PACIFIC ASIA PETROLEUM, INC.
EXHIBIT
10.5
PACIFIC
ASIA PETROLEUM, INC.
2009
EQUITY INCENTIVE PLAN
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 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ 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.
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OPTIONEE
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PACIFIC ASIA PETROLEUM, INC.
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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]
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Submitted
by:
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Accepted
by:
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