NATURAL GAS SYSTEMS, INC.
2004 STOCK PLAN
STOCK OPTION AGREEMENT
Name of Optionee: Xxxxxxxx X. XxXxxxxx
Optioned Shares: 350,000 shares of common stock, $0.001 par
value, of Natural Gas Systems, Inc.
Type of Option: INCENTIVE STOCK OPTION
Exercise Price Per Share: $1.80
Option Grant Date: April 4, 2005
Vesting Commencement Date April 4, 2005
Date Option Becomes Exercisable: This Option may be exercised with respect to
an 1/16TH of the total Optioned Shares
subject to this option when the Optionee
completes each three months of continuous
employment starting from the Vesting
Commencement Date. This option may become
exercisable on an accelerated basis under
Section 8 of this Stock Option Agreement.
Expiration Date of Option: April 4, 2015 This Option expires earlier if
the Optionee's employment terminates
earlier, as provided in Section 11 of the
Plan.
This Stock Option Agreement (this "Agreement") is executed and
delivered as of April 4, 2005 by and between Natural Gas Systems, Inc., a Nevada
corporation (the "Company") and the Xxxxxxxx X. XxXxxxxx. The Optionee and the
Company hereby agree as follows:
1. The Company, pursuant to the Natural Gas Systems, Inc. 2004 Stock Plan
(the "Plan"), which is incorporated herein by reference, and subject to
the terms and conditions thereof, hereby grants to the Optionee an
option to purchase the Optioned Shares at the Exercise Price Per Share.
2. The option granted hereby ("Option") shall be treated as an incentive
stock option under the Internal Revenue Code.
3. The Option granted hereby shall terminate, subject to the provisions of
the Plan, no later than at the close of business on the Expiration
Date.
4. The Optionee shall comply with and be bound by all the terms and
conditions contained in the Plan, as incorporated by reference herein.
5. Options granted hereby shall not be transferable except by will or the
laws of descent and distribution. During the lifetime of the Optionee,
the Option may be exercised only by the Optionee, the guardian or legal
representative of the Optionee.
6. The obligation of the Company to sell and deliver any stock under this
Option is specifically subject to all provisions of the Plan and all
applicable laws, rules, regulations and governmental and stockholder
approvals.
7. Any notice by the Optionee to the Company hereunder shall be in writing
and shall be deemed duly given only upon receipt thereof by the Company
at its principal offices. Any notice by the Company to the Optionee
shall be in writing and shall be deemed duly given if mailed to the
Optionee at the address last specified to the Company by the Optionee.
8. In addition to the change of control provisions specified under Section
14(e) of the Plan and the other conditions set forth in this Agreement,
the Company hereby agrees that all or part of this Option may be
exercised prior to its expiration at the time or times set forth below:
(a) If the Company is subject to a Change in Control (as
defined in below in this Agreement and not as defined in the Plan)
before the Optionee's employment terminates, this Option shall become
exercisable in full if and only if (i) this Option does not remain
outstanding following the Change in Control; (ii) this Option is not
assumed by the surviving corporation or its parent; (iii) the surviving
corporation or its parent does not substitute an option with
substantially the same terms for this Option; OR (iv) the full value of
the vested shares under this Option is not settled in cash or cash
equivalents.
(b) If the Option is not exercisable in full under Paragraph
(a) above, AND if the Optionee is subject to an Involuntary Termination
(defined below) within 12 months after the Change in Control, then this
Option shall become exercisable in full. However, in the case of an
-1-
employee incentive stock option described in Section 422(b) of the
Code, the acceleration of exercisability shall not occur without the
Optionee's written consent.
(c) If the Option is not exercisable in full under Paragraph
(a) above, AND if the Company is subject to a Change of Control, then
fifty percent (50%) of the remaining options shall become exercisable
in full, and the remaining options shall become exercisable at the rate
set forth herein, reduced by the accelerated Optioned Shares. All other
terms and conditions shall remain unchanged.
(d) Definitions:
(i) "Change in Control" shall mean: (1)The
consummation of a merger or consolidation of the Company with
or into another entity or any other corporate reorganization,
if persons who were not controlling stockholders of the
Company immediately prior to such merger, consolidation or
other reorganization own immediately after such merger,
consolidation or other reorganization 50% or more of the
voting power of the outstanding securities of each of (A) the
continuing or surviving entity and (B) any direct or indirect
parent corporation of such continuing or surviving entity; OR
(2) The sale, transfer or other disposition of all or
substantially all of the Company's assets.
A transaction shall not constitute a Change in Control if its
sole purpose is to change the state of the Company's
incorporation or to create a holding company that will be
owned in substantially the same proportions by the persons who
held the Company's securities immediately before such
transaction.
(ii) "Involuntary Termination" shall mean the
termination of the Optionee's employment by reason of: (1) The
involuntary discharge of the Optionee by the Company for reasons other
than Cause (as defined in Optionee's employment agreement with the
Company, of even date herewith); or (2) The voluntary resignation of
the Optionee following a reduction in the Optionee's base salary, a
substantial reduction of the responsibilities, authority or scope of
work of Executive, or receipt of notice that the Optionee's principal
workplace will be relocated more than 20 miles.
9. The validity and construction of this Agreement shall be governed by the laws
of the State of Nevada.
THIS AGREEMENT IS MADE UNDER AND SUBJECT TO THE PROVISIONS OF THE PLAN, AND ALL
OF THE PROVISIONS OF THE PLAN ARE ALSO PROVISIONS OF THIS AGREEMENT. IF THERE IS
A DIFFERENCE OR CONFLICT BETWEEN THE PROVISIONS OF THIS AGREEMENT AND THE
PROVISIONS OF THE PLAN, THE PROVISIONS OF THE PLAN WILL GOVERN; PROVIDED,
HOWEVER, THE THE ACCELERATION OF THE OPTIONED SHARES DESCRIBED IN SECTION 8
ABOVE SHALL GOVERN IN THE EVENT OF ANY CONFLICT WITH THE PLAN. BY SIGNING THIS
AGREEMENT, THE OPTIONEE ACCEPTS AND AGREES TO ALL OF THE FOREGOING TERMS AND
PROVISIONS AND TO ALL OF THE TERMS AND PROVISIONS OF THE PLAN INCORPORATED
HEREIN BY REFERENCE AND CONFIRMS THAT HE OR SHE HAS RECEIVED A COPY OF THE PLAN.
-2-
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized representative and the Optionee has hereunto set
his hand as of the date here above first written.
NATURAL GAS SYSTEMS, INC.:
By:
-----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
---------------------------------
Optionee: Xxxxxxxx X. XxXxxxxx
-3-
