Purchase and Sale Agreement dated October 1, 2010, by and between Surge Global Energy, Inc. and David McGuire. (Also included is an Engagement Agreement, Promissory Note, Security Agreement, Form of Stock Option and Non-Competition, Non-Solicitation and Confidentiality Agreement.)

For all services rendered by Executive in any capacity during his engagement under this Agreement, including, without limitation, services as a director, officer or member of any committee of the Board of the Company or of the Board of Directors of any subsidiary or affiliate of the Company, the Company will compensate Executive as follows:

 2.1           Base Compensation.  Commencing on October 1, 2010, the Company will pay to Executive an annual base compensation of $120,000.00 (the “Base Compensation”), in accordance with the Company’s standard payroll policies including compliance with applicable withholding requirements in the appropriate jurisdictions, or shall pay this compensation to a company of David McGuire’s choice.  The Base Compensation will be reviewed annually by the Board or a committee designated by the Board and the Board or such committee and Executive will negotiate in good faith, based upon the prior year’s performance by Executive, to determine Executive’s Base Compensation for the succeeding year. Executive will receive an annual compensation increase at least commensurate with the base compensation increase, if any, that the Company gives to its other senior executives.

 2.2           Incentive Compensation.  In addition to the Base Compensation provided for above, Company will pay Executive the following as incentive compensation:

2.2.1           Share of Increased Profits of the Company.  Executive will be entitled to receive a bonus equal to 10% of the amount by which the Company’s Net Profits from its SEC Compliance divisions1 (but none other), for the fiscal year ending December 31, 2011 and any subsequent complete fiscal year during which this Agreement is still in effect exceed $120,000.00 (the “Incentive Bonus”).  Net Profits for the fiscal year December 31, 2011 will serve as the constant base year for purposes of calculating the Incentive Bonus to be paid to Executive for each subsequent fiscal year.  For purposes of this Agreement,  “Net Profits”, will be determined consistent with the Company’s past accounting practices consistently applied and means, generally speaking, the Company’s annual revenues derived from its SEC Compliance divisions minus its expenses directly attributable to the SEC Compliance divisions (which expenses will include allocated state and federal tax payments,  Executive’s Base Compensation, and its share of the Company’s corporate overhead)  The Company will pay Executive the Incentive Bonus within 60 days of the date the Company determines its Net Profits for the applicable fiscal year.  If Executive’s engagement with the Company terminates for any other reason other than Cause (as defined below) the Company will pro-rate the Incentive Bonus for the corresponding fiscal year through Executive’s last day of engagement.  If the Company terminates Executive’s engagement for Cause, Executive will not be eligible to receive the Incentive Bonus for the fiscal year in which Executive’s termination date falls.

As used in this Agreement, “Cause” is defined as follows: (i) engaging in any act of illegal harassment, discrimination, physical violence or other unlawful conduct that exposes the Company to the risk of significant legal liability or which has a direct and substantial adverse effect on the Company’s reputation and/or financial well-being; (ii) unauthorized disclosure of Confidential Information of the Company (as defined in Exhibit “A” hereof) (iii) falsifying or altering the Company records; (iv) theft of, or deliberately causing harm to, Company property; (v) breach of a fiduciary duty owed to the Company; (vi) engaging in any act of misconduct which in any way has a direct and substantial adverse effect on the Company’s reputation and/or financial well-being; (vii) failure to devote a reasonable amount of time to the business and management of the Company in accordance with the terms hereof or failure to satisfactorily perform the job functions required by Executive’s position with the Company for a period of two (2) consecutive months, for reasons other than the poor health of Executive, following notice to Executive and a reasonable opportunity to cure.

2.2.2           Share of Profits of New Businesses. Executive will be eligible, for as long as he remains employed by the Company under this Agreement, to receive an additional bonus of up to 10% of the Net

 2.3           Stock Options in Company.  As additional compensation from the Company, and in consideration for Executive’s ongoing advice and expertise and agreeing to become a director of the Company, Executive will receive options to purchase 400,000 shares of the Company’s common stock (the “Option”) vesting monthly over a term of two years with vesting commencing on the date the stock options are issued, which date shall be no later than October 15, 2010. The exercise price per share of common stock shall be equal to the closing price of the common stock on the OTC Bulletin Board on the date that Executive is elected to the Surge Board of Directors on the date granted.  The Option shall accelerate and vest in its entirety if the Company terminates executive without Cause and Executive shall have at least thirty days to exercise the entire Option. If Executive ceases to be a director or employee of the Company, then the options vested shall be determined on a pro rata basis from the date of issuance to the date of termination.   The Option shall be further subject to the additional terms and conditions provided in the Option Agreement, attached hereto as Exhibit “B”.

 2.4           Additional Benefits.  If and when Executive becomes an employee of the Company, Executive will receive health insurance for himself at the Company’s expense.  Executive may purchase health insurance for his family on the same terms as such insurance is made available to other Executives of the Company.  If and when Executive becomes an employee of the Company, Executive will be entitled to participate in such other Executive benefit and welfare programs, plans and arrangements (including, without limitation, pension, supplemental pension and other retirement plans, group disability benefits, travel or accident insurance plans) and to receive fringe benefits, such as dues and fees of professional organizations and associations, which are from time to time available to the Company’s executive personnel; provided, however, there will be no duplication of termination or severance benefits, and to the extent that such benefits are specifically provided by the Company to Executive under other provisions of this Agreement, the benefits available under the foregoing plans and programs will be reduced by any benefit amounts paid under such other provisions.  The Company may terminate or reduce benefits under any benefit plans and programs to the extent such reductions apply uniformly to all of the Company’s executive personnel entitled to participate therein, and Executive’s benefits will be reduced or terminated accordingly.  The Company will not pay Executive the cash equivalent of any benefit it offers to Executive which Executive declines for any reason to accept.  Specifically, without limitation, Executive will receive the following benefits:

(a)           Reimbursement of Business Expenses.  Whether Executive is deemed and employee or consultant, the Company will, in accordance with standard Company policies, pay or reimburse Executive for all reasonable travel and other expenses incurred by Executive in performing his obligations in an amount not to exceed $2,000.00 per month.  Executive will submit an expense report on the last day of each month, starting on October 31, 2010.

 

                                               (b)           Vacations, Sick and Personal Time (PST).  If and when Executive becomes an employee of the Company, Executive will be entitled to 18 business days excluding Company holidays, of paid vacation and personal and sick time (PST) during each 12-month period of full-time engagement with the Company.  PST accruals may not exceed 30 business days. In other words, once Executive has accrued 30 days’ accrued PST, Executive will accrue no additional PST time until Executive has taken vacation and his accrued vacation time has dropped below the 30 day maximum.

 3.1           Death, Retirement or Disability of Executive. Executive’s engagement under this Agreement will automatically terminate upon the death or retirement of Executive, and the date of death or disability will be deemed to be the Termination Date.  Company may also terminate Executive’s engagement if Executive suffers a disability that renders Executive unable, as determined in good faith by the Board, to perform the essential functions of the position, even with reasonable accommodation, for four months in any twelve month period.  In such a case, the Termination Date will be that specified in the notice from the Company to Executive.  If Executive’s engagement is terminated due to Executive’s disability, then, provided Executive is an employee of the Company at the time of such disability, at Executive’s election and the Company’s cost, to the extent permitted by Company’ insurance policies and benefit plans, for six months after Executive’s Termination Date, except as required by law (e.g., COBRA health insurance continuation election) the Company will continue to provide health insurance.

 3.2           By Executive.

Executive will be allowed to resign for cause only. If he resigns without cause prior to October 31, 2012, then he will give up a pro rata share of the acquisition price of SEC Compliance, Inc.

 3.3           By Company.

(a)           This Agreement may only be terminated by the Company for Cause except as provided otherwise in this section..

(b)           If, and only if, the Company attempts to terminate this Agreement prior to the end of the initial two-year Term of this Agreement (expiring October 13, 2012), without Cause (as defined herein), the Company will pay Executive a separation payment equal to the greater of $50,000 or  $10,000 multiplied by the number of months and partial months remaining under the Term (the “Separation Payment”), subject to customary and usual withholdings if applicable, on Executive’s last day of engagement with the Company.  If after the termination of Executive’s engagement without Cause, Executive materially breaches any of his obligations under the Non-Competition, Non-Solicitation and Confidentiality Agreement attached hereto as Exhibit “A”, Executive must immediately repay any previously paid portion of the Separation Payment upon the Company’s demand.

(c)           If, and only if, the Company breaches any part of this agreement, and such breach is not cured within 60 days, or does not pay Executive pursuant to the purchase price payment set forth in the Asset Purchase Schedule and or this Compensation Agreement, the Company will transfer a pro rata amount of all shares/assets back to the Executive based on the amount paid compared with the total compensation due.  In the event of breach, the Company will be responsible for all expenses including legal expenses for transference of  shares/assets back to Executive.

 3.4           Compensation upon Termination of Engagement.  If Executive’s engagement hereunder is terminated without Cause, except for any other rights or benefits specifically provided for herein following his period of engagement, the Company will be obligated to provide compensation and benefits to Executive only as follows:

(a)           Pay Executive (or his estate or beneficiaries) any Base Compensation that has accrued but not been paid as of the Termination Date, less standard withholdings (if applicable) for tax and Social Security purposes;

(b)           If applicable, pay Executive (or his estate or beneficiaries) for unused vacation days accrued as of the Termination Date  in an amount equal to his Base Compensation multiplied by a fraction the numerator of which is the number of accrued unused vacation days and the denominator of which is 360;

 5.2           Successors; Binding Agreement.  This Agreement will be binding upon any successors or assigns of the Company and will inure to the benefit of and be enforceable by Executive’s personal or legal representatives, beneficiaries, designees, executors, administrators, heirs, distributees, devisees and legatees.

 5.3           Severability.  It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision of this Agreement will be adjudicated by a court of competent jurisdiction to be invalid, illegal, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, will be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.  Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, illegal, prohibited or unenforceable in such jurisdiction, it will, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 5.4           Notices.  All the notices and other communications required or permitted hereunder will be in writing and will be delivered personally or sent by registered or certified mail, return receipt requested, to the parties hereto at the following addresses, or at such other address as the party may otherwise indicate:

 5.6           Authority.  The undersigned individuals execute this Agreement on behalf of the respective parties, and represent that they are authorized to enter into and execute this Agreement on behalf of such parties.

                                 5.7           Further Assurances.  The parties agree to execute all instruments and documents of further assurance and will do any and all such acts as may be reasonably required to carry out their obligations and to consummate the transactions contemplated herein.

 5.8           Executive’s Representations.  Executive represents and warrants that neither the execution nor delivery of this Agreement nor the performance of his duties hereunder violates the provisions of any other agreement to which he is a party or by which he is bound including, without limitation, any non-competition, engagement or confidentiality agreements.

 
 

                                 5.9           Cumulative Rights and Remedies.  The rights and remedies in this Agreement will be cumulative, and in addition to, any duties, obligations, rights and remedies otherwise provided by law.

                                 5.11         Counterparts/Facsimile Signatures.  This Agreement may be executed in any number of counterparts, using facsimile signatures, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 5.12         Governing Law and Venue.  This Agreement will be construed in accordance with and governed for all purposes by the laws of the State of California applicable to contracts executed and wholly performed within such state. The parties agree that any civil action to enforce or interpret this Agreement will be brought exclusively in the state or federal courts serving San Diego County, California.

                                 5.13         Advice of Counsel.  Each party acknowledges and agrees that it has given mature and careful thought to this Agreement and that it has been given the opportunity to independently review this Agreement with his or its own independent legal counsel.

“Company Documentation” means notes, memoranda, reports, lists, records, contact lists, drawings, sketches, specifications, software programs, data, documentation or other materials of any nature and in any form, whether written, printed, or in digital format or otherwise, relating to any matter within the scope of the business of the Company or concerning any of its dealings or affairs.

“Confidential Information” means any information concerning the organization, business or finances of the Company or of any third party that the Company considers to be and maintains as confidential. Confidential Information includes, but is not limited to, trade secrets or confidential information respecting customer lists, pricing methodology, residual positions, residual charts, projects, plans and proposals; provided, however, that “Confidential Information” shall not include any information which:

(I) is publicly available at the time of disclosure (through no act of mine);

(ii) Is disclosed to me by a third party who did not disclose it to me in violation of a duty of confidentiality;

(iii) I knew or was in my possession before such information was provided to me (provided that I can clearly establish receipt and possession of that information before it was provided to me); or

(iv) Is required to be made available by me under legal process by subpoena or other court order (provided that I agree to make reasonable efforts to provide copies of such information to, or inform, the Company before disclosure).

“Developments” shall mean any invention, modification, discovery, design, development, process, software program, work of authorship, documentation, formula, data, technique, know-how, show-how, trade secret or intellectual property right whatsoever or any interest therein (whether or not patentable or registrable under copyright, trademark or similar statutes or subject to analogous protection).

By their signatures below, the Company and the Optionee agree that the Option is governed by this Notice and by the provisions of the Stock Option Agreement (except as otherwise set forth opposite Exceptions to Provisions of Stock Option Agreement), which is attached to and made a part of this document.  The Optionee acknowledges receipt of a copy of the Stock Option Agreement, represents that the Optionee has read and is familiar with its provisions, and hereby accepts the Option subject to all of its terms and conditions.

Surge Global Energy, Inc., a Delaware corporation, has granted to the individual (the “Optionee”) named in the Notice of Grant of Stock Option (the “Notice”) to which this Stock Option Agreement (the “Option Agreement”) is attached an option (the “Option”) to purchase certain shares of Stock upon the terms and conditions set forth in the Notice and this Option Agreement.  By signing the Notice, the Optionee: (a) represents that the Optionee has read and is familiar with the terms and conditions of the Notice and this Option Agreement, including the Effect of Termination of Service set forth in Section 7, (b) accepts the Option subject to all of the terms and conditions of the Notice and this Option Agreement, (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Notice or this Option Agreement, and (d) acknowledges receipt of a copy of the Notice and this Option Agreement.

 

1. Definitions and Construction.

 

1.1 Definitions.  Whenever used herein, the following terms shall have their respective meanings set forth below:

 

(a) “Board” means the Board of Directors of the Company, or a committee of the Board duly appointed to administer this Option and having such powers as shall be specified by the Board.

 

(b) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated there under.

 

(c) “Company” means Surge Global Energy, Inc., a Delaware corporation, or any successor corporation thereto.

 

(d) “Consultant” means a person engaged to provide consulting or advisory services (other than as an Employee or a Director) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to this Agreement in reliance on either the exemption from registration provided by Rule 701 under the Securities Act or, if the Company is required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Securities Act.

 

(f) “Disability” means the inability of the Optionee, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of the Optionee’s position with the Participating Company Group because of the sickness or injury of the Optionee.

 

(g) “Employee” means any person treated as an employee (including an officer or a Director who is also treated as an employee) in the records of a Participating Company; provided, however, that neither service as a Director nor payment of a director’s fee shall be sufficient to constitute employment for purposes of this Agreement.  The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be.

 

(h) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(i) “Fair Market Value” means, as of any date, the value of a share of Stock or other property as determined by the Board, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:

 

(i) If, on such date, the Stock is listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable.  If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its discretion.

 

(ii) If on such date, the Stock is not listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be as determined by the Board in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse.

 

(j) “Incentive Stock Option” means an Option intended to be (as set forth in the Option Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.

 

(k) “Insider” means an officer or a Director of the Company or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act.

 

(l) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Option Agreement) or which does not qualify as an Incentive Stock Option.

 

(m) “Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.

 

(n) “Participating Company” means the Company or any Parent Corporation or Subsidiary Corporation.

 

(o) “Participating Company Group” means, at any point in time, all corporations collectively which are then Participating Companies

(p) “Securities Act” means the Securities Act of 1933, as amended.

(q) “Service” means the Optionee’s employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant.  The Optionee’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Optionee renders Service to the Participating Company Group or a change in the Participating Company for which the Optionee renders such Service, provided that there is no interruption or termination of the Optionee’s Service.  Furthermore, the Optionee’s Service with the Participating Company Group shall not be deemed to have terminated if the Optionee takes any military leave, sick leave, or other bona fide leave of absence approved by the Company; provided, however, that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day of such leave the Optionee’s Service shall be deemed to have terminated unless the Optionee’s right to return to Service with the Participating Company Group is guaranteed by statute or contract.  Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a leave of absence shall not be treated as Service for purposes of determining vesting under this Option Agreement.  The Optionee’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the corporation for which the Optionee performs Service ceasing to be a Participating Company.  Subject to the foregoing, the Company, in its discretion, shall determine whether the Optionee’s Service has terminated and the effective date of such termination.

 

(r) “Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 9.

 

(s) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.

1.2 Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of’ this Option Agreement.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

All questions of interpretation concerning this Option Agreement shall be determined by the Board.  All determinations by the Board shall be final and binding upon all persons having an interest in the Option.  Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election.

4.1 Right to Exercise.  Except as otherwise provided herein, the Option shall be exercisable on and after the Initial Exercise Date and prior to the termination of the Option (as provided in Section 6) in an amount not to exceed the Number of Vested Shares (determined in accordance with the Notice) less the number of shares previously acquired upon exercise of the Option.

4.2 Method of Exercise.  Exercise of the Option shall be by written notice to the Company in the form of Exhibit 1 hereto (the “Exercise Notice”) which must state the election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Optionee’s investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement.  The written notice must be signed by the Optionee and must be delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Chief Financial Officer of the Company, or other authorized representative of the Participating Company Group, prior to the termination of the Option as set forth in Section 6, accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased.  The Option shall be deemed to be exercised upon receipt by the Company of such written notice, the aggregate Exercise Price, and, if required by the Company, such executed agreement.

4.3 Payment of Exercise Price.  Except as otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by means of a Cashless Exercise, as defined below, or (iii) by any combination of the foregoing.  Optionee shall be responsible for filing any reports of remittance or other foreign exchange filings required in order to pay the exercise price.  A “Cashless Exercise” means the delivery of a properly executed notice together with irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock acquired upon the exercise of the Option pursuant to a program or procedure approved by the Company (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System).  The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to decline to approve or terminate any such program or procedure.

 

4.4 Tax Withholding.  At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll and any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Participating Company Group, if any, which arise in connection with the Option, including, without limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in part, of any shares acquired upon exercise of the Option, or (iii) the operation of any law or regulation providing for the imputation of interest.  The Option is not exercisable unless the tax withholding obligations of the Participating Company Group are satisfied.  Accordingly, the Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company Group have been satisfied by the Optionee.

 

4.5 Certificate Registration.  Except in the event the Exercise Price is paid by means of a Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be registered in the name of the Optionee, or, if applicable, in the names of the heirs of the Optionee.

4.6 Restrictions on Grant of the Option and Issuance of Shares.  The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities.  The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed.  In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act.  THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.  ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained.  As a condition to the exercise of the Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.  Any shares which are issued will be “restricted securities” as that term is defined in Rule 144 under the Securities Act, as further described in Section 7 of the Exercise Notice, unless they are registered under the Securities Act.  The Company is under no obligation to register the shares of Stock issuable upon exercise of this Option.

(a) Disability.  If the Optionee’s Service with the Participating Company Group terminates because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service terminated, may be exercised by the Optionee (or the Optionee’s guardian or legal representative) at any time prior to the expiration of six (6) months after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration Date.

 

(b) Death.  If the Optionee’s Service with the Participating Company Group terminates because of the death of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service terminated, may be exercised by the Optionee’s legal representative or other person who acquired the right to exercise the Option by reason of the Optionee’s death at any time prior to the expiration of six (6) months after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration Date.  The Optionee’s Service shall be deemed to have terminated on account of death if the Optionee dies within three (3) months after the Optionee’s termination of Service.

 

(c) Other Termination of Service.  If the Optionee’s Service with the Participating Company Group terminates for any reason, except Disability or death, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee’s Service terminated, may be exercised by the Optionee at any time prior to the expiration of six (6) months (or such other longer period of time as determined by the Board, in its discretion) after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration Date.

 

7.2 Extension if Exercise Prevented by Law.  Notwithstanding the foregoing, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until three (3) months after the date the Optionee is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date.

 

7.3 Extension if Optionee Subject to Section 16(b).  Notwithstanding the foregoing, if a sale within the applicable time periods set forth in Section 7.1 of shares acquired upon the exercise of the Option would subject the Optionee to suit tinder Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or (iii) the Option Expiration Date.

(a) An “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company: (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company.

(b) A “Change in Control” shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, a “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of tile Company were transferred (the “Transferee Corporation(s)”), as the case may be.  For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations.

8.2 Effect of Change in Control on Option.  In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof as the case may be (the “Acquiring Corporation”), may either assume the Company’s rights and obligations under the Option or substitute for the Option a substantially equivalent option for the Acquiring Corporation’s stock.  In the event the Acquiring Corporation elects not to assume the Company’s rights and obligations under the Option or substitute for the Option in connection with the Change in Control, and provided that the Optionee’s Service has not terminated prior to such date, the Vested Ratio shall be deemed to be 1/1 as of the date ten (10) days prior to the date of the Change in Control.  Any vesting of the Option that was permissible solely by reason of this Section 8.2 shall be conditioned upon the consummation of the Change in Control.  The Option shall terminate and cease to be outstanding effective as of the date of the Change in Control to the extent that the Option is neither assumed or substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control.  Notwithstanding the foregoing, shares acquired upon exercise of the Option prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of this Option Agreement except as otherwise provided herein.  Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the Option immediately prior to an Ownership Change Event described in Section 8.1 (a)(i) constituting a Change in Control is the surviving or continuing corporation and immediately after such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the Option shall not terminate.

 

14.2 Termination or Amendment.  The Board may terminate or amend the Option at any time; provided, however, that except as provided in Section 8.2 in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Optionee unless such termination or amendment is necessary to comply with any applicable law or government regulation.  No amendment or addition to this Option Agreement shall be effective unless in writing.

 

14.3 Notices.  Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, with postage and fees prepaid, addressed to the other party at the address shown below that party’s signature or at such other address as such party may designate in writing from time to time to the other party.

 

14.4 Integrated Agreement.  The Notice and this Option Agreement constitute the entire understanding and agreement of the Optionee and the Participating Company Group with respect to the subject matter contained herein or therein and supersedes any prior agreements, understandings, restrictions, representations, or warranties among the Optionee and the Participating Company Group with respect to such subject matter other than those as set forth or provided for herein or therein.  To the extent contemplated herein or therein, the provisions of the Notice and the Option Agreement shall survive any exercise of the Option and shall remain in full force and effect.

 

14.5 Applicable Law.  This Option Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.

 

14.6 Counterparts.  The Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

1. Option.  I was granted an option (the “Option”) to purchase shares of the common stock (the “Shares”) of Surge Global Energy, Inc., a Delaware corporation (the “Company”), pursuant to my Notice of Grant of Stock Option and Stock Option Agreement (the “Option Agreement”) as follows:

6. Binding Effect.  I agree that the Shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Option Agreement, to all of which I hereby expressly assent.  This Agreement shall inure to the benefit of and be binding upon my heirs, executors, administrators, successors and assigns.

 

7. Transfer.  I understand and acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and that consequently the Shares must be held indefinitely unless they are subsequently registered under the Securities Act, an exemption from such registration is available, or they are sold in accordance with Rule 144 under the Securities Act, I further understand and acknowledge that the Company is under no obligation to register the Shares.  I understand that the certificate or certificates evidencing the Shares will be imprinted with legends which prohibit the transfer of the Shares unless they are registered or such registration is not required in the opinion of legal counsel satisfactory to the Company.

 

I am aware that Rule 144 under the Securities Act, which permits limited public resale of securities acquired in a nonpublic offering, is not currently available with respect to the Shares and, in any event, is available only if certain conditions are satisfied.  I understand that any sale of the Shares that might be made in reliance upon Rule 144 may only be made in limited amounts in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be delivered to me upon request.