PARALLEL PETROLEUM
CORPORATION
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.
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.
(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 gra
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