PARALLEL PETROLEUM
CORPORATION
NON-EMPLOYEE DIRECTORS STOCK
OPTION PLAN
1. Purpose of the Plan.
The purpose of the Parallel
Petroleum Corporation Non-employee Directors Stock Option Plan (the
“Plan”) is to secure for Parallel Petroleum Corporation
(the “Company”) and its stockholders the benefits of
the incentives inherent in increased common stock ownership by
members of the Board of Directors (the “Board”) of the
Company who are not employees of the Company (“Non-employee
Directors”) or any of its subsidiaries and to provide a means
whereby Non-employee Directors of the Company 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 to
Non-employee Directors the option (“Option”) to
purchase shares of common stock of the Company
(“Stock”), as hereinafter set forth. Options granted
under the Plan to Non-employee Directors are not intended to be
incentive stock options within the meaning of section 422 of the
Internal Revenue Code of 1986, as amended.
2. 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 Non-employee Directors who are to be granted Options; to
establish the number of shares which may be issued to Non-employee
Directors under each Option; and to prescribe the form of the
agreement embodying awards of Options. The Committee is authorized
to interpret the Plan, to determine all questions arising
thereunder and to 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 shall be final and
conclusive. 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.
3. Eligibility of Optionee.
Options may be granted only to
directors who are not employees of the Company or any parent or
subsidiary corporation of the Company at the time the Option is
granted. The adoption of this Plan shall not be deemed to give any
director any right to be granted an Option. Options may be granted
to the same Non-employee Director on more than one
occasion.
4. Shares Subject to the Plan.
The aggregate number of shares which
may be issued under Options granted under the Plan shall not exceed
500,000 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 sufficient number of shares to meet the requirements of
the Plan. If any Option hereunder expires or terminates 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
Paragraph 7 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.
5. 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 Non-employee Director during the
Non-employee Director’s lifetime and while the Non-employee
Director remains a director of the Company, except that:
(i) If the Non-employee Director ceases to
be a director of the Company because of disability, the Option may
be exercised in full by the Non-employee Director (or the
Non-employee Director’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 Non-employee Director) at any time
during the period of one year following such
termination;
(ii) If the Non-employee Director dies
while he is a director of the Company, the Non-employee
Director’s estate, or the p
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