Document:

ex10-2.htm

    
       

      Exhibit
10.2

       

      

       

      Amended and
Restated Flagstone Reinsurance Holdings Limited

      Employee Restricted
Share Unit Plan

      

      

      Section  1 –
Purpose of the Plan

      

      
        	
                1.01

              	
                Flagstone
      Reinsurance Holdings Limited (the “Company”) adopted this Amended and
      Restated Flagstone Reinsurance Holdings Limited Employee Restricted Share
      Unit Plan (the “Plan”), effective as of July 20th
      2007 for the benefit of the Directors, officers, and Employees of the
      Company.  The purpose of the Plan is to promote a proprietary
      interest in the Company and its Subsidiaries among its Directors,
      officers, and employees; encourage the Directors, officers, and Employees
      of the Company to further the development of the Company; and to attract
      and retain the key employees necessary for the Company’s long-term
      success.  This Plan amends and restates in its entirety the
      Flagstone Reinsurance Holdings Limited Employee Restricted Share Unit Plan
      adopted on July 1, 2006 and amended in November,
  2007.

              

      

      

      Section 2 –
Definitions

       

      
        
          	
                  2.01

                	
                  General –
      Whenever the following terms are used in the Plan with the first letter
      capitalized, they shall have the meanings specified below unless the
      context clearly indicates to the contrary or as provided under Section 7
      of the Plan.

                
	 
    	 
    
	
                  2.02

                	
                  “Account” of
      a Participant means his or her individual account, if any, or the account
      of a Director’s employer, as established in accordance with Section
      6.

                
	 
    	 
    
	
                  2.03

                	
                  “Beneficiary”
      means the person or persons designated by a Participant, on a form
      provided by the Plan Administrator, to receive payments under the Plan in
      the event of the Participant’s death.

                
	 
    	 
    
	
                  2.04

                	
                  “Board” means
      Board of Directors of the Company.

                
	 
    	 
    
	
                  2.05

                	
                  “Cause” shall
      mean (a) a material breach by a Participant of any contract between the
      Participant and the Company or a Subsidiary; (b) the willful and continued
      failure or refusal by the Participant to perform any duties reasonably
      required by the Company or a Subsidiary, after notification by the Company
      or the Subsidiary of such failure or refusal, and failure to correct such
      behaviour within 20 days of such notification; (c) commission by the
      Participant of a criminal offence or other offence of moral turpitude; (d)
      perpetration by the Participant of a dishonest act or common law fraud
      against the Company or a Subsidiary or a client of either; or (e) the
      Participant willfully engaging in misconduct which is materially injurious
      to the Company or a Subsidiary, including without limitation, the
      disclosure of any trade secrets, financial models, or computer software to
      persons outside the Company or a Subsidiary without the consent of the
      Company or a Subsidiary.

                
	 
    	 
    
	
                  2.07

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

                
	 
    	 
    
	
                  2.08

                	
                  “Common
      Stock” means common shares of the Company.

                
	 
    	 
    
	
                  2.09

                	
                  “Company”
      means Flagstone Reinsurance Holdings Limited.

                
	 
    	 
    
	
                  2.10

                	
                  “Director”
      means a member of the board of directors of the Company or its
      Subsidiaries.

                

        

      

       

       

       

      
        
          
          

        

        
          Page 1 of 15

          
            

          

        

        
          
            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

      
 

       

      
        
          	
                  2.11

                	
                  “Disability”
      means a condition by which the Compensation Committee has determined that
      the physical or mental condition of the Participant is such as would
      entitle him to receive payment of monthly benefits under any disability
      plan of the Company or a Subsidiary in which the individual
      participates.

                
	 
    	 
    
	
                  2.12

                	
                  “Employee”
      means an employee of the Company or its Subsidiaries.

                
	 
    	 
    
	
                  2.13

                	
                  “Grant
      Certificate” means a certificate evidencing the credit of or grant to a
      Participant of a Restricted Share Unit under the Plan (sample attached as
      Appendix 5).

                
	 
    	 
    
	
                  2.14

                	
                  “Inter Vivos
      Designee” means any person or body of persons corporate or unincorporate,
      association, trust, partnership or similar entity or arrangement
      designated by a Participant, on a form provided by the Plan Administrator,
      to hold such RSUs granted to the Participant under the Plan and receive
      payments under the Plan during the life of the
  Participant.

                
	 
    	 
    
	
                  2.15

                	
                  “Participant”
      means any Employee, officer, or Director, except for Management Directors,
      of the Company or its Subsidiaries who (1) are eligible for RSU credits or
      grants under the Plan and (2) the Compensation Committee decides pursuant
      to its authority under Section 3.01 of the Plan to grant or credit an RSU
      award.

                
	 
    	 
    
	
                  2.16

                	
                  “Plan” means
      the Flagstone Reinsurance Holdings Limited Employee Restricted Share Unit
      Plan, as it may be amended from time to time.

                
	 
    	 
    
	
                  2.17

                	
                  “Plan
      Administrator” means the Compensation Committee, or the person or persons
      appointed by the Compensation Committee to serve under Section 4 of the
      Plan.

                
	 
    	 
    
	
                  2.18

                	
                  “Restricted
      Share Unit” (or “RSU”) means a right to receive a payment, in cash or in
      actual Common Stock of the Company, of the value of Common Stock of the
      Company, subject to the terms of this Plan and the respective Grant
      Certificate.

                
	 
    	 
    
	
                  2.19

                	
                  “Subsidiary”
      means a subsidiary of the
Company.

                

        

      

       

      
 

      Section 3 – Awards Subject
to the Plan

      

      
        	
                3.01

              	
                Under the
      Plan, the Compensation Committee, in its sole discretion, may grant RSUs
      to Participants or credit RSUs to Directors’ Accounts.  The
      total stock credits or grants under the Plan shall not exceed (a) that
      amount required to satisfy the Director requests for fees to be paid in
      shares, plus (b) 0.2 percent of the total issued and outstanding share
      capital of the Company per annum or as decided by the Compensation
      Committee.  To the extent that any RSU granted or credited under
      the Plan expires, terminates, or is cancelled, such unissued stock credits
      or grants shall again be available for grant or credit under the
      Plan.

              

      

      

      
        	
                3.02

              	
                The RSUs will
      normally be settled by delivery of Common Stock, but can be settled to the
      Participant on distribution in cash, by issuance of shares of Common
      Stock, or partly in cash and partly by issuance of shares of Common Stock
      as determined by the Compensation Committee; provided that Participants
      who are UK domiciled for tax purposes may only receive distributions by
      issuance of shares of Common Stock.

              

      

       

       

       

       

      
        
          
          

        

        
          Page 2 of
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            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

       

       

       

      
 

      
        	
                3.03

              	
                The amount of
      cash, if any, to be paid in lieu of issuance of shares of Common Stock
      under the Plan shall be determined based on the net book value per share
      of Common Stock (or market value, if the Company’s shares are freely
      tradable on an exchange) as of the date on which a Participant becomes
      entitled to payment, whether or not such payment is
    deferred.

              

      

      

      Section 4 –
Administration

      

      
        	
                4.01

              	
                The Plan
      shall be administered by the Compensation Committee, and the Compensation
      Committee shall have the sole authority to interpret the Plan, to
      establish and revise rules and regulations relating to the Plan (including
      this Plan document), and to make any other determinations that it believes
      necessary or advisable for the administration of the Plan.  All
      of the powers and responsibilities of the Compensation Committee under the
      Plan may be delegated by the Compensation Committee, in writing, to any
      Compensation Subcommittee or appropriate Company personnel
      thereof.  The Board of Directors or the Shareholders of the
      Company can overrule the Compensation
Committee.

              

      

      

      Section 5 –
Participation

      

      
        	
                5.01

              	
                The
      Management Committee of the Company will recommend, and the Compensation
      Committee will approve, the Participants in the
      Plan.  Participation in the Plan will be limited to officers,
      Employees, and Directors (excluding Management Directors) of the Company
      or its Subsidiaries.  Participants in the Plan may also
      participate in the Flagstone Reinsurance Holdings Limited Performance
      Share Unit Plan (the “PSU Plan”) sponsored by the Company, however such
      persons shall not be eligible to receive grants of RSUs and Performance
      Share Units in the same calendar year.  In addition,
      participation in the Plan shall be limited only to those individuals who
      are approved by the Compensation Committee and whose participation in the
      Plan is evidenced by a Grant Certificate executed by the
      Company.

              

      

      

      Section 6 – Terms of the
Grant or Credit of RSUs

      

      
        	
                6.01

              	
                The
      Compensation Committee may grant RSUs to a Participant pursuant to the
      Plan.  In addition, a Director of the Company may elect to
      substitute all or a percentage of his/her compensation for services
      performed for the Company with RSUs issued under the Plan, such amount to
      be credited to his/her Account as RSUs. A Director who serves on the Board
      on behalf of his/her employer may stipulate that amounts be credited to
      such employer’s Account as RSUs.  Grants or credits of RSUs
      shall be evidenced by a Grant Certificate in such form as the Compensation
      Committee shall from time to time
approve.

              

      

      

      
        	
                6.02

              	
                A Director
      who is a Participant in the Plan shall elect no later than December 31 of
      the year prior to the year with respect to which the compensation is
      earned (or for the first year of the Plan, no later than the last day of
      the month prior to the Plan’s effective date), the dollar amount or
      percentage of compensation for such year to be converted into RSUs and
      credited to his/her Account pursuant to the written terms of the Plan and
      the Grant Certificate.

              

      

       

       

       

      
        
          
          

        

        
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            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

       

      
 

      
        	
                6.03

              	
                Upon a grant
      or credit of an award of RSUs under the Plan, as applicable, a
      Participant’s Account shall be credited with the amount of such grant or
      credit.

              

      

      

      
        	
                6.04

              	
                Actual shares
      of Company Common Stock or cash (as determined by the Committee), equal in
      amount to the number of RSUs that have vested, will be distributed to the
      Participant upon the earlier of the following: (a) separation from service
      other than for cause, (b) satisfaction of the applicable vesting
      

                period(s),
      (c) a specific date, or (d) such other time as the Committee may in its
      sole discretion determine (collectively, the “Distribution
      Dates”).  The Company shall deliver the shares of Common Stock
      of the Company and/or cash to the Participant as soon as administratively
      feasible after the identified date of
  distribution.

              

      

       

      
        
          	
                  6.05

                	
                  Grants of
      RSUs under the Plan will normally fully vest on the date that is specified
      in the applicable Grant Certificate, subject to the
    following:

                
	 
    	 
    	 
    
	 
    	
                  6.05.1

                	
                  Upon a
      Participant’s death or Disability, he/she shall become fully vested in all
      RSUs that have been credited or granted under the Plan.

                
	 
    	 
    	 
    
	 
    	
                  6.05.2

                	
                  Except as
      otherwise provided herein, the unvested RSU’s of Participants who are
      Employees or Officers shall be canceled upon notice of termination from
      the Employer to the Employee or the notice of resignation of the
      Employee.

                
	 
    	 
    	 
    
	 
    	
                  6.05.3

                	
                  Notwithstanding
      6.06.2, at the discretion of the Compensation Committee, vesting of RSUs
      that are granted under the Plan may continue for Employees who separate
      from service with the Company after at least five years’
      service.

                
	 
    	 
    	 
    
	 
    	
                  6.05.4

                	
                  If an
      Employee is terminated for Cause all of his RSU’s will be automatically
      canceled.

                
	 
    	 
    	 
    
	 
    	
                  6.05.5

                	
                  The RSU’s of
      a Director shall normally vest on the date noted on the Grant Certificate,
      unless accelerated under 6.04.1, and regardless of whether that Director
      continues to serve. The Compensation Committee can cancel the RSU’s of a
      Director, whether vested or not, if that director engages in action deemed
      to be materially hostile to the interests of the Company, as judged by the
      Board of Directors.

                
	 
    	 
    	 
    
	 
    	
                  6.05.6

                	
                  The
      Compensation Committee may, in its sole discretion, accelerate the vesting
      of any RSUs credited or granted under the Plan at any
  time.

                
	 
    	 
    	 
    
	 
    	 
    	 
    
	
                  6.06

                	
                  RSUs and the
      rights and privileges conferred therewith shall not be sold, transferred,
      encumbered, hypothecated, or otherwise anticipated by the Participant,
      except as provided for under the terms of the Plan.  This Award
      is not liable for or subject to, in whole or in part, the debts,
      contracts, liabilities, or torts of the Participant, nor shall it be
      subject to garnishment, attachment, execution, levy, or other legal or
      equitable process.

                

        

      

       

       

       

      
        
          
          

        

        
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          Flagstone
Reinsurance Holdings Limited 

            Employee Restricted Share Unit Plan

          

        

      

       

      
 

      Section 7 – Special
Provisions

      

      
        	
                7.01

              	
                The Plan has
      special provisions which apply variously to citizens, residents,
      domiciliaries, of certain countries, or employees of Company subsidiaries
      located in certain countries. These provisions form part of this Plan and
      are attached as Appendix 4.

              

      

      

      
        	
                7.02

              	
                The Company
      may extend or amend Appendix 4 from time to time in order to accommodate
      the development of the Company in new countries, to maintain the most
      tax-favorable status available in various countries under the applicable
      laws and further modifications/amendments carried out from time to time.
      Such technical amendments require the approval of the Management
      Compensation Committee of the Company, and the Chairman of the
      Compensation Committee.

              

      

      

      Section 8 –
Taxation

      

      
        	
                8.01

              	
                Participants
      shall be responsible for all individual tax consequences of the RSU grants
      under the Plan.  Where feasible, the Plan will be interpreted
      and administered to provide favorable tax treatment to the Participant,
      subject to the compliance with the applicable laws of their respective
      jurisdiction.

              

      

      

      
        	
                8.02

              	
                The Company
      reserves the right to withhold shares or deduct from the Participant
      payroll any taxes or social benefit costs to the Participant or the
      Company associated with the vesting or fulfillment of the
      RSUs.

              

      

      

      

      Section 9 – Designation of
Beneficiary

      

      
        	
                9.01

              	
                A
      Participant, by filing the prescribed form (the “Beneficiary Designation
      Form”, sample attached as Appendix 2) with the Plan Administrator, or such
      other person as the Plan Administrator may designate from time to time,
      may designate one or more Beneficiaries and successor Beneficiaries who
      shall be given the rights to the RSUs in accordance with the terms of the
      Plan in the event of the Participant’s death.  A Participant may
      change the designation of a Beneficiary at any time by completing a new
      Beneficiary Designation Form that shall revoke and supersede all earlier
      forms.  In the event a Participant does not file a Beneficiary
      Designation Form designating one or more Beneficiaries, or no designated
      Beneficiary survives the Participant, the RSUs shall be given to the
      individual to whom such right passes by will or the laws of descent and
      distribution and/or succession.

              

      

      

      
        	
                9.02

              	
                A
      Participant, by filing the prescribed form (the “Inter Vivos Designee
      Form”, sample attached as Appendix 1) with the Plan Administrator, or such
      other person as the Plan Administrator may designate from time to time,
      may designate one or more Inter Vivos Designees and successor Inter Vivos
      Designees who shall be given the rights to all past, present and future
      grants or series of RSUs, or to one or more specific grants or series of
      RSUs, designated within the Inter Vivos Designee Form during the life of
      the Participant and in accordance with the terms of the Plan.  A
      Participant may change the designation of any Inter Vivos Designee by
      completing a new Inter Vivos Designation Form that shall revoke and
      supersede all earlier forms. In the event a Participant does not file an
      Inter Vivos Designation Form designating one or more Inter Vivos
      Designees, or no Inter Vivos Designee survives the Participant, the RSUs
      and any payment of shares in place of cash shall be given to the
      Participant.

              

      

       

       

       

      
        
          
          

        

        
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          Flagstone
Reinsurance Holdings Limited 

            Employee
Restricted Share Unit Plan

          

        

      

       

      
 

      Section 10 – Expenses of the
Plan

      

      
        	
                10.01

              	
                Costs of
      administration of the Plan will be paid by the
  Company.

              

        
 

      

      Section 11 – Claims
Procedure

      

      
        	
                11.01

              	
                In general,
      any claim for benefits under the Plan shall be filed by the Participant or
      beneficiary (“claimant”) on the form prescribed for such purpose with the
      Plan Administrator.  If a claim for benefits under the Plan is
      wholly or partially denied, notice of the decision shall be furnished to
      the claimant by the Plan Administrator within a reasonable period of time
      after receipt of the claim by the Plan Administrator.  A
      Participant who is denied a claim for benefits may appeal to the
      Compensation Committee for a review of the Plan Administrator’s
      decision.  The decision of the Compensation Committee shall be
      furnished to the Participant within a reasonable period of receipt of the
      request for review and the decision of the Compensation Committee shall be
      final and binding to the
Participant.

              

      

      

      Section 12 – Termination or
Amendment of the Plan

      

      
        	
                12.01

              	
                The Plan may
      be amended in whole or in part from time to time, or may be terminated, by
      the Board in accordance with the bye-laws of the Company, provided that in
      event of such amendment or termination, the rights of the Participants
      related to an RSU that have been granted under the Plan shall be preserved
      and maintained and no amendment may confer additional benefits upon
      Participants without prior approval by the Board.  Notice of any
      amendment or termination of the Plan shall be given in writing to the
      Participant.

              

      

      

      Section 13 –Term of the
Plan

      

      
        	
                13.01

              	
                The Plan
      shall become effective on the date it is adopted by the Company and shall
      continue in effect as amended from time to time until terminated pursuant
      to Section 12.

              

      

      

      Section 14 – Rights as a
Stockholder

      

      
        	
                14.01

              	
                No
      Participant shall have any rights (including voting or dividend rights) as
      a shareholder of the Company with respect to any Common Stock covered by,
      or related to, any RSU granted or credited pursuant to the Plan until the
      date of the delivery of a stock certificate with respect to such Common
      Stock.

              

      

      

      Section 15  –
Anti-Dilution and Other Adjustments

      

      
        	
                15.01

              	
                In the event
      of any change in the issued and outstanding shares of Common Stock of the
      Company by reason of any share split, share dividend, recapitalization,
      merger, consolidation, reorganization, amalgamation, combination or
      exchange of shares of Common Stock or other similar event, and if the
      Compensation Committee shall determine, in its sole discretion, that such
      change equitably requires an adjustment in the number or kind of shares of
      Common Stock of the Company that may be issued pursuant to RSUs under the
      Plan pursuant to paragraph 6, then such adjustment shall be made by the
      Compensation Committee and shall be conclusive and binding for all
      purposes of the Plan.

              

      

       

       

       

      
        
          
          

        

        
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            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

       

       

       

      
        	
                15.02

              	
                Upon the
      declaration by the Board of Directors of the Company of a dividend in
      specie or in kind in favor of the holders of Common Shares in the Company,
      the Compensation Committee shall determine, in its sole discretion, if
      such dividend equitably requires an adjustment in the number or kind of
      RSUs that may be issued to a Participant under the Plan in lieu of a
      dividend payment.

              

      

       

      

      Section 16 –
Miscellaneous

      

      
        	
                16.01

              	
                If any
      provision of this Plan shall be held invalid or unenforceable, such
      invalidity or unenforceability shall not affect any other provisions
      hereof, and this Plan shall be construed and enforced as if such
      provisions had not been included.

              

      

      

      
        	
                16.02

              	
                Except by
      will or the laws of descent and distribution and/or succession, a
      Participant’s rights and interest under the Plan may not be assigned or
      transferred in whole or in part either directly or by operation of law or
      otherwise (except in the event of Participant’s  death),
      including but not limited to, execution, levy, garnishment, attachment,
      pledge, bankruptcy or in any other manner and no such right or interest of
      any Participant in the Plan shall be subject to any obligation or
      liability or such Participant; provided that Directors shall be permitted
      to assign their rights under the Plan to their employer or an affiliate of
      their employer, as approved by the Compensation
  Committee.

              

      

      

      
        	
                16.03

              	
                Except to the
      extent specifically set forth in the Grant Certificate, the Participant’s
      rights under the Plan shall be governed in all aspects by the terms of the
      Plan, including the provisions that authorize the Plan Administrator to
      administer and interpret the Plan and that provide that the Plan
      Administrator’s decisions, determinations, and interpretations with
      respect to the Plan are final and conclusive on all persons affected
      hereby.  Additionally, this Plan shall be construed in
      accordance with, and governed by the laws of the
  Bermuda.

              

      

      

      
        	
                16.04

              	
                Nothing in
      this Plan, nor any action taken pursuant to this Plan, shall be deemed to
      give any Participant any right to remain in the employ of the Company or
      affect the right of the Company to terminate a Participant’s employment at
      any time, with or without Cause.

              

      

      

      

      *           *           *           *           *

       

       

       

      
        
          
          

        

        
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            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

      
 

      As evidence of its
adoption of the Plan, Flagstone Reinsurance Holdings Limited has caused this
instrument to be signed by its officer of representative duly authorized on this
20th
day of July, 2007.

      

      

      
        	 
    	
                Flagstone
      Reinsurance Holdings Limited

                 

                 

              
	 
    	
                By:___________________________________

                 

                 

              
	 
    	
                Title:__________________________________

              

      

      

       

       

       

      
        
          
          

        

        
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          Flagstone
Reinsurance Holdings Limited 

            Employee
Restricted Share Unit Plan

          

        

      

      
 

      

      APPENDIX
1

      

      Inter
Vivos Designee Form

      

      

      

      
        	
                To:

              	
                The Plan
      Administrator of the Flagstone Reinsurance Holdings Limited Employee
      Restricted Share Unit Plan

              
	 
    	 
    
	
                From:

              	___________________________________________________

      

      

      

      *           *           *           *           *

      

      

      Pursuant to Section 9 of the Flagstone
Reinsurance Holdings Limited Employee Restricted Share Unit Plan (the “Plan”), I
hereby designate the following 

      person(s) as inter
vivos designee(ies) who during my life shall be entitled to receive amounts
under the Plan and respective Grant Certificate:

      

      

      Primary Inter Vivos Designee Name:
__________________________________________

      

      

      Secondary Inter Vivos Designee
Name:  ________________________________________

      

      Grant Certificates to which this designation
applies:

      

      
        	
                 
      

              	
                (i)

              	
                Series/Year(s)
      _____________________

              

      

      

      or,

      

      
        	
                 
      

              	
                (ii)

              	
                All Grants
      after:

              	
                /

              	
                /

              	
                _______________

              
	 	 	            Day	 Month	  Year	 

      

      

      In making the above designation, I reserve the
right to revoke this designation or change the inter vivos designee(ies)
designated at any time or times and without the consent of any other
person.

      

      This designation cancels and supersedes any
inter vivos designation previously made with respect to this Plan and respective
Grant Certificate.

       

      
 

      Signed:

      

      

      ______________________________

      Participant

      

      ______________________________

      Date

       

       

      
 

      
        
          
          

        

        
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            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

      

      

      APPENDIX
2

      

      Beneficiary
Designation Form

      

      

      

      
        	
                To:

              	
                The Plan
      Administrator of the Flagstone Reinsurance Holdings Limited Employee
      Restricted Share Unit Plan

              
	 
    	 
    
	
                From:

              	_______________________________________________________

      

       

      
 

      *           *           *           *           *

      

      

      Pursuant to Section 9 of the Flagstone
Reinsurance Holdings Limited Employee Restricted Share Unit Plan (the “Plan”), I
hereby designate the following 

      person(s) as
beneficiar(ies) who on my death shall be entitled to receive amounts under the
Plan and respective Grant Certificate:

      

      

      Primary Beneficiary Name:
__________________________________________

      

      

      Secondary Beneficiary
Name:  ________________________________________

      

      

      In making the above designation, I reserve the
right to revoke this beneficiary designation or change the beneficiar(ies)
designated at any time or times and without the consent of any
beneficiary.

      

      This beneficiary designation cancels and
supersedes any beneficiary designation previously made with respect to this Plan
and respective Grant Certificate.

      

      Signed:

      

      ______________________________

      Participant

      

      ______________________________

      Date

      

       

      
        
          
          

        

        
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            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

       

      
 

      APPENDIX
3

      

      Director
Participant Election and Account Designation Form

      

      
        	
                To:

              	
                The Plan
      Administrator of the Flagstone Reinsurance Holdings Limited Employee
      Restricted Share Unit Plan

              
	 
    	 
    
	
                From:

              	____________________________________________________ 
      

      

      

      *           *           *           *           *

      

      Amount of
Compensation Deferred

      

      I hereby elect to have the following amounts of
compensation for services performed for the Company for the 20___ year converted
into RSUs.

      

      ________%  or $________

      

      

      Distribution
Date(s)

      

      
        	 
    	
                _________

              	
                Separation
      from service

              
	 
    	 
    	 
    
	 
    	
                _________

              	
                A date
      certain (please specify date:
  __________________)

              

      

      

      

      Employer Account
Designation (for Directors providing services on behalf of their
Employer)

      

      Pursuant to Section 6.01 of the Flagstone
Reinsurance Holdings Limited Employee Restricted Share Unit Plan (the “Plan”), I
hereby designate the following as my employer on whose behalf I provide services
to the Board of Directors, and to whose account RSUs shall be
credited:

      

      Employer Account
Name: __________________________________________

       

      
 

      Signed:

      

      

      ______________________________

      Director
Participant

       

      
 

      ______________________________

      Date

       

       

       

      
 

      
        
          
          

        

        
          Page 11 of
15

          
            

          

        

        
          
            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

       

      
 

      APPENDIX
4

      

      Special
Provisions for citizens or residents of certain countries

      

      United States
Provisions

      

      Coverage: These
provisions apply to Participants to whom Section 409A of the United States
Internal Revenue Code of 1986 (as amended from time to time) (“the Code”)
applies.

      

      Provisions:

      
        	
                1.

              	
                Each grant
      and credit of RSUs shall comply with the minimum requirements of Code
      Section 409A,

              
	 
    	 
    
	
                2.

              	
                Any action
      that may be taken (and, to the extent possible, any action actually taken)
      by the Company or the Participant shall not be taken (or shall be void and
      without effect), if such action violates the requirements of Section
      409A.

              
	 
    	 
    
	
                3.

              	
                The
      definitions contained within this Plan and the respective Grant
      Certificate shall be interpreted and construed to comply with the minimum
      requirements of Section 409A.

              

      

      

      Canada
Provisions

      

      Coverage: These
provisions apply to Participants who are tax residents in Canada.

      

      Provisions:
Distributions to Participants to whom this section applies shall be made only
upon the respective Participant’s separation from service or retirement from the
Company or its Subsidiary, and shall be made within one year of such separation
or retirement.

      

      India
Provisions

      

      Coverage: These
provisions apply to Participants who are employees of West End Capital
Management BPO Services (India) Pvt. Ltd., or any other Subsidiary of the
Company incorporated and existing under the laws of India (“Indian Subsidiary)
(collectively, “Indian Participants”).

      

      Provisions: the
following provisions shall apply with respect to any RSUs granted prior to a
public offering of the capital stock of the Company/Indian Subsidiary, and only
to the extent required by applicable law:

      

      
        	
                1.

              	
                The aggregate
      number of RSUs which may be granted to Indian Participants under this Plan
      shall not exceed 300,000 or as decided by the Compensation Committee, and
      subject to the provisions of Section 3.01 hereof. RSU credits or grants
      subject to increase in accordance with the terms of the plan pursuant to
      the approval received from the Board of Directors/Shareholders of the
      Company.

              
	 
    	 
    
	
                2.

              	
                The RSUs will
      be actually paid to the Indian Participants in accordance
      with Sections 3.02 and 3.03 of the
Plan.

              

      

       

       

      
 

      
        
          
          

        

        
          Page 12 of
15

          
            

          

        

        
          
            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

       

       

      
 

      
        	
                3.

              	
                The approval
      of the Board of the Company to the Plan was accorded on 16 June 2006. The
      assent of the Board of the Company, approving the adoption of the Plan
      including this Appendix, for the Indian Subsidiary was accorded on 16 June
      2006.  The assent of the board of directors of the Indian
      Subsidiary approving the adoption of the Plan including this Appendix, for
      the Indian Subsidiary was accorded on [___].

              
	 
    	 
    
	
                4.

              	
                Participation
      in the Plan and the grant of Awards shall be awarded to such Indian
      Participant providing bona fide services to or for, one or more Indian
      Subsidiary as may be selected by the Board or such Compensation Committee
      as designated by the Board, in consultation with the board of directors of
      the Indian Subsidiary, from time to time.  The Board may also
      grant RSUs to individuals in connection with hiring, retention or
      otherwise, prior to the date the individual first performs services for an
      Indian Subsidiary, provided that such RSUs shall not become vested or
      exercisable prior to the date the individual first commences performance
      of such services.  Provided, however, that an Employee who is a
      Promoter or belongs to the Promoter Group or a director who either by
      himself or through his relative or through any body corporate, directly or
      indirectly holds more than 10% of the outstanding shall not be eligible to
      participate in the Plan.

              
	 	 
	
                5.

              	
                For purposes
      of the above paragraph (4)

              
	 
    	 
    
	 
    	
                a.

              	
                “Promoter”
      means –

              
	 
    	 
    	
                i.

              	
                the person or
      persons who are in over-all control of the Indian
    Subsidiary;

              
	 
    	 
    	
                ii.

              	
                the person or
      persons who are instrumental in the formation of the Indian Subsidiary or
      programme pursuant to which shares of the Indian Subsidiary may be offered
      to the public;

              
	 
    	 
    	
                iii.

              	
                the person or
      persons who are named in the offer document (inviting subscription from
      the public to the shares of the Indian Subsidiary) as promoter(s), in the
      event the Indian Subsidiary decided to offer shares to the
      public.

                 

              
	 
    	 
    	
                Provided that
      a director or officer of the Indian Subsidiary, if he is acting as such
      only in his professional capacity, will not be deemed to be a Promoter,
      and that where a Promoter of the Indian Subsidiary is a body corporate,
      the promoter of that body corporate shall also be deemed to be a Promoter
      of the Indian Subsidiary.

                 

              
	 
    	
                b.

              	
                “Promoter
      Group” means:

              
	 
    	 
    	
                i.

              	
                an immediate
      relative of the Promoter (i.e. spouse of that person, or any parent,
      brother, sister or child of the person or of the spouse);
    and,

              
	 
    	 
    	
                ii.

              	
                persons whose
      shareholding is aggregated for the purpose of disclosing in the offer
      document (inviting subscription from the public to the shares of the
      Indian Subsidiary) "shareholding of the promoter group"

                 

              
	 
    	
                c.

              	
                “Relative”
      means immediate relative namely spouse, parent, brother, sister or child
      of the person or the spouse.

                 

              
	
                6.

              	
                All defined
      terms that are not otherwise defined under this Appendix shall have the
      meaning attributed to them under the provisions of the Plan.

                 

              
	
                7.

              	
                Except to the
      extent as set forth in this Appendix and where not contrary to the meaning
      or intention herein, the provisions of the Plan shall apply to the Indian
      Participants granted the RSU.

              

      

      

      

      UK
Provisions

      

      Distributions to
Participants who are UK [resident domiciled for tax purposes]  shall
be made only in shares, notwithstanding the provisions Section 3.02,
above.

       

       

       

      
        
          
          

        

        
          Page 13 of
15

          
            

          

        

        
          
            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

       

      
 

      APPENDIX
5

      

      Sample
RSU Grant Certificate

      

      

      This CERTIFICATE,
effective as of the ____________ day of ____________, 20___ (the "Award Date"),
certifies that Flagstone Reinsurance Holdings Limited (the “Company”) has
awarded to ________________________ (the “Participant”) Restricted Share Units
(“RSUs”) in the amounts and on the terms set forth below, subject to and in
accordance with the Flagstone Reinsurance Holdings Limited Restricted Share Unit
Plan, dated [●] (“the RSU Plan”).

      

      The Company awards
to the Participant on the Award Date an amount of RSUs as follows:

      

      
        	 	
                RSU
      Holder

              	
                <<Column
      1>>

              
	 	 
    	 
    
	 	
                Restricted
      Share Units

              	
                <<Column
      2>>

              
	 	 
    	 
    
	 	
                RSU
      Series

              	
                [●]

              
	 	 
    	 
    
	 	
                Grant
      Date

              	
                [●]

              
	 	 
    	 
    
	 	
                Vesting
      Date

              	
                [Normal
      Vesting: Grants of these RSUs under the Plan will fully vest on the date
      that is two years after the Grant Date immediately above, except as may be
      modified by section by the terms of the RSU Plan, and in particular
      section [6.05].

                  -or-

                [The
      Participant is a Director and is fully and immediately vested in RSUs that
      are credited to his/her Account under the
Plan.]

              

      

       

      
 

      Upon occurrence of
a Distribution Date, the shares of Company Common Stock or cash (as determined
solely by the Compensation Committee of the Board of Directors of the Company)
shall be payable to the Participant and shall be delivered to the Participant as
soon as administratively feasible.

      

      This RSU grant is subject to the
terms and conditions described in the RSU Plan, as such plan may be properly
amended from time to time.  The terms of the RSU Plan are
incorporated herein, and capitalized words, if not defined herein, shall be
given the same meaning as under the terms of the Plan, unless the context
requires a different meaning.

      

      This
RSU grant is not transferable, and will lapse upon the occasion of an
assignment, charge, disposal or other dealing with the rights conveyed by it in
any other circumstances.

      

       

      
 

      ________________________________________

      Signed

      Mark Byrne,
Chairman

      

      

      

      
 

      
        
          
          

        

        
          Page 14 of
15

          
            

          

        

        
          
            Flagstone
Reinsurance Holdings Limited

            Employee
Restricted Share Unit Plan

          

        

      

      

      

      
 

      

       

      DOCUMENT  REVISION
HISTORY

       

      

      

      
        	
                Amendment

              	
                Date

              	
                Summary
      of Changes

              	
                Section

              	
                Approved
      by

                 

                 

              
	
                Amendment
      1

              	
                1/7/06

              	
                Amended and
      Restated

              	
                Various

              	
                Board of
      Directors

              
	
                Amendment
      2

              	
                11/9/06

              	
                Section 5
      clarified

              	
                5.01

              	
                Board of
      Directors

              
	
                Amendment
      3

              	
                16/11/06

              	
                Amended &
      Restated

              	
                Various

              	
                Shareholders

              
	
                Amendment
      4

              	
                20/7/07

              	
                Amended &
      Restated

              	
                Various

              	
                Board of
      Directors

              
	
                Amendment
      5

              	
                15/5/08

              	
                Language
      added regarding notification procedure

                of
      beneficiary or Designee and ability for such

                Designations
      to retroactively effect prior RSU grants

              	
                9

              	
                Board of
      Directors

              

      

      

    

     

     

     

     

    
      Page 15 of 15ex41.htm

    Exhibit 4.1

     

    
 

    SECURITIES
PURCHASE AGREEMENT

     

    SECURITIES
PURCHASE AGREEMENT (this “Agreement”), dated as
of  August 28, 2008, by and among Bonanza Oil & Gas, Inc., a
Nevada corporation, with headquarters located at 3000 Richmond Avenue, Suite
400, Houston Texas  77098 (the “Company”), and each of the
purchasers set forth on the signature pages hereto (the “Buyers”).

     

    WHEREAS:

     

    A. The
Company and the Buyers are executing and delivering this Agreement in reliance
upon an exemption from securities registration afforded by the rules and
regulations as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”);

     

    B. Buyers
desire to purchase and the Company desires to issue and sell, upon the terms and
conditions set forth in this Agreement (i) 12% notes of the Company, in the form
attached hereto as Exhibit
“A”, in the principal amount set forth next to the Buyer’s name on the
signature below (the “Notes”); and (ii) 50,000
shares of Common Stock (the “Shares”) for every $100,000
invested; and

     

    C. Each
Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, such principal amount of Notes and number of Shares as is set forth
immediately below its name on the signature pages hereto.

     

    NOW THEREFORE, the Company and
each of the Buyers severally (and not jointly) hereby agree as
follows:

     

    1. PURCHASE
AND SALE OF NOTES AND SHARES.

     

    a. Purchase
of Notes and Shares.  On the Closing Date (as defined below),
the Company shall issue and sell to each Buyer and each Buyer severally agrees
to purchase from the Company such principal amount of Notes and Shares as is set
forth immediately below such Buyer’s name on the signature pages
hereto.

     

    b. Form of
Payment.  On the Closing Date (as defined below), (i) each
Buyer shall pay the purchase price for the Notes and the Shares to be issued and
sold to it at the Closing (as defined below) (the “Purchase Price”) by wire
transfer of immediately available funds to the Company, in accordance with the
Company’s written wiring instructions, against delivery of the Notes in the
principal amount equal to the Purchase Price and the number of Shares set forth
immediately below such Buyer’s name on the signature pages hereto, and (ii) the
Company shall deliver such Notes and Shares duly executed on behalf of the
Company, to such Buyer, against delivery of such Purchase Price.

     

    c. Closing
Date.  Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Notes and the Shares pursuant to this Agreement
(the “Closing Date”)
shall be 12:00 noon, Eastern Standard Time on August 29, 2008 or such other
mutually agreed upon time.  The closing of the transactions
contemplated by this Agreement (the “Closing”) shall occur on the
Closing Date at such location as may be agreed to by the parties.  In
addition, if the full amount of the Purchase Price is not funded on the Closing
Date, subsequent Buyers and the Company may set additional Closing Dates until
the full Purchase Price is reached.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    2. BUYERS’
REPRESENTATIONS AND WARRANTIES.  Each Buyer severally (and not
jointly) represents and warrants to the Company solely as to such Buyer
that:

     

    a. Investment
Purpose.  As of the date hereof, the Buyer is purchasing the
Notes and the Shares (collectively, the “Securities”) for its own
account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the 1933 Act; provided, however, that by
making the representations herein, the Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.

     

    b. Accredited
Investor Status.  The Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D (an “Accredited
Investor”).

     

    c. Reliance
on Exemptions.  The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.

     

    d. Information.  The
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by the Buyer
or its advisors.  The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company.  The Buyer
understands that its investment in the Securities involves a significant degree
of risk.

     

    e. Governmental
Review.  The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Securities.

     

    f. Transfer
or Re-sale.  The Buyer understands that (i) the sale or re-sale
of the Securities has not been and is not being registered under the 1933 Act or
any applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the Company, (c) the
Securities are sold or transferred to an “affiliate” (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who
agrees to sell or otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S
under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer
shall have delivered to the Company an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any re-sale of such
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.  Notwithstanding the foregoing
or anything else contained herein to the contrary, the Securities may be pledged
as collateral in connection with a bona fide margin account
or other lending arrangement.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    g. Legends.  The
Buyer understands that the Shares, until such time as the Shares have been
registered under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, the Shares may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such
Securities):

     

    “The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended.  The securities may not be sold,
transferred or assigned in the absence of an effective registration statement
for the securities under said Act, or an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable transactions, that
registration is not required under said Act or unless sold pursuant to Rule 144
or Regulation S under said Act.”

     

    The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Security may be made without registration under the
1933 Act, which opinion shall be accepted by the Company so that the sale or
transfer is effected or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144 or Regulation
S.  The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if
any.

     

    h. Authorization;
Enforcement. This Agreement has been duly and validly
authorized.  This Agreement has been duly executed and delivered on
behalf of the Buyer, and this Agreement constitutes a valid and binding
agreements of the Buyer enforceable in accordance with their terms.

     

    i. Residency.  The
Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s
name on the signature pages hereto.

     

    3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.  The Company represents and
warrants to each Buyer that:

     

    a. Organization
and Qualification.  The Company and each of its Subsidiaries
(as defined below), if any, is a corporation duly organized, and validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and conducted.  The SEC Documents set forth all of the
Subsidiaries of the Company and the jurisdiction in which each is
incorporated.  The Company and each of its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect.  “Material
Adverse Effect” means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith.  “Subsidiaries” means any
corporation or other organization, whether incorporated or unincorporated, in
which the Company owns, directly or indirectly, any equity or other ownership
interest.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    b. Authorization;
Enforcement.  (i) The Company has all requisite corporate power
and authority to enter into and perform this Agreement and the Notes and to
consummate the transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement and the Notes and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the
issuance of the Notes have been duly authorized by the Company’s Board of
Directors (iii) this Agreement has been duly executed and delivered by the
Company by its authorized representative, and such authorized representative is
the true and official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the Company
accordingly, and (iv) this Agreement constitutes, and upon execution and
delivery by the Company of the Notes, each of such instruments will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.

     

    c. No
Conflicts.  The execution, delivery and performance of this
Agreement and the Notes by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby  will not (i)
conflict with or result in a violation of any provision of the Articles of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii)  result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect).

     

    d. No
Brokers.  The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, transaction fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.

     

    e. No
Investment Company.  The Company is
not, and upon the issuance and sale of the Securities as contemplated by this
Agreement will not be an “investment company” required to be registered under
the Investment Company Act of 1940 (an “Investment
Company”).  The Company is not controlled by an Investment
Company.

     

    4. COVENANTS.

     

    a. Best
Efforts.  The parties shall use their best efforts to satisfy
timely each of the conditions described in Section 6 and 7 of this
Agreement.

     

    b. Form D;
Blue Sky Laws.  The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing.  The Company shall,
on or before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers at the
applicable closing pursuant to this Agreement under applicable securities or
“blue sky” laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to the Closing Date.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    c. Reporting
Status.  The Company’s
Common Stock is registered under Section 12(g) of the 1934 Act.  So
long as the Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination.

     

    d. Use of
Proceeds.  The Company shall use the proceeds for working
capital.

     

    5. [INTENTIONALLY
LEFT BLANK].

     

    6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.  The obligation of the
Company hereunder to issue and sell the Notes and the Shares to a Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date of each of
the following conditions thereto, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion:

     

    a. The
applicable Buyer shall have executed this Agreement and delivered the same to
the Company.

     

    b. The
applicable Buyer shall have delivered the Purchase Price in accordance with
Section 1(b) above.

     

    c. The
representations and warranties of the applicable Buyer shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date), and the applicable Buyer shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Buyer at or prior to the Closing Date.

     

    d. No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

     

    7. CONDITIONS
TO EACH BUYER’S OBLIGATION TO PURCHASE.  The obligation of each
Buyer hereunder to purchase the Notes and the Shares at the Closing is subject
to the satisfaction, at or before the Closing Date of each of the following
conditions, provided that these conditions are for such Buyer’s sole benefit and
may be waived by such Buyer at any time in its sole discretion:

     

    a. The
Company shall have executed this Agreement and delivered the same to the
Buyer.

     

    b. The
Company shall have delivered to such Buyer duly executed Notes (in such
denominations as the Buyer shall request) and Shares in accordance with Section
1(b) above.

     

    c. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date.  The Buyer shall have received a
certificate or certificates, executed by the chief executive officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer including, but not
limited to certificates with respect to the Company’s Articles of Incorporation,
By-laws and Board of Directors’ resolutions relating to the transactions
contemplated hereby.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    d. No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

     

    e. No event
shall have occurred which could reasonably be expected to have a Material
Adverse Effect on the Company.

     

    8. GOVERNING
LAW; MISCELLANEOUS.

     

    a. Governing
Law.  THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
IN HOUSTON, TEXAS WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES
FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN
ANY SUCH SUIT OR PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER
PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW.  BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY
SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL
MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

     

    b. Counterparts;
Signatures by Facsimile.  This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party.  This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

     

    c. Headings.  The
headings of this Agreement are for convenience of reference only and shall not
form part of, or affect the interpretation of, this Agreement.

     

    d. Severability.  In
the event that any provision of this Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law.  Any provision
hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    e. Entire
Agreement; Amendments.  This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters.  No
provision of this Agreement may be waived or amended other than by an instrument
in writing signed by the party to be charged with enforcement.

     

    f. Notices.  Any
notices required or permitted to be given under the terms of this Agreement
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party.  The addresses for
such communications shall be:

     

    If to the
Company:

    

    Bonanza
Oil & Gas, Inc.

    3000
Richmond Avenue, Suite 400

    Houston,
TX 77098

    Attention:  Chief
Executive Officer

    Telephone:  (713)
333-5808

    Facsimile:   (713)333-5928

     

    With a
copy to:

    

    Law
Offices of Stephen M. Fleming PLLC

    403
Merrick Avenue, 2nd
Floor

    East
Meadow, New York 11554

    Attention:  Stephen
M. Fleming, Esq.

    Telephone:  (516)
833-5034

    Facsimile:   (516)
977-1209

    

    If to a
Buyer:  To the address set forth immediately below such Buyer’s name
on the signature pages hereto.  Each party shall provide notice to the
other party of any change in address.

     

    g. Successors
and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns.  Neither
the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
other.  Notwithstanding the foregoing, subject to Section 2(f),
any Buyer may assign its rights hereunder to any person that purchases
Securities in a private transaction from a Buyer or to any of its “affiliates,”
as that term is defined under the 1934 Act, without the consent of the
Company.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    h. Third
Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

     

    i. Survival.  The
representations and warranties of the Company and the agreements and covenants
set forth in Sections 3 and 4 shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of the
Buyers for a period of 12 months following the Closing Date.  The
Company agrees to indemnify and hold harmless each of the Buyers and all their
officers, directors, employees and agents for loss or damage arising as a result
of or related to any breach or alleged breach by the Company of any of its
representations, warranties and covenants set forth in Sections 3 and 4 hereof
or any of its covenants and obligations under this Agreement, including
advancement of expenses as they are incurred.

     

    j. Further
Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

     

    k. No Strict
Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.

     

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
undersigned Buyers and the Company have caused this Agreement to be duly
executed as of the date first above written.

     

    

    

    BONANZA
OIL & GAS, INC.

    

    

    By:________________________________

    William
Wiseman

    Chief
Executive Officer

    

    

    BUYERS:

    

    

    ___________________________________                                                                                                

    
 

    

    Notes:
$                                                      

    Shares:                                

    

    Address:                                                                

    

     

     

     

    9

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