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Exhibit 10
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
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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 person who acquires the Option by will or the laws of
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descent and distribution or otherwise by reason of the death
of the Non-employee Director, may exercise the Option in full
at any time during the period of one year following the
date of the Non-employee Director's death; and
(iii) If the Non-employee Director ceases to be director of
the Company for any reason other than as described in clause
(i) or (ii) above, unless the Non-employee Director is removed
for cause, the Option may be exercised by the Non-employee
Director at any time during the period of three months
following the date the Non-employee Director ceases to be a
director of the Company, or by 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) during a period of
one year following the Non-employee Director's death if the
Non-employee Director dies during such three-month period,
but in each case only as to the number of shares the
Non-employee Director was entitled to purchase hereunder
upon exercise of the Option as of the date the Non-employee
Director ceases to be a director.
(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 Non-employee Director, the Non-employee
Director (or the person permitted to exercise the Option in the event
of Director'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 Non-employee Director
Stock Option agreements need not be identical.
6. Term of Plan. The Plan shall be effective upon the date of its
approval and adoption by the stockholders of the Company. Except with
respect to Options then outstanding, if not sooner terminated under the
provisions of Paragraph 8, the Plan shall terminate upon and no further
Options shall be granted after the expiration of ten years from the date of
its adoption by the Board.
7. Recapitalization or Reorganization.
(a) The existence of the Plan and the Options granted hereunder
shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
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recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of
the Company, any issue of debt or equity securities ahead of or
affecting the Stock or the rights thereof, the dissolution or
liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any
other corporate act or proceeding.
(b) The shares with respect to which Options may be granted are
shares of Stock as presently constituted, but if, and whenever,
prior to the expiration of an Option theretofore granted, the
Company shall effect a subdivision or consolidation of shares of
Stock or the payment of a stock dividend on Stock without receipt
of consideration by the Company, the number of shares of Stock with
respect to which such Option may thereafter be exercised (i) in the
event of an increase in the number of outstanding shares shall be
proportionately increased, and the purchase price per share shall
be proportionately reduced, and (ii) in the event of a reduction in
the number of outstanding shares shall be proportionately reduced,
and the purchase price per share shall be proportionately increased.
(c) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore
granted the optionee shall be entitled to purchase under such Option,
in lieu of the number of shares of Stock as to which such Option
shall then be exercisable, the number and class of shares of stock
and securities to which the optionee would have been entitled pursuant
to the terms of the recapitalization if, immediately prior to such
recapitalization, the optionee had been the holder of record of the
number of shares of Stock as to which such Option is then exercisable.
If (i) the Company shall not be the surviving entity in any merger or
consolidation (or survives only as a subsidiary of an entity other than
a previously wholly-owned subsidiary of the Company), (ii) the Company
sells, leases or exchanges or agrees to sell, lease or exchange all or
substantially all of its assets to any other person or entity (other
than a wholly-owned subsidiary of the Company (iii) the Company is
to be dissolved and liquidated, (iv) any person or entity, including
a "group" as contemplated by Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of more than
50% of the outstanding shares of Stock, or (v) as a result of or in
connection with a contested election of directors, the persons who
were directors of the Company before such election shall cease to
constitute a majority of the Board (each such event is referred to
herein as a "Corporate Change"), then upon the occurrence of any
such Corporate Change, any outstanding Options held by Non-employee
Directors shall become fully exercisable and upon any exercise of an
Option theretofore granted the Non-employee Director shall be
entitled to purchase under such Option, in lieu of the number of
shares of Stock as to which such Option shall then be exercisable,
the number and class of shares of stock or other securities or
property to which the Non-employee Director would have been entitled
pursuant to the terms of the Corporate Change if, immediately prior
to such Corporate Change, the Non-employee Director had been the
holder of record of the number of shares of Stock as to which such
Option is then exercisable.
(d) Any adjustment provided for in Subparagraphs (b) or (c) above
shall be subject to any required stockholder action.
(e) Except as hereinbefore expressly provided, the issuance by
the Company of shares of stock of any class or securities convertible
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into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants
to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, and
in any case whether or not for fair value, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the
number of shares of Stock subject to Options theretofore granted or
the purchase price per share.
8. Amendment or Termination of the Plan. The Board in its
discretion may terminate the Plan at any time with respect to any
shares for which Options have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part
thereof from time to time, provided, that no change in any Option
theretofore granted may be made which would impair the rights of the
optionee without the consent of such optionee.
9. Miscellaneous Provisions.
(a) Neither the Plan nor any action taken hereunder shall be
construed as giving any Non-Employee Director any right to be
retained in the service of the Company.
(b) An optionee's rights and interest under the Plan may not be
assigned or transferred in whole or in part either directly or by
operation of law or otherwise (except in the event of an optionee's
death or disability, by will or the laws of descent and distribution),
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy, or in any other manner, and no such
right or interest of any participant in the Plan shall be subject to
any obligation or liability of such participant.
(c) No shares of Stock shall be issued hereunder unless counsel for
the Company shall be satisfied that such issuance will be in compliance
with applicable Federal, state, and other securities laws and
regulations.
(d) It shall be a condition to the obligation of the Company to
issue shares of Stock upon exercise of an Option, that the optionee
(or any beneficiary or person entitled to act under or through Optionee
as provided herein) pay to the Company, upon its demand, such amount as
may be requested by the Company for the purpose of satisfying any
liability to withhold Federal, state, local, or foreign income or other
taxes. If the amount requested is not paid, the Company may refuse to
issue shares of Stock.
(e) By accepting any Option under the Plan, each optionee and each
person claiming under or through such person shall be conclusively
deemed to have indicated his or her acceptance and ratification of, and
consent to, any action taken under the Plan by the Company, the Board
or the Committee.