EXHIBIT 4.3
THE SECURITIES REPRESENTED BY THIS OPTION AGREEMENT HAVE NOT BEEN REGISTERED
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), IN RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION
AFFORDED BY THE SECURITIES ACT. THESE SECURITIES CONSTITUTE "RESTRICTED
SECURITIES" UNDER RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THESE
SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF
ANY STATE OR TERRITORY OF THE UNITED STATES OR PROVINCE OF CANADA, IN RELIANCE
UPON EXEMPTIONS FROM REGISTRATION OR QUALIFICATION AFFORDED UNDER SUCH
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT PURPOSES ONLY. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED, WITH OR WITHOUT CONSIDERATION, OR OFFERED FOR SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION, WITHIN THE UNITED STATES OR ANY OF ITS
TERRITORIES OR TO A UNITED STATES PERSON, UNLESS (i) THE SECURITIES ARE
REGISTERED UNDER SECTION 5 OF THE SECURITIES ACT, AND/OR APPLICABLE PROVISIONS
OF CANADIAN SECURITIES LAWS; OR (ii) THE PROPOSED TRANSACTION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND/OR
APPLICABLE PROVISIONS OF CANADIAN SECURITIES LAWS. THE TRANSFER AGENT (OR THE
COMPANY IF THEN ACTING AS ITS TRANSFER AGENT) WILL REFUSE TO TRANSFER THESE
SECURITIES UNLESS PRESENTED WITH A WRITTEN OPINION SATISFACTORY TO COUNSEL FOR
THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
CIRCUMSTANCES OF SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION.
NON-QUALIFIED STOCK OPTION AGREEMENT
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(Incrementally Vested Options)
This Non-Qualified Stock Option Agreement (hereinafter the "Option Agreement"),
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dated as of the 10th day of March, 1998 (hereinafter the "Grand Date"), is
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entered into by and between Pinnacle Oil International, Inc., a Nevada
corporation, whose address is Suite 750 Phoenix Place, 840 - 7th Avenue S.W.,
Calgary, Alberta, Canada T2P 3G2 (hereinafter the "Company"), and ,
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an individual, whose business address is - (hereinafter the
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"Optionee"), with reference to the following facts:
RECITALS:
WHEREAS, the Optionee is a member of the Board of Directors (hereinafter
the "Board") and is special counsel to the Company; and
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WHEREAS, as an incentive for Optionee to continue to render service to the
Company as a member of its Board, the Company has determined that it is in its
best interests to grant an option to the Optionee to purchase the Company's
common stock, (hereinafter, the "Common Stock") under and in accordance with the
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terms and conditions of this Option Agreement; and
WHEREAS, the Board adopted this Option Agreement on the 10th day of March,
1998;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for valuable consideration, the receipt and sufficiency of
which are hereby mutually acknowledged, the parties to this Option Agreement
(hereinafter collectively called the "parties" and individually a "party") agree
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as follows:
AGREEMENT:
1. DEFINITIONS.
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Set forth below are definitions of capitalized terms which are generally
used throughout this Option Agreement and have not been defined elsewhere:
(a) "Act" - The term "Act" is defined as the Securities Act of 1933, as
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amended.
(b) "Code" - The term "Code" is defined as the Internal Revenue Code of
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1986, as amended.
(c) "Disposed Of" - The term "Disposed Of" (or equivalent terms
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"Disposition Of" or "Dispose Of") is defined as any of the following: (i) the
transfer, sale, assignment and/or gift of the Option; (ii) the granting of an
option or any rights with respect to the Option; (iii) the hypothecation,
encumbrance or pledge of the Option; or (iv) the attachment or imposition of a
lien by a creditor of the Optionee on the Option which is not released within
thirty (30) days after the imposition thereof.
(d) "Exchange Act" - The term "Exchange Act" is defined as the Securities
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and Exchange Act of 1934, as amended.
(e) "Expiration Date" - The term "Expiration Date" shall mean 5:00 p.m.
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Pacific Standard Time on the business day immediately preceding the fifth (5th)
annual anniversary of each vesting date (March 10, 2003, March 10, 2004 or
March 10, 2005).
(f) "Fair Market Value" - The term "Fair Market Value" is defined as the
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fair market value of a share of the Company's Common Stock as of a given date
determined as follows:
(i) The closing bid price of a share of the Company's Common Stock
on the principal exchange on which shares of the Company's Common Stock are then
trading, if any, on such date, or, if shares were not traded on such date, then
on the next preceding trading day during which a sale occurred; or
(ii) If such stock is not traded on an exchange but is quoted on
NASDAQ or a successor quotation system, (1) the last sales price (if the stock
is then listed as a National Market Issue under the NASD National Market
System); or (2) the mean between the closing representative bid and asked price
(in all other cases) for the stock on such date as reported by NASDAQ or such
successor quotation system; or
(iii) If such stock is not publicly traded on an exchange and not
quoted on the NASDAQ or a successor quotation system, the fair market value
established by the Board or any committee established by the Board acting in
good faith (without taking into consideration any restrictions placed on the
underlying stock with the exception of those which, by their terms, will never
lapse).
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(g) "Notice of Exercise" - The term "Notice of Exercise" is defined as
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that Notice Of Exercise Of Stock Option in the form of Exhibit "1" attached
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hereto and incorporated herein by this reference.
(h) "Optionee's Successors" - The term "Optionee's Successors" is
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defined as the Optionee's successors by bequest or inheritance or by reason of
death of the Optionee.
(i) "Qualified Code Provisions" - The term "Qualified Code Provisions"
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is defined as Subchapter D of Title A, Chapter 1 of the Code (presently
encompassing Sections 400 to 420 of the Code), as such Subchapter may be amended
from time to time.
(j) "Termination As A Director" - The term "Termination As A Director"
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is defined as the time when the Optionee is no longer a member of the Board as a
result of his death, disability, termination by resignation or retirement or
when the Company fails or refuses to nominate Optionee as a member of the Board
for cause. "Cause" shall be defined as the commission by Optionee of such acts
of dishonesty, fraud or misrepresentation as would prevent the effective
performance of his duties as a director or results in material harm to the
Company's business.
2. GRANT OF OPTION.
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Subject to the terms, conditions and limitations provided herein, the
Company hereby grants a stock option (hereinafter the "Option") to the Optionee
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to purchase (without obligation to do so), in whole or in part, ______________
(______________) shares of Common Stock (hereinafter, collectively and
severally, the "Option Shares") at a purchase price of U.S. __________________s
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(U.S. $______) (hereinafter, per share and in the aggregate, the "Option
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Price").
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3. VESTING OF OPTION SHARES.
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(a) Ordinary Vesting of Unvested Options. Beginning on March 10,
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1998, and on each of the subsequent annual anniversaries of that date as
hereinbelow specified, the percentage of the Option Shares hereinbelow specified
shall become vested; provided, however that there has been no Termination As A
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Director and the Company does not fail or refuse to nominate Optionee as a
director and Optionee is thereafter elected on or prior to such applicable grant
date:
Date Shares
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The term "Vested Option" shall refer to the portion of the Option and the
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underlying Option Shares to the extent the Option is vested. The portion of the
Option Shares which become vested shall be referred to, collectively and
severally, as the "Vested Option Shares".
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The term "Unvested Option" shall refer to the portion of the Option and the
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underlying Option Shares that remain unvested. The portion of the Option Shares
which remain unvested shall be referred to, collectively and severally, as the
"Unvested Option Shares".
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(b) Accelerated Vesting of Unvested Options. Notwithstanding
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Paragraph 3(a), Unvested Options shall immediately vest upon (i) the failure or
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refusal by the Company, without cause,
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to nominate Optionee as a member of the Board or upon the failure of the
shareholders to elect Optionee as a member of the Board; or (ii) the occurrence
of any of the following events: (A) the future sale or disposition by the
Company of substantially all of the business or assets of the Company; (B) the
sale of the capital stock of the Company in connection with the sale or transfer
of a controlling interest in the Company to any group other than the present
stockholders of the Company; (C) the merger or consolidation of the Company with
another corporation as part of a sale or transfer of a controlling interest in
the Company to any group other than the present stockholders of the Company; or
(D) the dissolution or liquidation of the Company.
4. ASSIGNMENT OF OPTIONS.
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Options may not be Disposed Of by the Optionee during his lifetime, nor
exercised by any person other than the Optionee, without the prior written
consent of the Company, which consent the Company may withhold in its sole and
absolute discretion, and such Options shall, upon the Disposition of or exercise
of such Options without the Company's prior written consent, terminate and be
null and void and of no further force and effect. Notwithstanding the
foregoing, Vested Options may, upon the death of the Optionee, be transferred to
the Optionee's Successors, and may thereafter be exercised by the Optionee's
Successors. Provided, however, Vested Options so transferred shall not be
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further Disposed Of by the Optionee's Successors, nor exercised by any person
other than the Optionee's Successors, and the Vested Option so Disposed Of or
exercised shall, upon any such Disposition Of or exercise without the Company's
prior written consent, terminate and be null and void and of no further force
and effect. The Company shall have no obligation, whether express or implied, to
consent to any Disposition Of the Vested Option except as hereinabove expressly
provided.
5. OPTION EXPIRATION DATE.
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(a) Ordinary Expiration. Options shall expire and be null and void
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and of no further force or effect to the extent not exercised by 5:00 p.m.
P.S.T. on the business day immediately preceding the _______ annual anniversary
of each vesting date (_________________).
(b) Early Expiration of Vested Options if Termination As A Director.
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In the event of Termination As A Director or upon the accelerated vesting of
unvested options as discussed hereinabove at Subparagraph 3(b), the Option
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Expiration Date for Vested Options shall be one year after the date of
Termination As A Director or after the date of the event requiring accelerated
vesting of unvested options, if such date is earlier than the date specified in
Paragraph 5(a).
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(c) Termination of Unvested Options. Unvested Options shall
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immediately terminate and be null and void and of no further force and effect
upon Termination As A Director.
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6. EXERCISE AND PAYMENT.
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A Vested Option shall be exercised, in whole or in part, solely by
delivery by the Optionee of all of the following to the Secretary of the Company
at such person's office at the Company prior to the Expiration Date:
(a) The Notice of Exercise, duly executed by the Optionee (or the
Optionee's Successors if permitted pursuant to the terms of Paragraph 4 of this
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Option Agreement), stating the Optionee's intent to exercise such Vested Option
and the number of Vested Option Shares to be purchased by such exercise
(hereinafter, collectively and severally, the "Purchased Option Shares").
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(b) Full payment for the Vested Option Shares to be purchased by
exercise of the Option as follows:
(i) In good funds (in U.S. Dollars) by cash or by check
(provided, however, if the aggregate Option Price for the Vested Option Shares
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to be purchased results in fractions of cents, the Option Price shall be rounded
down); or
(ii) If consented to in writing by the Board (with no obligation
to do so) immediately prior to the time of exercise of the Option, shares of the
Common Stock owned by the Optionee duly endorsed for transfer to the Company
with a Fair Market Value on the date of delivery equal to the aggregate Option
Price of the Vested Option Shares to be purchased by exercise of this Option; or
(iii) Unless prohibited by law, if consented to in writing by the
Board (with no obligation to do so) immediately prior to the time of exercise of
the Option, and subject to the provisions of Regulation G promulgated by the
Federal Reserve Board with respect to "Margin Stock" if the Company and the
Optionee are then subject to such Regulation, by (A) a full recourse promissory
note bearing interest (at a rate as shall then be determined by the Board which
shall not, in any event, be less than a rate as shall preclude the imputation of
interest under the Code or any successor provision) and payable upon such terms
as may be prescribed by the Board, and (B) secured by such security as is then
prescribed by the Board; or
(iv) To the extent the Board consents to consideration pursuant
to the foregoing Subsections (ii) and (iii), any combination of the
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consideration provided in the foregoing Subsections (i), (ii), and (iii), as
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applicable.
(c) In the event that a Vested Option shall be exercised by the
Optionee's Successors, appropriate proof of the right of such person or persons
to exercise such Vested Option.
7. CERTIFICATES; REGISTRATION; LEGENDS.
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(a) Issuance of Certificates. As soon as practicable after complete
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and timely delivery of the Notice Of Exercise and the Option Price with respect
to Vested Options, the Company shall deliver to the Optionee a certificate or
certificates for the Purchased Option Shares.
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(b) Exemptions From Registration And Regulatory Approvals And
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Consents. The Purchased Option Shares shall be issued in reliance upon such
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exemptions from registration or qualification under United States federal and
state securities laws, and under Canadian federal and/or provincial securities
laws, as applicable, that the Company, in its reasonable discretion, shall
determine to be appropriate, including, without limitation:
(i) In the case of United States securities laws, any of the
following: Rule 701 of the Securities Act for employee benefit plans;
Section 3(a)(11) of the Securities Act and Rule 147 promulgated thereto for
intrastate offerings; Section 3(b) of the Securities Act for limited
offerings and Rule 505 of Regulation D promulgated thereto; and/or Section
4(2) of the Securities Act for private offerings and Rule 506 of Regulation
D promulgated thereto, and
(ii) The requirements of any applicable exemptions from
registration or qualification afforded by the securities laws of such
state in which the Optionee is then a resident of and/or domiciled within;
and/or
(iii) The requirements of any applicable exemptions from
registration or qualification afforded by Canadian federal or provincial
securities laws.
If requested by the Company, the Optionee shall provide such further
representations or documents as the Company or its legal counsel, in their
reasonable discretion, deem necessary or advisable in order to effect compliance
with the conditions of any and all of the aforesaid exemptions from United
States and/or Canadian federal, state or provincial registration or
qualification upon which it is relying, or with all applicable rules and
regulations of any applicable securities exchanges.
In the event the Company is unable to obtain, without undue burden or
expense, such consents or approvals as may be required from any applicable
regulatory authority (or may be deemed reasonably necessary or advisable by
counsel from the Company) with respect to the applicable exemptions from United
States and/or Canadian federal or state registration or qualification which the
Company is reasonably relying upon, the Company shall have no obligation under
this Option Agreement to issue or sell the Purchased Option Shares until such
time as such consents or approvals may be reasonably obtained without undue
burden or expense, and the Company shall be relieved of all liability with
respect to its inability to issue or sell the Purchased Option Shares.
The Company shall not be required to register the Purchased Option
Shares under the Securities Act or any applicable Canadian securities law, or
to register or qualify the Purchased Option Shares under the securities laws of
any state, territory or province.
(c) Legend. In the event the Company delivers unregistered shares,
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the Company reserves the right to place the following legend or such other
legend as it deems necessary on the certificate or certificates to comply with
applicable Canadian securities law, the Securities Act, and any state,
territorial, or provincial securities laws, or any exemption from registration
or qualification thereunder which is being relied upon by the Company.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER SECTION 5 OF THE
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SECURITIES ACT OF 1933, OR WITH ANY CANADIAN
REGULATORY AUTHORITY.
Any new, additional or different securities the Optionee may become
entitled to receive with respect to such Option Shares by virtue of a stock
split or stock dividend or any other change in the corporate or capital
structure of the Company shall also bear such legend.
8. SALE OF PURCHASED OPTION SHARES.
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(a) Security Law Requirements for Sale. The Optionee acknowledges
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that he has been informed of the following requirements which must be satisfied
in order to sell any Purchased Option Shares:
(i) With respect to United States or Canadian federal, state or
provincial securities laws, unless the Purchased Option Shares are
registered or qualified, or if not registered or qualified, another
exemption is available which will permit an earlier sale, transfer,
assignment or other disposition of the Purchased Option Shares or any of
them by the Optionee, the Company will not permit the sale, transfer,
assignment or other disposition of the Purchased Option Shares or any of
them except as permitted by Rule 144 of the Securities Act pertaining to
restricted securities and any applicable Canadian securities law.
(ii) For so long as any restrictions placed upon the Option
Shares pursuant to the terms of this Option Agreement are applicable, the
Board may require that the share certificates representing the Option
Shares bear a restrictive legend evidencing said restrictions in such form
and subject to such stop transfer instructions as the Board shall deem
appropriate. The restrictions shall also apply to any new, additional or
different securities the Optionee may become entitled to receive with
respect to such Option Shares by virtue of a stock split or stock dividend
or any other change in the corporate or capital structure of the Company.
The Board shall also have the right, should it elect to do so, to require
the Optionee to deposit the share certificate with the Company or its
agent, endorsed in blank or accompanied by a duly executed irrevocable
stock power or other instrument of transfer, until such time as the
restrictions lapse.
(b) Agreement to Refrain From Resale. Without in any way limiting the
--------------------------------
representations and warranties in this Option Agreement, the Optionee shall,
prior to any sale, transfer, assignment, pledge, hypothecation or other
disposition of the Purchased Option Shares, either:
(i) Furnish the Company with a detailed explanation of the
proposed disposition, and an opinion of the Optionee's counsel in form and
substance satisfactory to the Company to the effect that such disposition
is exempted from and therefore will not require registration of the
Purchased Option Shares under the Act or qualification or registration
under the securities law of Canada or any state, territory or province; and
counsel for the Company shall have concurred in such opinion and the
Company shall have advised the Optionee of such concurrence; or
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(ii) Satisfy the Company that a registration statement on Form
S-1 under the Act (or any other form appropriate for the purpose under the
Act or any form replacing any such form) with respect to the Purchased
Option Shares proposed to be so disposed of shall be
7
then effective; and that such disposition shall have been appropriately
qualified or registered in accordance with any applicable Canadian state,
territorial or provincial securities laws.
(c) Company May Refuse to Transfer. Notwithstanding the foregoing, if
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in the opinion of counsel for the Company, the Optionee has acted in a manner
inconsistent with the promises, conditions or representations and warranties in
this Option Agreement, the Company may refuse to transfer the Purchased Option
Shares until such time as counsel for the Company is of the opinion that such
transfer (i) will not require registration of the Purchased Option Shares under
applicable Canadian securities laws, and/or the Act, or registration or
qualification of the Purchased Option Shares under the applicable securities
laws of any state, province or territory; or (ii) has complied with the Act or
the securities laws of Canada or of any state, province or territory with
respect to the sale or transfer of the Purchased Option Shares by the Optionee.
The Optionee understands and agrees that the Company may refuse to acknowledge
or permit any disposition of the Purchased Option Shares that is not in all
respects in compliance with this Option Agreement and the Company intends to
make an appropriate notation in its records to that effect.
(d) Section 162(m) Advisement. Section 162(m) of the Code states in
-------------------------
pertinent part, "In the case of any publicly held corporation, no deduction
shall be allowed under this chapter for applicable employee remuneration with
respect to any covered employee to the extent that the amount of such
remuneration for the taxable year with respect to such employee exceeds
$1,000,000." If the Optionee is a United States taxpayer, and is receiving this
Option as an officer of the Company, or an individual acting in that capacity,
or if his compensation is required to be reported to the shareholders under the
Securities Exchange Act of 1934 because he is among the 4 highest compensated
individuals to whom remuneration is payable, he shall be considered an
"applicable employee" within the meaning of section 162(m).
9. AMENDMENT OF OPTION AGREEMENT.
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The Board may at any time or from time-to-time, without consent by or
payment of consideration to the Optionee, modify or amend this Option Agreement
in order to: (i) comport with changes in securities, tax or other laws or rules,
regulations or regulatory interpretations thereof applicable to this Option
Agreement or to comply with stock exchange rules or requirements; or (ii) to
ensure that this Option Agreement is and remains or shall become exempt from the
application of any participation, vesting, benefit accrual, funding, fiduciary,
reporting, disclosure, administration or enforcement requirement of either ERISA
or the Qualified Code Provisions.
10. INTERPRETATION OF AGREEMENT.
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The Board shall, in its sole and absolute discretion, determine the
effect of all matters and questions relating to this Option Agreement including,
without limitation, any matters and questions pertaining to Termination As A
Director. All actions taken and all interpretations and determinations made
under this Option Agreement in good faith by the Board shall be final and
binding upon the Optionee, the Company, and all other interested persons. No
member of the Board shall be personally liable for any action taken or decision
made in good faith relating to this Option Agreement.
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11. TAX MATTERS.
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(a) Income Tax Consequences. The Optionee (if a United States
-----------------------
taxpayer) acknowledges that he has been informed and understands that the Option
is a "non-qualified" stock option which is subject to taxation under Section 83
of the Code. As such the Optionee will be required, in the year of exercise of
the Option, to recognize as compensation income (taxable at ordinary income tax
rates) an amount equal to the difference between the fair market value of the
Purchased Option Shares as of the date of exercise and the exercise price for
the Purchased Option Shares. When the Optionee later sells or disposes of the
Purchased Option Shares he will recognize, as capital gain income (assuming he
has held the Purchased Option Shares for the requisite period of time and
investment purposes) an amount equal to the difference between his amount
realized for such Purchased Option Shares and his basis for such Purchased
Option Shares (which will correspond with the fair market value of the Purchased
Option Shares as of the date of exercise).
The Optionee also understands that Section 83(b) of the Code, which
would ordinarily permit a taxpayer to elect to accelerate taxation to the year
of grant, in order to avoid taxation on future appreciation in the fair market
value of the underlying stock at ordinary income tax rates, will not be
available with respect to the Purchased Option Shares due to the unascertainable
value of the Option as of the date of the grant. See Section 83(e)(3) of the
Code and Treasury Regulation Sections 1.83-8(a)(iii) and 1.83-7(b)(i).
(b) Tax Withholding. As a condition of the grant of this Option
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and/or the issuance or transfer of any certificate or certificates for the
Purchased Option Shares upon exercise of a Vested Option, the Company shall have
the right to report compensation income to the Optionee (if a United States
taxpayer) pursuant to Section 83 of the Code in the year of exercise of the
Option and, in order for the Company to claim a deduction pursuant to Section
83(h) of the Code in connection therewith, to require the Optionee to remit to
the Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements incident to exercise. For withholding tax
purposes, the Purchased Option Shares shall be valued on the date the
withholding obligation is incurred.
(c) Reliance Upon Independent Advisors. THE OPTIONEE ACKNOWLEDGES
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THAT THE OPTIONEE HAS CONSULTED WITH AND IS RELYING SOLELY UPON THE ADVICE OF
THE OPTIONEE'S OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE
GRANT AND EXERCISE OF THIS OPTION AND THE SUBSEQUENT DISPOSITION OF THE
PURCHASED OPTION SHARES AND THE EFFECT OF SAME UPON THE OPTIONEE'S PERSONAL
FINANCIAL CIRCUMSTANCES. THE OPTIONEE ACKNOWLEDGES AND AGREES THAT THIS
PARAGRAPH IS INTENDED MERELY TO GENERALLY POINT OUT THE COMPLEXITY OF UNITED
STATES FEDERAL TAX LAW WITH RESPECT TO THE TAX TREATMENT OF NON-QUALIFIED STOCK
OPTIONS AND IS NOT INTENDED AS A COMPREHENSIVE OR DETAILED SUMMARY OR ANALYSIS
OF UNITED STATES FEDERAL TAX LAW OR OF ANY CANADIAN TAX LAW WHICH MAY BE
APPLICABLE, AS SUCH LAWS APPLY TO NON-QUALIFIED STOCK OPTIONS, AND THEREFORE
SHALL NOT BE DEEMED TO CONSTITUTE A REPRESENTATION OR WARRANTY BY THE COMPANY OR
ANY OF ITS OFFICERS, DIRECTORS AND AGENTS WITH RESPECT TO SUCH TAX CONSEQUENCES,
AND SHOULD NOT BE RELIED UPON BY THE OPTIONEE.
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12. SHAREHOLDER RIGHTS
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The Optionee shall not be, nor have any of the rights or privileges
of, a shareholder of the Company with respect to the Purchased Option Shares
unless and until all conditions for exercise of the Option and the issuance of
certificates for the Purchased Option Shares shall be satisfied, at which time
the Optionee shall become a shareholder of the Company with respect to the
Purchased Option Shares and as such shall thereafter be fully entitled to
receive dividends (if any are declared and paid), to vote and to exercise all
other rights of a shareholder with respect to the Purchased Option Shares.
13. ADJUSTMENTS.
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(a) Subdivision or Stock Dividend. If outstanding shares of the
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Common Stock of the Company shall be subdivided into a greater number of shares,
or a dividend in Common Stock shall be paid in respect of the Common Stock, the
Option Price of the outstanding Options in effect immediately prior to such
subdivision or at the record date of such dividend shall, simultaneously with
the effectiveness of such subdivision or immediately after the record date of
such dividend, be proportionately reduced; and conversely, if the outstanding
shares of the Common Stock of the Company shall be combined into a smaller
number of shares, the Option Price of any outstanding Option in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased.
(b) Adjustment to Option Price. When any adjustment is required to be
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made in the Option Price, the number of shares purchasable upon the exercise of
any outstanding Option shall be adjusted to that number of shares determined by
(i) multiplying an amount equal to the number of shares purchasable upon the
exercise of the Option immediately prior to such adjustment by the Option Price
in effect immediately prior to such adjustment, and then (ii) dividing that
product by the Option Price in effect immediately after such adjustment.
Provided, however, no fractional shares shall be issued, and any fractional
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shares resulting from the computations pursuant to this Paragraph 13 shall be
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eliminated from the Option.
(c) Capital Reorganization or Reclassification; Consolidation or
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Merger. In case of any capital reorganization or any reclassification of the
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Common Stock of the Company (other than a recapitalization hereinabove described
in Subparagraph (a) of this Paragraph 13), or the consolidation or merger of the
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Company with another entity, the Optionee shall thereafter be entitled upon
exercise of the Option to purchase the kind and number of shares of stock or
other securities or property of the Company receivable upon such event by a
holder of the number of shares of the Common Stock of the Company, which such
Option entitles the holder to purchase from the Company immediately prior to
such event. In every such case, appropriate adjustment shall be made in the
application of the provisions set forth in this Option Agreement with respect to
the rights and interests thereafter of the Optionee, to the end that the
provisions set forth in this Option Agreement (including the specified changes
and other adjustments to the Option Price) shall thereafter be applicable in
relation to any shares or other property thereafter purchasable upon exercise of
the Option.
(d) Dissolution or Liquidation of Company. Subject to Paragraph 3(b)
-------------------------------------
above, a dissolution or liquidation of the Company shall cause the outstanding
Option to terminate.
(e) Adjustments Determined in Sole Discretion of Board. To the extent
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that the
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foregoing adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive.
(f) No Other Rights to Optionee. Except as expressly provided in
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this Paragraph 13, (i) the Optionee shall have no rights by reason of any
------------
subdivision or consolidation of shares of stock of any class or the payment of
any stock dividend or any other increase or decrease in the number of shares of
stock of any class; and (ii) the dissolution, liquidation, merger, consolidation
or split-up or sale of assets or stock to another corporation, or any issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of, or the Option Price for,
the shares. The grant of an Option pursuant to this Option Agreement shall not
affect in any way the right or power of the Company to made adjustments,
reclassification, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
14. PERFORMANCE ON BUSINESS DAY.
---------------------------
In the event the date on which a party is required to take any
action under the terms of this Option Agreement is not a business day, the
action shall be deemed to be required to be taken on the next succeeding
business day.
15. NON-LIABILITY FOR DEBTS.
-----------------------
The Options, and each and every interest or right therein or
part thereof, shall not be liable for the debts, contracts, or engagements of
the Optionee or the Optionee's heirs, successors and assigns.
16. ADOPTION OF ARTICLES AND BYLAWS.
-------------------------------
The Optionee hereby adopts, accepts and agrees to be bound by
all the terms and provisions of the Articles of Incorporation and Bylaws of the
Company and to perform all obligations therein imposed upon a holder with
respect to the Purchased Option Shares.
17. MISCELLANEOUS.
-------------
(a) Preparation. It is acknowledged by each party that such
-----------
party either had separate and independent advice of counsel or the opportunity
to avail itself of same. In light of these facts it is acknowledged that no
party shall be construed to be solely responsible for the drafting hereof, and
therefore any ambiguity shall not be construed against any party as the alleged
draftsman of this Option Agreement.
(b) Cooperation. Each party agrees, without further
-----------
consideration, to cooperate and diligently perform any further acts, deeds and
things and to execute and deliver any documents that may from time to time be
reasonably required to consummate, evidence, confirm and /or carry out the
intent and provisions of this Option Agreement, all without undue delay or
expense.
11
(c) Interpretation.
--------------
(i) Entire Agreement/No Collateral Representations. EACH PARTY
----------------------------------------------
EXPRESSLY ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO: (1) IS THE FINAL, COMPLETE AND EXCLUSIVE STATEMENT OF
THE AGREEMENT OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF; (2)
SUPERSEDES ANY PRIOR OR CONTEMPORANEOUS PROMISES, ASSURANCES, GUARANTEES,
REPRESENTATIONS, UNDERSTANDINGS, CONDUCT, PROPOSALS, CONDITIONS, COMMITMENTS,
ACTS, COURSE OF DEALING, WARRANTIES, INTERPRETATIONS OR TERMS OF ANY KIND, ORAL
OR WRITTEN (HEREINAFTER COLLECTIVELY CALLED THE "PRIOR AGREEMENTS"), AND THAT
----- ----------
ANY SUCH PRIOR AGREEMENTS ARE OF NO FORCE OR EFFECT EXCEPT AS EXPRESSLY SET
FORTH HEREIN; AND (3) MAY NOT BE VARIED, SUPPLEMENTED OR CONTRADICTED BY
EVIDENCE OF SUCH PRIOR AGREEMENTS, OR BY EVIDENCE OF SUBSEQUENT ORAL AGREEMENTS.
Any agreement hereafter made shall be ineffective to modify, supplement or
discharge the terms of this Option Agreement, in whole or in part, unless such
agreement is in writing and signed by the party against whom enforcement of the
modification, supplement or is sought.
(ii) Waiver. No breach of any agreement or provision herein
------
contained, or of any obligation under this Option Agreement, may be waived, nor
shall any extension of time for performance of any obligations or acts be deemed
an extension of time for performance of any other obligations or acts contained
herein, except by written instrument signed by the party to be charged or as
otherwise expressly authorized herein. No waiver of any breach of any agreement
or provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof, or a waiver or relinquishment of any other agreement
or provision or right or power herein contained.
(iii) Remedies Cumulative. The remedies of each party under this
-------------------
Option Agreement are cumulative and shall not exclude any other remedies to
which such party may be lawfully entitled.
(iv) Severability. If any term or provision of this Option
------------
Agreement or the application thereof to any person or circumstance shall, to any
extent, be determined to be invalid, illegal or unenforceable under present or
future laws effective during the term of this Option Agreement, then and, in
that event: (1) the performance of the offending term or provision (but only to
the extent its application is invalid, illegal or unenforceable) shall be
excused as if it had never been incorporated into this Option Agreement, and, in
lieu of such excused provision, there shall be added a provision as similar in
terms and amount to such excused provision as may be possible and be legal,
valid and enforceable; and (2) the remaining part of this Option Agreement
(including the application of the offending term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable) shall not be affected thereby and shall continue in full force
and effect to the fullest extent provided by law. Anything in the preceding
sentence to the contrary notwithstanding, should any aspect of this Option
Agreement be determined by any Court of law or by any regulatory agency having
jurisdiction over this Option Agreement not to be exempt from the application of
the participation, vesting, benefit accrual, funding, fiduciary, reporting,
disclosure, administration or enforcement requirement of either (1) ERISA or (2)
the Qualified Code Provisions, then this entire Option Agreement shall, at the
election of the Company (without obligation to make such election), be null and
void and of no further force or effect. Provided, however, the Company shall not
-------- -------
be entitled to make such election in the event (A) the Company made application
to such
12
Court of law or regulatory agency to find or determine this Option Agreement to
be subject to application of any of the participation, vesting, benefit accrual,
funding, fiduciary, reporting, disclosure, administration or enforcement
requirements of either ERISA or the Qualified Code Provisions, or (B) the
actions or participation of the Optionee or Optionee's agents were not directly
or indirectly involved in or a factor of such Court of law or regulatory agency
considering or pursuing such action.
(v) Time is of the Essence. It is expressly understood and
----------------------
agreed that time of performance is strictly of the essence with respect to each
and every term, condition, obligation and provision hereof and that the failure
to timely perform any of the terms, conditions, obligations or provisions hereof
by any party shall constitute a material breach of and a non-curable (but
waivable) default under this Option Agreement by the party so failing to
perform.
(vi) No Third Party Beneficiary. Notwithstanding anything else
--------------------------
herein to the contrary, the parties specifically disavow any desire or intention
to create a "third party" beneficiary contract, and specifically declare that no
person or entity, save and except for the parties or their successors, shall
have any rights hereunder nor any right of enforcement hereof.
(vii) No Reliance Upon Prior Representation. Each party
-------------------------------------
acknowledges that no other party has made any oral representation or promise to
such party which representation or promise would induce such party prior to
executing this Option Agreement to change its position to its detriment,
partially perform, or part with value in reliance upon such representation or
promise; such party acknowledges that it has taken such action at its own risk;
and such party represents that it has not so changed its position, performed or
parted with value prior to the time of its execution of this Option Agreement.
(viii) Headings; References; Incorporation; Gender. The headings
-------------------------------------------
used in this Option Agreement are for convenience and reference purposes only,
and shall not be used in construing or interpreting the scope or intent of this
Option Agreement or any provision hereof. References to this Option Agreement
shall include all amendments or renewals thereof. All cross-references in this
Option Agreement, unless specifically directed to another agreement or document,
shall be construed only to refer to provisions within this Option Agreement, and
shall not be construed to be referenced to the overall transaction or to any
other agreement or document. Any Exhibit referenced as attached to this Option
Agreement shall be construed to be incorporated into this Option Agreement by
such reference. As used in this Option Agreement, each gender shall be deemed to
include each other gender, including neutral genders or genders appropriate for
entities, if applicable, and the singular shall be deemed to include the plural,
and vice versa, as the context requires.
(d) Enforcement.
-----------
(i) Applicable Law. THIS OPTION AGREEMENT AND THE RIGHTS AND
--------------
REMEDIES OF EACH PARTY ARISING OUT OF OR RELATING TO THIS OPTION AGREEMENT
(INCLUDING, WITHOUT LIMITATION, EQUITABLE REMEDIES) SHALL BE SOLELY GOVERNED BY,
INTERPRETED UNDER, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEVADA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES AS
IF THIS OPTION AGREEMENT WERE MADE, AND AS IF ITS OBLIGATIONS ARE TO BE
PERFORMED, WHOLLY WITHIN THE STATE OF NEVADA.
13
(ii) Consent to Jurisdiction. ANY ACTION OR PROCEEDING ARISING
-----------------------
OUT OF OR RELATING TO THIS OPTION AGREEMENT SHALL BE FILED IN AND HEARD AND
LITIGATED SOLELY BEFORE THE STATE COURTS OF NEVADA. EACH PARTY GENERALLY AND
UNCONDITIONALLY ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND WAIVES ANY
DEFENSE OR RIGHT TO OBJECT TO VENUE IN SAID COURTS BASED UPON THE DOCTRINE OF
"FORUM NON CONVENIENS". EACH PARTY IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGEMENT RENDERED THEREBY IN CONNECTION WITH THIS OPTION AGREEMENT.
(e) Successors and Assigns. Subject to the terms of this Option
----------------------
Agreement prohibiting the assignment of Options, all of the representations,
warranties, covenants, conditions and provisions of this Option Agreement shall
be binding upon and shall inure to the benefit of each party and such party's
respective heirs, executors, administrators, legal representatives, Successors
and/or assigns, whichever the case may be.
(f) Notices. Unless otherwise specifically provided in this Option
-------
Agreement, all notices, demands, requests, consents, approvals or other
communications (collectively and severally called "Notices") required or
-------
permitted to be given hereunder, or which are given with respect to this Option
Agreement, shall be in writing, and shall be given by: (i) personal delivery
(which form of Notice shall be deemed to have been given upon delivery); (ii) by
telegraph or by private airborne/overnight delivery service (which forms of
Notice shall be deemed to have been given upon confirmed delivery by the
delivery agency); (iii) by electronic or facsimile or telephonic transmission,
provided the receiving party has a compatible device or confirms receipt thereof
(which forms of Notice shall be deemed delivered upon confirmed transmission or
confirmation of receipt); or (iv) by mailing in the United States mail by
registered or certified mail, return receipt requested, postage prepaid (which
forms of Notice shall be deemed to have been given upon the fifth [5th] business
day following the date mailed). Each party, and their respective counsel,
hereby agree that if Notice is to be given hereunder by such party's counsel,
such counsel may communicate directly with all principals, as required to comply
with the foregoing notice provisions. Notices shall be addressed to the Company
and the Optionee at the addresses hereinabove set forth in the introductory
paragraph of this Option Agreement, or to such other address as the receiving
party shall have specified most recently by like Notice, with a copy to the
other parties hereto. Any Notice given to the estate of a party shall be
sufficient if addressed to the party as provided in this Paragraph.
(g) Counterparts. This Option Agreement may be executed in 2 or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute but one and the same instrument, binding on all
parties hereto. Any signature page of this Option Agreement may be detached
from any counterpart of this Option Agreement and reattached to any other
counterpart of this Option Agreement identical in form hereto but having
attached to it one or more additional signature pages.
(h) Execution by All Parties Required to be Binding. This Option
-----------------------------------------------
Agreement shall not be construed to be an offer and shall have no force and
effect until this Option Agreement is fully executed by all parties hereto.
14
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to
execute and attest this Option Agreement, and to apply the corporate seal
hereto, and the Optionee has placed his or her signature hereon, at the City of
Calgary, Alberta, Canada, effective as of the Grant Date.
COMPANY:
Pinnacle Oil International, Inc.
a Nevada corporation
By:
-----------------------------
OPTIONEE:
--------------------------------
15
Exhibit "1"
to
Non-Qualified Stock Option Agreement
NOTICE OF EXERCISE OF STOCK OPTION
----------------------------------
16
NOTICE OF EXERCISE OF STOCK OPTION
----------------------------------
(To be signed by Optionee only upon exercise of Option)
TO: President
Pinnacle Oil International, Inc.
Suite 750 Phoenix Place
840 - 7th Avenue S.W.
Calgary, Alberta, Canada T2P 3G2
The undersigned, the Optionee under that certain Non-Qualified Stock Option
Agreement dated March 10, 1998 (hereinafter the "Option Agreement"), between
----------------
Pinnacle Oil International, Inc., a Nevada corporation (hereinafter the
"Company") and the undersigned, hereby irrevocably elects, in accordance with
-------
the terms and conditions of the Option Agreement, to exercise the undersigned's
Option (as such term is defined by Paragraph 2 of the Option Agreement) to
-----------
purchase /(1)/ shares of the Common Stock of the
---------------------------
Company ("Common Stock"), and encloses herewith good funds in the amount of
------------
$ /(2)/ in full payment therefor/(3)/.
---------------------
/(1)/ Insert number of Vested Option Shares (as defined by Paragraph 2 of
-----------
the Option Agreement) which Optionee is exercising his Option to
purchase.
/(2)/ Number of Option Shares multiplied by the Option Price per share set
forth in Paragraph 2 of the Option Agreement (U.S. $8.31 per share).
-----------
/(3)/ Unless the Company permits payment pursuant to the alternatives set
forth in Paragraph 6 of the Option Agreement.
-----------
The undersigned hereby remakes all representations, warranties and
covenants set forth in the Option Agreement as of the date of this Notice, all
of which shall survive the closing with respect to the shares of Common Stock
purchased hereby.
(Signature must conform in all respects to name of Optionee
as specified on the Option Agreement, unless the undersigned
is Optionee's Successor, in which case the undersigned must
submit appropriate proof of the right of the undersigned to
exercise the Option)
Signature:
-----------------------------
Print Name:
-----------------------------
Address:
-----------------------------
-----------------------------
Date:
-----------------------------