Document:

Joint Development Agreement

 Exhibit 10.54 
  
 JOINT DEVELOPMENT AGREEMENT 
  

between 
  
 SYNTROLEUM INTERNATIONAL CORPORATION 
  
 and 
  
 SOVEREIGN OIL & GAS COMPANY II, LLC 
  
 March 1, 2004 
  

 1 

 TABLE OF CONTENTS 
  

					
	 	  	Page No.

		
	 ARTICLE NO.
	  	 
		
	 1. DEFINITIONS AND INTERPRETATION
	  	4
		
	 2. BUSINESS PURPOSE AND CONDUCT
	  	8
		
	 3. EXCLUSIVITY AND CERTAIN OTHER COVENANTS
	  	9
		
	 4. REPRESENTATIONS AND WARRANTIES
	  	9
		
	 5. CONDITIONS
	  	10
		
	 6. FUNDING AND COMPENSATION
	  	12
		
	 7. TAXES AND WITHHOLDINGS
	  	17
		
	 8. TERM AND TERMINATION
	  	17
		
	 9. IMPROPER PAYMENTS
	  	19
		
	 10. ASSIGNMENT
	  	20
		
	 11. INDEMNITY AND INSURANCE
	  	20
		
	 12. CONFIDENTIALITY
	  	22
		
	 13. GOVERNING LAW AND DISPUTE RESOLUTION
	  	23
		
	 14. NOTICES
	  	25
		
	 15. ANNOUNCEMENTS
	  	26
		
	 16. REMEDIES CUMULATIVE
	  	26
		
	 17. CERTAIN DAMAGES EXCLUDED
	  	26
		
	 18. AMENDMENTS
	  	27

  

 2 

 TABLE OF CONTENTS (Continued) 
  

					
	 	  	Page No.

		
	 ARTICLE NO.
	  	 
		
	 19. ENTIRE AGREEMENT
	  	27
		
	 20. NO WAIVER
	  	27
		
	 21. ENUREMENT
	  	27
		
	 22. FURTHER ASSURANCES
	  	27
		
	 23. FORCE MAJEURE
	  	27
		
	 24. DISCLAIMER
	  	27
		
	 25. COUNTERPART EXECUTION AND FAX DELIVERY
	  	28

  
 EXHIBITS TO THE AGREEMENT

  

					
	 	  	 Page No.

		
	 EXHIBIT ‘A’ - JV DISCRETIONARY ANNUAL BUDGET AND FUNDING SCHEDULE
	  	A-1
		
	 EXHIBIT ‘B’ - JV FIXED ANNUAL BUDGET AND FUNDING SCHEDULE
	  	B-1
		
	 EXHIBIT ‘C’ - WARRANT AGREEMENT
	  	C-1
		
	 EXHIBIT ‘D’ - REGISTRATION RIGHTS AGREEMENT
	  	D-1
		
	 EXHIBIT ‘E’ – LIST OF THE PRIOR SOVEREIGN PROJECTS
	  	E-1
		
	 EXHIBIT ‘F’ - SCHEDULE OF THE CONTRACT AREAS AND EXCLUDED AREAS
	  	F-1
		
	 EXHIBIT ‘G’ - ESCROW AGREEMENT
	  	G-1

  

 3 

 JOINT DEVELOPMENT AGREEMENT 
  
 THIS AGREEMENT is made and effective as of the 1st day of March, 2004, 
 BETWEEN: 
  
 SYNTROLEUM
INTERNATIONAL CORPORATION, a corporation incorporated and existing under the laws of the State of Delaware, with head offices in the City of Tulsa, Oklahoma, in the United States of America (hereinafter referred to as
“Syntroleum”); 
  
 - and - 
  
 SOVEREIGN OIL & GAS COMPANY II, LLC, a Texas Limited Liability
Company formed and existing under the laws of the State of Texas, with head offices in the City of Houston, Texas, in the United States of America (hereinafter referred to as “Sovereign”). 
  
 Whereas the Parties have executed respective versions of a Confidentiality Agreement and have
completed preliminary discussions contemplating that the Parties shall enter into this Agreement; 
  
 Now therefore the Parties agree as follows: 
  
 ARTICLE 1 
 DEFINITIONS AND INTERPRETATION 
  

	1.1	In this Agreement, including its recitals, all words importing the singular include the plural and vice versa, and except where the context otherwise indicates, shall have the
meanings set forth in this Article: 

  

	 	1.1.1	“Affiliate” means in relation to any Party, any company, partnership or other entity which controls or is controlled by that Party or is controlled by a company,
partnership or other entity which controls that Party. “Control” means the right to exercise, directly or indirectly, 50% or more than 50% of the voting rights of a company or other entity. 

  

	 	1.1.2	“Acquisition Date” shall have the meaning assigned it in Section 6.6.1. 

  

	 	1.1.3	“Appointing Authority” shall have the meaning assigned it in Section 13.2. 

  

	 	1.1.4	“Bank” shall mean the bank mutually agreed by the Parties, who shall administer the Escrow Account on behalf of the Parties in accordance with the terms and conditions of
the Escrow Agreement. 

  

	 	1.1.5	“Confidential Information” shall have the meaning assigned it in Section 12.1 

  

 4 

	 	1.1.6	“Contract Area” means the geographical area that is covered by each license, lease, production sharing agreement or other contract granted by the appropriate authority of
a sovereign state for the technical study, exploration, and/or appraisal and production of Hydrocarbons in which Syntroleum and/or its co-venturers and assigns may acquire Option Interests or Participating Interests. A Contract Area may also be an
Open Acreage Contract Area. 

  

	 	1.1.7	“Contract Year” means a period of twelve (12) consecutive months according to the Gregorian Calendar, counted from the Effective Date of this Agreement or from the
anniversary of such Effective Date. 

  

	 	1.1.8	“Dispute” shall have the meaning assigned it in Section 13.1. 

  

	 	1.1.9	“Effective Date” means the date first written above in the preamble to this Agreement. 

  

	 	1.1.10	“Escrow Account” shall have the meaning assigned it in Section 6.1. 

  

	 	1.1.11	“Escrow Agreement” means the escrow agreement (to be executed by the Parties pursuant to Section 6.1 of this Agreement) for the JV Discretionary Annual Budget and for the
JV Fixed Annual Budget. 

  

	 	1.1.12	“Excluded Area” shall have the meaning assigned it in Section 6.5.3 

  

	 	1.1.13	“Exercise Price” shall have the meaning assigned it in Section 6.8. 

  

	 	1.1.14	“First Production Date” shall have the meaning assigned it in Section 6.6.2.2. 

  

	 	1.1.15	“Force Majeure” shall have the meaning assigned it in Section 23.1. 

  

	 	1.1.16	“Government” means the government of the sovereign state whose territory includes the Contract Area and any political subdivision, agency, instrumentality, ministry, state
owned or operated oil company, agency, or organization, department, office or bureau of such government. 

  

	 	1.1.17	“Hydrocarbons” means substances, including both gaseous and liquid hydrocarbons, that are produced from a Contract Area. 

  

	 	1.1.18	“Industry Partner” or “Industry Partners” shall have the meaning assigned it in Section 6.5.4. 

  

	 	1.1.19	“JV Discretionary Annual Budget” means the budget for twelve calendar months’ discretionary costs of the Syntroleum-Sovereign Development Venture commencing with the
Effective Date of this Agreement. A copy of the initial estimate of the JV Discretionary Annual Budget and Funding Schedule is attached as Exhibit ‘A’ to this Agreement and incorporated by reference herein. 

  

	 	1.1.20	“JV Fixed Annual Budget” means the budget for twelve calendar months’ fixed costs of the Syntroleum-Sovereign Development Venture commencing with the Effective Date
of this Agreement and paid by Syntroleum to Sovereign in accordance with the JV Fixed Annual Budget and Funding Schedule in Exhibit ‘B’. A copy of the JV Fixed Annual Budget And Funding Schedule is attached as Exhibit ‘B’ to this
Agreement and incorporated by reference herein. 

  

 5 

	 	1.1.21	“Notice” means a notice in writing delivered in accordance with the provisions of Article 14. 

  

	 	1.1.22	“Open Acreage Contract Area” means a Contract Area that is available for acquisition directly from a Government and that has not already been acquired by a third party.

  

	 	1.1.23	“Option Interest” means a contractual right (but not an obligation) that is exercisable at the holder’s option to acquire a Participating Interest in a Contract Area.

  

	 	1.1.24	“Overriding Royalty Interest” or “ORRI” means an interest in a specified percentage of the gross proceeds from sales of all volumes of Hydrocarbons produced,
saved, and sold by the aggregate of the Participating Interest Owners from a Contract Area, less any volumes of Hydrocarbons or percentage of the gross proceeds from Hydrocarbons sales paid to or retained by the Government as a royalty or production
share, but before subtracting any volumes of Hydrocarbons sold for the recovery of capital costs, operating costs, taxes, and any other costs associated with the Contract Area or with the marketing and transportation of Hydrocarbons.

  

	 	1.1.25	“Participating Interest” means the percentage share of a Party in the undivided ownership, rights, benefits, duties, obligations and liabilities pertaining to a Contract
Area granted by the appropriate authority of a sovereign state. 

  

	 	1.1.26	“Parties” means the parties to this Agreement and “Party” means any one of them. 

  

	 	1.1.27	“Partner Date” shall have the meaning assigned it in Section 6.6.2. 

  

	 	1.1.28	“Person” means any individual, corporation, partnership, joint venture, association, trust, estate, unincorporated organization of government or any agency or political
subdivision thereof. 

  

	 	1.1.29	“Prior Sovereign Projects” shall have the meaning assigned it in Section 3.3. 

  

	 	1.1.30	“Quarterly Financials” shall have the meaning assigned it in Section 6.2. 

  

	 	1.1.31	“Quarterly Plan” shall have the meaning assigned it in Section 6.2. 

  

	 	1.1.32	“Registration Rights Agreement” means the agreement between Syntroleum Corporation and Sovereign concerning the registration of Syntroleum Common Stock covered by warrants
granted to Sovereign for the purchase of Syntroleum Common Stock issued under this Agreement. The Registration Rights Agreement is attached to this Agreement as Exhibit ‘D’ and incorporated by reference herein. 

  

	 	1.1.33	“Sovereign” has the meaning provided in the preamble to this Agreement and for the purposes of this Agreement shall include the Affiliates and co-venturers of Sovereign
and its lawful assigns. 

  

	 	1.1.34	“Sovereign Contract Area” shall have the meaning assigned it in Section 6.5. 

  

	 	1.1.35	“Sovereign Incentive Compensation” means the compensation to be paid to Sovereign in accordance with Section 6.6 and Section 6.7. 

  

 6 

	 	1.1.36	“Syntroleum” has the meaning provided in the preamble to this Agreement and for the purposes of this Agreement shall include the Affiliates and co-venturers of Syntroleum
and its lawful assigns. 

  

	 	1.1.37	“Syntroleum Acquisition Date” shall have the meaning assigned it in Section 6.7.1. 

  

	 	1.1.38	“Syntroleum Common Stock” means the common stock, par value of $0.01 per share, of Syntroleum Corporation, a Delaware corporation. 

  

	 	1.1.39	“Syntroleum Contract Area Interest” means a Syntroleum Option Interest or a Syntroleum Participating Interest. in a Contract Area acquired by Syntroleum with the
assistance of Sovereign. 

  

	 	1.1.40	“Syntroleum GTL Barge Project” means a project employing the Syntroleum proprietary Gas-to-Liquids (GTL) synthetic fuels process utilizing equipment primarily mounted on
an inland barge. 

  

	 	1.1.41	“Syntroleum Option Interest” means an Option Interest held by Syntroleum. 

  

	 	1.1.42	“Syntroleum Participating Interest” means a Participating Interest and the other rights, obligations and interests in a Contract Area acquired by Syntroleum with the
assistance of Sovereign. 

  

	 	1.1.43	“Syntroleum Partner Date” shall have the meaning assigned it in Section 6.7.2. 

  

	 	1.1.44	“Syntroleum Partner Contract Area” shall have the meaning assigned it in Section 6.5. 

  

	 	1.1.45	“Syntroleum-Sovereign Development Venture” or “Development Venture” means the contractual relationship between Syntroleum and Sovereign created by this
Agreement. 

  

	 	1.1.46	“Term of Agreement” shall have the meaning assigned it in Section 8.1. 

  

	 	1.1.47	“Warrant Agreement” means the agreement between Syntroleum Corporation and Sovereign concerning the award and exercise of Syntroleum Corporation warrants for the purchase
of Syntroleum Common Stock issued to Sovereign pursuant to this Agreement. The Warrant Agreement is attached to this Agreement as Exhibit ‘C’ and incorporated by reference herein. 

  

	1.2	All references to articles, sections, recitals and schedules are, unless otherwise expressly stated, references to clauses of, and recitals and schedules to, this Agreement.

  

	1.3	The headings in this Agreement are inserted for convenience only and shall be ignored in construing this Agreement. 

  

	1.4	Any reference to laws or regulations shall be a reference to the same as amended, supplemented or re-enacted from time to time. 

  

	1.5	Where a word or phrase is defined, its other grammatical forms shall have a corresponding meaning. 

  

	1.6	Unless otherwise expressly stated, references to currency shall mean currency of the United States of America. 

  

 7 

	1.7	The schedules attached hereto form part of this Agreement. In the event of any conflict between the provisions of this Agreement and the schedules hereto, the provisions of this
Agreement shall prevail. 

  
 ARTICLE 2

 BUSINESS PURPOSE AND CONDUCT 
  

	2.1	The Parties have formed the Syntroleum-Sovereign Joint Venture under this Agreement for the purpose of pursuing upstream Hydrocarbon assets outside the United States, principally as
a source of Natural Gas feedstock for one or more petrochemical plants mounted on an inland barge employing the Syntroleum proprietary Gas-to-Liquids (GTL) synthetic fuels process. Syntroleum desires to obtain the rights to develop such Hydrocarbon
assets for it and/or its co-venturers, and Sovereign has demonstrated the capacity to obtain such rights on behalf of third parties. The Parties agree that nothing in this Agreement shall be construed to provide Sovereign a license or any other
rights to Syntroleum’s proprietary Fischer-Tropsch gas to liquids technology. 

  

	2.2	Sovereign shall, in accordance with this Agreement, use its reasonable efforts to obtain on behalf of Syntroleum one or more known Hydrocarbon-bearing Contract Areas, and in
addition, to obtain on Syntroleum’s behalf the appropriate international upstream industry co-venturer(s) as needed for the realization of an integrated Syntroleum GTL Barge Project. In the event that Sovereign is negotiating an agreement with
a third party that shall bind Syntroleum, Sovereign shall regularly consult with Syntroleum to obtain its approval for the terms of such agreement that would bind Syntroleum and shall follow any instructions issued by Syntroleum concerning such
negotiations. Sovereign shall not indicate final approval of any agreement that shall bind Syntroleum until after having received prior written approval from Syntroleum. In all such negotiations and work conducted by Sovereign under this Agreement,
Sovereign shall do so on behalf of Syntroleum. 

  

	2.3	Except as limited by the terms of this Agreement, Sovereign shall determine the means by which it accomplishes the work agreed with Syntroleum, including the selection and
compensation of personnel to carry out the purposes hereof. Nothing in this Agreement shall be regarded as creating a partnership relationship among the parties (for tax or other purposes) or allowing any party to create or assume any obligation on
behalf of the other party for any purpose whatsoever. 

  

 8 

 ARTICLE 3 
 EXCLUSIVITY AND CERTAIN OTHER COVENANTS 
  

	3.1	The Syntroleum-Sovereign Joint Venture is established entirely and exclusively in respect of Syntroleum GTL Barge Projects, and unless agreed otherwise by the Parties in writing,
during the term of this Agreement, Sovereign shall devote one hundred per cent of its time in obtaining stranded natural gas Contract Areas to supply Syntroleum GTL Barge Projects. Sovereign shall deal exclusively with Syntroleum with respect to the
pursuit and acquisition of Contract Areas for Syntroleum GTL Barge Projects and, except as contemplated by this Agreement, Sovereign shall refrain from entering into or pursuing, either directly or indirectly, any negotiations with third parties
respecting the acquisition of rights or interests in Contract Areas without the written consent of Syntroleum. 

  

	3.2	During the term of this Agreement, except with Syntroleum’s written consent, Sovereign shall refrain from exercising any options to acquire rights or interests in Contract
Areas under any other agreements from time to time in effect between Sovereign and its former co-venturers and investors and shall refrain from exercising any other rights under such agreements in a manner inconsistent with Syntroleum’s rights
under this Agreement. 

  

	3.3	Notwithstanding any language to the contrary appearing in this Agreement, Syntroleum recognizes that Sovereign has limited but ongoing contractual obligations and economic interests
in certain oil and gas licenses in West Africa, the Middle East, and in the United States, that predate this Agreement (the “Prior Sovereign Projects”). A list of the Prior Sovereign Projects is attached as Exhibit ‘E’ to this
Agreement and incorporated by reference herein. Syntroleum acknowledges Sovereign’s right and obligation to maintain its interests in the Prior Sovereign Projects and to devote the necessary time and resources to do so, and Sovereign
shall not require Syntroleum’s permission to so do provided that Sovereign shall pay its own costs in relation to any Prior Sovereign Projects. By this Agreement, Syntroleum shall not incur any rights or obligations respecting the Prior
Sovereign Projects. 

  

	3.4	During the term of this Agreement, Syntroleum shall deal exclusively with Sovereign with respect to the types of services provided by Sovereign as contemplated by this Agreement in
the pursuit and acquisition of Contract Areas for Syntroleum GTL Barge Projects and, except as contemplated by this Agreement, Syntroleum shall refrain from entering into or pursuing, either directly or indirectly, any services to be provided by
Sovereign pursuant to this Agreement from third parties respecting the acquisition of rights or interests in Contract Areas for Syntroleum GTL Barge Projects. 

  
 ARTICLE 4 
 REPRESENTATIONS AND WARRANTIES 
  

	4.1	Sovereign hereby represents and warrants to Syntroleum that: 

  

	 	4.1.1	Sovereign is duly formed and validly subsisting in its jurisdiction of formation. 

  

	 	4.1.2	Sovereign has full capacity, power and authority to enter into this Agreement and to perform its obligations hereunder. 

  

 9 

	 	4.1.3	Neither the execution nor delivery of this Agreement nor the performance by Sovereign of its obligations hereunder will place the Sovereign in breach of (i) any court order,
judgement or arbitral award to which Sovereign is subject, or (ii) any agreement to which Sovereign is a party or is bound. 

  

	 	4.1.4	Sovereign has not, in connection with the transactions contemplated hereby, incurred any obligation for any finder’s fee or brokerage or other commission for which Syntroleum
may become liable. 

  

	 	4.1.5	Sovereign and its officers, employees and authorized representatives has not, in connection with the transactions contemplated hereby, made any Improper Payments as they are defined
and described in Section 9.1 of this Agreement. 

  

	4.2	Syntroleum hereby represents and warrants to Sovereign that: 

  

	 	4.2.1	Syntroleum is duly incorporated and validly subsisting in its jurisdiction of incorporation. 

  

	 	4.2.2	Upon approval by the shareholders of Syntroleum Corporation, Syntroleum has full corporate capacity, power and authority to enter into this Agreement and to perform its obligations
hereunder. 

  

	 	4.2.3	Neither the execution nor delivery of this Agreement nor the performance by Syntroleum of its obligations hereunder will place Syntroleum in breach of (i) any court order, judgement
or arbitral award to which Syntroleum is subject, or (ii) any agreement to which Syntroleum is a party or is bound. 

  

	 	4.2.4	Syntroleum has not, in connection with the transactions contemplated hereby, incurred any obligation for any finder’s fee or brokerage or other commission for which Sovereign
may become liable. 

  

	 	4.2.5	Syntroleum and its officers, employees and authorized representatives has not, in connection with the transactions contemplated hereby, made any Improper Payments as they are
defined and described in Section 9.1 of this Agreement. 

  
 ARTICLE 5 
 CONDITIONS 
  

	5.1	The obligation of Syntroleum to continue and complete its obligations under this Agreement is subject to satisfaction of the following conditions, which are included for the
exclusive benefit of and may be waived only by Syntroleum: 

  

	 	5.1.1	The representations and warranties of Sovereign in this Agreement shall be true and correct in all material respects on the date hereof and throughout the term of this Agreement.

  

	 	5.1.2	The execution by Sovereign of the Escrow Agreement covering both the JV Fixed Annual Budget and the JV Discretionary Annual Budget. 

  

	 	5.1.3	The unconditional approval of the shareholders of Syntroleum Corporation of the conditional grant of warrants contemplated by this Agreement shall have been obtained on or before
May 31, 2004, provided that if such unconditional approvals have not been 

  

 10 

 obtained on or before May 31, 2004, Syntroleum may by Notice delivered to Sovereign on or before May 20,
2004 request an extension of the time for the satisfaction of the conditions contained in this Subsection, and if the Parties mutually agree in writing to such extension on or prior to May 27, 2004, the time for the satisfaction of the conditions
contained in this Subsection shall be extended until the date agreed upon by the Parties in such extension agreement. 
  

	5.2	The obligation of Sovereign to continue and complete its obligations under this Agreement is subject to satisfaction of the following conditions, which are included for the benefit
of and may be waived only Sovereign: 

  

	 	5.2.1	The representations and warranties of Syntroleum in this Agreement shall be true and correct in all material respects on the date hereof and throughout the term of this Agreement.

  

	 	5.2.2	The execution by Syntroleum of the Escrow Agreement covering both the JV Fixed Annual Budget and the JV Discretionary Annual Budget and the timely funding by Syntroleum of the
Escrow Account in accordance with Article 6 and with the Funding Schedules contained in Exhibit ‘A’ and Exhibit ‘B’ incorporated by reference herein.  

  

	 	5.2.3	The unconditional approvals of the chief executive officer and the board of directors of Sovereign, of the transactions contemplated by this Agreement shall have been obtained on or
before March 1, 2004; provided that if such unconditional approvals have not been obtained on or before March 1, 2004, Sovereign may by Notice delivered to Syntroleum on or before March 2, 2004 request an extension of the time for the satisfaction
of the conditions contained in this Subsection, and if the Parties mutually agree in writing to such extension on or prior to March 9, 2004, the time for the satisfaction of the conditions contained in this Subsection shall be extended until the
date agreed upon by the Parties in such extension agreement. 

  

	 	5.2.4	The unconditional approval of the shareholders of Syntroleum Corporation of the conditional grant of warrants contemplated by this Agreement shall have been obtained on or before
May 31, 2004, provided that if such unconditional approvals have not been obtained on or before May 31, 2004, Syntroleum may by Notice delivered to Sovereign on or before May 20, 2004 request an extension of the time for the satisfaction of the
conditions contained in this Subsection, and if the Parties mutually agree in writing to such extension on or prior to May 27, 2004, the time for the satisfaction of the conditions contained in this Subsection shall be extended until the date agreed
upon by the Parties in such extension agreement. 

  

	5.3	If, due to the non-fulfillment of any condition included in this Agreement for its benefit, a Party refuses to continue and complete its obligations under this Agreement, such Party
shall have no liability to the other Party for refusing to do so; provided, however, that the refusing Party shall have complied with any obligation imposed on it by this Agreement to assist the other Party to satisfy or endeavour to satisfy such
condition. 

  
 ARTICLE 6 
 FUNDING AND COMPENSATION 
  

	6.1	Syntroleum shall pay to Sovereign the total of the JV Fixed Annual Budget to cover Sovereign’s fixed general and administrative costs for each Contract Year of this Agreement.
Syntroleum will 

  

 11 

 deposit the full amount of the JV Fixed Annual Budget funds into the Escrow Account within five (5) days
of the execution by the Parties of a mutually acceptable Escrow Agreement with the Bank, and Syntroleum shall again so do on each anniversary of the Effective Date thereafter during the Term of Agreement. The Parties shall negotiate and execute an
Escrow Agreement with the Bank and shall, after execution of the Escrow Agreement, attach the Escrow Agreement to this Agreement as Exhibit ‘G’. Said Escrow Agreement shall establish an escrow account (the “Escrow Account”) into
which the funds to be deposited by Syntroleum are to be placed. 
  
 The Escrow Agreement shall provide that the Bank release to Sovereign upon receipt of a letter from the Parties via wire transfer into Sovereign’s designated bank account the sum equal to one-fourth of the total JV Fixed Annual Budget
funds from the Escrow Account. This sum shall be released from the Escrow Account to Sovereign quarterly in advance in accordance with the JV Fixed Annual Budget and Funding Schedule attached to this Agreement as Exhibit ‘B’ and
incorporated by reference herein. Syntroleum agrees to execute instruction letters to the Bank as required and demanded by Sovereign to obtain the release of such sums. Syntroleum shall bear the costs of the Escrow Account and any interest paid on
the escrowed funds shall be paid to Syntroleum. 
  

	6.2	Sovereign shall provide to Syntroleum quarterly operational and planning forecasts (the “Quarterly Plan”) and quarterly compiled financial statements (the “Quarterly
Financials”) covering the work performed by Sovereign under this Agreement. Sovereign shall provide the Quarterly Plan to Syntroleum on or before May 1, August 1, November 1, and February 1, of each Contract Year, each being the date that is
thirty days in advance of the quarterly funding date of the JV Discretionary Annual Budget. Sovereign shall provide the Quarterly Financials to Syntroleum within thirty days of the completion of each quarter-year for the just-ended quarter of each
Contract Year, commencing with the quarter ending May 31, 2004. The Quarterly Financials shall be prepared by an independent certified public accountant appointed by Sovereign and acceptable to both Parties. The Parties agree that all funds paid to
Sovereign under the Escrow Agreement shall be accounted for Sovereign’s sole use for performing its obligations under this Agreement and Syntroleum shall bear its own in-house costs in pursuing Contract Areas, e.g., in executing its own
feasibility studies, conducting sales and negotiating trips, legal fees, and the like, independent of the JV Annual Budgets. 

  

	6.3	Syntroleum shall pay to Sovereign the JV Discretionary Annual Budget under the terms and conditions described in Section 6.4 below, to cover Sovereign’s discretionary
out-of-pocket business costs incurred in accordance with the Quarterly Plan for each Contract Year of this Agreement. Syntroleum shall continue to fund the Escrow Account thereafter at timely intervals so as to maintain at all times the
discretionary funds required by Sovereign to conduct the work and pay the financial obligations incurred for each approved Quarterly Plan, except as otherwise provided in Article 8. 

  

	6.4	The Parties have agreed on the initial estimate of the JV Discretionary Annual Budget as shown in the attached Exhibit ‘A’ incorporated by reference herein and Syntroleum
shall deposit funds in the amount equal to the sum of the first two quarterly payments (being four hundred two thousand dollars ($402,000.00)) into the Escrow Account within five (5) days of the execution of a mutually acceptable Escrow Agreement
with the Bank and Syntroleum and Sovereign shall immediately instruct the Bank to release to Sovereign the discretionary funds for the first quarter of the first Contract Year in the amount of $201,000. 

  

	 	6.4.1	The Parties shall meet once per quarter thereafter (but not less than 15 days prior to the end of the then current budget quarter) and agree on adjustments, if any, to be made to

  

 12 

 the JV Discretionary Annual Budget for the upcoming quarter Contract Year based on the approved Quarterly
Plan. Syntroleum shall then deposit a sum sufficient to fund the agreed amount of the discretionary funds for the next quarter into the Escrow Account within ten (10) days of the meeting in which the revised JV Discretionary Annual Budget was
approved. At each budget meeting, Sovereign and Syntroleum shall agree on the amount to be withdrawn from the Escrow Account pursuant to this paragraph for costs to be incurred in the period prior to the next budget meeting. Syntroleum and Sovereign
will thereupon instruct the Bank to release to Sovereign the agreed sum from the Escrow Account. 
  

	6.5	The Parties shall conduct management meetings monthly. At such management meetings Sovereign shall make progress reports and the Parties shall consult together to define the
objectives to be pursued by Sovereign during the upcoming month and to agree on the Contract Area or Areas to be reviewed and/or acquired. Either Sovereign or Syntroleum or both shall propose prospective Contract Areas for pursuit and acquisition,
as well as other forms of activity. The Parties shall designate each prospective Contract Area as a “Sovereign Contract Area” or as a “Syntroleum Partner Contract Area” or as an “Excluded Area” for purposes of
determining the Sovereign Incentive Compensation under Sections 6.6 and 6.7 below and shall add the Contract Areas so designated to the Schedule of Contract Areas provided in Exhibit F to this Agreement and incorporated by reference herein.

  

	 	6.5.1	A “Sovereign Contract Area” shall be an Open Acreage Contract Area or Contract Area proposed by Sovereign that is accepted by Syntroleum and that is listed by mutual
agreement in Exhibit F to this Agreement and incorporated by reference herein. 

  

	 	6.5.2	A “Syntroleum Partner Contract Area” is defined to be a Contract Area (i) for which Syntroleum initiated negotiations and/or acquired an Option Interest or Participating
Interest prior to this Agreement (which shall be listed by mutual agreement in Exhibit ‘F’) or (ii) proposed by Syntroleum and that is accepted by Sovereign and listed by mutual agreement in Exhibit ‘F’ to this Agreement and
incorporated by reference herein. The Parties agree that for any Syntroleum Partner Contract Area Sovereign may only earn incentive compensation pursuant to Section 6.7, and, only in the case of Sanaga Sud Field, Cameroon, Sovereign may only earn
incentive compensation pursuant to Section 6.7.2. 

  

	 	6.5.3	Unless a Contract Area is excluded by mutual agreement (an “Excluded Area”), the Parties agree that all Contract Areas in which Syntroleum obtains a Syntroleum Contract
Area Interest arising from this Agreement shall be either a Sovereign Contract Area or a Syntroleum Partner Contract Area.. Areas that are excluded by mutual consent will be listed in Exhibit ‘F’ to this Agreement under the heading
“Excluded Areas”. In general, the Parties shall name a Contract Area an Excluded Area if (i) Syntroleum does not intend to obtain a Syntroleum Contract Area Interest in such Contract Area or (ii) Syntroleum obtains a Syntroleum Contract
Area Interest in the Contract Area, subject to the provisions of Section 3.4, without the involvement of Sovereign. Each area listed on Exhibit ‘F’ shall be initialled by authorized representatives of both Parties.

  

	 	6.5.4	The Parties contemplate that when Syntroleum obtains a Syntroleum Option Interest or a Syntroleum Participating Interest in a Contract Area, Sovereign will undertake marketing
activities on Syntroleum’s behalf to secure a third party assignee or transferee for its interests in each Contract Area from among companies active in the international oil and gas industry (referred to hereafter as “Industry
Partner”). Syntroleum may also at other 

  

 13 

 times elect to seek an Industry Partner to participate in its Syntroleum GTL Barge Projects. The Parties
agree that Sovereign will assist Syntroleum in its quest for Industry Partners and agree that when Syntroleum obtains an Industry Partner in each of its Syntroleum GTL Barge Projects Sovereign will earn incentive compensation, as provided in Section
6.6.2 and Section 6.7.2. In performing the work of seeking an Industry Partner or Industry Partners for a Sovereign Contract Area, Sovereign shall regularly consult with Syntroleum and the Parties shall agree on the terms and conditions of sale for
any Syntroleum Option Interest or Syntroleum Participating Interest. 
  

	6.6	For each Sovereign Contract Area, the Parties agree that Sovereign shall receive the following incentive compensation: 

  

	 	6.6.1	Upon the date of execution by Syntroleum of an agreement to acquire a Syntroleum Contract Area Interest in a Sovereign Contract Area (hereafter referred to as the “Acquisition
Date”), Syntroleum shall issue to Sovereign warrants to purchase twenty-five thousand (25,000) shares of Syntroleum Common Stock at the Exercise Price, as defined below, exercisable (a) from the date that is the later of either (i) the date of
Syntroleum Corporation shareholder approval of this Agreement; or, (ii) the Acquisition Date, (b) until the date that is five years after the Acquisition Date. 

  

	 	6.6.2	Upon the later to occur of either (i) the date of execution by Syntroleum of an agreement with one or more Industry Partners for such Industry Partner(s) to acquire from Syntroleum
an Option Interest or Participating Interest in a Sovereign Contract Area; or, (ii) the date of execution of an agreement by Syntroleum and one or more Industry Partners to acquire together an Option Interest or a Participating Interest in a
Sovereign Contract Area (such later date being herein defined as the “Partner Date”), Syntroleum shall on the Partner Date provide by payment, assignment and/or issuance to Sovereign the following: 

  

	 	6.6.2.1	One third (1/3) of any cash bonus and/or one third (1/3) of any Overriding Royalty Interest that each Industry Partner has agreed to pay to Syntroleum as consideration for acquiring
its interest in the Sovereign Contract Area, plus, warrants to purchase twenty-five thousand (25,000) shares of Syntroleum Common Stock at the Exercise Price, as defined below, exercisable (a) from the later of either (i) the date of Syntroleum
Corporation shareholder approval of this Agreement; or, (ii) the Partner Date, (b) until the date that is five years after the Partner Date; provided, however, if an Industry Partner has agreed to pay a cash bonus and/or Overriding Royalty Interest
and Syntroleum elects to reduce the cash bonus or Overriding Royalty Interest received from such Industry Partner in exchange for other consideration from such Industry Partner, Syntroleum and Sovereign shall mutually agree that either (A) Sovereign
shall receive its one-third share of the cash bonus and/or Overriding Royalty Interest as if Syntroleum had not reduced the cash bonus or Overriding Royalty Interest as provided above, or (B) Sovereign shall receive the incentive compensation
provided for in Section 6.6.2.2. For purposes of clarification, it is the intent of the Parties with respect to the foregoing, that any decision by Syntroleum to forego its share of the cash bonus and Overriding Royalty Interest will not reduce the
Sovereign one-third share of the cash bonus and Overriding Royalty Interest the Industry Partner had agreed to pay; or 

  

 14 

	 	6.6.2.2	In the event that the Industry Partner(s) in aggregate did not provide to Syntroleum an Overriding Royalty Interest as part of the consideration for its or their acquisition of its
or their interest in the Sovereign Contract Area, warrants to purchase twenty-five thousand (25,000) shares of Syntroleum Common Stock at the Exercise Price, as defined below, exercisable (a) from the later of either (i) the date of Syntroleum
Corporation shareholder approval of this Agreement; or, (ii) the Partner Date, (b) until the date that is five years after the Partner Date, plus, upon the date of first production of Hydrocarbons from the Sovereign Contract Area by Syntroleum or
the Industry Partner(s) (“First Production Date”), warrants to purchase fifty thousand (50,000) shares of Syntroleum Common Stock at the Exercise Price, as defined below, exercisable from the First Production Date until five years after
the First Production Date. 

  

	6.7	For each Syntroleum Partner Contract Area, the Parties agree that Sovereign shall receive the following incentive compensation: 

  

	 	6.7.1	Upon the date of execution by Syntroleum of an agreement to acquire a Syntroleum Contract Area Interest in a Syntroleum Contract Area (the “Syntroleum Acquisition Date”),
Syntroleum shall issue to Sovereign warrants to purchase twelve thousand five hundred (12,500) shares of Syntroleum Common Stock at the Exercise Price, as defined below, exercisable (a) from the later of (i) the date of Syntroleum Corporation
shareholder approval of this Agreement or (ii) the Syntroleum Acquisition Date, (b) until five years after the Syntroleum Acquisition Date. 

  

	 	6.7.2	Upon the later to occur of either (i) the date of execution by Syntroleum of an agreement with one or more Industry Partners for such Industry Partner(s) to acquire an Option
Interest or Participating Interest in the Syntroleum Contract Area; or, (ii) the date of execution by Syntroleum and one or more Industry Partners of an agreement for Syntroleum and such Industry Partner(s) to acquire an Option Interest or
Participating Interest in a Syntroleum Contract Area (such later date being herein defined as the “Syntroleum Partner Date”), Syntroleum shall issue to Sovereign warrants to purchase twelve thousand five hundred (12,500) shares of
Syntroleum Common Stock at the Exercise Price, as defined below, exercisable (a) from the later of (i) the date of Syntroleum Corporation shareholder approval of this Agreement or (ii) the Syntroleum Partner Date, (b) until five years after the
Syntroleum Partner Date. 

  

	6.8	For purposes of Sections 6.6 and 6.7, the “Exercise Price” shall be defined and determined as follows: 

  

	 	6.8.1	For all Option Interests or Participating Interests in Contract Areas acquired during the first Contract Year of this Agreement, the Exercise Price for all warrants issued to
Sovereign attributable to such Contract Areas is the closing per share sale price of Syntroleum Common Stock on the date this Agreement is $6.40; 

  

	 	6.8.2	For all Option Interests or Participating Interests in Contract Areas acquired during any subsequent Contract Year of this Agreement, the Exercise Price for all warrants issued to
Sovereign attributable to such Contract Areas is the closing per share sale price of Syntroleum common stock on the first trading day during such Contract Year of the stock exchange on which Syntroleum lists its common stock. The Exercise Price
shall never be below the par value of Syntroleum Common Stock. 

  

 15 

	6.9	Upon Syntroleum Corporation shareholder approval of this Agreement, Syntroleum shall issue to Sovereign warrants to purchase fifty thousand (50,000) shares of Syntroleum Common
Stock at an exercise price equal to $6.40, exercisable from the date of the Syntroleum Corporation shareholder approval of this Agreement until five years from the date of Syntroleum Corporation shareholder approval of this Agreement. Syntroleum
shall immediately provide written notice to Sovereign of the date of the Syntroleum Corporation shareholder approval of this Agreement. 

  

	6.10	Upon and as a condition to each issuance of warrants to Sovereign pursuant to this Agreement, Syntroleum Corporation and Sovereign shall execute a Warrant Agreement in the form
attached to this Agreement and incorporated by reference herein as Exhibit ‘C’ covering said issuance. In addition, upon the issuance of warrants pursuant to this Agreement Syntroleum Corporation and Sovereign shall execute a Registration
Rights Agreement in the form attached to this Agreement and incorporated by reference herein as Exhibit ‘D’ covering said issuance. The Parties agree that the Registration Rights Agreement for the warrants to be issued pursuant to Section
6.9 shall include in Sections 2.1(b) and (c) a requirement that Syntroleum shall file a registration statement within sixty (60) days of the issuance of said warrants. 

  

	6.11	All Sovereign Incentive Compensation received by Sovereign prior to the termination of this Agreement, whether in the form of warrants for the purchase of Syntroleum stock, cash
and/or Overriding Royalty Interests, shall survive the termination of this Agreement. For the duration of each Syntroleum GTL Barge Project Syntroleum shall provide Sovereign with an annual statement of net and gross Hydrocarbons and produced and
sold from each Contract Area in which Sovereign has earned an Overriding Royalty Interest, and the sales prices received and approved by the host Government for the Hydrocarbons produced, in a form that will enable Sovereign to readily calculate its
lawful share of Hydrocarbon sales proceeds attributable to its ORRI percentage. Sovereign shall have the right to audit the Hydrocarbon production records pertaining to each Contract Area in which Sovereign has earned an Overriding Royalty Interest
at its own cost upon reasonable Notice to Syntroleum. 

  

	6.12	The Parties agree that no more than 2,000,000 shares of Syntroleum Common Stock shall be issuable upon exercise of warrants issued pursuant to this Agreement.

  
 ARTICLE 7 
 TAXES AND WITHHOLDINGS 
  

	7.1	Sovereign shall be individually responsible for the payment of any income, value added and other taxes assessed by the taxing authorities of the United States of America or any
other country having or claiming tax jurisdiction over Sovereign on any payments earned or received by Sovereign under the provisions of this Agreement. Sovereign agrees to protect, indemnify, and hold Syntroleum safe and harmless from and against
any such levies or assessments made by any such country against Sovereign or Syntroleum by reason of alleged nonpayment by Sovereign of income and other taxes. 

  

	7.2	Syntroleum agrees to protect, indemnify, and hold Sovereign safe and harmless from and against any such levies or assessments made by the United States of America or any other
country against Sovereign by reason of alleged nonpayment by Syntroleum of income and other taxes on any payments made, earned or received by Syntroleum under the terms of this Agreement. 

  

 16 

 ARTICLE 8 
 TERM AND TERMINATION 
  

	8.1	This term of this Agreement (“Term of Agreement”) shall be for successive one year periods from March 1, 2004 unless terminated in accordance with any of the provisions of
this Article 8: 

  

	 	8.1.1	This Agreement shall terminate upon a unanimous decision of the Parties to terminate this Agreement. 

  

	 	8.1.2	This Agreement may be terminated on Notice from one Party to other Party if such other Party is not in compliance in any material respect with any of its obligations under this
Agreement (including but not limited to, for greater certainty, Syntroleum’s payment obligations to Sovereign or Sovereign’s obligations to comply with Article 9); provided that the Party seeking to terminate this Agreement shall have
first provided at least thirty (30) days’ Notice of non-compliance to the Party not in compliance and such Party shall have failed to completely remedy such non-compliance within the thirty (30) day period. 

  

	 	8.1.2.1	Notwithstanding any language to the contrary anywhere else in this Agreement, Syntroleum may not unilaterally suspend or cancel the Escrow Agreement or otherwise withhold or
withdraw from the Escrow Account the funds for the JV Fixed Annual Budget that are due and payable to Sovereign under the Escrow Agreement except in the event of a finding to that effect by an arbitration tribunal conducted in accordance with
Article 13. 

  

	 	8.1.2.2	Notwithstanding any language to the contrary anywhere else in this Agreement, if either Party terminates this Agreement Syntroleum shall thereafter continue to be obligated to pay
to Sovereign timely any funds pertaining to the JV Discretionary Annual Budget that were previously approved by Syntroleum pursuant to Section 6.3 and Section 6.4 which have been contracted by Sovereign to be paid to a third party prior to either
Party’s notice of termination, except in the event of a contrary finding to that effect by an arbitration tribunal conducted in accordance with Article 13. 

  

	 	8.1.2.3	Notwithstanding any language to the contrary anywhere else in this Agreement, Syntroleum shall be liable and shall indemnify and hold Sovereign harmless for the payment in full of
all financial obligations incurred by Sovereign that are conformable with the performance of Sovereign’s reasonable duties under this Agreement and that are in amounts within the approved JV Discretionary Annual Budget and the JV Fixed Annual
Budget except in the event of a contrary finding to that effect by an arbitration tribunal conducted in accordance with Article 13. 

  

	 	8.1.3	Syntroleum shall have the right to terminate this Agreement at any time without cause by providing Sovereign fifteen (15) days prior written notice. In the event Syntroleum
terminates this Agreement pursuant to this Section 8.1.3 Sovereign shall have the right to draw any monies remaining in the Escrow Account attributable to the JV Fixed Annual Budget previously agreed pursuant to Section 6.1. Syntroleum shall have
the right to withdraw from the Escrow Account any monies in the Escrow Account attributable to the JV Discretionary Annual Budget previously approved pursuant to Section 6.3 and Section 6.4 that have not been contracted by Sovereign to be paid to a
third party prior to Syntroleum’s notice of termination, and Syntroleum shall allow Sovereign adequate time to settle such third-party contracted obligations before withdrawing the remaining discretionary monies from the Escrow Account.

  

 17 

	 	8.1.3.1	In the event that during any time period after the termination of the Agreement pursuant to this Section 8.1.3 for which monies have been paid into the Escrow Account pursuant to
the JV Fixed Annual Budget and Sovereign enters into an agreement with a third party from whom incentive compensation is received by Sovereign which would have been shared with Syntroleum under Section 6.6.2 if this Agreement had not been
terminated, such compensation shall be shared 50% for each Party until such time that Syntroleum recoups therefrom the monies Syntroleum paid to Sovereign under the JV Fixed Annual Budget attributable to the period after the termination of this
Agreement. After Syntroleum has recouped the monies Syntroleum paid under the JV Fixed Annual Budget attributable to the period after the termination of this Agreement, Sovereign shall retain one hundred percent of any other compensation received by
it. 

  

	 	8.1.4	Sovereign shall have the right to terminate this Agreement at any time without cause by providing Syntroleum fifteen (15) days prior written notice. In the event Sovereign
terminates this Agreement pursuant to this Section 8.1.4 Syntroleum shall have the right to withdraw from the Escrow Account any monies in the Escrow Account attributable to both the JV Fixed Annual Budget and the JV Discretionary Annual Budget
previously approved pursuant to Section 6.3 and Section 6.4 which have not been contracted by Sovereign to be paid to a third party prior to Sovereign’s notice of termination. 

  

	 	8.1.5	Either Party may terminate this Agreement by giving written notice on or before December 1 of the then current Contract Year to the other Party that the Agreement shall terminate on
the following March 1. Upon receipt of such prior written notice from Syntroleum, Sovereign shall be free to seek other joint venture partners to succeed Syntroleum upon termination, but shall otherwise continue its work under this Agreement within
the constraints established by the available discretionary budget funds paid to Sovereign by Syntroleum. Absent such notice by either Party by December 1, the Parties will be deemed to have renewed this Agreement for an additional Contract Year, to
commence on the anniversary of the Effective Date, and both Parties shall then be liable and subject to all of the terms and conditions of this Agreement. 

  

	8.2	Termination of this Agreement shall be without prejudice to any rights or obligations of the Parties that have accrued as of the date of such termination. 

 

	8.3	Following termination of this Agreement Sovereign shall be free to pursue and obtain interests in any Contract Area excepting only those Contract Areas that were pursued by the
Parties during the Term of Agreement and that are taken or continued under active negotiation by Syntroleum within the one year period following the date of termination of the Agreement pursuant to obtaining a Syntroleum Participating Interest.
Sovereign shall retain the rights to all electronic and hardcopy work products that it generates in the conduct of its work under this Agreement, but shall provide to Syntroleum copies of same for the cost of reproduction upon written request
received within three months of termination. 

  

	8.4	Upon termination of this Agreement Sovereign shall be entitled to purchase at the then current fair market price any furnishings, equipment, hardware, or software obtained for
Sovereign’s use with discretionary funds provided by Syntroleum under an approved budget during the term of this Agreement. The fair market price shall be established by arms-length bids from a minimum of three buyer/appraisers, in which the
high and low bids are disregarded and the middle bid, or the arithmetic average of the middle bids (if more than one) is calculated to be the fair market price. 

  

 18 

	8.5	Notwithstanding termination of this Agreement, the Parties shall remain bound by the obligations of Section 8.1.3, Section 6.11 and Articles 7, 11, 12, 13, 16, and 17.

  
 ARTICLE 9 
 IMPROPER PAYMENTS 
  

	9.1	Each Party warrants that it and its Affiliates have not made, offered, or authorized and will not make, offer, or authorize with respect to the matters which are the subject of this
Agreement, any payment, gift, promise or other advantage, whether directly or through any other person or entity, to or for the use or benefit of any public official (i.e., any person holding a legislative, administrative or judicial office,
including any person employed by or acting on behalf of a public agency, a public enterprise or a public international organization) or any political party or political party official or candidate for office, where such payment, gift, promise or
advantage would violate the applicable laws of the United States of America or of any other country in which the Parties are together in business. Each Party shall defend, indemnify and hold the other Party harmless from and against any and all
claims, damages, losses, penalties, costs and expenses arising from or related to, any breach by such first Party of such warranty. Such indemnity obligation shall survive termination or expiration of this Agreement. Each Party shall in good time
(i) respond in reasonable detail to any notice from any other Party reasonably connected with the above-stated warranty; and (ii) furnish applicable documentary support for such response upon request from such other Party. 

 

	9.2	Each Party agrees to (i) maintain adequate internal controls; (ii) properly record and report all transactions; and (iii) comply with the laws referred to in Section 9.1 above. Each
Party must rely on the other Party’s system of internal controls and on the adequacy of full disclosure of the facts, and of financial and other data provided under this Agreement. No Party is in any way authorized to take any action on behalf
of the other Party that would result in an inadequate or inaccurate recording and reporting of assets, liabilities or any other transaction, or which would put such Party in violation of its obligations under the laws applicable to this Agreement.
Each Party, at its own expense and upon providing reasonable notice to the other Party, shall have the right to audit the books and records of the other Party to the extent necessary to verify compliance with the provisions of this Section.

  
 ARTICLE 10 
 ASSIGNMENT 
  

	10.1	Syntroleum may assign or transfer all or any part of its rights and obligations under this Agreement without the consent of, but on Notice to, Sovereign; provided, however, that
such assignees or transferees shall first have agreed in writing to assume the Sovereign Incentive Compensation and other performance obligations of Syntroleum under this Agreement. As a further condition of its right of assignment, Syntroleum shall
immediately provide to Sovereign true copies of all executed agreements documenting the transfer to and acceptance of its obligations by an assignee or transferee. 

  

	10.2	Except as provided below, Sovereign may freely assign or transfer all or any part of the Sovereign Incentive Compensation under this Agreement without the consent of, but on Notice
to, Syntroleum. As to the warrants of Syntroleum Common Stock, Sovereign may direct Syntroleum to issue the warrants directly to employees and officers of Sovereign rather than to Sovereign. As a further condition of its right of assignment,
Sovereign shall immediately provide 

  

 19 

 to Syntroleum true copies of all executed agreements documenting the transfer of the Sovereign
Compensation to an assignee or transferee. Sovereign may not assign or transfer its performance obligations under this Agreement to a third party without the prior written approval of Syntroleum, which consent shall not be unreasonably withheld for
a technically and financially qualified prospective assignee. 
  
 ARTICLE 11 
 INDEMNITY AND INSURANCE 
  

	11.1	SOVEREIGN SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS SYNTROLEUM, ITS RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS HARMLESS FROM ANY
LOSSES, LIABILITIES, DAMAGES, DEMANDS, SUITS, CLAIMS, FINES, EXPENSES OR COSTS (INCLUDING BUT NOT LIMITED TO, REASONABLE ATTORNEY’S FEES) ATTRIBUTABLE TO THE DEATH, ILLNESS OR INJURY OF ANY SOVEREIGN EMPLOYEE, OFFICER, DIRECTOR OR CONSULTANT
REGARDLESS WHETHER THE LOSSES, LIABILITIES, DAMAGES (INCLUDING BUT NOT LIMITED TO ACTUAL, CONSEQUENTIAL, NON-ECONOMIC AND PUNITIVE), DEMANDS, SUITS, CLAIMS, FINES, EXPENSES OR COSTS ARISE DIRECTLY OR INDIRECTLY FROM A PRE-EXISTING DEFECT,
NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL FAULT OF SYNTROLEUM, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, OR CONTRACTORS OR THAT OF ITS AFFILIATES. 

  

	11.2	SYNTROLEUM SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS SOVEREIGN, ITS RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS HARMLESS FROM ANY
LOSSES, LIABILITIES, DAMAGES, DEMANDS, SUITS, CLAIMS, FINES, EXPENSES OR COSTS (INCLUDING BUT NOT LIMITED TO, REASONABLE ATTORNEY’S FEES) ATTRIBUTABLE TO THE DEATH, ILLNESS OR INJURY OF ANY SYNTROLEUM EMPLOYEE, OFFICER, DIRECTOR OR CONSULTANT
REGARDLESS WHETHER THE LOSSES, LIABILITIES, DAMAGES (INCLUDING BUT NOT LIMITED TO ACTUAL, CONSEQUENTIAL, NON-ECONOMIC AND PUNITIVE), DEMANDS, SUITS, CLAIMS, FINES, EXPENSES OR COSTS ARISE DIRECTLY OR INDIRECTLY FROM A PRE-EXISTING DEFECT,
NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL FAULT OF SOVEREIGN, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, OR CONTRACTORS OR THAT OF ITS AFFILIATES. 

  

	11.3	SYNTROLEUM SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS SOVEREIGN, ITS RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS HARMLESS FROM ANY
LOSSES, LIABILITIES, DAMAGES (INCLUDING BUT NOT LIMITED TO ACTUAL, CONSEQUENTIAL, NON-ECONOMIC AND PUNITIVE), DEMANDS, SUITS, CLAIMS, FINES, EXPENSES OR COSTS (INCLUDING BUT NOT LIMITED TO, REASONABLE ATTORNEY’S FEES) WHATSOEVER, ARISING FROM
OR RELATING TO PRODUCT LIABILITY CLAIMS, ENVIRONMENTAL CLAIMS (SURFACE AND SUB-SURFACE, PERSONS OR PROPERTY), OR INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS RELATED TO OR ATTRIBUTABLE TO THE SYNTROLEUM PROPRIETARY GAS-TO-LIQUIDS (GTL) SYNTHETIC
FUELS PROCESS OR TO A SYNTROLEUM GTL BARGE PROJECT AND, WITHOUT 

  

 20 

 LIMITATION, ANY ASSOCIATED PRODUCT, ENVIRONMENTAL DAMAGE (WHETHER TO PERSONS OR PROPERTY), OR
INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT.  
  

	11.4	SYNTROLEUM SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS SOVEREIGN, ITS RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS HARMLESS FROM ANY
LOSSES, LIABILITIES, DAMAGES (INCLUDING BUT NOT LIMITED TO ACTUAL, CONSEQUENTIAL, NON-ECONOMIC AND PUNITIVE), DEMANDS, SUITS, CLAIMS, FINES, EXPENSES OR COSTS (INCLUDING BUT NOT LIMITED TO, REASONABLE ATTORNEY’S FEES) OWED TO GOVERNMENTS OR
OTHER THIRD PARTIES WHATSOEVER ARISING FROM OR RELATED TO THE NONPERFORMANCE OR IMPROPER PERFORMANCE OF SYNTROLEUM’S CONTRACTUAL OBLIGATIONS PERTAINING TO A CONTRACT AREA OBTAINED OR ENTERED INTO UNDER THIS AGREEMENT. 

  

	11.5	Each Party shall procure the following types of insurance: 

  

	 	a.	Workers’ Compensation as required by state laws. 

  

	 	b.	Employer’s Liability insurance with limits of not less than $500,000.00. 

  

	 	c.	Comprehensive General Liability Insurance including Products/Completed Operations coverage and Contractual Liability Insurance with limits of not less than $1,000,000.00 per
occurrence and aggregate for Bodily Injury, and $1,000,000.00 per occurrence and aggregate for Property Damage. 

  

	 	d.	Comprehensive Automobile Liability Insurance with coverage for all owned, hired, and non-owned vehicles with limits of not less than $100,000.00 per each person and $300,000.00 per
each occurrence for Bodily Injury and $100,000.00 per each occurrence for Property Damage. 

  
 Each Party shall have its insurers waive subrogation as against the other Party. To the extent of the risks and indemnities being assumed by a Party
pursuant to this Article 11, such Party shall name the other Party as an additional assured on its policies acquired pursuant to Section 11.5 (c) and (d) above. 
  

ARTICLE 12 
 CONFIDENTIALITY

  

	12.1	For the purposes of this Article 12, “Confidential Information” shall mean: 

  

	 	12.1.1	the terms and conditions of this Agreement; 

  

	 	12.1.2	information and documentation disclosed to one Party by the other Party which it marks as confidential or instructs the other Party verbally as being confidential. In the event that
the disclosing Party verbally instructs the receiving Party that information or documentation is confidential it shall confirm in writing such instructions within five (5) days of such instruction. 

  

 21 

	 	12.2	Confidential Information shall be held confidential by the Parties and shall not be divulged in any way to any third party by either Party except as may be permitted by this
Agreement or with the prior written consent of the other Party; provided that either Party may, without such consent, disclose such terms as follows: 

  

	 	12.2.1	Provided that a Party shall be responsible and liable for any non-compliance by the following persons and entities with the provisions of this Article 12, such Party may disclose
Confidential Information to: 

  

	 	12.2.1.1	its employees, directors and officers or those of its Affiliates; 

  

	 	12.2.1.2	any outside professional consultants; 

  

	 	12.2.1.3	in the case of Syntroleum, any bona fide prospective assignee or transferee of all or any portion of a Syntroleum Option Interest or Syntroleum Participating Interest or Syntroleum
Overriding Royalty Interest in a Contract Area, or, of all or any portion of Syntroleum’s rights or obligations under this Agreement; provided that such assignee or transferee shall first have executed an undertaking of confidentiality in form
substantially similar to the then most current version of the Association of International Petroleum Negotiators Model Form Confidentiality Agreement; and 

  

	 	12.2.1.4	in the case of Sovereign, any bona fide prospective assignee or transferee of all or any portion of a Sovereign Overriding Royalty Interest or other form of Sovereign ownership
rights in a Contract Area earned in accordance with this Agreement, or, of all or any portion of Sovereign’s rights or obligations under this Agreement; provided that such assignee or transferee shall first have executed an undertaking of
confidentiality in form substantially similar to the then most current version of the Association of International Petroleum Negotiators Model Form Confidentiality Agreement. 

  

	12.2.2	Confidential Information may also be disclosed by a Party: 

  

	 	12.2.2.1	to the extent required by any applicable laws or regulations or the requirements of any recognized stock exchange in compliance with its rules and regulations;

  

	 	12.2.2.2	to the Government or any agency of any government lawfully requesting such information; 

  

	 	12.2.2.3	to any court of competent jurisdiction, or arbitral tribunal under Article 13, acting in pursuance of its powers; 

  

	 	12.2.2.4	to the extent required in order to exercise any rights or fulfil any obligations under this Agreement; and 

  

	 	12.2.2.5	to the extent required, in the opinion of the disclosing Party, in connection with proceedings under Article 13. 

  

	12.2.3	The Parties’ obligation under this Agreement to keep confidential the Confidential Information referred to in this Article 12 shall terminate two years from the date of
termination of this Agreement. 

  

 22 

 ARTICLE 13 
 GOVERNING LAW AND DISPUTE RESOLUTION 
  

	13.1	The substantive law of Texas, without regard to any conflicts of laws principles that could require application of any other law, shall govern the interpretation of this Agreement
and any dispute, controversy, or claim (collectively, a “Dispute”) arising out of, relating to, or in any way connected with this Agreement, including, without limitation, the existence, validity, performance, breach, or termination
thereof. Notwithstanding the foregoing, the Parties intend that no provision of this Agreement shall, by virtue of the Contracts (Rights of Third Parties) Act 1999 confer any benefit on, or be enforceable by, any person or entity which is not
a party to this Agreement. 

  

	13.2	Any Dispute arising out of, relating to, or in any way connected with this Agreement, including, without limitation, the existence, validity, performance, breach or termination
thereof, shall be settled by final and binding arbitration in accordance with the International Arbitration Rules of the American Arbitration Association (2001). The appointing authority (the “Appointing Authority”) shall be the
International Centre for Dispute Resolution or other appointing authority as agreed by the Parties. 

  

	13.3	The seat of the arbitration shall be Houston, Texas. 

  

	13.4	The arbitration shall be conducted by three arbitrators, unless all parties to the Dispute agree to a sole arbitrator within thirty (30) days after the filing of the arbitration.
For greater certainty, for purposes of this Section, the filing of the arbitration means the date on which the claimant’s request for arbitration is received by the other parties to the Dispute. 

  

	13.5	If the arbitration is to be conducted by a sole arbitrator, then the arbitrator will be jointly selected by the parties to the Dispute. If the parties to the Dispute fail to agree
on the arbitrator within thirty (30) days after the filing of the arbitration, then the Appointing Authority shall appoint the arbitrator. 

  

	13.6	If the arbitration is to be conducted by three arbitrators, then each party to the Dispute shall appoint one arbitrator within thirty (30) days of the filing of the arbitration, and
the two arbitrators so appointed shall select the presiding arbitrator within thirty (30) days after the latter of the two arbitrators has been appointed by the parties to the Dispute. If a party to the Dispute fails to appoint its party-appointed
arbitrator or if the two party-appointed arbitrators cannot reach an agreement on the presiding arbitrator within the applicable time period, then the Appointing Authority shall appoint the remainder of the three arbitrators not yet appointed.

  

	13.7	If the Parties initiate multiple arbitration proceedings, the subject matters of which are related by common questions of law or fact and which could result in conflicting awards or
obligations, then all such proceedings may be consolidated into a single arbitral proceeding. 

  

	13.8	The arbitration proceedings shall be conducted in the English language and the arbitrators shall be fluent in the English language. 

  

	13.9	The award of the arbitral tribunal shall be final and binding and shall include findings of fact and conclusions of law. Judgment on the award of the arbitral tribunal may be
entered and enforced by any court of competent jurisdiction. 

  

 23 

	13.10	All notices required for any arbitration proceeding shall be deemed properly given if sent in accordance with Article 14. 

  

	13.11	All arbitrators shall be and remain at all times wholly impartial, and, once appointed, no arbitrator shall have any ex parte communications with any of the parties to the
Dispute concerning the arbitration or the underlying Dispute other than communications directly concerning the selection of the presiding arbitrator, where applicable. 

  

	13.12	Any party to the Dispute may apply to a court for interim measures including, but not limited to, injunctions, attachments and conservation orders (i) prior to the constitution of
the arbitral tribunal (and thereafter as necessary to enforce the arbitral tribunal’s rulings); or (ii) in the absence of the jurisdiction of the arbitral tribunal to rule on interim measures in a given jurisdiction. The Parties agree that
seeking and obtaining such interim measures shall not waive the right to arbitration. The arbitrators (or in an emergency the presiding arbitrator acting alone in the event one or more of the other arbitrators is unable to be involved in a timely
fashion) may grant interim measures including injunctions, attachments and conservation orders in appropriate circumstances, which measures may be immediately enforced by court order. Hearings on requests for interim measures may be held in person,
by telephone, by videoconference or by other means that permit the parties to the Dispute to present evidence and arguments. 

  

	13.13	The arbitral tribunal is authorized to award costs and attorneys’ fees and to allocate them between the parties to the Dispute. The costs of the arbitration proceedings,
including attorneys’ fees, shall be borne in the manner determined by the arbitral tribunal, but in the absence of a finding of egregious breach of contract against a Party to the arbitration proceedings by the arbitral tribunal, the Parties
shall bear their own costs and attorney’s fees arising from the arbitration proceedings. 

  

	13.14	The award may include interest, as determined by and at the rate set by the arbitral award, from the date of any default or other breach of this Agreement until the arbitral award
is paid in full. 

  

	13.15	The arbitral award shall be made and payable in United States dollars, free of any tax or other deduction. The arbitral award shall bear interest at the then current LIBOR rate on
the date of the arbitral award plus two per cent (LIBOR + 2%), compounded monthly on the unpaid balance of the principal, until the arbitral award is paid in full. 

  

	13.16	The Parties waive their rights to claim or recover, and the arbitral tribunal shall not award, any punitive, multiple, or other exemplary damages (whether statutory or common law)
except to the extent such damages have been awarded to a third party and are subject to allocation between or among the parties to the Dispute. 

  

	13.17	To the extent permitted by law, any right to appeal or challenge any arbitral decision or award, or to oppose enforcement of any such decision or award before a court or any
governmental authority, is hereby waived by the Parties except with respect to the limited grounds for modification or non-enforcement provided by any applicable arbitration statute or treaty. 

  
 ARTICLE 14 
 NOTICES 
  

	14.1	Notices required or permitted to be given under this Agreement shall be addressed or sent in accordance with the receiving Party’s address information set forth below and be
delivered by (1) hand, (2) courier, or (3) facsimile which provides confirmation of receipt of complete transmission. A Party may change its address information by sending a notice to the other Party. 

  

 24 

 Such notices shall be effective if delivered by hand or courier, at the time of delivery, or if delivered
by facsimile, on the first day at the recipient’s address following the date of complete transmission. 
  

	14.2	Address of Sovereign: 

  
 Sovereign Oil & Gas Company II LLC 
 3555
Timmons Lane, Suite 1150 
 Houston, Texas 77027 
 U.S.A. 
 Attention         President 
 Facsimile:         (713) 961-0185 
  

	14.3	Address of Syntroleum: 

  
 Syntroleum International Corporation 
 4322
South 49th West Avenue 
 Tulsa, OK 74107 USA 
 Attention:         President 
 Facsimile:         (918) 592-7979 
  
 ARTICLE 15 
 ANNOUNCEMENTS 
  

	15.1	A Party shall not make any press release or other public announcement concerning this Agreement unless the text of such press release or announcement has been approved in writing by
the other Party; provided that such approvals shall not be required if and to the extent such press release or announcement is made in order to comply with any laws, rules or regulations of any government, securities or similar commissions or stock
exchanges to which the Party making the press release or announcement is subject. 

  
 ARTICLE 16 
 REMEDIES CUMULATIVE 
  

	16.1	The rights and remedies of the Parties under this Agreement are cumulative and in addition to and not in substitution for any rights or remedies provided by law or equity. Any
exercise by a Party of any right or remedy for breach of any provision of this Agreement shall not waive or prejudice any other right or remedy to which such Party may be lawfully entitled in respect of such breach. 

  
 ARTICLE 17 
 CERTAIN DAMAGES EXCLUDED 
  

	17.1	Notwithstanding anything to the contrary in this Agreement, neither Party shall be liable in an action initiated by one against the other for special, indirect or consequential
damages resulting from or arising out of this Agreement, including, without limitation, loss of profit or business interruptions, however same may be caused. 

  
 ARTICLE 18 
 AMENDMENTS 
  

	18.1	This Agreement shall only be amended or modified by an agreement in writing signed by each of the Parties and specifically referring to this Agreement. 

  

 25 

 ARTICLE 19 
 ENTIRE AGREEMENT 
  

	19.1	This Agreement constitutes the entire agreement between the Parties and supersedes all warranties and representations previously made and all previous agreements (including
confidentiality agreements), arrangements or understandings between the Parties relating to the matters contained herein whether oral or in writing made or dated prior to the date hereof. 

  
 ARTICLE 20 
 NO WAIVER 
  

	20.1	No waiver by any Party of any breach of a provision of this Agreement shall be binding unless made expressly in writing. Further, any such waiver shall relate only to the breach to
which it expressly relates and shall not apply to any subsequent or other breach. 

  
 ARTICLE 21 
 ENUREMENT 
  

	21.1	This Agreement shall enure to the benefit of and be binding upon the respective successors and permitted assigns of the Parties. 

  
 ARTICLE 22 
 FURTHER ASSURANCES 
  

	22.1	Each Party shall from time to time hereafter do all such acts and things and execute all such documents and instruments as are reasonably requested by the other Party to more
effectively carry out the terms of this Agreement. 

  
 ARTICLE 23 
 FORCE MAJEURE 
  

	23.1	If as a result of circumstances (“Force Majeure”) beyond the reasonable control of the Party concerned, such Party is unable, wholly or in part, to carry out its
obligations under this Agreement, then such obligations shall, to the extent such obligations are affected by such Force Majeure, be suspended during the continuance of such inability. The Party claiming Force Majeure shall notify the other Party of
the Force Majeure within a reasonable time after the occurrence of the facts relied on and shall keep such Party informed of all significant developments. 

  

 26 

			
	      ARTICLE 24	 	DISCLAIMER      

  

	24.1	THE PARTIES CONTEMPLATE, UNDERSTAND AND ACKNOWLEDGE THAT THE PRIMARY WORK PRODUCTS TO BE PREPARED BY SOVEREIGN UNDER THIS AGREEMENT WILL CONTAIN STATEMENTS BASED ON THE
INTERPRETATION OF GEOLOGIC, GEOPHYSICAL, AND ENGINEERING DATA THAT MAY NOT BE UNIQUE SOLUTIONS. THE STATEMENTS MADE TO SYNTROLEUM BY SOVEREIGN IN PERFORMING ITS WORK UNDER THIS AGREEMENT WILL BE TRUE AND CORRECT TO THE BEST OF SOVEREIGN’S
KNOWLEDGE AND WILL BE BASED UPON CREDIBLE REPORTS AND SUPPORTABLE INTERPRETATIONS OF THE AVAILABLE DATA IT HAS STUDIED PERTAINING TO ANY CONTRACT AREA OR PROSPECTIVE CONTRACT AREA AND IN ACCORDANCE WITH ACCEPTED PROFESSIONAL STANDARDS BUT NO
WARRANTIES WHATSOEVER EITHER EXPRESS OR IMPLIED ARE MADE BY SOVEREIGN AS TO THE ACCURACY OF ANY OF THESE STATEMENTS. IT IS THE SOLE RESPONSIBILITY OF SYNTROLEUM TO ASSESS THE ACCURACY AND VALIDITY OF THESE STATEMENTS. 

 
 ARTICLE 25 
 COUNTERPART EXECUTION AND FAX DELIVERY 
  

	25.1	This Agreement may be executed in any number of counterparts and each such counterpart shall be deemed an original agreement for all purposes; provided that no Party shall be bound
by the terms of this Agreement unless and until all Parties have executed a counterpart. Delivery by a Party of an executed counterpart of this Agreement by fax to the other Parties shall constitute sufficient delivery of this Agreement by that
Party. 

  
 IN WITNESS WHEREOF, Syntroleum and Sovereign have duly
executed this Agreement as of the date and year first above written. 
  

			
	 SYNTROLEUM INTERNATIONAL CORPORATION
	  	 SOVEREIGN OIL & GAS COMPANY II LLC

		
	
	  	

	 Ronald E. Stinebaugh.
	  	 Joseph M. Bruso, Jr.

	 Vice President
	  	 President and Chief Executive Officer

  

 27 

 EXHIBIT ‘A’ 
  
 JV DISCRETIONARY ANNUAL BUDGET AND FUNDING SCHEDULE 
  

							
	 2004-05
 Monthly
 Budget

	  	 SOVEREIGN DISCRETIONARY COSTS

	  	 2004-05
 Annual
 Budget

	  	 G/L Account # - Description

	  
	417	  	D	  	140 - Support Personnel Incentive Bonuses	  	5,000
	2,500	  	D	  	235 - Corporate Communications (PR & Brochures)	  	30,000
	8,333	  	D	  	250 - Legal	  	100,000
	33,333	  	D	  	280 - Consultants (Reserves, Economics, G&G)	  	400,000
	16,667	  	D	  	300 - Travel	  	200,000
	500	  	D	  	310 - Meals and Entertainment	  	6,000
	667	  	D	  	360 - Courier Service	  	8,000
	2,500	  	D	  	380 - Graphics & Reproduction (3rd party)	  	30,000
	375	  	D	  	410 - Computer Equipment	  	4,500
	42	  	D	  	420 - Computer Software	  	500
	1,667	  	D	  	450 - Seismic Data	  	20,000
	67,000	  	 	  	Total	  	804,000

  
 FUNDING SCHEDULE FOR JV FIXED
DISCRETIONARY BUDGET VIA WIRE TRANSFER FROM ESCROW ACCOUNT: 
  
 FUNDING
AMOUNTS ARE DUE IN SOVEREIGN’S ACCOUNT ON THE DATES SHOWN: 
  

			
	 MARCH 1, 2004
	 	$201,000
		
	 JUNE 1, 2004
	 	Amount to be mutually agreed in accordance with Section 6.4
		
	 SEPTEMBER 1, 2004                
	 	Amount to be mutually agreed in accordance with Section 6.4 .
		
	 DECEMBER 1, 2004
	 	Amount to be mutually agreed in accordance with Section 6.4

  

 28 

 EXHIBIT ‘B’ 
  
 JV FIXED ANNUAL BUDGET AND FUNDING SCHEDULE 
  

							
	 2004-05
 Monthly
 Budget ($)

	  	 SOVEREIGN FIXED COSTS

	  	 2004-05
 Annual
 Budget ($)

	  	 G/L Account # - Description

	  
	54,167	  	F	  	100 - Salaries (3 Professional, 2 High Support)	  	650,000
	2,917	  	F	  	110 - Payroll Taxes & Payroll Costs	  	35,000
	6,667	  	F	  	120 - Employee Benefits	  	80,000
	0	  	F	  	130 - Parking, Bus and Other	  	0
	625	  	F	  	160 - Temporary Personnel	  	7,500
	1,250	  	F	  	170 - Employee Recruitment	  	15,000
	250	  	F	  	180 - Employee Training	  	3,000
	583	  	F	  	190 - Club Dues and Subscriptions	  	7,000
	83	  	F	  	210 - Professional Dues (AAPG, SEG, AIPN, TXCPG)	  	1,000
	4,167	  	F	  	240 - Business Insurance	  	50,000
	1,250	  	F	  	260 - Audit, Tax & Accounting	  	15,000
	3,667	  	F	  	320 - Office Lease & Utilities*	  	44,000
	1,667	  	F	  	340 - Communications (Phone, Fax, Cell, Data)	  	20,000
	167	  	F	  	350 - Postage	  	2,000
	625	  	F	  	370 - Office Supplies	  	7,500
	667	  	F	  	390 - Office Machine Rental	  	8,000
	500	  	F	  	400 - Maintenance - Office Equipment	  	6,000
	583	  	F	  	430 - Computer & Printer Supplies	  	7,000
	167	  	F	  	435 - Furniture	  	2,000
	3,833	  	F	  	460 - Maps, Production Data & License Fees	  	46,000
	0	  	F	  	470 - Miscellaneous	  	0
	83,833	  	 	  	Total	  	1,006,000

  
 FUNDING SCHEDULE FOR JV FIXED
ANNUAL BUDGET VIA WIRE TRANSFER FROM ESCROW ACCOUNT: 
  
 FUNDING AMOUNTS
ARE DUE IN SOVEREIGN’S ACCOUNT ON THE DATES SHOWN: 
  

				
	 MARCH 1, 2004
	  	$	251,500
	 JUNE 1, 2004
	  	$	251,500
	 SEPTEMBER 1, 2004
	  	$	251,500
	 DECEMBER 1, 2004
	  	$	251,500
	 	  	
	

	 TOTAL
	  	$	1,006,000

  

 29 

 EXHIBIT ‘C’ 
  
 WARRANT AGREEMENT 
  
 THIS WARRANT AGREEMENT (the “Agreement”), dated as of
                        , is made and entered into by and among Syntroleum Corporation, a Delaware corporation (the
“Company”), and                                     
(the “Warrantholder”). This Agreement is being executed in connection with the Joint Development Agreement dated March 1, 2004 by and between the Company and [the Warrantholder] [Sovereign Oil & Gas Company II, LLC, a Texas limited
liability company] (the “JD Agreement”). 
  
 The Company
agrees to issue, and the Warrantholder agrees to accept[, for an agreed value of $                 per warrant,] the warrants, as hereinafter described (the
“Warrants”), to purchase up to              shares (the “Shares”), of the Company’s Common Stock, par value $.01 per share (the “Common Stock”).
The issuance of the Warrants shall occur as provided in the JD Agreement. 
  
 In consideration of the foregoing and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations thereunder, the Company and the Warrantholder, for value received,
hereby agree as follows: 
  
 Section 1. Transferability and
Form of Warrants. 
  
 1.1 Registration. The Warrants
shall be numbered and shall be registered on the books of the Company when issued. 
  
 1.2 Limitations on Transfer. The Warrants and the Shares shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Agreement. The Warrantholder will cause any proposed
purchaser, assignee, transferee or pledgee of the Warrants or the Shares, except for transferees in dispositions of Shares that are pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Act”),
or dispositions of Shares pursuant to Rule 144 under the Act, to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement. The Warrants may be divided or combined, upon request to the
Company by the Warrantholder, into a certificate or certificates representing the right to purchase the same aggregate number of Shares. Unless the context indicates otherwise, the term “Warrantholder” shall include any transferee or
transferees of the Shares that are required to be bound by the terms hereof, and the term “Warrants” shall include any and all warrants outstanding pursuant to this Agreement, including those evidenced by a certificate or certificates
issued upon division, exchange or substitution pursuant to this Agreement. The Warrantholder by its receipt of a Warrant certificate, agrees to be bound by and comply with the terms of this Agreement. The Warrantholder represents and agrees that the
Warrant (and Shares if the Warrant is exercised) is purchased only for investment, for the Warrantholder’s own account, and without any present intention to sell, or with a view to distribution of, the Warrant or Shares. 
  
 1.3 Form of Warrants. The text of the Warrants and of the form of
election to purchase Shares shall be substantially as set forth in Exhibit A attached hereto. The number of 
  

 30 

 Shares issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events, all as
hereinafter provided. The Warrant shall be executed on behalf of the Company by its Chief Executive Officer, President or by a Vice President, attested to by its Secretary or an Assistant Secretary. A Warrant bearing the signature of an individual
who was at any time the proper officer of the Company shall bind the Company, notwithstanding that such individual shall have ceased to hold such office prior to the delivery of such Warrant or did not hold such office on the date of this Agreement.

  
 The Warrants shall be dated as of the date of signature
thereof by the Company either upon initial issuance or upon division, exchange or substitution. 
  
 1.4 Legend on Warrants. Each Warrant certificate shall bear the following legend: 
  

	 	(a)	“THE WARRANTS EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (I) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED AND ANY
PROSPECTUS DELIVERY REQUIREMENTS ARE NOT APPLICABLE OR (III) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES. COPIES OF THE WARRANT AGREEMENT AND THE JOINT DEVELOPMENT AGREEMENT COVERING THE ISSUANCE OF THESE WARRANTS AND
VARIOUS REQUIREMENTS, INCLUDING WITHOUT LIMITATION PROVISIONS RESTRICTING THEIR TRANSFER, MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE COMPANY.”; and 

  

	 	(b)	any legend required by applicable state securities law. 

  
 Any certificate issued at any time in exchange or substitution for any certificate bearing such legends (except, in the case of the Shares, a new
certificate issued upon completion of a public distribution pursuant to a registration statement under the Act or upon completion of a sale under Rule 144 under the Act of the securities represented thereby) shall also bear the above legend or
similar legend unless, in the opinion of the Company’s counsel, the securities represented thereby need no longer be subject to such restrictions. The Warrantholder consents to the Company making a notation on its records and giving
instructions to any registrar or transfer agent of the Warrants and the Common Stock in order to implement the restrictions on transfer established in this Agreement. 
  

 31 

 Section 2. Exchange of Warrant Certificate. Any Warrant certificate may be exchanged for another
certificate or certificates entitling the Warrantholder to purchase a like aggregate number of Shares as the certificate or certificates surrendered then entitled the Warrantholder to purchase. If the Warrantholder desires to exchange a Warrant
certificate, it shall make such request in writing delivered to the Company, and shall surrender, properly endorsed, the certificate evidencing the Warrant to be so exchanged. Thereupon, the Company shall execute and deliver to the person entitled
thereto a new Warrant certificate as so requested. 
  
 Section 3.
Term of Warrants; Exercise of Warrants. 
  
 (a) Subject to
the terms of this Agreement, the Warrantholder shall have the right, at any time and from time to time on a day that is not a Saturday, Sunday or public holiday in Tulsa, Oklahoma during the period commencing
                         [as determined in accordance with the JD Agreement], and ending at 5:00 p.m., Tulsa, Oklahoma
time, on                          [as determined in accordance with the JD Agreement] (the “Termination Date”),
to exercise a Warrant and to purchase from the Company up to the number of fully paid and nonassessable Shares to which the Warrantholder may at the time be entitled to purchase pursuant to this Agreement, upon surrender to the Company, at its
principal office, of the certificate evidencing the Warrants to be exercised, together with the purchase form on the reverse thereof duly completed and signed, and upon payment to the Company of the Warrant Price (as defined in and determined in
accordance with the provisions of this Section 3 and Sections 7 and 8 hereof), for the number of Shares in respect of which such Warrants are then exercised, but in no event for less than 100 Shares (unless less than an aggregate of 100 Shares are
then purchasable under all outstanding Warrants held by the Warrantholder). 
  
 (b) Payment by the Warrantholder of the aggregate Warrant Price due from it shall be made in cash or by immediately available funds, check or any combination thereof. 
  
 (c) Upon such surrender of the Warrants and payment of such Warrant Price as
aforesaid, the Company shall issue and cause to be delivered to or upon the written order of the Warrantholder and in the name of the Warrantholder a certificate or certificates for the number of full Shares so purchased upon the exercise of its
Warrant, together with cash, as provided in Section 9 hereof, in respect of any fractional Shares otherwise issuable upon such surrender. Such certificate or certificates shall be deemed to have been issued and the Warrantholder shall be deemed to
have become a holder of record of such securities as of the date of surrender of the Warrants and payment of the Warrant Price, as aforesaid, notwithstanding that the certificate or certificates representing such securities shall not actually have
been delivered or that the stock transfer books of the Company shall then be closed. The Warrants shall be exercisable, at the election of the Warrantholder, either in full or from time to time in part and, in the event that a certificate evidencing
the Warrants is exercised in respect of less than all of the Shares specified therein at any time prior to the Termination Date, a new certificate evidencing the remaining portion of the Warrants held by the Warrantholder will be issued by the
Company. 
  
 Section 4. Payment of Taxes. The Company will
pay all documentary stamp taxes, if any, attributable to the initial issuance of the Warrants or the Shares; provided, however, the Company shall not be required to pay any tax which may be payable in respect of any secondary transfer of the
Warrants or the Shares. 
  

 32 

 Section 5. Mutilated or Missing Warrants. In case the certificate or certificates evidencing the
Warrants shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant certificate or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of
such loss, theft or destruction of such Warrant and a bond of indemnity, if requested, also satisfactory in form and amount at the applicant’s cost. Applicants for such substitute Warrants certificate shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company may prescribe. 
  
 Section 6. Reservation of Shares. There has been reserved, and the Company shall at all times keep reserved so long as the Warrants remain outstanding, out of its authorized Common Stock, such number of shares
of Common Stock as shall be subject to purchase under the Warrants. On or before taking any action that would cause an adjustment pursuant to the terms of the Warrants resulting in an increase in the number of shares of Common Stock deliverable upon
such conversion or exercise above the number thereof previously authorized, reserved and available therefor, the Company shall take all such action so required for compliance with this Section. 
  
 Section 7. Warrant Price. The price per Share at which Shares shall be
purchasable upon the exercise of the Warrants (the “Warrant Price”) shall be $             [as determined in accordance with the JD Agreement], subject to adjustment
pursuant to Section 8 hereof. 
  
 Section 8. Adjustment of
Number of Shares. The number and kind of securities purchasable upon the exercise of the Warrants and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events, as follows: 
  
 8.1 Adjustments. The number of Shares purchasable upon the exercise
of the Warrants and the Warrant Price shall be subject to adjustment as follows:(a) In case the Company after the date hereof shall (1) make or pay a dividend or make a distribution in shares of Common Stock on its Common Stock, (2) subdivide its
outstanding shares of Common Stock into a greater number of shares or (3) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the number of Shares purchasable upon exercise of the Warrants immediately prior
to such action shall be adjusted so that the Warrantholder upon exercise of the Warrants shall be entitled to receive the number of shares of Common Stock which it would have owned or would have been entitled to receive immediately following such
action had the Warrants been exercised immediately prior thereto. An adjustment made pursuant to this subsection (a) shall become effective on the day immediately after the record date, except as provided in subsection (f) below, in the case of a
dividend or distribution and shall become effective on the day immediately after the effective date in the case of a subdivision or combination. Whenever the number of Shares purchasable upon the exercise of a Warrant is adjusted as provided in this
paragraph (a), the Warrant Price shall be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of Shares purchasable upon the exercise of the Warrants immediately
prior to such adjustment, and of which the denominator shall be the number of Shares so purchasable immediately thereafter. 
  

 33 

 (b) In case the Company after the date hereof shall distribute any rights, warrants or options to all
holders of its Common Stock entitling them, for a period expiring within 60 days after the record date for such distribution, to purchase shares of Common Stock or securities convertible into Common Stock at a price per share less than the Relevant
Current Market Price Per Share (as defined below), the Warrant Price shall be adjusted by multiplying the Warrant Price in effect immediately prior to such adjustment by a fraction, of which (i) the numerator shall be the sum of (A) the number of
shares of Common Stock outstanding on the record date for the distribution to which this subsection (b) is being applied and (B) the number of shares of Common Stock which the aggregate price of the total number of shares of Common Stock offered
pursuant to the distribution to which this subsection (b) is being applied would purchase at the Relevant Current Market Price Per Share and (ii) the denominator shall be the sum of (A) the number of shares of Common Stock outstanding on the record
date for the distribution to which this subsection (b) is being applied and (B) the number of additional shares of Common Stock offered pursuant to the distribution to which this subsection (b) is being applied. For purposes of this subsection (b),
the “Relevant Current Market Price Per Share” means the then current market price per share of the Common Stock (determined as provided in subsection (d) below) on the record date for the distribution to which this subsection (b) applies,
minus, for any distribution to which subsection (c) applies and for which (x) the record date shall occur on or before the record date for the distribution to which this subsection (b) applies and (y) the “‘ex’ date” shall occur
on or after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this subsection (b) applies, the fair market value (on the record date for the distribution to which this subsection (b)
applies and as reasonably determined in good faith by the Board of Directors of the Company) of the assets of the Company or evidences of indebtedness, cash or securities distributed in respect of each share of Common Stock in such subsection (c)
distribution. The adjustment shall, except as provided in subsection (f) below, become effective on the day immediately after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this
subsection (b) applies. 
  
 (c) In case the Company or any
subsidiary of the Company after the date hereof shall distribute to all holders of Common Stock any of its assets, evidences of indebtedness, cash or securities (excluding any distributions referred to in subsections (a) or (b) and any dividend or
distribution paid in cash out of earned surplus of the Company) then in each such case the Warrant Price shall be adjusted so that the same shall equal the price determined by multiplying the Warrant Price in effect immediately prior to the record
date of such distribution by a fraction of which the numerator shall be the then current market price per share of the Common Stock (determined as provided in subsection (d) below) on the record date mentioned below less the then fair market value
(as reasonably determined in good faith by the Board of Directors of the Company) of the portion of the assets, evidences of indebtedness, cash or securities so distributed applicable to one share of Common Stock, and of which the denominator shall
be such current market price per share of the Common Stock. Such adjustment shall, except as provided in subsection (f) below, become effective on the day immediately after the record date for the determination of stockholders entitled to receive
such distribution. 
  
 (d) For the purpose of any computation
under subsection (b) or (c) above, the current market price per share of Common Stock on any date shall be deemed to be the average of the Market Value of the Common Stock for the 10 trading days before, and ending not later than, the earlier of the
date in question and the date before the “‘ex’ date”, with respect to the issuance or 
  

 34 

 distribution requiring such computation. For purposes of subsection (b) and this subsection (d), the term
“‘ex’ date,” when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the Nasdaq (or, if not listed or admitted to trading thereon, then on the principal
national securities exchange or automated quotation system on which the Common Stock is listed or admitted to trading and if not listed or admitted to trading on any national securities exchange or automated quotation system, as determined in good
faith by the Company’s Board of Directors) without the right to receive such issuance or distribution. 
  
 (e) In addition to the foregoing adjustments in subsections (a), (b) and (c) above, the Company will be permitted to make such reductions in the Warrant
Price as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the holders of the shares of Common Stock. 
  
 (f) In any case in which this Section 8 shall require that an adjustment be
made effective on the day immediately following a record date, the Company may elect to defer the effectiveness of such adjustment (but in no event until a date later than the effective time of the event giving rise to such adjustment), in which
case the Company shall, with respect to any Warrant exercised after such record date and on and before such adjustment shall have become effective (i) defer paying any cash payment pursuant to Section 9 hereof or issuing to the Warrantholder the
number of shares of Common Stock (or other assets or securities) issuable upon such exercise in excess of the number of shares of Common Stock and other capital stock of the Company issuable thereupon only on the basis of the Warrant Price prior to
such adjustment, and (ii) not later than five business days after such adjustment shall have become effective, pay to the Warrantholder the appropriate cash payment pursuant to Section 9 hereof and issue to the Warrantholder the additional shares of
Common Stock (or other asset or securities) issuable on such exercise. 
  
 (g) Upon the expiration of any rights, warrants or options referred to in subsection (b) or (c) above, to the extent the Warrants shall not have been exercised, the Warrant Price shall be adjusted to such amount as would have been received
by the Warrantholder had the adjustment in such Warrant Price made upon the distribution of such rights, warrants or options been made upon the basis of the distribution of only such number of rights, warrants or options as were actually exercised.

  
 (h) No adjustment in the number of Shares purchasable pursuant
to the Warrants or in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least 1.0% of the number of Shares then purchasable upon exercise of the Warrants or in the Warrant Price; provided,
however, that any adjustments which by reason of this subsection 8.1(h) are not required to be made immediately shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 8 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be. 
  
 (i) Whenever the number of Shares purchasable upon the exercise of the Warrants or the Warrant Price is adjusted as herein provided, the Company shall cause to be promptly mailed to the Warrantholder by first class
mail, postage prepaid, notice of such adjustment setting forth the number of Shares purchasable upon the exercise of the Warrants and the Warrant Price after such adjustment, a brief statement of the facts requiring such adjustment and the
computation by which such adjustment was made. 
  

 35 

 (j) Except as provided in this Section 8 or in Section 11, during the term of the Warrants or upon the
exercise of the Warrants, no adjustment shall be made (i) in respect of any dividends or distributions or (ii) in respect of the consummation of any business combination or other extraordinary transaction. 
  
 (k) Irrespective of any adjustments in the number of securities issuable upon
exercise of Warrants or in the Warrant Price, Warrant certificates theretofore or thereafter issued may continue to express the same number of securities and Warrant Price as are stated in the Warrant certificates initially issuable pursuant to this
Agreement. However, the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that does not affect the substance thereof; and any Warrant
certificate thereafter issued, whether upon registration of, or in exchange or substitution for, an outstanding Warrant certificate, may be in the form so changed. 
  
 8.2 Par Value of Shares of Common Stock. Before taking any action which would cause an adjustment effectively
reducing the portion of the Warrant Price allocable to each Share below the then par value per share of the Common Stock issuable upon exercise of the Warrants, the Company will take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and nonassessable Common Stock upon exercise of the Warrants. 
  
 8.3 Independent Public Accountants. The Company may retain a firm of independent public accountants of recognized national standing (which may be
any such firm regularly employed by the Company) to make any computation required under this Section 8, and a certificate signed by such firm shall be conclusive evidence of the correctness of any computation made under this Section 8. 

 
 8.4 Statement on Warrant Certificates. Irrespective of any
adjustments in the number of securities issuable upon exercise of Warrants or in the Warrant Price, Warrant certificates theretofore or thereafter issued may continue to express the same number of securities and Warrant Price as are stated in the
Warrant certificates initially issuable pursuant to this Agreement. However, the Company may, at any time in its sole discretion (which shall be conclusive), make any change in the form of Warrant certificate that it may deem appropriate and that
does not affect the substance thereof; and any Warrant certificate thereafter issued, whether upon registration of, or in exchange or substitution for, an outstanding Warrant certificate, may be in the form so changed. 
  
 Section 9. Fractional Interests; Fair Value. The Company shall not be
required to issue fractional Shares on the exercise of the Warrants. If any fraction of a Share would, except for the provisions of this Section 9, be issuable on the exercise of the Warrants (or specified portion thereof), the Company shall pay an
amount in cash equal to the then Market Value of the Common Stock on the day of such exercise multiplied by such fraction. 
  
 Section 10. No Right as Stockholder; Notices to Warrantholder. Nothing contained in this Agreement or in the Warrants shall be construed as
conferring upon the Warrantholder or its transferees any rights as a stockholder of the Company, including the right to vote, receive dividends, call meetings, consent or receive notices as a stockholder in respect of any meeting of stockholders for
the election of directors of the Company or any other matter or 
  

 36 

 imposing any fiduciary or other duty on the Company, its officers or directors, in favor of the Warrantholder, all of
which rights and duties owed to stockholders are disclaimed and waived by the Warrantholder. If, however, at any time prior to the expiration of the Warrants and prior to their exercise, any one or more of the following events shall occur:

  
 (a) any action which would require an adjustment pursuant to
Section 8.1; or 
  
 (b) a dissolution, liquidation or winding up
of the Company or a consolidation, merger or similar business combination or sale of its property, assets and business as an entirety or substantially as an entirety shall be proposed; 
  
 then the Company shall give notice in writing of such event to the Warrantholder, as provided in Section 13 hereof, promptly prior to the
date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to any relevant dividend, distribution, subscription rights or other rights, or for the determination of stockholders entitled
to vote on such proposed dissolution, liquidation or winding up. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to mail or receive such notice or any defect therein shall not affect
the validity of any action taken with respect thereto. 
  
 Section
11. Continuation of Purchase Rights in Case of Reclassification, Change, Merger, Consolidation or Sale of Assets. If any of the following shall occur, namely: (a) any reclassification or change of outstanding shares of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of outstanding shares of Common Stock), (b) any consolidation or
merger of the Company with or into any other person, or the merger of any other person with or into the Company (other than a merger which does not result in any reclassification, change, conversion, exchange or cancellation of outstanding shares of
Common Stock) or (c) sale, transfer or conveyance of all or substantially all of the assets of the Company (computed on a consolidated basis), then the Company, or such successor or purchasing entity, as the case may be, shall, as a condition
precedent to such reclassification, change, consolidation, merger, sale, transfer or conveyance, execute and deliver to the Warrantholder an agreement providing that the Warrantholder shall have the right to exercise the Warrants only into the kind
and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, change, consolidation, merger, sale, transfer or conveyance by a holder of the number of shares of Common Stock issuable upon
exercise of the Warrants and (ii) failed to exercise its rights of an election, if any, as to the kind or amount of securities, cash and upon such reclassification, change, consolidation, merger, sale, transfer or conveyance (provided that if the
kind or amount of securities, cash, and other property receivable upon such reclassification, change, consolidation, merger, sale, transfer or conveyance is not the same for each share of Common Stock of the Company held immediately prior to such
reclassification, change, consolidation, merger, sale, transfer or conveyance in respect of which such rights of election shall not have been exercised (“non-electing share”), then for the purpose of this Section 11 the kind and amount of
securities, cash and other property receivable upon such reclassification, change, consolidation, merger, sale, transfer or conveyance by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). Such agreement shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided 
  

 37 

 for in this Agreement. If, in the case of any such consolidation, merger, sale or conveyance, the stock or other
securities and property (including cash) receivable thereupon by a holder of shares of Common Stock includes shares of stock or other securities and property (including cash) of a corporation other than the successor or purchasing corporation, as
the case may be, in such consolidation, merger, sale or conveyance, then such agreement shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Warrantholder as the Board of
Directors of the Company shall reasonably consider necessary by reason of the foregoing. The provisions of this Section 11 shall similarly apply to successive consolidations, mergers, sales or conveyances. Notice of the execution of each such
agreement shall be mailed to the Warrantholder by first class mail, postage prepaid. 
  
 Section 12. Securities Laws; Restrictions on Transfer of Shares; Registration Rights. 
  
 (a) The Warrantholder agrees that the Warrant and the related Shares (each of the Warrant and the Shares being referred to herein as a
“Security” and together, “Securities”) are being acquired for investment and that the Warrantholder will not purchase, offer, sell or otherwise dispose of any of the Securities except under circumstances which will not result in
a violation of the Act. In order to exercise this Warrant, the Warrantholder must be able to confirm and shall confirm in writing, by executing a certificate to be supplied by the Company, all of the representations and other covenants contained in
this Agreement, including that the Securities so purchased are being acquired for investment and not with a view toward distribution or resale. The Shares (unless registered under the Act) shall be stamped or imprinted with, in addition to any other
appropriate or required legend, a legend in substantially the following form: 
  
 “THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED AND ANY PROSPECTUS DELIVERY REQUIREMENTS ARE NOT APPLICABLE OR (iii) RECEIPT OF NO-ACTION LETTERS
FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES. COPIES OF THE AGREEMENT COVERING THE ISSUANCE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.” 
  

 38 

 (b) In addition, the Warrantholder specifically represents to the Company both at the time of initial
purchase of the Warrant and at those future times as specified herein: 
  
 (1) The Warrantholder has experience in analyzing and investing in companies like the Company and is capable of evaluating the merits and risks of an investment in the Company and has the capacity to protect its own interests. The
Warrantholder is an “Accredited Investor” as that term is defined in Rule 501(a) promulgated under the Act. The Warrantholder is aware of the Company’s business affairs and financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable decision to acquire the Securities. The Warrantholder is acquiring the Securities for its own account for investment purposes only not as a nominee or agent and not with a view to, or for the
resale in connection with, any “distribution” thereof for purposes of the Act. The Warrantholder is acquiring the Securities for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection
with, any distribution thereof. The Warrantholder acknowledges the Company’s obligation to file a registration statement with respect to the Shares as set forth in the Registration Rights Agreement dated as of the date hereof by and among the
Company and the Warrantholder (the “Registration Rights Agreement”), the effectiveness of which registration statement may be required for the resale of the Shares. The Warrantholder has not offered or sold any portion of the Securities to
be acquired by the Warrantholder and has no present intention of reselling or otherwise disposing of any portion of such Securities either currently or after the passage of a fixed or determinable period of time or upon the occurrence or
nonoccurrence of any predetermined event or circumstance, and in particular the Warrantholder has no current intention to resell the Shares under such registration statement nor would it have such intention if such registration statement were
effective as of the date of purchase. The Warrantholder understands that investment in the Securities is subject to a high degree of risk. The Warrantholder can bear the economic risk of its investment, including the full loss of its investment, and
by reason of its business or financial experience or the business or financial experience of its professional advisors has the capacity to evaluate the merits and risks of its investment and protect its own interest in connection with the purchase
of the Securities. If other than an individual, the Warrantholder also represents it has not been organized for the purpose of acquiring the Securities. 
  
 (2) The Warrantholder understands that the Securities have not been and except as provided in the Registration Rights Agreement with respect to the Shares
will not be registered under the Act or any applicable State securities law in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Warrantholder’s investment intent and the
accuracy of the Warrantholder’s representations as expressed herein and the Warrantholder will furnish the Company with such additional information as is reasonably requested by the Company in connection with such exemption. 
  
 (3) The Warrantholder further understands that the Securities must be held
indefinitely unless subsequently registered under the Act and any applicable state securities laws, or unless exemptions from registration are otherwise available. Moreover, the Warrantholder understands that the Company is under no obligation to
and does not expect to register the Securities except as provided for in the Registration Rights Agreement with respect to the Shares. 
  
 (4) The Warrantholder is aware of the provisions of Rule 144, promulgated under the Act, which, in substance, permit limited public resale of
“restricted securities” acquired, directly or indirectly, from the issuer thereof (or from an Affiliate of such issuer), in a nonpublic offering subject to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the resale occurring not 
  

 39 

 less than one year after the party has purchased and paid for the Securities to be sold; the sale 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, as amended) and the amount of securities being sold during any
three-month period not exceeding the specified limitations stated therein. 
  
 (5) The Warrantholder further understands that it may not transfer the Warrants and that at the time it wishes to sell the Securities, it is possible that there will be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144, and that, in such event, the Warrantholder may be precluded from selling the Securities under Rule 144
even if the one-year minimum holding period had been satisfied. 
  
 (6) The Warrantholder further understands that in the event all of the requirements of Rule 144 are not satisfied, registration under the Act or compliance with registration exemption will be required; and that, notwithstanding the fact
that Rule 144 is 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 Rule 144
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 actions do so at their own risk.

  
 (7) To the Warrantholder’s knowledge, the Company has
made available copies of the Company’s reports filed under the Exchange Act since the beginning of the Company’s current fiscal year. The Warrantholder has had a reasonable opportunity to ask questions relating to and otherwise discuss the
Company’s business, management and financial affairs with the Company’s management, customers and other parties, and the Warrantholder has received satisfactory responses to the Warrantholder’s inquiries. The Warrantholder has relied
solely on its own independent investigation before deciding to enter into the purchase of the Warrants contemplated hereby. Unless the Warrantholder has otherwise notified the Company in writing, the Warrantholder is not, and has not been within the
ninety (90) days prior to the closing date of the purchase of the Securities, a broker or dealer of securities. Unless the Warrantholder has otherwise notified the Company in writing, the Warrantholder is not an employee, officer or director of the
Company nor prior to the consummation of the actions contemplated hereby, is the Warrantholder the beneficial owner of 5% or more of the Common Stock of the Company. 
  
 (c) With respect to any offer, sale or other disposition of any Securities that is not registered under the Act, the
Warrantholder agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of the Warrantholder’s counsel, if reasonably requested by the Company, to the effect that such
offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state law then in effect) of such Securities and indicating whether or not under the Act, certificates for the
Securities in question to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Such opinion must be satisfactory to the Company in its
reasonable judgment and shall state that it may be relied upon by counsel to the Company, and any stock exchange or transfer agent. Promptly upon receiving such written notice and satisfactory opinion, if so requested, the 
  

 40 

 Company shall notify the Warrantholder that the Warrantholder may sell or otherwise dispose of such Securities all in
accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this subsection (c) that the opinion of counsel for the Warrantholder is not satisfactory to the Company, the Company shall so notify the
Warrantholder promptly after such determination has been made and shall specify in detail the legal analysis supporting any such conclusion. Each certificate representing the Securities thus transferred (except a transfer registered under the Act or
a transfer of Shares pursuant to Rule 144) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the Warrantholder, such legend is not
required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 
  
 (d) Prior to any transfer of the Securities (except a transfer registered under the Act or a transfer of Shares pursuant to
Rule 144), the proposed transferee shall agree in writing with the Company to be bound by the terms of this Agreement (whether or not the Warrant has been exercised or otherwise outstanding) as if an original signatory hereto and the proposed
transferee must be able to and must make representations as set forth in this Section 12. 
  
 (e) As used in this Section 12, “Affiliate” shall mean, with respect to any person, any other person controlling, controlled by or under direct or indirect common control with such person (for the purposes
of this definition “control,” when used with respect to any specified person, shall mean the power to direct the management and policies of such person, directly or indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms “controlling” and “controlled” shall have meanings correlative to the foregoing). 
  
 Section 13. Notices. Any notice pursuant to this Agreement by the Company or by the Warrantholder or a holder of Shares shall be in writing and
shall be deemed to have been duly given if delivered or mailed by certified mail, return receipt requested: 
  
 (a) If to the Warrantholder or holders of Shares addressed to it at
                                        
            , Attention:
                                . 
  
 (b) If to the Company addressed to it at 4322 South 49th West Avenue, Tulsa,
Oklahoma 74107, Attention: Chief Financial Officer. 
  
 Each party
may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance herewith to the other party. 
  
 Section 14. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company, the Warrantholder or the holders
of Shares shall bind and inure to the benefit of their respective successors and assigns hereunder. 
  
 Section 15. Applicable Law. This Agreement shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes
shall be construed in accordance with the laws of said State. 
  
 Section 16. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrantholder and the 
  

 41 

 holders of Shares any legal or equitable right, remedy or claim under this Agreement. This Agreement shall be for the
sole and exclusive benefit of the Company, the Warrantholder and the holders of Shares. 
  
 Section 17. Counterparts. This Agreement may be executed in any number of counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 
  
 Section 18. Amendment. Except as expressly provided herein, neither
this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought; provided, however,
that any provisions hereof may be amended, waived, discharged or terminated upon the written consent of the Company and the Warrantholder. 
  
 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, all as of the day and year first above written. 
  

			
	 SYNTROLEUM CORPORATION

		
	 By:
	 	 /s/ John B. Holmes, Jr.

	 Name:
	 	 John B. Holmes, Jr.

	 Title:
	 	 President and Chief Operating Officer

  

			
	 [SOVEREIGN OIL & GAS COMPANY II, LLC

		
	 By:
	 	  

	 Name:
	 	  

	 Title:]
	 	  

  

	
	 [WARRANTHOLDER:]

	
	 [Name]

  

 42 

 Exhibit A 
  
 THE WARRANTS EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (I) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED AND ANY PROSPECTUS DELIVERY REQUIREMENTS ARE NOT APPLICABLE OR (III) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES. COPIES OF THE WARRANT AGREEMENT AND THE JOINT DEVELOPMENT AGREEMENT COVERING THE ISSUANCE OF
THESE WARRANTS AND VARIOUS REQUIREMENTS, INCLUDING WITHOUT LIMITATION PROVISIONS RESTRICTING THEIR TRANSFER, MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY. 
  
 Warrant Certificate
No.              
  
 WARRANTS TO PURCHASE 
                          SHARES OF COMMON STOCK 
  
 SYNTROLEUM CORPORATION 
  
 INCORPORATED UNDER THE LAWS 
 OF THE STATE OF
DELAWARE 
  
 This certifies that, for value received,
                        , the registered holder hereof (the “Warrantholder”), is entitled to purchase from
SYNTROLEUM CORPORATION (the “Company”), at any time during the period commencing the date hereof and ending at 5:00 p.m., Tulsa, Oklahoma time, on
                     at a purchase price per share of $            , (the
“Warrant Price”) the number of shares of Common Stock of the Company set forth above (the “Shares”). The number of shares of Common Stock of the Company purchasable upon exercise of each Warrant evidenced hereby and the Warrant
Price shall be subject to adjustment from time to time as set forth in the Warrant Agreement. 
  
 The Warrants evidenced hereby may be exercised in whole or in part by presentation of this Warrant certificate with the Purchase Form attached hereto duly executed and simultaneous payment of the Warrant Price at the
principal office of the Company. Payment of such price shall be made in cash or immediately available funds. 
  
 The Warrants evidenced hereby are issued under and in accordance with a Warrant Agreement, dated as of
                     (the “Warrant Agreement”), between the Company and the Warrantholder and are subject to the terms and
provisions contained in the Warrant Agreement, including certain restrictions on the exercise thereof, to all of which the Warrantholder by acceptance hereof consents. 
  

 43 

 Upon any partial exercise of the Warrants evidenced hereby, there shall be signed and issued to the
Warrantholder a new Warrant certificate in respect of the Shares as to which the Warrants evidenced hereby shall not have been exercised. These Warrants may be exchanged at the office of the Company by surrender of this Warrant certificate properly
endorsed for one or more new Warrants of the same aggregate number of Shares as here evidenced by the Warrant or Warrants exchanged. No fractional shares of Common Stock will be issued upon the exercise of rights to purchase hereunder, but the
Company shall pay the cash value of any fraction upon the exercise of one or more Warrants. These Warrants are transferable in the manner and subject to the restrictions set forth or referred to in the Warrant Agreement. 
  
 This Warrant Certificate does not entitle the Warrantholder to any of the
rights of a stockholder of the Company. 
  

			
	 	 	 SYNTROLEUM CORPORATION

		
	 By:
	 	  

	 Name:
	 	 
	 Title:
	 	 

  

	
	 Dated:
                        , 200    

	
	 ATTEST:

	
	

	 Secretary

  

 44 

 SYNTROLEUM CORPORATION 
 PURCHASE FORM 
  
 SYNTROLEUM CORPORATION

 4322 South 49th West Avenue 
 Tulsa, Oklahoma 74107 

 
 The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant certificate for, and to purchase thereunder,              shares of Common Stock (the “Shares”) provided for therein, and
requests that certificates for the Shares be issued in the name of: 
  
 ____________________ 
 __________________ 
 ______________________ 
  
 (Please Print or Type Name, Address and Social Security Number or Taxpayer Identification Number) 
  
 and, if said number of Shares shall not be all the Shares purchasable thereunder, that a new Warrant certificate for the balance of the Shares purchasable under the within Warrant certificate be registered in the name
of the undersigned Warrantholder as below indicated and delivered to the address stated below. The undersigned has also submitted to the Company a certificate in which it has made the representations and covenants required in Section 12 of the
Warrant Agreement. 
  

			
	 Dated:
	 	 
	
	 Name of Warrantholder:

	
	  

	 (Please Print)

	 Address:
	 	  

	 	 	  

		
	 Signature:
	 	  

  
 Note: The above signature must
correspond with the name as written upon the face of this Warrant certificate in every particular, without alteration or enlargement or any change whatever. 
  

 45 

 EXHIBIT ‘D’ 
  
 REGISTRATION RIGHTS AGREEMENT 
  

THIS REGISTRATION RIGHTS AGREEMENT is entered into effective as of
                         by and among Syntroleum Corporation, a Delaware corporation (the “Company”), and
Sovereign Oil & Gas Company II, LLC, a Texas limited liability company (“Sovereign”). 
  
 RECITALS 
  
 WHEREAS, the Company and Sovereign are parties to that certain Joint Development Agreement, dated as of March 1, 2004, providing for the issuance by the Company to Sovereign or certain individuals identified by Sovereign (each, an
“Individual”, and collectively, the “Individuals”) of up to              warrants (the “Warrants”) to purchase shares (the “Warrant Shares”)
of the Company’s common stock, par value $0.01 per share (the “Common Stock”); and 
  
 WHEREAS, the issuance of the Warrants to Sovereign and the Individuals is conditioned upon granting the rights set forth herein to Sovereign and the
respective Individuals; 
  
 NOW THEREFORE, in consideration of the
foregoing, the parties agree as follows: 
  
 ARTICLE 6

 DEFINITIONS 
  
 6.1 Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: 
  
 “Affiliate” shall mean, with respect to any Person, any
other Person controlling, controlled by or under direct or indirect common control with such Person (for the purposes of this definition “control,” when used with respect to any specified Person, shall mean the power to direct the
management and policies of such Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” shall have meanings correlative to the
foregoing). 
  
 “Closing Date” means
                        , 2004. 
  

“Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 “Holder” means Sovereign or each of the Individuals. 
  
 “Indemnitee” shall have the meaning ascribed to such term in
subsection 2.1(f). 
  
 “Indemnified Party” shall
have the meaning ascribed to such term in subsection 2.1(f). 
  
 “Indemnifying Party” shall have the meaning ascribed to such term in subsection 2.1(f). 
  

 46 

 “Person” shall mean any person, individual, corporation, partnership, trust or other
nongovernmental entity or any governmental agency, court, authority or other body (whether foreign, federal, state, local or otherwise). 
  
 The terms “register,” “registered” and “registration” refer to the registration effected by preparing
and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. 
  

“Registrable Securities” shall mean (A) the Warrant Shares, and (B) any shares of Common Stock issued as (or issuable upon the
conversion of any warrant, right or other security which is issued as) a dividend or other distribution with respect to or in replacement of the Shares or the Warrant Shares; provided, however, that securities shall only be treated as Registrable
Securities if and only for so long as they are held by a Holder and (1) have not been disposed of pursuant to a registration statement declared effective by the SEC and (2) have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale. Notwithstanding the foregoing, securities shall cease to constitute
Registrable Securities when such Holder may sell under Rule 144 under the Securities Act in a three-month period all Registrable Securities then held by such Holder. 
  
 “Registration Expenses” shall mean all expenses incurred by the Company in complying with subsection 2.1(a)
or (b) hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and expenses of counsel for the Company, blue sky fees and expenses (for a reasonable number of states) and the
expense of any special audits incident to or required by any such registration (but excluding the fees of legal counsel for any Holder). 
  
 “Registration Statement” shall mean a registration statement under the Securities Act filed by the Company with the SEC. 
  
 “Registration Period” shall have the meaning ascribed to
such term in subsection 2.1(d). 
  
 “SEC” means
the Securities and Exchange Commission of the United States or any other U.S. federal agency at the time administering the Securities Act. 
  
 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time. 
  
 “Selling
Expenses” shall mean all underwriting discounts and selling commissions and similar fees applicable to the sale of Registrable Securities and all fees and expenses of legal counsel for any Holder and all transfer taxes. 
  

 47 

 ARTICLE 2 
 REGISTRATION RIGHTS 
  
 2.1
Registration Rights. 
  
 (a) Piggyback
Registration. 
  
 (i) If the Company at any
time proposes to register any of its Common Stock or any other of its securities (collectively with the Common Stock, “Other Securities”) under the Securities Act, whether or not for sale for its own account, in a manner which would permit
registration of Registrable Securities for sale for cash to the public under the Securities Act, it will at such time give prompt written notice to Sovereign of its intention to do so at least 10 business days prior to the anticipated filing date of
the Registration Statement relating to such registration. Such notice shall offer Sovereign the opportunity to include in such Registration Statement such number of Registrable Securities as Sovereign may request. Upon the written request of
Sovereign made within 5 business days after the receipt of the Company’s notice (which request shall specify the number of Registrable Securities intended to be disposed of and the intended method of disposition thereof), the Company shall
effect, in the manner set forth in subsection 2.1(e), in connection with the registration of the Other Securities, the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register, to the
extent required to permit the disposition (in accordance with such intended methods thereof) of the Registrable Securities so requested to be registered; provided, that if at any time after giving written notice of its intention to register any
securities and prior to the effective date of such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to
Sovereign and, thereupon, (A) in the case of a determination not to register, the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration and (B) in the case of a determination to delay
such registration, the Company shall be permitted to delay registration of any Registrable Securities requested to be included in such registration for the same period as the delay in registering such other securities, but, in either such case,
without prejudice to the rights of Sovereign under subsection 2.1(b) or (c); 
  
 (ii) If the registration referred to in the first sentence of this subsection 2.1(a) is to be a registration in connection with an underwritten offering on behalf of either the Company or holders of securities (other
than Registrable Securities) of the Company (“Other Holders”), and the managing underwriter for such offering advises the Company in writing that, in such firm’s opinion, such offering would be materially and adversely affected by the
inclusion therein of Registrable Securities requested to be included therein because such Registrable Securities are not of the same type, class or series as the securities to be offered and sold in such offering on behalf of the Company and/or the
Other Holders, the Company may exclude all such Registrable Securities from such offering; 
  

 48 

 (iii) If the registration referred to in the first sentence of this subsection 2.1(a) is
to be a registration in connection with an underwritten primary offering on behalf of the Company, and the managing underwriter for such offering advises the Company in writing that, in such firm’s opinion, such offering would be materially and
adversely affected by the inclusion therein of the Registrable Securities requested to be included therein because the number or principal amount of such Registrable Securities, considered together with the number or principal amount of securities
proposed to be offered by the Company, exceeds the aggregate number or principal amount of securities which, in such firm’s opinion, can be sold in such offering without materially and adversely affecting the offering, the Company shall include
in such registration: (1) first, all securities the Company proposes to sell for its own account (“Company Securities”) and (2) second, the number or principal amount of Registrable Securities and securities, if any, requested to be
included therein by Other Holders in excess of the number or principal amount of Company Securities which, in the opinion of such underwriter, can be so sold without materially and adversely affecting such offering (allocated pro rata among
Sovereign and the Other Holders on the basis of the number of securities (including Registrable Securities) requested to be included therein by Sovereign and each such Other Holder); 
  
 (iv) If the registration referred to in the first sentence of this subsection 2.1(a) is to be a registration
in connection with an underwritten secondary offering on behalf of Other Holders made pursuant to demand registration rights granted by the Company to such Other Holders (the “Initiating Holders”), and the managing underwriter for such
offering advises the Company in writing that, in such firm’s opinion, such offering would be materially and adversely affected by the inclusion therein of the Registrable Securities requested to be included therein because the number or
principal amount of such Registrable Securities, considered together with the number or principal amount of securities proposed to be offered by the Initiating Holders, exceeds the aggregate number or principal amount of securities which, in such
firm’s opinion, can be sold in such offering without materially and adversely affecting the offering, the Company shall include in such registration; (1) first, to the extent the registration rights granted to an Initiating Holder permit it to
exclude other securities from its registration on substantially the same basis as that set forth in subsection 2.1(a)(iii) hereof, all securities any such Initiating Holder proposes to sell for its own account, and (2) second, the number or
principal amount of additional securities (including Registrable Securities) that such managing underwriter advises can be sold without materially and adversely affecting such offering, allocated pro rata among any Other Holders to which
clause (1) does not apply and Sovereign on the basis of the number of securities (including Registrable Securities) requested to be included therein by Sovereign and each such Other Holder; 
  
 (v) The Company shall not be required to effect any
registration of Registrable Securities under this subsection 2.1(a) incidental to the registration of any of its securities in connection with stock option or other executive or employee benefit or compensation plans of the Company; 
  

 49 

 (vi) No registration of Registrable Securities effected under this subsection 2.1(a)
shall relieve the Company of its obligation to effect any registration of Registrable Securities required of the Company pursuant to subsection 2.1(b) or (c) hereof; and 
  
 (vii) The provisions of this subsection 2.1(a) shall not require the Company to include Registrable
Securities in any registration statement of the Company that has been filed prior to the date of this Agreement. 
  
 (b) Form S-8 Registration Statement. If any of the Warrants are issued to the Individuals, no later than 60 days following the receipt of a written
demand requiring registration of the Registrable Securities from Sovereign to Company subsequent to issuance of any Warrants, the Company will file a Registration Statement on Form S-8 with the SEC with respect to the Registrable Securities and will
use its commercially reasonable best efforts to cause such Registration Statement to be declared effective by the SEC.  
  
 (c) Form S-3 Registration Statement. If any of the Warrants are issued to Sovereign, no later than 60 days following the receipt of written demand
requiring registration of the Registrable Securities from Sovereign to Company subsequent to issuance of any Warrants, the Company will file a Registration Statement on Form S-3 (or other applicable Form) with respect to such Registrable Securities
and will use its commercially reasonable best efforts to cause such Registration Statement to be declared effective by the SEC. 
  
 (d) Expenses of Registration. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to
subsection 2.1(a), (b) or (c) shall be borne by the Company. All Selling Expenses relating to the sale of securities registered by or on behalf of Holders shall be borne by such Holders pro rata on the basis of the number of securities so registered
except to the extent such Selling Expense is specifically attributable to one Holder, in which case it shall be borne by such Holder. 
  
 (e) Registration Procedures. In the case of the registration, qualification or compliance effected by the Company pursuant to this Agreement, the
Company will, upon reasonable request, inform each Holder as to the status of such registration, qualification and compliance. At its expense, the Company will during such time as the Holder holds Registrable Securities: 
  
 (i) use its commercially reasonable best efforts to keep
such registration, and any qualification or compliance under state securities laws which the Company determines to obtain, effective until (A) in the case of a Registration Statement on Form S-8, the date all of the Warrants have been exercised or
cease to be exercisable in accordance with their terms and (B) in the case of a Registration Statement on Form S-3 (or other applicable Form), the later of the date all of the Warrants cease to be exercisable in accordance with their terms and the
first anniversary of the date all of the Warrants have been exercised; 
  
 (ii) furnish such number of prospectuses and other documents incident thereto as the Holders from time to time may reasonably request; 
  

 50 

 (iii) use its commercially reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such jurisdictions as any Holder reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate
the disposition of the Registrable Securities owned by such Holder in such jurisdictions; provided, that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 2.1(d), or (B) subject itself to income taxation in any such jurisdiction; 
  
 (iv) notify each Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading,
and, at the request of any such Holder, the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements therein not misleading; 
  
 (v) cause all such Registrable Securities to be listed or quoted on each securities exchange or automated quotation system on which
similar securities issued by the Company are then listed or quoted; 
  
 (vi) appoint a transfer agent and registrar for all such Registrable Securities not later than the effective date of such Registration Statement; and 
  
 (vii) The Company will use its commercially reasonable best efforts to effect the registration,
qualifications or compliances (including, without limitation, the execution of any required undertaking to file post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance
with applicable securities laws, requirements or regulations) as may be so reasonably requested and as would permit or facilitate the sale and distribution of all Registrable Securities; provided that the Company shall not be obligated to take any
action to effect any such state registration, qualification or compliance pursuant to this Section 2 in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject to service or is required to qualify in such jurisdiction, as the case may be, and except as may be required by the Securities Act. 
  
 The period of time during which the Company is required hereunder to keep the Registration
Statement effective is referred to herein as “the Registration Period.” 
  
 (f) Delay of Registration. The Holders shall have no right to take any action to restrain, enjoin or otherwise delay any registration pursuant to subsection 2.1(a), (b) or (c) hereof as a result of any
controversy that may arise with respect to the interpretation or implementation of this Agreement. 
  

 51 

 (g) Indemnification. In the case of the sale of Registrable Securities pursuant to a Registration
Statement on Form S-3: 
  
 (i) To the extent
permitted by law, the Company will indemnify Sovereign and each Person controlling Sovereign within the meaning of Section 15 of the Securities Act, with respect to which any registration, qualification or compliance has been effected pursuant to
this Agreement, (each an “Indemnitee”), against all claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of
or based on any untrue statement of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereof, incident to any such registration, qualification or compliance, or
based on any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Indemnitee for reasonable legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss, damage, liability or action; provided that the Company will not be liable in the case of any untrue statement or omission to the extent that such untrue statement or
omission is made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by or on behalf of such Indemnitee and stated to be specifically for use in preparation of such registration
statement, prospectus, offering circular or other document; and provided that the Company will not be liable in any such case where the expense, claim, loss, damage or liability arises out of or is related to the failure of Sovereign to comply with
the covenants and agreements contained in this Agreement respecting sales of Registrable Securities; and, provided, further, that the indemnity with respect to any preliminary prospectus shall not apply to the extent that any such claim, loss,
damage or liability results from the fact that a current copy of the prospectus was not sent or given to the Person asserting any such claims, losses, damages or liabilities at or prior to the written confirmation of the sale of the Registrable
Securities confirmed to such Person if such current copy of the prospectus would have cured the defect giving rise to such claim, loss, damage or liability. 
  
 (ii) To the extent permitted by law, if Registrable Securities held by Sovereign are included in the securities as to which such
registration, qualification or compliance is being effected, Sovereign will indemnify the Company, each of its directors, officers, employees, legal counsel and accountants and each Person who controls the Company within the meaning of Section 15 of
the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue
statement of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereof, incident to any such registration, qualification or compliance, or based on any omission
to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any failure by Sovereign to comply with the covenants or agreements contained in this Agreement respecting the Registrable
Securities and will reimburse the Company, such directors, officers, employees, legal counsel and accountants and such controlling Person for reasonable 
  

 52 

 legal and any other expenses reasonably incurred in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action; provided that Sovereign will only be liable in the case of any untrue statement or omission to the extent that such untrue statement or omission is made in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by or on behalf of Sovereign and stated to be specifically for use in preparation of such registration statement, prospectus, offering circular or other document.
Notwithstanding the foregoing, in no event shall Sovereign be liable for any such claims, losses, damages or liabilities in excess of the proceeds received by Sovereign in the offering, except in the event of fraud by Sovereign. 
  
 (iii) Each party entitled to indemnification under this
subsection 2.1(f) (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, unless such failure is prejudicial to the Indemnifying Party in defending such claim or litigation. An Indemnifying
Party shall not be liable for any settlement of an action or claim effected without its written consent (which consent will not be unreasonably withheld). 
  
 (iv) If the indemnification provided for in this subsection 2.1(f) is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with
the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 
  
 (h) Covenants of Holders. 
  
 (i) Sovereign agrees that, upon receipt of any notice from the Company of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable Securities so that, as thereafter 
  

 53 

 delivered to Sovereign, such prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make the statements therein not misleading, Sovereign will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement contemplated by
subsection 2.1(c) until its receipt of copies of the supplemented or amended prospectus from the Company and, if so directed by the Company, Sovereign shall deliver to the Company all copies, other than permanent file copies then in Sovereign’s
possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. 
  
 (ii) Each Holder severally agrees for a period of 90 days from the effective date of any registration (other than a registration effected
solely to implement an employee benefit plan) of securities of the Company for any underwritten offering in which securities of the Company are sold not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities or any other stock of the Company held by such Holder, other than any shares of Registrable Securities included in such registration, without the prior written consent of the Company or the underwriters managing
such underwritten offering, as the case may be; provided that this obligation is subject to the condition that all executive officers and directors of the Company shall enter into similar agreements. 
  
 (iii) Sovereign agrees to suspend, upon request of the
Company, any disposition of Registrable Securities pursuant to the Registration Statement and prospectus contemplated by subsection 2.1(c) during any period, not to exceed in the aggregate 90 days in any 12-month period, when the Company determines
in good faith that offers and sales pursuant thereto should not be made by reason of the presence of material, undisclosed circumstances or developments with respect to which the disclosure that would be required in such a prospectus is premature,
would have an adverse effect on the Company or is otherwise inadvisable. Any such request by the Company shall be held confidential by Sovereign. 
  
 (iv) Sovereign agrees to notify the Company, at any time when a prospectus relating to the registration statement contemplated by
subsection 2.1(c) is required to be delivered by it under the Securities Act, of the occurrence of any event relating to Sovereign which requires the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the
purchasers of Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading relating to
Sovereign, and Sovereign shall promptly make available to the Company the information to enable the Company to prepare any such supplement or amendment. Sovereign also agrees that, upon delivery of any notice by it to the Company of the happening of
any event of the kind described in the preceding sentence of this subsection, Sovereign will forthwith discontinue disposition of Registrable Securities pursuant to such registration statement until its receipt of the copies of the supplemental or
amended prospectus contemplated by this subsection, which the Company shall promptly make available to Sovereign and, if so directed by the Company, Sovereign shall deliver to the Company all copies, other than permanent file copies then in
Sovereign’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. 
  

 54 

 (v) Each Holder shall promptly furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may request in writing or as shall be required in connection with any registration, qualification or compliance referred to in this Section 2.1. Such Holder will promptly keep the
Company informed as to all sales of Registrable Securities made under the Registration Statement and assist the Company in updating such information in the Registration Statement and any prospectus supplement relating thereto. 
  
 (vi) Sovereign hereby covenants with the Company (1) not to
make any sale of the Shares pursuant to the registration statement contemplated by subsection 2.1(c) without effectively causing the prospectus delivery requirements under the Securities Act to be satisfied, and (2) if such Shares are to be sold by
any method or in any transaction other than on a national securities exchange, in the over-the-counter market, on the Nasdaq, in privately negotiated transactions, or in a combination of such methods, to notify the Company at least five business
days prior to the date on which Sovereign first offers to sell any such Shares. 
  
 (vii) Sovereign acknowledges and agrees that the Registrable Securities sold pursuant to the registration statement contemplated by
subsection 2.1(c) are not transferable on the books of the Company unless the stock certificate submitted to the transfer agent evidencing such Registrable Securities is accompanied by a certificate reasonably satisfactory to the Company to the
effect that (A) the Registrable Securities have been sold in accordance with such registration statement and (B) the requirement of delivering a current prospectus has been satisfied. 
  
 (viii) In the event that the Company determines that Form S-8 is not available for the issuance of the
Registrable Securities, Sovereign agrees that it will not effect any disposition of the Registrable Securities that would constitute a sale within the meaning of the Securities Act except as contemplated in the registration statement contemplated by
subsection 2.1(c). Sovereign agrees not to take any action with respect to any distribution deemed to be made pursuant to such registration statement that constitutes a violation of Regulation M under the Exchange Act or any other applicable rule,
regulation or law. 
  
 (i) Rule 144 Reporting. With a view
to making available to the Holders the benefits of certain rules and regulations of the SEC which at any time permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its reasonable best efforts to:

  
 (i) make and keep public information
available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times; and 
  
 (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act. 
  

 55 

 ARTICLE 3 
 MISCELLANEOUS 
  
 3.1
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to any principles of conflicts of law thereof. 
  
 3.2 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be illegal, invalid, unenforceable or void, this Agreement shall continue in full force and effect without said provision. In such event, the parties shall negotiate, in good
faith, a legal, valid and binding substitute provision which most nearly effects the intent of the parties in entering into this Agreement. 
  
 3.3 Notices. All notices and other communications required or permitted hereunder shall be in writing (or in the form of a telex or telecopy
(confirmed in writing) to be given only during the recipient’s normal business hours unless arrangements have otherwise been made to receive such notice by telex or telecopy outside of normal business hours) and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand, messenger, or telex or telecopy (as provided above) addressed (a) if to a Holder, at such address as such Holder shall have furnished to the Company in writing or (b) if to the
Company, one copy should be sent to its principal executive offices and addressed to the attention of the President, or at such other address as the Company shall have furnished to the Holders. 
  
 Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of
the United States mail, addressed and mailed as aforesaid, or, if by telex or telecopy pursuant to the above, when received. 
  
 3.4 Facsimile Signatures. Any signature page delivered by a fax machine or telecopy machine shall be binding to the same extent as an
original signature page, with regard to any agreement subject to the terms hereof or any amendment thereto. Any party who delivers such a signature page agrees to later deliver an original counterpart to any party which requests it. 
  
 3.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one instrument. 
  
 3.6 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this Agreement. 
  
 3.7 Termination. Except as otherwise provided herein, this Agreement shall terminate on the tenth anniversary of the date hereof. 
  
 3.8 Waivers and Amendments. With the written consent of the Company and the Holders holding at least a majority of the Registrable
Securities, any provision of this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively 
  

 56 

 and either for a specified period of time or indefinitely) or amended. Upon the effectuation of each such waiver or
amendment, the Company shall promptly give written notice thereof to the Holders, if any, who have not previously received notice thereof or consented thereto in writing. 
  
 3.9 Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the
benefit of and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 
  
 3.10 Entire Agreement; Amendment. This Agreement constitutes the full and entire understanding and agreement between the parties with regard
to the subject hereof. 
  
 3.11 Construction.
Whenever the context so requires, the singular number includes the plural and vice versa, and a reference to one gender includes the other gender or the neuter. 
  

3.12 Interpretation. The parties hereto acknowledge and agree that: (i) the rule of construction to the effect that any ambiguities are
resolved against the drafting party shall not be employed in the interpretation of this Agreement, and (ii) the terms and provisions of this Agreement shall be construed fairly as to all parties hereto and not in favor of or against any party,
regardless of which party was generally responsible for the preparation of this Agreement. 
  
 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first above written. 
  

					
	SYNTROLEUM CORPORATION
		
	 By:
	 	  

	 	 	     Name:
	 	 John B. Holmes, Jr.

	 	 	     Title:
	 	 President and Chief Operating Officer

			
	
	SOVEREIGN OIL & GAS COMPANY II, LLC
		
	 By:
	 	  

	 	 	     Name:

	 	 	     Title:

  

 57 

 EXHIBIT ‘E’ 
  
 LIST OF THE PRIOR SOVEREIGN PROJECTS 
  

	1.	Block ‘K’, Offshore Rio Muni, Equatorial Guinea 

  

	2.	OML 115, Offshore Nigeria 

  

	3.	OPL 205/206, Onshore Nigeria 

  

	4.	Taq Taq Field and PSA, Onshore Iraq 

  

	5.	Sovereign-SAB Joint Venture 

  

	6.	Sovereign-ARK Joint Venture 

  

 58 

 EXHIBIT ‘F’ 
  
 SCHEDULE OF CONTRACT AREAS AND EXCLUDED AREAS 
  
 LIST OF SOVEREIGN CONTRACT AREAS 
  

							
	1.	 	 	  	Syntroleum Initials	  	Sovereign Initials
				
	 	 	 	  	  

	  	

  
 LIST OF SYNTROLEUM
PARTNER CONTRACT AREAS 
  

							
	 	  	 	  	Syntroleum Initials	  	Sovereign Initials
				
	1.	  	 Sanaga Sud Field and PSA, Offshore Cameroon
	  	  

	  	

  
 LIST OF THE EXCLUDED
AREAS 
  

							
	 	  	 	  	Syntroleum Initials	  	Sovereign Initials
				
	 1.
	  	Low BTU Natural Gas located within the continental United States of America 	  	  

	  	  

  

 59 

 EXHIBIT ‘G’ 
  
 ESCROW AGREEMENT 
  
 (to be added upon execution of the Escrow Agreement with the Bank) 
  

 60Hawthorne Financial Corporation 2001 Stock Incentive Plan

 EXHIBIT 10.1 
  
 HAWTHORNE FINANCIAL CORPORATION 
  
 2001 STOCK INCENTIVE PLAN 
 (as amended on May 21, 2001) 
  
 ARTICLE ONE 
  
 GENERAL PROVISIONS

  
 I. PURPOSE OF THE PLAN 
  
 This 2001 Stock Incentive Plan is intended to promote the interests of
Hawthorne Financial Corporation, a Delaware corporation (the “Corporation”), by providing eligible persons with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the Service of the Corporation. 
  
 Capitalized terms shall have the meanings assigned to such terms in the attached Appendix. 
  
 II. STRUCTURE OF THE PLAN 
  
 A. The Plan shall be divided into two separate equity programs: 
  

	 	•	the Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock and stock
appreciation rights; and 

  

	 	•	the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate
purchase of such shares, as a bonus for services rendered the Corporation (or any Parent or Subsidiary), or pursuant to share right awards which entitle Participants to receive shares upon the attainment of designated performance goals or Service
requirements. 

  
 B. The provisions of Articles One
and Four shall apply to all equity programs under the Plan and shall govern the interests of all persons under the Plan. 
  
 III. ADMINISTRATION OF THE PLAN 
  
 A. The Plan shall be administered by the Board or one or more committees appointed by the Board, provided that with respect to Section 16 Insiders (i) the
Board may administer the Plan in compliance with Rule 16b-3 of the 1934 Act, or (ii) the Primary Committee may, at the Board’s discretion, administer the Plan. Administration of the Plan may otherwise, at the Board’s discretion, be vested
in the Primary Committee or a Secondary Committee. Any discretionary option grants or stock issuances to members of the Board or the Primary Committee must be authorized and approved by a disinterested majority of the Board. 
  
 B. Members of the Primary Committee or any Secondary Committee shall serve
for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of the Primary Committee or any Secondary Committee and reassume all powers and authority
previously delegated to such committee. 
  
 C. Each Plan
Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration
of the Discretionary Option Grant and Stock Issuance Programs and to make such determinations under, and issue such interpretations of, the provisions of such programs and any outstanding options or stock issuances thereunder as it may deem
necessary or advisable. Decisions of the Plan 

 
Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or any option or stock issuance thereunder. 
  
 D. Each Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority to determine: (i) with respect
to the option grants or stock appreciation rights under the Discretionary Option Grant Program, which eligible persons are to receive grants, the time or times when such grants are to be made, the number of shares to be covered by each such grant,
the status of a granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the
option is to remain outstanding; and (ii) with respect to stock issuances under the Stock Issuance Program, which eligible persons are to receive stock issuances, the time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule applicable to the issued shares and the consideration for such shares. 
  
 E. The Plan Administrator shall have the absolute discretion either to grant options or stock appreciation rights in accordance with the Discretionary
Option Grant Program or to effect stock issuances in accordance with the Stock Issuance Program. 
  
 F. Service on the Primary Committee or any Secondary Committee shall constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or any Secondary Committee shall be liable for any act or omission made in good faith with
respect to the Plan or any option grants or stock issuances under the Plan. 
  
 IV. ELIGIBILITY 
  
 The persons eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs are as follows: 
  
 (i) Employees, 
  
 (ii) non-employee members of the Board or the board of directors of any Parent or Subsidiary, and 
  
 (iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary). 
  
 V. STOCK SUBJECT
TO THE PLAN 
  
 A. The stock issuable under the Plan shall be
shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock initially reserved for issuance over the term of the Plan shall not exceed
One Million Eighteen Thousand Nine Hundred (1,018,900) shares. Such authorized reserve consists of (i) the number of shares which remain available for issuance, as of the Plan Effective Date, under the Predecessor Plans, (768,900 shares), consisting
of the maximum aggregate number of shares originally reserved for issuance under the Predecessor Plans (1,300,000 shares), less the aggregate number of shares issued upon the exercise of options under the Predecessor Plans as of the Plan Effective
Date (531,100 shares), plus (ii) an increase of 250,000 shares authorized by the Board but subject to stockholder approval. No one person participating in the Plan may receive stock options, direct stock issuances and share right awards for more
than One Million Eighteen Thousand Nine Hundred (1,018,900) shares of Common Stock in the aggregate per calendar year. 
  
 B. Shares of Common Stock subject to outstanding options (including options incorporated into this Plan from the Predecessor Plans) shall be available for
subsequent issuance under the Plan to the extent (i) those 

  

 2 

 
options expire or terminate for any reason prior to exercise in full or (ii) the options are cancelled in accordance with the cancellation-regrant provisions
of Article Two. Unvested shares issued under the Plan and subsequently cancelled or repurchased by the Corporation at the original exercise or issue price paid per share, pursuant to the Corporation’s repurchase rights under the Plan, shall be
added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan. In addition, should the
exercise price of an option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the
exercise of an option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced only by the net number of shares of Common Stock issued to the holder of such
option or stock issuance, and not by the gross number of shares for which the option is exercised or which vest under the stock issuance. However, shares of Common Stock underlying one or more stock appreciation rights exercised under Section V of
Article Two of the Plan shall not be available for subsequent issuance under the Plan. 
  
 C. If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class
without the Corporation’s receipt of consideration, appropriate adjustments shall be made to: (i) the maximum number and/or class of securities issuable under the Plan; (ii) the number and/or class of securities for which any one person may be
granted stock options, direct stock issuances and share right awards under this Plan per calendar year; (iii) the number and/or class of securities and the exercise price per share in effect under each outstanding option under the Plan; (iv) the
number and/or class of securities and exercise price per share in effect under each outstanding option incorporated into this Plan from the Predecessor Plans; and (v) the maximum number and/or class of securities which may be added to the Plan
through the forfeiture, surrender, cancellation or termination of shares issued under the Predecessor Plans. Such adjustments to the outstanding options are to be effected in a manner which shall preclude the enlargement or dilution of rights and
benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. 
  
 ARTICLE TWO 
  
 DISCRETIONARY OPTION GRANT PROGRAM 
  
 I. OPTION TERMS 
  
 Each
option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. 
  
 Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such
option. 
  
 A. EXERCISE PRICE. 
  
 1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date; provided, however, that the Plan Administrator may, in its discretion, fix the exercise price per share
for one or more option grants at less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date if (i) the number of shares of Common Stock underlying the Below Fair Market Value Options to be
granted under such one or more grants will not cause the limitation set forth in Section VI of this Article Two to be exceeded, or (ii) the Plan Administrator determines at the time of the granting of the option, and the Optionee agrees in writing,
under terms and conditions satisfactory to the Plan Administrator, that cash compensation which the Optionee would otherwise receive from the Corporation or any Parent or Subsidiary shall be reduced dollar-for-dollar by the difference between the
aggregate exercise price for the shares of Common Stock subject to such Below Fair Market Value Option 

  

 3 

 
and the aggregate Fair Market Value of such shares on the grant date of such Below Fair Market Option. Notwithstanding the foregoing, (i) in no event, shall
the Plan Administrator grant options with an exercise price per share of less than eighty-five percent (85%) of the Fair Market Value per share of Common Stock on the option grant date and (ii) if a Below Fair Market Value Option is canceled and
re-granted pursuant to Section III of this Article Two, the grant of the new option shall not be considered to be the grant of an additional Below Fair Market Option (for purposes of the limitation set forth in Section VI of this Article Two) so
long as the percentage of Fair Market Value per share of Common Stock on the new grant date which is used to determine the exercise price for the new option is equal to or greater than the percentage of Fair Market Value per share of Common Stock
which was used to determine the exercise price for the canceled option. 
  
 2. The exercise price shall become immediately due upon exercise of the option and may, subject to the provisions of Section I of Article Four and the documents evidencing the option, be payable in one or more of the
forms specified below: 
  
 (i) cash or certified
check made payable to the Corporation, 
  
 (ii)
shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or 
  
 (iii) to the extent the sale complies with all applicable
laws relating to the regulation and sale of securities, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written instructions to: (a) a brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation by reason of such exercise; and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.

  
 Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 
  
 B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the option grant date. 
  
 C. EFFECT OF TERMINATION OF SERVICE. 
  
 1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death: 
  
 (i) Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set
forth in the documents evidencing the option. 
  
 (ii) Any option held by the Optionee at the time of death and exercisable in whole or in part at that time may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the
option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution or by the Optionee’s designated beneficiary or beneficiaries of that option. 
  
 (iii) Except as otherwise determined in the discretion of
the Plan Administrator either at the time an option is granted or at any time the option remains outstanding, should the Optionee’s Service be 

  

 4 

 
terminated for Misconduct or should the Optionee otherwise engage in Misconduct while holding one or more outstanding options under this Article Two, then
all those options shall terminate immediately and cease to be outstanding. 
  
 (iv) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares. 
  
 2. The Plan Administrator shall have complete discretion, either at the time an option is granted or at any time while the option remains outstanding, to: 
  
 (i) extend the period of time for which the option is to remain exercisable following the Optionee’s
cessation of Service from the limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or 

 
 (ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested had the Optionee continued in Service. 
  
 D. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record of the purchased shares. 
  
 E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. 
  
 F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
Incentive Options shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or by the laws of descent and distribution following the Optionee’s death. Non-Statutory Options shall be subject to the
same limitation, except that a Non-Statutory Option may be assigned in whole or in part during Optionee’s lifetime to one or more members of the Optionee’s Immediate Family or to a trust established for the exclusive benefit of one or more
members of the Optionee’s Immediate Family or the Optionee’s former spouse, to the extent such assignment is in connection with Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion shall be
exercisable only by the person or persons who acquire a proprietary interest in the option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. Notwithstanding the foregoing, the Optionee may also designate one or more persons as the beneficiary or beneficiaries of his
or her outstanding options under this Article Two, and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such
beneficiary or beneficiaries shall take the transferred option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s
death. 
  

 5 

 II. INCENTIVE OPTIONS 
  
 The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Four shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall NOT be subject to the terms of this Section II. 
  
 A. ELIGIBILITY. Incentive Options may only be granted to Employees.

  
 B. EXERCISE PRICE. The exercise price per share shall not be
less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. 
  
 C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one
or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed the sum of
One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are granted. 
  
 D. FAILURE TO QUALIFY AS INCENTIVE OPTION. To the extent that any option governed by this Plan does not qualify as an Incentive Option by reason of the dollar limitation described in Section II.C of this Article Two
or for any other reason, such option shall be exercisable as a Non-Statutory Option under the Federal tax laws. 
  
 E. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date. 
  
 III. CANCELLATION AND REGRANT OF OPTIONS 
  
 Subject to the limitations set forth below in this Section III, the Plan
Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of outstanding options under the Discretionary Option Grant Program (including outstanding options
incorporated from the Predecessor Plans) and to grant in substitution new options covering the same or different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the
new grant date. The Plan Administrator shall be permitted to exercise its authority under this Section III only if the cancellation of outstanding options and substitution of new options in each case (i) is authorized by the Plan Administrator, (ii)
will fulfill a legitimate corporate purpose as determined by the Plan Administrator, and (iii) will not cause the limitation set forth in Section VI of this Article Two to be exceeded. 
  
 IV. CHANGE IN CONTROL/HOSTILE TAKE-OVER 
  
 A. No option outstanding at the time of a Change in Control shall become exercisable on an accelerated basis if and to the extent: (i) that option is, in
connection with the Change in Control, assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction, (ii) such option is replaced with a cash
incentive program of the successor corporation which preserves the spread existing at the time of the Change in Control on the shares of Common Stock for which the option is not otherwise at that time exercisable and provides for subsequent payout
in accordance with the same exercise/vesting schedule applicable to those option shares or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. However, if none of
the foregoing conditions are satisfied, then each option outstanding at the time of the Change in Control but 

  

 6 

 
not otherwise exercisable for all the shares of Common Stock at that time subject to such option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control, become exercisable for all the shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully vested shares of Common
Stock. 
  
 B. All of the Corporation’s outstanding repurchase
rights under the Discretionary Option Grant Program shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control, except to the extent:
(i) those repurchase rights are assigned to the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase right is issued. 
  
 C. Immediately following the consummation of the Change in Control, all outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise expressly continued in full force and effect pursuant to the terms of the Change in Control transaction. 
  
 D. Each option which is assumed in connection with a Change in Control or otherwise continued in effect shall be
appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control had the option been exercised immediately prior
to such Change in Control. Appropriate adjustments to reflect such Change in Control shall also be made to: (i) the exercise price payable per share under each outstanding option (including options incorporated into this Plan from the Predecessor
Plans), provided the aggregate exercise price payable for such securities shall remain the same; (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan; (iii) the maximum number and/or class of
securities for which any one person may be granted options, direct stock issuances and share right awards under the Plan per calendar year; and (iv) the maximum number and class of securities which may be added to the Plan through the repurchase of
shares issued under the Predecessor Plans. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control transaction, the successor
corporation may, in connection with the assumption of the outstanding options under the Discretionary Option Grant Program, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per
share of Common Stock in such Change in Control transaction. 
  
 E. The Plan Administrator shall have the discretionary authority to structure one or more outstanding options under the Discretionary Option Grant Program so that those options shall, immediately prior to the effective date of a Change in
Control, become exercisable for all the shares of Common Stock at that time subject to such options on an accelerated basis and may be exercised for any or all of such shares as fully vested shares of Common Stock, whether or not those options are
to be assumed or otherwise continued in full force and effect or replaced with a cash incentive program pursuant to the express terms of the Change in Control transaction. In addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation’s repurchase rights under the Discretionary Option Grant Program so that those rights shall immediately terminate at the time of such Change in Control and shall not be assignable to the successor
corporation (or parent thereof), and the shares subject to those terminated rights shall accordingly vest in full at the time of such Change in Control. 
  
 F. The Plan Administrator shall have full power and authority to structure one or more outstanding options under the Discretionary Option Grant Program so
that those options shall vest and become exercisable for all the shares of Common Stock at that time subject to such options on an accelerated basis in the event the Optionee’s Service is subsequently terminated by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control in which those options do not otherwise accelerate. Any options so accelerated shall remain exercisable for fully
vested shares of Common 

  

 7 

 
Stock until the expiration or sooner termination of the option term. In addition, the Plan Administrator may structure one or more of the Corporation’s
repurchase rights under the Discretionary Option Grant Program so that those rights shall immediately terminate with respect to any shares of Common Stock held by the Optionee at the time of his or her Involuntary Termination, and the shares subject
to those terminated repurchase rights shall accordingly vest in full at that time. 
  
 G. The Plan Administrator shall have the discretionary authority to structure one or more outstanding options under the Discretionary Option Grant Program so that those options shall, immediately prior to the
effective date of a Hostile Take-Over, vest and become exercisable for all the shares of Common Stock at that time subject to such options on an accelerated basis and may be exercised for any or all of such shares as fully vested shares of Common
Stock. In addition, the Plan Administrator shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Discretionary Option Grant Program so that those rights shall terminate automatically
upon the consummation of such Hostile Take-Over, and the shares subject to those terminated rights shall thereupon immediately vest in full. Alternatively, the Plan Administrator may condition the automatic acceleration of one or more outstanding
options under the Discretionary Option Grant Program and the termination of one or more of the Corporation’s outstanding repurchase rights under such program upon the Involuntary Termination of the Optionee’s Service within a designated
period (not to exceed eighteen (18) months) following the effective date of such Hostile Take-Over. Each option so accelerated shall remain exercisable for fully vested shares of Common Stock until the expiration or sooner termination of the option
term. 
  
 H. The portion of any Incentive Option accelerated in
connection with a Change in Control or Hostile Take-Over shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws. 
  
 I. The grant of options under the Discretionary Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 
  
 V. STOCK APPRECIATION RIGHTS 
  
 A. The Plan Administrator shall have full power and authority to grant to selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights. 
  
 B. The following terms shall govern the
grant and exercise of tandem stock appreciation rights: 
  
 (i) One or more Optionees may be granted the right, exercisable upon such terms as the Plan Administrator may establish, to elect between the exercise of the underlying option for shares of Common Stock and the
surrender of that option in exchange for a payment from the Corporation in an amount equal to the excess of (a) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (b) the aggregate exercise price payable for such shares. 
  
 (ii) No such option surrender shall be effective unless it is approved by the Plan Administrator, either at the time of the actual option
surrender or at any earlier time. If the surrender is so approved, then the payment to which the Optionee shall be entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares
and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. 
  
 (iii) If the surrender of an option is not approved by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee
had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the later of (a) five (5) business days after the receipt of the rejection notice or (b) the last day on
which the option is otherwise exercisable in 

  

 8 

 
accordance with the terms of the documents evidencing such option, but in no event may such rights be exercised more than five (5) years after the option
grant date with respect to an Incentive Option held by a 10% Stockholder and not more than ten (10) years after the option grant date with respect to all other options. 
  
 C. The following terms shall govern the grant and exercise of limited stock appreciation rights: 
  
 (i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding options. 
  
 (ii) Upon the occurrence of a Hostile Take-Over, each individual holding one or more options with such a limited stock appreciation right shall have the unconditional right (exercisable for a thirty (30)-day period
following such Hostile Take-Over) to surrender each such option (or any portion thereof) to the Corporation. In return for the surrendered option, the Optionee shall receive a cash payment from the Corporation in an amount equal to the excess of (A)
the Take-Over Price of the shares of Common Stock at the time subject to such option (whether or not the option is otherwise vested and exercisable for those shares) over (B) the aggregate exercise price payable for those shares. Such cash payment
shall be paid within five (5) days following the option surrender date. 
  
 (iii) At the time such limited stock appreciation right is granted, the Plan Administrator shall pre-approve any subsequent exercise of that right in accordance with the terms of this Paragraph C. Accordingly, no
further approval of the Plan Administrator or the Board shall be required at the time of the actual option surrender and cash payment. 
  
 (iv) The balance of the option (if any) shall remain outstanding and exercisable in accordance with the documents evidencing such option.

  
 VI. LIMITATION ON NUMBER OF BELOW FAIR
MARKET VALUE OPTIONS AND CANCELLATION AND REGRANT OF OPTIONS 
  
 Notwithstanding any other provision of the Plan, the combined number of shares of Common Stock underlying (i) all Below Fair Market Value Options granted pursuant to clause (i) of Section I.A.1 of this Article Two and (ii) all options
cancelled in exchange for the substitution of new options pursuant to Section III of this Article Two shall not exceed, in the aggregate, ten percent (10%) of the maximum number of shares of Common Stock reserved for issuance over the term of the
Plan under Section V.A of Article One of the Plan (as such maximum number may be adjusted under Section V.C of Article One of the Plan). The foregoing provisions of this Section VI shall not apply to any Below Fair Market Value Option granted to an
Optionee pursuant to clause (ii) of Section I.A.1 of this Article Two. 
  
 ARTICLE THREE 
  
 STOCK ISSUANCE PROGRAM

  
 I. STOCK ISSUANCES 
  
 Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants. Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below. Shares of Common Stock may also be issued under
the Stock Issuance Program pursuant to share right awards which entitle the recipients to receive those shares upon the attainment of designated performance goals or Service requirements. 
  
 II. STOCK ISSUANCE TERMS 
  
 A. PURCHASE PRICE. 
  
 1. The purchase price per share shall be fixed by the Plan Administrator, but shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the issuance date. 
  

 9 

 2. Subject to the provisions of Section I of Article Four, shares of Common Stock may be
issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance: 
  
 (i) cash or certified check made payable to the Corporation, or 
  
 (ii) past services rendered to the Corporation (or any
Parent or Subsidiary). 
  
 B. VESTING PROVISIONS. 
  
 1. Shares of Common Stock issued under the Stock Issuance
Program shall vest in one or more installments over the Participant’s period of Service or upon attainment of specified performance objectives. The elements of the vesting schedule applicable to shares of Common Stock issued under the Stock
Issuance Program shall be determined by the Plan Administrator and incorporated into the Stock Issuance Agreement; provided, however, in no event, shall such shares of Common Stock vest over a period of less than three (3) years from the effective
date of the Stock Issuance Agreement, regardless of whether vesting is conditioned on the Participant’s period of Service or the attainment of specified performance objectives. Shares of Common Stock may also be issued under the Stock Issuance
Program pursuant to share right awards which entitle the recipients to receive those shares upon the attainment of designated performance goals or Service requirements. Upon the attainment of such performance goals or Service requirements, fully
vested shares of Common Stock shall be issued upon satisfaction of those share right awards; provided, however, in no event shall shares of Common Stock be issued to a Participant pursuant to any such share right award before one (1) year after the
date on which the share right award was granted to such Participant, regardless of whether the vesting or issuance of the shares is conditioned on the attainment of performance goals or Service requirements. 
  
 2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to: (i) the same vesting requirements
applicable to the Participant’s unvested shares of Common Stock; and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 
  
 3. The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant’s interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. The holder of a share
right award shall have no stockholder rights with respect to such award until shares of Common Stock have been issued to such Participant in satisfaction of such award. 
  
 4. Should the Participant cease to remain in Service while holding one or more unvested shares of Common
Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the
Participant’s purchase-money indebtedness), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the
Participant attributable to the surrendered shares. 
  
 5. Except as provided in Section III of this Article III, the Plan Administrator shall have no discretionary authority to waive the surrender and cancellation of one or more unvested shares of Common Stock which shall occur upon the
cessation of the Participant’s Service or the non-attainment of the performance objectives applicable to those shares. 
  

 10 

 6. Outstanding share right awards under the Stock Issuance Program shall automatically
terminate, and no shares of Common Stock shall actually be issued in satisfaction of those awards, if the performance goals or Service requirements established for such awards are not attained. The Plan Administrator shall have no discretionary
authority to issue shares of Common Stock under one or more outstanding share right awards as to which the designated performance goals or Service requirements have not been attained. 
  
 III. CHANGE IN CONTROL/HOSTILE TAKE-OVER 
  
 A. All of the Corporation’s outstanding repurchase rights under the Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control, except to the extent (i) those repurchase rights are assigned to the successor corporation (or parent thereof) or otherwise
continued in full force and effect pursuant to the express terms of the Change in Control transaction or (ii) such accelerated vesting is precluded by other limitations imposed in the Stock Issuance Agreement. 
  
 B. The Plan Administrator shall have the discretionary authority to structure
one or more of the Corporation’s repurchase rights under the Stock Issuance Program so that those rights shall automatically terminate in whole or in part upon the occurrence of a Change in Control and shall not be assignable to the successor
corporation (or parent thereof), and the shares of Common Stock subject to those terminated rights shall immediately vest in full at the time of such Change in Control. 
  
 C. The Plan Administrator shall also have the discretionary authority to structure one or more of the Corporation’s
repurchase rights under the Stock Issuance Program so that those rights shall automatically terminate in whole or in part, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, upon the Involuntary
Termination of the Participant’s Service within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control in which those repurchase rights do not otherwise terminate. 
  
 D. The Plan Administrator shall also have the discretionary authority to
structure one or more of the Corporation’s repurchase rights under the Stock Issuance Program so that those rights shall automatically terminate in whole or in part upon the occurrence of a Hostile Take-Over, and the shares of Common Stock
subject to those terminated rights shall immediately vest in full at the time of such Hostile Take-Over. 
  
 ARTICLE FOUR 
  
 MISCELLANEOUS 
  
 I. FINANCING

  
 The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option Grant Program or the purchase price of shares issued under the Stock Issuance Program by delivering a full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the maximum credit available to the Optionee or
Participant exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares plus (ii) any Federal, state and local income and employment tax liability incurred by the Optionee or the Participant in
connection with the option exercise or share purchase. 
  
 II. SHARE
ESCROW/LEGENDS 
  
 Unvested shares issued under the Plan may,
in the Plan Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those
unvested shares. 
  

 11 

 III. TAX WITHHOLDING 
  
 A. The Corporation’s obligation to deliver shares of Common Stock upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. 
  
 B. The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options or unvested shares of Common Stock under the Plan
with the right to use shares of Common Stock in satisfaction of all or part of the Taxes incurred by such holders in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in
either or both of the following formats: 
  
 1.
Stock Withholding: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair
Market Value equal to the amount of the Taxes (not to exceed one hundred percent (100%) of such Taxes) to be satisfied in such manner as designated by the holder in writing; or 
  
 2. Stock Delivery: The election to deliver to the Corporation, at the time the Non-Statutory Option is
exercised or the shares vest, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise or share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the amount of
the Taxes (not to exceed one hundred percent (100%) of such Taxes) to be satisfied in such manner as designated by the holder in writing. 
  
 IV. EFFECTIVE DATE AND TERM OF THE PLAN 
  
 A. The Plan shall become effective immediately upon the Plan Effective Date. Options may be granted under the Discretionary Option Grant at any time on or
after the Plan Effective Date. However, no options granted under the Plan may be exercised, and no shares shall be issued under the Plan, until the Plan is approved by the Corporation’s stockholders. If such stockholder approval is not obtained
within twelve (12) months after the Plan Effective Date, then all options previously granted under this Plan shall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued under the Plan.

  
 B. The Plan shall serve as the successor to the Predecessor
Plans, and no further option grants or direct stock issuances shall be made under the Predecessor Plans after the Plan Effective Date. All options outstanding under the Predecessor Plans on the Plan Effective Date shall be incorporated into the Plan
at that time and shall be treated as outstanding options under the Plan. However, each outstanding option so incorporated shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall
be deemed to affect or otherwise modify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares of Common Stock. 
  
 C. One or more provisions of the Plan, including (without limitation) the option/vesting acceleration provisions of Article
Two relating to Changes in Control and Hostile Take-Overs, may, in the Plan Administrator’s discretion, be extended to one or more options incorporated from the Predecessor Plans which do not otherwise contain such provisions. 
  
 D. The Plan shall terminate upon the EARLIEST of (i) the tenth anniversary of
the Plan Effective Date, (ii) the date on which all shares available for issuance under the Plan shall have been issued as fully-vested shares or (iii) the termination of all outstanding options in connection with a Change in Control. Upon such plan
termination, all outstanding option grants and unvested stock issuances shall thereafter continue to have force and effect in accordance with the provisions of the documents evidencing such grants or issuances. 
  
 V. AMENDMENT OF THE PLAN 
  
 A. The Board shall have complete and exclusive power and authority to amend
or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with 

  

 12 

 
respect to stock options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment
or modification. In addition, an amendment or modification of the Plan must be approved by the Corporation’s stockholders if such amendment or modification would: 
  
 1. Increase the number of shares of Common Stock reserved for issuance over the term of the Plan under
Section V.A of Article One of the Plan (other than increases pursuant to Section V.C of Article One of the Plan); 
  
 2. Change the number of shares of Common Stock for which any one person participating in the Plan may receive stock options, direct stock
issuances and share right awards in the aggregate per calendar year under Section V.A of Article One of the Plan; 
  
 3. Change the persons or class of persons eligible to participate in the Plan under Section IV of Article One of the Plan; or 

 
 4. Materially increase or enlarge the rights or benefits
available to persons participating in the Plan. 
  
 B. Options to
purchase shares of Common Stock may be granted under the Discretionary Option Grant Program and shares of Common Stock may be issued under the Stock Issuance Program that are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained any required approval of an amendment sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding. 
  
 VI. USE OF PROCEEDS 
  
 Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.

  
 VII. REGULATORY APPROVALS 
  
 A. The implementation of the Plan, the granting of any stock option under
the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any granted option or (ii) under the Stock Issuance Program shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted under it and the shares of Common Stock issued pursuant to it. 
  
 B. No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any stock
exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. 
  
 VIII. NO EMPLOYMENT/SERVICE RIGHTS 
  
 Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or
without cause. 
  
 [REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK] 
  

 13 

 APPENDIX 
  

The following definitions shall be in effect under the Plan: 
  

A. BELOW FAIR MARKET VALUE OPTION shall mean an option granted pursuant to the Plan Administrator’s discretionary authority under Section I.A.1 of
Article Two of the Plan with an exercise price per share less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. 
  
 B. BOARD shall mean the Corporation’s Board of Directors. 
  
 C. CHANGE IN CONTROL shall mean a change in ownership or control of the Corporation effected through any of the following
transactions: 
  
 (i) a stockholder-approved
merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities are transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction; 
  
 (ii) a sale, transfer or other disposition of all or substantially all of the Corporation’s assets; or 
  
 (iii) the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders which the Board recommends such stockholders accept. 
  
 D. CODE shall mean the Internal Revenue Code of 1986, as amended. 

 
 E. COMMON STOCK shall mean the Corporation’s common stock.

  
 F. CORPORATION shall mean Hawthorne Financial Corporation, a
Delaware corporation, and its successors. 
  
 G. DISCRETIONARY
OPTION GRANT PROGRAM shall mean the discretionary option grant program in effect under the Plan. 
  
 H. EMPLOYEE shall mean an “employee” of the Corporation (or any Parent or Subsidiary) within the meaning of Section 3401(c) of the Code and the
regulations thereunder. 
  
 I. EXERCISE DATE shall mean the date
on which the Corporation shall have received written notice of the option exercise. 
  
 J. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: 
  
 (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value
shall be deemed equal to the closing selling price per share of Common Stock on the date in question, as such price is reported on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 
  

 APPENDIX 
 1 

 (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be deemed equal to the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such
quotation exists. 
  
 K. HOSTILE TAKE-OVER shall mean: 

 
 (i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than twenty-five percent (25%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders
which the Board does not recommend such stockholders to accept; or 
  
 (ii) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either: (a) have been Board members continuously since the beginning of such period; or (b) have been elected or nominated for election as Board members during such period by at least a majority of the
Board members described in clause (a) who were still in office at the time the Board approved such election or nomination. 
  
 L. IMMEDIATE FAMILY shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships. 
  
 M. INCENTIVE OPTION shall mean an option which satisfies the requirements of Code Section 422. 
  
 N. INVOLUNTARY TERMINATION shall mean the termination of the Service of any
individual which occurs by reason of: 
  
 (i)
such individual’s involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or 
  
 (ii) such individual’s voluntary resignation following (A) a change in his or her position with the Corporation which materially
reduces his or her level of responsibility or the level of management to which Optionee reports, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and participation in any corporate-performance based bonus
or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation
without the individual’s consent. 
  
 O. MISCONDUCT shall
mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or
any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of any Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary). 
  
 P. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

  

 APPENDIX 
 2 

 Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy the requirements of Code Section
422. 
  
 R. OPTIONEE shall mean any person to whom an option is
granted under the Discretionary Option Grant Program. 
  
 S.
PARENT shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 
  
 T. PARTICIPANT shall mean any person who is issued shares of Common Stock or a share right award under the Stock Issuance Program. 
  
 U. PLAN shall mean the Corporation’s 2001 Stock Incentive Plan, as set
forth in this document. 
  
 V. PLAN ADMINISTRATOR shall mean the
particular entity, whether the Board, the Primary Committee or the Secondary Committee, which is authorized to administer the Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the
extent such entity is carrying out its administrative functions under those programs with respect to the persons under its jurisdiction. 
  
 W. PLAN EFFECTIVE DATE shall mean the date on which the Plan was adopted by the Board. 
  
 X. PREDECESSOR PLANS shall collectively mean the Corporation’s 1994 Stock Option Plan and the Corporation’s 1995
Stock Option Plan, as in effect immediately prior to the Plan Effective Date hereunder. 
  
 Y. PRIMARY COMMITTEE shall mean a committee of two (2) or more Board members appointed by the Board to administer the Plan with respect to Section 16 Insiders, which shall be constituted in such a manner as to permit
grants under the Plan in compliance with Rule 16b-3 of the 1934 Act. 
  
 Z. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board members appointed by the Board to administer any aspect of Plan not administered by the Primary Committee. The members of the Secondary Committee may be Board members
who are Employees eligible to receive discretionary option grants or direct stock issuances under the Plan or any other stock option, stock appreciation, stock bonus or other stock plan of the Corporation (or any Parent or Subsidiary). 

 
 AA. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. 
  
 BB. SERVICE shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance. 
  
 CC. SHORT TERM FEDERAL RATE shall mean the federal short-term rate in effect under Section 1274(d) of the Code for the period the shares were held in
escrow. 
  
 DD. STOCK EXCHANGE shall mean either the American
Stock Exchange or the New York Stock Exchange. 
  

 APPENDIX 
 3 

 EE. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the Corporation and the Participant
at the time of issuance of shares of Common Stock under the Stock Issuance Program. 
  
 FF. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect under the Plan. 
  
 GG. SUBSIDIARY shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in
such chain. 
  
 HH. TAKE-OVER PRICE shall mean the greater of (i)
the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a Hostile Take-Over or, if applicable, (ii) the highest reported price per share of Common Stock paid by the tender offeror
in effecting the Hostile Take-Over through the acquisition of such Common Stock. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the price per share described in clause (i) above. 
  
 II. TAXES shall mean the Federal, state and local income and employment tax
liabilities incurred by the holder of Non-Statutory Options or unvested shares of Common Stock in connection with the exercise of those options or the vesting of those shares. 
  
 JJ. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). 
  

 APPENDIX 
 4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00063-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00063-of-00352.parquet"}]]