Exhibit 10.1
ARETE INDUSTRIES, INC.
2002 OMNIBUS STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE.
The Plan is intended to provide incentive to key employees and directors of, and
key consultants, vendors, customers, and others expected to provide significant
services to the Corporation, to encourage proprietary interest in the
Corporation, to encourage such key employees to remain in the employ of the
Corporation and its Subsidiaries, to attract new employees with outstanding
qualifications, and to afford additional incentive to consultants, vendors,
customers, and others to increase their efforts in providing significant
beneficial services to the Corporation.
2. DEFINITIONS.
2.1 "Award" shall mean an Option which may be designated an Incentive Stock
Option or a Non-statutory Stock Option, a Purchase Right, a Stock Appreciation
Right or a Stock Payment, in each case as granted pursuant to the Plan.
2.2 "Award Agreement" shall mean a Stock Option Agreement, Restricted Stock
Agreement or a Purchase Right Agreement.
2.3 "Beneficiary" shall mean the person, persons, trust or trusts entitled by
will or the laws of descent and distribution to receive the benefits specified
under the Plan in the event of a Participant's death.
2.4 "Board" shall mean the Board of Directors of the Corporation.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Committee" shall mean the committee, if any, appointed by the Board in
accordance with Section 4 of the Plan.
2.7 "Common Stock" shall mean the Common Stock of the Corporation.
2.8 "Corporation" shall mean Arete Industries, Inc. and its Subsidiaries.
2.9 "Disability" shall mean the condition of a Participant who is unable to (i)
perform his or her substantial and material job duties due to injury or sickness
or such other condition as the Board or Committee may determine in its sole
discretion; and/or (ii) engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months.
2.10 "Discount" shall mean, with respect to the Purchase Price of Purchase
Rights, the discount from the Fair Market Value of a Share as set forth in
Section 8.3.
2.11 "Dividend Equivalent" shall mean a right to receive a number of Shares or a
cash amount, determined as provided in Article 12 hereof.
2.12 "Eligible Employee" shall mean an individual who is employed (within the
meaning of Code Section 3401 and the regulations thereunder) by the Corporation.
2.13 "Event" shall mean any of the following:
(a) Any person or entity (or group of affiliated persons or entities) who
acquired in one or more transactions, whether before or after the Effective Date
of the Plan, ownership of more than fifty percent (50%) of the outstanding
Shares of stock entitled to vote in the election of directors of the
Corporation; or
(b) The dissolution or liquidation of the Corporation or a reorganization,
merger or consolidation of the Corporation with one or more entities, as a
result of which the Corporation is not the surviving entity, or a sale of all or
substantially all of the assets of the Corporation as an entirety to another
entity.
For purposes of this definition, ownership does not include ownership: (i) by a
person owning such Shares merely of record (such as a member of a securities
exchange, a nominee or a securities depository system), (ii) by a person who is
a bona fide pledgee of Shares prior to a default and determination to exercise
powers as an owner of the Shares, (iii) by a person who is not required to file
a statement on Schedule 13D by virtue of Rule 13d-1(b) of the Securities and
Exchange Commission under the Exchange Act, or (iv) by a person who owns or
holds Shares as an underwriter acquired in connection with an underwritten
offering pending and for purposes of resale.
2.14 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
2.15 "Exercise Price" shall mean the price per Share of Common Stock, determined
by the Board or the Committee, at which an Award may be exercised.
2.16 "Fair Market Value" shall mean the value of one (1) Share of Common Stock,
determined as follows:
(i) if the Shares are traded on an exchange, the price at which Shares traded at
the close of business on the date of valuation; or
(ii) if the Shares are traded over-the-counter on the NASDAQ System, the closing
bid price if one is available, or the mean between the bid and asked prices on
said system at the close of business on the date of valuation; or
(iii) if neither (i) nor (ii) above applies, the Fair Market Value as determined
by the Board or the Committee in good faith. Such determination shall be
conclusive and binding on all persons.
2.17 "Incentive Stock Option" shall mean an option described in Section 422A(b)
of the Code.
2.18 "Nonstatutory Stock Option" shall mean an option not described in Section
422(b), 422A(b), 423(b) or 424(b) of the Code.
2.19 "Option" shall mean either an Incentive Stock Option or a Nonstatutory
Stock Option granted pursuant to the Plan.
2.20 "Participant" shall mean an Eligible Employee who has received an Award
under the Plan.
2.21 "Performance Award" shall mean a cash bonus, stock bonus or other
performance or incentive award that is paid in cash, stock or a combination of
both.
2.22 "Plan" shall mean the Arete Industries, Inc. 2002 Omnibus Stock Option and
Incentive Plan, as it may be amended from time to time.
2.23 "Purchase Price" shall mean the Exercise Price times the number of Shares
with respect to which an Award is exercised.
2.24 "Purchase Right" shall mean the grant to an Employee of the right to
purchase Shares under the Plan.
2.25 "Restricted Stock" shall mean those Shares issued pursuant to a Restricted
Stock Award that are not free of the restrictions set forth in the related
Restricted Stock Agreement.
2.26 "Restricted Stock Award" shall mean an award of a fixed number of shares
subject to payment of such consideration, if any, and such forfeiture
provisions, as are set forth in the related Restricted Stock Agreement.
2.27 "Retirement" shall mean the voluntary termination of employment by an
Employee upon the attainment of age sixty-five (65) and the completion of not
less than twenty (20) years of service with the Corporation or a Subsidiary.
2.28 "Share" shall mean one (1) share of Common Stock, adjusted in accordance
with Section 15.3 of the Plan (if applicable).
2.29 "Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
2.30 "Stock Appreciation Right" shall mean the right to receive a number of
Shares or a cash amount, or a combination of Shares and cash, based upon the
Fair Market Value, book value or other measure determined by the Board or the
Committee, as the case may be, pursuant to Section 9 of the Plan.
2.31 "Stock Payment" shall mean a payment in the form of Shares, or a Purchase
Right, as part of a deferred compensation arrangement made in lieu of all or any
portion of the compensation, including without limitation the salary, bonuses or
commissions, that would otherwise become payable in cash to an Eligible
Employee.
2.32 "Subsidiary" shall mean any corporation at least fifty percent (50%) of the
total combined voting power of which is owned by the Corporation or by another
subsidiary.
2.33 "Tax Date" shall have the meaning set forth in Section 15.3 hereof.
3. EFFECTIVE DATE.
The Plan was proposed by the Board of Directors on May 31, 2002 and adopted by
the Corporation's shareholders on July 2, 2002. The Effective Date of the Plan
shall be June 1, 2002 (the "Effective Date").
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4. ADMINISTRATION.
The Plan shall be administered by the Board in compliance with Rule 16b-3 of the
Exchange Act ("Rule 16b-3"), or by a Committee appointed by the Board, which
Committee shall be constituted to permit the Plan to comply with Rule 16b-3, and
which shall consist of not less than three (3) members. The Board shall appoint
one (1) of the members of the Committee, if there be one, as Chairman of the
Committee. If a Committee has been appointed, the Committee shall hold meetings
at such times and places as it may determine. Acts of a majority of the
Committee at which a quorum is present, or acts reduced to or approved in
writing by a majority of the members of the Committee shall be valid acts of the
Committee. The Board, or the Committee, if there be one, shall from time to time
at its discretion select the Eligible Employees and consultants who are to be
granted Awards, determine the number of Shares or cash, or the combination
thereof, to be applicable to such Award, and designate any Options as Incentive
Stock Options or Nonstatutory Stock Options, except that no Incentive Stock
Option may be granted to a non-employee director or a non-employee consultant. A
member of the Board or Committee member shall in no event participate in any
determination relating to Awards held by or to be granted to such Board or
Committee member; however, a member of the Board or a Committee member shall be
entitled to receive Awards approved by the shareholders in accordance with the
provisions of Rule 16b-3. The interpretation and construction by the Board, or
by the Committee, if there be one, of any provision of the Plan or of any Award
granted thereunder shall be final. No member of the Board or the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan or any Award granted thereunder. In addition to any right of
indemnification provided by the Articles of Incorporation or Bylaws of the
Corporation, such person shall be indemnified and held harmless by the
Corporation from any loss, cost, liability or expense that may be imposed upon
or reasonably incurred by him in connection with any claim, suit, action or
proceeding to which he may be a party by reason of any action or omission under
the Plan.
5. PARTICIPATION.
5.1 Eligibility. Subject to the terms and conditions of Section 5.2 below, the
Participants shall be such persons as the shareholders may approve or as the
Committee may select from among the following classes of persons: (i) Employees
of the Corporation or of a Subsidiary (who may be officers, whether or not they
are directors); and (ii) Consultants, vendors, customers, and others expected to
provide significant services to the Corporation or a Subsidiary.
For purposes of this Plan, a Participant who is a director or a consultant,
vendor, customer, or other provider of significant services to the Corporation
or a Subsidiary shall be deemed to be an Eligible Employee, and service as a
director, consultant, vendor, customer, or other provider of significant
services to the Corporation or a Subsidiary shall be deemed to be employment,
except that no Incentive Stock Option may be granted to a non-employee director
or non-employee consultant, vendor, customer, or other provider of significant
services to the Corporation or a Subsidiary, and except that no Nonstatutory
Stock Option may be granted to a non-employee director or non-employee
consultant, vendor, customer, or other provider of significant services to the
Corporation or a Subsidiary other than upon a vote of a majority of
disinterested directors finding that the value of the services rendered or to be
rendered to the Corporation or a Subsidiary by such non-employee director or
non-employee consultant, vendor, customer, or other provider of services is at
least equal to the value of the Awards granted.
5.2 Ten-Percent Shareholders. An Eligible Employee who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Corporation, its parent or any of its Subsidiaries shall not be
eligible to receive an Award for an Incentive Stock Option unless (i) the
Exercise Price of the Shares subject to such Award is at least one hundred ten
percent (110%) of the Fair Market Value of such Shares on the date of grant: and
(ii) such Award by its terms is not exercisable after the expiration of five (5)
years from the date of grant.
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5.3 Stock Ownership. For purposes of Section 5.2 above, in determining stock
ownership, an Eligible Employee shall be considered as owning the stock owned,
directly or indirectly, by or for a corporation, partnership, estate or trust
shall be considered as being owned proportionately by or for its shareholders,
partners or beneficiaries. Stock with respect to which such Eligible Employee
holds an Award shall not be counted.
5.4 Outstanding Stock. For purposes of Section 5.2 above, "Outstanding stock"
shall include all stock actually issued and outstanding immediately after the
grant of the Award to the Participant. "Outstanding stock" shall not include
shares authorized for issue under outstanding Options or Purchase Rights held by
the Participant or by any other person.
6. STOCK SUBJECT TO THE PLAN.
The stock subject to Awards granted under the Plan shall be Shares of the
Corporation's authorized but unissued or reacquired Common Stock. The aggregate
number of Shares that may be issued as Awards or upon exercise of Awards under
the Plan shall not exceed Eight Hundred Million (800,000,000) common shares (or
Forty Million (40,000,000) common shares if the proposal to perform a
consolidation of the outstanding common stock of the corporation by a 20 to 1
reverse stock split is approved by shareholders at the stockholders meeting
scheduled for July 2, 2002). The number of Shares subject to unexercised
Options, Stock Appreciation Rights or Purchase Rights (plus the number of Shares
previously issued under the Plan) shall not at any time exceed the number of
Shares available for issuance under the Plan. In the event that any unexercised
Option, Stock Appreciation Right or Purchase Right, or any portion thereof, for
any reason expires or is terminated, or if any Shares subject to a Restricted
Stock Award do not vest or are not delivered, the unexercised or unvested Shares
allocable to such Option, Stock Appreciation Right, Purchase Right or Restricted
Stock Award may again be made subject to any Award. Any Shares withheld by the
Corporation pursuant to Section 15.3 shall not be deemed to be issued. The
number of withheld Shares shall be deducted from the applicable Award and shall
not entitle the Participant to receive additional Shares. The limitations
established by this Article 6 shall be subject to adjustment in the manner
provided in Section 14.5 hereof upon the occurrence of an event specified
therein.
7. OPTIONS.
7.1 Stock Option Agreements. Options shall be evidenced by written stock option
agreements in such form as the Committee shall from time to time determine. Such
agreements shall comply with and be subject to the terms and conditions set
forth below.
7.2 Number of Shares. Each Option shall state the number of Shares to which it
pertains and shall provide for the adjustment thereof in accordance with the
provisions of Section 14.5 hereof.
7.3 Exercise Price. Each Option shall state the Exercise Price thereof. The
Exercise Price in the case of any Incentive Stock Option shall not be less than
the Fair Market Value on the date of grant and, in the case of any Option
granted to an Optionee described in Section 5.2 hereof, shall not be less than
one hundred ten percent (110%) of the Fair Market Value on the date of grant.
The Exercise Price in the case of any Nonstatutory Stock Option shall not be
less than eighty-five percent (85%) of the Fair Market Value on the date of
grant.
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7.4 Medium and Time of Payment. The Purchase Price shall be payable in full in
United States dollars upon the exercise of the Option; provided, however, that
if the applicable Stock Option Agreement so provides the Purchase Price may the
paid (i) by the surrender of Shares in good form for transfer, owned by the
Participant and having a Fair Market Value on the date of exercise equal to the
Purchase Price, or in any combination of cash and Shares, as long as the sum of
the cash so paid and the Fair Market Value of the Shares so surrendered equals
the Purchase Price, (ii) by cancellation of indebtedness owed by the Corporation
to the Participant, (iii) with a full recourse promissory note executed by the
Participant, or (iv) any combination of the foregoing. The interest rate and
other terms and conditions of such note shall be determined by the Committee.
The Committee may require that the Participant pledge his or her Shares to the
Corporation for the purpose of securing the payment of such note. In no event
shall the stock certificate(s) representing such Shares be released to the
Participant until such note shall be paid in full.
7.5 Term and Non-Transferability of Options. Each option shall state the time or
times which all or part thereof becomes exercisable. No Option shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no Option granted to a Participant described in Section 5.2 hereof shall be
exercisable after the expiration of five (5) years from the date it was granted.
During the lifetime of the Participant, the Option shall be exercisable only by
the Participant and shall not be assignable or transferable. In the event of the
Participant's death, the Option shall not be transferable by the Participant
other than by will or the laws of descent and distribution.
7.6 Modification, Extension and Renewal of Option. Within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Options or accept
the cancellation of outstanding Options (to the extent not previously exercised)
for the granting of new Options in substitution therefor. The foregoing
notwithstanding, no modifications of an Option shall, without the consent of the
Participant, alter or impair any rights or obligations under any Option
previously granted.
7.7 Limitation on Grant of Incentive Stock Options. In the case of Incentive
Stock Options granted hereunder, the aggregate Fair Market Value (determined as
of the date of the grant thereof) of the Shares with respect to which Incentive
Stock Options become exercisable by any Participant for the first time during
any calendar year (under this Plan and all other plans maintained by the
Corporation, its parent or it Subsidiaries) shall not exceed One Hundred
Thousand Dollars ($100,000). The Board or Committee may, however, with the
Participant's consent authorize an amendment to the incentive Stock Option,
which renders it a Nonstatutory Stock Option.
7.8 Other Provisions. The Stock Option Agreements authorized under the Plan may
contain such other provisions not inconsistent with the terms of the Plan
(including, without limitation, restrictions upon the exercise of the Option) as
the Committee shall deem advisable.
7.9 Specific Awards Approved by the Shareholders. Subject to the approval by the
vote of the shareholders at the Annual Meeting of the Shareholders to be held on
July 2, 2002, the individuals whose names are set forth in Schedule "A", a copy
of which is attached hereto and incorporated herein by this reference, shall be
deemed granted Awards in the amounts and denominations specified thereon, in the
amounts and for the amount indicated opposite their respective names, and in
accordance with the vesting schedule set forth herein, all in accordance with
the provisions set form in this Article 7 of the Plan, effective as of the date
granted or the Effective Date, whichever is specified in resolutions of the
Board of Directors granting such awards. The provisions of this Section 7.9
shall not be amended more than once every six (6) months, other than to comport
with changes in the Internal Revenue Code, the Employee Retirement Income
Security Act, or the rules thereunder, and/or intended to be construed in
accordance with the provisions pertaining to "formula awards" under Paragraph
(c)(2)(ii) of Rule 16b-3.
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8. RESTRICTED STOCK PURCHASE RIGHTS
8.1 Stock Purchase Agreements. Purchase Rights shall be evidenced by written
Stock Purchase Agreements in such form as the Committee shall from time to time
determine. Such agreements shall comply with and be subject to the terms and
conditions set forth below.
8.2 Number of Shares. Each Purchase Right shall state the number of Shares to
which it pertains and shall provide for the adjustment thereof in accordance
with the provisions of Section 14.5 hereof.
8.3 Purchase Price. Each Stock Purchase Agreement shall state the Purchase Price
per Share at which the Purchase Right may be exercised which, unless the Board
or Committee otherwise determines, shall not be less than the Fair Market Value
of a Share as of the date on which the Purchase Right is granted, less a
discount (the "Discount") equal to not more than seventy-five percent (75%) of
such value.
8.4 Exercisability and Non -Transferability of Purchase Rights. Purchase Rights
granted to an Eligible Employee pursuant to the Plan must be exercised within
sixty (60) days after the later to occur of (i) Board approval of the grant of
the Purchase Right or (ii) delivery of notice of such grant. Purchase Rights may
not be sold, pledged assigned, hypothecated, transferred or disposed of in any
manner and shall expire immediately upon the death of the Participant or the
termination of such Participant a employment with the Corporation.
8.5 Medium and Time of Payment. The Purchase Price shall be payable in full in
United States dollars upon exercise of the Purchase Right; provided however that
if the applicable Stock Purchase Agreement so provides the Purchase Price may be
paid (i) by the surrender of Shares in good form for transfer owned by the
person exercising the Purchase Right and having a Fair Market Value on the date
of exercise equal to the Purchase Price or in any combination of cash and Shares
as long as the sum of the cash so paid and the Fair Market Value of the Shares
so surrendered equal the Purchase Price or (iii) with a full recourse promissory
note executed by the Participant. The interest rate and other terms and
conditions of such note shall be determined by the Committee. The Committee may
require that the Participant pledge his or her Shares to the Corporation for the
purpose of securing the payment of such note. In no event shall the stock
certificate(s) representing such Shares be released to Participant until such
note shall be paid in full. In the event the Corporation determines that it is
required to withhold state or federal income tax as a result of the exercise of
a Purchase Right, as a condition to the exercise thereof, a Participant may be
required to make arrangements satisfactory to the Corporation for it to satisfy
such withholding requirements. In addition, the Participant shall agree to
immediately notify the Corporation if he or she files an election pursuant to
Section 83(b) of the Code with respect to receipt of the Shares.
8.6 Consent of Spouse. Each Participant who is married must cause his or her
spouse to sign and deliver the Stock Purchase Agreement to the Corporation, in
the place provided for such signature on the Stock Purchase Agreement.
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8.7 Modification, Extension and Renewal of Purchase Rights. Within the
limitations of the Plan, the Board or the Committee may modify, extend or renew
outstanding Purchase Rights or accept the cancellation of outstanding Purchase
Rights (to the extent not previously exercised) for the granting of new Purchase
Rights in substitution therefor. The foregoing notwithstanding, no modification
of a Purchase Right shall, without the consent of the Employee, alter or impair
any rights or obligations under any Purchase Right previously granted.
8.8 Repurchase Option as to Unvested Shares.
8.8.1 Termination of Employment. In the event of the voluntary or
involuntary termination or cessation of employment or association of
the Participant with the Corporation or any Subsidiary for any reason
whatsoever, with or without cause (including death or disability), the
Corporation shall, upon the date of such termination, have an
irrevocable, exclusive option to repurchase (the "Repurchase Option")
all or any portion of the Shares held by the Employee that are subject
to the Repurchase Option as of such date at the original Purchase
Price.
8.8.2 Vesting. Initially, all of the Shares shall be subject to the
Repurchase Option. Thereafter, the Repurchase Option shall lapse and
expire, or "vest", as to a specified number of the Shares in
accordance with a schedule to be determined by the Board or the
Committee, as the case may be, which shall be attached to the Stock
Purchase Agreement to be entered into between the Participant sad the
Corporation as provided in Section 8.1 above. All Shares which
continue to be subject to the Repurchase Option are sometimes
hereinafter referred to as "Unvested Shares."
8.8.3 Notice. Within ninety (90) days following the date of the
Participant's termination of employment by the Corporation, the
Corporation shall notify the Employee as to whether it wishes to
repurchase the Unvested Shares pursuant to the exercise of the
Repurchase Option. If the Corporation elects to repurchase said
Unvested Shares, it shall set a date for the closing of the
transaction at the Executive Offices of the Corporation, not later
than thirty (30) days from the date of such notice.
8.8.4 Transfers. Except for transfers to Participant's descendants and
spouses, the Participant shall not transfer by sale, assignment,
hypothecation, donation or otherwise any of the Shares or any interest
therein prior to the release of such Shares from the Repurchase
Option.
8.8.5 Assignment. The Corporation's Repurchase Option may be assigned in
whole or in part to any stockholder or stockholders of the Corporation
or other persons or organizations.
Corporation's Right of First Refusal to Purchase Vested Shares. Each Stock
Purchase Agreement entered into as provided herein shall provide for a right of
first refusal and option on the part of the Corporation to purchase all or any
part of any Shares which are no longer subject to the Repurchase Option which
the Participant purposes to sell, transfer or otherwise dispose of (except for
transfers to Participant's descendants and spouses) on the following terms and
conditions:
The Participant must notify the Corporation in writing of any proposed sale,
transfer or other disposition of any of the Shares, specifying the proposed
transferee, the number of Shares proposed to be transferred, and the price at
which such Shares are to be sold, transferred or otherwise disposed.
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The Corporation shall have a period of thirty (30) days from receipt of such
notice to notify the Participant in writing as to whether or not the Corporation
elects to purchase all or a specified portion of such Shares at the lower of: i)
price per share set forth in the notice given by the Participant, or ii) the
Fair Market Value for a share of the Corporation's Common Stock, without
restrictions, on the date on which the notice is given by Participant to the
Corporation (determined as provided in Section 2.13 above), less in either case
an amount equal to the Discount. If the Corporation elects not to purchase all
of the Shares specified in the notice, the Participant may sell, transfer or
otherwise dispose of the remaining Shares in strict accordance with the terms
specified in the notice within ninety (90) days following the date of the
notice. It is understood and agreed that any transferee of any of such Shares
(other than the Corporation) will take and acquire all of such Shares subject to
the continuing right of first refusal and option on the part of the Corporation
to purchase all or any portion of such Shares from the transferee on all of the
same terms and conditions as are set forth in the Stock Purchase Agreement,
unless the Participant shall have paid to the Corporation, out of the proceeds
from the sale of such Shares or otherwise, an amount equal to the lesser of (i)
the Discount, or (ii) the amount by which the Fair Market Value for a share of
the Corporation's Common Stock, without restrictions, on the date on which the
notice is given by Participant to the Corporation (determined as provided in
Section 2.13 above) exceeds the price per Share paid by the Participant for such
Shares.
8.10 Other Provisions. The Stock Purchase Agreements authorized may contain such
other provisions not inconsistent with the terms of the Plan as the Board or the
Committee shall deem advisable.
9. STOCK APPRECIATION RIGHTS.
9.1 Grant. Stock Appreciation Rights related or unrelated to Options or other
Awards may be granted to Eligible Employees: (i) at any time, if unrelated to an
Award, or if related to an Award other than an Incentive Stock Option; or (ii)
only at the time of grant of an Option if related thereto. A Stock Appreciation
Right may extend to all or a portion of the Shares covered by a related Award.
9.2 Exercise of Stock Appreciation Rights. A Stock Appreciation Right granted in
connection with an Award shall be exercisable only at such time or times, and to
the extent that a related Award is exercisable. A Stock Appreciation Right
granted in connection with an Option may be exercisable only when the Fair
Market Value of the stock subject to the Option exceeds the Exercise Price of
the Incentive Stock Option.
9.3 Payment.
(a) Upon the exercise of a Stock Appreciation Right, and, if such Stock
Appreciation Right is related to an Award, surrender of an exercisable portion
of a related Award, the Participant shall be entitled to receive payment of an
amount determined by multiplying: (i) the difference obtained by subtracting the
purchase price of a share of Common Stock specified in the related Award, or if
such Stock Appreciation Right is unrelated to an Award, from the Fair Market
Value, book value or other measure specified in the Award of such Stock
Appreciation Right of a share of Common Stock on the date of exercise of such
Stock Appreciation Right, by (ii) the number of Shares as to which such Stock
Appreciation Right has been exercised.
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(b) The Board or the Committee, as the case may be, in its sole discretion, may
require settlement of the amount determined under paragraph (a) above solely in
cash, solely in Shares of Common Stock (valued at Fair Market Value on the
business day next preceding the date of exercise of such Stock Appreciation
Right), or partly in such Shares and partly in cash.
9.4 Maximum Stock Appreciation Right Term. Each Stock Appreciation Right and all
rights and obligations thereunder shall expire on such date as shall be
determined by the Board or the Committed but not later than ten (10) years after
the date of the Award thereof, and shall be subject to earlier termination as
provided in the related Award Agreement and Sections 14.6, 14.7, 14.8, 14.9 and
15.1.
10. PERFORMANCE AWARDS.
One or more Performance Awards may be granted to any Eligible Employee. The
value of such Awards may be linked to the market value, book value or other
measure of the value of the Common Stock or other specific performance criteria
determined appropriate by the Board or the Committee, in each case on a
specified date or over any period determined by the Board or the Committee, or
may be based upon the appreciation in the market value, book value or other
measure of the value of a specified number of Shares of Common Stock over a
fixed period determined by the Board or the Committee. In making such
determinations, the Board or the Committee may consider (among such other
factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the Participant.
11. DIVIDEND EQUIVALENTS.
A Participant may also be granted "Dividend Equivalents" based on the dividends
declared on the Common Stock, to be credited as of dividend payment dates,
during the period between the Award Date and the date such Award is exercised,
vests or expires as determined by the Board or the Committee. Such Dividend
Equivalents shall be converted to cash or additional Shares of Common Stock by
such formula and at such time and subject to such limitations as may be
determined by the Board or the Committee.
12. STOCK PAYMENTS.
The Board or the Committee may approve Stock Payments to Eligible Employees who
elect to receive such payments in the manner determined from time to time by the
Board or the Committee. The number of Shares shall be determined by the Board or
the Committee and may be based upon the Fair Market Value, book value or other
measure of the value of such Shares on the Award Date or on any date thereafter.
13. LOANS.
The Corporation may, with the Board's or the Committee's approval, extend one or
more loans to Participants in connection with the exercise or receipt of
outstanding Awards granted under the Plan; provided any such loan shall be
subject to the following terms and conditions;
(i) The principal of the loan shall not exceed the amount required to be paid to
the Corporation upon the exercise or receipt of one or more Awards under the
Plan less the aggregate Par Value of any Common Stock deliverable on such event,
and the loan proceeds shall be paid directly to the Corporation in consideration
of such exercise or receipt.
(ii) The initial term of the loan shall be determined by the Board or the
Committee; provided that the term of the loan, including extensions, shall not
exceed a period of ten (10) years.
10
(iii) The loan shall be with full recourse to the Participant, shall be
evidenced by the Participant's promissory note and shall bear interest at a rate
determined by the Board or the Committee but not less than the Corporation's
average cost of funds as of a date within thirty-one (31) days of the date of
such loan, as determined by the Board or Committee.
(iv) in the event a Participant terminates his or her employment at the request
of the Corporation, the unpaid principal balance of the note shall become due
and payable on the tenth (10th) business day after such termination; provided,
however, that if a sale of such Shares would cause such Participant to incur
liability under Section 16(b) of the Exchange Act, the unpaid balance shall
become due and payable on the tenth (10th) business day after the first day on
which a sale of such Shares could have been made without incurring such
liability assuming for these purposes that there are no other transactions by
the Participant subsequent to such termination. In the event a Participant
terminates employment other than at the request of the Corporation, the unpaid
principal balance of the note shall become due and payable six (6) months after
the date of such termination.
14. RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES.
14.1 Employee Status. Status as an Eligible Employee shall not be construed as a
commitment that any Award will be made under the Plan to an Eligible Employee or
to Eligible Employees generally.
14.2 No Employment Contract. Nothing contained in the Plan (or in the Award
Agreements or in any other documents related to the Plan or to Awards) shall
confer upon any Eligible Employee or any Participant any right to continue in
the employ of the Corporation or constitute any contract or agreement of
employment, or interfere in any way with the right of the Corporation to reduce
such person's compensation or to terminate the employment of such Eligible
Employee or Participant, with or without cause, but nothing contained in the
Plan or any document related thereto shall affect any other contractual right of
any Eligible employee or Participant. Nothing contained in the Plan (or in the
Award Agreements or in any other documents related to the Plan or the Awards)
shall confer upon any director of the Corporation any right to continue as a
director of the Corporation.
14.3 No Transferability. Awards may be exercised only by, and amounts payable or
Shares issued pursuant to an Award shall be paid only to or registered only in
the name of, the Participant or, in the event of the Participant's death, to the
Participant's Beneficiary or, in the event of the Participant's Disability, to
the participant's Personal Representative or, if there is none, to the
Participant. Other than by will or the laws of descent and distribution, no
right or benefit under the Plan or any Award, including, without limitation, any
Option or share of Restricted Stock that has not vested, shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge and any such attempted action shall be void and no such
right or benefit shall be, in any manner, liable for, or subject to, debts,
contract, liabilities, engagements, or torts of any Eligible Employee,
Participant or Beneficiary, in any case except as may otherwise by expressly
required by applicable law. The Board or the Committee shall disregard any
attempt at transfer; assignment or other alienation prohibited by the preceding
sentence and shall pay or deliver such cash or Shares of Common Stock in
accordance with the provisions of the Plan. Notwithstanding the foregoing, the
Board or the Committee may authorize exercise by or transfers or payments to a
third party in a specific case or more generally; provided, however, with
respect to any option or similar right (including any Stock Appreciation Right)
such discretion may only be exercised to the extent that applicable rules under
Section 16 of the Exchange Act would so permit without disqualifying the Plan
from certain benefits thereunder.
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14.4 Plan Not Funded. No Participant, Beneficiary or other person shall have any
right, title or interest in any fund or in any specific asset (including Shares
of Common Stock) of the Corporation by reason of any Award granted hereunder.
There shall be no funding of any benefits which may become payable hereunder.
Neither the provision of the Plan (or of any documents related hereto, nor the
creation or adoption of the Plan, nor any action taken pursuant to the
provisions of the Plan shall create, or be construed to create, a trust of any
kind or a fiduciary relationship between the Corporation and any Participant or
Beneficiary. To the extent that a Participant, a Beneficiary or other person
acquires a right to receive an Award hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Corporation. Awards
payable under the Plan shall be paid in Shares of Common Stock or from the
general assets of the Corporation, and no special or separate fund or deposit
shall be established and no segregation of assets or Shares shall be made to
assure payment of such Awards.
14.5 Adjustment Upon Recapitalization and Corporate Changes. If the outstanding
Shares of Common Stock are changed into or exchanged for cash or a different
number or kind of Shares or securities of the Corporation, or if the outstanding
Shares of the Common Stock are increased, decreased, exchanged for, or otherwise
changes, or if additional Shares or new or different shares or securities are
distributed with respect to the outstanding Shares of the Common Stock, through
a reorganization or merger in which the Corporation is the surviving entity or
through a combination, consolidation, recapitalization, reclassification, stock
split, stock dividend, reverse stock split, stock consolidation or other capital
change or adjustment, an appropriate adjustment shall be made in the number and
kind of shares or other consideration that is subject to or may be developed
under the Plan and pursuant to outstanding Awards. A corresponding adjustment to
the consideration payable with respect to Awards granted prior to any such
change and to the price, if any, to be paid in connection with Restricted Stock
Awards shall also be made as appropriate. Corresponding adjustments shall be
made with respect to Stock Appreciation Rights related to Options to which they
are related. In addition, the Board or the Committee may grant such additional
rights in the foregoing circumstances as the Board or the Committee deems to be
in the best interest of any Participant and the Corporation in order to preserve
for the participant the benefits of an Award.
14.6 Termination of Employment Except by Death, Disability or Retirement. If a
Participant ceases to be an Employee for any reason other than his or her death,
disability or retirement, such Participant shall have the right, subject to the
restrictions of Section 14.3 above, to exercise any Award at any time within
three (3) months after termination of employment, but only to the extent that,
at the date of termination of employment, the Participant's right to exercise
such Award had accrued pursuant to the terms of the applicable agreement and had
not previously been exercised; provided, however, that if the Participant was
terminated for cause (as defined in the applicable agreement) any Award not
exercised in full prior to such termination shall be canceled. For this purpose,
the employment relationship shall be treated as continuing intact while the
Participant is on military leave, sick leave or other bona fide leave of absence
(to be determined in the sole discretion of the Board or the Committee). The
foregoing notwithstanding, in the case of an Incentive Stock Option, employment
shall not be deemed to continue beyond the ninetieth (90th) day after the
Participant's re-employment rights are guaranteed by statute or by contract.
12
14.7 Death of Participant. If a Participant dies while an Employee, or after
ceasing to be an Employee but during the period while he or she could have
exercised the Award under this Section 14.7, and has not fully exercised the
Award, then the Award may be exercised in full at any time within twelve (12)
months after the Participant's death but no later than the date of termination
(fixed in the applicable agreement), by the executors or administrators of his
or her estate or by any person or persons who have acquired the Award directly
from the Participant by bequest or inheritance, but only to the extent that, at
the date of death, the Participant's right to exercise such Award had accrued
and had not been forfeited pursuant to the terms of the applicable agreement and
had not previously been exercised.
14.8 Disability of Participant. If a Participant ceases to be an Employee by
reason of Disability, such Participant shall have the right to exercise the
Award at any time within twelve (12) months after termination of employment (but
not later than the termination date fixed in the applicable agreements) but only
to the extent that at the date of termination of employment, the Participant's
right to exercise such Award had accrued pursuant to the terms of the applicable
agreement and had not previously been exercised.
14.9 Retirement of Participant. If a Participant ceases to be an Employee by
reason of Retirement, such Participant shall have the right to exercise the
Award at any time within three (3) months after termination of employment (but
not later than the termination date fixed in the applicable agreements) but only
to the extent that, at the date of termination of employment, the Participant's
right to exercise such Award had accrued pursuant to the terms of the applicable
agreement and had not previously been exercised.
14.10 Rights as a Stockholder. A Participant, or a transferee of a Participant,
shall have no rights as a stockholder with respect to any Shares covered by his
or her Award until the date of the issuance of a stock certificate for such
Shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property), distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as provided in Section 14.5 hereof.
14.11 Deferral of Payments. The Board or the Committee may approve the deferral
of any payments that may become due under the Plan. Such deferrals shall be
subject to any conditions, restrictions or requirements as the Board or the
Committee may determine.
14.12 Acceleration of Awards. Immediately prior to the occurrence of an Event,
(i) each Option and Stock Appreciation Right under the Plan shall become
exercisable in full; (ii) Restricted Stock delivered under the Plan shall
immediately vest free of restriction; and (iii) each other Award outstanding
under the Plan shall be fully vested or exercisable unless prior to the Event,
the Board or the Committee otherwise determines that there shall be no such
acceleration or vesting of an Award or otherwise determines those Awards which
shall be accelerated or vested and to the extent to which they shall be
accelerated or vested, or that an Award shall terminate, or unless in connection
with such Event the Board provides (a) for the assumption of such Awards
theretofore granted; or (b) for the substitution for such Awards of new awards
covering securities or obligations (or any combination thereof) of a successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to number and kind of shares and prices; or (c) for the payment of the Fair
Market Value of the then outstanding Awards. In addition, the Board or the
Committee may grant such additional rights in the foregoing circumstances as the
Board or the Committee deems to be in the best interest of the Participant and
the Corporation in order to preserve for the Participant the benefits of an
Award. For purposes of this Section 14.12 only, Board shall mean the Board of
Directors of the Corporation as constituted immediately prior to the Event. In
addition, the Board may in its sole discretion accelerate the exercisability or
vesting of any or all Awards outstanding under the Plan in circumstances under
which the Board or the Committee determines such acceleration appropriate.
13
15. MISCELLANEOUS
15.1 Termination, Suspension and Amendment. The Board or the Committee may, at
any time suspend, amend, modify of terminate the Plan (or any part thereof) and
may, with the consent of a Participant, authorize such modifications of the
terms and conditions of such Participant's Award as it shall deem advisable;
provided that, except as permitted under the provision of Section 14.5 hereof,
no amendment or modification of the Plan may be adopted without approval by a
majority of the Shares of the Common Stock (represented in person or by proxy)
at a meeting of stockholders at which a quorum is present and entitled to vote
thereat, if such amendment or modification would:
(i) materially increase the benefits accruing to Participants under the Plan
within the meaning of Rule 16b-3 under the Exchange Act or any successor
provision;
ii) materially increase the aggregate number of Shares which may be delivered
pursuant to Awards granted under the Plan; or
iii) materially modify the requirements of eligibility for either adoption of
the Plan.
Neither adoption of the Plan nor the provisions hereof shall limit the authority
of the Board to adopt other Plans or to authorize other payment of compensation
and benefits under applicable law. No Awards under the Plan may be granted or
amended during any suspension of the Plan or after its termination. The
amendment, suspension or termination of the Plan shall not, without the consent
of the Participant, alter or impair any rights or obligations pertaining to any
Awards granted under the Plan prior to such amendment, suspension or
termination.
15.2 No Fractional Shares. No Award or installment thereof shall be exercisable
except in respect to whole Shares, and fractional share interest shall be
disregarded.
15.3 Tax Withholding and Tax Bonuses. As required by law, federal, state or
local taxes that are subject to the withholding of tax at the source shall be
withheld by the Corporation as necessary to satisfy such requirement. The
Corporation is entitled to require deduction from other compensation payable to
such Participant or, in the alternative; i) the Corporation may require the
Participant to advance such sums: or ii) if Participant elects, the Corporation
may withhold (or require the return of) Shares having the Fair Market Value
equal to the sums required to be withheld. If the Participant elects to advance
such sums directly, written notice of that election shall be delivered prior to
such exercise and, whether pursuant to such election or pursuant to a
requirement imposed by the Corporation, payment in cash or by check of such sums
for taxes shall be delivered within ten (10) days after the Exercise Date. If
the Participant elects to have the Corporation withhold Shares (or be entitled
to the return of Shares) having a Fair Market Value equal to the sums required
to be withheld, the value of the Shares to be withheld (or returned) will be
equal to the Fair Market Value on the day the amount of tax to be withheld (or
subject to return) is to be determined (the "Tax Date").
15.4 Restriction on Elections Made by Participants. Elections by Participants to
have Shares withheld (or subject to return) for this purpose will be subject to
the following restrictions: i) the election must be made prior to the Tax Date;
ii) the election must be irrevocable; iii) the election will be subject to the
Board's disapproval; and (iv) if the Participant is an "officer" within the
meaning of Section 16 of the Exchange Act, the election shall be subject to such
additional restrictions as the Board or the Committee may impose in an effort to
secure the benefits of any regulations thereunder.
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15.5 Limitations on the Corporation's Obligations. The Corporation shall not be
obligated to issue Shares and/or distribute cash to the Participant upon any
Award exercise until such payment has been received or Shares have been
withheld, (unless withholding for offset against a cash payment) as of or prior
to the Exercise Date, sufficient to cover all such sums due or which may be due
with respect to such exercise. In addition, the Board or the Committee may grant
to a Participant a cash bonus in any amount required by federal, state, or local
tax law to be withheld with respect to an Award.
15.6 Compliance with Laws. The Plan, the granting of Awards under the Plan, the
Stock Option Agreements and Stock Purchase Agreements and the delivery of
Options, Shares and Awards (and/or the payment of money or Common Stock)
pursuant thereto and the extension of any loans hereunder are subject to such
additional requirements as the Board or the Committee may impose to assure or
facilitate compliance with all applicable federal and state laws, rules and
regulations (including, without limitation, securities laws and margin
requirements) and to such approvals by any regulatory or governmental agency
which may be necessary or advisable in connection therewith. In connection with
the administration of the Plan or the grant of any Award, the Board or the
Committee may impose such further limitations or conditions as in its opinion
may be required or advisable to satisfy, or secure the benefits of, applicable
regulatory requirements (including those rules promulgated under Section 16 of
the Exchange Act or those rules that facilitate exemption from or compliance
with the Securities Act or the Exchange Act), the requirements of any stock
exchange upon which such Shares or shares of the same class are then listed, and
any Blue Sky or other securities laws applicable to such Shares.
15.7 Governing Laws. The Plan and all Awards granted under the Plan and the
documents evidencing Awards shall be governed by, and construed in accordance
with, the laws of the State of Colorado.
15.8 Securities Law Requirements.
a) Legality of issuance. The issuance an any Shares upon the exercise of any
Option and the grant of any Option shall be contingent upon the following:
i) the Corporation and the Participant shall have taken all actions required to
register the Shares under the Securities Act, and to qualify the Option and the
Shares under any and all applicable state securities or "Blue Sky" laws or
regulations, or to perfect an exemption from the respective registration and
qualification requirements thereof;
ii) any applicable listing requirement of any stock exchange on which the Common
Stock is listed shall have been satisfied; and
iii) any other applicable provision of federal law shall have been satisfied.
b) Restrictions on Transfer. Regardless of whether the offering and sale of
Shares under the Plan has been registered under the Securities Act or has been
registered or qualified under the securities laws of any state, the Corporation
may impose restrictions on the sale, pledge or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Corporation and its counsel, such restrictions are necessary
or desirable in order to achieve compliance with the provision of the Securities
Act, the securities laws of any state or any other law. In the event that the
sale of Shares under the Plan is not registered under the Securities Act but an
15
exemption is available which required an investment representation or other
representation, each Participant shall be required to represent that such Shares
are being acquired for investment, and not with a view to the sale or
distribution thereof, and to make such other representations as are deemed
necessary or appropriate by the Corporation and its counsel. Any determination
by the Corporation and its counsel in connection with any of the matter set
forth in this Section 15.8(b) shall be conclusive and binding on all persons.
Stock certificates evidencing Shares acquired under the Plan pursuant to an
unregistered transaction shall bear the following restrictive legend and such
other restrictive legends as are required or deemed advisable under the
provisions of any applicable law:
THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). ANY TRANSFER OF SUCH SECURITIES
WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT IS IN
EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH
REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE
SECURITIES ACT.
c) Registration or Qualification of Securities. The Corporation may, but shall
not be obligated to register or qualify the issuance of Awards and/or the sale
of Shares under the Securities Act or any other applicable law. The Corporation
shall not be obligated to take any affirmative action in order to cause the
issuance of Awards or the sale of Shares under the Plan to comply with any law.
d) Exchange of Certificates. If, in the opinion of the Corporation and its
counsel, any legend placed on a certificate representing Shares issued under
that Plan is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
15.9 Execution. To record the adoption of the Plan in the form set forth above
by the Board effective as of June 1, 2002, the Corporation has caused this Plan
to be executed in the name and on behalf of the Corporation where provided below
by an officer of the Corporation thereunto duly authorized.
ARETE INDUSTRIES, INC.
By: /s/ Thomas P. Raabe
------------------------------------
Chief Executive Officer
Attest:
/s/ William W. Stewart
------------------------------------
Secretary
16
Schedule A to Omnibus Stock Option and Compensation Plan
Arete Industries, Inc.
Effective June 1, 2002
Name Grant Date/ Type of Stock Quantity Consideration/ Period
Vest Date Exercise Price
- ------------------------------------------ ------------ ----------------- ---------- ---------- ---------------
Thomas Raabe 11/19/01 Common Option 40,000,000* $ 40,000 To 11/19/03
- ------------------------------------------ ------------ ----------------- ---------- ---------- ---------------
Thomas Y. Gorman, Jr 11/19/01 Common Option 40,000,000* $ 40,000 To 11/19/03
- ------------------------------------------ ------------ ----------------- ---------- ---------- ---------------
William W. Stewart 12/19/01 Common Option 40,000,000* $ 40,000 To 12/19/03
- ------------------------------------------ ------------ ----------------- ---------- ---------- ---------------
Gerald J. Brandimarte 5/31/02 Common Option 40,000,000* $ 40,000 To 06/01/03
- ------------------------------------------ ------------ ----------------- ---------- ---------- ---------------
Thomas Raabe 7/15/02 Compensation 40,000,000* $ 40,000 Pre-reverse
Grant
- ------------------------------------------ ------------ ----------------- ---------- ---------- ---------------
Gerald J. Brandimarte 7/15/02 Compensation 40,000,000* $ 40,000
Grant
- ------------------------------------------ ------------ ----------------- ---------- ---------- ---------------
William W. Stewart 7/15/02 Compensation 40,000,000* $ 40,000
Grant
- ------------------------------------------ ------------ ----------------- ---------- ---------- ---------------