EXHIBIT 10.16: Stock Option Agreement - Xxxxxx Xxxx
(Attached to Employment Contract of Xxxxxx X. Xxxx as Exhibit A)
SOUTH TEXAS OIL COMPANY
EXECUTIVE STOCK OPTION AGREEMENT
SOUTH TEXAS OIL COMPANY (the "Company"), desiring to afford an opportunity
to the Grantee named below to purchase certain shares of the Company's Common
Stock to provide the Grantee with an added incentive as an employee of the
Company or one or more of its subsidiaries, hereby grants to the Grantee, and
the Grantee hereby accepts, an option to purchase the number of such shares
specified below, during a term ending at midnight (prevailing local time at the
Company's principal offices) on the expiration date of this Option specified
below, at the option exercise price specified below, subject to and upon the
following terms and conditions:
1. Identifying Provisions. As used in this Option, the following terms
shall have the following respective meanings:
(a) Grantee: Xxxxxx X. Xxxx
(b) Date of grant: December 1, 2005
(c) Number of shares optioned: 100,000 Common
(d) Option exercise price per share: $0.46
(e) Expiration date: November 30, 2010
This Option is not intended to be and shall not be treated as an incentive
stock option under Section 422 of the Internal Revenue Code unless this
sentence has been manually lined out and its deletion is followed by the
signature of the corporate officer who signed this Option on behalf of the
Company.
2. Vesting Schedule and Expiration. This Option is not exercisable in any
part until one year after the date of grant. Upon the expiration of one year
after the date of grant and subject to the provisions for termination and
acceleration herein, this Option shall become exercisable in installments as
follows: This Option may not in the aggregate be exercised as to more than 25%
of the total number of shares optioned until one year after the date of grant;
nor as to more than 75% of the total number of shares optioned until two years
after the date of grant; in each case to the nearest whole share. Upon the
expiration of three years after the date of grant this Option may be exercised
as to all optioned shares for which it had not previously been exercised, until
and including the expiration date of this Option wherein upon the Option shall
expire and may thereafter no longer be exercised.
3. Termination Provisions. The right to exercise this Option is subject
to the following additional restrictions and limitations:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than
death only that portion of the Option exercisable at the time of such
termination of employment may thereafter be exercised, and it may not be
exercised more than three months after such termination nor after the
expiration date of this Option, whichever date is earlier, unless such
termination is by reason of the Grantee's permanent and total disability, in
which case such period of three months shall be extended to one year. In all
other respects, this Option shall terminate upon such termination of
employment.
(b) Death of Grantee. If the Grantee shall die while this Option
remains exercisable, the Grantee's legal representative or
representatives or the persons entitled to do so under the Grantee's last will
and testament or under applicable intestate laws shall have the right to
exercise this Option, but only for the number of shares as to which this Option
might have been exercised on the date of the Grantee's death, and such right
shall expire and this Option shall terminate one year after the date of the
Grantee's death or on the expiration date of this Option, whichever date is
earlier. In all other respects, this Option shall terminate upon such death.
(c) Continuity of Employment. This Option shall not be exercisable in
any part during the Grantee's lifetime unless at all times beginning with the
date of grant and ending no more than three months prior to the date of
exercise the Grantee has, except for military service leave, sick leave or
other bona fide leave of absence (such as temporary employment by the United
States Government), been in the continuous employ of the Company or a parent of
subsidiary thereof, except that such period of three months shall be extended
to one year following any termination of such employment by reason of the
Grantee's permanent and total disability.
4. Restrictions on Transferability of Option. This Option may not be
transferred by the Grantee other than by will or the laws of descent and
distribution and may be exercised during the Grantee's lifetime only by the
Grantee or the Grantee's guardian or legal representative. However, if this
Option is not intended to be treated as an incentive stock option under Section
422 of the Internal Revenue Code (see Section I above) it may during the
Grantee's lifetime also be transferred to and may thereafter be exercised by
members of the Grantee's immediate family, or a partnership whose members
include only the Grantee and/or members of the Grantee's immediate family, or a
trust for the benefit of only the Grantee and/or members of the Grantee's
immediate family; but (a) any such permitted transfer shall not prevent
termination of the Option following the Grantee's termination of employment as
provided in Section 3 above, and (b) this Option shall terminate immediately if
it has been transferred to a partnership or trust as permitted above and any
person who is not a member of the Grantee's immediate family becomes a member
of such partnership or a beneficiary of such trust, As used herein, the
Grantee's immediate family includes only the Grantee's spouse, parents or other
ancestors, and children and other direct descendants of the Grantee or of the
Grantee's spouse (including such ancestors and descendants by adoption).
5. Adjustments and Corporate Reorganizations. If the outstanding shares of
stock of the class then subject to this Option are increased or decreased, or
are changed into or exchanged for a different number or kind of shares or
securities or other forms of property (including cash) or rights, as a result
of one or more reorganizations, recapitalizations, spin-offs, stock splits,
reverse stock splits, stock dividends or the like, appropriate adjustments
shall be made in the number and/or kind of shares or securities or other forms
of property (including cash) or rights for which this Option may thereafter be
exercised, all without any change in the aggregate exercise price applicable to
the unexercised portions of this Option, but with a corresponding adjustment in
the exercise price per share or other unit. No fractional share of stock shall
be issued under this Option or in connection with any such adjustment. Such
adjustments shall be made by or under authority of the Company's board of
directors whose determinations as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which the
outstanding securities of the class then subject to this Option are changed
into or exchanged for property (including cash), rights or securities not of
the Company's issue, or any combination thereof, or upon a sale of
substantially all the property of the Company to, or the acquisition of stock
representing more than eighty percent (80%) of the voting power of the stock of
the Company then outstanding by, another corporation or person, this Option
shall terminate, unless provision be made in writing in connection with such
transaction for the assumption of this Option, or the substitution for this
Option of an option covering the stock of a successor employer corporation, or
a parent or a subsidiary thereof, with appropriate adjustments in accordance
with the provisions hereinabove in this Section entitled "Adjustments and
Corporate Reorganizations" as to the number and kind of shares optioned and
their exercise prices, in which event this Option shall continue in the manner
and under the terms so provided.
If this Option shall terminate pursuant to the next preceding paragraph,
the Grantee or other person then entitled to exercise this Option shall have
the right, at such time prior to the consummation of the transaction causing
such termination as the Company shall designate, to exercise the unexercised
portions of this Option, including the portions thereof which would, but for
this Section entitled "Adjustments and Corporate Reorganizations," not yet be
exercisable.
6. Exercise, Payment For and Delivery of Stock. This Option may be
exercised by the Grantee or other person then entitled to exercise it by giving
four business days' written notice of exercise to the Company specifying the
number of shares to be purchased and the total purchase price, accompanied by a
check to the order of the Company in payment of such price. If the Company is
required to withhold on account of any federal, state or local tax imposed as a
result of such exercise, the notice of exercise shall also be accompanied by a
check to the order of the Company in payment if the amount thus required to be
withheld.
7. Alternative Payment with Stock. Notwithstanding the foregoing
provisions requiring payment by check, if stock of the class then subject to
this Option is then Publicly Traded, payment of such purchase price or any
portion thereof may also be made in whole or in part with shares of the same
class of stock as that then subject to this Option, surrendered in lieu of the
payment of cash concurrently with such exercise, the shares so surrendered to
be valued on the basis of the Fair Market Value of the stock on the date of
exercise, in which event the stock certificates evidencing the shares so to be
used shall accompany the notice of exercise and shall be duly endorsed or
accompanied by duly executed stock powers to transfer the same to the Company;
provided, however, that such payment in stock instead of cash shall not be
effective and shall be rejected by the Company if (a) the Company is then
prohibited from purchasing or acquiring shares of the class of its stock thus
tendered to it, or (b) the right or power of the person exercising the Option
to deliver such shares in payment of the purchase price is subject to the prior
interests of any other person (excepting the Company) as indicated by legends
upon the certificate(s) or known to the Company. If the Company rejects the
payment in stock, the tendered notice of exercise shall not be effective
hereunder unless promptly after being notified of such rejection the person
exercising the Option pays the purchase price in acceptable form. If and while
payment with stock is permitted in accordance with the foregoing provision, the
person then entitled to exercise this Option may, in lieu of using previously
outstanding stock therefor, use some of the shares as to which this Option is
then being exercised, in which case the notice of exercise need not be
accompanied by any stock certificates but shall include a statement directing
the Company to retain so many shares that would otherwise have been delivered
by the Company upon that exercise of this Option as equals the number of shares
that would have been surrendered to the Company if the purchase price had been
paid with previously issued stock. If the Company is required to withhold on
account of any federal, state or local tax imposed as a result of an exercise
of this Option with previously issued stock or by retention of some optioned
shares under this Section entitled "Alternative Payment with Stock," the stock
surrendered or retained shall include an additional number of shares whose Fair
Market Value equals the amount thus required to be withheld.
8. Rights in Stock Before Issuance and Delivery. No person shall be
entitled to the privileges of stock ownership in respect of any shares issuable
upon exercise of this Option, unless and until such shares have been issued to
such person as fully paid shares.
9. Requirements of Law. By accepting this Option, the Grantee represents
and agrees for himself or herself and his or her transferees by will or the
laws of descent and distribution that, unless a registration statement under
the Securities Act of 1933 is in effect as to shares purchased upon any
exercise of this Option, (a) any and all shares so purchased shall be acquired
for his or her personal account and not with a view to or for sale in
connection with any distribution, and (b) each notice of the exercise of any
portion of this Option shall be accompanied by a representation and warranty in
writing, signed by the person entitled to exercise the same, that the shares
are being so acquired in good faith for his or her personal account and not
with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon exercise
of this Option shall be issued and delivered unless and until, in the opinion
of legal counsel for the Company, such securities may be issued and delivered
without causing the Company to be in violation of or incur any liability under
any federal, state or other securities law or any other requirement of law or
of any regulatory body having jurisdiction over the Company.
10. Stock Appreciation Rights. The Grantee or other person entitled to
exercise this Option is further hereby granted the right ("Stock Appreciation
Right") in lieu of exercising this Option or any portion thereof to receive an
amount equal to the lesser of (a) the excess of the Fair Market Value of the
stock subject to this Option or such portion thereof over the aggregate
exercise price for such shares hereunder as of the date the Stock Appreciation
Right is exercised, or (b) 200% of the aggregate exercise price for such shares
hereunder. The amount payable upon exercise of such Stock Appreciation Right
may be settled by payment in cash or in shares of the class then subject to
this Option valued on the basis of their Fair Market Value on the date Stock
Appreciation Right is exercised, or in a combination of cash and such shares so
valued. No Stock Appreciation Right may be exercised, in whole or in part, (i)
other than in connection with the contemporaneous surrender without exercise of
this Option or the portion thereof that corresponds to the portion of the Stock
Appreciation Right being exercised, or (ii) except to the extent that this
Option or such portion thereof is exercisable on the date of exercise of the
Stock Appreciation Right by the Person exercising the Stock Appreciation Right,
or (iii) unless the class of stock then subject to this Option is then Publicly
Traded.
11. Company's Right of First Purchase. While and so long as the stock of
the class subject to this Option has not been Publicly Traded for at least
ninety days, any stock issued on exercise of this Option shall be subject to
the Company's right of first purchase. By virtue of that right, (a) such stock
may not be transferred during the Grantee's lifetime to any person other than
members of the Grantee's Immediate Family, a partnership whose members are the
Grantee and/or members of the Grantee's Immediate Family, or a trust for the
benefit of the Grantee and/ or members of the Grantee's Immediate Family,
unless such transfer occurs within fifteen days following the expiration of
thirty days after the Company has been given a written notice which correctly
identified the prospective transferee or transferees and which offered the
Company an opportunity to purchase such stock at its Fair Market Value in cash,
and such offer was not accepted within thirty days after the Company's receipt
of that notice; and (b) upon the Grantee's death, the Company shall have the
right to purchase all or some of such stock at its Fair Market Value within
nine months after the date of death. This fight of first purchase shall
continue to apply to any such stock after the transfer during the Grantee's
lifetime of that stock to a member of the Grantee's Immediate Family or to a
family partnership or trust as aforesaid, and after any transfer of that stock
with respect to which the Company waived its right of first purchase without
also waiving it as to any subsequent transfers thereof, but it shall not apply
after a transfer of that stock with respect to which the Company was offered
but did not exercise or waive its right of first purchase or more than nine
months after the Grantee's death. The Company may assign all or any portion of
its right of first purchase to any one or more of its stockholders, or to a
pension or retirement plan or trust for employees of the Company, who may then
exercise the right so assigned. Stock certificates evidencing stock subject to
this right of first purchase shall be appropriately legended to reflect that
right.
12. Notices. Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to the Grantee at the address set
forth beneath the Grantee's signature hereto or at such other address as the
Grantee may hereafter designate in writing to the Company. Any such notice
shall be deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, registered or certified, and deposited, postage
and registry or certification fees prepaid, in a post office or branch post
office regularly maintained by the United States Postal Service.
13. Rules of Construction. This Agreement has been executed and delivered
by the Company in the State of Nevada, and shall be construed and enforced in
accordance with the laws of Nevada, other than any choice of law rules calling
for the application of laws of another jurisdiction. Should there by any
inconsistency or discrepancy between the provisions of this Option and the
terms and conditions of the Executive Compensation Agreement between the
Company and the Grantee, the provisions of this Option shall prevail. The
receipt of this Option does not give the Grantee any right to continued
employment by the Company or subsidiary for any period, nor shall granting of
this Option or the issuance of shares on exercise thereof give the Company or
any subsidiary any right to the continued services of the Grantee for any
period.
IN WITNESS WHEREOF, the Company has granted this Option on the date of grant
specified above.
SOUTH TEXAS OIL COMPANY XXXXXX X. XXXX
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxxxxxx, CEO / Director An individual
