Document:

pxte10q20100630ex10-28.htm

Exhibit 10.28

 

Paxton Energy, Inc.

a Nevada corporation

2010 STOCK OPTION PLAN

 

1.      Purposes of the Plan.  The purposes of this 2010 Stock Option Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants of the Company and its Subsidiaries and to promote the success of the Company's business.  Options granted under this Plan may be incentive stock options (as defined under Section 422 of the Code) or nonqualified stock options, as determined by the Option Committee at the time of grant of an option and subject to the applicable provisions of Section 422 of the Code, as amended, and the regulations promulgated thereunder.

 

2.      Definitions.  As used herein, the following definitions shall apply:

 

2.1      “Option Committee” means the Board or any of its committees, as applicable, that is administering the Plan pursuant to Section 4 of the Plan.

 

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

 

2.3      “Code” means the Internal Revenue Code of 1986, as amended.

 

2.4      “Company” means Paxton Energy, Inc., a Nevada corporation.

 

2.5      “Consultant” means any consultant or advisor to the Company or any Parent or Subsidiary and any director of the Company whether compensated for such services or not, but not including any Employee.

 

2.6      “Continuous Status as an Employee” means the absence of any interruption or termination of the employment relationship by the Company or any Subsidiary.  Continuous Status as an Employee shall not be considered interrupted in the case of:  (i) any leave of absence approved by the Board, including sick leave, military leave, or any other personal leave; provided, however, that for purposes of Incentive Stock Options, such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (ii) in the case of transfers between locations of the Company or between the Company, its Subsidiaries or its successors.

 

2.7      “Employee” means any person, including officers and directors, employed by the Company or any Parent or Subsidiary of the Company.  The payment of a director's fee by the Company shall not be sufficient to constitute “employment” by the Company.

 

2.8      “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

2.9      “Fair Market Value” means, as of any date, the value of Stock determined as follows:

 

2.9.1  If the Stock is listed on any established stock exchange or a national market system including without limitation the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported, as quoted on such system or exchange or the exchange with the greatest volume of trading in Stock for the last market trading day prior to the time of determination) as reported in the Wall Street Journal or such other source as the Option Committee deems reliable;

Paxton Energy, Inc. 2010 Stock Option Plan

  

Exhibit 10.28 - 1

  

 

2.9.2  If the Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high and low asked prices for the Stock; or

 

2.9.3  In the absence of an established market for the Stock, the Fair Market Value thereof shall be determined in good faith by the Option Committee.

 

2.10            “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

 

2.11            “Nonqualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

 

2.12            “Option” means a stock option granted pursuant to the Plan.

 

2.13            “Optioned Stock” means the Stock subject to an Option.

 

2.14            “Optionee” means an Employee or Consultant who receives an Option.

 

2.15            “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

2.16            “Plan” means this Paxton Energy, Inc. 2010 Stock Option Plan.

 

2.17            “Share” means a share of the Stock subsequent to approval of both stock splits for which stockholder approval is being sought at a stockholders meeting scheduled for June 29, 2010, as described in the Proxy Statement filed with the SEC,  as adjusted in accordance with Section 13 of the Plan.

 

2.18            “Stock” means the Common Stock, par value $.001 per share, of the Company.

 

2.19            “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

3.      Stock Subject to the Plan.  Subject to the provisions of Section 13 of the Plan and subject to and following approval of both proposed reverse stock splits by stockholders at the stockholders meeting currently scheduled for June 29th, the maximum number of shares of Stock which may be optioned and sold under the Plan is twenty million (20,000,000) shares of the Company’s (post both stock split) common stock.  In the event, the stockholders do not approve both stock splits and approve the adoption of this Stock Option Plan, this Plan shall not be void.  The shares subject to the Plan may be authorized, but unissued or reacquired Stock.  If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan.

 

4.      Administration of the Plan.

 

4.1      Administration by Board or Committee.  The Plan shall be administered by: (a) the Board or (b) a committee designated by the Board to administer the Plan, which committee shall be constituted in such a manner as to permit the Plan to comply with Rule 16b-3 promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with respect to a plan intended to qualify thereunder as a discretionary plan.  Once appointed, such committee shall continue to serve in its designated capacity until otherwise directed by the Board.  From time to time the Board may increase the size of the committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the committee and thereafter directly administer the Plan, all to the extent permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary plan.

Paxton Energy, Inc. 2010 Stock Option Plan

  

Exhibit 10.28 - 2

  

 

4.2      Limitation on Administration by Board.  Notwithstanding the foregoing, the Plan shall not be administered by the Board if (a) the Company and its officers and directors are then subject to the requirements of Section 16 of the Exchange Act and (b) the Board's administration of the Plan would prevent the Plan from complying with Rule 16b-3.

 

4.3      Multiple Administrative Bodies.  If permitted by Rule 16b-3, the Plan may be administered by different bodies with respect to directors, non-director officers and Employees who are neither directors nor officers.

 

4.4      Powers of the Option Committee.  Subject to the provisions of the Plan and in, the case of a committee, the specific duties delegated by the Board to such committee, the Option Committee shall have the authority, in its discretion:

 

4.4.1  to determine whether and to what extent Options shall be granted hereunder;

 

4.4.2  to select the officers, Consultants and Employees to whom Options may from time to time be granted hereunder;

 

4.4.3  to determine the number of shares of Stock to be covered by each such award granted hereunder;

 

4.4.4  to determine the Fair Market Value of the Stock, in accordance with Section 2.9 of the Plan;

 

4.4.5  to approve forms of agreement for use under the Plan;

 

4.4.6  to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (including, but not limited to, the per share exercise price for the Shares to be issued pursuant to the exercise of an Option and any restriction or limitation, or any vesting, acceleration or waiver of forfeiture restrictions regarding any Option or other award and/or the shares of Stock relating thereto, based in each case on such factors as the Option Committee shall determine, in its sole discretion);

 

4.4.7  to determine whether and under what circumstances an Option may be bought-out for cash under subsection 10.4;

 

4.4.8  to determine whether, to what extent and under what circumstances Stock and other amounts payable with respect to an award under this Plan shall be deferred either automatically or at the election of the participant (including providing for and determining the amount, if any, of any deemed earnings on any deferred amount during any deferral period); and

 

4.4.9  to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Stock covered by such Option shall have declined since the date the Option was granted.

 

4.5      Effect of Option Committee's Decision.  All decisions, determinations and interpretations of the Option Committee shall be final and binding on all Optionees and any other holders of any Options. Neither the Board, the Committee, nor any member thereof shall be liable for any act, omission, interpretation, construction or determination made in connection with the Plan in good faith, and the members of the Board and of the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including counsel fees) arising therefrom to the full extent permitted by law.

Paxton Energy, Inc. 2010 Stock Option Plan

  

Exhibit 10.28 - 3

  

 

5.      Eligibility.

 

5.1      Nonqualified Stock Options may be granted to Employees and Consultants.  Incentive Stock Options may be granted only to Employees.  An Employee or Consultant who has been granted an Option may, if he is otherwise eligible, be granted an additional Option or Options.

 

5.2      Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonqualified Stock Option.  However, notwithstanding such designations to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonqualified Stock Options.  For this purpose, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

 

5.3      The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his right or the Company's right to terminate his employment or consulting relationship at any time, with or without cause, unless otherwise agreed in writing by the Company and such Optionee.

 

6.      Term of Plan.  The Plan shall become effective upon its adoption by the Board of Directors subject only to approval by the holders of a majority of the outstanding Shares within 12 months after such date.  Should the Plan not be approved by a vote of shareholders as specified above, the Plan shall terminate 12 months after the effective date, all options issued prior to that termination date shall continue in effect but without the benefits that would accrue under the Code or the Act from such shareholder approval.  Otherwise, it shall continue in effect until ten years from the effective date, unless extended by the Board or sooner terminated under Section 15 of the Plan.  No grants of Options will be made pursuant to the Plan after termination of the Plan.

 

7.      Term of Option.  The term of each Option shall be the term stated in the Option Agreement; provided, however, that in the case of an Incentive Stock Option, the terms shall be no more than 10 years from the date of grant thereof or such shorter term as may be provided in the Option Agreement.  However, in the case of an Option granted to an Optionee who, at the time the Option is granted, owns Stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five years from the date of grant thereof or such shorter term as may be provided in the Option Agreement.

 

8.      Option Exercise Price and Consideration.

 

8.1      The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Option Committee; provided, however, that as to an Incentive Option:

 

8.1.1 granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant.

 

Paxton Energy, Inc. 2010 Stock Option Plan

  

Exhibit 10.28 - 4

  

 

8.1.2  granted to any Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

 

8.2      The consideration to be paid for the Shares to be issued upon exercise of an Option may be paid by certified or cashier's check. In the discretion of the Option Committee as set forth in the Option Agreement or, except for Incentive Options, determined at the time of exercise, payment may also be made by any or all of the following:

 

8.2.1  check,

 

8.2.2  promissory note,

 

8.2.3  other shares of the Company's capital stock which (a) in the case of shares of the Company's capital stock acquired upon exercise of an Option either have been owned by the Optionee for more than six months on the date of surrender or were not acquired, directly or indirectly, from the Company, and (b) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares to which said Option shall be exercised,

 

8.2.4  authorization for the Company to retain from the total number of Shares as to which the Option is exercised that number of Shares having a Fair Market Value on the date of exercise equal to the exercise price for the total number of Shares as to which the Option is exercised,

 

8.2.5  delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds required to pay the exercise price, or

 

8.2.6  such other consideration and method of payment for the issuance of Shares to the extent permitted under applicable laws.

 

9.      Limitation on Exercise.  The following limitations on exercise of Options shall apply to all Incentive Options and, except to the extent waived by the Option Committee and stated in the Option Agreement, to all other Options.

 

9.1      Termination of Employment.  In the event of termination of an Optionee's relationship as a Consultant (unless such termination is for purposes of becoming an Employee of the Company) or on termination of an Optionee's Continuous Status as an Employee with the Company (as the case may be), such Optionee may, but only within 90 days (or, as to Options other than Incentive Options, such longer period of time as is determined by the Option Committee) after the date of such termination, but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement, exercise his Option to the extent that Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of such termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.

 

9.2      Disability of Optionee.  Notwithstanding the provisions of Section 9.1 above, in the event of termination of an Optionee's relationship as a Consultant or Continuous Status as an Employee as a result of his total and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within 12 months from the date of such termination and in no event later than the expiration date of the term of such Option as set forth in the Option Agreement, exercise the Option to the extent otherwise entitled to exercise it at the date of such termination.  To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.

Paxton Energy, Inc. 2010 Stock Option Plan

  

Exhibit 10.28 - 5

  

 

9.3      Death of Optionee.  In the event of the death of an Optionee, the Option may be exercised, at any time within 12 months following the date of death (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death.  To the extent that the Optionee was not entitled to exercise the Option at the date of termination, or if the Optionee's estate (or such other person who acquired the right to exercise the Option) does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.

 

10.      Exercise of Option.

 

10.1  Procedure for Exercise; Rights as a Stockholder.  An Option shall be deemed to be exercised, and the Optionee deemed to be a stockholder of the Shares being purchased upon exercise, when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company.  Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 8.2 of the Plan.  An Option may not be exercised for a fraction of a Share.

 

10.2   Effect on Number of Shares.  Exercise of an Option in any manner shall result in a decrease in the number of shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

 

10.3  Rule 16b-3.  Options granted to persons subject to Section 16(b) of the Exchange Act must comply with the Rule 16b-3 and shall contain such additional conditions or restrictions as may be required  thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.

 

10.4  Buyout Provisions.  The Option Committee may at any time offer to buy out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Option Committee shall establish and communicate to the Optionee at the time that such offer is made.

 

11.      Non-Transferability of Options.  The Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.

 

12.      Stock Withholding to Satisfy Withholding Tax Obligations.

 

12.1  At the discretion of the Option Committee, Optionees may satisfy withholding tax obligations as provided in this paragraph.  When an Optionee incurs tax liability in connection with an Option, which tax liability is subject to tax withholding under applicable tax laws, and the Optionee is obligated to pay the Company an amount required to be withheld under applicable tax laws, the Optionee may satisfy the withholding tax obligation by electing to have the Company withhold from the Shares to be issued upon exercise of the Option, that number of Shares having a Fair Market Value equal to the amount required to be withheld.  The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined (the “Tax Date”).

Paxton Energy, Inc. 2010 Stock Option Plan

  

Exhibit 10.28 - 6

  

 

12.2   All elections by an Optionee to have Shares withheld for this purpose shall be made in writing in a form acceptable to the Option Committee and shall be subject to the following restrictions:

 

12.2.1   the election must be made on or prior to the applicable Tax Date;

 

12.2.2  once made, the election shall be irrevocable as to the particular Shares of the Option as to which the election is made;

 

12.2.3  all elections shall be subject to the consent or disapproval of the Option Committee; and

 

12.2.4  if the Optionee is subject to Rule 16b-3, the election must comply with the applicable provisions of Rule 16b-3 and shall be subject to such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.

 

12.3             In the event the election to have Shares withheld is made by an Optionee, the Tax Date is deferred under Section 83 of the Code and no election is filed under Section 83(b) of the Code, the Optionee shall receive the full number of Shares with respect to which the Option is exercised but such Optionee shall be unconditionally obligated to tender back to the Company the proper number of Shares on the Tax Date.

 

13.      Changes in the Company's Capital Structure.  The existence of outstanding Options shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bond, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise; subject to the following:

 

13.1 If the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Stock outstanding, without receiving compensation therefor in money, services or property, then (a) the number, class, and per share price of shares of Stock subject to outstanding Options hereunder shall be appropriately adjusted in such a manner as to entitle an Optionee to receive upon exercise of an Option, for the same aggregate cash consideration, the same total number and class of shares as he would have received had he exercised his Option; (b) the number and class of shares of Stock then reserved for issuance under the Plan shall be adjusted by substituting for the total number and class of shares of Stock then reserved that number and class of shares of stock that would have been received by the owner of an equal number of outstanding shares of each class of Stock as the result of the event requiring the adjustment.

 

13.2   Unless otherwise expressly provided in an Option Agreement, upon a Corporate Change (as defined below), notwithstanding any other term of this Plan, any and all outstanding Options not fully vested and exercisable shall vest in full and be immediately exercisable, and any other restrictions on such Options including, without limitation, requirements concerning the achievement of specific goals shall terminate.  The foregoing shall apply to Incentive Options, unless stated to the contrary in the Option Agreement, even though the effect may be to convert part of the Option to a Nonqualified Option.

Paxton Energy, Inc. 2010 Stock Option Plan

  

Exhibit 10.28 - 7

  

 

13.3   As used in this Plan, a “Corporate Change” shall be deemed to have occurred upon, and shall mean (a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 80% or more of either (i) the then outstanding shares of Stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following transactions shall not constitute a Corporate Change: (u) any acquisition by virtue of the conversion of preferred stock of the Company outstanding on the effective date hereof; (v) customary transactions with and between underwriters and selling group members with respect to a bona fide public offering of securities, (w) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (x) any acquisition by the Company, (y) any acquisition by any employee benefit plan(s) (or related trust(s)) sponsored or maintained by the Company or any corporation controlled by the Company or (z) any acquisition by any entity pursuant to a reorganization, merger or consolidation, if, immediately following such reorganization, merger or consolidation the conditions described in clauses (i), (ii) and (iii) of clause (b) of this paragraph are satisfied; or (b) the approval by the stockholders of the Company of a reorganization, merger or consolidation, in each case, unless immediately following such reorganization, merger or consolidation (i) more than 60% of, respectively, the then outstanding shares of common stock (or other equivalent securities) of the entity resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such entity entitled to vote generally in the election of directors (or other similar governing body) is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company, any employee benefit plan(s) (or related trust(s)) of the Company and/or its subsidiaries or such entity resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 80% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 80% or more of, respectively, the then outstanding shares of common stock (or other equivalent securities) of the entity resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such entity entitled to vote generally in the election of directors (or other similar governing body) and (iii) at least a majority of the members of the board of directors (or other similar governing body) of the entity resulting from such reorganization, merger or consolidation were members of the Incumbent Board (as defined below) at the time of the execution of the initial agreement providing for such reorganization, merger on consolidation.  The "Incumbent Board" shall mean individuals who as of the effective date hereof constitute the Company's Board of Directors; provided, however, that any individual becoming a director subsequent to such date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either (i) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act), or an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Company's Board of Directors or (ii) a plan or agreement to replace a majority of the members of the Board of Directors then comprising the Incumbent Board.

Paxton Energy, Inc. 2010 Stock Option Plan

  

Exhibit 10.28 - 8

  

 

13.4  The Company intends that this Section shall comply with the requirements of Rule 16b-3 and any future rules promulgated in substitution therefor under the Exchange Act during the term of the Plan.  Should any provision of this Section not be necessary to comply with the requirements of Rule 16b-3 or should any additional provisions be necessary for this Section to comply with the requirements of Rule 16b-3, the Board of Directors may amend the Plan to add to or modify the provisions of the Plan accordingly.

 

13.5  Except as hereinbefore expressly provided, the issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number, class, or price of shares of Stock then subject to outstanding Options.

 

14.    Time of Granting Options.  The date of grant of an Option shall, for all purposes, be the date on which the Option Committee makes the determination granting such Option, or such other date as is determined by the Option Committee.  Notice of the determination shall be given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant.

 

15.      Amendment and Termination of the Plan.

 

15.1             Amendment and Termination.  The Board may at any time amend, alter, suspend or discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or her consent.  In addition, to the extent necessary and desirable to comply with Rule 16b-3 under the Exchange Act or with Section 422 of the Code (or any other applicable law or regulation, including the applicable requirements of the NASD or an established stock exchange), the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required.

 

15.2              Effect of Amendment or Termination.  Any such amendment or termination of the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company.

 

16.      Conditions upon Issuance of Shares.

 

16.1   Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

16.2   As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.

Paxton Energy, Inc. 2010 Stock Option Plan

  

Exhibit 10.28 - 9

  

 

17.      Reservation of Shares.  The Company, during the term of this Plan, will at all time reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

18.      Information to Optionees.  The Company shall provide to each Optionee, during the period for which such Optionee has one or more Options outstanding, copies of all annual reports and other information which are generally provided to all stockholders of the Company.  The Company shall not be required to provide such information to persons whose duties in connection with the Company assure their access to equivalent information.

 

19.      Governing Law; Construction.  All rights and obligations under the Plan shall be governed by, and the Plan shall be construed in accordance with, the laws of the State of Nevada without regard to the principals of conflicts of laws.  Titles and headings to Sections herein are for purposes of reference only, and shall in no way limit, define or otherwise affect the meaning or interpretation of any provisions of the Plan.

ADOPTED by the Unanimous Written Consent of the Board Directors on May 18, 2010.

APPROVED by the affirmative vote of the Shareholders held on June 29, 2010.

 

 

 

Paxton Energy, Inc. 2010 Stock Option Plan

 

Exhibit 10.28 - 10pxte10q20100630ex10-29.htm

Exhibit 10.29

 

 

Paxton Energy, Inc.

a Nevada corporation

2010 STOCK OPTION PLAN

 

STOCK OPTION AGREEMENT

 

Unless otherwise defined herein, the terms defined in the Paxton Energy, Inc. 2010 Stock Option Plan shall have the same defined meanings in this Stock Option Agreement.

 

RECITALS

 

A.      On or about March 17, 2010 Charles F. Volk, Jr. and Company executed an agreement (“Change of Control Agreement”), which provides for a change of control of Company, contemplates an infusion of capital and acquisition of producing and non-producing oil and gas properties, and replaces the existing directors of Company with three new directors.

 

B.      The Change of Control Agreement also contemplates, subject to approval of the stockholders of Company: (i) a reverse 1-for-3 stock split of the Company’s presently outstanding 23,586,139 shares of common stock, which would reduce the outstanding shares to 7,862,046 shares, and (ii) should the stockholders approve the 1-for-3 reverse stock split, following the issuance of approximately 15,001,630 shares of common stock to persons described in the Change of Control Agreement - increasing the number of outstanding shares of common stock to approximately 22,900,000 shares of common stock - a second reverse 1-for-2.3 stock split of our then-issued and outstanding shares of common stock, which would reduce the number of outstanding shares of our common stock to approximately 10,000,000 shares.  The shares of common stock outstanding following both of these reverse stock splits are referred to as “Post-Both Split Shares”).

 

C.      On March 17, 2010, Optionee was appointed a member of the board of directors of Company (the “Board”) by vote of the Board to fill a vacancy on the board of directors as provided in the Bylaws of Company.

 

1.   NOTICE OF STOCK OPTION GRANT

	
Optionee:

	
Company:

	 	 
	
Charles F. Volk, Jr.

	
Paxton Energy, Inc.

	
3701 Sacramento Street, #104

	
Delivery:  295 Highway 50, Suite 2

	
San Francisco, CA 04118

	
Lake Village Professional Building

	  	
Stateline, NV 89449

	  	  
	  	
Mailing:  P.O. Box 1148

	  	
Zephyr Cove, NV 89448-1148

 

Company hereby grants to Optionee an Option to purchase Post-Both Split Shares of Common Stock of the Company subject to the terms and conditions of the Plan and this Option Agreement, as follows:

 

	
Date of Grant:

	
May 18, 2010

 

	
Vesting Commencement Date:

	
May 18, 2010

 

	
Exercise Price Per Post-Both Split Share:

	
Twenty-Four Cents ($0.24)

 

	
Total Number of Shares Granted:

	
Three Million (3,000,000) Post-Both Split Shares

 

	
Total Exercise Price:

	
Seven Hundred Twenty Thousand Dollars

	  	
($720,000.00)

 

	
Type of Option:

	
Incentive Stock Option to the limit of ISO

	  	
Non-Statutory Stock Option balance above limit

 

	
Term/Expiration Date:

	
May 17, 2020

 

  

Exhibit 10.29 - 1

  

 

Vesting Schedule:  This Option shall vest, in whole or in part, according to the following vesting schedule:  The Total Number of Shares Granted shall vest in whole as of the Date of Grant.

 

Termination Period:  If during the Term of this Option, Optionee ceases to provide services to the Company either as a director, an officer, an employee or as an independent contractor under a written contract (“Service Provider”), this Option shall be exercisable with respect to vested shares for ninety (90) days after the date Optionee ceases to be a Service Provider.  If the Option is not duly exercised within such period, all option rights hereunder shall cease and terminate. Upon Optionee's death or disability, this Option may be exercised for such longer period as provided in the Plan. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above.

 

2. AGREEMENT

 

A.  Grant of Option:  The Company hereby grants to the Optionee named above in the Notice of Stock Option Grant (the “Optionee”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Stock Option Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which are incorporated herein by reference.  In the event of a conflict between the terms and conditions of the Plan and this Stock Option Agreement, the terms and conditions of the Plan shall prevail.

 

     If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Non-statutory Stock Option ("NSO").

 

B.  Exercise of Option.

 

      (i)  Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement. Optionee may elect to exercise the Option and pay the consideration for the Shares prior to the date Optionee is fully vested under the Vesting Schedule.  In such case, concurrently with the delivery of the Shares, Optionee shall execute and deliver to the Company an option agreement in favor of the Company granting the Company the option to repurchase the Shares, or a portion thereof based on the Vesting Schedule, to the extent Optionee is no longer with the Company in the time frames and on the terms described in the Vesting Schedule.  The consideration for the repurchase shall be the same consideration paid by Optionee to Company upon exercise of the Option.

 

     (ii) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the "Exercise Notice") which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price.

  

Exhibit 10.29 - 2

  

 

     No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.

 

C.   Optionee's Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B, and shall read the applicable rules of the Commissioner of Corporations attached to such Investment Representation Statement.

 

D.  Lock-Up Period. Optionee hereby agrees that, if so requested by the Company or any representative of the underwriters (the "Managing Underwriter") in connection with any registration of the offering of any securities of the Company under the Securities Act, Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180- day period (or such other period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the "Market Standoff Period") following the effective date of a registration statement of the Company filed under the Securities Act. Such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period.

 

E.  Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:

 

        (i)  Cash or check;

 

       (ii) Consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or

 

      (iii)  Surrender of other Shares which, (i) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares.

 

F.  Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.

 

G.  Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

 

H.  Term of Option. This Option may be exercised only within the term set out in this Stock Option Agreement and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.

  

Exhibit 10.29 - 3

  

 

I.  Tax Consequences. Set forth below is a brief summary as of the date of this Option of some of the federal tax consequences of exercise of this Option and disposition of the Shares.

 

THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

 

(i)   Exercise of ISO. If this Option qualifies as an ISO, there will be no regular federal income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as an adjustment to the alternative minimum tax for federal tax purposes and may subject the Optionee to the alternative minimum tax in the year of exercise.

 

(ii)  Exercise of ISO Following Disability. If the Optionee ceases to be an Employee as a result of a disability that is not a total and permanent disability as defined in Section 22(e)(3) of the Code, to the extent permitted on the date of termination, the Optionee must exercise an ISO within three months of such termination for the ISO to be qualified as an ISO.

 

(iii) Exercise of Non-statutory Stock Option. There may be a regular federal income tax liability upon the exercise of a Non-statutory Stock Option. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If Optionee is an Employee or a former Employee, the Company may be required to withhold from Optionee's compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.

 

(iv)  Disposition of Shares. In the case of an NSO, if Shares are held for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. In the case of an ISO, if Shares transferred pursuant to the Option are held for at least one year after exercise and of at least two years after the Date of Grant, any gain realized on disposition of the Shares will also be treated as long-term capital gain for federal income tax purposes. If Shares purchased under an ISO are disposed of within one year after exercise or two years after the Date of Grant, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price and the lesser of (1) the Fair Market Value of the Shares on the date of exercise, or (2) the sale price of the Shares. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were held.

 

(v) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, or (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.

 

J.  Entire Agreement; Amendment. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee.

  

Exhibit 10.29 - 4

  

 

K. Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of this Agreement shall be enforceable in accordance with its terms and shall be interpreted as if such provisions were as excluded.

 

L.  Mandatory Mediation and Arbitration as EXCLUSIVE Remedies.

 

The parties agree that all claims, disputes or controversies arising out of or relating to this Agreement shall be resolved and determined exclusively under the mandatory mediation and arbitration procedures described below.  Before filing for mandatory and binding arbitration respect to any dispute, controversy or claim arising out of or relating to this Agreement, the parties shall be obligated first to seek by good faith efforts to resolve such matter by mediation.  As a condition precedent to filing for mandatory arbitration, a Notice of Claim shall be sent to the other party.  The Notice of Claim shall specify the nature of the dispute, controversy and (or) claim and shall include the name of a proposed independent third party mediator or organization of mediators who shall be located in Northern Nevada.  The party receiving the Notice of Claim shall within fifteen days thereafter either consent to mediate the matter in front of the mediator or organization of mediators so proposed or suggest an alternative mediator or organization of mediators likewise so located.  The parties shall undertake good faith efforts for a period of thirty days thereafter to appoint a mediator and submit the dispute, controversy and (or) claims to mediation.  The mediation shall be held in such place as agreed upon by the parties or, if no agreement, in Reno, Nevada notwithstanding that certain duties of Optionee may be performed elsewhere.  If the mediation attempt is unsuccessful, either party thereafter shall be entitled to seek binding arbitration.  The parties by mutual consent may elect to have the mediator act as the neutral arbitrator to render mandatory and binding decision.  If either party objects to having the mediator act as the binding arbitrator, the dispute will be referred to the American Arbitration Association (“AAA”) for appointment of a neutral arbitrator for a mandatory final and binding determination pursuant to the Commercial Rules (the “Rules”) of the AAA.  Such arbitration shall be administered by the AAA.  Binding arbitration shall be initiated by a written request for arbitration delivered by one party to the other party and to the AAA.  A neutral arbitrator will be selected in accordance with the Rules.  The hearing will be commenced within 60 days of the selection of the arbitrators.  Pending the hearing, the parties shall be entitled to undertake discovery proceedings, including the taking of depositions.  Promptly following the closing of the hearing, a final decision will be made concerning the disputed matter, which decision and the basis thereof will be in writing and delivered to the parties.  The final decision of the arbitrator will be binding on the parties and enforceable in any court of law having jurisdiction thereof.

 

THE PARTIES HAVE READ AND UNDERSTAND THAT THIS SECTION SETS OUT MANDATORY MEDIATION AND ARBITRATION PROCEDURES TO RESOLVE ALL DISPUTES HEREUNDER.  BY SIGNING THIS AGREEMENT, EACH PARTY AGREES, TO THE EXTENT PERMITTED BY LAW, TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING TO, OR CONNECTED WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATION THEREOF TO BINDING ARBITRATION AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EACH PARTY’S RIGHT TO A JURY TRIAL.

  

Exhibit 10.29 - 5

  

 

	  	
SO ACKNOWLEDGED AND AGREED:

	  
	  	
/s/ CV

	
/s/ JEB

	  	
___________________

	
______________________

	  	
Optionee

	
Company

 

M. Governing Law.  All matters, such as the interpretation of the rights granted and the obligations of the parties under this Agreement, will be governed by the laws of the State of Nevada as such laws are applied to agreements between Nevada residents entered into and to be performed entirely within Nevada.

 

N. Counterparts; Facsimile Signatures.  This Agreement may be executed in counterpart originals, each of which together shall constitute one binding agreement.  Signatures on a counterpart copy of this page shall be deemed to incorporate all of the provisions of this Agreement.  Each party may rely on a signed counterpart copy of this Agreement or an executed counterpart of this signature page with the same effect as if one originally executed complete document were delivered to such party.  The facsimile signature of any party shall be deemed to be the party’s binding signature to this Agreement; thus, a signed counterpart of this signature page faxed to the other party may be relied upon by the receiving party with the same effect as if a complete originally executed Agreement were delivered and received by such party.

 

O. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR ANY PERIOD AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

 

P. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof.  Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

	
OPTIONEE:

	
COMPANY:

	  	
Paxton Energy, Inc.

	  	
a Nevada corporation

	  	  
	
/s/ Charles Volk

	
/s/ James E. Burden

	
_____________________________

	
___________________________________

	
Signature

	
By:        James E. Burden

	  	
Title:     President

  

Exhibit 10.29 - 6

  

EXHIBIT A

Paxton Energy, Inc.

2010 STOCK PLAN

EXERCISE NOTICE

Paxton Energy, Inc.

Attention:  President

P.O. Box 1148

Zephyr Cove, NV 89448-1148

     1. Exercise of Option.  Effective as of today, ___________, 201__, the undersigned (“Optionee”) hereby elects to exercise Optionee’s option to purchase _________ shares of the Common Stock (the “Shares”) of Paxton Energy, Inc. a Nevada corporation (the “Company”) under and pursuant to the Paxton Energy, Inc. 2010 Stock Plan (the “Plan”) and the Stock Option Agreement dated ________, 2010 (the “Option Agreement”).

 

     2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement.

 

     3. Representations of Optionee.  Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.

 

     4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 11 of the Plan.

 

     5. Company’s Right of First Refusal. Before any of the Shares held by Optionee or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase such Shares on the terms and conditions set forth in this Section (the “Right of First Refusal”).

 

          (a)  Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).

 

          (b)  Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.

  

Exhibit 10.29 - 7

  

 

         (c)  Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.

 

          (d)  Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.

 

          (e)  Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.

 

          (f)  Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionee’s lifetime or on the Optionee’s death by will or intestacy to the Optionee’s immediate family or a trust for the benefit of the Optionee’s immediate family shall be exempt from the provisions of this Section. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.

 

          (g)  Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended.

 

     6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

 

     7. Restrictive Legends and Stop-Transfer Orders.

 

          (a)  Legends. Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR QUALIFIED OR REGISTERED UNDER ANY STATE SECURITIES LAWS.  THESE SHARES ARE “RESTRICTED SECURITIES” AS DEFINED IN RULE 144 UNDER THE ACT.  THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALES AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN ANY MANNER ABSENT EITHER AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS OR THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL (SUCH SATISFACTION BEING TO THE FORM AND SUBSTANCE OF THE OPINION AS WELL AS THE COUNSEL RENDERING THE OPINION) THAT REGISTRATION AND/OR QUALIFICATION IS NOT REQUIRED.

  

Exhibit 10.29 - 8

  

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER ESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.

 

          (b)  Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

 

          (c)  Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

 

     8.  Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.

 

     9.  Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.

 

     10. Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of this Agreement shall be enforceable in accordance with its terms and shall be interpreted as if such provisions were excluded.

 

    11. Further Assurances.  From time to time before or after the delivery of the Shares, the parties shall, at the reasonable request of one another and without further consideration, execute and deliver or cause to be executed and delivered such instruments, and take such other actions as any party may reasonably request in order fully to effectuate the transactions contemplated by this Agreement.

  

Exhibit 10.29 - 9

  

 

     12.  Notices. Any and all notices or other communications required or permitted by this Agreement or by law to be served on or given to a party hereto by the other party shall be deemed given: (a) when personally delivered, (b) one (1) business day after deposit with United Parcel Service, Federal Express or other courier for overnight delivery, charges prepaid, or (c) after written confirmation from the fax machine of the party sending the notice that the notice has been transmitted successfully, in each case addressed to the following address or faxed to the following number:

 

	 	
If to the Company:

	
Paxton Energy, Inc.

	 	  	
Attention:  

	
President

	 	  	
Delivery:

	
295 Highway 50, Suite 2

	 	  	  	
Lake Village Professional Building

	 	  	  	
Stateline, NV 89449

	 	  	  	  
	 	  	
Mailing:

	
P.O. Box 1148

	 	  	  	
Zephyr Cove, NV 89448-1148

 

If to Optionee, at the address or to the fax number set forth on the signature page of the Stock Option Agreement. Either party may change the address or fax number by written notice to the other party.

 

     13.  Dispute Resolution - Mandatory Mediation and Arbitration as EXCLUSIVE Remedies. The parties agree that all claims, disputes or controversies arising out of or relating to this Agreement shall be resolved and determined exclusively under the mandatory mediation and arbitration procedures described below.  Before filing for mandatory and binding arbitration respect to any dispute, controversy or claim arising out of or relating to this Agreement, the parties shall be obligated first to seek by good faith efforts to resolve such matter by mediation.  As a condition precedent to filing for mandatory arbitration, a Notice of Claim shall be sent to the other party.  The Notice of Claim shall specify the nature of the dispute, controversy and (or) claim and shall include the name of a proposed independent third party mediator or organization of mediators who shall be located in Northern Nevada.  The party receiving the Notice of Claim shall within fifteen days thereafter either consent to mediate the matter in front of the mediator or organization of mediators so proposed or suggest an alternative mediator or organization of mediators likewise so located.  The parties shall undertake good faith efforts for a period of thirty days thereafter to appoint a mediator and submit the dispute, controversy and (or) claims to mediation.  The mediation shall be held in such place as agreed upon by the parties or, if no agreement, in Reno, Nevada notwithstanding that certain duties of Optionee may be performed elsewhere.  If the mediation attempt is unsuccessful, either party thereafter shall be entitled to seek binding arbitration.  The parties by mutual consent may elect to have the mediator act as the neutral arbitrator to render mandatory and binding decision.  If either party objects to having the mediator act as the binding arbitrator, the dispute will be referred to the American Arbitration Association (“AAA”) for appointment of a neutral arbitrator for a mandatory final and binding determination pursuant to the Commercial Rules (the “Rules”) of the AAA.  Such arbitration shall be administered by the AAA.  Binding arbitration shall be initiated by a written request for arbitration delivered by one party to the other party and to the AAA.  A neutral arbitrator will be selected in accordance with the Rules.  The hearing will be commenced within 60 days of the selection of the arbitrators.  Pending the hearing, the parties shall be entitled to undertake discovery proceedings, including the taking of depositions.  Promptly following the closing of the hearing, a final decision will be made concerning the disputed matter, which decision and the basis thereof will be in writing and delivered to the parties.  The final decision of the arbitrator will be binding on the parties and enforceable in any court of law having jurisdiction thereof.

  

Exhibit 10.29 - 10

  

 

THE PARTIES HAVE READ AND UNDERSTAND THAT THIS SECTION SETS OUT MANDATORY MEDIATION AND ARBITRATION PROCEDURES TO RESOLVE ALL DISPUTES HEREUNDER.  BY SIGNING THIS AGREEMENT, EACH PARTY AGREES, TO THE EXTENT PERMITTED BY LAW, TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING TO, OR CONNECTED WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATION THEREOF TO BINDING ARBITRATION AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EACH PARTY’S RIGHT TO A JURY TRIAL.

 

     14. Governing Law.  All matters, such as the interpretation of the rights granted and the obligations of the parties under this Agreement, will be governed by the laws of the State of Nevada as such laws are applied to agreements between Nevada residents entered into and to be performed entirely within Nevada.

 

     15. Entire Agreement. The Paxton Energy, Inc. 2010 Stock Plan and Stock Option Agreement are incorporated herein by reference. This Exercise Notice, the 2010 Stock Plan, the Stock Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee.

 

     16. Counterparts; Facsimile Signatures.  This Agreement may be executed in counterpart originals, each of which together shall constitute one binding agreement. Signatures on a counterpart copy of this page shall be deemed to incorporate all of the provisions of this Agreement.  Each party may rely on a signed counterpart copy of this Agreement or an executed counterpart of this signature page with the same effect as if one originally executed complete document were delivered to such party.  The facsimile signature of any party shall be deemed to be the party=s binding signature to this Agreement; thus, a signed counterpart of this signature page faxed to the other party may be relied upon by the receiving party with the same effect as if a complete originally executed Agreement were delivered and received by such party.

 

	
Submitted by:

 

	
Accepted by Company:

	
OPTIONEE:

	
Paxton Energy, Inc.

	  	  
	  	  
	
Signature:

	
          By:

	  	  
	
Print Name:

	
Its:

	
Address:

	
          Date Received

 

 

  

Exhibit 10.29 - 11

  

EXHIBIT B

INVESTMENT REPRESENTATION STATEMENT

OPTIONEE:        (Name)

COMPANY:       Paxton Energy, Inc., a Nevada corporation

SECURITY:        COMMON STOCK:

AMOUNT:                                Shares

DATE:

 

In connection with the purchase of the above-listed Security, the undersigned Optionee represents to the Company the following:

 

          (1)  Optionee is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

 

          (2) Optionee acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionee’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company, and unless there is compliance as required under applicable state securities laws.

 

          (3)  Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.

  

Exhibit 10.29 - 12

  

 

         In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than two years after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than three years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.

 

          (4) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event.

 

 

Signature of Optionee:

 

 

________________________________________

 

Date:_________________________, 201___

 

 

 

 

 

Exhibit 10.29 - 13

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