Document:

exv10w1

 

Exhibit 10.1

WEST DOUGLAS

PARTICIPATION AGREEMENT

     THIS WEST DOUGLAS PARTICIPATION AGREEMENT (this “Agreement”) is dated June 25, 2007, by and
among RED TECHNOLOGY ALLIANCE, LLC, a Delaware limited liability company (“RTA”), and AMERICAN OIL
& GAS, INC., a Nevada corporation (“AOGI”) and NORTH FINN, LLC, a Wyoming limited liability
company (“North Finn”) (AOGI and North Finn may be referred to collectively herein as “Company”).
RTA and Company may be referred to individually as a “Party” and collectively as the “Parties”.

RECITALS:

     WHEREAS, Company holds or will hold certain leasehold interests in the Project Area (as
hereinafter defined) and desires to convey certain rights and interests therein to RTA in exchange
for RTA’s participation in the development thereof; and

     WHEREAS, RTA desires to participate in the development of the Project Area and acquire
interests therein, pursuant to the terms of this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises, conditions and agreements herein
contained, the sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS

     1.1 Defined Terms and References. For purposes of this Agreement, unless the context
otherwise requires, the following terms shall have the meanings given:

          “Additional Fort Union Test Wells” shall have the meaning assigned to such term at
Section 2.3.

          “Affiliate” means, with respect to any Person, any other Person controlling or
controlled by or under common control with such Person, with the concept of control in such context
meaning the possession, directly or indirectly, of the power to direct the management and policies
of another, whether by ownership of voting securities, contract or otherwise. With respect to a
corporation, partnership or limited liability company, control is conclusively deemed to exist
where a Person owns fifty percent (50%) or more of the voting stock in such corporation or of the
voting interest as a partner in such partnership or as a member of such limited liability company.
In addition to the foregoing, for purposes of this Agreement, Halliburton Energy Services, Inc. is
an Affiliate of RTA.

          “Agreement” has the meaning assigned to such term in the Preamble.

          “AMI” means the lands located within and coincident with the Project Area as depicted
on the plat attached hereto as Exhibit A and made a part hereof for all purposes.

          “AOGI” shall have the meaning assigned to such term in the Preamble, and includes
AOGI’s successors and assigns.

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          “Business Day” means any day other than a Saturday, a Sunday, or a day on which the
United States Postal Service is not scheduled to deliver ordinary first class mail.

          “Company” shall have the meaning assigned to such term in the Preamble, and includes
both AOGI and North Finn, or either of them, and their respective, successors and assigns.

          “Confidential Information” has the meaning assigned to such term at Section
10.1.

          “Dakota Formation” means that hydrocarbon bearing zone encountered between depths of
13,875 feet and 13,937 feet (electric log measurements) as found in the State of Wyoming #1 well,
located in Section 16, Township 34 North, Range 74 West, Converse County, Wyoming, or the
stratigraphic equivalent thereof.

          “Effective Date” means March 23, 2007.

          “Federal Test Leases” means, notwithstanding any other federal leases shown on Exhibit
B-1, only (i) Lease WYW-142289 granted by the United States of America, as lessor, to Rosita S.
Trujillo, as lessee, dated effective July 1, 1997 and covering all of Section 21, Township 34
North, Range 74 West, and (ii) Lease WYW-142290, granted by the United States of America, as
lessor, to Rosita S. Trujillo, as lessee, dated effective July 1, 1997 and covering all of Section
10, Township 34 North, Range 74 West, together with other lands.

          “First Fort Union Test Well” shall have the meaning assigned to such term at
Section 2.2.

          “Fort Union Formation” means that hydrocarbon bearing zone encountered between depths
of 1250 feet and 2850 feet (electric log measurements) as found in the State of Wyoming #1 well,
located in Section 16, Township 34 North, Range 74 West, Converse County, Wyoming, or the
stratigraphic equivalent thereof.

          “Fort Union Wells” means, collectively, the First Fort Union Test Well and the
Additional Fort Union Test Wells.

          “January 2007 Agreement” means that certain Participation Agreement, dated January 17,
2007, entered by and among the Parties and concerning the Fetter Project. (as referenced therein).

          “Leases” means all oil, gas and/or mineral leases within the Project Area in which
Company, or either of them, owns an interest on the Effective Date; individually, a
“Lease”.

          “Material Contracts” means those agreements set forth at Schedule II hereto.

          “Mowry Formation” means that hydrocarbon bearing zone encountered between depths of
13,565 feet and 13,743 feet (electric log measurements) as found in the State of Wyoming #1 well,
located in Section 16, Township 34 North, Range 74 West, Converse County, Wyoming, or the
stratigraphic equivalent thereof.

          “North Finn” shall have the meaning assigned to such term in the Preamble, and
includes North Finn’s successors and assigns.

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          “OAC” means the operations advisory committee created by the Parties pursuant to
Section 6.4 of this Agreement.

          “Oil and Gas Interests” means any nature of interest in oil and/or gas rights,
including, but not limited to, a mineral interest, royalty interest, overriding royalty interest,
leasehold interest or related personal property interest, or any combination thereof, BUT EXCLUDING
the Leases.

          “Operating Agreement” means that certain form of 1989 AAPL Model Form Operating
Agreement, attached hereto and made a part hereof as Exhibit C.

          “Operator” means North Finn as operator in accordance with the applicable Operating
Agreement.

          “Party” or “Parties” shall have the meaning assigned to such term in the
Preamble.

          “Person” means any individual, governmental agency, corporation, limited liability
company, partnership, joint venture, trust, estate, unincorporated organization, or other entity or
organization.

          “Project Area” means those lands known by the Parties as the “West Douglas Project”,
as depicted on that plat attached hereto as Exhibit A and made a part hereof for all
purposes, and includes, without limitation, the Leases set forth at Schedule I hereto.

          “Project Area Operations” has the meaning given at Section 6.4(a).

          “RTA” shall have the meaning assigned to such term in the Preamble, and includes RTA’s
successors and assigns.

          “Sims 15-26 Well” is the “Initial Test Well” as defined in the January 2007 Agreement,
as further described in Section 2.1.

          “State Test Lease” means, notwithstanding any other state leases shown on Exhibit B-1,
only Lease 02-00030 granted by the State of Wyoming, as lessor, to John P. Ellbogen, II, as lessee,
dated effective April 2, 2002, and covering all of Section 16, Township 34 North, Range 74 West.

          “Tax Partnership Agreement” has the meaning given at Section 6.1.

          “Third Party” means a Person who is neither a Party nor an Affiliate of a Party.

          “Well Costs” means the costs and liabilities incurred in connection with drilling,
testing and completing a well, including, but not limited to, plugging and abandoning costs if the
well is completed as a dry hole and the costs of equipping the well for production if it is
completed as a producer.

          “West Douglas Well” has the meaning given in Section 2.5.

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     1.2 In this Agreement, unless the context or an express provision otherwise requires:

          (a) Headings and underlining are for convenience only and do not affect the interpretation of
this Agreement.

          (b) Words importing the singular include the plural and vice versa.

          (c) A reference to an article, section or clause is a reference to that article, section or
clause of this Agreement.

          (d) A reference to an exhibit or schedule is a reference to an exhibit or schedule to this
Agreement. All schedules and exhibits attached to or referred in this Agreement are incorporated
into this Agreement for all purposes. Reference to this “Agreement” includes all agreements and
instruments attached as schedules or exhibits to this Agreement and/or executed in connection with
the transactions contemplated by this Agreement.

          (e) References, including use of a pronoun, shall include, where applicable, masculine,
feminine, singular or plural individuals or legal entities.

ARTICLE II

PARTICIPATION; ASSIGNMENTS OF INTERESTS

     2.1 Sims 15-26 Well. Pursuant to the Parties’ agreement, and notwithstanding Section
2.1 of the January 2007 Agreement, RTA has drilled the Sims 15-26 Well vertically into the Dakota
Formation and has obtained a minimum of 30 feet of core in the Mowry Formation. The Parties have
agreed that any and all reservoir data acquired during the course of drilling the Sims 15-26 Well
may be used by RTA or Company to evaluate the Project Area under this Agreement and/or the Fetter
Project under the January 2007 Agreement.

     2.2 First Fort Union Test Well. On or about April 8, 2007, Company commenced drilling
operations on that certain Fort Union Formation test well located on lands covered by the State
Test Lease and identified as the State #7-16-34-74 Well (the “First Fort Union Test Well”).
Company represents and warrants that the commencement of such drilling operations was sufficient
to extend the term of the State Test Lease to April 1, 2008. In part consideration of Company
entering this Agreement, RTA, within thirty (30) days after receiving an invoice therefor, shall
pay to Company an amount equal to 50% of Company’s aggregate Well Costs incurred with respect to
the First Fort Union Test Well. In the event RTA elects to drill the West Douglas Well in
accordance with Section 2.5, and the First Fort Union Test Well is completed as a producer
(whether or not in paying quantities), Company shall assign to RTA a 50% working interest in the
First Fort Union Test Well and in the regulatory spacing unit allocated thereto, which assignment
shall be effective as of the date the well is completed as a well capable of production. The
obligation of RTA to reimburse to Company 50% of its aggregate Well Costs incurred for the First
Fort Union Test Well is unconditional and does not depend upon whether RTA receives an assignment
of working interest therein.

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     2.3 Additional Fort Union Test Wells. Company shall commence drilling operations on
two (2) additional Fort Union Formation test wells in the Project Area (the “Additional Fort
Union Test Wells”), which wells shall be located on the Federal Test Leases. The Additional
Fort Union Test Wells shall be drilled in a manner believed to be sufficient to extend the terms of
each of the Federal Test Leases to at least June 30, 2009. In accordance with Section 2.5
below, (a) if RTA has asserted its election on or before June 30, 2007, to drill the West Douglas
Well, or (b) if RTA has not asserted an election by June 30, 2007, but RTA’s option to drill the
West Douglas Well is still available at that time, then RTA shall pay to Company an amount equal to
50% of Company’s aggregate Well Costs incurred with respect to the Additional Fort Union Test
Wells. In such event, and provided the Additional Fort Union Test Wells, or either of them, are
completed as a producer (whether or not in paying quantities), Company shall assign to RTA a 50%
working interest in each producing Additional Fort Union Test Well and in the regulatory spacing
unit(s) allocated thereto, which assignment(s) shall be effective as of the date the respective
well is completed as a well capable of production. If, subsequent to June 30, 2007, RTA elects not
(or is deemed not to have elected) to drill the West Douglas Well, RTA nonetheless shall reimburse
to Company 50% of its aggregate Well Costs incurred for the Additional Fort Union Test Wells.

     2.4 Failure to Commence Test Wells. If the First Fort Union Test Well or either of
the Additional Fort Union Test Wells is not commenced in accordance with Section 2.2 and
Section 2.3 hereof, RTA, in its sole discretion, may terminate this Agreement by providing
advance written notice of such termination to Company. In such event, (a) this Agreement shall no
longer be in force and effect, (b) the Parties shall be free of any further rights, liabilities or
obligations under this Agreement (including any obligations to pay for or commence operations not
yet begun), and (c) no Party shall have any further recourse against the other under this
Agreement. 

     2.5 Option to Drill West Douglas Well. Until September 14, 2007, RTA shall have the
option to commit to drill a vertical test well (the “West Douglas Well”) into the Dakota Formation
in the SW/4 NE/4 of Section 16, Township 34 North, Range 74 West, Converse County, Wyoming. If RTA
does not notify Company in writing on or before September 14, 2007 of its election to commit to
drill the West Douglas Well, then it shall be deemed to have elected not to commit to drill such
well. The only penalty to RTA for failing to commit to drill the West Douglas Well shall be
termination of its right to earn a portion of Company’s interest in the Project Area, including the
forfeiture of its right to receive assignments of the Fort Union Wells as described in Sections
2.2 and 2.3. If RTA elects to commit to drill such well, it shall pay 100% of the Well Costs
thereof; provided, however, the level of completion and equipping of the West Douglas Well shall be
determined by RTA, in its sole discretion, based upon results seen in such well. RTA will perform
such reservoir data acquisition on the well as it deems necessary, in RTA’s sole discretion, to
determine whether a vertical completion is proper or whether a horizontal operation and completion
should be undertaken. If RTA and the Company mutually agree that a horizontal operation and
completion should be undertaken, the Company shall pay to RTA such amount as then may be mutually
agreed as a contribution toward the increased cost of such horizontal operation and completion. If
the Company and RTA fail to agree that a horizontal operation and completion should be undertaken
or if they fail to agree on the amount to be paid by Company as a contribution toward the increased
cost, then RTA shall drill, complete and equip the well, at its option, either as a vertical test
well or as a horizontal test well, but in either event at the sole cost of RTA, without any
contribution by Company. 

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     2.6 Well Commencement; Failure to Commence.

          (a) Subsequent to exercising its option to commit to drill the West Douglas Well, and subject
to incidents of force majeure as described at Section 11.2, RTA shall cause actual drilling
of the West Douglas Well to be commenced within forty-five (45) days of the date (i) all permits
and other requisite regulatory approval is obtained for such well, (ii) applicable title has been
approved by RTA, and (iii) an appropriate rig (in RTA’s sole opinion) is available, but in
no event later than six (6) months following the effective date of the West Douglas Unit as
approved and designated by the Bureau of Land Management (currently pending).

          (b) If, after committing to drill the West Douglas Well pursuant to Section 2.5, RTA
fails to commence actual drilling of the West Douglas Well in accordance with Section
2.6(a), then (i) RTA’s right to earn a portion of Company’s interest in the Project Area shall
be terminated, and (ii) RTA shall promptly pay One Million Dollars ($1,000,000.00) to
Company as liquidated damages for its failure to commence drilling after committing to do so.
Without limitation of Section 2.6(a), in the event RTA is prevented from commencing actual
drilling of the West Douglas Well for reasons beyond its control (such as failure of drilling
permit to timely issue, failure of title in the drillsite lease or other incidents of force majeure
as described at Section 11.2), RTA shall not be liable to Company for such payment. For
the avoidance of doubt, and subject to incidents of force majeure, this Section 2.6(b)
shall be given effect ONLY IN THE EVENT RTA commits to drill the West Douglas Well and then fails
to timely commence such drilling. At such time as RTA commences drilling of the West Douglas Well
in accordance with Section 2.6(a), this Section 2.6(b) shall have no force or
effect and RTA shall incur no liability hereunder.

     2.7 Substitute West Douglas Well. If in the drilling of the West Douglas Well,
impenetrable substances or conditions, including the loss of the hole from mechanical difficulties,
are encountered, which in the opinion of the OAC (applying the standard of a reasonably prudent
operator operating under the same or similar conditions) would render further drilling
impracticable or hazardous, and as a result, the West Douglas Well fails to encounter the Dakota
Formation, RTA shall have the right and option, but not the obligation, to cause a substitute well
or wells to be drilled, provided such substitute well (a) is commenced within ninety (90) days
after release of the rig used in drilling the West Douglas Well or, if applicable, used in the
drilling of the preceding substitute well and (b) is at or near the original location of the West
Douglas Well. When drilling for said substitute well is commenced, said substitute well shall be
regarded for all purposes hereunder as the West Douglas Well.

     2.8 Project Earning Rights. Upon drilling the West Douglas Well into the Dakota
Formation (whether or not completed as a producer and whether or not a horizontal operation and
completion is undertaken) and paying 100% of its Well Costs (but subject to Company’s reimbursement
of Well Costs, as applicable, for horizontal operation and completion, as set forth in Section
2.5), RTA shall earn and receive an assignment of 50% of Company’s right, title and interest in
such well and in the regulatory spacing unit allocated thereto. In addition, RTA shall earn and
receive an assignment of an undivided 50% of Company’s right, title and interest in the Leases, to
the extent not assigned pursuant to assignments made in accordance with Section 2.2,
Section 2.3 and/or the first sentence of this Section 2.8. The assignments of
rights in the West Douglas Well and in the Leases shall be effective as of the date the West
Douglas Well is

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completed (either as a dry hole or as a well capable of production) and shall be subject to
all applicable terms and conditions contained in the Material Contracts.

     2.9 Assignments of Interests. Upon RTA having earned the right to receive any
assignment of interest from Company under this Agreement, RTA may request an assignment from
Company, and Company, within fifteen (15) Business Days after such request, shall execute and
deliver to RTA an assignment in form substantially the same as that attached hereto as Exhibit
B-1 (Leases) or Exhibit B-2 (wells and related regulatory units), as applicable, which
forms of assignment shall be completed to reflect the appropriate legal descriptions as to the
interests conveyed, effective dates, and such other information as may be necessary to properly
reflect the Parties’ intent under this Agreement; provided, however, if other forms of assignment
are prescribed for the transfer of interests in governmental leases, then such prescribed forms
shall be utilized. RTA shall submit the executed assignments for filing in the real property
records in the county(ies) where the Project Area is located.

ARTICLE III

AREA OF MUTUAL INTEREST

     3.1 Rights in AMI. Upon RTA earning rights in the West Douglas Well and in the
Leases, as set forth at Section 2.8, but effective as of and retroactive to March 24, 2007,
the AMI shall be established by and among the Parties which shall then continue in effect until
March 24, 2012. If either Party acquires any Oil and Gas Interests within the AMI during the time
period that the AMI is in effect, the other Party shall have the option to acquire a 50% interest
in the acquired Oil and Gas Interests in accordance with the further terms of this Article III. In
addition, if RTA earns rights in the West Douglas Well and the Leases, it will then become subject
to the area of mutual interest obligations contained in the Participation Agreement, as amended,
dated effective April 4, 2005 by and among Red River Oil & Gas, LLC, Cohort Energy Company, and
Company.

     3.2 Notice of Acquisition. On or before the later of (a) thirty (30) days following
the date RTA earns rights in the West Douglas Well and in the Leases, in accordance with
Section 2.8, or (b) thirty (30) days after a Party acquires any Oil and Gas Interests
within the AMI, the acquiring Party shall give the other Party written notice thereof by certified
mail (return receipt requested), courier or personal delivery. Simultaneous with such written
notice, the acquiring Party also shall make available to the other Party for its examination all
material information in the possession of the acquiring Party regarding such acquired Oil and Gas
Interests, including, without limitation, costs, title, surveying, geological, and/or geophysical
information.

     3.3 Election to Acquire Interests. Within thirty (30) days after receipt of such
written notice from the acquiring Party, the Party receiving notice shall advise the acquiring
Party whether or not it elects to exercise its option to acquire 50% of such acquired Oil and Gas
Interests. Within thirty (30) days of making its election, as to all interests so acquired as to
which the non-acquiring Party timely elects to participate, such non-acquiring Party shall
reimburse the acquiring Party for its proportionate share of all actual costs and expenses incurred
by the acquiring Party in acquiring such interests. Upon tender by the non-acquiring Party to the
acquiring Party of such proportionate share of costs and expenses, the acquiring Party promptly

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shall deliver to the other Party an assignment transferring 50% of the acquired Oil and Gas
Interests in a form substantially the same as that attached hereto as Exhibit B-1 or
Exhibit B-2, as applicable, appropriately completed; provided, however, if other forms of
assignment are prescribed for the transfer of interests in governmental leases, then such
prescribed forms shall be utilized. RTA shall submit the executed assignments for filing in the
real property records in the county(ies) where the acquired Oil and Gas Interests are located.
If the non-acquiring Party (a) notifies the acquiring Party that it elects not to exercise
its option, (b) fails to notify the acquiring Party in writing within the 30-day period as to
whether or not it elects to exercise its option, or, (c) having notified the acquiring Party of its
election to exercise such option, fails to timely make reimbursement for its share of the costs of
such interests, then it shall be deemed that (i) the non-acquiring Party elected not to exercise
its option to participate in the acquired Oil and Gas Interests, (ii) the acquiring Party, in its
sole discretion, may retain such acquired Oil and Gas Interests or assign all or a portion thereof
to an Affiliate or Third Party, and (iii) such acquired Oil and Gas Interests shall no longer be
subject to the AMI or this Agreement.

     3.4 No Reservations. Assignments of Oil and Gas Interests in the AMI by an acquiring
Party to the other Party shall be made without reservation to the assignor of overriding royalty,
net profits interest, production payment or any other similar burden or encumbrance, but shall be
subject to all applicable Material Contracts.

ARTICLE IV

PROJECT DUE DILIGENCE AND MAINTENANCE 

     4.1 Company’s Interests; RTA Due Diligence. Without limitation of Section 5.2
below, RTA acknowledges that, prior to its execution of this Agreement, it has been provided
reasonable access to Company’s lease records for purposes of conducting customary due diligence
evaluation of the Leases, and such due diligence of RTA confirms those interests of Company as set
forth at Schedule I hereto.

     4.2 Lease Maintenance. Without limitation of any other warranty, representation or
covenant of Company set forth in this Agreement, Company covenants and agrees
that Company has used and will use its best efforts to:
(a) timely pay rentals for Leases; (b) extend any Leases that are near the end of their respective
terms; (c) obtain drilling and other requisite permits necessary for the development of the Leases;
(d) comply with all applicable government regulations and requirements; and (e) take such other
actions as are necessary to maintain the Leases in full force and effect. Company will not,
however, be liable to RTA for failure to timely pay any necessary rental, minimum royalty or
shut-in royalty UNLESS such failure arises out of Company’s gross negligence or willful misconduct.

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ARTICLE V

NET REVENUE; REPRESENTATION OF INTERESTS

     5.1 Net Revenue Interest. All assignments of interests to which RTA is entitled under
this Agreement (including, but not limited to, assignments of Oil and Gas Interests in the AMI)
shall be made without reservation by Company of overriding royalty, net profits interest,
production payment or any other similar burden or encumbrance, and, without limitation, shall
deliver to RTA its proportionate share of the Company’s net revenue interest (after giving effect
to any overriding royalty assignments required to be made under the terms of the Material
Contracts) as of the Effective Date.

     5.2 Represented Interests. Company represents (without warranty of title) that (a)
all Leases are set forth and described at Schedule I hereto and (b) without limitation of
Section 5.1 above, to the best of its knowledge and belief, it owns all of the working
interest in the net acres (shown under column heading “Net Acs”) set forth at Schedule I
hereto and all of the net revenue interest (under column heading “NRI”) related thereto as shown on
said Schedule I. Further, Company represents that, to the best of its knowledge and
belief, it will be able to convey to RTA record title to the Leases, including, but not limited to,
the Fort Union Wells and the West Douglas Well, in accordance with the terms and conditions of this
Agreement.

ARTICLE VI

PROJECT AREA OPERATIONS

     6.1 Operations. All operations in the Project Area, unless subject to a federal unit
operating agreement (as discussed below) or other existing operating agreement, shall be conducted
in accordance with the terms and conditions of an Operating Agreement, the form of which is
attached hereto as Exhibit C. Should the West Douglas Unit (federal exploratory unit) or
other federal unit be formed in the Project Area, the Parties agree that the related federal unit
operating agreement shall incorporate, to the extent practical, the terms and conditions of the
Operating Agreement. All operations conducted by or among the Parties in the Project Area shall be
subject to a single tax partnership governed by the tax partnership agreement attached hereto as
Exhibit D (the “Tax Partnership Agreement”). The Tax Partnership Agreement shall be
incorporated by reference into each Operating Agreement or, as applicable, by ratification of an
existing operating agreement or of a federal unit operating agreement (provided that third parties
to any such agreements shall not be parties to the Tax Partnership Agreement). The Parties agree
that Operator may contract with a Third Party to perform the functions of the “Tax Preparing
Partner” (as described in the Tax Partnership Agreement) and may charge the actual costs incurred
under such contract to the “Joint Account” under the applicable operating agreement. The “Contract
Area” as defined in each unique Operating Agreement shall be the regulatory spacing unit for the
“Initial Well” (as defined in such Operating Agreement) drilled under such Operating Agreement,
which Operating Agreement will be signed before the spud of each “Initial Well”. Without
limitation, the Operator shall maintain the applicable leases for the benefit of all Parties
(including, but not limited to, payment of lease royalties, which shall be expressly provided in
the JOA) according to their proportionate interests. Further, the JOA shall provide that, in the
event RTA elects not to take its production “in kind”, RTA shall have the option to cause Operator
to market such production for the benefit of RTA (a) without imposition by Operator of a marketing
fee or other similar cost to RTA (except RTA’s pro rata share of any direct and actual costs or
fees incurred by Operator in the ordinary course of marketing such production, but excluding
general and administrative costs) and (b) on terms and conditions no less favorable that those
obtained by

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or on behalf of Operator in marketing its own production from the same wells, EXCEPT, if, as
of the date RTA requests Operator to market such production, Operator already is subject to the
terms of a Third Party marketing agreement covering such wells and is unable to obtain as favorable
terms and conditions with such Third Party for the benefit of RTA, then Operator shall market RTA’s
production on such terms and conditions that Operator believes in good faith to be reasonable under
the circumstances. Except as otherwise expressly set forth herein, the development and maintenance
of the Project Area shall be governed by this Agreement, the Leases, and the applicable operating
agreements. In the event of a conflict between the terms of this Agreement and the terms of any
operating agreement, the terms of this Agreement shall prevail.

     6.2 Well Proposals.

          (a) Any Party who desires to propose the drilling of a well in the Project Area shall submit
such proposal in writing to the other Parties hereto, UNLESS such proposed well is already subject
to the terms of another operating agreement (in which event, such other operating agreement shall
control), AND EXCLUDING, without limitation, those wells anticipated at Article II herein. Each
Party to whom such written proposal is delivered shall have thirty (30) days from receipt of the
written proposal to notify the proposing Party as to whether it elects to participate; a Party’s
failure to respond within such 30-day period shall be deemed an election not to participate. At
such time as the Parties have elected to participate or not participate, as the case may be, in the
proposed well, the participating Parties shall sign an Operating Agreement (with the proposed well
being the “Initial Well”), all as anticipated pursuant to Section 6.1 above, and the terms
of this Section 6.2(a) thereafter shall be superseded by such Operating Agreement.
Notwithstanding the foregoing, the Parties agree that, should any Party hereto elect not to
participate in the proposed well, such non-participating Party, within thirty (30) days of the
completion of such well (whether completed as a dry hole or as a producer), shall relinquish and
assign to the participating Party(ies), without creating or reserving any new burdens on
production, all of its right, title and interest in the regulatory spacing unit allocated thereto,
BUT LIMITED to a depth of one hundred feet (100’) below the stratigraphic equivalent of the deepest
depth drilled in such well.

          (b) Notwithstanding (a) above, no more than two drilling rigs will be engaged in drilling
within the Project Area at the same time, unless all Parties otherwise agree. Consequently, no
Party may make a proposal for a new well under (a) above, or under any Operating Agreement, if such
proposal would, after giving priority to pending or previously approved well proposals, require the
use of a third drilling rig in the Project Area, unless all Parties agree in advance to consider
such proposal.

     6.3 Operator. North Finn, as Operator, shall operate each of the First Fort Union
Test Well, the Additional Fort Union Test Wells and the West Douglas Well. North Finn agrees not
to resign as Operator and/or vote in favor of its removal or replacement as Operator without first
obtaining RTA’s written consent UNLESS such resignation, removal or replacement arises in
connection with the allowed assignment of all of North Finn’s interests in the Leases and Project
Area to a Third Party.

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     6.4 Operations Advisory Committee.

          (a) The OAC shall consist of a voting membership appointed by RTA (as to 50% of such voting
members) and Company (as to 50% of such voting members). The voting members shall appoint such
other non-voting temporary or permanent members as the voting members shall deem necessary or
convenient. A voting member designated by RTA shall serve as chairperson of the OAC. The OAC shall
be formed by the Parties within ten (10) days after this Agreement has been entered into by the
Parties (or at a later date if mutually agreed by the Parties) and shall remain intact for a period
coextensive with this Agreement, unless discontinued and disbanded at the mutual agreement of the
Parties. The OAC will meet at such times as determined by the Parties in order to permit the
Parties to consult freely with each other regarding the development of the Project Area and
operations related to such development (“Project Area Operations”). The voting members of
the OAC shall establish such procedures for the conduct of their meetings as they deem reasonable
and necessary. If the OAC’s members should disagree with respect to any portion of the Project
Area Operations, the decision of the Party representing the largest cost bearing interest
attributable to such Project Area Operations (or, in the event of a deadlock, the decision of the
Operator) shall be final; provided, however, that any such decision that otherwise would require
consent of all or a portion of the parties under an applicable operating agreement will still
require such consent. Nothing in this Section 6.4 is intended to reduce the rights
accorded to the Operator and Non-Operators under an applicable operating agreement. The OAC
meetings may be telephonic. In emergency situations, the Operator shall have the authority to act
without the guidance or oversight of the OAC and to exercise the discretionary judgment customarily
afforded operators. If the OAC delays the progress of activities while a rig is on location,
stand-by time will be charged to the participating parties in the well or operation.

          (b) The OAC shall have oversight and design responsibility as to the drilling and completion
of the West Douglas Well and as to any well arising out of this Agreement that is subject to an
Operating Agreement entered by the Parties, including without limitation, the right to determine,
and revise from time to time as the OAC determines to be necessary or desirable, the depth, casing
program and other particulars of each such well; provided, however, that the Party(ies) conducting
the Project Area Operations shall retain responsibility for the conduct of such Project Area
Operations, the OAC being interested only in the results to be obtained thereby.

          (c) The OAC may make recommendations to the Parties concerning the development of the Project
Area.

          (d) Notwithstanding anything in this Agreement to the contrary, in no event shall any Party or
the representative of any Party have any liability to any other Party or Party’s representative for
any act or failure to act as a voting or non-voting member of the OAC (except in the case of gross
negligence or willful misconduct), each of the Parties hereby agreeing to release the other Party
and its respective representatives from any and all claims or demands arising out of or related or
incident to the other Party’s or its representatives’ acts or omissions as a member of the OAC.

     6.5 Construction of Post-Production Facilities. Should any Party construct or acquire
a pipeline or gathering line to transport production or any other post-production facility,
including, but not limited to, facilities to dehydrate, treat, process or fractionate production
of oil and gas from a Contract Area (as such term may be defined in an applicable operating
agreement),

11

 

but regardless of whether such facility is located within such Contract Area, then such party
shall offer each of the other Parties the right to participate in the construction, acquisition,
operation and ownership in such post-production facilities on an actual cost basis with no Party
obtaining an economic profit or advantage from any other Party. In such event, all Parties
participating in post-production facilities shall be governed by the terms and conditions of a
facilities agreement to be agreed upon among such Parties.

ARTICLE VII

PARTIES’ REPRESENTATIONS AND WARRANTIES

     7.1 AOGI’s Representations and Warranties. Without limitation of any other
representations, warranties and covenants in this Agreement, AOGI represents and warrants to RTA
that, as of the Effective Date:

          (a) AOGI is a corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada.

          (b) AOGI has the power and authority to carry on its business as presently conducted, to enter
into this Agreement and to perform its obligations under this Agreement.

          (c) Execution and delivery of this Agreement, consummation of the transactions contemplated by
this Agreement, and performance of all obligations under this Agreement have been authorized by all
necessary action, corporate and otherwise, on the part of AOGI. Execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by this Agreement will
not, violate or be in conflict with any agreement, instrument, judgment, order, decree, law, rule
or regulation by which AOGI or, to the best of AOGI’s knowledge (which term “best of AOGI’s
knowledge” shall mean, wherever used in this Agreement, the actual knowledge of any officer or
senior manager of AOGI), the Leases are bound.

          (d) Subject to laws and equitable principles affecting the rights of creditors generally, this
Agreement is a binding obligation of AOGI enforceable according to its terms.

          (e) No suit, claim, demand, or investigation is pending or, to the best of AOGI’s knowledge,
is threatened, that would impair AOGI’s title to the Leases or adversely affect their value,
operation, or development. There are no bankruptcy or reorganization proceedings pending or, to
the best of AOGI’s knowledge, threatened against AOGI.

          (f) To the best of AOGI’s knowledge, AOGI is not in breach of any obligation, or would be in
breach with the passage of time or the giving of notice, which might adversely affect to a material
extent ownership, operation or value of the Leases.

          (g) To the best of AOGI’s knowledge, there are no material agreements binding on AOGI relating
to the Leases or any of the Project Area, or any wells located or to be located thereon, EXCEPT
those agreements identified at Schedule II hereto.

12

 

          (h) AOGI has incurred no liability for brokers’ or finders’ fees related to the transaction
contemplated by this Agreement for which RTA shall be liable.

          (i) Except as contemplated by the Operating Agreement, no portion of the Leases, or any wells
thereon or anticipated to be drilled thereon, (i) has been contributed to or is currently held by
a tax partnership, (ii) is subject to any form of agreement deemed by any state or federal law,
rule or regulation to be or to have created a tax partnership, or (iii) otherwise constitutes
“partnership property” (as that term is used in Subchapter K, Chapter 1, Subtitle A of the Internal
Revenue Code) of a tax partnership.

          (j) Neither AOGI nor any Person acting at AOGI’s direction has assigned away or encumbered any
of AOGI’s interest in any of the Leases.

          (k) AOGI has no actual knowledge that any of RTA’s representations set forth in Section
7.3 below are untrue in any material respect.

          (l) To the best of AOGI’s knowledge, AOGI has disclosed all information that would be
necessary to make the representations made by AOGI in this Section 7.1 not misleading.

     7.2 North Finn’s Representations and Warranties. Without limitation of any other
representations, warranties and covenants in this Agreement, North Finn represents and warrants to
RTA that, as of the Effective Date:

          (a) North Finn is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Wyoming.

          (b) North Finn has the power and authority to carry on its business as presently conducted, to
enter into this Agreement and to perform its obligations under this Agreement; without limitation,
North Finn has obtained all necessary and required permits, licenses and qualifications
(including, but not limited to, qualifications to conduct business where required by applicable
state law) to act as Operator of the Project Area.

          (c) Execution and delivery of this Agreement, consummation of the transactions contemplated by
this Agreement, and performance of all obligations under this Agreement have been authorized by all
necessary action, corporate and otherwise, on the part of North Finn. Execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated by this Agreement
will not, violate or be in conflict with any agreement, instrument, judgment, order, decree, law,
rule or regulation by which North Finn or, to the best of North Finn’s knowledge (which term “best
of North Finn’s knowledge” shall mean, wherever used in this Agreement, the actual knowledge of any
officer or senior manager of North Finn), the Leases are bound.

          (d) Subject to laws and equitable principles affecting the rights of creditors generally, this
Agreement is a binding obligation of North Finn enforceable according to its terms.

13

 

          (e) No suit, claim, demand, or investigation is pending or, to the best of North Finn’s
knowledge, is threatened, that would impair North Finn’s title to the Leases or adversely affect
their value, operation, or development. There are no bankruptcy or reorganization proceedings
pending or, to the best of North Finn’s knowledge, threatened against North Finn.

          (f) To the best of North Finn’s knowledge, North Finn is not in breach of any obligation, or
would be in breach with the passage of time or the giving of notice, which might adversely affect
to a material extent ownership, operation or value of the Leases.

          (g) To the best of North Finn’s knowledge, there are no material agreements binding on North
Finn relating to the Leases or any of the Project Area, or any wells located or to be located
thereon, EXCEPT those agreements identified at Schedule II.

          (h) North Finn has incurred no liability for brokers’ or finders’ fees related to the
transaction contemplated by this Agreement for which RTA shall be liable.

          (i) Except as contemplated by the Operating Agreement, no portion of the Leases, or any wells
thereon or anticipated to be drilled thereon, (i) has been contributed to or is currently held by a
tax partnership, (ii) is subject to any form of agreement deemed by any state or federal law, rule
or regulation to be or to have created a tax partnership, or (iii) otherwise constitutes
“partnership property” (as that term is used in Subchapter K, Chapter 1, Subtitle A of the Internal
Revenue Code) of a tax partnership.

          (j) Neither North Finn nor any Person acting at North Finn’s direction has assigned away or
encumbered any of North Finn’s interest in any of the Leases.

          (k) North Finn has no actual knowledge that any of RTA’s representations set forth in
Section 7.3 below are untrue in any material respect.

          (l) To the best of North Finn’s knowledge, North Finn has disclosed all information that would
be necessary to make the representations made by North Finn in this Section 7.2 not
misleading.

     7.3 RTA’s Representations and Warranties. Without limitation of any other
representations, warranties and covenants in this Agreement, RTA represents and warrants to Company
that, as of the Effective Date:

          (a) RTA is a limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware.

          (b) RTA has the power and authority to carry on its business as presently conducted, to enter
into this Agreement and to perform its obligations under this Agreement.

          (c) Execution and delivery of this Agreement, consummation of the transactions contemplated by
this Agreement, and performance of all obligations under this Agreement have been authorized by all
necessary action, corporate and otherwise, on the part of RTA. Execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by this Agreement will
not, violate or be in conflict with any agreement, instrument, judgment, order, decree, law, rule
or regulation by which RTA is bound.

14

 

          (d) Subject to laws and equitable principles generally affecting the rights of creditors, this
Agreement is a binding obligation of RTA enforceable according to its terms.

          (e) RTA has incurred no liability for brokers’ or finders’ fees related to the transactions
contemplated by this Agreement for which Company shall be liable.

          (f) RTA has no actual knowledge that any of Company’s representations set forth in Section
7.1 or Section 7.2 above are untrue in any material respect.

          (g) To the best of RTA’s knowledge (which term “best of RTA’s knowledge” shall mean, wherever
used in this Agreement, the actual knowledge of any officer or senior manager of RTA), RTA has
disclosed all information that would be necessary for RTA to disclose to make the statements and
representations made by RTA not misleading.

ARTICLE VIII

COVENANTS

     8.1 Encumbrances. From the Effective Date until the delivery of each assignment
anticipated under Article II hereof (or until such time as it is determined that RTA shall not earn
such assignments), Company shall not sell, transfer or encumber in any way the Leases, except to
the extent required under the terms of the Material Contracts.

     8.2 Well Tests. Subject to Section 2.5, in the course of drilling the West
Douglas Well, RTA shall cause to be obtained formation cores and shall cause to be conducted such
other tests as are customary and necessary to such operations, to allow each Party, respectively,
in its discretion, to (a) calculate gas in place, (b) identify fractures, and (c) determine
minimum-maximum stress orientation. All such tests, including daily drilling reports, shall be
furnished to the Company. In addition, the Company will have reasonable access to the well
location and drilling rig during drilling operations, provided, however, that such access shall be
at the Company’s sole cost, risk and liability and, further, such access may not interfere with
operations and may be denied for safety reasons.

     8.3 Unit Formation Costs; Lease Rentals. Upon RTA’s election to drill the West
Douglas Well, RTA will reimburse Company for 50% of the reasonable and customary costs incurred by
Company in connection with the formation of the West Douglas Unit (federal exploratory unit).
Likewise, upon such election and RTA’s receipt of the assignment of Leases described at
Section 2.8, RTA will reimburse Company for 50% of all Lease rentals incurred by Company
from and after the Effective Date. Notwithstanding the foregoing, no such reimbursements shall be
due from RTA until thirty (30) days following RTA’s receipt of an invoice from Company that
provides reasonable detail of each item for which payment is due, including, but not limited to,
the date Lease rentals are due (and date of payment by Company if already paid) and such other
details as RTA reasonably may request to process such invoice for payment.

15

 

     8.4 Sales and Use Taxes and Recording. The Parties believe that any assignment of Oil
and Gas Interests granted under this Agreement will be exempt from all transfer, sales, and use
taxes. If any such assignment is not exempt, the Party receiving such assignment shall pay all
applicable transfer, sales, and use taxes occasioned thereby. In addition, the Party receiving an
assignment shall pay all documentary, filing, and recording fees required in connection with the
filing and recording of that assignment.

     8.5 Further Assurances. Company and RTA agree to execute and deliver such instruments
and take other action as may be necessary or advisable to carry out the intent and purposes of this
Agreement.

     8.6 Preferential Rights; Consents. In the event any interest to be assigned pursuant
to Article II of this Agreement is subject to a preferential right of purchase, consent to
assignment, or any similar obligation arising under any of the Leases, the Operating Agreement or
under any other agreement whatsoever, Company shall be responsible in all respects for obtaining a
waiver of such applicable preferential right to purchase, obtaining the consents to assign, or
fulfilling such other obligations to allow RTA to obtain and enjoy the full interests anticipated
under this Agreement.

     8.7 Company Indemnity.

          (a) COMPANY SHALL INDEMNIFY, DEFEND AND HOLD RTA, its Affiliates, and its/their directors,
officers, managers, partners, employees, agents and representatives HARMLESS FROM AND AGAINST ANY
AND ALL CLAIMS (as defined below) to the extent arising out of or attributable to a preferential
right of purchase, consent to assignment, or similar obligation arising under any of the Leases,
any Operating Agreement or under any other agreement whatsoever, BUT ONLY INSOFAR AS any assignment
of interest earned by RTA pursuant to Article II of this Agreement is subject to such preferential
right, consent or similar obligation at the time such interest is earned by RTA. For the avoidance
of doubt, and without limitation, RTA shall have no obligation to obtain any such waivers or
consents or to fulfill such other obligations; likewise, RTA shall incur no liability whatsoever in
the event of the exercise of preferential rights to purchase, or if Company is unable to obtain
consents to assign or fulfill similar obligations, and RTA shall be indemnified by Company in such
respect as set forth above.

          (b) Further, COMPANY SHALL INDEMNIFY, DEFEND AND HOLD RTA, its Affiliates, and its/their
directors, officers, managers, partners, employees, agents and representatives HARMLESS FROM AND
AGAINST ANY AND ALL CLAIMS to the extent arising out of or attributable to Company’s, or either of
their, failure to obtain applicable regulatory approval of any drilling or other operations
conducted in the Project Area, including, but not limited to, drilling of the Fort Union Wells and
the West Douglas Well. For the avoidance of doubt, and without limitation, RTA shall have no
obligation to obtain any permits or other governmental authority requisite to the conduct of any
drilling or other operations in the Project Area, and RTA shall be indemnified by Company in such
respect as set forth above.

          (c) As used in this Section 8.7, “Claims” shall mean all liabilities, penalties,
fines, obligations, judgments, claims, governmental actions, causes of action, demands,
administrative proceedings, suits and other legal proceedings, together with any fees and

16

 

expenses associated therewith (including, without limitation, costs of investigation,
attorney’s fees, and expert’s fees and expenses).

     8.8 WAIVER OF CONSUMER RIGHTS. EACH PARTY WAIVES ITS RIGHTS UNDER THE TEXAS DECEPTIVE
TRADE PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 et seq., TEXAS BUSINESS & COMMERCE CODE (the
“ACT”), A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF SUCH PARTY’S OWN SELECTION, EACH PARTY VOLUNTARILY CONSENTS TO THIS WAIVER.

IN ORDER TO EVIDENCE ITS ABILITY TO GRANT THE ABOVE WAIVER, EACH PARTY HEREBY REPRESENTS AND
WARRANTS TO EACH OTHER PARTY THAT SUCH PARTY IS NOT A “CONSUMER” UNDER THE ACT. WITHOUT
LIMITATION, EACH PARTY REPRESENTS AND WARRANTS THAT IT (I) IS IN THE BUSINESS OF SEEKING OR
ACQUIRING, BY PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS USE, (II) HAS
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO EVALUATE THE MERITS
AND RISKS OF THE TRANSACTION CONTEMPLATED HEREBY AND (III) IS NOT IN A SIGNIFICANTLY DISPARATE
BARGAINING POSITION.

ARTICLE IX

TERMINATION

     9.1 Termination. Without limitation of Section 2.4 or Section 2.5
herein, this Agreement shall be in effect until such time as the earlier to occur of the following:
(a) RTA has not timely commenced the actual drilling of the West Douglas Well pursuant to
Section 2.6, (b) this Agreement is terminated pursuant to Section 9.2 below, (c)
RTA has assigned all of its Oil and Gas Interests earned under this Agreement to a Third Party, or
(d) the Parties mutually agree in writing to terminate this Agreement.

     9.2 Insolvency. Upon written notice from a terminating Party to the other Party, the
terminating Party, may, without prejudice to any of its legal, equitable or other rights,
immediately terminate this Agreement if the other Party (or, as to Company, either of AOGI or North
Finn) becomes insolvent, makes a general assignment for the benefit of its creditors, applies for
or consents to the appointment of a receiver, trustee or liquidation of all or substantially all of
its assets, has an involuntary petition in bankruptcy filed against it which is not dismissed
within forty-five (45) days or fails to pay its debts and obligations as they become due, or if
such terminating Party reasonably believes that any of the above events is likely to occur.

     9.3 Effect of Termination. No termination of this Agreement shall affect the rights
or obligations of RTA with respect to any rights in Oil and Gas Interests earned prior to the date
of such termination.

17

 

ARTICLE X 

CONFIDENTIALITY

     10.1 Confidential Information. A Party shall not disclose to any Person information
concerning the content of this Agreement and any information of the other Party or the other
Party’s business and affairs that is disclosed or otherwise acquired in consequence of this
Agreement (“Confidential Information”), provided that a Party may disclose Confidential
Information if:

          (a) such disclosure is to

	 	(i)	 	a Party’s, or its Affiliate’s, officers, managers, agents, employees
or legal, technical or financial consultants,

	 	(ii)	 	a lender, a potential lender, an investor or a potential investor in
a Party, or

	 	(iii)	 	a prospective purchaser of all or a portion of a Party’s interest in
the Project Area,

who have a bona fide need to know the same for the purposes of or as contemplated by this Agreement
and who agree to keep the same confidential in accordance with the terms of this Agreement;

          (b) such disclosure is required to comply with any applicable law or order, provided that the Party
must first notify and consult with the other Party before making any such disclosure;

          (c) the other Party has given its prior written consent to the disclosure;

          (d) such disclosure is required for the purposes of a Party lawfully exercising its rights pursuant
to this Agreement;

          (e) such disclosure was at the time of disclosure already in the lawful possession of the Party; or

          (f) such disclosure is lawfully in the public domain.

The Parties recognize that the full text of this Agreement and the Operating Agreement will be
filed with the Securities and Exchange Commission and, to the extent required by applicable
regulation, made publicly available by AOGI in connection with its reporting obligations under the
Securities Exchange Act. Subject to the foregoing, unless otherwise mutually agreed, and except as
required by law, the contents of this Agreement, and the Operating Agreement and their respective
subject matter will be Confidential Information.

     10.2 Use of Confidential Information. A Party:

          (a) may use the Confidential Information only for the purposes of or as contemplated by this
Agreement and not for any other purpose EXCEPT for a purpose that involves or reasonably may be
expected to benefit all Parties; and

          (b) must not make use of the Confidential Information to the commercial, financial, or competitive
disadvantage of the Party that provided the Confidential Information.

18

 

     10.3 Publicity. No public announcement with regard to this Agreement, or any related
matter, shall be made without the consent of all Parties, which consent shall not be unreasonably
withheld; provided, however, that a Party may make a public announcement without the consent of all
Parties when it believes in good faith that it is legally obligated to do so. In any event, the
Party that wishes to make the public announcement must first provide an advance copy of such
announcement to all Parties, who shall be provided a reasonable time to provide comment thereto
prior to the release of such announcement to the public. As used in the previous sentence, “a
reasonable time” shall be no less than three (3) Business Days, unless the announcing Party is
legally obligated to make such announcement sooner, in which case the other Parties shall be
allowed a reasonable time under the circumstances.

ARTICLE XI

MISCELLANEOUS

     11.1 Notices. All notices required or permitted under this Agreement shall be
effective upon receipt if personally delivered, if mailed by registered or certified mail (return
receipt requested), postage prepaid, or if delivered by facsimile transmission, if directed to the
Parties as follows:

	 	 	 
	To RTA:

	 	Red Technology Alliance, LLC
	 

	 	2101 CityWest Blvd., Building 2
	 

	 	P.O. Box 42806 (77242-2806)
	 

	 	Houston, TX 77042-2827
	 

	 	Phone: (713) 839-4689
	 

	 	Fax: (713) 839-4618
	 

	 	Attn: Jim Buckingham
	 
	 	 
	To AOGI:

	 	American Oil & Gas, Inc.
	 

	 	1050 17th St., Suite 2400
	 

	 	Denver, CO 80265
	 

	 	Phone: (303) 991-0173
	 

	 	Fax: (303) 595-0709
	 

	 	Attn: Patrick D. O’Brien
	 
	 	 
	To North Finn

	 	: North Finn, LLC
	 

	 	950 Stafford
	 

	 	Casper, WY 82609
	 

	 	Phone: (307) 237-7854
	 

	 	Fax: (307) 237-7628
	 

	 	Attn: Wayne P. Neumiller

     Any Party may give written notice of a change in the address or individual to which delivery
shall be made.

19

 

     11.2 Force Majeure. The force majeure provisions contained in the attached form of
Operating Agreement, at Article XI. therein, shall apply to this Agreement and are incorporated
herein by reference for all purposes.

     11.3 Expenses. All fees, costs and expenses incurred by the Parties in negotiating
this Agreement and in consummating the transactions contemplated by this Agreement shall be paid by
the Party that incurred them.

     11.4 Amendment. The provisions of this Agreement may be altered, amended or waived
only by a written agreement executed by all Parties. No waiver of any provision of this Agreement
shall be construed as a continuing waiver of the provision.

     11.5 Assignment. Except as expressly set forth in this Agreement, for a period of
five (5) years from and after the Effective Date, no Party may assign any portion of its rights or
interests in the Leases, or assign or delegate all or any portion of its rights and duties under
this Agreement, without the other Parties’ prior written consent, which consent shall not be
unreasonably withheld; provided, however, consent of the other Parties shall not be required (a) if
the assignment or delegation is made to an Affiliate, (b) if the assignment is part of a
transaction involving the sale of all of the assets of a Party, (c) in the instance of a merger
(regardless of whether the affected Party is the surviving entity under such merger), or (d) if the
assignment or delegation is from North Finn to AOGI. Upon expiration of such five-year period, the
Parties may assign their respective interests to Third Parties following thirty (30) days advance
written notice to the other Parties. Without limitation of the foregoing, no rights or duties
under this Agreement shall be assigned except in connection with the assignment of all or a portion
of the Party’s interest in the Project Area, and only insofar as this Agreement concerns the
portion assigned. Any such assignment shall bind the assignee only to the extent of the
specifically assigned interest, and not as to any other Oil and Gas Interests that the assignee may
then own or thereafter acquire. Any consent to assign required under this section shall be
requested in writing and the Parties to whom such request is directed shall have ten (10) Business
Days to respond in writing to such request; provided, however, if a Party fails to respond to such
request within such time period, then such Party shall be deemed to have provided its consent to
the requested assignment. Any written response of non-consent by a Party shall include the
reason(s) such Party is denying its consent. If the Party requesting consent believes the denying
Party is unreasonably withholding its consent, then such dispute shall be submitted to binding
arbitration in accordance with Section 11.8 hereof. The restrictions on assignment set
forth in this Section 11.5 shall not apply to assignments of Oil and Gas Interests in the
AMI made by an acquiring Party to a Third Party where the non-acquiring Party elected (or deemed
elected) not to receive an assignment of such acquired Oil and Gas Interests, as set forth in
Section 3.3 hereof.

     11.6 Survival. All representations made by AOGI in Section 7.1, by North Finn
in Section 7.2 and by RTA in Section 7.3 and all covenants, obligations, and
indemnities of the Parties, respectively, under this Agreement that are performable after delivery
of assignments of Oil and Gas Interests in the Project Area shall survive such delivery.

     11.7 Counterparts. This Agreement may be executed in counterparts, each of which
shall be an original and which, taken together, shall constitute the same agreement.

20

 

     11.8 Disputes. If any of RTA, AOGI or North Finn defaults in its obligations under
this Agreement, or if a dispute arises under the terms of this Agreement, the matter shall be
submitted to binding arbitration in Denver, Colorado, before a three arbitrator panel (with one (1)
arbitrator being chosen by RTA and one (1) arbitrator being chosen by Company, and the third
arbitrator being chosen by the other two arbitrators). All arbitrators shall have experience in
the oil and gas industry. The arbitration shall be conducted in accordance with the commercial
arbitration rules of the American Arbitration Association, as then in effect. Any Party shall be
entitled to entry of a judgment by a court of competent jurisdiction upon the award of the
arbitrators.

     11.9 Governing Law. Without regard to principles of conflicts of law, this Agreement,
and the transactions contemplated herein, shall be construed and enforced in accordance with and
governed by the laws of the State of Texas, EXCEPT that to the extent the laws of the State of
Wyoming necessarily govern with respect to procedural and substantive matters relating to the
creation and enforcement of rights in real property, including, but not limited to, recordation of
assignments of interests in real property, the law of the State of Wyoming shall control in that
regard.

     11.10 Entire Agreement. This Agreement is the entire understanding between the
Parties concerning the subject matter of this Agreement. This Agreement supersedes all
negotiations, discussions, representations, prior agreements and understandings, whether oral or
written, concerning the subject matter of this Agreement, including, without limitation, that
certain letter of intent dated March 23, 2007, and all letters or expressions of intent between the
Parties.

     11.11 Parties in Interest. This Agreement is binding upon and shall inure to the
benefit of the Parties and, except where prohibited, their successors, legal representatives and
assigns. Unless expressly stated to the contrary, no other person is intended to have any
benefits, rights or remedies under this Agreement.

     11.12 Severance. If any provision of this Agreement is found to be illegal or
unenforceable, the other terms of this Agreement shall remain in effect and this Agreement shall be
construed as if the illegal or unenforceable provision had not been included.

     11.13 LIMITATIONS OF REMEDIES. NO PARTY SHALL BE LIABLE TO ANOTHER PARTY FOR
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, SPECIAL OR INDIRECT DAMAGES ARISING FROM OR IN
CONNECTION WITH PERFORMANCE OF THIS AGREEMENT. SAVE IN THE EVENT OF FRAUD, NO RIGHT OF RESCISSION
SHALL BE AVAILABLE TO ANY PARTY BY REASON OF ANY PROVISION OF THIS AGREEMENT OR OF ANY BREACH
THEREOF. THE PARTIES INTEND THAT THE LIMITATIONS UNDER THIS SECTION 11.13 IMPOSED ON
REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO,
INCLUDING, WITHOUT LIMITATION, THE NEGLIGENCE OR STRICT LIABILITY OF ANY PARTY, WHETHER SUCH
NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE.

     As evidence of the agreement set forth herein, the Parties have caused this Agreement to be
executed by their respective duly authorized representatives as of the date first written above.

21

 

	 	 	 	 	 
	 	Red Technology Alliance, LLC

 	 
	 	By:  	 	 
	 	Its: 	 	 
	 

	 	 	 	 	 
	 	American Oil & Gas, Inc.

 	 
	 	By:  	

 	 
	 	Its: 	 	 
	 

	 	 	 	 	 
	 	North Finn, LLC

 	 
	 	By:  	 	 
	 	Its: 	 	 
	 

22Exhibit 10.5

 

BLADELOGIC, INC.

 

2007 STOCK OPTION AND INCENTIVE
PLAN

 

SECTION 1.     GENERAL PURPOSE OF THE PLAN; DEFINITIONS

 

The name of the
plan is the BladeLogic, Inc. 2007 Stock Option and Incentive Plan (the “Plan”).  The purpose of the Plan is to encourage and
enable the officers, employees, Non-Employee Directors and other key persons
(including consultants and prospective employees) of BladeLogic, Inc. (the “Company”)
and its Subsidiaries upon whose judgment, initiative and efforts the Company
largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company.  It
is anticipated that providing such persons with a direct stake in the Company’s
welfare will assure a closer identification of their interests with those of
the Company and its stockholders, thereby stimulating their efforts on the
Company’s behalf and strengthening their desire to remain with the Company.

 

The following
terms shall be defined as set forth below:

 

“Act”
means the Securities Act of 1933, as amended, and the rules and regulations
thereunder.

 

“Administrator”
means either the Board or the compensation committee of the Board or a similar
committee performing the functions of the compensation committee and which is
comprised of not less than two Non-Employee Directors who are independent.

 

“Award”
or “Awards,” except where
referring to a particular category of grant under the Plan, shall include
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Deferred Stock Awards, Restricted Stock Awards, Unrestricted Stock
Awards, Cash-based Awards, Performance Share Awards and Dividend Equivalent
Rights.

 

“Award
Agreement” means a written or electronic agreement setting
forth the terms and provisions applicable to an Award granted under the
Plan.  Each Award Agreement is subject to
the terms and conditions of the Plan.

 

“Board”
means the Board of Directors of the Company.

 

“Cash-based
Award” means an Award entitling the recipient to receive a
cash-denominated payment.

 

“Code”
means the Internal Revenue Code of 1986, as amended, and any successor Code,
and related rules, regulations and interpretations.

 

“Covered
Employee” means an employee who is a “Covered Employee”
within the meaning of Section 162(m) of the Code.

 

“Deferred
Stock Award” means an Award of phantom stock units to a
grantee.

 

 

“Dividend
Equivalent Right” means an Award entitling the grantee to
receive credits based on cash dividends that would have been paid on the shares
of Stock specified in the Dividend Equivalent Right (or other award to which it
relates) if such shares had been issued to and held by the grantee.

 

“Effective
Date” means the date on which the Plan is approved by
stockholders as set forth in Section 21.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.

 

“Fair
Market Value” of the Stock on any given date means the fair
market value of the Stock determined in good faith by the Administrator;
provided, however, that if the Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System (“NASDAQ”), NASDAQ
Global Market or another national securities exchange, the determination shall
be made by reference to market quotations. 
If there are no market quotations for such date, the determination shall
be made by reference to the last date preceding such date for which there are
market quotations; provided further, however, that if the date for which Fair
Market Value is determined is the first day when trading prices for the Stock
are reported on NASDAQ or on another national securities exchange, the Fair
Market Value shall be the “Price to the Public” (or equivalent) set forth on
the cover page for the final prospectus relating to the Company’s Initial
Public Offering.

 

“Incentive
Stock Option” means any Stock Option designated and qualified
as an “incentive stock option” as defined in Section 422 of the Code.

 

“Initial
Public Offering” means the consummation of the first fully
underwritten, firm commitment public offering pursuant to an effective
registration statement under the Act covering the offer and sale by the Company
of its equity securities, or such other event as a result of or following which
the Stock shall be publicly held.

 

“Non-Employee
Director” means a member of the Board who is not also an
employee of the Company or any Subsidiary.

 

“Non-Qualified
Stock Option” means any Stock Option that is not an Incentive
Stock Option.

 

“Option”
or “Stock Option” means any
option to purchase shares of Stock granted pursuant to Section 5.

 

“Performance-based
Award” means any Restricted Stock Award, Deferred Stock Award,
Performance Share Award or Cash-based Award granted to a Covered Employee that
is intended to qualify as “performance-based compensation” under Section 162(m)
of the Code and the regulations promulgated thereunder.

 

“Performance
Criteria” means the criteria that the Administrator selects
for purposes of establishing the Performance Goal or Performance Goals for an
individual for a Performance Cycle.  The
Performance Criteria (which shall be applicable to the organizational level
specified 

 

2

 

by the Administrator, including, but not limited to, the Company or a
unit, division, group, or Subsidiary of the Company) that will be used to
establish Performance Goals are limited to the following: earnings before
interest, taxes, depreciation and amortization, net income (loss) (either
before or after interest, taxes, depreciation and/or amortization), changes in
the market price of the Stock, economic value-added, funds from operations or
similar measure, sales or revenue, acquisitions or strategic transactions,
operating income (loss), cash flow (including, but not limited to, operating
cash flow and free cash flow), return on capital, assets, equity, or
investment, stockholder returns, return on sales, gross or net profit levels,
productivity, expense, margins, operating efficiency, customer satisfaction,
working capital, earnings (loss) per share of Stock, sales or market shares and
number of customers, any of which may be measured either in absolute terms or
as compared to any incremental increase or as compared to results of a peer
group.

 

“Performance
Cycle” means one or more periods of time, which may be of
varying and overlapping durations, as the Administrator may select, over which
the attainment of one or more Performance Criteria will be measured for the
purpose of determining a grantee’s right to and the payment of a Restricted
Stock Award, Deferred Stock Award or Cash-based Award.

 

“Performance Goals” means, for a Performance Cycle,
the specific goals established in writing by the Administrator for a
Performance Cycle based upon the Performance Criteria.

 

“Performance
Share Award” means
an Award entitling the recipient to acquire shares of Stock upon the attainment
of specified Performance Goals.

 

“Restricted
Stock Award” means an Award entitling the recipient to
acquire, at such purchase price (which may be zero) as determined by the Administrator,
shares of Stock subject to such restrictions and conditions as the Administrator
may determine at the time of grant.

 

“Sale
Event” shall mean (i) the sale of all or substantially
all of the assets of the Company on a consolidated basis to an unrelated person
or entity, (ii) a merger, reorganization or consolidation in which the
outstanding shares of Stock are converted into or exchanged for securities of
the successor entity and the holders of the Company’s outstanding voting power
immediately prior to such transaction do not own a majority of the outstanding
voting power of the successor entity immediately upon completion of such
transaction, or (iii) the sale of all of the Stock of the Company to an
unrelated person or entity.

 

“Sale Price” means the value as determined by the Administrator
of the consideration payable, or otherwise to be received by stockholders, per
share of Stock pursuant to a Sale Event.

 

“Section
409A” means Section 409A of the Code and the regulations and
other guidance promulgated thereunder.

 

“Stock”
means the Common Stock, par value $.001 per share, of the Company, subject to
adjustments pursuant to Section 3.

 

“Stock
Appreciation Right” means an Award entitling the recipient to
receive shares of Stock having a value equal to the excess of the Fair Market
Value of the Stock on the date of 

 

3

 

exercise over the exercise price of the Stock Appreciation Right
multiplied by the number of shares of Stock with respect to which the Stock
Appreciation Right shall have been exercised.

 

“Subsidiary”
means any corporation or other entity (other than the Company) in which the
Company has at least a 50 percent interest, either directly or indirectly.

 

“Ten
Percent Owner” means an employee who owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than 10
percent of the combined voting power of all classes of stock of the Company or
any parent or subsidiary corporation.

 

“Unrestricted
Stock Award” means an Award of shares of Stock free of any
restrictions.

 

SECTION 2.     ADMINISTRATION OF PLAN; ADMINISTRATOR
AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS

 

(a)           Administration of Plan.  The Plan shall be administered by the
Administrator.

 

(b)           Powers of Administrator.  The Administrator shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

 

(i)            to select the individuals to whom
Awards may from time to time be granted;

 

(ii)           to determine the time or times of
grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Stock Awards, Deferred Stock
Awards, Unrestricted Stock Awards, Cash-based Awards, Performance Share Awards
and Dividend Equivalent Rights, or any combination of the foregoing, granted to
any one or more grantees;

 

(iii)          to determine the number of shares of
Stock to be covered by any Award;

 

(iv)          to determine and modify from time to
time the terms and conditions, including restrictions, not inconsistent with
the terms of the Plan, of any Award, which terms and conditions may differ
among individual Awards and grantees, and to approve the form of written
instruments evidencing the Awards;

 

(v)           to accelerate at any time the
exercisability or vesting of all or any portion of any Award;

 

(vi)          subject to the provisions of
Section 5(a)(ii), to extend at any time the period in which Stock Options
may be exercised; and

 

(vii)         at any time to adopt, alter and repeal such
rules, guidelines and practices for administration of the Plan and for its own
acts and proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written instruments);
to make all determinations it deems advisable for the administration of the
Plan; to decide all disputes arising in connection with the Plan; and to
otherwise supervise the administration of the Plan.

 

4

 

All decisions and
interpretations of the Administrator shall be binding on all persons, including
the Company and Plan grantees.

 

(c)           Delegation of Authority to Grant
Options.  Subject to applicable law,
the Administrator, in its discretion, may delegate to the Chief Executive
Officer of the Company all or part of the Administrator’s authority and duties
with respect to the granting of Options, to individuals who are (i) not subject
to the reporting and other provisions of Section 16 of the Exchange Act
and (ii) not Covered Employees.  Any such
delegation by the Administrator shall include a limitation as to the amount of
Options that may be granted during the period of the delegation and shall
contain guidelines as to the determination of the exercise price and the
vesting criteria.  The Chief Executive
Officer shall periodically report to the Administrator all grants made by him
or her through such delegation of authority. 
The Administrator may revoke or amend the terms of a delegation at any
time but such action shall not invalidate any prior actions of the Administrator’s
delegate or delegates that were consistent with the terms of the Plan.

 

(d)           Award Agreement.  Awards under the Plan shall be evidenced by
Award Agreements that set forth the terms, conditions and limitations for each
Award which may include, without limitation, the term of an Award, the
provisions applicable in the event employment or service terminates, and the
Company’s authority to unilaterally or bilaterally amend, modify, suspend,
cancel or rescind an Award.

 

(e)           Indemnification.  Neither the Board nor the Administrator, nor
any member of either or any delegate thereof, shall be liable for any act,
omission, interpretation, construction or determination made in good faith in
connection with the Plan, and the members of the Board and the Administrator
(and any delegate thereof) shall be entitled in all cases to indemnification
and reimbursement by the Company in respect of any claim, loss, damage or
expense (including, without limitation, reasonable attorneys’ fees) arising or
resulting therefrom to the fullest extent permitted by law and/or under the
Company’s articles or bylaws or any directors’ and officers’ liability
insurance coverage which may be in effect from time to time and/or any
indemnification agreement between such individual and the Company.

 

(f)            Foreign Award Recipients. 
Notwithstanding any provision of the Plan to the contrary, in order to
comply with the laws in other countries in which the Company and its
Subsidiaries operate or have employees or other individuals eligible for
Awards, the Administrator, in its sole discretion, shall have the power and
authority to: (i) determine which Subsidiaries shall be covered by the Plan;
(ii) determine which individuals outside the United States are eligible to
participate in the Plan; (iii) modify the terms and conditions of any Award
granted to individuals outside the United States to comply with applicable
foreign laws; (iv) establish subplans and modify exercise procedures and other
terms and procedures, to the extent the Administrator determines such actions
to be necessary or advisable (and such subplans and/or modifications shall be
attached to this Plan as appendices); provided, however, that no such subplans
and/or modifications shall increase the share limitations contained in Section
3(a) hereof; and (v) take any action, before or after  an Award is made, that the Administrator determines to be
necessary or advisable to obtain approval or comply with any local governmental
regulatory exemptions or approvals. 
Notwithstanding the foregoing, the Administrator may not take any
actions hereunder, and no Awards shall be granted, that would 

 

5

 

violate
the Exchange Act or any other applicable United States securities law, the
Code, or any other applicable United States governing statute or law.

 

SECTION 3.     STOCK ISSUABLE UNDER THE PLAN; MERGERS;
SUBSTITUTION

 

(a)           Stock Issuable.  The maximum number of shares of Stock
reserved and available for issuance under the Plan shall be the sum of (i) 1,332,750
shares, and (ii) for a period of four years, on each October 1, beginning in
2008 and ending in and inclusive of 2011, an additional number of shares equal
to 5% of the outstanding number of shares of Stock on the immediately preceding
September 30, subject to adjustment as provided in Section 3(b).  For purposes of this limitation, the shares
of Stock underlying any Awards that are forfeited, canceled, held back upon
exercise of an Option or settlement of an Award to cover the exercise price or
tax withholding, reacquired by the Company prior to vesting, satisfied without
the issuance of Stock or otherwise terminated (other than by exercise) shall be
added back to the shares of Stock available for issuance under the Plan.  Subject to such overall limitations, shares
of Stock may be issued up to such maximum number pursuant to any type or types
of Award; provided, however, that Stock Options or Stock Appreciation Rights with
respect to no more than 666,375 shares of Stock may be granted to any one
individual grantee during any one calendar year period and the number of shares
that may be issued in the form of Incentive Stock Options shall not exceed 1,332,750
shares, plus on each October 1, beginning in 2008 and ending in and inclusive
of 2011, an additional number of shares equal to 5% of the outstanding number
of shares of Stock on the immediately preceding September 30, subject in all
cases to adjustment as provided in Section 3(b).  The shares available for issuance under the
Plan may be authorized but unissued shares of Stock or shares of Stock
reacquired by the Company.

 

(b)           Changes in Stock.  Subject to Section 3(c) hereof, if, as a
result of any reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar change in the Company’s
capital stock, the outstanding shares of Stock are increased or decreased or
are exchanged for a different number or kind of shares or other securities of
the Company, or additional shares or new or different shares or other
securities of the Company or other non-cash assets are distributed with respect
to such shares of Stock or other securities, or, if, as a result of any merger
or consolidation, sale of all or substantially all of the assets of the
Company, the outstanding shares of Stock are converted into or exchanged for
securities of the Company or any successor entity (or a parent or subsidiary
thereof), the Administrator shall make an appropriate or proportionate adjustment
in (i) the maximum number of shares reserved for issuance under the Plan, (ii)
the number of Stock Options or Stock Appreciation Rights that can be granted to
any one individual grantee and the maximum number of shares that may be granted
under a Performance-based Award, (iii) the number and kind of shares or other
securities subject to any then outstanding Awards under the Plan, (iv) the
repurchase price, if any, per share subject to each outstanding Restricted
Stock Award, and (v) the price for each share subject to any then outstanding
Stock Options and Stock Appreciation Rights under the Plan, without changing
the aggregate exercise price (i.e., the exercise price multiplied by the number
of Stock Options and Stock Appreciation Rights) as to which such Stock Options
and Stock Appreciation Rights remain exercisable.  The Administrator shall also make equitable
or proportionate adjustments in the number of shares subject to outstanding
Awards and the exercise price and the terms of outstanding Awards to take into
consideration cash dividends paid other than in the ordinary course or any
other extraordinary corporate event 

 

6

 

to the extent determined
to be necessary by the Administrator to avoid distortion in the operation of
the Plan.  The adjustment by the Administrator
shall be final, binding and conclusive. 
No fractional shares of Stock shall be issued under the Plan resulting
from any such adjustment, but the Administrator in its discretion may make a
cash payment in lieu of fractional shares.

 

(c)           Mergers and Other Transactions.  Except as the Administrator may otherwise
specify with respect to particular Awards in the relevant Award documentation,
in the case of and subject to the consummation of a Sale Event, all Options and
Stock Appreciation Rights that are not exercisable immediately prior to the
effective time of the Sale Event shall terminate as of the effective time of
the Sale Event, all other Awards with time-based vesting, conditions or restrictions
that are not vested and nonforfeitable immediately prior to the effective time
of the Sale Event shall terminate as of the effective time of the Sale Event,
and all Awards with conditions and restrictions relating to the attainment of
performance goals may become vested and nonforfeitable in connection with a
Sale Event in the Administrator’s discretion, unless, in any case, the parties
to the Sale Event agree that Awards will be assumed or continued by the
successor entity.  Upon the effective time
of the Sale Event, the Plan and all outstanding Awards granted hereunder shall
terminate, unless provision is made in connection with the Sale Event in the
sole discretion of the parties thereto for the assumption or continuation of
Awards theretofore granted by the successor entity, or the substitution of such
Awards with new Awards of the successor entity or parent thereof, with
appropriate adjustment as to the number and kind of shares and, if appropriate,
the per share exercise prices, as such parties shall agree (after taking into
account any acceleration hereunder).  In
the event of such termination, (i) the Company shall have the option (in its
sole discretion) to make or provide for a cash payment to the grantees holding
Options and Stock Appreciation Rights, in exchange for the cancellation
thereof, in an amount equal to the difference between (A) the Sale Price
multiplied by the number of shares of Stock subject to outstanding Options and
Stock Appreciation Rights (to the extent then exercisable (after taking into
account any acceleration hereunder) at prices not in excess of the Sale Price)
and (B) the aggregate exercise price of all such outstanding Options and Stock
Appreciation Rights; or (ii) each grantee shall be permitted, within a specified
period of time prior to the consummation of the Sale Event as determined by the
Administrator, to exercise all outstanding Options and Stock Appreciation
Rights held by such grantee.

 

(d)           Substitute Awards.  The Administrator may grant Awards under the
Plan in substitution for stock and stock based awards held by employees,
directors or other key persons of another corporation in connection with the
merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation.  The Administrator
may direct that the substitute awards be granted on such terms and conditions
as the Administrator considers appropriate in the circumstances.  Any substitute Awards granted under the Plan
shall not count against the share limitation set forth in Section 3(a).

 

SECTION 4.     ELIGIBILITY

 

Grantees under the
Plan will be such full or part-time officers and other employees, Non-Employee
Directors and key persons (including consultants and prospective employees) of
the Company and its Subsidiaries as are selected from time to time by the Administrator
in its sole discretion.

 

7

 

SECTION 5.     STOCK OPTIONS

 

Any Stock Option granted
under the Plan shall be in such form as the Administrator may from time to time
approve.

 

Stock Options
granted under the Plan may be either Incentive Stock Options or Non-Qualified
Stock Options.  Incentive Stock Options
may be granted only to employees of the Company or any Subsidiary that is a “subsidiary
corporation” within the meaning of Section 424(f) of the Code.  To the extent that any Option does not
qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock
Option.

 

Stock Options
granted pursuant to this Section 5 shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable.  If the Administrator so
determines, Stock Options may be granted in lieu of cash compensation at the
optionee’s election, subject to such terms and conditions as the Administrator
may establish.

 

(a)           Exercise Price.  The exercise price per share for the Stock
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Administrator at the time of grant but shall not be less than
100 percent of the Fair Market Value on the date of grant.  In the case of an Incentive Stock Option that
is granted to a Ten Percent Owner, the option price of such Incentive Stock
Option shall be not less than 110 percent of the Fair Market Value on the grant
date.

 

(b)           Option Term.  The term of each Stock Option shall be fixed
by the Administrator, but no Stock Option shall be exercisable more than ten
years after the date the Stock Option is granted.  In the case of an Incentive Stock Option that
is granted to a Ten Percent Owner, the term of such Stock Option shall be no
more than five years from the date of grant.

 

(c)           Exercisability; Rights of a
Stockholder.  Stock Options shall
become exercisable at such time or times, whether or not in installments, as
shall be determined by the Administrator at or after the grant date.  The Administrator may at any time accelerate
the exercisability of all or any portion of any Stock Option.  An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of a Stock Option and
not as to unexercised Stock Options.

 

(d)           Method of Exercise.  Stock Options may be exercised in whole or in
part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. 
Payment of the purchase price may be made by one or more of the
following methods to the extent provided in the Option Award Agreement:

 

(i)            In cash, by certified or bank check
or other instrument acceptable to the Administrator;

 

(ii)           Through the delivery (or attestation
to the ownership) of shares of Stock that have been purchased by the optionee
on the open market or that are beneficially owned by the optionee and are not
then subject to restrictions under any Company plan.  Such surrendered shares shall be valued at
Fair Market Value on the exercise date. 
To the extent required to avoid 

 

8

 

variable accounting
treatment under FAS 123R or other applicable accounting rules, such surrendered
shares shall have been owned by the optionee for at least six months; or

 

(iii)          By the optionee delivering to the
Company a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a check
payable and acceptable to the Company for the purchase price; provided that in
the event the optionee chooses to pay the purchase price as so provided, the
optionee and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Administrator shall
prescribe as a condition of such payment procedure.

 

Payment instruments
will be received subject to collection. 
The transfer to the optionee on the records of the Company or of the
transfer agent of the shares of Stock to be purchased pursuant to the exercise
of a Stock Option will be contingent upon receipt from the optionee (or a
purchaser acting in his stead in accordance with the provisions of the Stock
Option) by the Company of the full purchase price for such shares and the
fulfillment of any other requirements contained in the Option Award Agreement
or applicable provisions of laws (including the satisfaction of any withholding
taxes that the Company is obligated to withhold with respect to the
optionee).  In the event an optionee
chooses to pay the purchase price by previously-owned shares of Stock through
the attestation method, the number of shares of Stock transferred to the
optionee upon the exercise of the Stock Option shall be net of the number of
shares attested to.  In the event that
the Company establishes, for itself or using the services of a third party, an
automated system for the exercise of Stock Options, such as a system using an
internet website or interactive voice response, then the paperless exercise of
Stock Options may be permitted through the use of such an automated system.

 

(e)           Annual Limit on Incentive Stock
Options.  To the extent required for “incentive
stock option” treatment under Section 422 of the Code, the aggregate Fair
Market Value (determined as of the time of grant) of the shares of Stock with
respect to which Incentive Stock Options granted under this Plan and any other
plan of the Company or its parent and subsidiary corporations become
exercisable for the first time by an optionee during any calendar year shall
not exceed $100,000.  To the extent that
any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.

 

SECTION 6.     STOCK APPRECIATION RIGHTS

 

(a)           Exercise Price of Stock
Appreciation Rights.  The exercise
price of a Stock Appreciation Right shall not be less than 100 percent of the
Fair Market Value of the Stock on the date of grant.

 

(b)           Terms and Conditions of Stock
Appreciation Rights.  Stock
Appreciation Rights shall be subject to such terms and conditions as shall be
determined from time to time by the Administrator.

 

SECTION 7.     RESTRICTED STOCK AWARDS

 

(a)           Nature of Restricted Stock Awards.  The Administrator shall determine the
restrictions and conditions applicable to each Restricted Stock Award at the
time of grant.  Conditions may be based
on continuing employment (or other service relationship) and/or 

 

9

 

achievement of
pre-established performance goals and objectives.  The grant of a Restricted Stock Award is
contingent on the grantee executing the Restricted Stock Award Agreement.  The terms and conditions of each such Award
Agreement shall be determined by the Administrator, and such terms and
conditions may differ among individual Awards and grantees.

 

(b)           Rights as a Stockholder.  Upon execution of the Restricted Stock Award
Agreement and payment of any applicable purchase price, a grantee shall have
the rights of a stockholder with respect to the voting of the Restricted Stock,
subject to such conditions contained in the Restricted Stock Award Agreement.  Unless the Administrator shall otherwise
determine, (i) uncertificated Restricted Stock shall be accompanied by a
notation on the records of the Company or the transfer agent to the effect that
they are subject to forfeiture until such Restricted Stock are vested as
provided in Section 7(d) below, and (ii) certificated Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested
as provided in Section 7(d) below, and the grantee shall be required, as a
condition of the grant, to deliver to the Company such instruments of transfer
as the Administrator may prescribe.

 

(c)           Restrictions.  Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Restricted Stock Award Agreement.  Except as may otherwise be provided by the Administrator
either in the Award Agreement or, subject to Section 18 below, in writing after
the Award Agreement is issued, if any, if a grantee’s employment (or other
service relationship) with the Company and its Subsidiaries terminates for any
reason, any Restricted Stock that has not vested at the time of termination
shall automatically and without any requirement of notice to such grantee from
or other action by or on behalf of, the Company be deemed to have been
reacquired by the Company at its original purchase price (if any) from such
grantee or such grantee’s legal representative simultaneously with such
termination of employment (or other service relationship), and thereafter shall
cease to represent any ownership of the Company by the grantee or rights of the
grantee as a stockholder.  Following such
deemed reacquisition of unvested Restricted Stock that are represented by
physical certificates, a grantee shall surrender such certificates to the
Company upon request without consideration.

 

(d)           Vesting of Restricted Stock.  The Administrator at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Stock and the Company’s right of repurchase or forfeiture shall
lapse.  Subsequent to such date or dates
and/or the attainment of such pre-established performance goals, objectives and
other conditions, the shares on which all restrictions have lapsed shall no
longer be Restricted Stock and shall be deemed “vested.”  Except as may otherwise be provided by the Administrator
either in the Award Agreement or, subject to Section 18 below, in writing
after the Award Agreement is issued, a grantee’s rights in any shares of
Restricted Stock that have not vested shall automatically terminate upon the
grantee’s termination of employment (or other service relationship) with the
Company and its Subsidiaries and such shares shall be subject to the provisions
of Section 7(c) above.

 

SECTION 8.                DEFERRED STOCK
AWARDS

 

(a)           Nature of Deferred Stock Awards.   The Administrator shall determine the
restrictions and conditions applicable to each Deferred Stock Award at the time
of grant.  

 

10

 

Conditions may be based
on continuing employment (or other service relationship) and/or achievement of
pre-established performance goals and objectives.  The grant of a Deferred Stock Award is contingent
on the grantee executing the Deferred Stock Award Agreement.  The terms and conditions of each such Award
Agreement shall be determined by the Administrator, and such terms and
conditions may differ among individual Awards and grantees.  At the end of the deferral period, the
Deferred Stock Award, to the extent vested, shall be settled in the form of
shares of Stock.  To the extent that a
Deferred Stock Award is subject to Section 409A, it shall contain such
additional terms and conditions as the Administrator shall determine in order
for such Award to comply with Section 409A.

 

(b)           Election to Receive Deferred Stock
Awards in Lieu of Compensation.  The Administrator
may, in its sole discretion, permit a grantee to elect to receive a portion of
future cash compensation otherwise due to such grantee in the form of a
Deferred Stock Award.  Any such election
shall be made in writing and shall be delivered to the Company no later than
the date specified by the Administrator and in accordance with Section 409A and
such other rules and procedures established by the Administrator.  Any such future cash compensation that the
grantee elects to defer shall be converted to a fixed number of phantom stock
units based on the Fair Market Value of Stock on the date the compensation
would otherwise have been paid to the grantee if such payment had not been
deferred as provided herein.  The Administrator
shall have the sole right to determine whether and under what circumstances to
permit such elections and to impose such limitations and other terms and
conditions thereon as the Administrator deems appropriate.

 

(c)           Rights as a Stockholder.  A grantee shall have the rights as a
stockholder only as to shares of Stock actually acquired by the grantee upon
settlement of a Deferred Stock Award; provided, however, that the grantee may
be credited with Dividend Equivalent Rights with respect to the phantom stock
units underlying his Deferred Stock Award, subject to such terms and conditions
as the Administrator may determine.

 

(d)           Termination.  Except as may otherwise be provided by the Administrator
either in the Award Agreement or, subject to Section 18 below, in writing
after the Award Agreement is issued, a grantee’s right in all Deferred Stock
Awards that have not vested shall automatically terminate upon the grantee’s
termination of employment (or cessation of service relationship) with the
Company and its Subsidiaries for any reason.

 

SECTION 9.                UNRESTRICTED
STOCK AWARDS

 

Grant or Sale of
Unrestricted Stock. 
The Administrator may, in its sole discretion, grant (or sell at par
value or such higher purchase price determined by the Administrator) an
Unrestricted Stock Award under the Plan. 
Unrestricted Stock Awards may be granted in respect of past services or
other valid consideration, or in lieu of cash compensation due to such grantee.

 

SECTION 10.          CASH-BASED AWARDS

 

Grant of
Cash-based Awards.  The
Administrator may, in its sole discretion, grant Cash-based Awards to any
grantee in such number or amount and upon such terms, and subject to such
conditions, as the Administrator shall determine at the time of grant.  The Administrator shall 

 

11

 

determine the maximum duration of the Cash-based Award, the amount of
cash to which the Cash-based Award pertains, the conditions upon which the
Cash-based Award shall become vested or payable, and such other provisions as
the Administrator shall determine.  Each
Cash-based Award shall specify a cash-denominated payment amount, formula or
payment ranges as determined by the Administrator.  Payment, if any, with respect to a Cash-based
Award shall be made in accordance with the terms of the Award and may be made
in cash or in shares of Stock, as the Administrator determines.

 

SECTION 11.          PERFORMANCE SHARE
AWARDS

 

(a)           Nature of Performance Share Awards.  The Administrator may, in its sole
discretion, grant Performance Share Awards independent of, or in connection
with, the granting of any other Award under the Plan.  The Administrator shall determine whether and
to whom Performance Share Awards shall be granted, the Performance Goals, the
periods during which performance is to be measured, which may not be less than
one year, and such other limitations and conditions as the Administrator shall
determine.

 

(b)           Rights as a Stockholder.  A grantee receiving a Performance Share Award
shall have the rights of a stockholder only as to shares actually received by
the grantee under the Plan and not with respect to shares subject to the Award
but not actually received by the grantee. 
A grantee shall be entitled to receive shares of Stock under a
Performance Share Award only upon satisfaction of all conditions specified in
the Performance Share Award agreement (or in a performance plan adopted by the Administrator).

 

(c)           Termination.  Except as may otherwise be provided by the Administrator
either in the Award agreement or, subject to Section 18 below, in writing
after the Award agreement is issued, a grantee’s rights in all Performance
Share Awards shall automatically terminate upon the grantee’s termination of
employment (or cessation of service relationship) with the Company and its
Subsidiaries for any reason.

 

SECTION 12.          PERFORMANCE-BASED
AWARDS TO COVERED EMPLOYEES

 

(a)           Performance-based Awards.  Any employee or other key person providing
services to the Company and who is selected by the Administrator may be granted
one or more Performance-based Awards in the form of a Restricted Stock Award,
Deferred Stock Award, Performance Share Awards or Cash-based Award payable upon
the attainment of Performance Goals that are established by the Administrator
and relate to one or more of the Performance Criteria, in each case on a
specified date or dates or over any period or periods determined by the Administrator.  The Administrator shall define in an
objective fashion the manner of calculating the Performance Criteria it selects
to use for any Performance Period. 
Depending on the Performance Criteria used to establish such Performance
Goals, the Performance Goals may be expressed in terms of overall Company
performance or the performance of a division, business unit, or an
individual.  The Administrator, in its
discretion, may adjust or modify the calculation of Performance Goals for such
Performance Period in order to prevent the dilution or enlargement of the
rights of an individual (i) in the event of, or in anticipation of, any unusual
or extraordinary corporate item, transaction, event or development, (ii) in
recognition of, or in anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial 

 

12

 

statements of the
Company, or (iii) in response to, or in anticipation of, changes in applicable
laws, regulations, accounting principles, or business conditions provided
however, that the Administrator may not exercise such discretion in a manner
that would increase the Performance-based Award granted to a Covered
Employee.  Each Performance-based Award
shall comply with the provisions set forth below.

 

(b)           Grant of Performance-based Awards.  With respect to each Performance-based Award
granted to a Covered Employee, the Administrator shall select, within the first
90 days of a Performance Cycle (or, if shorter, within the maximum period
allowed under Section 162(m) of the Code) the Performance Criteria for
such grant, and the Performance Goals with respect to each Performance
Criterion (including a threshold level of performance below which no amount
will become payable with respect to such Award).  Each Performance-based Award will specify the
amount payable, or the formula for determining the amount payable, upon
achievement of the various applicable performance targets.  The Performance Criteria established by the Administrator
may be (but need not be) different for each Performance Cycle and different
Performance Goals may be applicable to Performance-based Awards to different
Covered Employees.

 

(c)           Payment of Performance-based
Awards.  Following the completion of
a Performance Cycle, the Administrator shall meet to review and certify in
writing whether, and to what extent, the Performance Goals for the Performance
Cycle have been achieved and, if so, to also calculate and certify in writing
the amount of the Performance-based Awards earned for the Performance
Cycle.  The Administrator shall then
determine the actual size of each Covered Employee’s Performance-based Award,
and, in doing so, may reduce or eliminate the amount of the Performance-based
Award for a Covered Employee if, in its sole judgment, such reduction or
elimination is appropriate.

 

(d)           Maximum Award Payable.  The maximum Performance-based Award payable
to any one Covered Employee under the Plan for a Performance Cycle is 666,375 shares
(subject to adjustment as provided in Section 3(b) hereof) or $9,329,250  in the case of a Performance-based Award that is a
Cash-based Award.

 

SECTION 13.          DIVIDEND EQUIVALENT
RIGHTS

 

(a)           Dividend Equivalent Rights.  A Dividend Equivalent Right may be granted
hereunder to any grantee as a component of another Award or as a freestanding
award.  The terms and conditions of
Dividend Equivalent Rights shall be specified in the Award Agreement.  Dividend equivalents credited to the holder
of a Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional shares of Stock, which may thereafter accrue
additional equivalents.  Any such
reinvestment shall be at Fair Market Value on the date of reinvestment or such
other price as may then apply under a dividend reinvestment plan sponsored by
the Company, if any.  Dividend Equivalent
Rights may be settled in cash or shares of Stock or a combination thereof, in a
single installment or installments.  A
Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise, settlement,
or payment of, or lapse of restrictions on, such other Award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the
same conditions as such other Award.  A
Dividend Equivalent Right granted as a 

 

13

 

component of another
Award may also contain terms and conditions different from such other Award.

 

(b)           Interest Equivalents.  Any Award under this Plan that is settled in
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment.  Interest equivalents may be compounded and
shall be paid upon such terms and conditions as may be specified by the grant.

 

(c)           Termination.  Except as may otherwise be provided by the Administrator
either in the Award Agreement or, subject to Section 18 below, in writing
after the Award Agreement is issued, a grantee’s rights in all Dividend
Equivalent Rights or interest equivalents granted as a component of another
Award that has not vested shall automatically terminate upon the grantee’s
termination of employment (or cessation of service relationship) with the
Company and its Subsidiaries for any reason.

 

SECTION 14.          TRANSFERABILITY OF
AWARDS

 

(a)           Transferability.  Except as provided in Section 14(b)
below, during a grantee’s lifetime, his or her Awards shall be exercisable only
by the grantee, or by the grantee’s legal representative or guardian in the
event of the grantee’s incapacity.  No
Awards shall be sold, assigned, transferred or otherwise encumbered or disposed
of by a grantee other than by will or by the laws of descent and
distribution.  No Awards shall be
subject, in whole or in part, to attachment, execution, or levy of any kind,
and any purported transfer in violation hereof shall be null and void.

 

(b)           Administrator Action.  Notwithstanding Section 14(a), the Administrator,
in its discretion, may provide either in the Award Agreement regarding a given
Award or by subsequent written approval that the grantee (who is an employee or
director) may transfer his or her Awards (other than any Incentive Stock
Options) to his or her immediate family members, to trusts for the benefit of
such family members, or to partnerships in which such family members are the
only partners, provided that the transferee agrees in writing with the Company
to be bound by all of the terms and conditions of this Plan and the applicable
Award.

 

(c)           Family Member.  For purposes of Section 14(b), “family
member” shall mean a grantee’s child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the grantee’s
household (other than a tenant of the grantee), a trust in which these persons
(or the grantee) have more than 50 percent of the beneficial interest, a
foundation in which these persons (or the grantee) control the management of
assets, and any other entity in which these persons (or the grantee) own more
than 50 percent of the voting interests.

 

(d)           Designation of Beneficiary.  Each grantee to whom an Award has been made
under the Plan may designate a beneficiary or beneficiaries to exercise any
Award or receive any payment under any Award payable on or after the grantee’s
death.  Any such designation shall be on
a form provided for that purpose by the Administrator and shall not be
effective until received by the Administrator. 
If no beneficiary has been designated by a deceased grantee, or if the 

 

14

 

designated beneficiaries
have predeceased the grantee, the beneficiary shall be the grantee’s estate.

 

SECTION 15.          TAX WITHHOLDING

 

(a)           Payment by Grantee.  Each grantee shall, no later than the date as
of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the grantee for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld by the Company with
respect to such income.  The Company and
its Subsidiaries shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to the
grantee.  The Company’s obligation to
deliver evidence of book entry (or stock certificates) to any grantee is
subject to and conditioned on tax withholding obligations being satisfied by
the grantee.

 

(b)           Payment in Stock.  Subject to approval by the Administrator, a
grantee may elect to have the Company’s minimum required tax withholding
obligation satisfied, in whole or in part, by authorizing the Company to
withhold from shares of Stock to be issued pursuant to any Award a number of
shares with an aggregate Fair Market Value (as of the date the withholding is effected)
that would satisfy the withholding amount due.

 

SECTION 16.          SECTION 409A AWARDS.

 

To the extent that
any Award is determined to constitute “nonqualified deferred compensation”
within the meaning of Section 409A (a “409A Award”), the Award will be subject
to such additional rules and requirements as specified by the Administrator in
order to comply with Section 409A.  In
this regard, if any amount under a 409A Award is payable upon a “separation
from service” (within the meaning of Section 409A) to a grantee who is
considered a “specified employee” (within the meaning of Section 409A), then no
such payment shall be made prior to the date that is the earliest of (i) six
months and one day after the grantee’s date of separation from service, or (ii)
the grantee’s death, if such delay is necessary to prevent such payment from
being subject to interest, penalties and/or additional tax imposed pursuant to
Section 409A.

 

SECTION 17.          TRANSFER, LEAVE OF
ABSENCE, ETC.

 

For purposes of
the Plan, the following events shall not be deemed a termination of employment:

 

(a)           a transfer to the employment of the
Company from a Subsidiary or from the Company to a Subsidiary, or from one
Subsidiary to another; or

 

(b)           an approved leave of absence for
military service or sickness, or for any other purpose approved by the Company,
if the employee’s right to re-employment is guaranteed either by a statute or
by contract or under the policy pursuant to which the leave of absence was
granted or if the Administrator otherwise so provides in writing.

 

15

 

SECTION 18.          AMENDMENTS AND
TERMINATION

 

The Board may, at
any time, amend or discontinue the Plan and the Administrator may, at any time,
amend or cancel any outstanding Award for the purpose of satisfying changes in
law or for any other lawful purpose, but no such action shall adversely affect
rights under any outstanding Award without the holder’s consent.  Except as provided in Section 3(b) or 3(c),
in no event may the Administrator exercise its discretion to reduce the
exercise price of outstanding Stock Options or Stock Appreciation Rights or
effect repricing through cancellation and re-grants.  Any material Plan amendments (other than
amendments that curtail the scope of the Plan), including any Plan amendments
that (i) increase the number of shares reserved for issuance under the Plan,
(ii) expand the type of Awards available under, materially expand the
eligibility to participate in, or materially extend the term of, the Plan, or
(iii) materially change the method of determining Fair Market Value, shall be
subject to approval by the Company stockholders entitled to vote at a meeting
of stockholders.  In addition, to the
extent determined by the Administrator to be required by the Code to ensure
that Incentive Stock Options granted under the Plan are qualified under
Section 422 of the Code or to ensure that compensation earned under Awards
qualifies as performance-based compensation under Section 162(m) of the
Code, Plan amendments shall be subject to approval by the Company stockholders
entitled to vote at a meeting of stockholders. 
Nothing in this Section 18 shall limit the Administrator’s
authority to take any action permitted pursuant to Section 3(c).

 

SECTION 19.          STATUS OF PLAN

 

With respect to
the portion of any Award that has not been exercised and any payments in cash,
Stock or other consideration not received by a grantee, a grantee shall have no
rights greater than those of a general creditor of the Company unless the Administrator
shall otherwise expressly determine in connection with any Award or
Awards.  In its sole discretion, the Administrator
may authorize the creation of trusts or other arrangements to meet the Company’s
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.

 

SECTION 20.          GENERAL PROVISIONS

 

(a)           No Distribution.  The Administrator may require each person
acquiring Stock pursuant to an Award to represent to and agree with the Company
in writing that such person is acquiring the shares without a view to
distribution thereof.

 

(b)           Delivery of Stock Certificates.  Stock certificates to grantees under this
Plan shall be deemed delivered for all purposes when the Company or a stock
transfer agent of the Company shall have mailed such certificates in the United
States mail, addressed to the grantee, at the grantee’s last known address on
file with the Company.  Uncertificated Stock
shall be deemed delivered for all purposes when the Company or a Stock transfer
agent of the Company shall have given to the grantee by electronic mail (with
proof of receipt) or by United States mail, addressed to the grantee, at the
grantee’s last known address on file with the Company, notice of issuance and
recorded the issuance in its records (which may include electronic “book entry”
records).  Notwithstanding anything
herein to the contrary, the Company shall not be required to issue or deliver any
certificates evidencing shares of Stock pursuant to the exercise of 

 

16

 

any Award, unless and
until the Board has determined, with advice of counsel (to the extent the Board
deems such advice necessary or advisable), that the issuance and delivery of
such certificates is in compliance with all applicable laws, regulations of
governmental authorities and, if applicable, the requirements of any exchange
on which the shares of Stock are listed, quoted or traded.  All Stock certificates delivered pursuant to
the Plan shall be subject to any stop-transfer orders and other restrictions as
the Administrator deems necessary or advisable to comply with federal, state or
foreign jurisdiction, securities or other laws, rules and quotation system on
which the Stock is listed, quoted or traded. 
The Administrator may place legends on any Stock certificate to
reference restrictions applicable to the Stock. 
In addition to the terms and conditions provided herein, the Board may
require that an individual make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems necessary or advisable
in order to comply with any such laws, regulations, or requirements.  The Administrator shall have the right to
require any individual to comply with any timing or other restrictions with
respect to the settlement or exercise of any Award, including a window-period
limitation, as may be imposed in the discretion of the Administrator.

 

(c)           Stockholder Rights.  Until Stock is deemed delivered in accordance
with Section 20(b), no right to vote or receive dividends or any other rights
of a stockholder will exist with respect to shares of Stock to be issued in
connection with an Award, notwithstanding the exercise of a Stock Option or any
other action by the grantee with respect to an Award.

 

(d)           Other Compensation Arrangements;
No Employment Rights.  Nothing
contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, including trusts, and such arrangements
may be either generally applicable or applicable only in specific cases.  The adoption of this Plan and the grant of
Awards do not confer upon any employee any right to continued employment with
the Company or any Subsidiary.

 

(e)           Trading Policy Restrictions.  Option exercises and other Awards under the
Plan shall be subject to such Company’s insider trading policy and procedures,
as in effect from time to time.

 

(f)            Forfeiture of Awards under
Sarbanes-Oxley Act.  If the Company
is required to prepare an accounting restatement due to the material
noncompliance of the Company, as a result of misconduct, with any financial
reporting requirement under the securities laws, then any grantee who is one of
the individuals subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 shall reimburse the Company for the amount of any
Award received by such individual under the Plan during the 12-month period
following the first public issuance or filing with the United States Securities
and Exchange Commission, as the case may be, of the financial document
embodying such financial reporting requirement.

 

SECTION 21.          EFFECTIVE DATE OF
PLAN

 

This Plan shall
become effective upon approval by the holders of a majority of the votes cast
at a meeting of stockholders at which a quorum is present or pursuant to
written consent.  No grants of Stock
Options and other Awards may be made hereunder after the tenth (10th)

 

17

 

anniversary of the Effective Date and no grants of Incentive Stock
Options may be made hereunder after the tenth (10th) anniversary of
the date the Plan is approved by the Board.

 

SECTION 22.                          GOVERNING
LAW

 

This Plan and all
Awards and actions taken thereunder shall be governed by, and construed in
accordance with, the laws of the State of Delaware, applied without regard to
conflict of law principles.

 

 

DATE APPROVED BY
BOARD OF DIRECTORS:  May 22, 2007

 

DATE APPROVED BY
STOCKHOLDERS:  June 13, 2007

 

18

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