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EXHIBIT 10.7
QUEEN SAND RESOURCES, INC.
1997 INCENTIVE EQUITY PLAN
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QUEEN SAND RESOURCES, INC.
1997 INCENTIVE EQUITY PLAN
TABLE OF CONTENTS
PAGE
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ARTICLE 1 PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 3 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 4 ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 5 SHARES SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 6 GRANT OF AWARDS . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.2 Maximum ISO Grants . . . . . . . . . . . . . . . . . . . . . . 6
6.3 SAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.4 Maximum Individual Grants . . . . . . . . . . . . . . . . . . 6
6.5 Tandem Awards . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 7 OPTION PRICE; SAR PRICE . . . . . . . . . . . . . . . . . . . 7
ARTICLE 8 AWARD PERIOD; VESTING . . . . . . . . . . . . . . . . . . . . 7
8.1 Award Period . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.2 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 9 TERMINATION OF SERVICE . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 10 EXERCISE OF INCENTIVE . . . . . . . . . . . . . . . . . . . . 7
10.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Stock Options . . . . . . . . . . . . . . . . . . . . . 8
(b) SARs . . . . . . . . . . . . . . . . . . . . . . . . . 8
10.2 Disqualifying Disposition of ISO . . . . . . . . . . . . . . . 9
ARTICLE 11 AMENDMENT OR DISCONTINUANCE . . . . . . . . . . . . . . . . . 9
ARTICLE 12 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 13 CAPITAL ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . 10
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ARTICLE 14 RECAPITALIZATION, MERGER AND CONSOLIDATION; CHANGE IN
CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 15 LIQUIDATION OR DISSOLUTION . . . . . . . . . . . . . . . . . . 11
ARTICLE 16 INCENTIVES IN SUBSTITUTION FOR INCENTIVES GRANTED BY OTHER
CORPORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 17 MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 12
17.1 Investment Intent . . . . . . . . . . . . . . . . . . . . . . 12
17.2 No Right to Continued Employment . . . . . . . . . . . . . . . 12
17.3 Indemnification of Board and Committee . . . . . . . . . . . . 12
17.4 Effect of the Plan . . . . . . . . . . . . . . . . . . . . . . 12
17.5 Compliance With Other Laws and Regulations . . . . . . . . . . 12
17.6 Tax Requirements . . . . . . . . . . . . . . . . . . . . . . . 13
17.7 Assignability . . . . . . . . . . . . . . . . . . . . . . . . 13
17.8 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 13
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QUEEN SAND RESOURCES, INC.
1997 INCENTIVE EQUITY PLAN
The name of the plan is the QUEEN SAND RESOURCES, INC. 1997 INCENTIVE
EQUITY PLAN (the "PLAN"). The Plan was adopted by the Board of Directors of
QUEEN SAND RESOURCES, INC., a Delaware corporation (the "COMPANY"), effective
as of July 1, 1997, and was approved by the Company's stockholders on
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ARTICLE 1
PURPOSE
The purpose of the Plan is to attract and retain the services of key
management employees of the Company and its Subsidiaries and to provide such
persons with a proprietary interest in the Company through the granting of
incentive stock options, non-qualified stock options, stock appreciation
rights, or whether granted singly, or in combination, or in tandem, that will
(a) increase the interest of such persons in the Company's
welfare and success;
(b) furnish an incentive to such persons to continue their
services for the Company; and
(c) provide a means through which the Company may attract able
persons as employees.
With respect to Reporting Participants, the Plan and all transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (the "1934 ACT").
To the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void ab initio, to the extent permitted by
law and deemed advisable by the Committee.
ARTICLE 2
DEFINITIONS
Unless the context requires otherwise, the following terms shall have
the meanings indicated:
2.1 "AWARD" means the grant of any Incentive Stock Option, Non-
qualified Stock Option, or SAR whether granted singly, in combination or in
tandem (each individually referred to herein as an "INCENTIVE").
2.2 "AWARD AGREEMENT" means a written agreement between a Participant
and the Company which sets out the terms of the grant of an Award.
2.3 "AWARD PERIOD" means the period during which one or more
Incentives granted under an Award may be exercised.
2.4 "BOARD" means the board of directors of the Company.
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2.5 "CHANGE OF CONTROL" means any of the following: (i) any
consolidation, merger or share exchange of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which shares of the
Company's Common Stock would be converted into cash, securities or other
property of another entity, other than a consolidation, merger or share
exchange of the Company in which the holders of the Company's Common Stock
immediately prior to such transaction have the same proportionate ownership of
Common Stock of the surviving entity immediately after such transaction; (ii)
any sale, lease, exchange or other transfer (excluding transfer by way of
pledge or hypothecation) in one transaction or a series of related
transactions, of all or substantially all of the assets of the Company; (iii)
the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; (iv) the cessation of control (by
virtue of their not constituting a majority of directors) of the Board by the
individuals (the "CONTINUING DIRECTORS") who (x) at the date of this Plan were
directors or (y) become directors after the date of this Plan and whose
election or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors (1) then in office who were
directors at the date of this Plan or (2) whose election or nomination for
election was previously so approved; (v) the acquisition of beneficial
ownership (within the meaning of Rule 13d-3 under the 1934 Act) of an aggregate
of twenty percent (20%) of the voting power of the Company's outstanding voting
securities by any person or group (as such term is used in Rule 13d-5 under the
1934 Act) who beneficially owned less than fifteen percent (15%) of the voting
power of the Company's outstanding voting securities on the date of this Plan,
or the acquisition of beneficial ownership of an additional five percent (5%)
of the voting power of the Company's outstanding voting securities by any
person or group who beneficially owned at least fifteen percent (15%) of the
voting power of the Company's outstanding voting securities on the date of this
Plan, provided, however, that notwithstanding the foregoing, an acquisition
shall not constitute a Change of Control hereunder if the acquiror is (x) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company and acting in such capacity, (y) a Subsidiary of the Company or a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of voting securities
of the Company or (z) any other person whose acquisition of shares of voting
securities is approved in advance by a majority of the Continuing Directors; or
(vi) in a Title 11 bankruptcy proceeding, the appointment of a trustee or the
conversion of a case involving the Company to a case under Chapter 7.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended, or
any successor legislation.
2.7 "COMMITTEE" means the committee appointed or designated by the
Board to serve as the Compensation and Stock Option Committee (or a similarly
named Committee generally intended to administer and oversee employee
compensation plans such as the Plan) of the Board to administer the Plan in
accordance with ARTICLE 3 of this Plan.
2.8 "COMMON STOCK" means the common stock, par value $0.0015 per
share, which the Company is currently authorized to issue or may in the future
be authorized to issue.
2.9 "COMPANY" means QUEEN SAND RESOURCES, INC., a Delaware
corporation, and any successor entity.
2.10 "DATE OF GRANT" means the effective date on which an Award is
made to a Participant as set forth in the applicable Award Agreement; provided,
however, that solely for purposes of Section 16 of the 1934 Act and the rules
and regulations promulgated thereunder, the Date of Grant of an Award shall be
the date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.
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2.11 "EMPLOYEE" means common law employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section 3401(c)
of the Code) of the Company or any Subsidiary of the Company.
2.12 "FAIR MARKET VALUE" of a share of Common Stock is (i) the mean of
the highest and lowest prices per share on any exchange or stock quotation
system that reports daily high and low sales prices, (ii) the mean of the bid
and sale prices on any other stock quotation system, or (iii) if the common
stock is not then-traded on any organized system, the fair market value of a
share of Common Stock as determined in good faith by the Board, on the
appropriate date, or in the absence of reported sales on such day, the most
recent previous day for which sales were reported.
2.13 "INCENTIVE STOCK OPTION" or "ISO" means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.
2.14 "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
Employee and who satisfies the requirements of Rule 16b-3(b)(3) promulgated
under the 1934 Act or any successor provision.
2.15 "NON-QUALIFIED STOCK OPTION" or "NQSO" means a non-qualified
stock option, granted pursuant to this Plan.
2.16 "OPTION PRICE" means the price which must be paid by a
Participant upon exercise of a Stock Option to purchase a share of Common
Stock.
2.17 "PARTICIPANT" shall mean an Employee of the Company or a
Subsidiary to whom an Award is granted under this Plan.
2.18 "PLAN" means this QUEEN SAND RESOURCES, INC. 1997 INCENTIVE
EQUITY PLAN, as amended from time to time.
2.19 "REPORTING PARTICIPANT" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.
2.20 "RETIREMENT" means any Termination of Service solely due to
retirement upon attainment of age 62, or permitted early retirement as
determined by the Committee.
2.21 "SAR" means the right to receive a payment, in cash and/or Common
Stock, equal to the excess of the Fair Market Value of a specified number of
shares of Common Stock on the date the SAR is exercised over the SAR Price for
such shares.
2.22 "SAR PRICE" means the Fair Market Value of each share of Common
Stock covered by an SAR, determined on the Date of Grant of the SAR.
2.23 "STOCK OPTION" means a Non-qualified Stock Option or an Incentive
Stock Option.
2.24 "SUBSIDIARY" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership
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or limited liability company, if the partners or members thereof are composed
only of the Company, any corporation listed in item (i) above or any limited
partnership listed in item (ii) above. "SUBSIDIARIES" means more than one of
any such corporations, limited partnerships, partnerships or limited liability
companies.
2.25 "TERMINATION OF SERVICE" occurs when a Participant who is an
Employee of the Company or any Subsidiary shall cease to serve as an Employee
of the Company and its Subsidiaries, for any reason.
2.26 "TOTAL AND PERMANENT DISABILITY" means a Participant is qualified
for long-term disability benefits under the Company's disability plan or
insurance policy; or, if no such plan or policy is then in existence, that the
Participant, because of ill health, physical or mental disability or any other
reason beyond his or her control, is unable to perform his or her duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Committee; provided that, with respect to any Incentive Stock
Option, Total and Permanent Disability shall have the meaning given it under
the rules governing Incentive Stock Options under the Code.
ARTICLE 3
ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board
(the "Committee"). The Committee shall consist of not fewer than two persons.
Any member of the Committee may be removed at any time, with or without cause,
by resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.
Membership on the Committee shall be limited to those members of the
Board who are Non-employee Directors and who are "OUTSIDE DIRECTORS" under
Section 162(m) of the Code. The Committee shall select one of its members to
act as its Chairman. A majority of the Committee shall constitute a quorum,
and the act of a majority of the members of the Committee present at a meeting
at which a quorum is present shall be the act of the Committee.
The Committee shall determine and designate from time to time the
eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement the Award Period, the Date of Grant, and such other
terms, provisions, limitations, and performance requirements, as are approved
by the Committee, but not inconsistent with the Plan. The Committee shall
determine whether an Award shall include one type of Incentive, two or more
Incentives granted in combination, or two or more Incentives granted in tandem
(that is, a joint grant where exercise of one Incentive results in cancellation
of all or a portion of the other Incentive).
The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or
appropriate for the administration of the Plan, and (iii) make such other
determinations and take such other action as it deems necessary or advisable in
the administration of the Plan. Any interpretation, determination, or other
action made or taken by the Committee shall be final, binding, and conclusive
on all interested parties.
With respect to restrictions in the Plan that are based on the
requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the
Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer
quotation system upon which the Company's securities are listed or quoted, or
any other applicable law, rule or restriction (collectively, "APPLICABLE LAW"),
to the extent that any such restrictions are no longer required by applicable
law, the Committee shall have the sole discretion and
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authority to grant Awards that are not subject to such mandated restrictions
and/or to waive any such mandated restrictions with respect to outstanding
Awards.
ARTICLE 4
ELIGIBILITY
Any Employee (including an Employee who is also a director or an
officer) whose judgment, initiative, and efforts contributed or may be expected
to contribute to the successful performance of the Company is eligible to
participate in the Plan; provided that only Employees shall be eligible to
receive Incentive Stock Options. The Committee, upon its own action, may
grant, but shall not be required to grant, an Award to any Employee of the
Company or any Subsidiary. Awards may be granted by the Committee at any time
and from time to time to new Participants, or to then Participants, or to a
greater or lesser number of Participants, and may include or exclude previous
Participants, as the Committee shall determine. Except as required by this
Plan, Awards granted at different times need not contain similar provisions.
The Committee's determinations under the Plan (including without limitation
determinations of which Employees, if any, are to receive Awards, the form,
amount and timing of such Awards, the terms and provisions of such Awards and
the agreements evidencing same) need not be uniform and may be made by it
selectively among Employees who receive, or are eligible to receive, Awards
under the Plan.
ARTICLE 5
SHARES SUBJECT TO PLAN
Subject to adjustment as provided in ARTICLES 13 and 14, the maximum
number of shares of Common Stock that may be delivered pursuant to Awards
granted under the Plan is (a) three million (3,000,000) shares; plus (b) shares
of Common Stock previously subject to Awards which are forfeited, terminated,
settled in cash in lieu of Common Stock, or exchanged for Awards that do not
involve Common Stock, or expired unexercised; plus (c) without duplication for
shares counted under the immediately preceding clause, a number of shares of
Common Stock equal to the number of shares repurchased by the Company in the
open market or otherwise and having an aggregate repurchase price no greater
than the amount of cash proceeds received by the Company from the sale of
shares of Common Stock under the Plan; plus (d) any shares of Common Stock
surrendered to the Company in payment of the exercise price of options issued
under the Plan.
Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the number
of shares of Common Stock that shall be sufficient to satisfy the requirements
of this Plan.
ARTICLE 6
GRANT OF AWARDS
6.1 IN GENERAL. The grant of an Award shall be authorized by the
Committee and shall be evidenced by an Award Agreement setting forth the
Incentive or Incentives being granted, the total number of shares of Common
Stock subject to the Incentive(s), the Option Price (if applicable), the Award
Period, the Date of Grant, and such other terms, provisions, limitations, and
performance objectives, as are
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approved by the Committee, but not inconsistent with the Plan. The Company
shall execute an Award Agreement with a Participant after the Committee
approves the issuance of an Award. Any Award granted pursuant to this Plan
must be granted within ten (10) years of the date of adoption of this Plan. The
Plan shall be submitted to the Company's stockholders for approval; however,
the Committee may grant Awards under the Plan prior to the time of stockholder
approval. Any such Award granted prior to such stockholder approval shall be
made subject to such stockholder approval. The grant of an Award to a
Participant shall not be deemed either to entitle the Participant to, or to
disqualify the Participant from, receipt of any other Award under the Plan.
6.2 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee
during any calendar year to exceed $100,000. To the extent any Stock Option
granted under this Plan which is designated as an Incentive Stock Option
exceeds this limit or otherwise fails to qualify as an Incentive Stock Option,
such Stock Option shall be a Non-qualified Stock Option.
6.3 SAR. An SAR shall entitle the Participant at his election to
surrender to the Company the SAR, or portion thereof, as the Participant shall
choose, and to receive from the Company in exchange therefor cash in an amount
equal to the excess (if any) of the Fair Market Value (as of the date of the
exercise of the SAR) per share over the SAR Price per share specified in such
SAR, multiplied by the total number of shares of the SAR being surrendered. In
the discretion of the Committee, the Company may satisfy its obligation upon
exercise of an SAR by the distribution of that number of shares of Common Stock
having an aggregate Fair Market Value (as of the date of the exercise of the
SAR) equal to the amount of cash otherwise payable to the Participant, with a
cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash.
6.4 MAXIMUM INDIVIDUAL GRANTS. No participant may receive during any
calendar year of the Company Awards covering an aggregate of more than one
hundred thousand (100,000) shares of Common Stock.
6.5 TANDEM AWARDS. The Committee may grant two or more Incentives in
one Award in the form of a "TANDEM AWARD," so that the right of the Participant
to exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and an SAR are issued
in a tandem Award, and the Participant exercises the SAR with respect to one
hundred (100) shares of Common Stock, the right of the Participant to exercise
the related Stock Option shall be canceled to the extent of one hundred (100)
shares of Common Stock.
ARTICLE 7
OPTION PRICE; SAR PRICE
The Option Price for a Non-qualified Stock Option shall be such price as
determined by the Committee; provided, however, such Option Price shall not be
less than the par value per share of the Common Stock. The Option Price for an
Incentive Stock Option and the SAR Price for any share of Common Stock subject
to an SAR shall be at least one hundred percent (100%) of the Fair Market Value
of the share on the Date of Grant. If an Incentive Stock Option is granted to
an Employee who owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than ten percent (10%) of the combined voting
power of all classes of stock of the Company (or any parent or Subsidiary),
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the Option Price shall be at least one hundred and ten percent (110%) of the
Fair Market Value of the Common Stock on the Date of Grant.
ARTICLE 8
AWARD PERIOD; VESTING
8.1 AWARD PERIOD. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be
exercised in whole or in part for any period or periods of time or beyond any
date specified in the Award Agreement. Except as provided in the Award
Agreement, an Incentive may be exercised in whole or in part at any time during
its term. The Award Period for an Incentive shall be reduced or terminated
upon Termination of Service in accordance with this ARTICLE 8 and ARTICLE 9.
No Incentive granted under the Plan may be exercised at any time after the end
of its Award Period. No portion of any Incentive may be exercised after the
expiration of ten (10) years from its Date of Grant. However, if an Employee
owns or is deemed to own (by reason of the attribution rules of Section 424(d)
of the Code) more than ten percent (10%) of the combined voting power of all
classes of stock of the Company (or any parent or Subsidiary) and an Incentive
Stock Option is granted to such Employee, the term of such Incentive Stock
Option (to the extent required by the Code at the time of grant) shall be no
more than five (5) years from the Date of Grant.
8.2 VESTING. The Committee, in its sole discretion, may determine
that an Incentive will be immediately exercisable, in whole or in part, or that
all or any portion may not be exercised until a date, or dates, subsequent to
its Date of Grant, or until the occurrence of one or more specified events,
subject in any case to the terms of the Plan. If the Committee imposes
conditions upon exercise, then subsequent to the Date of Grant, the Committee
may, in its sole discretion, accelerate the date on which all or any portion of
the Incentive may be exercised.
ARTICLE 9
TERMINATION OF SERVICE
In the event of Termination of Service of a Participant, an Incentive
may only be exercised as determined by the Committee and provided in the Award
Agreement.
ARTICLE 10
EXERCISE OF INCENTIVE
10.1 IN GENERAL. A vested Incentive may be exercised during its
Award Period, subject to limitations and restrictions set forth therein and in
ARTICLE 9. A vested Incentive may be exercised at such times and in such
amounts as provided in this Plan and the applicable Award Agreement, subject to
the terms, conditions, and restrictions of the Plan.
In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing or quotation of the shares
of Common Stock on a stock exchange or inter-dealer quotation system or any
registration under state or federal securities laws required under the
circumstances has not been accomplished. No Incentive may be exercised for a
fractional share of Common Stock. The granting of an Incentive shall impose no
obligation upon the Participant to exercise that Incentive.
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(a) STOCK OPTIONS. Subject to such administrative regulations as the
Committee may from time to time adopt, a Stock Option may be exercised by the
delivery of written notice to the Committee setting forth the number of shares
of Common Stock with respect to which the Stock Option is to be exercised and
the date of exercise thereof (the "EXERCISE DATE") which shall be at least
three (3) days after giving such notice unless an earlier time shall have been
mutually agreed upon. On the Exercise Date, the Participant shall deliver to
the Company consideration with a value equal to the total Option Price of the
shares to be purchased, payable as follows: (a) cash, check, bank draft, or
money order payable to the order of the Company, (b) Common Stock owned by the
Participant on the Exercise Date, valued at its Fair Market Value on the
Exercise Date, (c) by delivery (including by FAX) to the Company or its
designated agent of an executed irrevocable option exercise form together with
irrevocable instructions from the Participant to a broker or dealer, reasonably
acceptable to the Company, to sell certain of the shares of Common Stock
purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any other
form of valid consideration that is acceptable to the Committee in its sole
discretion.
Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Common Stock then being purchased to be delivered as
directed by the Participant (or the person exercising the Participant's Stock
Option in the event of his death) at its principal business office promptly
after the Exercise Date; provided that if the Participant has exercised an
Incentive Stock Option, the Company may at its option retain physical
possession of the certificate evidencing the shares acquired upon exercise
until the expiration of the holding periods described in Section 422(a)(1) of
the Code. The obligation of the Company to deliver shares of Common Stock
shall, however, be subject to the condition that if at any time the Committee
shall determine in its discretion that the listing, registration, or
qualification of the Stock Option or the Common Stock upon any securities
exchange or inter-dealer quotation system or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the Stock Option or the
issuance or purchase of shares of Common Stock thereunder, the Stock Option may
not be exercised in whole or in part unless such listing, registration,
qualification, consent, or approval shall have been effected or obtained free
of any conditions not acceptable to the Committee.
If the Participant fails to pay for any of the Common Stock specified in
such notice or fails to accept delivery thereof, the Participant's right to
purchase such Common Stock may be terminated by the Company.
(b) SARS. Subject to the conditions of this Section 10.1(b) and such
administrative regulations as the Committee may from time to time adopt, an SAR
may be exercised by the delivery (including by FAX) of written notice to the
Committee setting forth the number of shares of Common Stock with respect to
which the SAR is to be exercised and the date of exercise thereof (the
"EXERCISE DATE") which shall be at least three (3) days after giving such
notice unless an earlier time shall have been mutually agreed upon. On the
Exercise Date, the Participant shall receive from the Company in exchange
therefor cash in an amount equal to the excess (if any) of the Fair Market
Value (as of the date of the exercise of the SAR) per share of Common Stock
over the SAR Price per share specified in such SAR, multiplied by the total
number of shares of Common Stock of the SAR being surrendered. In the
discretion of the Committee, the Company may satisfy its obligation upon
exercise of an SAR by the distribution of that number of shares of Common Stock
having an aggregate Fair Market Value (as of the date of the exercise of the
SAR) equal to the amount of cash otherwise payable to the Participant, with a
cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash.
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10.2 DISQUALIFYING DISPOSITION OF ISO. If shares of Common Stock
acquired upon exercise of an Incentive Stock Option are disposed of by a
Participant prior to the expiration of either two (2) years from the Date of
Grant of such Stock Option or one (1) year from the transfer of shares of
Common Stock to the Participant pursuant to the exercise of such Stock Option,
or in any other disqualifying disposition within the meaning of Section 422 of
the Code, such Participant shall notify the Company in writing of the date and
terms of such disposition. A disqualifying disposition by a Participant shall
not affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.
ARTICLE 11
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this ARTICLE 11, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan and Incentives awarded under the Plan to continue to comply
with Section 162(m) of the Code, including any successors to such Section,
shall be effective unless such amendment shall be approved by the requisite
vote of the stockholders of the Company entitled to vote thereon. Any such
amendment shall, to the extent deemed necessary or advisable by the committee,
be applicable to any outstanding Incentives theretofore granted under the Plan,
notwithstanding any contrary provisions contained in any stock option
agreement. In the event of any such amendment to the Plan, the holder of any
Incentive outstanding under the Plan shall, upon request of the Committee and
as a condition to the exercisability thereof, execute a conforming amendment in
the form prescribed by the Committee to any Award Agreement relating thereto.
Notwithstanding anything contained in this Plan to the contrary, unless
required by law, no action contemplated or permitted by this ARTICLE 11 shall
adversely affect any rights of Participants or obligations of the Company to
Participants with respect to any Incentive theretofore granted under the Plan
without the consent of the affected Participant.
ARTICLE 12
TERM
The Plan shall be effective from the date that this Plan is approved by
the Board. Unless sooner terminated by action of the Board, the Plan will
terminate on July 1, 2007, but Incentives granted before that date will
continue to be effective in accordance with their terms and conditions.
ARTICLE 13
CAPITAL ADJUSTMENTS
If at any time while the Plan is in effect, or Incentives are
outstanding, there shall be any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from (1) the declaration or
payment of a stock dividend, (2) any recapitalization resulting in a stock
split-up, combination, or exchange of shares of Common Stock, or (3) other
increase or decrease in such shares of Common Stock effected without receipt of
consideration by the Company, then and in such event:
(i) An appropriate adjustment shall be made in the maximum
number of shares of Common Stock then subject to being awarded under the
Plan and in the maximum number of shares of Common Stock that may be
awarded to a Participant to the end that the same proportion
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of the Company's issued and outstanding shares of Common Stock shall
continue to be subject to being so awarded.
(ii) Appropriate adjustments shall be made in the number of
shares of Common Stock and the Option Price thereof then subject to
purchase pursuant to each such Stock Option previously granted and
unexercised, to the end that the same proportion of the Company's issued
and outstanding shares of Common Stock in each such instance shall
remain subject to purchase at the same aggregate Option Price.
(iii) Appropriate adjustments shall be made in the number of
SARs and the SAR Price thereof then subject to exercise pursuant to each
such SAR previously granted and unexercised, to the end that the same
proportion of the Company's issued and outstanding shares of Common
Stock in each instance shall remain subject to exercise at the same
aggregate SAR Price.
Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct
sale or 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, shall not affect, and no adjustment by reason thereof
shall be made with respect to (i) the number of or Option Price of shares of
Common Stock then subject to outstanding Stock Options granted under the Plan,
or (ii) the number of or SAR Price or SARs then subject to outstanding SARs
granted under the Plan.
Upon the occurrence of each event requiring an adjustment with respect
to any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.
ARTICLE 14
RECAPITALIZATION, MERGER AND
CONSOLIDATION; CHANGE IN CONTROL
(a) The existence of this Plan and Incentives granted
hereunder shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's
capital structure and its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or preference
stocks ranking prior to or otherwise affecting the Common Stock or the
rights thereof (or any rights, options, or warrants to purchase same),
or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
(b) Subject to any required action by the stockholders, if the
Company shall be the surviving or resulting corporation in any
reorganization, merger, consolidation or share exchange, any Incentive
granted hereunder shall pertain to and apply to the securities or rights
(including cash, property, or assets) to which a holder of the number of
shares of Common Stock subject to the Incentive would have been
entitled. Notwithstanding the foregoing, however, all such Incentives
may be canceled by the Company as of the effective date of any such
reorganization, merger, consolidation or share exchange by giving notice
to each holder thereof or his personal representative of its intention
to do so and by permitting the purchase during the thirty (30) day
period next preceding such effective date of all of the shares of Common
Stock subject to such outstanding Incentives.
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(c) In the event of any reorganization, merger, consolidation
or share exchange pursuant to which the Company is not the surviving or
resulting corporation, there shall be substituted for each share of
Common Stock subject to the unexercised portions of such outstanding
Incentives, that number of shares of each class of stock or other
securities or that amount of cash, property, or assets of the surviving,
resulting or consolidated company which were distributed or
distributable to the stockholders of the Company in respect to each
share of Common Stock held by them, such outstanding Incentives to be
thereafter exercisable for such stock, securities, cash, or property in
accordance with their terms.
(d) In the event of a Change of Control, then, notwithstanding
any other provision in this Plan to the contrary, all unmatured
installments of Incentives outstanding shall thereupon automatically be
accelerated and exercisable in full. The determination of the Committee
that any of the foregoing conditions has been met shall be binding and
conclusive on all parties.
ARTICLE 15
LIQUIDATION OR DISSOLUTION
In case the Company shall, at any time while any Incentive under this
Plan shall be in force and remain unexpired, (i) sell all or substantially all
of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the
expiration of any Incentive, make any partial distribution of its assets, in
the nature of a partial liquidation, whether payable in cash or in kind (but
excluding the distribution of a cash dividend payable out of earned surplus and
designated as such) then in such event the Option Prices or SAR Prices then in
effect with respect to each Stock Option or SAR shall be reduced, on the
payment date of such distribution, in proportion to the percentage reduction in
the tangible book value of the shares of the Company's Common Stock (determined
in accordance with generally accepted accounting principles) resulting by
reason of such distribution.
ARTICLE 16
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER CORPORATIONS
Incentives may be granted under the Plan from time to time in
substitution for similar instruments held by employees of a corporation who
become or are about to become management Employees of the Company or any
Subsidiary as a result of a merger or consolidation of the employing
corporation with the Company or the acquisition by the Company of stock of the
employing corporation. The terms and conditions of the substitute Incentives
so granted may vary from the terms and conditions set forth in this Plan to
such extent as the Board at the time of grant may deem appropriate to conform,
in whole or in part, to the provisions of the Incentives in substitution for
which they are granted.
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ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 INVESTMENT INTENT. The Company may require that there be
presented to and filed with it by any Participant under the Plan, such evidence
as it may deem necessary to establish that the Incentives granted or the shares
of Common Stock to be purchased or transferred are being acquired for
investment and not with a view to their distribution.
17.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.
17.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board
or the Committee, nor any officer or Employee of the Company acting on behalf
of the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to
the Plan, and all members of the Board or the Committee and each and any
officer or employee of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination, or interpretation.
17.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted an Award or any other rights except as may be evidenced by
an Award Agreement, or any amendment thereto, duly authorized by the Committee
and executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.
17.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Incentive if the issuance
thereof would constitute a violation by the Participant or the Company of any
provisions of any law or regulation of any governmental authority or any
national securities exchange or inter-dealer quotation system or other forum in
which shares of Common Stock are quoted or traded (including without limitation
Section 16 of the 1934 Act and Section 162(m) of the Code); and, as a condition
of any sale or issuance of shares of Common Stock under an Incentive, the
Committee may require such agreements or undertakings, if any, as the Committee
may deem necessary or advisable to assure compliance with any such law or
regulation. The Plan, the grant and exercise of Incentives hereunder, and the
obligation of the Company to sell and deliver shares of Common Stock, shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required.
17.6 TAX REQUIREMENTS. The Company shall have the right to deduct
from all amounts hereunder paid in cash or other form, any Federal, state, or
local taxes required by law to be withheld with respect to such payments. The
Participant receiving shares of Common Stock issued under the Plan shall be
required to pay the Company the amount of any taxes which the Company is
required to withhold with respect to such shares of Common Stock.
Notwithstanding the foregoing, in the event of an assignment of a Non-qualified
Stock Option or SAR pursuant to Section 17.7, the Participant who assigns the
Non-qualified Stock Option or SAR shall remain subject to withholding taxes
upon exercise of the Non-qualified Stock Option or SAR by the transferee to the
extent required by the Code or the rules and regulations promulgated
thereunder. Such payments shall be required to be made prior to the delivery
of any certificate representing such shares of Common Stock. Such payment may
be made in cash, by check,
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or through the delivery of shares of Common Stock owned by the Participant
(which may be effected by the actual delivery of shares of Common Stock by the
Participant or by the Company's withholding a number of shares to be issued
upon the exercise of a Stock Option, if applicable), which shares have an
aggregate Fair Market Value equal to the required minimum withholding payment,
or any combination thereof.
17.7 ASSIGNABILITY. Incentive Stock Options may not be transferred or
assigned other than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only by the Participant or the
Participant's legally authorized representative, and each Award Agreement in
respect of an Incentive Stock Option shall so provide. The designation by a
Participant of a beneficiary will not constitute a transfer of the Stock
Option. The Committee may waive or modify any limitation contained in the
preceding sentences of this Section 17.7 that is not required for compliance
with Section 422 of the Code. The Committee may, in its discretion, authorize
all or a portion of a Non-qualified Stock Option or SAR to be granted to a
Participant to be on terms which permit transfer by such Participant to (i) the
spouse, children or grandchildren of the Participant ("IMMEDIATE FAMILY
MEMBERS"), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, or (iii) a partnership in which such Immediate Family Members
are the only partners, (iv) an entity exempt from federal income tax pursuant
to Section 501(c)(3) of the Code or any successor provision, or (v) a split
interest trust or pooled income fund described in Section 2522(c)(2) of the
Code or any successor provision, provided that (x) there shall be no
consideration for any such transfer, (y) the Award Agreement pursuant to which
such Non-qualified Stock Option or SAR is granted must be approved by the
Committee and must expressly provided for transferability in a manner
consistent with this Section, and (z) subsequent transfers of transferred Non-
qualified Stock Options or SARs shall be prohibited except those by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined in the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended. Following transfer, any such Non-qualified
Stock Option and SAR shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of ARTICLES 10, 11, 13, 15 and 17 hereof the term "PARTICIPANT" shall
be deemed to include the transferee. The events of Termination of Service
shall continue to be applied with respect to the original Participant,
following which the Non-qualified Stock Options and SARs shall be exercisable
by the transferee only to the extent and for the periods specified in the Award
Agreement. The Committee and the Company shall have no obligation to inform
any transferee of a Non-qualified Stock Option or SAR of any expiration,
termination, lapse or acceleration of such Option. The Company shall have no
obligation to register with any federal or state securities commission or
agency any Common Stock issuable or issued under a Non-qualified Stock Option
or SAR that has been transferred by a Participant under this Section 17.7.
17.8 USE OF PROCEEDS. Proceeds from the sale of shares of Common
Stock pursuant to Incentives granted under this Plan shall constitute general
funds of the Company.
A copy of this Plan shall be kept on file in the office of the Company
in Dallas, Texas or any successor location of the Company's principal executive
offices.
* * * * * * * * * * * * * * *
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IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized representative pursuant to prior action taken
by the Board.
QUEEN SAND RESOURCES, INC.
By: /s/ Edward J. Munden
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Name: Edward J. Munden
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Title: Chief Executive Officer and President
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