NATURAL GAS SYSTEMS, INC.
2004 STOCK PLAN
STOCK OPTION AGREEMENT
Name of Optionee: Xxxxx 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: $1.61
Option Grant Date: June 23, 2005
Vesting Commencement Date June 23, 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: June 23, 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 June 23, 2005 by and between Natural Gas Systems, Inc., a Nevada
corporation (the "Company") and the Optionee. 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
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.
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(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 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.
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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:
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Name: Xxxxxx X. Xxxxxx
Title: President
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Optionee: Xxxxx X. Xxxxxxxx
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