NONE OF THE SECURITIES TO WHICH THIS SUBSCRIPTION
AGREEMENT (THE “AGREEMENT”) RELATES HAVE BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES
LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
STOCK OPTION AGREEMENT
For U.S. Persons
This AGREEMENT is entered into as of the 22nd day of
November, 2007 (the “Date of Grant”).
BETWEEN:
SOUTHERN STAR ENERGY INC. , with an office at 115 – 110 Cypress Station Drive,
Houston, Texas 77090 (the ”Company”)
AND:
SIERRA PINE RESOURCES INTERNATIONAL,
INC. , with an office at 3118 Ivy Falls,
Houston, Texas 77068 (the “Optionee”)
WHEREAS:
A.
The Company’s board of directors (the
“Board”) has approved a Stock Option Plan
(the ”Plan”), whereby the Board is authorized to
grant stock options to purchase common shares of the Company
pursuant to the Plan to the directors, officers, employees,
management company employees and consultants of the
Company;
B.
The Optionee has been appointed as a consultant of
the Company and has entered into a Services Agreement dated
November 22, 2007 (the “Services Agreement”) with the
Company, pursuant to which the Optionee will provide the consulting
services as set out in the Services Agreement
(the “Services”); and
C.
The Company seeks to grant stock options to purchase
a total of SEVEN HUNDRED FIFTY THOUSAND (750,000) shares of Common
Stock to the Optionee as an incentive for the provision of the
Services.
NOW THEREFORE THIS AGREEMENT WITNESSES that in
consideration of the covenants and agreements set forth herein and
for other good and valuable consideration, the receipt and
sufficiency whereof is hereby acknowledged, the parties hereto
agree as follows:
1.1
In this Agreement, the following terms shall have
the following meanings:
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(a)
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“ Change of Control Event ” means the occurrence
of any one of the events set out in (i) to (iii) below:
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(i)
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the acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act
of 1934 ) of beneficial ownership of 30%
or more of either the then outstanding shares of common stock of
the Company or the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors,
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(ii)
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the approval by the stockholders of the Company of a
reorganization, merger or consolidation of the Company in which the
individuals and entities who were the respective beneficial owners
of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation
do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such reorganization,
merger or consolidation, or
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(iii)
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a liquidation or dissolution of the Company or of
the sale or other disposition of all or substantially all of the
assets of the Company.
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In the case of the occurrence of any of the events set forth in
this Section 1.1(a), a Change of Control Event shall be deemed to
occur immediately prior to the occurrence of any such events. An
event shall not constitute a Change of Control Event if its sole
purpose is to change the jurisdiction of the Company’s
organization or to create a holding company, partnership or trust
that will be owned in substantially the same proportions by the
persons who held the Company’s securities immediately before
such event. Additionally, a Change of Control Event will not be
deemed to have occurred, with respect to the Optionee, if the
Optionee is part of a purchasing group that consummates the Change
of Control Event;
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(b)
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“ Common
Stock ” means the shares of common
stock of the Company;
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(c)
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“ Exercise
Payment ” means the amount of money
equal to the Exercise Price multiplied by the number of Optioned
Shares specified in the Notice of Exercise;
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(d)
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“ Exercise
Price ” means $1.09;
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(e)
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“ Expiry
Date ” means November 22,
2011;
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(f)
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“ Notice of
Exercise ” means a notice in
writing addressed to the Company at its address first recited (or
such other address of the Company as may from time to time be
notified to the Optionee in writing), substantially in the form
attached as Schedule B hereto, which notice shall specify
therein the number of Optioned Shares in respect of which the
Options are being exercised;
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(g)
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“ Options
” means the irrevocable right and option to
purchase, from time to time, all, or any part of the Optioned
Shares granted to the Optionee by the Company pursuant to
Section 1.2 of this Agreement;
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(h)
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“ Optioned
Shares ” means the shares of Common
Stock, subject to the Options;
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(i)
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“ Securities ” means,
collectively, the Options and the Optioned Shares;
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(j)
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“ Shareholders ” means holders of
record of the shares of Common Stock;
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(k)
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“ U.S.
Person ” shall have the meaning
ascribed thereto in Regulation S under the 1933 Act, and for
the purpose of the Agreement includes any person in the United
States; and
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(l)
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“ Vested
Options ” means the Options that
have vested in accordance with Section 1.3 of this
Agreement.
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1.2
The Company hereby grants to the Optionee, on the
terms and conditions set out in this Agreement and in the Plan,
Options to purchase a total of SEVEN HUNDRED FIFTY THOUSAND
(750,000) Optioned Shares at the Exercise Price.
1.3
The SEVEN HUNDRED FIFTY THOUSAND (750,000) Options
shall vest in accordance with the following schedule:
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(a)
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TWO HUNDRED FIFTY THOUSAND (250,000) Options shall
vest on the first anniversary of the Date of Grant;
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(b)
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TWO HUNDRED FIFTY THOUSAND (250,000) Options shall
vest on the second anniversary of the Date of Grant; and
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(c)
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TWO HUNDRED FIFTY THOUSAND (250,000) Options shall
vest on the third anniversary of the Date of Grant.
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1.4
The Options shall, at 5:00 p.m. (Houston time) on
the Expiry Date, expire and be of no further force or effect
whatsoever.
1.5
Vested Options shall terminate, to the extent not
previously exercised, in accordance with Section 5(g) of the Plan.
Unless the Company undergoes a Change of Control Event, as defined
herein, each unvested Option granted pursuant hereto shall
terminate immediately upon termination of or resignation from the
Optionee’s employment or contractual relationship with the
Company for any reason whatsoever. Upon a Change of Control Event,
each unvested Option will immediately vest.
1.6
Subject to the provisions of this Agreement and the
Plan and subject to compliance with any applicable securities laws,
the Options shall be exercisable, in full or in part, at any time
after vesting, until termination; provided, however, that if the
Optionee is subject to the reporting and liability provisions of
Section 16 of the Securities Exchange Act
of 1934 with respect to the Common Stock,
the Optionee shall be precluded from selling, transferring or
otherwise disposing of any Common Stock underlying any Options
during the six (6) months immediately following the grant of that
Option. If less than all of the shares included in the vested
portion of any Options are purchased, the remainder may be
purchased at any subsequent time prior to the Expiry Date. Only
whole shares may be issued pursuant to the exercise of any Options,
and to the extent that any Options covers less than one (1) share,
it is unexercisable.
Each exercise of the Options shall be by means of
delivery of a Notice of Exercise (which may be in the form attached
hereto as Schedule B) to the President of the Company at its
principal executive office, specifying the number of shares of
Common Stock to be purchased and accompanied by payment in cash by
certified check or cashier’s check in the amount of the full
exercise price for the Common Stock to be purchased. In addition to
payment in cash by certified check or cashier’s check, an
Optionee or transferee
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of the Options may pay for all or any portion of the
aggregate exercise price by complying with one or more of the
following alternatives:
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(a)
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by delivering a properly executed Notice of Exercise
together with irrevocable instructions to a broker promptly to sell
or margin a sufficient portion of the Common Stock and deliver
directly to the Company the amount of sale or margin loan proceeds
to pay the exercise price; or
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(b)
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by complying with any other payment mechanism
approved by the Board at the time of exercise.
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It is a condition precedent to the issuance of
Optioned Shares that the Optionee execute and/or deliver to the
Company all documents and withholding taxes required in accordance
with applicable laws.
1.7
Nothing in this Agreement shall obligate the
Optionee to purchase any Optioned Shares except those Optioned
Shares in respect of which the Optionee shall have exercised the
Options in the manner provided in this Agreement.
1.8
Reference is made to the Plan and the Services
Agreement for particulars of the rights and obligations of the
Optionee and the Company in respect of:
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(a)
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the terms and conditions on which the Options are
granted; and
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(b)
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a consolidation or subdivision of the
Company’s share capital or an amalgamation or
merger;
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all to the same effect as if the provisions of the
Plan were set out in this Agreement and to all of which the
Optionee assents.
1.9
The terms of the Options are subject to the
provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies among this Agreement, the Services
Agreement and the Plan, as the same may be from time to time
amended, shall be governed by the provisions of the
Plan.
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2.
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Documents Required from
Optionee
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2.1
The Optionee must complete, sign and return an
executed copy of this Agreement to the Company and a duly executed
Accredited Investor Questionnaire attached hereto as
Schedule A.
2.2
The Optionee shall complete, sign and return to the
Company as soon as possible, on request by the Company, any
documents, questionnaires, notices and undertakings as may be
required by regulatory authorities, and applicable law.
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3.
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Acknowledgements of the
Optionee
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3.1
The Optionee acknowledges and agrees
that:
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(a)
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the Optionee is an “Accredited Investor”
as defined in Regulation D of the 1933 Act;
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(b)
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the Securities have not been registered under the
1933 Act or under any state securities or “blue sky”
laws of any state of the United States, and are being offered only
in a transaction not involving any public offering within the
meaning of the 1933 Act, and, unless so registered, may not be
offered or sold in the United States or to U.S. Persons
(as
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defined herein), except pursuant to an effective
registration statement under the 1933 Act, or pursuant to an
exemption from, or in a transaction not subject to, the
registration requirements of the 1933 Act, and in each case only in
accordance with applicable state securities laws;
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(c)
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the Company will refuse to register any transfer of
the Securities not made in accordance with the provisions of
Regulation S, pursuant to an effective registration statement under
the 1933 Act or pursuant to an available exemption from, or in a
transaction not subject to, the registration requirements of the
1933 Act;
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(d)
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the decision to execute this Agreement and acquire
the Securities hereunder has not been based upon any oral or
written representation as to fact or otherwise made by or on behalf
of the Company and such decision is based solely upon a review of
publicly available information regarding the Company available on
the website of the United States Securities and Exchange Commission
(the “SEC”) available at www.sec.gov (the
“Company Information”);
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(e)
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the Company is entitled to rely on the
representations and warranties and the statements and answers of
the Optionee contained in this Agreement, and the Optionee will
hold harmless the Company from any loss or damage it may suffer as
a result of the Optionee’s failure to correctly complete this
Agreement;
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(f)
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the Optionee has been advised to consult its own
legal, tax and other advisors with respect to the merits and risks
regarding the exercise of the Options and the issuance of the
Optioned Shares and with respect to applicable resale restrictions
and it is solely responsible (and the Company is in any way
responsible) for compliance with applicable resale
restrictions;
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