Rio
Vista Energy Partners L.P.
NEITHER THIS
OPTION NOR THE UNITS ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. NEITHER THIS OPTION NOR THE COMMON
UNITS ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR QUALIFICATION OR AN
EXEMPTION THEREFROM UNDER APPLICABLE LAW.
Nonqualified Unit
Option Agreement
Under the 2005 Equity Incentive
Plan
This Nonqualified Unit Option Agreement (this
“Agreement”) and the Rio Vista Energy Partners L.P.
2005 Equity Incentive Plan, as such plan may be amended from time
to time (the “Plan”), set forth the terms of an option
(this “Option”) to purchase common units (the
“Common Units”) of Rio Vista Energy Partners L.P., a
Delaware limited partnership (“Rio Vista” or the
“Partnership”). The Plan is administered by a committee
(the “Committee”) of the Board of Managers of Rio Vista
GP LLC, a Delaware limited liability company and the general
partner of Rio Vista (the “General Partner”). As used
herein, the term “Manager” means a member of the Board
of Managers of the General Partner (the “Board of
Managers”). The terms “employee” and
“consultant” include officers, employees and
consultants of Rio Vista and/or the General Partner.
2.
NONQUALIFIED UNIT OPTION
This Option is not intended to be an
“incentive stock option” under Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”)
and will be interpreted accordingly.
The exercise price of this Option (the
“option price”) is 100% of the market value of the
Common Units on the date of grant, as specified on the signature
page below. “Market value” means the average of the
highest and lowest sales prices of the Common Units as reported by
NASDAQ on such date (or, if no sales were reported on such date,
the average on the last preceding day on which a sale was
made).
4. TERM OF
OPTION AND EXERCISE OF OPTION
This Option shall vest and become exercisable at
the rate of
% of the units underlying this Option each month following of the
date of grant and shall be fully vested and exercisable ___months
from the date of grant, subject to termination or acceleration as
provided in this Agreement or the Plan. To the extent this Option
has vested and has not been previously exercised, and subject to
termination or acceleration as provided in this Agreement and the
requirements of this Agreement and the Plan, Participant may
exercise this Option to purchase up to the number of Common Units
set forth on the signature page below. Notwithstanding any contrary
provision of this Agreement, no part of this Option may be
exercised after ten (10) years from the date of grant.
The procedure for exercising this Option (or any
part thereof) is governed by this Agreement and the Plan. Except as
otherwise provided in the preceding paragraph, this Option may be
exercised, and Common Units will be issued and delivered pursuant
to such exercise, only on the dates determined by Rio Vista, not
more often than once each calendar quarter (each such date, a
“Quarterly Exercise Date”), unless otherwise determined
by the Committee. The Quarterly Exercise Dates shall be determined
annually by the Committee in consultation with the Chief Financial
Officer of the General Partner, subject to change as a result of
applicable accounting and securities law requirements. The Chief
Financial Officer shall notify Participant of such Quarterly
Exercise Dates upon request.
Subject to the foregoing, this Option shall be
exercised by delivering to the Chief Financial Officer at his or
her principal office a written notice in the form attached as
Exhibit A stating the number of units as to which this
Option is exercised and the Quarterly Exercise Date upon which such
exercise is desired to be effective. The written notice must be
accompanied by payment of the full option price for such units.
Exercises of unit options for each Quarterly Exercise Date will be
processed as soon as practicable. The option price may be paid:
(a) in cash; (b) by arrangement acceptable to Rio Vista
where payment of the option price is made pursuant to an
irrevocable direction to the broker to deliver all or part of the
proceeds from the sale of the Common Units issuable under this
Option to Rio Vista; (c) by cancellation of a portion of this
Option (a “Net Exercise”), with the value of the
canceled portion deemed to be equal to the number of Common Units
subject to such canceled portion multiplied by an amount equal to
the positive difference between the market value per unit on the
applicable Quarterly Exercise Date and the exercise price per unit,
as set forth in Section 4A below; (d) by delivery of any
other lawful consideration approved in advance by the Committee or
its delegate; or (e) in any combination of the foregoing.
Fractional units may not be exercised. The Common Units will be
issued as soon as practicable after the relevant Quarterly Exercise
Date. Participant will have the rights of a unitholder only after
the Common Units have been issued to Participant. For
administrative or other reasons, Rio Vista may from time to time
suspend the ability of Managers, employees and consultants to
exercise options for limited periods of time.
If any vested portion of this Option remains
unexercised at the time of the termination or expiration of this
Option and Participant wishes to exercise such vested portion,
Participant must so notify the Chief Financial Officer in writing
before such termination or expiration date. The Committee, in its
sole discretion, may either permit such exercise before the next
Quarterly Exercise Date following such termination or expiration
(provided that no Common Units will be issued before the next
Quarterly Exercise Date) or extend the term of this Option until
such Quarterly Exercise Date. No such extension shall have the
effect of increasing the number of units vested under this
Option.
2
Notwithstanding the above, Rio Vista shall not
be obligated to deliver any Common Units during any period when Rio
Vista determines that the exercise of this Option or the delivery
of units hereunder would violate any federal, state or other
applicable laws.
4A. NET
EXERCISE OF OPTION
The following formulas shall govern a Net
Exercise of this Option by Participant:
X = the number of units to be issued to
Participant pursuant to a Net Exercise
Y = the number of units to be canceled in
payment of the aggregate exercise price
Z = the total number of units subject to this
Option
A = the market value per unit of the Common
Units on the date of exercise
B = the exercise price per unit of this Option,
which must be less than A
5.
TERMINATION OF EMPLOYMENT OR SERVICE
Except as expressly provided otherwise in this
Agreement, if Participant’s employment or service is
terminated by Rio Vista and/or the General Partner or its
affiliates for Cause (as defined below) or by Participant without
Good Reason (as defined below), any unvested portion of this Option
shall immediately be cancelled, and Participant may exercise any
portion of this Option that had vested on or prior to
Participant’s last day of employment or service, effective as
of any Quarterly Exercise Date within one hundred eighty
(180) days after the date of such termination, to the extent
not previously exercised. The foregoing provisions of this
paragraph shall not apply if, without interruption, Participant
begins or continues to serve as a Manager, employee or consultant,
even if Participant’s service or employment in another such
capacity terminates.
If Participant’s employment or service is
terminated by Rio Vista and/or the General Partner or its
affiliates without Cause or by Participant for Good Reason, any
unvested portion of this Option shall immediately become fully
vested and exercisable, and Participant may exercise this Option
effective as of any Quarterly Exercise Date within one
(1) year after the date of such termination, to the extent not
previously exercised.
3
For purposes of this Option, termination for
“Cause” shall mean an event where Participant:
(i) materially fails to perform Participant’s duties and
responsibilities as determined by the Board of Managers, provided
that Rio Vista and/or the General Partner provides Participant with
notice and reasonable opportunity to cure such failure;
(ii) commits a material breach of Participant’s
obligations under any written employment or consulting agreement
with Rio Vista and/or the General Partner; (iii) commits any
act of gross misconduct or conducts himself or herself in a way
which is harmful to Rio Vista and/or the General Partner or its
affiliates (whether or not in connection with Participant’s
employment or service); (iv) commits one or more acts of
dishonesty which are intended to result in substantial gain or
personal enrichment of Participant at the expense of any Rio Vista
and/or the General Partner or its affiliates; (v) is convicted
of a felony (whether or not in connection with Participant’s
employment or service); and/or (vi) commits a violation of any
law or regulation in force which may affect or relate to the
business of any Rio Vista and/or the General Partner or its
affiliates.
For purposes of this Option, “Good
Reason” shall mean: (a) a reduction in
Participant’s base salary, absent Participant’s prior
written consent; (b) the failure of Rio Vista and/or the
General Partner to pay any compensation, or otherwise provide any
material benefits, due to Participant in accordance with the terms
of any written employment agreement with Rio Vista and/or the
General Partner, or as otherwise provided to other employees of Rio
Vista and/or the General Partner, absent Participant’s prior
written consent; (c) a material reduction in
Participant’s title and responsibilities or the assignment to
Participant of duties substantially inconsistent with
Participant’s position, duties, and status with Rio Vista
and/or the General Partner as of the date of this Option, absent
Participant’s prior written consent; (d) the breach of
any of Rio Vista’s and/or the General Partner’s
material obligations under any written employment agreement with
Participant or under applicable law; and/or (e) the change by
Rio Vista and/or the General Partner of Participant’s place
of employment more than fifty (50) miles from
Participant’s office location as of the date of this Option,
absent Participant’s prior written approval.
Except as expressly provided otherwise in this
Agreement, if Participant dies during Participant’s term as a
Manager, employee or consultant, any unvested portion of this
Option shall immediately become fully vested and exercisable, and
the executor of Participant’s will, administrator of
Participant’s estate or any successor trustee of a grantor
trust may exercise this Option, whether or not vested on the date
of death, effective as of any Quarterly Exercise Date on or before
the later of the Expiration Date and one (1) year from the
date of the Participant’s death, to the extent not previously
exercised.
Except as expressly provided otherwise in this
Agreement, if Participant dies after Participant’s last day
of employment or service (including service as a Manager) but on or
before the Expiration Date, the execut
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