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EXHIBIT 4.2
DOMAIN ENERGY CORPORATION
1997 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
1. PURPOSES
Domain Energy Corporation, a Delaware corporation (the "Company"),
desires to attract and retain the services of outstanding nonemployee directors
by affording them an opportunity to acquire a proprietary interest in the
Company through automatic, non-discretionary awards of options ("Options")
exercisable to purchase shares of Common Stock (as defined below), and thus to
create in such directors an increased interest in and a greater concern for the
welfare of the Company and its subsidiaries.
The Options offered pursuant to this Domain Energy Corporation 1997
Stock Option Plan for Nonemployee Directors (the "Plan") are a matter of
separate inducement and are not in lieu of any other compensation for the
services of any director.
The Options granted under the Plan are intended to be options that do
not meet the requirements for incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
As used in the Plan, the term "subsidiary corporation" shall mean a
corporation coming within the definition of such term contained in Section
424(f) of the Code.
2. STOCK SUBJECT TO THE PLAN
Options granted under the Plan shall be exercisable for shares of the
Company's common stock, par value $.01 per share ("Common Stock").
The total number of shares of Common Stock authorized for issuance
under the Plan upon the exercise of Options (the "Shares"), shall not exceed, in
the aggregate, 50,010 of the currently authorized shares of Common Stock of the
Company, such number to be subject to adjustment in accordance with Section 13
of the Plan.
Shares available for issuance under the Plan may be either authorized
but unissued Shares, Shares of issued stock held in the Company's treasury, or
both, at the discretion of the Company. If and to the extent that Options
granted under the Plan expire or terminate without having been exercised, the
Shares covered by such
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expired or terminated Options may again be subject to an Option under the Plan.
3. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective at 10:00 a.m., Houston time, on June
27, 1997 (the "Effective Date"). The Plan shall terminate at the close of
business on June 27, 2007 (the "Termination Date"), unless sooner terminated in
accordance with its terms.
4. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board of Directors"), which may designate from among its members a
committee to exercise all power and authority of the Board of Directors at any
time and from time to time to administer the Plan. (References herein to the
Board of Directors shall be deemed to include references to any such committee,
except as the context otherwise requires.) Subject to the express provisions of
the Plan, the Board of Directors shall have authority to construe the Plan and
the Options granted hereunder, to prescribe, amend and rescind rules and
regulations relating to the Plan and to make all other ministerial
determinations necessary or advisable for administering the Plan. However, the
timing of grants of Options under the Plan and the determination of the amounts
and prices of such Options shall be effected automatically in accordance with
the terms and provisions of the Plan without further action by the Board of
Directors.
The determination of the Board of Directors on matters referred to in
this Section 4 shall be conclusive.
5. ELIGIBILITY
Each member of the Board of Directors who is not an employee of the
Company or any subsidiary corporation of the Company shall be eligible to be
granted Options under the Plan ("Eligible Directors").
6. OPTION GRANTS
On the Effective Date, each Eligible Director then in office shall
automatically be granted an Option to purchase 4,002 Shares (subject to
adjustment as provided in Section 13). Future Eligible Directors shall
automatically be granted an Option to purchase 4,002 Shares (subject to
adjustment as provided in Section 13) upon their initial appointment or election
to the Board of Directors. On the date of the annual meeting of stockholders of
the Company which takes place during the calendar year in which the first
anniversary of the Final Vesting Date (as defined below) of an
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Option occurs, the holder of such Option shall automatically be granted an
Option to purchase 3,000 Shares (subject to adjustment as provided in Section
13), provided such holder is an Eligible Director in office immediately
following such annual meeting. Each Option granted to an Eligible Director
pursuant to the Plan shall be evidenced by a written agreement between the
Company and such Eligible Director substantially in the form of Exhibit A hereto
(each such agreement, a "Grant Agreement"). Any Eligible Director entitled to
receive an Option grant pursuant to the Plan may elect to decline the Option.
7. OPTION PRICE AND PAYMENT
The price for each Share purchasable upon exercise of any Option
granted hereunder shall be an amount equal to the fair market value per Share on
the date of grant. For purposes of the Plan, fair market value per share with
respect to any date of determination, means:
(I) if the Shares are listed or admitted to trading
on a national securities exchange in the United States or
reported through the National Association of Securities
Dealers Automated Quotation System-National Market System
("NASDAQ-NMS"), then the closing sale price on such exchange
or NASDAQ-NMS on such date or, if no trading occurred or
quotations were available on such date, then on the closest
preceding date on which the Shares were traded or quoted; or
(II) if not so listed or reported but a regular,
active public market for the Shares exists (as determined in
the sole discretion of the Board of Directors, whose decision
shall be conclusive and binding), then the average of the
closing bid and ask quotations per Share in the
over-the-counter market for such Shares in the United States
on such date or, if no such quotations are available on such
date, then on the closest date preceding such date. For
purposes of the foregoing, a market in which trading is
sporadic and the ask quotations generally exceed the bid
quotations by more than 15% shall not be deemed to be a
"regular, active public market."
If the Board of Directors determines that a regular, active public
market does not exist for the Shares, the Board of Directors shall determine the
fair market value of the Shares in its good faith judgment based on the total
number of shares of Common Stock then outstanding, taking into account all
outstanding options, warrants, rights or other securities exercisable or
exchangeable for, or convertible into, shares of Common Stock.
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The payment of the option price for all Shares purchased pursuant to
the exercise of an Option shall be (w) by cash or check in full on the date of
exercise (such cash or check may be delivered on behalf of a holder of an option
by a stock broker designated by the Company to whom such holder has submitted an
irrevocable notice of election, on forms approved by the Company, to sell shares
of Common Stock deliverable upon exercise of an Option), (x) through the
delivery of shares of Common Stock having a fair market value equal to the full
amount of the exercise price, (y) by the withholding by the Company from the
Shares issuable upon any exercise of the Option that number of Shares having a
fair market value equal to such exercise price pursuant to a written election
delivered to the Board of Directors prior to the date of exercise, or (z) by a
combination of such methods. The Board of Directors shall determine acceptable
methods for tendering Common Stock and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate. The fair market value per share of shares of Common Stock so
delivered or withheld shall be determined as of the date immediately preceding
the date on which the Option is exercised, or as may be required in order to
comply with or conform to the requirements of any applicable laws or
regulations.
8. TERMS OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Any Option granted to an Eligible Director shall be exercisable, on a
cumulative basis, for a period commencing on the date of grant and ending ten
(10) years after the date of grant of such Option as follows:
(a) up to one third of the total number of Shares subject to an Option
may be purchased as of the date of grant of an Option;
(b) up to an additional one third of the total number of Shares subject
to an Option may be purchased as of the date of the annual meeting of
stockholders of the Company in the year following the year in which the Option
was granted ("Second Vesting Date"), provided that such holder is an Eligible
Director immediately following such annual meeting; and
(c) the balance of the total number of Shares subject to an Option may
be purchased as of the date of the annual meeting of stockholders of the Company
next following the Second Vesting Date (the "Final Vesting Date"), provided such
holder is an Eligible Director immediately following such annual meeting.
To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
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In no event shall an Option granted hereunder be exercised for a
fraction of a Share or for less than one hundred (100) Shares (unless the number
purchased is the total balance for which the Option is then exercisable).
A person entitled to receive Shares upon the exercise of an Option
shall not have the rights of a stockholder with respect to such Shares until the
date of issuance of a stock certificate to him or her for such Shares; provided,
however, that until such stock certificate is issued, any holder of an Option
using previously acquired shares of Common Stock in payment of an option
exercise price shall continue to have the rights of a stockholder with respect
to such previously acquired shares of Common Stock.
9. TERMINATION OF DIRECTORSHIP
If an Eligible Director's service as a director of the Company is
terminated, any Option previously granted to such Eligible Director shall, to
the extent not theretofore exercised, terminate and become null and void;
provided, however, that:
(a) if an Eligible Director holding an outstanding
Option dies, including during either the three (3) month or one (1)
year period, whichever is applicable, specified in clause (b)
immediately below, such Option shall, to the extent exercisable on the
date of death and not theretofore exercised, remain exercisable for one
(1) year after such Eligible Director's death, by such Eligible
Director's legatee, distributee, guardian or legal or personal
representative; and
(b) if the service of an Eligible Director holding an
outstanding Option is terminated by reason of (i) such Eligible
Director's disability (as described in Section 22(e)(3) of the Code),
(ii) voluntary retirement from service as a director of the Company or
(iii) failure of the Company to nominate for re-election such Eligible
Director who is otherwise eligible, except if such failure to nominate
for re-election is due to any act of (A) fraud or intentional
misrepresentation or (B) embezzlement, misappropriation or conversion
of assets or opportunities of the Company or any subsidiary corporation
or parent corporation of the Company (in which case, such Option shall
terminate and no longer be exercisable), such Option shall, to the
extent exercisable on the date of such termination and not therefore
exercised, remain exercisable at any time up to and including (X) three
(3) months after the date of such termination of service in the case of
termination by reason of voluntary retirement or failure of the Company
to nominate for re-election such Eligible Director who is otherwise
eligible, subject to the
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above exceptions thereto stated in this clause (b), and (Y) one (1)
year after the date of termination of service in the case of
termination by reason of disability.
None of the events described above shall extend the period of
exercisability of an Option beyond the expiration date thereof. If an Option
granted hereunder shall be exercised by the legal representative of a deceased
Eligible Director or former Eligible Director, or by a person who acquired an
Option granted hereunder by bequest or inheritance or by reason of the death of
any Eligible Director or former Eligible Director, written notice of such
exercise shall be accompanied by a certified copy of letters testamentary or
equivalent proof of the right of such legal representative or other person to
exercise such Option.
10. EXERCISE OF OPTIONS
Options granted under the Plan, or any exercisable portion thereof, may
be exercised solely by delivering to the Secretary of the Company all of the
following prior to the time when the Option or such portion becomes
unexercisable under Sections 8 or 9:
(a) Notice in writing signed by the optionee or the other
person then entitled to exercise the Option or portion thereof, stating
that the Option or portion thereof is thereby exercised, such notice
complying with all applicable rules established by the Board of
Directors;
(b) Payment for the shares with respect to which such Option
or portion thereof is exercised (i) by cash or check on the date of
exercise (such cash or check may be delivered on behalf of a optionee
by a stock broker designated by the Company to whom the optionee has
submitted an irrevocable notice of election, on forms approved by the
Company, to sell shares of Common Stock deliverable upon exercise of an
Option), (ii) through the delivery of shares of Common Stock having a
fair market value equal to the full amount of the exercise price, (iii)
by the withholding by the Company from the shares of Common Stock
issuable upon any exercise of the Option that number of shares having a
fair market value equal to such exercise price pursuant to a written
election delivered to the Board of Directors prior to the date of
exercise, or (iv) by a combination of such methods;
(c) A written representation and agreement (which may be
included within the applicable Grant Agreement), in a form satisfactory
to the Board of Directors, signed by the optionee or other person then
entitled to exercise such Option or portion thereof, stating that the
shares of stock are being acquired for his own account, for investment
and without any
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present intention of distributing or reselling said shares or any of
them except as may be permitted under the Securities Act of 1933, as
amended (the "Act"), and the applicable rules and regulations
thereunder, and that the optionee or other person then entitled to
exercise such Option or portion thereof will indemnify the Company
against and hold it free and harmless from any loss, damage, expense or
liability resulting to the Company if any sale or distribution of the
shares by such person is contrary to the representation and agreement
referred to above; provided, however, that the Board of Directors may,
in its absolute discretion, take whatever additional actions it deems
appropriate to ensure the observance and performance of such
representation and agreement and to effect compliance with the Act and
any other federal or state securities laws or regulations;
(d) Full payment to the Company of all amounts which, under
federal, state or local law, it is required to withhold upon exercise
of the Option, which payment shall be (i) by cash or check or (ii) by
electing, pursuant to a written notice delivered to the Board of
Directors prior to the date of exercise, to have shares of Common Stock
(having an aggregate fair market value on the date of exercise
sufficient to satisfy the applicable tax withholding requirements)
withheld from the shares deliverable upon such exercise; and
(e) In the event the Option or portion thereof shall be
exercised pursuant to Section 9 by any person or persons other than the
optionee, appropriate proof of the right of such person or persons to
exercise the Option.
Without limiting the generality of the foregoing, the Board of Directors may
require an opinion of counsel acceptable to it to the effect that any subsequent
transfer of shares acquired on exercise of an Option does not violate the Act,
and may issue stop-transfer orders covering such shares. Share certificates
evidencing stock issued on exercise of this Option shall bear an appropriate
legend referring to the provisions of subsection (c) above and the agreements
herein. The written representation and agreement referred to in subsection (c)
above shall, however, not be required if the shares to be issued pursuant to
such exercise have been registered under the Act, and such registration is then
effective in respect of such shares.
11. USE OF PROCEEDS
The cash proceeds of the sale of Shares subject to the Options granted
hereunder are to be added to the general funds of the Company and used for its
general corporate purposes as the Board of Directors shall determine.
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12. NON-TRANSFERABILITY OF OPTIONS
An Option granted hereunder shall not be transferable, whether by
operation of law or otherwise, other than by will or the laws of descent and
distribution, and any Option granted hereunder shall be exercisable, during the
lifetime of such holder, only by such holder. Except to the extent provided
above, Options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
13. ADJUSTMENTS
In the event of any change in the outstanding Common Stock by reason of
a stock split, spin-off, stock dividend, stock combination or reclassification,
recapitalization or merger, Change of Control (as defined below) or similar
event, or as required under any Grant Agreement, the Board of Directors may
adjust appropriately the number of Shares subject to the Plan and available for
or covered by each outstanding Option and make such other revisions to
outstanding Options as it deems are equitably required.
14. MERGER, CONSOLIDATION, EXCHANGE, ACQUISITION, LIQUIDATION OR
DISSOLUTION
In its absolute discretion, and on such terms and conditions as it
deems appropriate, coincident with or after the grant of any Option, the Board
of Directors may provide, with respect to the merger or consolidation of the
Company into another corporation, the exchange of all or substantially all of
the assets of the Company for the securities of another corporation, a Change of
Control or the recapitalization, reclassification, liquidation or dissolution of
the Company, either (a) that such Option cannot be exercised after such event,
in which case the Board of Directors shall also provide, either by the terms of
such Option or by a resolution adopted prior to the occurrence of such event,
that for some period of time prior to such event, such Option shall be
exercisable as to all Shares subject thereto which are exercisable or, by virtue
of the event, become exercisable, notwithstanding anything to the contrary
herein (but subject to the expiration thereof pursuant to Sections 8 and 9
hereof) and that, upon the occurrence of such event, such Option shall terminate
and be of no further force or effect; or (b) that even if the Option shall
remain exercisable after such event, from and after such event, any such Option
shall be exercisable only for the kind and amount of securities and/or other
property, or the cash equivalent thereof, receivable as a result of such event
by the holder of a number of shares of stock for which such Option could have
been exercised immediately prior to such event.
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In addition, in the event of a Change of Control, the Board of
Directors may, in its absolute discretion and on such terms and conditions as it
deems appropriate, provide, either by the terms of such Option or by a
resolution adopted prior to the occurrence of the Change of Control, that such
Option shall be exercisable as to all or any portion of the shares subject
thereto, notwithstanding anything to the contrary herein (but subject to the
expiration thereof pursuant to Sections 8 and 9 hereof).
As used in the Plan, the following words shall have the following
meanings:
(a) "Change of Control" shall mean the occurrence of either (x) the
purchase or other acquisition by any person, entity or group (within the meaning
of section 13(d) of 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any comparable successor provisions) of persons or
entities (a "Group"), other than the FRC Entities, of (i) ownership of fifty
percent (50%) or more of the combined voting power of the Company's then
outstanding voting securities entitled to vote generally or (ii) all or
substantially all of the direct and indirect assets of the Company and its
subsidiaries or (y) any merger, consolidation, reorganization or other business
combination of the Company with or into any other entity which results in a
person, entity or Group other than the FRC Entities owning fifty percent (50%)
or more of the combined voting power of the surviving or resulting corporation's
then outstanding voting securities entitled to vote generally; and
(b) "FRC Entities" shall mean investment funds or other entities for
which First Reserve Corporation acts as a general and/or managing partner or in
respect of which First Reserve Corporation provides investment advice, either
directly or through entities controlled by it.
15. RIGHT TO TERMINATE SERVICE
The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the service of
any Eligible Director holding Options and shall not impose any obligation on the
part of any Eligible Director holding Options to remain in the service of the
Company or of any subsidiary corporation or parent corporation thereof.
16. ISSUANCE OF STOCK CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
Upon any exercise of an Option granted hereunder and payment of the
purchase price therefor, a certificate or certificates representing the Shares
shall be issued by the Company in the name
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of the person exercising the Option and shall be delivered to or upon the order
of such person.
The Company may endorse such legend or legends upon the certificates
for Shares issued pursuant to the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such Shares as the Board of
Directors, in its sole discretion, determines to be necessary or appropriate to
(a) prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act or (b) implement the provisions of the Plan
and any agreement between the Company and the optionee with respect to such
Shares.
The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares. All Shares issued as provided herein shall be
fully paid and nonassessable to the extent permitted by law.
17. WITHHOLDING TAXES
The Company may require an Eligible Director exercising an Option to
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 shall have no obligation to issue, and the Eligible Director shall have
no right to receive, the Shares subject to such Option.
18. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board of Directors shall determine that the listing,
registration or qualification of the Shares subject to such Option on any
securities exchange or under any applicable law, or the consent or approval of
any governmental regulatory authority, is necessary or desirable as a condition
of, or in connection with, the granting of an Option, or the issuance of Shares
thereunder, such 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 Board of
Directors.
19. AMENDMENT OF THE PLAN
The Board of Directors may, from time to time, amend the Plan;
provided, however, that (i) no amendment shall become effective without the
approval of the stockholders of the Company to the extent that stockholder
approval is required in order to comply with Rule 16b-3 (or any successor
provision) under the Exchange Act and (ii) if required in order to comply with
Rule 16b-3 under the Exchange Act, no provision of the Plan addressing
eligibility to
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participate in the Plan or the amount, price or timing of Options to be granted
under the Plan may be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules promulgated thereunder. The rights and
obligations under any Option granted before amendment of the Plan or any
unexercised portion of such Option shall not be adversely affected by amendment
of the Plan or the Option without the consent of the holder of such Option.
20. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the Plan.
Options may not be granted while the Plan is suspended or after it is
terminated. Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except upon the consent of the person to whom the Option was granted. The
ministerial power of the Board of Directors to construe and administer any
Options under Section 4 that are granted prior to the termination or suspension
of the Plan shall continue after such termination or during such suspension.
21. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not be
deemed to affect the validity of any other provision.