Yuma Energy, Inc.
2014 LONG-TERM INCENTIVE PLAN
NOTICE OF STOCK OPTION AWARD
| Participant: | (the “Participant”) | |||||||||||||||
| Notice: | You have been granted the following award of stock options of Yuma Energy, Inc., a Delaware corporation (the “Company”), in accordance with the terms of this Notice of Stock Option Award (this “Notice”), the Yuma Energy, Inc. 2014 Long-Term Incentive Plan, as assumed by the Company in October 2016, as in effect and as amended from time to time (the “Plan”), and the attached Stock Option Agreement (the “Agreement”). | |||||||||||||||
| Date of Grant: | (the “Date of Grant”) | |||||||||||||||
| Aggregate Number of Stock Options: | (the “Options”) | |||||||||||||||
| Type of Option: | Nonqualified Stock Option | Incentive Stock Option | ||||||||||||||
| Term: | The close of business on the day before the 10th anniversary of the Date of Grant (the “Expiration Date”) | |||||||||||||||
| Vesting Schedule: | Options (Number of Shares) | Vesting Date (each, a “Vesting Date”) | Exercise Price Per Share | |||||||||||||
| The vesting of the Options is subject to your continued service as an employee of the Company or any of its subsidiaries through such Vesting Date, and upon the terms of this Notice, the Plan and the Agreement. | ||||||||||||||||
You, by your signature as the Participant below, acknowledge that you (i) have reviewed the Agreement and the Plan in their entirety and have had the opportunity to obtain the advice of counsel prior to executing this Notice, (ii) understand that the award of the Options is granted under and governed by the terms and provisions of this Notice, the Agreement and the Plan, and (iii) agree to accept as binding all of the determinations and interpretations made by the Compensation Committee of the Board of Directors of the Company with respect to matters arising under or relating to this Notice, the Agreement and the Plan.
| PARTICIPANT | YUMA ENERGY, INC. | |||||
| By: | By: | |||||
| Name: | Name: | |||||
| Title: |
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YUMA ENERGY, INC.
STOCK OPTION AGREEMENT
1. Award of Stock Options. Yuma Energy, Inc., a Delaware corporation (the “Company”), hereby grants to the Participant under the Yuma Energy, Inc. 2014 Long-Term Incentive Plan, as in effect and as amended from time to time (the “Plan”), an award (the “Award”) of options to purchase an aggregate number of shares (the “Shares”) of common stock, $0.001 par value per share, of the Company (the “Common Stock”), set forth in the Notice of Stock Option Award (the “Notice”) attached to this Stock Option Agreement (this “Agreement”), at each of the exercise prices per share (collectively, the “Exercise Price”) set forth in the Notice and each vesting date set forth in the Notice (collectively, the “Vesting Date”), subject to the terms, definitions and provisions of the Plan and the terms of this Agreement. This Agreement consists of the Notice and the terms and conditions of the Plan. Unless otherwise provided herein, capitalized terms herein will have the same meanings as in the Plan or in the Notice.
2. Designation of Option. This Award is intended to be an Incentive Stock Option as defined in Section 422 of the Code only to the extent so designated in the Notice, and to the extent it is not so designated or to the extent this Award does not qualify as an Incentive Stock Option, it is intended to be a Nonqualified Stock Option.
Notwithstanding the above, if designated as an Incentive Stock Option, in the event that the Shares subject to this Award (and all other Incentive Stock Options granted to Participant) that first become exercisable in any calendar year have an aggregate fair market value (determined for each Share as of the Date of Grant of this Award covering such Share) in excess of $100,000, the Shares in excess of $100,000 shall be treated as subject to a Nonqualified Stock Option.
3. Vesting.
(a) Vesting of the Options. Except as otherwise provided in this Agreement or the Plan, the Options awarded by this Agreement are scheduled to vest and be exercisable in accordance with the vesting schedule (the “Vesting Schedule”) set forth in the Notice; provided, however, no Options shall vest after the Expiration Date. The Options scheduled to vest on a Vesting Date will vest only if the Participant remains in continued service as an employee of the Company or any of its subsidiaries through such Vesting Date. Should the Participant’s continued service as an employee of the Company or any of its subsidiaries end (“Termination of Service”) at any time (the “Termination Date”), any unvested Options will be immediately terminated and forfeited. However, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company may, in its discretion, vest any unvested Options upon the Participant’s Termination of Service.
(b) Change of Control Event. If there is a Change of Control Event, any unvested Options shall not vest immediately and shall remain outstanding and continue subject to restrictions in accordance with the terms hereof, unless one of the following things happens:
(i) the Committee, in its sole discretion, without the consent of the Participant or holder of this Award, and on such terms and conditions as it deems appropriate, may take any one or more of the actions or make the adjustments set forth in Section 12.2 of the Plan in connection with such Change in Control Event; and
(ii) unless the terms contained in any employment agreement between the Participant and the Company provide otherwise, if the Participant incurs a Termination of Service within a period beginning sixty (60) days before and ending twelve (12) months following a Change of Control Event on account of (1) a termination by the Company or any of its subsidiaries for any reason other than Cause, or (2) a termination by the Participant for Good Reason, then any unvested Options shall vest on the Termination Date.
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For purposes of this Agreement, the following definitions apply:
“Good Reason” means without the Participant’s written consent (A) a material reduction in the Participant’s authority, duties or responsibilities compared to the Participant’s authority, duties and responsibilities immediately prior to the Change of Control Event; (B) the Participant’s principal work location being moved more than thirty-five (35) miles, from the location immediately prior to the Change of Control Event; (C) the Company or any of its subsidiaries materially reduces the Participant’s base salary (unless the base salaries of substantially all other senior executives of the Company are similarly reduced); or (D) if the Participant is a party to an employment agreement with the Company, any material breach of such employment agreement by the Company. The Participant will not resign for Good Reason without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the initial existence of the grounds for “Good Reason” and the Company must have an opportunity within thirty (30) days following delivery of such notice to cure the Good Reason condition.
“Cause” means (A) the Participant’s failure to perform (other than due to Disability or death) the duties of the Participant’s position (as they may exist from time to time) to the reasonable satisfaction of the Company or any of its subsidiaries after receipt of a written warning and at least fifteen (15) days’ opportunity for the Participant to cure the failure, (B) any act of fraud or dishonesty committed by the Participant against or with respect to the Company or any of its subsidiaries or customers as shall be reasonably determined to have occurred by the Board, (C) the Participant’s conviction or plea of no contest to a crime that negatively reflects on the Participant’s fitness to perform the Participant’s duties or harms the Company’s or any of its subsidiaries’ reputation or business, (D) the Participant’s willful misconduct that is injurious to the Company or any of its subsidiaries, or (E) the Participant’s willful violation of a material Company or any of its subsidiaries policy. The preceding definition shall not be deemed to be inclusive of all the acts or omissions that the Company or any of its subsidiaries may consider as grounds for the dismissal or discharge of the Participant or any other individual in the service of the Company or any of its subsidiaries. Notwithstanding the foregoing, if the Participant is a party to an employment agreement with the Company, the definition of “cause” as defined in the employment agreement will supersede the above definition.
(c) All Options held by the Participant which are not vested on the Termination Date pursuant to the provisions of Sections 3(a) or 3(b) shall be deemed terminated and forfeited.
4. Exercise of the Options. This Award will be exercisable during its term in accordance with the Vesting Schedule set forth in the Notice as follows:
(a) Right to Exercise.
(i) This Award may not be exercised for a fraction of a share of Common Stock.
(ii) This Award may not be exercised if the issuance of Common Stock at that time would violate any law or regulation.
(iii) In no event may this Award be exercised after the Expiration Date set forth in the Notice.
(b) Method of Exercise. This Award, or any exercisable portion thereof, may be exercised, prior to the Expiration Date to the extent such Option is vested, solely by delivery of the Exercise Notice (attached hereto as Exhibit A) to the Corporate Secretary of the Company.
(c) Payment of Exercise Price. Payment of the Exercise Price may be by any of the following, or a combination thereof, at the election of the Participant:
(i) cash or check;
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(ii) Common Stock already owned by the Participant for at least six (6) months prior to the date of exercise and based on the Fair Market Value of the Common Stock on the date this Award is exercised;
(iii) irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or broker loan proceeds necessary to pay the Exercise Price;
(iv) net cashless exercise; or
(v) any combination of (i), (ii), (iii), or (iv) above.
(d) Withholding. The Participant will not be allowed to exercise this Award unless he or she makes arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the Option exercise as set forth in Section 6.
5. Termination of the Award.
(a) Term. This Award expires in any event at the close of business at Company headquarters on the day before the 10th anniversary of the Date of Grant, set forth in the Notice. (It will expire earlier if the Participant’s service as an employee of the Company or any of its subsidiaries ceases, as described herein.)
(b) Termination for Reasons Other Than Cause, Death, Disability. If the Participant’s continued service as an employee of the Company or any of its subsidiaries ends for any reason other than Cause, death or Disability, the Participant may exercise the vested Options, but only within such period of time ending on the earlier of (i) the date three (3) months following the Participant’s Termination Date and (ii) the Expiration Date.
(c) Termination Due to Disability. If the Participant’s continued service as an employee of the Company or any of its subsidiaries ends as a result of the Participant’s Disability, the Participant may exercise the vested Options, but only within such period of time ending on the earlier of (i) the date twelve (12) months following the Participant’s Termination Date and (ii) the Expiration Date.
(d) Termination Due to Death. If the Participant’s continued service as an employee of the Company or any of its subsidiaries ends as a result of the Participant’s death, the vested Options may be exercised by the Participant’s estate, by a person who acquired the right to exercise the Options by bequest or inheritance or by the person designated to exercise the Options upon the Participant’s death, but only within the time period ending on the earlier of (i) the date twelve (12) months following the Participant’s Termination Date and (ii) the Expiration Date.
(e) Termination for Cause. If the Participant’s continued service as an employee of the Company or any of its subsidiaries ends for Cause, the Options (whether vested or unvested) shall immediately terminate and cease to be exercisable.
6. Taxes.
(a) Tax Liability. The Participant is ultimately liable and responsible for all taxes owed by the Participant in connection with this Award, regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with this Award. The Company does not make any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or vesting of this Award or the subsequent exercise of the Options. The Company does not commit and is under no obligation to structure this Award to reduce or eliminate the Participant’s tax liability.
(b) Payment of Withholding Taxes. In the event required by federal, state or local law, the Company will have the right and is hereby authorized to withhold, and/or to require the Participant to pay upon the occurrence of the event triggering the requirement, any applicable withholding taxes in respect of the Options, their grant, vesting, exercise or otherwise and to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes. The Company, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit the Participant to satisfy such tax withholding obligation, in whole or in part (without limitation) by (i) paying cash; (ii) electing to have the Company withhold otherwise then deliverable shares of Common Stock upon exercise of the Options having a Fair Market Value equal to the minimum amount required to be withheld; (iii) delivering to the Company, vested and owned shares of Common Stock having a Fair Market Value equal to the amount required to be withheld; or (iv) through any other lawful manner. The Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to inadequate withholding. The Company shall withhold from any dividends paid during the vesting period only the amounts the Company is required to withhold to satisfy any applicable tax withholding requirements with respect to such dividends based on minimum statutory withholding rates for federal and state tax purposes, including any payroll taxes.
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YOU FURTHER ACKNOWLEDGE THAT THE COMPANY HAS DIRECTED YOU TO SEEK INDEPENDENT ADVICE REGARDING THE APPLICABLE PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), AND THE INCOME TAX LAWS OF ANY MUNICIPALITY OR STATE IN WHICH YOU MAY RESIDE.
7. No Rights as Stockholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to the Award, notwithstanding the exercise of this Award. The Shares so acquired will be issued to the Participant as soon as practicable after exercise of the Award. 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.
8. No Effect on Employment. Nothing contained in this Agreement shall confer upon the Participant the right to continue as an employee of the Company or any of its subsidiaries.
9. Address for Notices. Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company, Attn: Corporate Secretary, at the Company’s headquarters, 1177 West Loop South, Suite 1825, Houston, Texas 77027, or at such other address as the Company may hereafter designate in writing. Any notice to be given to the Participant will be addressed to such Participant at the address maintained by the Company for such person or at such other address as the Participant may specify in writing to the Company.
10. Award is Not Transferable. This Award and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Award, or of any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this Award and the rights and privileges conferred hereby immediately will become null and void.
11. Compliance with Laws and Regulations.
(a) If the Participant is an “affiliate” of the Company, as that term is defined in Rule 144 (“Rule 144”) under the Securities Act of 1933, as amended (the “Securities Act”), the Participant may not sell the Common Stock received upon exercise of any Options unless in compliance with Rule 144. Further, the Participant’s subsequent sale of the Common Stock received upon the exercise of this Award will be subject to any market blackout-period that may be imposed by the Company and must comply with the Company’s insider trading policies and any other applicable securities laws. The Participant acknowledges and agrees that, prior to the sale of any Common Stock acquired hereunder, it is the Participant’s responsibility to determine whether or not such sale of such Common Stock will subject the Participant to liability under insider trading rules or other applicable federal securities laws.
(b) The obligation of the Company to deliver Common Stock upon exercise hereunder will be subject in all respects to (i) all applicable federal and state laws, rules and regulations and (ii) any registration, qualification, approvals or other requirements imposed by any government or regulatory agency or body which the Committee will, in its discretion, determine to be necessary or applicable. Moreover, the Company will not issue any Common Stock to the Participant or any other person pursuant to this Agreement if doing so would be contrary to applicable law. If at any time the Company determines, in its discretion, that the listing, registration or qualification of the Common Stock upon any national securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable, the Company will not be required to issue any Common Stock to the Participant or any other person pursuant to this Agreement unless and until such listing, registration, qualification, consent or approval has been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Company.
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12. Market Standoff Agreement. The Participant agrees in connection with any registration of the Company’s securities under the Securities Act that, upon the request of the Company or the underwriter(s) managing any registered public offering of the Company’s securities, the Participant will not sell or otherwise dispose of any shares of Common Stock acquired pursuant to this Agreement without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) after the effective date of such registration requested by such managing underwriter(s) and subject to all restrictions as the Company or the managing underwriter(s) may specify for employees, directors or other service provider stockholders generally. The Participant further agrees to enter into any agreement reasonably required by the underwriter(s) to implement the foregoing.
13. Binding Agreement. This Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
14. Committee Authority. All actions taken and all interpretations and determinations made by the Committee will be final and binding upon the Participant, the Company and all other persons, and will be given the maximum deference permitted by law. No member of the Committee will be personally liable for any action, determination or interpretation made in good faith with respect to this Agreement.
15. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
16. Provisions Severable. In the event that any provision in this Agreement is held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement.
17. Entire Agreement. This Agreement, including the Notice, and the Plan constitute the entire understanding of the parties relating to the subjects covered herein. The Participant expressly warrants that he or she is not executing the Notice in reliance on any promises, representations or inducements other than those contained herein and in the Plan.
18. Modifications to this Agreement. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless made in writing signed by the Participant and a duly authorized officer of the Company. All modifications of or amendments to this Agreement must either (a) comply with Section 409A of the Code or (b) not cause this Award to be subject to Section 409A of the Code if this Award is not already subject to Section 409A of the Code.
19. Amendment, Suspension or Termination of the Plan. By accepting this Award, the Participant expressly warrants that he or she has received an award under the Plan, and has received, read and understood a description of the Plan. The Participant understands that the Plan is discretionary in nature and may be modified, suspended or terminated by the Company at any time.
20. Recoupment Policy. Notwithstanding the vesting terms of this Agreement, this Award is subject to any compensatory recovery (clawback) policy in effect at the time of each Vesting Date.
21. Governing Law; Dispute Resolution.
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(a) This Agreement will be governed by, and construed in accordance with, the laws of the State of Texas, without regard to its conflict of law provisions.
(b) Any dispute arising out of, or relating to this Agreement or any breach hereof, shall be resolved by binding arbitration in Harris County, Texas, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect, and judgment on the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction. The location of such arbitration in Harris County, Texas, shall be selected by the Company in its sole and absolute discretion. All costs and expenses, including attorneys’ fees, relating to the resolution of any such dispute shall be borne by the party incurring such costs and expenses.
22. Data Protection. By accepting this Award, the Participant agrees and consents:
(a) to the collection, use, processing and transfer by the Company of certain personal information about the Participant, including the Participant’s name, home address and telephone number, date of birth, other employee information, details of the Options granted to the Participant, and of Common Stock issued or transferred to the Participant pursuant to this Agreement (“Data”); and
(b) to the Company transferring Data to any subsidiary or affiliate of the Company for the purposes of implementing, administering and managing this Agreement; and
(c) to the use of such Data by any person for such purposes; and
(d) to the transfer to and retention of such Data by third parties in connection with such purposes.
23. Plan Governs. Except where explicitly stated in this Agreement, this Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan shall govern, unless the Committee shall determine otherwise.
24. Adjustments. In the event of a stock split, a stock dividend or a similar change in the Common Stock, the number of shares covered by this Award and the Exercise Price may be adjusted pursuant to the Plan.
25. Notice of Disqualifying Disposition of Incentive Stock Option Shares. If this Award granted to Participant herein is an Incentive Stock Option, and if Participant sells or otherwise disposes of any shares of Common Stock acquired pursuant to the Incentive Stock Option on or before (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of transfer to the Participant of the Common Stock, Participant will immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to additional income tax withholding by the Company on his salary or wages as a result of the compensation income recognized by the Participant.
26. Participant Acknowledgements. The Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Award subject to all of the terms and provisions hereof and thereof. The Participant has reviewed this Agreement and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Notice and fully understands all provisions of this Agreement, including the Notice, and the Plan.
THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE OPTIONS WILL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE PARTICIPANT’S CONTINUED SERVICE AS AN EMPLOYEE OF THE COMPANY OR ANY OF ITS SUBSIDIARIES (NOT THROUGH THE ACT OF BEING GRANTED THIS AWARD OR ACQUIRING COMMON STOCK HEREUNDER). THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THE NOTICE, THIS AGREEMENT NOR THE PLAN WILL CONFER UPON THE PARTICIPANT ANY RIGHT WITH RESPECT TO CONTINUATION OF THE PARTICIPANT’S SERVICE AS AN EMPLOYEE OF THE COMPANY OR ANY OF ITS SUBSIDIARIES.
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Yuma Energy, Inc.
2014 LONG-TERM INCENTIVE PLAN
EXERCISE NOTICE
Yuma Energy, Inc.
1177 West Loop South, Suite 1825
Houston, Texas 77027
Attention: Corporate Secretary
1. Exercise of Award. Effective as of today, , , the undersigned (the “Purchaser”) hereby elects to purchase shares (the “Shares”) of the Common Stock of Yuma Energy, Inc., a Delaware corporation (the “Company”), under and pursuant to the Yuma Energy, Inc. 2014 Long-Term Incentive Plan, as amended (the “Plan”), and the Stock Option Agreement dated (the “Agreement”). The purchase price for the Shares will be $ , as required by the Agreement. Unless otherwise provided herein, capitalized terms herein will have the same meanings as in the Plan or the Agreement.
2. Delivery of Payment. The Purchaser herewith delivers to the Company the full purchase price of the Shares and any required tax withholding to be paid in connection with the exercise of the Award.
3. Representations of Purchaser. The Purchaser acknowledges that the Purchaser has received, read and understood the Plan and the Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to the Award, notwithstanding the exercise of the Award. The Shares so acquired will be issued to the Purchaser as soon as practicable after exercise of the Award. 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. The Purchaser understands that the Purchaser may suffer adverse tax consequences as a result of the Purchaser’s purchase or disposition of the Shares. The Purchaser represents that the Purchaser has consulted with any tax consultants the Purchaser deems advisable in connection with the purchase or disposition of the Shares and that the Purchaser is not relying on the Company for any tax advice.
6. Entire Agreement; Governing Law. The Plan and Agreement are incorporated herein by reference. This Exercise Notice, the Plan and the 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 the Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser’s interest except by means of a writing signed by the Company and the Purchaser. This Exercise Notice will be governed by, and construed in accordance with, the laws of the State of Texas, without regard to its conflict of law provisions.
| Submitted By: | Accepted By: | ||||||
| PURCHASER | YUMA ENERGY, INC. | ||||||
| By: | |||||||
| Name: | Name: | ||||||
| Title: | |||||||
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