Exhibit 10.38


 


WESTERN GAS
RESOURCES, INC.


 


2002
NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN


 


This plan is established by WESTERN GAS
RESOURCES, INC., a Delaware corporation, (hereinafter referred to as the
“Corporation”), the non-employee directors of the Corporation who qualify as
participants, and shall be known as the Western Gas Resources, Inc. 2002
Non-Employee Directors’ Stock Option Plan (the “Plan”).  The Plan provides stock options for
non-employee directors of the Corporation.


 


1.                                       Purpose.  The purpose of the Plan is to enable the
Corporation’s non-employee directors to participate in growth and profitability
of the Corporation by providing a method whereby non-employee directors are
regularly encouraged to invest in the Corporation’s common stock to increase
incentives to contribute to the Corporation’s future success and prosperity and
to allow them to acquire a proprietary interest in the Corporation’s
business.  Further, the availability of
stock options under the Plan supports and encourages non-employee directors to
remain as directors of the Corporation.


 


2.                                       Definitions.  The terms used herein shall have the
following meanings:


 


(a)                                  “Board” shall mean the Board of
Directors of Western Gas Resources, Inc., a Delaware corporation.


 


(b)                                 “Change in Control of the
Corporation” shall mean (i) the acquisition by any person or persons acting in
concert (including corporations, partnerships, associations or unincorporated
organizations), of legal ownership or beneficial ownership (within the meaning
of Rule 13d-3, promulgated by the Securities and Exchange Commission and now in
effect under the Securities Exchange Act of 1934 (as amended), of a number of
voting shares of capital stock of the Corporation greater than either 30% or
the number of voting shares of capital stock of the Corporation that are then
owned, beneficially (as defined above), by Brion G. Wise, Bill M. Sanderson,
Walter L. Stonehocker, Dean Phillips, Ward Sauvage, their immediate families
and the companies through which they and their immediate families hold
ownership in the Corporation (“the Founders”), whichever is higher; (ii) a
merger or consolidation of the Corporation or any of its subsidiaries other
than a merger or consolidation immediately following which the directors of the
Corporation prior thereto constitute a majority of the of the board of the
surviving company or parent thereof; (iii) a change in the majority of the
Board pursuant to an actual or threatened proxy contest; or (iv) a sale of
substantially all of the Corporation’s assets.


 


(c)                                  “Code” shall mean the Internal
Revenue Code of 1986, as amended.


 


(d)                                 “Common Stock” shall mean the $0.10
par value common stock of the Corporation which shall be authorized and
unissued stock or treasury stock.


 


(e)                                  “Corporation” shall mean Western Gas
Resources, Inc., a Delaware corporation.


 


(f)                                    “Disabled” shall mean a non-employee
director of the Corporation found to be unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death, or which has lasted, or can be
expected to last, for a continuous period of not less than twelve (12) months.


 


(g)                                 “Fair Market Value” of stock shall
mean the New York Stock Exchange Composite Transactions average closing price
for the Common Stock reflected in The Wall Street Journal or another
publication selected by the Board for the ten (10) days preceding the day the
Option is granted to non-employee director. 
If Shares of Common Stock have not been traded on the New York Stock Exchange
for more than 10 days immediately preceding the granting of an Option, or if
deemed


 

















 


appropriate by the Board for any other
reason, the Fair Market Value of shares of Common Stock shall be as determined
by the Board in such other manner as it may deem appropriate.


 


(h)                                 “Option” shall mean a nonstatutory
stock option granted by the Corporation under this Plan which is not intended
to qualify as an “incentive stock option” within the meaning of the Code.


 


(i)                                     “Optionee” shall mean a non-employee
director of the Corporation who has been granted an Option under this Plan.


 


(j)                                     “Plan” shall mean this 2002
Non-Employee Directors’ Stock Option Plan set forth in and by this document and
all subsequent amendments thereto.


 


(k)                                  “Stock Option Agreement” shall mean
an agreement between an Optionee and the Corporation which evidences the
Optionee’s right to acquire Common Stock under the Plan and which contains
terms and conditions consistent with this Plan as approved by the Board.


 


3.                                       Administration
of Plan.


 


(a)                                  The Board shall administer the
Plan.  The Board shall have the
authority to: (i) construe and interpret the Plan; (ii) define the terms used
herein; (iii) determine the duration and purpose of leaves of absence which may
be granted to Optionees without constituting a termination of their services
for the purposes of the Plan; and (iv) make all other determinations necessary
or advisable for the administration of the Plan.  The determination of the Board in the matters referred to in this
paragraph shall be conclusive.


 


(b)                                 The Board may cancel at any time any
Options awarded under the Plan is an Optionee engages in conduct which the
Board determines to be detrimental to the best interests of the Corporation.


 


(c)                                  The Board may at any time and from
time to time amend, suspend or terminate the Plan and may amend the form of the
Stock Option Agreement, in such respects as it shall deem advisable; provided
that such modification shall not change: 
(1) the maximum number of shares for which Options may be granted; (2)
the Option prices; (3) the period during which Options may be granted or
exercised; (4) the provisions relating to the class of persons eligible to
receive Options granted under the Plan; or (5) the provisions relating to
adjustments to be made upon changes in capitalization of the Corporation.  Such modifications in the Plan shall not,
without the consent of an Optionee, affect such Optionee’s rights under an
Option previously granted to him.


 


4.                                       Annual
Grant and Election Grant.  Each
non-employee director shall automatically be issued an Option to purchase 2,000
shares of Common Stock on the first business day following the annual meeting
of stockholders of the Corporation held in each year subsequent to 2001 and
prior to the termination of the Plan. 
Each person who, after May 17, 2002, becomes a non-employee director of
the Corporation for the first time shall, at the time such director is elected
and duly qualified, automatically be issued an Option to purchase 5,000 shares
of Common Stock.  Directors of the
Corporation who are employees or officers of the Corporation are not eligible
to participate in the Plan.


 


Participation in the Plan shall not confer
any right of continuation of service as a director of the Company.


 


5.                                       Shares
Subject to Plan.  Subject to
adjustment under Paragraph 12, below, the maximum number of shares from which
Options may be granted under the Plan are One Hundred Ten Thousand (110,000)
shares of the Corporation’s authorized and unissued Common Stock.  If any Option granted under the Plan shall
terminate or expire prior to exercise, in whole or in part, the shares so
released from the Option may be made the subject of additional grants under the
Plan.  The Corporation shall


 


2

















 


reserve and
keep available such number of shares of stock as will satisfy the requirements
of all outstanding grants of Options under this Plan.


 


6.                                       Option
Price.  The purchase price of the
stock under each Option shall be not be less than one hundred percent (100%) of
the fair market value of the stock subject to the Option at the time the Option
is granted.


 


7.                                       Conditions
for Exercise of Option.


 


(a)                                  Notwithstanding anything to the
contrary, no Option or portion thereof granted under this Plan may be exercised
after the earlier of (i) five (5) years from the date the Optionee has the
right to exercise such Option or portion thereof as provided in this Paragraph
7(a); or (ii) ten (10) years from the date the Option is granted.  The Optionee’s right to purchase the shares
subject to the Option shall become exercisable during each calendar year in
accordance with the following schedule:


 


(1)                                  Commencing
one year from the date of the grant, the Optionee shall have the right to exercise
thirty-three percent and one-third percent (33 1/3%) of the Option and to
purchase thirty-three and one-third percent (33 1/3%) of the Common Stock
subject to the Option.


 


(2)                                  Commencing
two years from the date of the grant, the Optionee shall have the right to
exercise an additional thirty-three percent and one-third percent (33 1/3%) of
the Option and to purchase an additional thirty-three and one-third percent (33
1/3%) of the Common Stock subject to the Option.


 


(3)                                  Commencing
three years from the date of the grant, the Optionee shall have the right to
exercise an additional thirty-three and one-third percent (33 1/3%) of the
Option and to purchase an additional thirty-three and one-third percent (33
1/3%) of the Common Stock subject to the Option.


 


(b)                                 Except as provided in Paragraphs
7(c) and (d), an Optionee may exercise an Option only if, at the time such
Option is exercised, such Optionee is a non-employee director of and has
continuously, since the grant of the Option, been a non-employee director of
the Corporation or any subsidiary or parent of the Corporation.


 


(c)                                  If the directorship of the Optionee
is terminated for any reason other than (i) his or her death or becoming
Disabled; or (ii) his or her discharge for dishonesty or commission of a crime,
the Optionee may, within three (3) months thereafter, subject to provisions of
this Plan and earlier expiration of the Option, exercise the Option to the
extent the Option is exercisable as of the date of termination of his
directorship.  All unexercised Options
shall terminate, be forfeited, and shall lapse upon expiration of said three
(3) month period, or immediately if the employment of the Optionee is
terminated by the Corporation for the reason set forth in clause (ii) above.


 


(d)                                 If an Optionee dies or becomes
Disabled while serving as a director of the Corporation, all of the Options
granted to such Optionee shall become one hundred percent (100%) exercisable,
without regard to the provisions of Paragraph 7(a), above.  In such event, the Options may be exercised
by the Disabled Optionee, or the person or persons to whom the deceased
Optionee’s rights under the Option shall pass by will, or by the applicable
laws of descent and distribution; provided, however, that no such Option may be
exercised after one hundred eighty days (180) days from such Optionee’s date of
death, or termination of employment as a result of becoming Disabled, whichever
is applicable, or after the expiration date of the Option, if earlier.  Upon expiration of said period, all
unexercised Options, or portions thereof, shall terminate, be forfeited, and
shall lapse.


 


(e)                                  Except as set forth above, the
Options and rights granted hereunder shall not be transferred by the Optionee
and may not be assigned, pledged, or hypothecated in any way and shall not be
subject to execution, attachment, or similar process.  Upon any attempt by the Optionee to


 


3

















 


transfer the Option or to assign, pledge,
hypothecate, or otherwise dispose of such Option or of any rights granted
hereunder contrary to the provisions hereof, or upon the levy of any attachment
or similar process upon such Option or such rights, such Option and such rights
shall immediately become null and void. 
The Option shall be exercisable during the lifetime of the Optionee,
only by the Optionee.


 


(f)                                    As of the date of a Change in
Control of the Corporation, all of the Options granted under the Plan which
have not otherwise been terminated or forfeited shall become one hundred
percent (100%) exercisable, without regard to the provisions of Paragraph 7(a),
above.


 


8.                                       Method
of Exercise.


 


(a)                                  To exercise the Option, the
Optionee, or his or her successors, shall give written notice to the
Corporation’s treasurer at the Corporation’s principal office accompanied by
full payment of the shares being purchased and a written statement that the
shares are purchased for investment and not with a view to distribution.  However, this statement shall not be
required in the event the shares subject to the Option are registered with the
Securities and Exchange Commission.  If
the Option is exercised by the successor of the Optionee, following his or her
death, proof shall be submitted, satisfactory to the Board, of the right of the
successor to exercise the Option.


 


(b)                                 Shares of stock issued pursuant to
this Plan which have not been registered with the Securities and Exchange
Commission shall bear the following legend:


 


“The
securities represented by this Stock Certificate have not been registered under
the Securities Act of 1933 (the “Act”) or applicable state securities laws (the
“State Acts”), and shall not be sold, pledged, hypothecated, donated or
otherwise transferred (whether or not for consideration) by the holder, except
upon the issuance to the Corporation of a favorable opinion of its counsel and
submission to the Corporation of such other evidence as may be satisfactory to
the Corporation to the effect that any such transfer shall not be in violation
of the Act and the State Acts.”


 


(c)                                  The Corporation shall not be
required to transfer and deliver any certificate or certificates for shares
purchased upon exercise of said Options until after compliance with all then
applicable requirements of law.  If the
Corporation shall be advised by counsel that shares of stock deliverable upon
exercise of an Option are required to be registered under the Securities Act of
1933, or that the consent of any other authority is required for the issuance
of same, the Corporation may effect registration or obtain consent, and
delivery of shares by the Corporation may be deferred until registration is
effected or consent obtained.


 


9.                                       Rights
under the Plan.  Nothing contained
in the Plan, nor in any Stock Option Agreement, shall confer upon any Optionee
any right to remain as a director of the Corporation.


 


10.                                 Amendments
and Termination.  The Board may
amend, suspend, discontinue or terminate the Plan; provided, however, that
unless first approved by the requisite vote of stockholders, no amendment shall
be made to the Plan that would (a) permit a decrease in the Option price of any
outstanding Option, (b) increase the total number of shares of Common Stock
reserved for issuance under the Plan, or (c) expand or alter the provisions
relating to the class of persons eligible to receive Options granted under the
Plan.  No modification to the Plan
shall, without the consent of an Optionee, adversely affect such Optionee’s
rights under an Option previously granted to him.


 


11.                                 Issuance
of Stock.  No shares of Common Stock
shall be issued until full payment for such stock has been made.  The Optionee shall have no rights as a
stockholder with respect to optioned shares until the date of the issuance of
the stock certificate to him or her for such shares.  No adjustments shall be made for dividends (ordinary or
extraordinary, whether in cash, securities, or other properties) or
distributions or other rights for which the record date is prior to the date
such certificate is issued except as provided in Sections 5 and 12 hereof.


 


4

















 


12.                                 Adjustments
and Changes in the Common Stock.  No
adjustment shall be made to the number of shares of Common Stock for which
Options are granted by the Plan or the exercise price thereof as a result of
any change in the number of issued and outstanding shares of Common Stock.  However, the number of shares of Common
Stock covered by outstanding Options, as well as the exercise price, shall be
adjusted proportionately for any increase or decrease in the number of
outstanding shares of Common Stock resulting from a stock split, the payment of
a stock dividend with respect to the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company.  In
addition, in the event of a dissolution or liquidation of the Corporation, a
capital reorganization, or consolidation or merger of the Company with another
corporation or corporations, or any sale of all or substantially all of the
Company’s profits and assets to any other corporation or corporations, the
Corporation shall take such action as may be necessary to enable the Optionee
to receive upon any subsequent exercise of their respective options, in whole
or in part, in lieu of shares of Common Stock, securities or other assets as
were issued or payable upon such reorganization, consolidation, merger, or
sale, in respect of, or in exchange for such shares of Common Stock.


 


13.                                 Stock
Option Agreement.  The granting of
an Option under this Agreement occurs only by a written Stock Option Agreement,
substantially in the form of the Stock Option Agreement which is attached
hereto and marked Exhibit 1, is executed by and on behalf of the Corporation
and the non-employee director to whom the Option is granted, and such executed
Agreement is delivered to the Corporation.


 


14.                                 Period
of Plan.  No Options shall be
granted on or after the 10th anniversary of the date of adoption of
the Plan by the Board of Directors of the Corporation.  The Plan shall expire no later than said
tenth anniversary date, or the date on which all Options granted under the Plan
have expired or been exercised in full.


 


 


	
   

  	
  ADOPTED BY THE BOARD OF DIRECTORS OF

  WESTERN GAS RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
  Secretary

  	
   

  



 


5