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EXHIBIT 99.2
NONSTATUTORY STOCK OPTION AGREEMENT
This Nonstatutory Stock Option Agreement (the "Agreement") is
made and entered into on this 8th day of September, 1996, by and between
HUGOTON ENERGY CORPORATION, a Kansas corporation (the "Company"), and XXX X.
XXXXXX ("Employee").
In consideration of the mutual agreements and other matters
set forth herein, the Company and Employee hereby agree as follows:
1. Grant or Option. The Company hereby irrevocably grants to
Employee the right and option ("Option") to purchase all or any part of an
aggregate of 125,000 shares of common stock of the Company ("Stock"), on the
terms and conditions set forth herein. Exercise of this Option is subject to,
and contingent upon, approval of this Agreement by the stockholders of the
Company on or before twelve (12) months after the date this Agreement is
approved by the Board of Directors of the Company (the "Board"). This Option
shall not be treated as an incentive stock option within the meaning of section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of Stock purchased
pursuant to the exercise of this Option shall be $8.34 per share, which has
been determined to be the fair market value of the Stock at the date of grant
of this Option.
3. Vesting and Exercise of Option. The Option granted hereunder
shall vest as follows:
(a) the option to purchase 25% of the shares covered
herein shall vest immediately;
(b) the option to purchase 25% of the shares covered
herein shall vest twelve (12) months after the date
of this Agreement;
(c) the option to purchase 25% of the shares covered
herein shall vest twenty-four (24) months after the
date of this Agreement; and
(d) the option to purchase 25% of the shares covered
herein shall vest thirty-six (36) months after the
date of this Agreement.
Subject to the earlier expiration of this Option as herein
provided, this Option may be exercised by written notice to the Company at its
principal executive office addressed to the attention of its Chief Executive
Officer. The options granted hereunder must be exercised within thirty-six
(36) months after the date they become vested or they will expire worthless.
This Option is not transferable by Employee otherwise than by
will or the laws of descent and distribution, and may be exercised only by
Employee during Employee's lifetime. This option may be exercised only while
Employee remains an employee of the Company and will terminate and cease to be
exercisable upon Employee's termination of employment with the Company, except
that:
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(a) If Employee's employment with the Company terminates
by reason of disability (within the meaning of section 22(c)(3) of the Code),
this Option may be exercised in full (whether or not the option is fully
vested) by Employee (or Employee's estate or the person who acquires this
Option by will or the laws of descent and distribution or otherwise by reason
of the death of Employee) at any time during the period of one (1) year
following such termination.
(b) If Employee dies while in the employ of the Company,
Employee's estate, or the person who acquires this Option by will or the laws
of descent and distribution or otherwise by reason of the death of Employee.
may exercise this Option in full (whether or not the option is fully vested) at
any time during, the period of one (1) year following the date of Employee's
death.
(c) If Employee's employment with the Company terminates
for any reason other than as described in (a) or (b) above, unless Employee
voluntarily terminates without the written consent of the Company or is
terminated for cause, this Option may be exercised by Employee at any time
during the period of three (3) months following such termination, or by
Employee's estate (or the person who acquires this Option by will or the laws
of descent and distribution or otherwise by reason of the death of Employee)
during a period of one (1) year following Employee's death if Employee dies
during such three-month period, but in each case only to the extent the Option
was vested and only as to the number of shares Employee was entitled to
purchase hereunder as of the date Employee's employment so terminates. For
purposes of this Agreement, "cause" shall mean the inability of Employee,
through sickness or other incapacity, to perform his duties under his
employment agreement for a period of six (6) months, dishonesty, theft,
conviction of a crime involving moral turpitude or commission of a material act
of fraud against the Company or its subsidiaries, failure of Employee to
observe or perform his material duties and obligations as an employee of the
Company or a material breach of his employment agreement.
The purchase price of shares as to which this Option is
exercised shall be paid in full at the time of exercise (a) in cash (including
check, bank draft or money order payable to the order of the Company), or (b)
by delivering to the Company shares of Stock having a fair market value equal
to the purchase price, or (c) a combination of cash and Stock. No fraction of
a share of Stock shall be issued by the Company upon exercise of an Option or
accepted by the Company in payment of the exercise price thereof, rather,
Employee shall provide a cash payment for such amount as is necessary to effect
the issuance and acceptance of only whole shares of Stock. Unless and until a
certificate or certificates representing such shares shall have been issued by
the Company to Employee, Employee (or the person permitted to exercise this
Option in the event of Employee's death) shall not be or have any of the rights
or privileges of a stockholder of the Company with respect to shares acquirable
upon an exercise of this Option.
4. Recapitalization.
(a) The shares with respect to which this Option granted
are shares of Stock as presently constituted but if, and whenever, prior to the
expiration of this Option, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
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without receipt of consideration by the Company, the number of shares of Stock
with respect to which this Option may thereafter be exercised (a) in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced
and (b) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced and the purchase price per share shall be
proportionately increased. If the Company recapitalizes or otherwise changes
its capital structure, thereafter upon any exercise hereunder, Employee shall
be entitled to purchase, in lieu of the number of shares of Stock as to which
this Option shall be exercisable, the number and class of shares of stock and
securities to which he would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization, he had been
the holder of record of the number of shares of Stock as to which this Option
is then exercisable.
The existence of the Options granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization
or other change in the Company's capital structure or its business, any merger
or consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
(b) If the Company recapitalizes, reclassifies its
capital stock, or otherwise changes its capital structure (a
"recapitalization"), the number and class of shares of Stock covered by this
Option shall be adjusted so that such Option shall thereafter cover the number
and class of shares of stock, and securities to which Employee would have been
entitled pursuant to the terms of the recapitalization if, immediately prior to
the recapitalization, Employee had been the holder of record of the number of
shares of Stock then covered by this Option. If (i) the Company shall not be
the surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company), (ii) the Company sells, leases or exchanges
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of the Company), (iii) the Company is to be dissolved
and liquidated, (iv) any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the Company's voting stock
(based upon voting power), or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board (each
such event is referred to herein as a "Corporate Change"), no later than (a)
ten (10) days after the approval by the stockholders of the Company of such
merger. consolidation, reorganization, sale, lease or exchange of assets or
dissolution or such election of directors or (b) thirty (30) days after a
change of control of the type described in clause (iv) the Board, acting in its
sole discretion without the consent or approval of Employee, shall act to
effect one or more of the following alternatives, which may vary: (1)
accelerate the time at which this Option may be exercised so that this Option
may be exercised in full for a limited period of time on or before a specified
date (before or after such Corporate Change) fixed by the Board, after which
specified date all unexercised portions of this Option and all rights of
Employee thereunder shall
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terminate, (2) require that mandatory surrender to the Company by Employee of
this option (irrespective of whether this Option is then exercisable) as of a
date, before or after such Corporate Change, specified by the Board, in which
event the Board shall thereupon cancel this Option and the Company shall pay to
Employee an amount of cash per share equal to the excess, if any, of the amount
calculated in subparagraph (d) below (the "Change of Control Value") of the
shares subject to this Option over the exercise price(s) under this Option for
such shares, (3) make such adjustments to this Option as the Board deems
appropriate to reflect such Corporate Change (provided, however, that the Board
may determine in its sole discretion that no adjustment is necessary to this
Option) or (4) provide that the number and class of shares of Stock covered by
this Option shall be adjusted so that this Option shall thereafter cover the
number and class of shares of stock or other securities or property (including,
without limitation, cash) to which Employee would have been entitled pursuant
to the terms of the agreement of merger, consolidation or sale of assets and
dissolution if, immediately prior to such merger, consolidation or sale of
assets and dissolution Employee had been the holder of record of the number of
shares of Stock then covered by this Option.
(c) For the purposes of clause (2) in subparagraph (b)
above, the "Change of Control Value" shall equal the amount determined in
clause (i), (ii) or (iii), whichever is applicable, as follows: (i) the per
share price offered to stockholders of the Company in any such merger,
consolidation, reorganization, sale of assets or dissolution transaction, (ii)
the price per share offered to stockholders of the Company in any tender offer
or exchange offer whereby a Corporate Change takes place, or (iii) if such
Corporate Change occurs other than pursuant to a tender or exchange offer, the
fair market value per share of the shares into which this Option, if being
surrendered are exercisable, as determined by the Board as of the date
determined by the Board to be the date of cancellation and surrender of this
Option. In the event that the consideration offered to stockholders of the
Company in any transaction described in this subparagraph (c) or subparagraph
(b) above consists of anything other than cash, the Board shall determine the
fair cash equivalent of the portion of the consideration offered which is other
than cash.
(d) Any adjustment provided for in subparagraph (a) or
(b) above shall be subject to any required stockholder action.
(e) Except as hereinbefore expressly provided, the
issuance by the Company of shares of stock of any class or securities
convertible into shares of stock, of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case whether or
not for fair value, shall not affect, and no adjustment by reason therefor
shall be made with respect to, the number of shares of Stock subject to this
Option or the purchase price per share.
5. Withholding of Tax. To the extent that the exercise of this
Option or the disposition of shares of Stock acquired by exercise of this
Option results in compensation income to Employee for federal or state income
tax purposes, Employee shall deliver to the Company at the time of such
exercise or disposition such amount of money or shares of Stock as the Company
may require it to
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meet its obligation under applicable tax laws or regulations, and, if Employee
fails to do so, the Company is authorized to withhold from any cash or Stock
remuneration then or thereafter payable to Employee any tax required to be
withheld by reason of such resulting compensation income. Upon an exercise of
this Option, the Company is further authorized in its discretion to satisfy any
such withholding requirement out of any cash or shares of Stock distributable
to Employee upon such exercise.
6. Status of Stock. Following approval of this Agreement by the
stockholders of the Company, the Company intends to register for issuance under
the Securities Act of 1933, as amended (the "Act") the shares of Stock
acquirable upon exercise of this Option, and to keep such registration
effective throughout the period this Option is exercisable. In the absence of
such effective registration or an available exemption from registration under
the Act, issuance of shares of Stock acquirable upon exercise of this Option
will be delayed until registration of such shares is effective or an exemption
from registration under the Act is available. In the event exemption from
registration under the Act is available upon an exercise of this Option,
Employee (or the person permitted to exercise this Option in the event of
Employee's death or incapacity), if requested by the Company to do so, will
execute and deliver to the Company in writing an agreement containing such
provisions as the Company may require to assure compliance with applicable
securities laws.
Employee agrees that the shares of Stock which Employee may
acquire by exercising this Option will not be sold or otherwise disposed of in
any manner which would constitute a violation of any applicable securities
laws, whether federal or state. Employee also agrees (i) that the certificates
representing the shares of Stock purchased under this Option may bear such
legend or legends as the Company deems appropriate in order to assure
compliance with applicable securities laws, and (ii) that the Company may
refuse to register the transfer of the shares of Stock purchased under this
Option on the stock transfer records of the Company if such proposed transfer
would in the opinion of counsel satisfactory to the Company constitute a
violation of any applicable securities laws and (iii) that the Company may give
related instructions to its transfer agent, if any, to stop registration of the
transfer of the shares of Stock purchased under this Option.
7. Employment Relationship. For purposes of this Agreement,
Employee shall be considered to be in the employment of the Company as long as
Employee remains an employee of either the Company, a parent or subsidiary
corporation (as defined in section 424 of the Code) of the Company, or a
corporation or a parent or subsidiary of such corporation assuming or
substituting a new option for this Option. Any question as to whether and when
there has been a termination of such employment, and the cause of such
termination, shall be determined by the Board and its determination shall be
final.
8. Plan. This Agreement is intended to constitute an employee
benefit plan within the meaning of Rule 405 of the Act.
9. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
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10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Kansas.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed, by its officer thereunto duly authorized, and Employee has
executed this Agreement, all as of the day and year first above written.
HUGOTON ENERGY CORPORATION
By: /s/ W. XXXX XXXXXX
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Name: W. Xxxx Xxxxxx
Title: Executive Vice President and CFO
/s/ XXX X. XXXXXX
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XXX X. XXXXXX
"Employee"
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