1
EXHIBIT 99.1
HUGOTON ENERGY CORPORATION
1993 STOCK OPTION PLAN
I. PURPOSE OF PLAN
The HUGOTON ENERGY CORPORATION 1993 STOCK OPTION PLAN (the "Plan") intended
to provide a means whereby certain employees of HUGOTON ENERGY CORPORATION, a
Kansas corporation (the "Company"), and its subsidiary 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 Company may grant to certain
employees ("OPTIONEES") the option ("OPTION") to purchase shares of the common
stock of the Company ("STOCK"), as hereinafter set forth. Options granted under
the Plan may be either incentive stock options, within the meaning of section
422(b) of the Internal Revenue Code, as amended (the "CODE"), ("INCENTIVE STOCK
OPTIONS") or options which do not constitute Incentive Stock Options.
II. ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"COMMITTEE") of the Board of Directors of the Company (the "BOARD"), and the
Committee shall, be (a) comprised solely of two or more outside directors
(within the meaning of section 162(m) of the Code and applicable interpretive
authority thereunder), and (b) constituted so as to permit the Plan to comply
with Rule 16b-3, as currently in effect or as hereinafter modified or amended
("RULE 16B-3"), promulgated under the Securities Exchange Act of 1934, as
amended (the "1934 ACT"). The Committee shall have sole authority to select the
Optionees from among those individuals eligible hereunder and to establish the
number of shares which may be issued under each Option. In making such
determination, the Committee may take into account the nature of the services
rendered by such individuals, their present and potential contributions to the
Company's success and such other factors as the Committee in its discretion
shall deem relevant. 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 Optionees, in establishing the
number of shares which may be issued under each Option and in construing the
provisions of the Plan shall be final.
II. OPTION AGREEMENTS
(a) Each Option shall be evidenced by a written agreement between the
Company and
2
the Optionee ("OPTION AGREEMENT") which shall contain such terms and conditions
as may be approved by the Committee. The terms and conditions of the respective
Option Agreements need not be identical. Specifically, an Option Agreement may
provide for the surrender of the right to purchase shares under the Option in
return for a payment in cash or shares of Stock or a combination of cash and
shares of Stock equal in value to the excess of the fair market value of the
shares with respect to which the right to purchase is surrendered over the
option price therefor ("STOCK APPRECIATION RIGHTS"), on such terms and
conditions as the Committee in its sole discretion may prescribe; provided, that
with respect to Stock Appreciation Rights granted to employees who are subject
to Section 16 of the 1934 Act, except as provided in Subparagraph VII(c) hereof,
the Committee shall retain final authority (i) to determine whether an Optionee
shall be permitted, or (ii) to approve an election by an Optionee, to receive
cash in full or partial settlement of Stock Appreciation Rights. Moreover, an
Option Agreement may provide for the payment of the option price, in whole or in
part, by the delivery of a number of shares of Stock (plus cash if necessary)
having a fair market value equal to such option price.
(b) For all purposes under the Plan, the fair market value of a share of
Stock on a particular date shall be equal to the mean of the reported high and
low sales price of the Stock (i) reported by the National Market System or
NASDAQ on that date or (ii) if the Stock is listed on a national stock exchange,
reported on the stock exchange composite tape on that date; or, in either case,
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 traded over the counter at
the time a determination of its fair market value is required to 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 Stock on the most
recent date on which Stock was publicly traded. Notwithstanding the foregoing,
the fair market value of the Stock for Options granted effective as of the date
of the Company's initial public sale of shares of Stock shall be the initial
offering price under the Company's registration statement relating to such
initial public sale. In the event 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.
(c) Each Option and all rights granted thereunder shall not be transferable
other than by will or the laws of descent and distribution, and shall be
exercisable during the Optionee's lifetime only by the Optionee or the
Optionee's guardian or legal representative.
IV. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are employees (including
officers and directors who are also employees) of the Company or any parent
subsidiary corporation (as defined in section 424 of the Code) of the Company at
the time the Option is granted; provided, however, that members of the Committee
shall not be eligible to be granted Options. Options may be granted to the same
individual on more than one occasion. No Incentive Stock Option shall be granted
to an individual if, at the time the Option is granted, such individual owns
stock
-2-
3
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or its parent or subsidiary corporation, within the meaning
of section 422(b) of the Code, unless (i) at the time such Option is granted the
option price is 110% of the fair market value of the Stock subject to the Option
and (ii) such Option by its terms is not exercisable after the expiration of
five years from the date of grant. To the extent that the aggregate fair market
value (determined at the time the respective Incentive Stock Option is granted)
of stock with respect to which Incentive Stock Options are exercisable for the
first time by an individual during any calendar year under all incentive stock
option plans of the Company and its parent and subsidiary corporations exceeds
$100,000, such excess Incentive Stock Options shall be treated as Options which
do not constitute Incentive Stock Options. The Committee shall determine, in
accordance with applicable provisions of the Code, Treasury Regulations and
other administrative pronouncements, which of an Optionee's Incentive Stock
Options will not constitute Incentive Stock Options because of such limitation
and shall notify the Optionee of such determination as soon as practicable after
such determination.
V. SHARES SUBJECT TO PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 600,000 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 a sufficient number of shares to meet the
requirements of the Plan. Should any Option hereunder expire or terminate prior
to its exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted under the Plan to the extent permitted under
Rule l6b-3. 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 VIII
hereof with respect to shares of Stock subject to Options then outstanding.
Exercise of an Option in any manner, including an exercise involving a Stock
Appreciation Right, 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.
Separate stock certificates shall be issued by the Company for those shares
acquired pursuant to the exercise of any Option which does not constitute an
Incentive Stock Option.
IV. OPTION PRICE
The purchase price of Stock issued under each Option shall be equal to the
fair market value of Stock subject to the Option on the date the Option is
granted; provided, however, that this limitation shall not apply to (a)
Incentive Stock Options for which a greater purchase price is required pursuant
to Paragraph IV hereof, and (b) the Options granted under the Plan that are
described in that certain Agreement Regarding Options dated _____________, 1993
by and
-3-
4
between the Company and Floyd C. Wilson (which Options shall have the purchase
price therein provided).
VII. TERM OF PLAN
The Plan shall be effective upon the date of its adoption by the Board,
provided the Plan is approved by the stockholders of the Company within twelve
months thereafter. Notwithstanding any provision in this Plan or in any Option
Agreement, no Option shall be exercisable prior to such stockholder approval.
Except with respect to Options then outstanding if not sooner terminated under
the provisions of Paragraph IX, 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.
VIII. 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, 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, 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
and class of shares of Stock then covered by such Option, 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 then covered by the such Option. If (i) the Company shall not be
the surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a
-4-
5
previously wholly-owned subsidiary of the Company), (ii) the Company sells,
leases or exchanges 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 1934 Act acquires or gains
ownership or control (including, without limitation, power to vote) of more than
50% of the outstanding shares of the Company's voting stock (based upon voting
power), 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"), no later than (a) ten days after the
approval by the stockholders of the Company of such merger, consolidation,
reorganization, sale, lease or exchange of assets or dissolution or such
election of directors or (b) thirty days after a change of control of the type
described in Clause (iv), the Committee, acting in its sole discretion without
the consent or approval of any Optionee, shall act to effect one or more of the
following alternatives, which may vary among individual Optionees and which may
vary among Options held by any individual Optionee: (1) accelerate the time at
which Options then outstanding may be exercised so that such Options may be
exercised in full for a limited period of time on or before a specified date
(before or after such Corporate Change) fixed by the Committee, after which
specified date all unexercised Options and all rights of Optionees thereunder
shall terminate, (2) require that mandatory surrender to the Company by selected
Optionees of some or all of the outstanding Options held by such Optionees
(irrespective of whether such Options are then exercisable under the provisions
of the Plan) as of a date, before or after such Corporate Change, specified by
the Committee, in which event the Committee shall thereupon cancel such Options
and the Company shall pay to each Optionee an amount of cash per share equal to
the excess, if any, of the amount calculated in Subparagraph (d) below (the
"Change of Control Value") of the shares subject to such Option over the
exercise price(s) under such Options for such shares, (3) make such adjustments
to Options then outstanding as the Committee deems appropriate to reflect such
Corporate Change (provided, however, that the Committee may determine in its
sole discretion that no adjustment is necessary to Options then outstanding) or
(4) provide that 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 then covered by such Option the number and class of
shares of stock or other securities or property (including, without limitation,
cash) to which the Optionee would have been entitled pursuant to the terms of
the agreement of merger, consolidation or sale of assets and dissolution if,
immediately prior to such merger, consolidation or sale of assets and
dissolution the Optionee had been the holder of record of the number of shares
of Stock then covered by such Option.
(d) For the purposes of clause (2) in Subparagraph (c) above, the "Change
of Control Value" shall equal the amount determined in clause (i), (ii) or
(iii), whichever is applicable, as follows: (i) the per share price offered to
stockholders of the Company in any such merger, consolidation, reorganization,
sale of assets or dissolution transaction, (ii) the price per share offered to
stockholders of the Company in any tender offer or exchange offer whereby a
Corporate Change takes place, or (iii) if such Corporate Change occurs other
than pursuant to a tender or exchange offer, the fair market value per share of
the shares into which such Options
-5-
6
being surrendered are exercisable, as determined by the Committee as of the date
determined by the Committee to be the date of cancellation and surrender of such
Options. In the event that the consideration offered to stockholders of the
Company in any transaction described in this Subparagraph (d) or Subparagraph
(c) above consists of anything other than cash, the Committee shall determine
the fair cash equivalent of the portion of the consideration offered which is
other than cash.
(e) Any adjustment provided for in Subparagraph (b) or (c) above shall be
subject to any required stockholder action.
(f) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible 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 therefor shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.
IX. 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 (unless such change is required in order to cause the benefits under
the Plan to qualify as performance-based compensation within the meaning of
section 162(m) of the Code and applicable interpretive authority thereunder),
and provided, further, that (i) the Board may not make any alteration or
amendment which would decrease any authority granted to the Committee hereunder
in contravention of Rule l6b-3 ) and (ii) the Board may not make any alteration
or amendment which would materials increase the benefits accruing to
participants under the Plan, increase the aggregate number of shares which may
be issued pursuant to the provisions of the Plan, change the class of
individuals eligible to receive Options under the Plan or extend the term of the
Plan, without the approval of the stockholders of the Company.
X. SECURITIES LAWS
(a) The Company shall not be obligated to issue any Stock pursuant to any
Option granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of 1933
and such other state and federal laws, rules or regulations as the Company or
the Committee deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of such laws,
-6-
7
rules or regulations available for the offering and sale of such shares.
(b) It is intended that the Plan and any grant of an Option may make to
a person subject to Section 16 of the 1934 Act meet all of the requirements of
Rule 16b-3. If any provision of the Plan or any such Option would disqualify the
Plan or such Option under, or would otherwise not comply with, Rule 16b-3, such
provision or Option shall be construed or deemed amended to conform to Rule
16b-3.
-7-