Exhibit 10.2

 

1988 NONQUALIFIED STOCK OPTION PLAN

FOR NON-EMPLOYEE DIRECTORS

OF

NOBLE ENERGY, INC.

 

(As Amended Through April 27, 2004)

 

 

RECITALS

 

A.            Effective as of July 26, 1988 (the “Effective Date”), the board of
directors (the “Board of Directors”) of Noble Energy, Inc. (formerly known as
Noble Affiliates, Inc.), a Delaware corporation (the “Company”), adopted this
1988 Nonqualified Stock Option Plan for Non-Employee Directors (the “Plan”).

 

B.            The purposes of the Plan are to provide to each of the directors
of the Company who is not also either an employee or an officer of the Company
added incentive to continue in the service of the Company and a more direct
interest in the future success of the operations of the Company by granting to
such directors options (the “Options”, or individually, the “Option”) to
purchase shares of the Company’s common stock, $3.33-1/3 par value (the “Common
Stock”), subject to the terms and conditions described below.

 

ARTICLE I

 

GENERAL

 

1.01         Definitions.  For purposes of this Plan and as used herein,
“non-employee director” shall mean an individual who (a) is now, or hereafter
becomes, a member of the Board of Directors by virtue of an election by the
shareholders of the Company, (b) is neither an employee nor an officer of the
Company and (c) has not elected to decline to participate in the Plan pursuant
to the next succeeding sentence.  A director otherwise eligible to participate
in the Plan may make an irrevocable, one-time election, by written notice to the
Company within 30 days after his initial election to the Board of Directors or,
in the case of the directors in office on the Effective Date, prior to
shareholder approval of the Plan, to decline to participate in the Plan.  For
purposes of this Plan, “employee” shall mean an individual whose wages are
subject to the withholding of federal income tax under Section 3401 of the
Internal Revenue Code of 1986, as amended from time to time (the “Code”), and
“officer” shall mean an individual elected or appointed by the Board of
Directors or chosen in such other manner as may be prescribed in the By-laws of
the Company to serve as such, except that for the purposes of this Plan, the
Chairman of the Board will not be deemed to be an officer of the Company.

 

For purposes of this Plan, and as used herein, the “fair market value” of a
share of Common Stock is the closing sales price on the date in question (or, if
there was no reported sale on such date, on the last preceding day on which any
reported sale occurred) of the Common Stock on the New York Stock Exchange.

 

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1.02         Options.  The Options granted hereunder shall be options that are
not qualified under Section 422A of the Code.

 

ARTICLE II

 

ADMINISTRATION

 

The Plan shall be administered by the Board of Directors.  The Board of
Directors shall have no authority, discretion or power to select the
participants who will receive Options, to set the number of shares to be covered
by each Option, or to set the exercise price or the period within which the
Options may be exercised, or to alter any other terms or conditions specified
herein, except in the sense of administering the Plan subject to the express
provisions of the Plan and except in accordance with Sections 3.02(a) and 6.02
hereof.  Subject to the foregoing limitations, the Board of Directors shall have
authority and power to adopt such rules and regulations and to take such action
as it shall consider necessary or advisable for the administration of the Plan,
and to construe, interpret and administer the Plan.  The decisions of the Board
of Directors relating to the Plan shall be final and binding upon the Company,
the Holders, as defined hereinafter, and all other persons.  No member of the
Board of Directors shall incur any liability by reason of any action or
determination made in good faith with respect to the Plan or any stock option
agreement entered into pursuant to the Plan.

 

ARTICLE III

 

OPTIONS

 

3.01         Participation.  Each non-employee director shall be granted Options
to purchase Common Stock under the Plan on the terms and conditions herein
described.

 

3.02         Stock Option Agreements.  Each Option granted under the Plan shall
be evidenced by a written stock option agreement, which agreement shall be
entered into by the Company and the non-employee director to whom the Option is
granted (the “Holder”), and which agreement shall include, incorporate or
conform to the following terms and conditions, and such other terms and
conditions not inconsistent therewith or with the terms and conditions of this
Plan as the Board of Directors considers appropriate in each case:

 

(a)           Option Grant Date.  Options shall be granted initially as of the
Effective Date to each non-employee director serving the Company as a director
on such date.  Thereafter, on each July 1 during the term of the Plan until and
including July 1, 2001, Options shall be granted automatically to the incumbent
non-employee directors serving the Company as directors on such date.  Beginning
on February 1, 2002, Options shall be granted to incumbent non-employee
directors each year on February 1 during the term of the Plan.  Options shall be
granted to new non-employee directors at the time of their election or
appointment.  The date of grant of an Option pursuant to the Plan shall be
referred to hereinafter as the “Grant Date” of such Option.  Notwithstanding
anything herein to the contrary, the Board of Directors may revoke, on or prior
to July 1, 2001 or on or prior to each subsequent February 1, the next automatic
grant of Options otherwise provided for by the

 

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Plan if no options have been granted to employees since the preceding Grant Date
under the Company’s 1982 Stock Option Plan or any other employee stock option
plan that the Company might adopt hereafter.

 

(b)           Number.  Each non-employee director serving the Company as a
director on the Effective Date shall be granted, as of such date, an Option to
purchase a number of shares of Common Stock equal to the product obtained by
multiplying (i) the number of completed years such director has served the
Company as a director by (ii) 500.  Thereafter, as of each subsequent Grant Date
prior to July 1, 2001, each then current non-employee director shall be granted
an Option to purchase the number of shares of Common Stock equal to the nearest
number of whole shares determined in accordance with the following formula,
subject to adjustment in accordance with Section 5.02 hereof:

 

 

30,000

 

 

=

 

Number of Shares of
Common Stock

Number of Non-Employee Directors

 

 

 

 

“Number of Non-Employee Directors” shall mean the number of non-employee
directors serving the Company as a director on such Grant Date.  The formula set
forth above will not be affected by any decision of the Board of Directors to
revoke an automatic grant.

 

If, on any July 1 during the term of the Plan prior to July 1, 2001, fewer than
30,000 shares of Common Stock (subject to adjustment in accordance with Section
5.02 hereof) remain available for grant on such date, such smaller number will
be substituted for 30,000 as the numerator in the formula described above to
determine the number of shares of Common Stock to be subject to each Option to
be granted to each non-employee director on such date.

 

Beginning on July 1, 2001 and on each Grant Date thereafter, each new
non-employee director shall be granted an Option to purchase 10,000 shares of
Common Stock, upon election to the Board of Directors as a director, for his or
her first year of service as a director.  On each subsequent Grant Date, each
then current incumbent non-employee director who has completed his or her first
year of service as a director shall be granted an Option to purchase 5,000
shares of Common Stock.

 

(c)           Price.  The price at which each share of Common Stock covered by
an Option may be purchased pursuant to this Plan shall be the fair market value
of the shares on the Grant Date of such Option.

 

(d)           Option Period.  Each Option shall be exercisable from time to time
over a period (the “Option Period”) commencing one year from the Grant Date of
such Option and ending upon the expiration of ten years from the Grant Date,
unless terminated sooner pursuant to the provisions described in Section 3.02(e)
below; provided, however, that any Option granted pursuant to the Plan shall
become exercisable in full upon the mandatory retirement of the Holder as a
regular director because of age in accordance with Article III of the By-laws of
the Company.

 

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(e)           Termination of Service, Death, Etc.  Each stock option agreement
shall provide as follows with respect to the exercise of the Option granted
thereby in the event that the Holder ceases to be a non-employee director for
the reasons described in this Section 3.02(e):

 

(i)  If the Holder ceases to be a director of the Company on account of such
Holder’s (A) fraud or intentional misrepresentation, or (B) embezzlement,
misappropriation or conversion of assets or opportunities of the Company or any
direct or indirect majority-owned subsidiary of the Company, then the Option
shall automatically terminate and be of no further force or effect as of the
date the Holder’s directorship terminated;

 

(ii)  If the Holder shall die during the Option Period while a director of the
Company (or during the additional five-year period provided by paragraph (iii)
of this Section 3.02(e)), the Option may be exercised, to the extent that the
Holder was entitled to exercise it at the date of Holder’s death, within five
years after such death (if otherwise within the Option Period), but not
thereafter, by the executor or administrator of the estate of the Holder, or by
the person or persons who shall have acquired the Option directly from the
Holder by bequest or inheritance or permitted transfer; or

 

(iii)  If the directorship of a Holder is terminated for any reason (other than
the circumstances specified in paragraphs (i) and (ii) of this Section 3.02(e))
within the Option Period, the Option may be exercised, to the extent the Holder
was able to do so at the date of termination of the directorship, within five
years after such termination (if otherwise within the Option Period), but not
thereafter.

 

(f)            Transferability.  Except as provided in this subsection (f), no
Option granted under the Plan shall be (i) transferable otherwise than by will
or the laws of descent and distribution, or (ii) exercisable during the lifetime
of the Holder by anyone other than the Holder.  An Option granted under the Plan
to a Holder may be transferred by such Holder to a permitted transferee (as
defined below), provided that (i) there is no consideration for such transfer
(other than receipt by the Holder of interests in an entity that is a permitted
transferee); (ii) the Holder (or such Holder’s estate or representative) shall
remain obligated to satisfy all income or other tax withholding obligations
associated with the exercise of such Option; (iii) the Holder shall notify the
Company in writing that such transfer has occurred and disclose to the Company
the name and address of the permitted transferee and the relationship of the
permitted transferee to the Holder; and (iv) such transfer shall be effected
pursuant to transfer documents in a form approved by the Board of Directors.  A
permitted transferee may not further assign or transfer any such transferred
Option otherwise than by will or the laws of descent and distribution. 
Following the transfer of an Option to a permitted transferee, such Option shall
continue to be subject to the same terms and conditions that applied to it prior
to its transfer by the Holder, except that it shall be exercisable by the
permitted transferee to whom such transfer was made rather than by the
transferring Holder.  For the purposes of the Plan, the term “permitted
transferee” means, with respect to a Holder, (i) any child, stepchild,
grandchild, parent, stepparent, grandparent,

 

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spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law of the Holder,
including adoptive relationships, (ii) any person sharing the Holder’s household
(other than a tenant or an employee), (iii) a trust in which the persons
described in clauses (i) and (ii) above have more than fifty percent of the
beneficial interest, (iv) a foundation in which the Holder and/or persons
described in clauses (i) and (ii) above control the management of assets, and
(v) any other entity in which the Holder and/or persons described in clauses (i)
and (ii) above own more than fifty percent of the voting interests.

 

(g)           Agreement to Continue in Service.  Each Holder shall agree to
remain in the continuous service of the Company, at the pleasure of the
Company’s shareholders, at least until the earlier of one year after the date of
the grant of any Option or the mandatory retirement of the Holder as a regular
director because of age in accordance with Article III of the By-laws of the
Company, at the retainer rate and fee schedule then in effect or at such changed
rate or schedule as the Company from time to time may establish.

 

(h)           Exercise, Payments, Etc.  Each stock option agreement shall
provide that the method for exercising the Option granted thereby shall be by
delivery to the President of the Company of, or by sending by United States
registered or certified mail, postage prepaid, addressed to the Company (for the
attention of its President) of, written notice signed by Holder specifying the
number of shares of Common Stock with respect to which such Option is being
exercised.  Such notice shall be accompanied by the full amount of the purchase
price of such shares.  Any such notice shall be deemed to be given on the date
on which the same was deposited in a regularly maintained receptacle for the
deposit of United States mail, addressed and sent as above-stated.  In addition
to the foregoing, promptly after demand by the Company, the exercising Holder
shall pay to the Company an amount equal to applicable withholding taxes, if
any, due in connection with such exercise.

 

ARTICLE IV

 

[Deleted]

 

ARTICLE V

 

AUTHORIZED COMMON STOCK

 

5.01         Common Stock.  The total number of shares of Common Stock as to
which Options may be granted pursuant to the Plan shall be 750,000, in the
aggregate, except as such number of shares shall be adjusted from and after the
Effective Date in accordance with the provisions of Section 5.02 hereof.  If any
outstanding Option under the Plan shall expire or be terminated for any reason
before the end of the Option Period, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to the Plan.  The
Company shall, at all times during the life of any outstanding Options, retain
as authorized and unissued Common Stock at least the number of shares from time
to time included in the outstanding Options or otherwise assure itself of its
ability to perform its obligation under the Plan.

 

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5.02         Adjustments Upon Changes in Common Stock.  In the event the Company
shall effect a split of the Common Stock or dividend payable in Common Stock, or
in the event the outstanding Common Stock shall be combined into a smaller
number of shares, the maximum number of shares as to which Options may be
granted under the Plan shall be increased or decreased proportionately.  In the
event that before delivery by the Company of all of the shares of Common Stock
in respect of which any Option has been granted under the Plan, the Company
shall have effected such a split, dividend or combination, the shares still
subject to the Option shall be increased or decreased proportionately and the
purchase price per share shall be increased or decreased proportionately so that
the aggregate purchase price for all the then optioned shares shall remain the
same as immediately prior to such split, dividend or combination.

 

In the event of a reclassification of the Common Stock not covered by the
foregoing, or in the event of a liquidation or reorganization, including a
merger, consolidation or sale of assets, the Board of Directors of the Company
shall make such adjustments, if any, as it may deem appropriate in the number,
purchase price and kind of shares covered by the unexercised portions of Options
theretofore granted under the Plan.  The provisions of this Section 5.02 shall
only be applicable if, and only to the extent that, the application thereof does
not conflict with any valid governmental statute, regulation or rule.

 

ARTICLE VI

 

GENERAL PROVISIONS

 

6.01         Termination of the Plan.  The Plan shall terminate whenever the
Board of Directors adopts a resolution to that effect.  If not sooner terminated
under the preceding sentence, the Plan shall wholly cease and expire at the
close of business on July 25, 2006.  After termination of the Plan, no Options
shall be granted under this Plan, but the Company shall continue to recognize
Options previously granted.

 

6.02         Amendment of the Plan.  Subject to the limitations set forth in
this Section 6.02, the Board of Directors may from time to time amend, modify,
suspend or terminate the Plan.  No such amendment, modification, suspension or
termination shall (a) impair any Options theretofore granted under the Plan or
deprive any Holder of any shares of Common Stock which he might have acquired
through or as a result of the Plan, or (b) be made without the approval of the
shareholders of the Company where such change would (i) increase the total
number of shares of Common Stock which may be granted under the Plan or decrease
the purchase price under the Plan (other than as provided in Section 5.02
hereof), (ii) materially alter the class of persons eligible to be granted
Options under the Plan, (iii) materially increase the benefits accruing to
Holders under the Plan or (iv) extend the term of the Plan or the Option Period.

 

6.03         Treatment of Proceeds.  Proceeds from the sale of Common Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Company.

 

6.04         Effectiveness.  This Plan as originally adopted became effective as
of the Effective Date.  The Plan as amended, effective April 27, 2004, was
approved and adopted by the Board of Directors on January 27, 2004.  The Plan
was amended by the Board of Directors on January 27, 2004

 

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subject to the approval of such amendment by the affirmative vote of the holders
a majority of the outstanding shares of Common Stock present in person or by
proxy entitled to vote at the next annual meeting of the stockholders of the
Company.

 

6.05         Paragraph Headings.  The paragraph headings included herein are
only for convenience, and they shall have no effect on the interpretation of the
Plan.

 

IN WITNESS WHEREOF, the undersigned has executed this amendment to the 1988
Nonqualified Stock Option Plan for Non-Employee Directors on this 22nd day of
March, 2004, effective as of April 27, 2004.

 

 

NOBLE ENERGY, INC.

 

 

 

 

 

By

 /s/ Charles D. Davidson

 

 

Name:

Charles D. Davidson

 

Title:

President and Chief Executive Officer

 

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