material breach of any provision of any employment, non-disclosure, non-competition, non-solicitation or other similar agreement executed by Optionee for the benefit of the Company or its subsidiaries, all as reasonably determined by the Company’s Board, which determination will be conclusive.  The Options, to the extent exercisable after death of Optionee, may be exercised by Optionee’s personal representatives.

 

  

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7. Transfer of Options.  The Options may not be assigned, pledged or transferred in any manner except upon the death of Optionee by will or by the laws of descent and distribution.  During the lifetime of Optionee, the Options shall be exercisable only by Optionee.

 

8. Reservation of Shares.  The Company, during the term hereof, will at all times reserve and keep available, and will seek or obtain from any regulatory body having jurisdiction any requisite authority in order to issue and sell such number of shares of its Common Stock as shall be sufficient to satisfy the requirements hereof.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares of stock hereunder shall relieve the Company of any liability in respect of the nonissuance or sale of such stock as to which such requisite authority shall not have been obtained.

 

9. Restriction on Option Exercise.  Notwithstanding any contrary provision hereof, the Options may not be exercised by Optionee unless the shares to be acquired by Optionee have been registered under the Securities Act of 1933 (the “Act”), and any other applicable securities laws of any other state, or the Company receives an opinion of counsel (which may be counsel for the Company) reasonably acceptable to the Company stating that the exercise of the Options and the issuance of shares pursuant to the exercise is registered or exempt from such registration requirements.  Optionee shall represent that unless and until the shares have been registered under the Act and applicable state securities laws:  (1) Optionee is acquiring the shares for investment purposes only and without the intent of making any sale or disposition thereof; (2) Optionee has been advised and understands that the shares have not been registered for sale pursuant to federal and state securities laws and are “restricted securities” under such laws; and (3) Optionee acknowledges that the shares will be subject to stop transfer instructions and bear the following legend:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION.  NO OFFER, SALE OR TRANSFER MAY TAKE PLACE WITHOUT PRIOR WRITTEN APPROVAL OF THE COMPANY BEING AFFIXED HERETO.  IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, SUCH APPROVAL SHALL BE GRANTED ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF SHAREHOLDER’S COUNSEL AT SHAREHOLDER’S EXPENSE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT THIS CERTIFICATE MAY BE LAWFULLY TRANSFERRED PURSUANT TO AN EXEMPTION FROM REGISTRATION.

 

10. Withholding of Taxes.  The Options may not be exercised unless Optionee has paid or has made provision satisfactory to the Company for payment of, federal, state and local income taxes, or any other taxes (other than stock transfer taxes) which the Company may be obligated to collect as a result of the issue or transfer of Common Stock upon such exercise of the Options, unless waived by the Company.  In its sole discretion, and at the request of Optionee, the Company may permit Optionee (other than an Optionee who would be subject to Section 16(b) of the Exchange Act) to satisfy the obligation imposed by this Section, in whole or in part, by instructing the Company to withhold up to that number of shares otherwise issuable to Optionee with a fair market value equal to the amount of tax to be withheld.

 

  

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11. Corporate Transactions and Certain Other Changes.

 

(a) Changes in Capital Structure.  Subject to subsection (c) below, if the stock of the Company is changed by reason of a stock split, reverse stock split, stock dividend, recapitalization, reclassification or other distribution of the Company’s securities without consideration, appropriate adjustments shall be made by the Administrator, in its sole discretion, in (a) the number and class of shares of stock subject to this Option, and (b) the exercise price of each outstanding Option; provided, however, that the Company shall not be required to issue fractional shares as a result of any such adjustments.

 

(b) Mergers, etc.  In the event of any capital reorganization, any reclassification of the Common Stock of the Company (other than a recapitalization described in subsection (a) above), or the consolidation or merger of the Company, upon exercise of all or any portion of this Option following such capital reorganization, reclassification, consolidation or merger, Optionee shall receive the securities or property (including cash) that Optionee would have received had the Optionee exercised the Options immediately prior to such capital reorganization, reclassification, consolidation or merger.

 

(c) Corporate Transactions.

 

In the event of a Corporate Transaction, the Administrator, in its sole discretion, and prior to consummation of the Corporate Transaction, may (i) terminate any outstanding Options effective immediately prior to the consummation of such Corporate Transaction, (ii) permit exercise of any Options prior to their termination, even if such Options would not otherwise have been exercisable, and/or (iii) provide that all or certain of the outstanding Options shall be assumed or an equivalent option substituted by an applicable successor corporation or entity or any Affiliate of the successor corporation or entity.  In addition, in the event the Corporate Transaction involves a merger or consolidation in which the shareholders of the Company receive cash for their shares, the Administrator may provide that the Options may be exercised contingent upon the closing of such merger or consolidation and that, with respect to Options which have an exercise price less than the per share cash merger consideration Optionee would receive upon the closing or such merger or consolidation, Optionee shall not be required to deliver the exercise price but the exercise price shall be offset against the merger consideration.

 

For purposes of this Agreement, a “Corporate Transaction” means (i) a liquidation or dissolution of the Company; (ii) a merger or consolidation of the Company with or into another corporation with the shareholders of the Company immediately prior to the merger or consolidation owning less than 50% of the voting securities of the surviving entity (or the parent of the surviving entity if the merger is a triangular merger); or (iii) a sale of all or substantially all of the assets of the Company in a single transaction or a series of related transactions.

 

12. No Rights as a Stockholder.  Optionee or a permitted transferee of the Options shall have no rights as a stockholder with respect to any shares covered by the Options until the date as of which stock is issued following exercise of such Options.  Except as provided in this Agreement, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or any other distributions for which the record date is prior to the date as of which such stock is issued.

 

13. No Employment Rights.  This Agreement is not an employment agreement or contract and does not grant any employment rights to Optionee.

 

  

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14. Other Provisions.  The Company may, as a condition precedent to the exercise of the Options, require Optionee (including, in the event of Optionee’s death, his legal representatives, legatees or distributees) to enter into such agreements or to make representations as may be required to make lawful the exercise of the Options and the ultimate disposition of the shares acquired by such exercise.

 

15. Notices.  Any notice which either of the parties hereto is required or permitted to give to the other must be in writing and may be given by personal delivery or by mailing the same by registered or certified mail, return receipt requested, or via nationally recognized courier service, to the party to which or to whom the notice is directed, at the address each party designates in writing.  Any notice mailed to such address shall be effective when deposited in the mail, duly addressed and postage prepaid, notwithstanding failure by the addressee thereof to receive the mailed notice.

 

16. Governing Law.  All transactions contemplated hereunder and all rights of the parties hereto shall be governed as to validity, construction, enforcement and in all other respects by the laws and decisions of the State of California.

 

17. Titles.  The titles of the sections of this Agreement are inserted only as a matter of convenience and for reference, and in no way define, limit or describe the scope of this Agreement or the intent of any provisions hereof.

 

18. Amendment.  This Agreement shall not be modified or amended except by written agreement signed by all of the parties hereto.

 

19. Severability of Provisions.  Any provision of this Agreement which is invalid, prohibited, or unenforceable in any jurisdiction, shall not invalidate the remainder of the provision or the remaining provisions of the Agreement.

 

20. Entire Agreement.  This Agreement contains all of the representations, declarations and statements from either party to the other and expresses the entire understanding between the parties with respect to the transactions provided for herein. All prior memoranda, letters, statements and agreements concerning this subject matter, if any, including any references to the grant of options to Optionee in any prior employment agreement or employment offer letter, are merged in and replaced by this Agreement.

 

21. Pronouns, Number and Gender.  Wherever necessary to implement the intent of the parties hereto, references herein to the singular shall be interpreted as the plural, and vice versa, and the feminine, masculine or neuter gender shall be treated as one of the other genders.

 

22. Binding Effect.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns.

 

23. Counterparts.  This Agreement may be executed in one or more counterparts, each of which may be deemed an original, but all of which together shall constitute one and the same instrument.

 

24. Rule 701.  This Agreement is intended to qualify as a written compensation contract that complies with all conditions of Rule 701 of the Act.

 

  

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IN WITNESS WHEREOF, the parties hereto have signed this Agreement the day and year first above written.

 

	  	
PACIFIC ENERGY DEVELOPMENT CORP.

 

By:________________________________

Name:

Its:

 

	  	
OPTIONEE

___________________________________

 

By:________________________________

Type:____________________

Grantee:_________________

No. of Shares:_____________

Grant Date:_______________

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