PARALLEL PETROLEUM
CORPORATION
EMPLOYEE STOCK OPTION
PLAN
The Parallel Petroleum Corporation Employee
Stock Option Plan (the “ Plan ”) is intended to
provide a means whereby certain employees who are not officers or
directors 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 shareholders. Accordingly, the Plan provides for granting
employees (in each case, “ Optionee ”) the
option (“ Option” ) to purchase shares of common
stock of the Company (“ Stock ”), as hereinafter
set forth. Options granted under the Plan to employees will not be
incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the “
Code ”).
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 from among those
eligible 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.
III. Option Agreements; Terms and
Conditions
Each Option granted under the Plan shall be
evidenced by a written stock option 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) Each Option and all rights granted
thereunder shall not be transferable otherwise than by will or the
laws of descent and distribution, and may be exercised only by the
Optionee during the Optionee’s lifetime and while the
Optionee remains employed by the Company, except that: (i) if
the Optionee ceases to be an employee of the Company because of
disability, the Option may be exercised in full by the Optionee (or
the Optionee’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 Optionee) at any time during the period
of one year following such termination; (ii) if the Optionee
dies while Optionee is an employee of the Company, the
Optionee’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 Optionee, may exercise the Option in full at
any time during the period of one year following the date of the
Optionee’s death; and (iii) if the Optionee ceases to be
an employee of the Company for any reason other than as described
in clause (i) or (ii) above, unless the Optionee is
removed for cause, the Option may be exercised by the Optionee at
any time during the period of three months following the date the
Optionee ceases to be an employee of the Company, or by the
Optionee’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 Optionee) during a period of one year following
the Optionee’s death if the Optionee dies during such
three-month period, but in each case only as to the number of
shares the Optionee was entitled to purchase hereunder upon
exercise of the Option as of the date the Optionee ceases to be an
employee of the Company.
(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 on the date of delivery
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 Optionee, the Optionee (or the
person permitted to exercise the Option in the event of the
Optionee’s death) shall not be or have any of the rights or
privileges of a shareholder of the Company with respect to shares
acquirable upon an exercise of the Option.
(e) The
terms and conditions of the respective stock option agreements need
not be identical.
IV. Eligibility of
Optionee
Options may be granted only to employees (who
are not officers or directors) 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 Optionee on more than one occasion.
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V. Shares Subject to the
Plan
The aggregate number of shares which may be
issued under Options granted under the Plan shall not exceed
200,000 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 t
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