Exhibit 10.2
PARALLEL PETROLEUM CORPORATION
1998 STOCK OPTION PLAN
I. Purpose of the Plan
The Parallel Petroleum Corporation 1998 Stock Option Plan (the “Plan”) is
intended to provide a means whereby certain employees of Parallel Petroleum
Corporation, a Delaware corporation (the “Company”), and its subsidiaries may
develop a sense of proprietorship and personal involvement in the development
and financial success of the Company, and to encourage them to remain with and
devote their best efforts to the business of the Company, thereby advancing the
interests of the Company and its stockholders. Accordingly, the Plan provides
for granting certain employees the option (“Option”) to purchase shares of the
common stock of the Company (“Stock”), as hereinafter set forth. Options granted
under the Plan to employees may be either incentive stock options, within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”), (“Incentive Stock Options”) or options which do not constitute
Incentive Stock Options.
II. Administration
The Plan shall be administered by the Board of Directors of the Company (the
“Board”) or by a committee (the “Committee”) of two or more directors of the
Company appointed by the Board. If a Committee is not appointed by the Board,
the Board shall act as and be deemed to be the Committee for all purposes of the
Plan. The Committee shall have sole authority (within the limitations described
herein) to select the employees who are to be granted Options hereunder and to
establish the number of shares which may be issued to employees under each
Option and to prescribe the form of the agreement embodying awards of Options.
The Committee is authorized to interpret the Plan and may from time to time
adopt such rules and regulations, consistent with the provisions of the Plan, as
it may deem advisable to carry out the Plan. All decisions made by the Committee
in selecting the employees to whom Options shall be granted, in establishing the
number of shares which may be issued to employees under each Option and in
construing the provisions of the Plan shall be final. No member of the Board
shall be liable for anything done or omitted to be done by such member or by any
other member of the Board in connection with the Plan, except for such member’s
own willful misconduct or as expressly provided by statute.
III. Option Agreements; Terms and Conditions
Each Option granted under the Plan shall be evidenced by an agreement and shall
contain such terms and conditions, and may be exercisable for such periods, as
the Committee shall prescribe from time to time in accordance with this Plan,
and shall comply with the following terms and conditions:
(a) The Option exercise price shall be the fair market value of the Stock
subject to the Option on the date the Option is granted. For all purposes under
the Plan, the fair market of a share of Stock on a particular date shall be
equal to the average of the high and low sales prices of the Stock on the date
of grant as reported on the Nasdaq National Market tier of The Nasdaq Stock
Market (“NMS”), or on the stock exchange composite tape if the Stock is traded
on a national stock exchange on that date, or if no prices are reported on that
date, on the last preceding date on which such prices of the Stock are so
reported. If the Stock is not traded on the NMS or other stock exchange on that
date, but is otherwise traded over the counter at the time a determination of
its fair market value is required to be made hereunder, its fair market value
shall be deemed to be equal to the average between the reported high and low or
closing bid and asked prices of the Stock on the most recent date on which the
Stock was publicly traded. If the Stock is not publicly traded at the time a
determination of its value is required to be made hereunder, the determination
of its fair market value shall be made by the Committee in such manner as it
deems appropriate.

 

 

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(b) The Option shall not be transferable otherwise than by will or the laws of
descent and distribution, and may be exercised only by the employee during the
employee’s lifetime and while the employee remains employed by the Company,
except that: (i) if the employee ceases to be an employee of the Company because
of disability, the Option may be exercised in full by the employee (or the
employee’s estate or the person who acquires the Option by will or the laws of
descent and distribution or otherwise by reason of the death of the employee) at
any time during the period of one year following such termination; (ii) if the
employee dies while he is an employee of the Company, the employee’s estate, or
the person who acquires the Option by will or the laws of descent and
distribution or otherwise by reason of the death of the employee, may exercise
the Option in full at any time during the period of one year following the date
of the employee’s death; and (iii) if the employee ceases to be an employee of
the Company for any reason other than as described in clause (i) or (ii) above,
unless the employee is removed for cause, the Option may be exercised by the
employee at any time during the period of three months following the date the
employee ceases to be an employee of the Company, or by the employee’s estate
(or the person who acquires the Option by will or the laws of descent and
distribution or otherwise by reason of the death of the employee) during a
period of one year following the employee’s death if the employee dies during
such three-month period, but in each case only as to the number of shares the
employee was entitled to purchase hereunder upon exercise of the Option as of
the date the employee ceases to be an employee.
(c) The Option shall not be exercisable in any event after the expiration of ten
years from the date of grant.
(d) The purchase price of shares as to which the Option is exercised shall be
paid in full at the time of exercise (a) in cash, (b) by delivering to the
Company shares of Stock having a fair market value equal to the purchase price,
or (c) any combination of cash or Stock, as shall be established by the
Committee. Unless and until a certificate or certificates representing such
shares shall have been issued by the Company to the employee, the employee (or
the person permitted to exercise the Option in the event of the employee’s
death) shall not be or have any of the rights or privileges of a stockholder of
the Company with respect to shares acquirable upon an exercise of the Option.
(e) The terms and conditions of the respective employee stock option agreements
need not be identical.
IV. Eligibility of Optionee
(a) Subject to the provisions of paragraph (b) below, Options may be granted
only to individuals who are employees (including officers and directors who are
also employees) of the Company or any parent or subsidiary corporation (as
defined in Section 424 of the Code) of the Company at the time the Option is
granted. Options may be granted to the same employee on more than one occasion.

 

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(b) No Incentive Stock Option shall be granted to an individual if, at the time
the Option is granted, such individual owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporation, within the meaning of Section 422(b)(6) of the
Code, unless (i) at the time such Option is granted the option price is at least
110% of the fair market value of the Stock subject to the Option and (ii) such
Option by its terms is not exercisable after the expiration of five years from
the date of grant. To the extent that the aggregate fair market value
(determined at the time the respective Incentive Stock Option is granted) of
stock with respect to which Incentive Stock Options are exercisable for the
first time by an individual during any calendar year under all incentive stock
option plans of the Company and its parent and subsidiary corporations exceeds
$100,000, such Incentive Stock Options shall be treated as options which do not
constitute Incentive Stock Options. The Committee shall determine, in accordance
with applicable provisions of the Code, Treasury Regulations and other
administrative pronouncements, which of an employee optionee’s Incentive Stock
Options will not constitute Incentive Stock Options because of such limitation
and shall notify the employee optionee of such determination as soon as
practicable after such determination.
V. Shares Subject to the Plan
The aggregate number of shares which may be issued under Options granted under
the Plan shall not exceed 850,000 shares of Stock. Such shares may consist of
authorized but unissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Options at the termination of the Plan shall
cease to be subject to the Plan, but, until termination of the Plan, the Company
shall at all times make available a sufficient number of shares to meet the
requirements of the Plan. Should any Option hereunder expire or terminate prior
to its exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted under the Plan. The aggregate number of shares
which may be issued under the Plan shall be subject to adjustment in the same
manner as provided in Article VII hereof with respect to shares of Stock subject
to Options then outstanding. Exercise of an Option in any manner shall result in
a decrease in the number of shares of Stock which may thereafter be available,
both for purposes of the Plan and for sale to any one individual, by the number
of shares as to which the Option is exercised. Separate stock certificates shall
be issued by the Company for those shares acquired pursuant to the exercise of
an Incentive Stock Option and for those shares acquired pursuant to the exercise
of any Option which does not constitute an Incentive Stock Option.
VI. Term of Plan
The Plan shall be effective upon the date of its approval and adoption by the
stockholders of the Company. Except with respect to Options then outstanding, if
not sooner terminated under the provisions of Article VIII, the Plan shall
terminate upon and no further Options shall be granted after the expiration of
ten years from the date of its adoption by the Board.
VII. Recapitalization or Reorganization
(a) The existence of the Plan and the Options granted hereunder shall not affect
in any way the right or power of the Board or the stockholders of the Company to
make or authorize any adjustment, recapitalization, reorganization or other
change in the Company’s capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities ahead of or
affecting the Stock or the rights thereof, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition of all or any part of
its assets or business or any other corporate act or proceeding.

 

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(b) The shares with respect to which Options may be granted are shares of Stock
as presently constituted, but if, and whenever, prior to the expiration of an
Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i) in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
(c) If the Company recapitalizes or otherwise changes its capital structure,
thereafter upon any exercise of an Option theretofore granted the optionee shall
be entitled to purchase under such Option, in lieu of the number of shares of
Stock as to which such Option shall then be exercisable, the number and class of
shares of stock and securities to which the optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to such
recapitalization, the optionee had been the holder of record of the number of
shares of Stock as to which such Option is then exercisable. If (i) the Company
shall not be the surviving entity in any merger or consolidation (or survives
only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company), (ii) the Company sells, leases or exchanges or
agrees to sell, lease or exchange all or substantially all of its assets to any
other person or entity (other than a wholly-owned subsidiary of the Company),
(iii) the Company is to be dissolved and liquidated, (iv) any person or entity,
including a “group” as contemplated by Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of Stock, or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board (each
such event is referred to herein as a “Corporate Change”), then upon the
occurrence of any such Corporate Change, any outstanding Options held by
employees shall become fully exercisable and upon any exercise of an Option
theretofore granted the employee shall be entitled to purchase under such
Option, in lieu of the number of shares of Stock as to which such Option shall
then be exercisable, the number and class of shares of stock or other securities
or property to which the employee would have been entitled pursuant to the terms
of the Corporate Change if, immediately prior to such Corporate Change, the
employee had been the holder of record of the number of shares of Stock as to
which such Option is then exercisable. Notwithstanding any of the foregoing
provisions of this paragraph (c) to the contrary, any Option referred to herein
shall be adjusted, where necessary, so that the fair value of the Option
immediately after the transaction or event referred to herein is equal to the
fair value of the Option immediately prior to such transaction or event by
adjusting the number and type of shares of Stock and/or the purchase price per
share, and/or making such other adjustments as may be appropriate, in order to
comply with the requirements of Section 409A of the Code and the final
regulations and other guidance issued thereunder.
(d) Any adjustment provided for in paragraphs (b) or (c) above shall be subject
to any required stockholder action.
(e) Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class or securities convertible into shares of stock of
any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.

 

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VIII. Amendment or Termination of the Plan
The Board in its discretion may terminate the Plan at any time with respect to
any shares for which Options have not theretofore been granted. The Board shall
have the right to alter or amend the Plan or any part thereof from time to time,
provided, that no change in any Option theretofore granted may be made which
would impair the rights of the optionee without the consent of such optionee.
IX. Miscellaneous Provisions
(a) Neither the Plan nor any action taken hereunder shall be construed as giving
any employee any right to be retained in the service of the Company.
(b) An optionee’s rights and interest under the Plan may not be assigned or
transferred in whole or in part either directly or by operation of law or
otherwise (except in the event of an optionee’s death or disability, by will or
the laws of descent and distribution, all as provided in Article III),
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy, or in any other manner, and no such right or
interest of any participant in the Plan shall be subject to any obligation or
liability of such participant.
(c) No shares of Stock shall be issued hereunder unless counsel for the Company
shall be satisfied that such issuance will be in compliance with applicable
Federal, state, and other securities laws and regulations.
(d) It shall be a condition to the obligation of the Company to issue shares of
Stock upon exercise of an Option, that the optionee (or any beneficiary or
person entitled to act under or through Optionee as provided herein) pay to the
Company, upon its demand, such amount as may be requested by the Company for the
purpose of satisfying any liability to withhold Federal, state, local, or
foreign income or other taxes. If the amount requested is not paid, the Company
may refuse to issue shares of Stock.
(e) By accepting any Option under the Plan, each optionee and each person
claiming under or through such person shall be conclusively deemed to have
indicated his or her acceptance and ratification of, and consent to, any action
taken under the Plan by the Company, the Board of Directors or the Committee.

 

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