Document:

pfab_ex105.htm

    EXHIBIT
10.5

     

    
 

     

    PACIFIC
ASIA PETROLEUM, INC.

     

    2009
EQUITY INCENTIVE PLAN

     

    STOCK OPTION
AGREEMENT

     

    Unless
otherwise defined herein, the terms in the Stock Option Agreement (the “Option
Agreement”) have the same meanings as defined in the Pacific Asia
Petroleum, Inc. 2009 Equity Incentive Plan (the “Plan”).

     

    I. NOTICE OF STOCK OPTION
GRANT

     

    Optionee:

     

    Address:

     

    You have
been granted an Option to purchase Common Stock of the Company, subject to the
terms and conditions of the Plan and this Option Agreement, as
follows:

     

    Grant
Date: ___________________________________________________                                                 

     

    Vesting
Commencement
Date: _____________________________________         

     

    Exercise
Price per
Share:  ________________________________________         

     

    Total
Number of Shares
Granted:  __________________________________        

     

    Total
Exercise
Price:  ___________________________________________

     

    Type
of
Option:    _______________________________________________         

     

    Expiration
Date:  _______________________________________________                                                                  

     

    Vesting
Schedule:
______________________________________________         

     

    Termination
Period: _______________________________________

     

    To the
extent vested, this Option will be exercisable for three (3) months after
Optionee ceases to be a Service Provider, unless termination is due to
Optionee’s death or Disability, in which case this Option will be exercisable
for twelve (12) months after Optionee ceases to
be a Service Provider.  In the event of termination due to Optionee’s
death, the Company shall use commercially reasonable efforts to notify
Optionee’s estate of the exercisability of the Option following Optionee’s
death.  Notwithstanding the foregoing sentence, in no event may this
Option be exercised after any termination of the Optionee as a Service Provider
determined by the Company’s Board to be for Cause or after the Expiration Date
as provided above and this Option may be subject to earlier termination as
provided in the Plan.

     

    “Cause” has
the meaning ascribed to such term or words of similar import in Optionee’s
written employment or service contract with the Company or its Parent or any
Subsidiary and, in the absence of such

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    agreement
or definition, means Optionee’s (i) conviction of, or plea of nolo
contendere to, a felony or any other crime involving moral turpitude;
(ii) fraud on or misappropriation of any funds or property of the Company
or its subsidiaries, or any affiliate, customer or vendor; (iii) personal
dishonesty, incompetence, willful misconduct, willful violation of any law, rule
or regulation (other than minor traffic violations or similar offenses), or
breach of fiduciary duty which involves personal profit; (iv) willful
misconduct in connection with Optionee’s duties or willful failure to perform
Optionee’s responsibilities in the best interests of the Company or its
subsidiaries; (v) illegal use or distribution of drugs; (vi) violation
of any material rule, regulation, procedure or policy of the Company or its
subsidiaries, the violation of which could have a material detriment to the
Company; or (vii) material breach of any provision of any employment,
non-disclosure, non-competition, non-solicitation or other similar agreement
executed by Optionee for the benefit of the Company or its subsidiaries, all as
reasonably determined by the Company’s Board, which determination will be
conclusive.  

     

    II. AGREEMENT

     

    1. Grant of
Option.  The Administrator grants to the Optionee named in the
Notice of Stock Option Grant in Part I of this Option
Agreement, an Option to purchase the number of Shares set forth in the Notice of
Stock Option Grant, at the exercise price per Share set forth in the Notice of
Stock Option Grant (the “Exercise
Price”), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference.  In the event of a conflict between
the terms and conditions of the Plan and this Option Agreement, the terms and
conditions of the Plan prevail.

     

    If
designated in the Notice of Stock Option Grant as an Incentive Stock Option,
this Option is intended to qualify as an Incentive Stock Option as defined in
Code section 422.  Nevertheless, to the extent that it exceeds
the $100,000 rule of Code section 422(d), this Option will be treated as a
Nonstatutory Stock Option.

     

    2. Exercise of
Option.

     

    (a) Right to
Exercise.  This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
and with the applicable provisions of the Plan and this Option
Agreement.

     

    (b) Method of
Exercise.  This Option is exercisable by (i) delivery of an
exercise notice in the form attached as Exhibit A (the “Exercise
Notice”) or in a manner and pursuant to procedures as the Administrator
may determine, which will state the election to exercise the Option, the number
of Shares with respect to which the Option is being exercised, and other
representations and agreements as may be required by the Company and (ii) paying
the Company in full the aggregate Exercise Price as to all Shares being
acquired, together with any applicable tax withholding.

     

    This
Option will be deemed to be exercised upon receipt by the Company of a fully
executed Exercise Notice accompanied by the aggregate Exercise Price, together
with any applicable tax withholding.

     

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

     

    3. Method of
Payment.  The aggregate Exercise Price may be paid by any of
the following, or a combination thereof, at the election of the
Optionee:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    4. cash;

     

    (a) check;

     

    (b) to the extent not prohibited by Section
402 of the Sarbanes-Oxley Act of 2002, a promissory note;

     

    (c) other Shares, provided Shares have a
Fair Market Value on the date of surrender equal to the aggregate exercise price
of the Shares as to which said Option will be exercised;

     

    (d) by asking the Company to withhold
Shares from the total Shares to be delivered upon exercise equal to the number
of Shares having a value equal to the aggregate Exercise Price of the Shares
being acquired;

     

    (e) any combination of the foregoing
methods of payment; or

     

    (f) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable
Laws.

     

    5. Restrictions on
Exercise.  This Option may not be exercised (a) until such time
as the Plan has been approved by the stockholders of the Company, or (b) if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Laws.  The Company will be relieved of any liability with respect to
any delayed issuance of shares or its failure to issue shares if such delay or
failure is necessary to comply with Applicable Laws.

     

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

     

    7. Term of
Option.  This Option may be exercised only within the term set
out in the Notice of Stock Option Grant, and may be exercised during the term
only in accordance with the Plan and the terms of this Option.

     

    8. Tax
Obligations.

     

    (a) Withholding
Taxes.  Optionee agrees to arrange for the satisfaction of all
Federal, state, local and foreign income and employment tax withholding
requirements applicable to the Option exercise.  Optionee acknowledges
and agrees that the Company may refuse to honor the exercise and refuse to
deliver the Shares if withholding amounts are not delivered at the time of
exercise.

     

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

     

    (c) Code Section
409A.  Under Code section 409A, an Option that vests after
December 31, 2004 that was granted with a per Share exercise price that is
determined by the Internal Revenue Service (the “IRS”) to
be less than the Fair Market Value of a Share on the Grant Date (a “discount
option”) may be

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d) considered
deferred compensation.  An Option that is a discount option may result
in (i) income recognition by the Optionee prior to the exercise of the Option,
(ii) an additional twenty percent (20%) tax, and (iii) potential penalty and
interest charges.  Optionee acknowledges that the Company cannot and
has not guaranteed that the IRS will agree that the per Share Exercise Price of
this Option equals or exceeds Fair Market Value of a Share on the Grant Date in
a later examination.  Optionee agrees that if the IRS determines that
the Option was granted with a per Share exercise price that was less than the
Fair Market Value of a Share on the Grant Date, Optionee will be solely
responsible for any and all resulting tax consequences.

     

    9. No Guarantee of Continued
Service.  OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A
SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY
EMPLOYING OR RETAINING OPTIONEE) AND NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. OPTIONEE FURTHER ACKNOWLEDGES
AND AGREES THAT THIS OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER
AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR
IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH
OPTIONEE’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY
EMPLOYING OR RETAINING OPTIONEE) TO TERMINATE OPTIONEE’S RELATIONSHIP AS A
SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

     

    10. Notices.  All
notices or other communications which are required or permitted hereunder will
be in writing and sufficient if (i) personally delivered or sent by telecopy,
(ii) sent by nationally-recognized overnight courier or (iii) sent by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:

     

    (a)           if
to the Optionee, to the address (or telecopy number) set forth on the Notice of
Stock Option Grant; and

    

    (b)           if
to the Company, to its principal executive office as specified in any report
filed by the Company with the Securities and Exchange Commission or to such
address as the Company may have specified to the Grantee in writing, Attention:
Corporate Secretary;

     

    or to any
other address as the party to whom notice is to be given may have furnished to
the other party in writing in accordance herewith.  Any communication
will be deemed to have been given (i) when delivered, if personally delivered,
or when telecopied, if telecopied, (ii) on the first Business Day (as
hereinafter defined) after dispatch, if sent by nationally-recognized overnight
courier and (iii) on the fourth Business Day following the date on which the
piece of mail containing the communication is posted, if sent by
mail.  As used herein, “Business
Day” means a day that is not a Saturday, Sunday or a day on which banking
institutions in the city to which the notice or communication is to be sent are
not required to be open.

     

    11. Specific
Performance.  Optionee expressly agrees that the Company will
be irreparably damaged if the provisions of this Option Agreement and the Plan
are not specifically enforced.  Upon a breach or threatened breach of
the terms, covenants and/or conditions of this Option Agreement or the Plan by
the Optionee, the Company will, in addition to all other remedies, be entitled
to a temporary or permanent injunction, without showing any actual damage,
and/or decree for specific performance, in accordance with the provisions hereof
and thereof.  The Administrator has the power to determine what
constitutes a breach or threatened breach of this Option Agreement or the
Plan.  The Administrator’s determinations will be final and conclusive
and binding upon the Optionee.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    12. No
Waiver.  No waiver of any breach or condition of this Option
Agreement will be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.

     

    13. Optionee
Undertaking.  The Optionee agrees to take whatever additional
actions and execute whatever additional documents the Company may in its
reasonable judgment deem necessary or advisable in order to carry out or effect
one or more of the obligations or restrictions imposed on the Optionee pursuant
to the express provisions of this Option Agreement.

     

    14. Modification of
Rights.  The rights of the Optionee are subject to modification
and termination in certain events as provided in this Option Agreement and the
Plan.

     

    15. Governing
Law.  This Agreement is governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to its
conflict or choice of law principles that might otherwise refer construction or
interpretation of this Agreement to the substantive law of another
jurisdiction.

     

    16. Counterparts; Facsimile
Execution.  This Option Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original, but all of
which together constitute one and the same instrument.  Facsimile
execution and delivery of this Option Agreement is legal, valid and binding
execution and delivery for all purposes.

     

    17. Entire
Agreement.  The Plan, this Option Agreement, and upon
execution, the Exercise Notice, constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede in their entirety all
prior undertakings and agreements of the Company and Optionee with respect to
the subject matter hereof, and may not be modified adversely to the Optionee’s
interest except by means of a writing signed by the Company and
Optionee.

     

    18. Severability.  In
the event one or more of the provisions of this Option Agreement should, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability will not affect any other provisions
of this Option Agreement, and this Option Agreement will be construed as if such
invalid, illegal or unenforceable provision had never been contained
herein.

     

    19. WAIVER OF JURY
TRIAL.  THE OPTIONEE EXPRESSLY, IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS OPTION
AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

     

    [remainder of page left blank
intentionally]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

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

     

    
      
 

      
        
          	
                  OPTIONEE 

                	 	 	
                  PACIFIC ASIA PETROLEUM, INC.

                	 
	 	 	 	 	 
	 	 	 	 	 
	Signature	
                   

                	 	 	By:	
                   

                	 
	
                   

                	 	 	
                   

                   

                	 
	Print
      Name:	
                   

                	 	 	Print
      Name:	
                  

                     

                  

                	 
	 	 	 	 	 
	Address:	 	 	 	Address:	 	 
	 	 	 	 	 
	 	 	 	Date
      Received:	
                   

                	 

        

      

       

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

     

    EXHIBIT
A

     

    2009
EQUITY INCENTIVE PLAN

     

    EXERCISE
NOTICE

    

    Pacific
Asia Petroleum, Inc.

    [Address]

    

    

    Attention:
_______________, _________________

    

     

    1. Exercise of
Option.  Effective as of today, _____________, _____, the
undersigned (“Optionee”)
elects to exercise Optionee’s option to purchase _________ shares of the Common
Stock (the “Shares”)
of Pacific Asia Petroleum, Inc. (the “Company”)
under and pursuant to the Pacific Asia Petroleum, Inc. 2009 Equity Incentive
Plan (the “Plan”) and
the Stock Option Agreement dated ____________, ____ (the “Option
Agreement”).

     

    2. Delivery of
Payment.  Optionee herewith delivers to the Company the full
purchase price of the Shares, as set forth in the Option Agreement, and any and
all withholding taxes due in connection with the exercise of the
Option.

     

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

     

    4. Rights as
Stockholder.  Until the issuance of the Shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a stockholder exists with respect to the Optioned Stock,
notwithstanding the exercise of the Option.  Subject to the
requirements of Section 6 below, the
Shares will be issued to the Optionee as soon as practicable after the Option is
exercised in accordance with the Option Agreement.  No adjustment will
be made for a dividend or other right for which the record date is prior to the
date of issuance except as provided in the Plan.

     

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

     

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

     

    7. Successors and
Assigns.  The Company may assign any of its rights under this
Exercise Notice to single or multiple assignees, and this Exercise Notice inures
to the benefit of the successors and assigns of the Company.  Subject
to the restrictions on transfer herein set forth, this Exercise Notice is
binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    8. Interpretation.  Any
dispute regarding the interpretation of this Exercise Notice will be submitted
by Optionee or by the Company forthwith to the Administrator for review at its
next regular meeting.  The resolution of disputes by the Administrator
will be final and binding on all parties.

     

    9. Governing Law;
Severability.  This Exercise Notice is be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to its conflict or choice of law principles that might otherwise refer
construction or interpretation of this Exercise to the substantive law of
another jurisdiction.  In the event that any provision hereof becomes
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Exercise Notice will continue in full force and
effect.

     

    10. Notices.  Any
notice required or permitted hereunder will be provided in writing and deemed
effective if provided in the manner specified in the Option
Agreement.

     

    11. Further
Instruments.  The parties agree to execute any further
instruments and to take any further action as may be reasonably necessary to
carry out the purposes and intent of the Option Agreement and this Exercise
Notice.

     

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

     

    [signature page
follows]

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    
      
        	
                Submitted
      by:

              	 	 	
                Accepted
      by:

                 

              	 
	OPTIONEE  	 	 	PACIFIC
      ASIA PETROLEUM, INC.	 
	 	 	 	 	 
	Signature	
                 

              	 	 	By:	
                 

              	 
	
                 

              	 	 	
                 

                 

              	 
	Print
      Name:	
                 

              	 	 	Print
      Name:	
                

                   

                

              	 
	 	 	 	 	 
	Address:	 	 	 	Address:	 	 
	 	 	 	 	 
	 	 	 	Date
      Received:pfab_ex106.htm

    EXHIBIT
10.6

    
 

    PACIFIC
ASIA PETROLEUM, INC.

    

    2009
EQUITY INCENTIVE PLAN

    

    NOTICE OF RESTRICTED SHARES
GRANT

    

    Capitalized but otherwise undefined
terms in this Notice of Restricted Shares Grant and the attached Restricted
Shares Grant Agreement shall have the same defined meanings as in the Pacific
Asia Petroleum, Inc. 2009 Equity Incentive Plan (the “Plan”).

    

    Grantee
Name: __________________________________  Address:
______________________________

    
 

    You have been granted Restricted Shares
subject to the terms and conditions of the Plan and the attached Restricted
Shares Grant Agreement, as follows:

    

    Date of
Grant: _______________________________________________

    Vesting Commencement
Date:___________________________________

    Price Per
Share:______________________________________________

    Total Number of Shares
Granted:_________________________________

    Total Value of Shares
Granted:___________________________________

    Total Purchase
Price:_________________$0_______________________ 

    Agreement
Date:_____________________________________________

    Vesting
Schedule: ____________________________________________                                                     

    

    
      
         

      

      
         

         

      

      
         

      

    

    PACIFIC
ASIA PETROLEUM, INC.

    

    2009
EQUITY INCENTIVE PLAN

     

    RESTRICTED SHARES GRANT
AGREEMENT

    

     

    This RESTRICTED SHARES GRANT AGREEMENT
(“Agreement”),
dated as of the Agreement Date specified on the Notice of Restricted Shares
Grant is made by and between PACIFIC ASIA PETROLEUM, INC., a Delaware Company
(the “Company”),
and the grantee named in the Notice of Restricted Shares Grant (the “Grantee,”
which term as used herein shall be deemed to include any successor to Grantee by
will or by the laws of descent and distribution, unless the context shall
otherwise require).

     

    BACKGROUND

     

     

    Pursuant to the Plan, the Company,
acting through the Administrator, approved the issuance to Grantee, effective as
of the date set forth above, of an award of the number of Restricted Shares as
is set forth in the attached Notice of Restricted Shares Grant (which is
expressly incorporated herein and made a part hereof, the “Notice of
Restricted Shares Grant”) at the purchase price per share of Restricted
Shares (the “Purchase
Price”), if any, set forth in the attached Notice of Restricted Shares
Grant, upon the terms and conditions hereinafter set forth.

     

     

    NOW, THEREFORE, in
consideration of the mutual premises and undertakings hereinafter set forth, the
parties agree as follows:

     

    1. Grant and
Purchase of Restricted Shares.  The Company hereby grants to
Grantee, and Grantee hereby accepts the number of Restricted Shares set forth in
the Notice of Restricted Shares Grant, subject to the payment by Grantee of the
total purchase price, if any, set forth in the Notice of Restricted Shares
Grant.

     

    2. Stockholder
Rights.

     

    (a) Voting
Rights.  Until such time as all or any part of the Restricted
Shares are forfeited to the Company under this Agreement, if ever, Grantee (or
any successor in interest) has the rights of a stockholder, including voting
rights, with respect to the Restricted Shares subject, however, to the transfer
restrictions or any other restrictions set forth in the Plan.

     

    (b) Dividends and Other
Distributions.  During the period of restriction, Participants
holding Restricted Shares are entitled to all regular cash dividends or other
distributions paid with respect to all Shares while they are so
held.  If any such dividends or distributions are paid in Shares, such
Shares will be subject to the same restrictions on transferability and
forfeitability as the Restricted Shares with respect to which they were
paid.

     

    3. Vesting
of Restricted Shares.

     

    (a) The
Restricted Shares are restricted and subject to forfeiture until
vested.  The Restricted Shares which have vested and are no longer
subject to forfeiture are referred to as “Vested
Shares.”  All Restricted Shares which have not become Vested
Shares are referred to as “Nonvested
Shares.”

     

    (b) Restricted
Shares will vest and become nonforfeitable in accordance with the vesting
schedule contained in the Notice of Restricted Shares Grant.

     

    
      
         

      

      
         

         

      

      
         

      

    

    (c)  Any
Nonvested Shares of Grantee will automatically vest and become nonforfeitable if
Grantee’s service with the Company ceases owing to the Grantee’s (a) death, (b)
Disability, or (c) Retirement, unless the Administrator provides
otherwise.

     

    (d) In the
event of a Change in Control, the Administrator, in its discretion, may
accelerate the time at which all or any portion of Grantee’s Restricted Shares
will vest.

     

    (e) Terms
used in Section
3 and Section
4 have the following meanings:

     

    (i) “Cause” has
the meaning ascribed to such term or words of similar import in Grantee’s
written employment or service contract with the Company or its subsidiaries and,
in the absence of such agreement or definition, means Grantee’s
(i) conviction of, or plea of nolo contendere to, a felony
or crime involving moral turpitude; (ii) fraud on or misappropriation of
any funds or property of the Company or its subsidiaries, or any affiliate,
customer or vendor; (iii) personal dishonesty, incompetence, willful
misconduct, willful violation of any law, rule or regulation (other than minor
traffic violations or similar offenses), or breach of fiduciary duty which
involves personal profit; (iv) willful misconduct in connection with
Grantee’s duties or willful failure to perform Grantee’s responsibilities in the
best interests of the Company or its subsidiaries; (v) illegal use or
distribution of drugs; (vi) violation of any material rule, regulation,
procedure or policy of the Company or its subsidiaries, the violation of which
could have a material detriment to the Company; or (vii) material breach of
any provision of any employment, non-disclosure, non-competition,
non-solicitation or other similar agreement executed by Grantee for the benefit
of the Company or its subsidiaries, all as reasonably determined by the Board of
Directors of the Company, which determination will be conclusive.

     

    (ii) “Retirement”
means Grantee’s retirement from Company employ at age 65 as determined in
accordance with the policies of the Company or its subsidiaries in good faith by
the Board of Directors of the Company, which determination will be final and
binding on all parties concerned.

     

    (f) Nonvested
Shares may not be sold, transferred, assigned, pledged, or otherwise disposed
of, directly or indirectly, whether by operation of law or
otherwise.  The restrictions set forth in this Section will terminate
upon a Change in Control.

     

    4. Forfeiture
of Nonvested Shares.  Except as provided herein, if Grantee's
service with the Company ceases for any reason other than Grantee’s (a) death,
(b) Disability, or (c) Retirement, any Nonvested Shares will be automatically
forfeited to the Company, subject to the re-payment by the Company at the lesser
of (1) the original purchase price paid by the Participant pursuant to the Award
Agreement or (2) the Shares’ Fair Market Value on the date of repurchase;
provided, however, that the Administrator may cause any Nonvested Shares
immediately to vest and become nonforfeitable if Grantee’s service with the
Company is terminated by the Company without Cause.

     

    (a) Legend.  Each
certificate representing Restricted Shares granted pursuant to the Notice of
Restricted Shares Grant may bear a legend substantially as follows:

     

    “THE SALE
OR OTHER TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE, WHETHER
VOLUNTARY, INVOLUNTARY OR BY OPERATION OF LAW, IS SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE PACIFIC ASIA PETROLEUM, INC. 2009
EQUITY INCENTIVE PLAN AND IN A RESTRICTED SHARE GRANT AGREEMENT.  A
COPY OF SUCH PLAN AND SUCH

     

    
      
         

      

      
         

         

      

      
         

      

    

    AGREEMENT
MAY BE OBTAINED FROM PACIFIC ASIA PETROLEUM, INC.”

     

    (b)           Escrow of Nonvested
Shares.  The Company has the right to retain the certificates
representing Nonvested Shares in the Company’s possession until such time as all
restrictions applicable to such Shares have been satisfied.

     

    (c)           Removal of
Restrictions.  The Participant is entitled to have the legend
removed from certificates representing Vested Shares.

     

    5. Recapitalizations,
Exchanges, Mergers, Etc.  The provisions of this Agreement
apply to the full extent set forth herein with respect to any and all shares of
capital stock of the Company or successor of the Company which may be issued in
respect of, in exchange for, or in substitution for the Restricted Shares by
reason of any stock dividend, split, reverse split, combination,
recapitalization, reclassification, merger, consolidation or otherwise which
does not terminate this Agreement.  Except as otherwise provided
herein, this Agreement is not intended to confer upon any other person except
the parties hereto any rights or remedies hereunder.

     

    6. Grantee
Representations.

     

    Grantee represents to the Company the
following:

     

    (a) Restrictions on
Transfer.  Grantee acknowledges that the Restricted Shares to
be issued to Grantee must be held indefinitely unless subsequently registered
and qualified under the Securities Act or unless an exemption from registration
and qualification is otherwise available.  In addition, Grantee
understands that the certificate representing the Restricted Shares will be
imprinted with a legend which prohibits the transfer of such Restricted Shares
unless they are sold in a transaction in compliance with the Securities Act or
are registered and qualified or such registration and qualification are not
required in the opinion of counsel acceptable to the Company.

     

    (b) Relationship to the Company;
Experience.  Grantee either has a preexisting business or
personal relationship with the Company or any of its officers, directors or
controlling persons or, by reason of Grantee’s business or financial experience
or the business or financial experience of Grantee’s personal representative(s),
if any, who are unaffiliated with and who are not compensated by the Company or
any affiliate or selling agent, directly or indirectly, has the capacity to
protect Grantee’s own interests in connection with Grantee’s acquisition of the
Restricted Shares to be issued to Grantee hereunder.  Grantee and/or
Grantee’s personal representative(s) have such knowledge and experience in
financial, tax and business matters to enable Grantee and/or them to utilize the
information made available to Grantee and/or them in connection with the
acquisition of the Restricted Shares to evaluate the merits and risks of the
prospective investment and to make an informed investment decision with respect
thereto.

     

    (c) Grantee’s
Liquidity.  In reaching the decision to invest in the
Restricted Shares, Grantee has carefully evaluated Grantee’s financial resources
and investment position and the risks associated with this investment, and
Grantee acknowledges that Grantee is able to bear the economic risks of the
investment.  Grantee (i) has adequate means of providing for
Grantee’s current needs and possible personal contingencies, (ii) has no
need for liquidity in Grantee’s investment, (iii) is able to bear the
substantial economic risks of an investment in the Restricted Shares for an
indefinite period and (iv) at the present time, can afford a complete loss
of such investment.  Grantee’s commitment to investments which are not
readily marketable is not disproportionate to Grantee’s net worth and Grantee’s
investment in the Restricted Shares will not cause Grantee’s overall commitment
to become excessive.

    
      
         

      

      
         

         

      

      
         

      

    

     

    (d) Access to
Data.  Grantee acknowledges that during the course of this
transaction and before deciding to acquire the Restricted Shares, Grantee has
been provided with financial and other written information about the
Company.  Grantee has been given the opportunity by the Company to
obtain any information and ask questions concerning the Company, the Restricted
Shares, and Grantee’s investment that Grantee felt necessary; and to the extent
Grantee availed himself of that opportunity, Grantee has received satisfactory
information and answers concerning the business and financial condition of the
Company in response to all inquiries in respect thereof.

     

    (e) Risks.  Grantee
acknowledges and understands that (i) an investment in the Company
constitutes a high risk, (ii) the Restricted Shares are highly speculative,
and (iii) there can be no assurance as to what investment return, if any,
there may be.  Grantee is aware that the Company may issue additional
securities in the future which could result in the dilution of Grantee’s
ownership interest in the Company.

     

    (f) Valid
Agreement.  This Agreement when executed and delivered by
Grantee will constitute a valid and legally binding obligation of Grantee which
is enforceable in accordance with its terms.

     

    (g) Residence.  The
address set forth on the Notice of Restricted Shares Grant is Grantee’s current
address and accurately sets forth Grantee’s place of residence.

     

    (h) Tax
Consequences.  Grantee has reviewed with Grantee’s own tax
advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this
Agreement.  Grantee is relying solely on such advisors and not on any
statements or representations of the Company or any of its
agents.  Grantee understands that Grantee (and not the Company) is
responsible for Grantee’s own tax liability that may arise as a result of the
transactions contemplated by this Agreement.  Grantee understands that
Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”),
taxes as ordinary income the difference between the purchase price for the
Restricted Shares and the fair market value of the Restricted Shares as of the
date any restrictions on the Restricted Shares lapse.  Grantee
understands that Grantee may elect to be taxed at the time the Restricted Shares
is purchased rather than when and as the restrictions lapse by filing an
election under Section 83(b) of the Code with the Internal Revenue Service
within 30 days from the date of purchase.  The form for making this
election is attached as Exhibit A
hereto.

    

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

    

    7. No
Employment Contract Created.  The issuance of the Restricted
Shares is not be construed as granting to Grantee any right with respect to
continuance of employment or any service with the Company or any of its
subsidiaries.  The right of the Company or any of its subsidiaries to
terminate at will Grantee's employment or terminate Grantee’s service at any
time (whether by dismissal, discharge or otherwise), with or without cause, is
specifically reserved, subject to any other written employment or other
agreement to which the Company and Grantee may be a party.

     

    8. Tax
Withholding.  The Company has the power and the right to deduct
or withhold, or require Grantee to remit to the Company, an amount sufficient to
satisfy Federal, state and local taxes (including the Grantee’s FICA obligation)
required by law to be withheld with respect to the grant and vesting of the
Restricted Shares.

     

    
      
         

      

      
         

         

      

      
         

      

    

    9. Interpretation.  The
Restricted Shares are being issued pursuant to the terms of the Plan, and are to
be interpreted in accordance therewith.  The Administrator will
interpret and construe this Agreement and the Plan, and any action, decision,
interpretation or determination made in good faith by the Administrator will be
final and binding on the Company and Grantee.

     

    10. Notices.  All notices or
other communications which are required or permitted hereunder will be in
writing and sufficient if (i) personally delivered or sent by telecopy, (ii)
sent by nationally-recognized overnight courier or (iii) sent by registered or
certified mail, postage prepaid, return receipt requested, addressed as
follows:

     

    (a)           if
to the Grantee, to the address (or telecopy number) set forth on the Notice of
Grant; and

    

    (b)           if
to the Company, to its principal executive office as specified in any report
filed by the Company with the Securities and Exchange Commission or to such
address as the Company may have specified to the Grantee in writing, Attention:
Corporate Secretary;

    

    or to
such other address as the party to whom notice is to be given may have furnished
to the other party in writing in accordance herewith.  Any such
communication will be deemed to have been given (i) when delivered, if
personally delivered, or when telecopied, if telecopied, (ii) on the first
Business Day (as hereinafter defined) after dispatch, if sent by
nationally-recognized overnight courier and (iii) on the fifth Business Day
following the date on which the piece of mail containing such communication is
posted, if sent by mail.  As used herein, “Business
Day” means a day that is not a Saturday, Sunday or a day on which banking
institutions in the city to which the notice or communication is to be sent are
not required to be open.

    

    11. Specific
Performance.  Grantee expressly agrees that the Company will be
irreparably damaged if the provisions of this Agreement and the Plan are not
specifically enforced.  Upon a breach or threatened breach of the
terms, covenants and/or conditions of this Agreement or the Plan by Grantee, the
Company will, in addition to all other remedies, be entitled to a temporary or
permanent injunction, without showing any actual damage, and/or decree for
specific performance, in accordance with the provisions hereof and
thereof.  The Administrator has the power to determine what
constitutes a breach or threatened breach of this Agreement or the
Plan.  Any such determinations will be final and conclusive and
binding upon Grantee.

     

    12. No
Waiver.  No waiver of any
breach or condition of this Agreement will be deemed to be a waiver of any other
or subsequent breach or condition, whether of like or different
nature.

     

    13. Grantee
Undertaking.  Grantee hereby
agrees to take whatever additional actions and execute whatever additional
documents the Company may in its reasonable judgment deem necessary or advisable
in order to carry out or effect one or more of the obligations or restrictions
imposed on Grantee pursuant to the express provisions of this
Agreement.

     

    14. Modification
of Rights.  The rights of
Grantee are subject to modification and termination in certain events as
provided in this Agreement and the Plan.

     

    15. Governing
Law.  This Agreement is
governed by, and construed in accordance with, the laws of the State of
Delaware, without giving effect to its conflict or choice of law principles that
might otherwise refer construction or interpretation of this Agreement to the
substantive law of another jurisdiction.

     

    16. Counterparts;
Facsimile Execution.  This Agreement
may be executed in one or more counterparts, each of which will be deemed to be
an original, but all of which together will constitute one

     

    
      
         

      

      
         

         

      

      
         

      

    

    17. and the
same instrument.  Facsimile execution and delivery of this Agreement
is legal, valid and binding execution and delivery for all
purposes.

     

    18. Entire
Agreement.  This Agreement
(including the Notice of Restricted Shares Grant) and the Plan, constitute the
entire agreement between the parties with respect to the subject matter hereof,
and supersede all previously written or oral negotiations, commitments,
representations and agreements with respect thereto.

     

    19. Severability.  In the event one
or more of the provisions of this Agreement should, for any reason, be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability will not affect any other provisions of this Agreement, and
this Agreement will be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.

     

    20. WAIVER OF
JURY TRIAL.  THE GRANTEE
HEREBY EXPRESSLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.

     

    [Signature Page
Follows]

     

    
      
         

      

      
         

         

      

      
         

      

    

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

    

    PACIFIC ASIA PETROLEUM,
INC.

    

    

    By:________________________________________                                                                

    Name:___________________________________

    Title:____________________________________

    

    

    GRANTEE:

    

    

    __________________________________________

    Name:

    

    
      
         

      

      
         

         

      

      
         

      

    

    SPOUSE'S
CONSENT TO AGREEMENT

    (Required
where Grantee resides in a community property state)

    

    I acknowledge that I have read the
Agreement and the Plan and that I know and understand the contents of
both.  I am aware that my spouse has agreed therein to the imposition
of certain forfeiture provisions and restrictions on transferability with
respect to the Restricted Shares that are the subject of the Agreement,
including with respect to my community interest therein, if any, on the
occurrence of certain events described in the Agreement.  I hereby
consent to and approve of the provisions of the Agreement, and agree that I will
abide by the Agreement and bequeath any interest in the Restricted Shares which
represents a community interest of mine to my spouse or to a trust subject to my
spouse's control or for my spouse's benefit or the benefit of our children if I
predecease my spouse.

    

    

    

    Dated:                                                                 

    ____________________________________

                             Signature

    

    

    

    ____________________________________
                         Print
Name

    

    

    
      
         

      

      
         

         

      

      
         

      

    

     
 

    Exhibit
A

     

     

    ELECTION
UNDER SECTION 83(b)

     

    OF
THE INTERNAL REVENUE CODE OF 1986

    

    The undersigned taxpayer hereby elects,
pursuant to Sections 55 and 83(b) of the Internal Revenue Code of 1986, as
amended, to include in taxpayer’s gross income or alternative minimum taxable
income, as the case may be, for the current taxable year the amount of any
compensation taxable to taxpayer in connection with taxpayer’s receipt of the
property described below.

    

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

    

    
      	 
      	
              TAXPAYER:

            	
              SPOUSE:

            
	
              NAME:

            	 
      	 
      
	
              ADDRESS:

            	 
      	 
      
	
              IDENTIFICATION
      NO.:

            	 
      	 
      
	
              TAXABLE
      YEAR:

            	 
      	 
      

    

     

    2.           The
property with respect to which the election is made is described as follows:
____ shares (the “Shares”)
of the Common Stock of Pacific Asia Petroleum, Inc. (the “Company”).

     

    
      	
              3.

            	
              The
      date on which the property was transferred is:___________________
      ,______.

            

    

     

    
      	
              4.

            	
              The
      property is subject to the following
  restrictions:

            

    

     

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

     

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

     

    
      	
              6.

            	
              The
      amount (if any) paid for such property
      is:  $_________________.

            

    

    

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

    

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

     

    Dated:
______________________,
_____                                                                                 

    Taxpayer

    The undersigned spouse of taxpayer
joins in this election.

     

    Dated:
______________________,
_____                                                                                 

    Spouse of
Taxpayer

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