STOCK OPTION AGREEMENT
THIS NON-INCENTIVE STOCK OPTION AGREEMENT (this "Agreement") is made and
entered into as of June 23, 2006, by and between Indigo-Energy, Inc., a Nevada
corporation (the "Company"), and HUB Energy, LLC, a Pennsylvania limited
liability company (the "Holder" and together with the Company, the "Parties"
each a "Party").
This Agreement is made pursuant to the Advisory Services Agreement, dated
as of June 23, 2006 by and between the Parties (the "Advisory Services
Agreement"). For good and valuable consideration, the Parties hereby agree as
follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the meanings given to such terms in the Advisory Services Agreement.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Common Stock" means the common stock of the Company, par value $.001
per share;
(b) "Option(s)" has the meaning set forth in paragraph 2 herein;
(c) "Option Shares" means the Stock (as defined below) underlying the
Options (as defined below);
(d) "Stock" means collectively the Common stock and Preferred Stock of the
Company;
2. Issuance of Stock Options.
(a) Pursuant to the terms of the Advisory Services Agreement, the Company
hereby grants to the Holder, options (the "Options") exercisable into shares of
the Company's Stock, at a price and in the amounts set forth in Schedule A
attached hereto. The Options shall become exercisable upon achievement of the
milestones (the "Milestones") set forth in Schedule A attached hereto.
(b) Status of Option(s). The Option(s) are non-qualified stock options.
3. Right to Exercise. The Options issued herein shall vest and be
exercisable in whole or in part when the Milestones as set forth in Schedule A
are reached.
(a) Option Exercise and Payment. The Options may be exercised by written
notice to the Company, in form and substance satisfactory to the Company, which
must state the election to exercise the Options, the number of shares of Stock
for which the Option is being exercised and such other representations and
agreements as to your investment intent with respect to such shares as may be
required pursuant to the provisions of this Agreement. The written notice must
be accompanied by full payment of the exercise price for the number of shares of
stock being purchased.
-1-
(b) Cashless Exercise. The holder shall also have the right to exercise
options by receiving in shares the difference between the option price and the
fair market value of the stock at the time of exercise.
(c) In the event a change in control occurs, all options will become
immediately exercisable.
Change in Control shall be deemed to have occurred if:
(i) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes a "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than 35% of the voting
power of the then outstanding securities of the Company, and such
person owns more aggregate voting power of the Company's then
outstanding securities entitled to vote generally in the election of
directors than any other person;
(ii) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing
for (x) the merger of consolidation of the Company with another
corporation where the shareholders of the Company, immediately prior
to the merger or consolidation, will not beneficially own,
immediately after the merger or consolidation, shares entitling such
shareholders to 50% or more of all votes to which all shareholders
of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock
to elect directors by a separate class vote), (y) the sale or other
disposition of all or substantially all of the assets of the
Company, or (z) a liquidation or dissolution of the Company; or
(iii) directors are elected such that a majority of the members of
the Board shall have been members of the Board for less than two
years, unless the election or nomination for election of each new
director who was not a director at the beginning of such two-year
period was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning
of such period.
(c) Effect of Failure to Exercise. Any failure by Holder to exercise any
Options, or any exercise for less than all shares purchasable under the Option,
shall not affect Holder's right to exercise the unexercised portion at a later
time.
4. Piggyback Registration. In the event that the Company proposes to
register any of its Stock, under the Securities Act of 1933, as amended (the
"Securities Act"), whether or not for sale for its own account, in a manner that
would permit registration of registerable securities for sale for cash to the
public under the Securities Act, it shall afford the Holder piggyback
registration rights of its registerable shares pursuant to the Registration
Rights Agreement, attached hereto as Exhibit A.
-2-
5. Capital Adjustments. In the event that Stock is changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company, whether through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split-up or other substitution of
securities of the Company, the Board shall make appropriate equitable
anti-dilution adjustments to the number and class of shares of stock available
for issuance under this Agreement and to the option price. Any reference to the
option price in this Agreement shall be a reference to the option price as so
adjusted.
6. Form of Payment. The Option exercise price may be paid, in whole or in
part, (i) in cash, by check, or by cash equivalent, or (ii) by any other form of
payment permitted by the Company.
7. Representations and Warranties. The Company represents and warrants
that:
(a) Existence and Rights. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of Nevada. The
Company has all requisite corporate power and authority, to carry on its
business and to own and use the properties owned and used by it. The Company is
qualified to conduct business and is in good standing under the laws of each
jurisdiction wherein the nature of its business or its ownership of property
requires it to be so qualified, except where the failure to be so qualified,
would not individually or in the aggregate, have a material adverse effect on
the assets or business of the Company.
(b) Corporate Authorization. The Company has all necessary power and
authority to enter into this Agreement and has taken all action, specifically
including, without limitation, all corporate action, necessary to execute,
deliver and perform this Agreement. This Agreement has been duly authorized,
executed and delivered by the Company and is a legally valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
(c) No Conflict. The execution, delivery and performance of this Agreement
and of the related documents by the Company will not violate any provision of
the Company's Articles of Incorporation or the Bylaws; or violate any law or
rule or regulation of any administrative agency or governmental body; or any
order, writ, injunction or decree of any court, arbiter, administrative agency
or governmental authority having jurisdiction over the Company; or violate any
indenture, mortgage, contract, will, agreement or other undertaking to which the
Company is a party or is subject, or result in the creation or imposition of any
lien or encumbrance on any of the properties of the Company under any of the
foregoing.
(d) Litigation. There is no litigation, proceeding, dispute, tax audit or
other governmental investigation pending, or to the best of the Company's
knowledge, threatened against, or affecting the Company's business or its assets
before any court or governmental agency or other body, which would adversely
affect the financial condition of The Company, its assets, or the conduct of the
Company's business, or which may impede the transaction contemplated herein.
There are no outstanding and unpaid judgments, tax deficiencies, statements, or
notices of assessments or other demands for payment of taxes served on or filed
against the Company. The Company is not in default with respect to an order,
writ, injunction, decree or demand of any court or other governmental or
regulatory authority.
-3-
8. Miscellaneous.
(a) Notices. Any notice or other communication required or permitted to be
given under this Agreement shall be deemed given when received in writing by the
Parties at the address below or to such other address or the attention of such
other party as the Parties shall advise the other by written notice given in
conformity herewith:
If to the Company: Indigo-Energy, Inc.
13350 Random Hills Road
Suite 800
Fairfax, VA 22030
Tel: (703) 934-6189
Fax:(703) 591-3049
Attention: David Larson
With a Copy to: Gersten Savage, LLP
600 Lexington Avenue
New York, New York, 10022
Attention: Arthur S. Marcus, Esq.
If to the Advisor: HUB Energy, LLC
255 Airport Road
Indiana, PA 15701
Tel: (724) 349-6690
Attention: Mark A. Thompson
or to such other address or the attention of such other party as the Parties
shall advise the other by notice in conformity herewith.
(b) Partial Invalidity. Each part of this Agreement is intended to be
separate. If any term, covenant, condition or provision hereof is illegal or
invalid or unenforceable for any reason whatsoever, such illegality, invalidity
or unenforceability shall not affect the legality, validity or enforceability of
the remaining parts of this Agreement and all such remaining parts hereto shall
not be impaired or invalidated in any way, but shall be legal, valid and
enforceable and have full force and effect as if the illegal, invalid,
unenforceable part has not been included.
(c) Law Governing Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without giving effect to its conflict of laws provisions. Venue shall be the
court of Common Pleas, Indiana, PA.
(d) Entire Agreement. This Agreement constitutes the entire understanding
and Agreement of the parties hereto, and supersedes any and all prior
understandings or other Agreements, either oral or in writing, if any, among
such parties with respect to the subject matter hereof and contains all of the
covenants and Agreements between the parties with respect thereto. Each party to
this Agreement acknowledges that no representations, inducements, or Agreements,
oral or otherwise, have been made by such party, or anyone acting on behalf of
such party, which are not embodied herein, and no other Agreement, statement or
promise not contained in this Agreement shall be valid or binding. The parties
hereto have had an opportunity to consult with their respective attorneys
concerning the meaning and the import of this Agreement and each has read this
Agreement, as signified by their signatures below, and is executing the same for
the purposes and consideration herein expressed.
-4-
(e) Waivers. No delay on the part of any party in exercising any right,
power, or privilege hereunder shall operate as a waiver thereof. Nor shall any
waiver on the part of any party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege. The rights and remedies of any party based upon, arising out of or
otherwise in respect of any inaccuracy in or breach by any other party of any
representation, warranty, covenant or Agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant or Agreement contained in this Agreement (or in any other Agreement
between the parties) as to which there is no inaccuracy or breach.
(f) Tax Consultation. Each Party acknowledges that it has had the
opportunity to and has consulted with their own separate independent accounting
and tax advisors in connection with the accounting and tax treatment for the
transactions contemplated hereby and the tax ramifications thereof. Each Party
shall bear all risk in connection with the accounting and tax treatment of the
transactions contemplated by this Agreement and no Party is relying on the other
Party in connection with the same.
(g) Variations in Pronouns. Wherever the context shall so require, all
words herein in the male gender shall be deemed to include the female or neuter
gender and vice versa, all singular words shall include the plural, and all
plural words shall include the singular. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
(h) Headings. The headings used in this Agreement are for administrative
purposes only and do not constitute substantive matter to be considered in
construing the terms and shall not affect the interpretation of this Agreement.
All references herein to Sections, subsections, and clauses, shall be deemed
references to such parts of this Agreement, unless the context shall otherwise
require. A reference to an article or section will mean an article or section in
this Agreement, unless otherwise explicitly set forth. The titles and headings
in this Agreement are for reference purposes only and will not in any manner
limit the construction of this Agreement. For the purposes of such construction,
this Agreement will be considered as a whole. The terms "including" and
"include" as used in this Agreement will be deemed to include the phrase
"without limitation."
(i) Attorney's Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs, and necessary
disbursements, but only from the offending party, in addition to any other
relief to which it may be entitled.
-5-
(j) Representation by Counsel. Each Party acknowledges that it has had the
opportunity to be represented by separate independent counsel in the negotiation
of this Agreement, that any such respective attorneys were of its own choosing,
that each authorized representative has read this Agreement and that he
understands its meaning and legal consequences to each party. Each Party
warrants and represents that he has consulted with his attorney of choice, or
voluntarily chose not to do so, concerning the execution, the meaning and the
import of this Agreement, and has read this Agreement and fully understands the
terms hereof as signified by his signature below, and is executing the same of
his own free will for the purposes and consideration herein expressed. Each
Party warrants and represents that he has had sufficient time to consider
whether to enter into this Agreement and that he is relying solely on his own
judgment and the advice of his own counsel, if any, in deciding to execute this
Agreement. Each Party warrants and represents that he has read this Agreement in
its entirety and has consulted with his attorney, if any concerning the
execution of this Agreement. If any or all Parties have chosen not to seek
counsel, said party or parties hereby acknowledge that he or they refrained from
seeking counsel entirely of his or their own volition and with full knowledge of
the consequences of such a decision.
(k) Capacity. Each party represents and warrants that he has the authority
to enter into this Agreement either on his own behalf or in an official capacity
on behalf of a corporate party.
(l) Further Assurances. At any time and from time to time after the date
hereof, at the request of any Party, and without further consideration, every
other party will execute and deliver such other and further instruments and
documents, and take such other action as the other Party may reasonably deem
necessary, convenient or desirable in order to more effectively assist any Party
in exercising all rights with respect thereto, and carrying out the business,
duties, and obligations created by this Agreement.
(m) Amendments. This Agreement may not be modified, amended, superceded,
cancelled, renewed or extended, except in writing, signed by the party or
parties to be bound thereby or signed by their respective attorneys.
-6-
(n) Binding Effect and Assignment. This Agreement and the terms,
covenants, conditions, provisions, obligations, undertakings, rights and
benefits hereof, shall be binding upon, and shall inure to the benefit of, the
undersigned parties and their respective heirs, executors, administrators,
representatives, officers, directors, Company, successors, agents, servants,
employees, attorneys, and assigns. This Agreement and any rights hereunder are
freely assignable by Investor to the extent that Investor has assigned or sold
any Warrant or portion thereof. This Agreement shall inure to the benefit of and
bind the Parties hereto and their respective legal representatives, successors,
and permitted assigns.
(o) Counterparts. This Agreement may be executed in several counterparts
by one or more of the undersigned and all such counterparts so executed shall
together be deemed and constitute one final Agreement, as if one document had
been signed by all parties hereto; and each such counterpart shall be deemed an
original, binding the parties subscribed hereto and multiple signature pages
affixed to a single copy of this Agreement shall be deemed to be a fully
executed original Agreement. Several counterparts consisting of multiple copies
hereof each signed by less than all parties, but together signed by all parties
shall constitute and be deemed a fully executed original Agreement.
(p) Corporate Authority. The Company represents and warrants to the
Investor other that it has previously taken the necessary corporate action
authorizing the execution of this Agreement and the undertakings to be
accomplished hereunder by its officer recited below.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-7-
IN WITNESS WHEREOF, the Parties have executed this Stock Option Agreement
as of the date first written above.
INDIGO-ENERGY, INC.
By: /s/ David Larson
--------------------------
Name: David Larson
Title: President
HUB ENERGY, LLC
By: /s/ Mark A. Thompson
--------------------------
Name: Mark A. Thompson
Title: President
Signature Page to the Stock Option Agreement