UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20649
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No.__ )
Filed
by
the Registrant T
Filed
by
a Party other than the Registrant ࿇
Check
the
appropriate box:
o
Preliminary
Proxy Statement
࿇
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x
Definitive
Proxy Statement
࿇
Definitive
Additional Materials
࿇
Soliciting
Material Pursuant to § 240.14a-12
EMPIRE PETROLEUM CORPORATION
(Name
of
Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
T
No
fee
required.
࿇
Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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Title
to each class of securities to which transaction
applies:
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| 2) |
Aggregate
number of securities to which transaction
applies:
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| 3) |
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was
determined):
|
| 4) |
Proposed
maximum aggregate value of transaction:
|
| 5) |
Total
fee paid:
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࿇
Fee
paid
previously with preliminary materials.
࿇
Check
box
if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and
identify the filing for which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or the Form or Schedule
and the date of its filing.
| 1) |
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Previously Paid:
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Party:
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Date
Filed:
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EMPIRE
PETROLEUM CORPORATION
8801
South Yale
Suite
120
Tulsa,
Oklahoma 74137
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held June 5, 2006
To
Our
Stockholders:
NOTICE
IS
HEREBY GIVEN that the Annual Meeting of Stockholders of Empire Petroleum
Corporation, a Delaware corporation (the “Company”),
will be held at
the Crowne Plaza Hotel, 100 East Second Street, Tulsa, Oklahoma, in the
Executive Room on the 2nd floor on Monday, June 5, 2006, at 10:00
a.m., local time, for the following purposes:
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1.
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To
elect two members to the Board of Directors to serve until the next
annual
meeting of stockholders and until their successors are duly elected
and
qualified;
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2.
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To
approve the adoption of the Company’s
2006 Stock
Incentive Plan;
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3.
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To
approve an amendment to the Company’s Certificate of Incorporation to
increase the shares of the Company’s authorized common
stock;
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4.
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To
ratify the appointment of Tullius Taylor Sartain & Sartain LLP as the
Company’s independent registered public accounting firm for 2006;
and
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5.
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To
transact any other business that may properly come before the meeting
or
any adjournment thereof.
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The
Board
of Directors has fixed the close of business on May 4, 2006, as the record
date
for the meeting, and only stockholders of record at such time will be entitled
to notice of and to vote at the meeting or any adjournment thereof. A list
of
the stockholders entitled to vote at the meeting will be open to the examination
of any stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of 10 days prior to the date of the meeting at
the
offices of the Company and at the time and place of the meeting.
| By Order of the Board of Directors, | ||
| |
|
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| /s/ Albert E. Whitehead | ||
|
Albert E. Whitehead |
||
| Chairman and Chief Executive Officer | ||
Tulsa,
Oklahoma
May
10,
2006
YOUR
VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED
TO VOTE BY MAIL SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES.
IF YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON.
EMPIRE
PETROLEUM CORPORATION
8801
South Yale
Suite
120
Tulsa,
Oklahoma 74137
PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To
Be Held June 5, 2006
SOLICITATION
AND REVOCATION OF PROXIES
This
Proxy Statement is furnished in connection with the solicitation by the Board
of
Directors of Empire Petroleum Corporation, a Delaware corporation (the “Company”),
of proxies to
be voted at the Annual Meeting of Stockholders of the Company to be held on
June
5, 2006, or at any adjournment thereof (the “Annual
Meeting”),
for the purposes set forth in the accompanying Notice of Annual Meeting. This
Proxy Statement and accompanying proxy are first being forwarded to stockholders
on or about May 10, 2006.
If
the
accompanying proxy is properly executed and returned, the shares represented
by
the proxy will be voted as directed at the Annual Meeting. Stockholders whose
shares are registered in their own names may instruct the proxies how to vote
by
executing and returning the accompanying proxy, and the shares represented
by
the proxy will be voted at the Annual Meeting. Stockholders holding their shares
through a broker, bank or other record holder should follow the instructions
provided to them by such record holders in order to vote their
shares.
If
a
stockholder indicates in his or her proxy a choice with respect to any matter
to
be acted upon, that stockholder’s shares will be voted in accordance with such
choice. If no choice is indicated on a proxy, the stockholder’s shares will be
voted “FOR”
(a) the
election of all of the nominees for directors listed below, (b) the adoption
of
the 2006 Stock Incentive Plan, (c) the amendment to the Company’s Certificate of
Incorporation and (d) the ratification of the appointment of the
independent registered public accounting firm. A stockholder giving a proxy
may
revoke it by giving written notice of revocation to the Chief Executive Officer
of the Company at any time before it is voted, by executing another valid proxy
bearing a later date and delivering such proxy to the Chief Executive Officer
of
the Company prior to or at the Annual Meeting or by attending the Annual Meeting
and voting in person.
The
expenses of this proxy solicitation, including the cost of preparing and mailing
this Proxy Statement and accompanying proxy will be borne by the Company. Such
expenses will also include the charges and expenses of banks, brokerage firms,
and other custodians, nominees or fiduciaries for forwarding solicitation
material regarding the Annual Meeting to beneficial owners of the Company’s
common stock. Solicitation of proxies may be made by mail, telephone, personal
interviews or by other means by the Board of Directors or employees of the
Company who will not be additionally compensated therefor, but who may be
reimbursed for their out-of-pocket expenses in connection
therewith.
STOCKHOLDERS
ENTITLED TO VOTE
Stockholders
of record at the close of business on May 4, 2006 (the “Record
Date”), will
be
entitled to vote at the Annual Meeting. As of the Record Date, there were
42,830,190 shares of the Company’s common stock issued and outstanding. The
holders of common stock are entitled to one vote per share. There is no
cumulative voting with respect to the election of directors. The presence in
person or by proxy of the holders of a majority of the shares issued and
outstanding at the Annual Meeting and entitled to vote will constitute a quorum
for the transaction of business. Votes withheld from nominees for directors,
abstentions and broker non-votes will be counted for purposes of determining
whether a quorum has been reached. With regard to the election of directors,
votes may be cast in favor of or withheld from each nominee and votes that
are
1
withheld
will have no effect on the vote. Abstentions, which may be specified on all
proposals except the election of directors, will have the effect of a negative
vote. Under applicable Delaware law, a broker non-vote will not be considered
present for the purpose of calculating the vote on any matter.
Votes
will be counted by the inspector of election at the Annual Meeting.
PROPOSAL
ONE
ELECTION
OF DIRECTORS
The
Board
of Directors is currently comprised of two directors. Members of the Company’s
Board of Directors are elected at annual meetings and serve until the next
annual meeting of stockholders and until their successors are duly elected
and
qualified. Because the Company’s Board is currently only comprised of two
members, the Company does not currently have any committees. Since the Company
does not have a nominating committee, each of the current directors nominated
the other as a candidate for reelection as director of the Company by the
stockholders at the Annual Meeting.
The
nominees, Messrs. Kinard and Whitehead, currently serve as directors of the
Company. The person named as proxy in the accompanying proxy, who has been
designated by the Board of Directors, intends to vote, unless otherwise
instructed in such proxy, for the election of Messrs. Kinard and Whitehead.
Should any of the nominees become unable for any reason to stand for election
as
a director of the Company, it is intended that the person named in such proxy
will vote for the election of such other person as the Board of Directors may
propose to replace such nominee. The Company knows of no reason why any of
the
nominees will be unavailable or unable to serve.
The
affirmative vote of the holders of a plurality of the shares present in person
or represented by proxy and entitled to vote at the Annual Meeting is required
for the election of directors. Accordingly, the two nominees for election as
directors at the Annual Meeting who receive the greatest number of votes cast
for election by the holders of common stock shall be duly elected directors
upon
completion of the vote tabulation at the Annual Meeting.
The
Board of Directors recommends a vote “FOR”
each of the
following nominees for directors.
Nominees
for Directors
Albert
E. Whitehead,
age
76. Mr. Whitehead has been a member of the Company’s Board of Directors
since 1991 and served as Chairman of the Board and Chief Executive Officer
from
March 1998 to May 2001. Mr. Whitehead again assumed the role of Chairman and
Chief Executive Officer on April 16, 2002. Mr. Whitehead also currently serves
as the Non-Executive Chairman of PetroWorld Corp., a company whose stock is
traded on the London Stock Exchange’s Alternative Investment Market and the TSE
Venture Exchange in Canada. Mr. Whitehead served as the Chairman and Chief
Executive Officer of Seven Seas Petroleum Inc., a publicly held company, engaged
in international oil and gas exploration from February 1995 to May 1997. From
April 1987 through January 1995, Mr. Whitehead served as Chairman and Chief
Executive Officer of Garnet Resources Corporation, a publicly held oil and
gas
exploration and development company.
John
C. Kinard,
age
71. Mr. Kinard has served as a Director of the Company since June 1998 and
is currently a Partner in Silver Run Investments, LLC, an oil and gas investment
firm. Mr. Kinard served as President of the Remuda Corporation, a private oil
and gas exploration company, from 1967 until 2002. From 1990 through December
1995, Mr. Kinard served as President of Glen Petroleum, Inc., a private oil
and
gas exploration company. From 1990 through 2002, Mr. Kinard also served as
the
Chairman of Envirosolutions UK Ltd., a private industrial wastewater treatment
company.
2
CORPORATE
GOVERNANCE AND BOARD MATTERS
Overview
The
Board
of Directors is committed to sound and effective corporate governance practices
and believes such practices are important to ensure that the Company is managed
for the long-term benefit of its stockholders. The Board of Directors has
engaged in a process of periodically reviewing and considering the Company’s
corporate governance practices. The Company also regularly reviews its practices
in light of proposed and adopted laws and regulations, including the
Sarbanes-Oxley Act of 2002 and the rules of the Securities and Exchange
Commission (“SEC”).
In the first
quarter of this fiscal year, the Company adopted a Code of Ethics applicable
to
the Company’s officers, directors and employees.
Communications
to the Board of Directors
A
stockholder may send a written communication to the Board of Directors or any
individual member or members of the Board by addressing the communication to
Empire Petroleum Corporation, 8801 S. Yale, Suite 120, Tulsa, Oklahoma 74137.
All communications so received will be forwarded to the members of the Board
of
Directors or specified Board members.
Board
Meetings
During
fiscal 2005, the Board of Directors held three meetings. All of the directors
attended 100% of the meetings of the Board of Directors. In addition, the Board
of Directors took action two times during fiscal 2005 by unanimous written
consent.
Directors
are expected to attend the Annual Meeting of Stockholders, and it is the
practice of the Company to introduce each director at the Annual Meeting. There
was no annual meeting of the Company’s stockholders in the fiscal year
2005.
Code
of Ethics
In
the
first quarter of this fiscal year, the Company adopted a Code of Ethics that
applies to all of the Company’s directors and employees, including the Company’s
principal executive officer, principal financial officer and principal
accounting officer or persons performing similar functions. The Company has
undertaken to provide any person without charge, upon request, a copy of the
Code of Ethics. Requests may be directed to Empire Petroleum Corporation, 8801
S. Yale, Suite 120, Tulsa, Oklahoma 74137, or by calling (918)
488-8068.
Committees
of the Board of Directors
Since
the
Board of Directors is currently only comprised of two members, it does not
have
any committees. Rather, the entire Board acts as, and performs the same
functions as, the audit committee, compensation committee and nominating
committee.
Process
for Director Nominations
As
stated
above, the Board of Directors does not have any committees. As such, each of
the
current directors, Messrs. Whitehead and Kinard, participates in the
consideration of director nominees. In connection with the upcoming Annual
Meeting, Mr. Kinard nominated Mr. Whitehead as a candidate for reelection as
director and Mr. Whitehead nominated Mr. Kinard as a candidate for reelection
as
director of the Company.
The
Board
does not have a charter regarding the director nomination process. The Company
has determined that Mr. Kinard is “independent” within the meaning of Rule
4200(a)(15) of the NASDAQ listing standards.
3
The
Board
of Directors will consider candidates for director nominees that are recommended
by stockholders of the Company in accordance with the procedures set forth
below. Any such nominations should be submitted to the Board of Directors in
care of the Chief Executive Officer to
Empire
Petroleum Corporation, 8801 S. Yale, Suite 120, Tulsa, Oklahoma 74137 and
accompany it with the following information:
| · |
Appropriate
biographical information, a statement as to the qualifications of
the
nominee and any other information relating to such nominee that is
required to be disclosed pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”),
including such person’s written consent to being named in the proxy
statement as a nominee and to serving as a director if elected;
and
|
| · |
The
name(s) and address(es) of the stockholder(s) making the nomination
and
the number of shares of the Company’s common stock which are owned
beneficially and of record by such stockholder(s).
|
The
written recommendation should be submitted in the time frame described under
the
caption “Stockholder
Proposals”
below.
In
evaluating potential director candidates, the Board will take into consideration
such factors that it deems appropriate for the needs of the Board of Directors.
Generally, the Board will evaluate new potential director candidates by
reviewing their biographical information and qualifications and checking the
candidates’ references. Those candidates determined to be of interest will be
subject to interview by the Board. Using the information obtained and input
from
the interview, the Board will evaluate whether a prospective candidate is
qualified to serve as a director and whether the Board of Directors will
nominate the prospective candidate or elect such candidate to fill a vacancy
on
the Board.
Compensation
of Directors
The
Company does not have any formal procedure for compensating the members of
its
Board of Directors. From time to time in the past, the Company has granted
options to the members of its Board of Directors under its 1995 Stock Option
Plan as compensation for serving on the Board of Directors. During the fiscal
year ended December 31, 2005, the Company did not grant any options to any
member of its Board of Directors. All directors are reimbursed by the Company
for out-of-pocket expenses incurred by them in connection with their service
on
the Board of Directors.
PROPOSAL
TWO
APPROVAL
OF ADOPTION OF THE
2006
STOCK INCENTIVE PLAN
At
the
Annual Meeting, stockholders are being asked to approve the Company’s 2006 Stock
Incentive Plan (the “Incentive
Plan”), which
was adopted, subject to stockholder approval, by the Board of Directors pursuant
to an Unanimous Consent to Action in Lieu of a Special Meeting of the Board
of
Directors dated April 12, 2006. The Incentive Plan permits the issuance of
stock
options, restricted stock awards and performance shares. Effective as of May
15,
2005, the Company’s Stock Option Plan (the “1995 Plan”)
terminated,
except to the extent necessary to govern outstanding options. The Board has
recommended the adoption of the Incentive Plan to replace the 1995 Plan. As
of
the end of fiscal 2005, there were no shares of common stock remaining available
for future issuance under the 1995 Plan and there were outstanding options
to
purchase 575,000 share of common stock that were subject to the 1995
Plan.
The
Board
believes the Incentive Plan will form an important part of the Company’s overall
compensation program. The Incentive Plan will support the Company’s efforts to
attract, retain and motivate its officers and employees, and will give the
Company the ability to provide those employees with incentives that are linked
to the profitability of the Company’s businesses and increases in stockholder
value.
4
The
following is a summary of the principal features of the Incentive Plan. This
summary is qualified in its entirety by reference to the more detailed terms
and
conditions of the Incentive Plan, a copy of which is attached as Appendix A
to
this Proxy Statement.
Administration
Initially,
the Board of Directors will administer the Incentive Plan. All references herein
to the Compensation Committee shall mean the Board unless and until such time
as
the Board designates a Compensation Committee to administer the Incentive Plan.
The Compensation Committee will select the eligible employees, directors and
other participants to whom awards are granted, determine the terms, conditions,
form and amount of the awards, establish, where deemed applicable, performance
goals with respect to awards and determine and certify the achievement thereof.
The Compensation Committee will have full power to administer the Incentive
Plan
and to adopt or establish, and to modify and waive, rules, regulations,
agreements, guidelines and procedures which it deems necessary or advisable
for
the administration of the Incentive Plan.
Eligibility
and Limits on Awards
Employees,
officers, directors and consultants of the Company, or any of its subsidiaries
or affiliates, are eligible to receive awards under the Incentive Plan. Awards
will be made at the discretion of the Compensation Committee.
The
Incentive Plan places limits on the maximum amount of awards that may be granted
to any participant in any fiscal year. Under the Incentive Plan, no participant
may receive awards of stock options that cover in the aggregate more than
500,000 shares of common stock in any fiscal year.
Shares
Authorized
The
total
number of shares of common stock that may be issued pursuant to awards under
the
Incentive Plan is 5,000,000. The total number of shares authorized under the
Incentive Plan is subject to adjustment in the event of a recapitalization,
stock split, reorganization or similar transaction.
To
the
extent that shares of common stock subject to an award under the Incentive
Plan
are not issued by reason of (i) the expiration, termination or forfeiture of
such award, (ii) the withholding of shares to satisfy tax withholding
requirements of an award, or (iii) the tendering of previously-owned shares
to
pay all or a portion of the exercise price of a stock option or satisfy the
tax
withholding requirements of an award, then such unissued shares shall again
be
available for issuance under the Incentive Plan. The shares of common stock
covered by an award are counted as used under the Incentive Plan only to the
extent they are actually issued and delivered to a participant.
The
source of common stock issued with respect to awards may be either authorized
but unissued shares or previously issued shares held as treasury stock. The
average for the high and low bid information for a share of the Company’s common
stock as reported by the National Association of Securities Dealers Automatic
Quotation (NASDAQ) over-the-counter bulletin board system on May 4, 2006, was
$0.195.
Awards
The
following types of awards may be granted under the Incentive Plan:
Stock
Options.
Stock options may be (i) options to purchase common stock intended to qualify
as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”),
or (ii) options
that do not so qualify, or non-qualified stock options. The exercise price
per
share of each stock option will be determined by the Compensation Committee
but
may not be less than 100% of the fair market value of a share of common stock
on
the date of grant. Each stock option may be exercised in whole, at any time,
or
in part, from time to time, after the option becomes exercisable. Upon exercise,
an option holder must pay the exercise price of the option in full, including
applicable taxes. Payment of the exercise price may be in
5
any
legal
manner permitted by the Compensation Committee and set forth in the award
agreement, which may include the use of shares of common stock already owned
by
the option holder or through a broker-assisted cashless exercise procedure.
The
Incentive Plan limits the term of any stock option to 10 years.
Restricted
Stock.
Restricted stock is an award of shares of common stock that is made subject
to
specified restrictions on transfer and subject to a substantial risk of
forfeiture until certain conditions are met as determined by the Compensation
Committee. Conditions may be based on continuing employment and/or achieving
performance goals. Unless otherwise specified by the Compensation Committee,
shares of restricted stock may be voted by the recipient.
Performance
Shares.
Performance shares are awards entitling the recipient to receive a number
of
shares of common stock upon the achievement of performance goals and such
other
conditions as established by the Compensation Committee. The minimum vesting
period (i.e., performance cycle) for a performance share award is one year.
A
recipient of a performance share will have no right as a stockholder until
shares of common stock are delivered to the recipient in settlement of such
performance share.
Performance
Goals
To
allow
certain awards granted under the Incentive Plan to the Company’s Chief Executive
Officer and its four most highly compensated executive officers to qualify
as
“performance-based
compensation”
under Section 162(m) of the Code, the Incentive Plan provides that the
Compensation Committee may establish performance goals with respect to an award
based upon one or more of the following performance criteria: (i) total
shareholder return, (ii) return on invested capital, equity or assets, (iii)
operating profit, (iv) earnings per share, (v) sales or revenues, (vi) operating
expenses, (vii) common stock price appreciation, (viii) cash flow, (ix) increase
in economic value of a subsidiary, division, business unit, or asset or group
of
assets, (x) earnings of the Company (A) before interest, taxes, depreciation
and
amortization or (B) after interest, taxes, depreciation and amortization, (xi)
reductions in expenses, expressed in specific amounts and/or as a percentage
reduction, or (xii) backlog.
At
the
end of each performance cycle, the Compensation Committee will determine and
certify the extent to which the performance goal established for the performance
cycle has been achieved and determine the number of shares to be delivered,
if
any, as a result thereof.
Award
Agreements
The
terms
and provisions of each award under the Incentive Plan award shall be evidenced
by an award agreement. The award agreement will generally set forth the number
of shares of common stock subject to the award, the exercise or purchase price
(if applicable), vesting requirements, term and other restrictions applicable
to
an award and, in the case of performance-based awards, the applicable
performance goals.
Change
in Control
In
the
event of a “change
in
control” of
the Company (as defined in the Incentive Plan), all stock options granted under
the Incentive Plan shall vest and become exercisable immediately, awards of
restricted stock shall vest immediately, and all performance goals established
for outstanding performance shares shall be deemed immediately satisfied at
the
respective target levels. In addition, the Compensation Committee may adjust
outstanding options by substituting stock or other securities of any successor
or another party to the change in control transaction or cash out the
outstanding stock options, in any such case, generally based on the
consideration received by the Company’s stockholders in the
transaction.
Amendment
and Termination of Incentive Plan
The
Board
of Directors may at any time terminate, suspend, amend or modify the Incentive
Plan, provided that no such action may impair any outstanding award without
the
consent of the participant affected thereby. In addition, unless approved by
the
Company’s stockholders, no amendment or modification may increase the number of
shares of common stock that may be issued under the Incentive Plan (except
pursuant to an adjustment related to a corporate change affecting the common
stock), reduce the minimum purchase price at which shares may be offered under
stock options, change the class of persons eligible to participate in the
Incentive Plan, or extend the termination date for making awards under the
Incentive Plan. Also, no amendment or modification which is required to be
approved by the Company’s stockholders under the requirements of Rule 16b-3
under the Exchange Act or any other applicable law, regulation or rule
may
6
become
effective unless and until the Company’s stockholders approve it. No award may
be granted under the Incentive Plan after the tenth anniversary date of its
approval by the Company’s stockholders.
Tax
Consequences
The
following is a brief description of the federal income tax treatment that will
generally apply to awards under the Plan based on current federal income tax
rules.
Non-Qualified
Stock Options.
A
participant who has been granted a non-qualified stock option will not realize
taxable income at the time of grant, and the Company will not be entitled to
a
tax deduction at that time. In general, when the option is exercised, the
participant will realize ordinary income in an amount equal to the excess of
the
fair market value of the acquired shares over the exercise price for those
shares, and the Company will be entitled to a corresponding tax deduction.
Any
gains or losses realized by the participant upon disposition of the shares
will
be treated as capital gains or losses, and the participant’s tax basis in such
shares will equal to the fair market value of the shares at the time of
exercise.
Incentive
Stock Options.
A
participant who has been granted an incentive stock option will not realize
taxable income at the time of grant, and the Company will not be entitled to
a
tax deduction at that time. The exercise of an incentive stock option will
not
result in taxable income to the participant provided that the participant was,
without a break in service, an employee of the Company or a subsidiary during
the period beginning on the date of the grant of the option and ending on the
date three months prior to the date of exercise (one year prior to the date
of
exercise if the participant is disabled). The excess of the fair market value
of
the shares at the time of the exercise of an incentive stock option over the
exercise price is included in calculating the participant’s alternative minimum
taxable income for the tax year in which the incentive stock option is exercised
unless the participant disposes of the shares in the year of
exercise.
If
the
participant does not sell or otherwise dispose of the shares of common stock
received upon exercise of an incentive stock option within two years from the
date of the grant of the incentive stock option or within one year after the
exercise of the incentive stock option, then, upon disposition of such shares,
any amount realized in excess of the exercise price will be taxed to the
participant as capital gain and the Company will not be entitled to a tax
deduction at the time of disposition. The participant will generally recognize
a
capital loss to the extent that the amount realized is less than the exercise
price.
If
the
foregoing holding period requirements are not met, the participant will
generally realize ordinary income at the time of the disposition of the shares,
in an amount equal to the lesser of (i) the excess of the fair market value
of the shares on the date of exercise over the exercise price, or (ii) the
excess, if any, of the amount realized upon disposition of the shares over
the
exercise price, and the Company will be entitled to a corresponding tax
deduction. Any amount realized in excess of the value of the shares on the
date
of exercise will be capital gain. If the amount realized is less than the
exercise price, the participant will not recognize ordinary income, and the
participant will generally recognize a capital loss equal to the excess of
the
exercise price over the amount realized upon the disposition of the
shares.
Restricted
Stock.
In
general, a participant who has been granted a restricted stock award will not
realize taxable income at the time of grant and the Company will not be entitled
to a tax deduction at that time, assuming that the shares are not transferable
and that the restrictions create a “substantial risk of forfeiture” for federal
income tax purposes. Upon the vesting of the shares subject to a restricted
stock award, the participant will realize ordinary income in an amount equal
to
the then fair market value of the shares, and the Company will be entitled
to a
corresponding tax deduction. Any gains or losses realized by the participant
upon disposition of such shares will be treated as capital gains or losses,
and
the participant’s basis in such shares will be equal to the fair market value of
the shares at the time of vesting. A participant may elect pursuant to
section 83(b) of the Code to have income recognized at the date of grant of
a restricted stock award and to have the applicable capital gain holding period
commence as of that date. If a participant makes this election, the Company
will
generally be entitled to a corresponding tax deduction in the year of
grant.
Performance
Shares.
A
participant who has been granted a performance share award will not realize
taxable income at the time of grant and the Company will not be entitled
to a
tax deduction at that time. The participant will recognize taxable compensation
income at the time of distribution of shares of common stock earned equal
to the
then fair market value of the distributed shares, and the Company will then
be
entitled to a corresponding tax deduction. Any gains or losses realized by
the
participant upon disposition of the shares will be treated as capital gains
or
losses, and the participant’s tax basis in such shares will equal to the fair
market value of the shares at the time of issuance of the
shares.
Limitation
in the Company’s Deductions.
Under
Section 162(m) of the Code, a federal income tax deduction for certain awards
under the Incentive Plan may be limited to the extent that the Company’s Chief
7
Executive
Officer or any of the four other most highly compensated officers receives
compensation, other than performance-based compensation, in excess of $1,000,000
in any year.
New
Plan Benefits
No
determination has yet been made as to the amount or terms of any awards to
be
granted under the Incentive Plan and such grants will be determined at the
discretion of the Compensation Committee. No awards will be granted under the
Incentive Plan unless and until it is approved by the Company’s
stockholders.
Required
Vote of Stockholders
The
affirmative vote of a majority of the votes cast on this proposal is required
to
approve the Incentive Plan, provided that the total votes cast represent over
50% of all votes entitled to be cast on the proposal. Abstentions will be
included in determining the number of votes cast on the proposal, thus having
the effect of a vote against the proposal. Broker non-votes are not counted
in
determining the number of votes cast on the proposal.
The
Board of Directors recommends that stockholders vote FOR
the approval of the Incentive Plan.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth certain information as of December 31, 2005,
concerning outstanding stock options and rights to purchase common stock granted
to participants in all of the Company’s equity compensation plans and the number
of shares of common stock remaining available for issuance under such equity
compensation plans.
|
Plan Category
|
|
Number of Shares to be
Issued Upon Exercise of
Outstanding Options
and
Rights
|
|
Weighted-Average
Exercise Price of
Outstanding Options
and
Rights
|
Number of Shares
Remaining Available
For Future Issuance
|
|||
|
Equity
compensation plans approved by stockholders (1)
|
|
575,000
|
|
$
0.65
|
0
|
|
||
|
Equity
compensation plans not approved by stockholders
|
|
|
|
N/A
|
|
|||
|
Total
|
|
575,000
|
|
0
|
||||
|
(1)
|
|
Consists
of the Company’s 1995 Stock Option Plan.
|
AUDIT
RELATED MATTERS
Audit
Committee Report
The
Board
of Directors does not have an audit committee. Instead, the full Board performs
the equivalent functions of an audit committee.
The
Board
of Directors has reviewed and discussed the audited financial statements with
management. The Board of Directors has caused its Chief Executive Officer to
discuss with the Company’s independent registered public accounting firm the
matters required to be discussed by SAS 61, as may be modified or supplemented.
The Board of Directors has received the written disclosures and the letter
from
the
8
independent
registered public accounting firm required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), as may be modified or supplemented, and
has
caused its Chief Executive Officer to discuss with the independent registered
public accounting firm the independent registered public accounting firm’s
independence. Based on the review and discussions referred to above, the Board
of Directors approved the inclusion of the audited financial statements in
the
Company’s Annual Report on Form 10-KSB for the last fiscal year for filing with
the Securities and Exchange Commission.
Board
of
Directors
Albert
E.
Whitehead
John
C.
Kinard
Independent
Registered Public Accounting Firm Fees
The
following is a summary of the fees billed or to be billed to the Company by
Tullius Taylor Sartain & Sartain LLP, the Company’s independent registered
public accounting firm, for professional Services rendered for the fiscal years
ended December 31, 2005 and December 31, 2004:
|
Fee
Category
|
Fiscal
2005 Fees
|
Fiscal
2004 Fees
|
|||||
|
Audit
Fees (1)
|
$
|
22,625
|
$
|
16,750
|
|||
|
Audit-Related
Fees (2)
|
0
|
0
|
|||||
|
Tax
Fees
|
0
|
0
|
|||||
|
All
Other Fees (3)
|
0
|
0
|
|||||
|
Total
Fees
|
$
|
22,625
|
$
|
16,750
|
|||
(1) Audit
Fees consist
of aggregate fees billed for professional services rendered for the audit of
the
Company’s annual financial statements and review of the interim financial
statements included in quarterly reports or services that are normally provided
by the independent registered public accounting firm in connection with
statutory and regulatory filings or engagements for the fiscal years ended
December 31, 2005 and December 31, 2004, respectively.
(2) Audit-Related
fees consist of aggregate fees billed for assurance and related services that
are reasonably related to the performance of the audit or review of our
financial statements and are not reported under “Audit Fees.”
(3) All
Other
Fees consist of aggregate fees billed for products and services provided by
Tullius Taylor Sartain & Sartain LLP, other than those disclosed
above.
The
entire Board of Directors of the Company is responsible for the appointment,
compensation and oversight of the work of the independent registered public
accounting firm and approves in advance any services to be performed by the
independent registered public accounting firm, whether audit-related or not.
The
entire Board of Directors reviews each proposed engagement to determine whether
the provision of services is compatible with maintaining the independence of
the
independent registered public accounting firm. All of the fees shown above
were
pre-approved by the entire Board of Directors.
9
PROPOSAL
THREE
AMENDMENT
TO CERTIFICATE OF INCORPORATION TO INCREASE THE SHARES OF THE COMPANY’S
AUTHORIZED COMMON STOCK
At
the
Annual Meeting, the stockholders are being asked to approve an amendment to
the
Company’s Certificate of Incorporation, as amended (the “Certificate of
Incorporation”), to increase
the
authorized stock of the Company from Fifty Million (50,000,000) shares to One
Hundred Million (100,000,000) shares (the “Amendment”). The
Amendment
was adopted, subject to stockholder approval, by the Board of Directors pursuant
to a Unanimous Consent to Action in Lieu of a Special Meeting of the Board
of
Directors dated April 12, 2006.
In
connection with the proposed Amendment, Article V of the Certificate of
Incorporation would be amended to read in its entirety as follows:
“The
Corporation shall have the authority to issue 100,000,000 (one hundred million)
shares of stock each having a par value of one-tenth of one cent ($0.001).
All
stock of the Corporation shall be of the same class and shall have the same
rights and preferences. Fully paid stock of this Corporation shall not be liable
for further call or assessment. The Board of Directors shall have the authority
by resolution to grant rights or subscriptions for common stock and for such
consideration as the Board of Directors may fix and determine, without action
by
the shareholders, provided such consideration be as allowed by the laws of
the
State of Delaware.”
At
any
time prior to the effectiveness of the filing of the Amendment with the
Secretary of State of Delaware, notwithstanding the prior authorization of
such
amendment by the stockholders of the Company, the Board of Directors may abandon
the Amendment without any further action by the stockholders. The Amendment
must
be approved by at least a majority of the holders of the outstanding shares
of
common stock of the Company.
As
of May
6, 2006, there were approximately: (i) 42,830,190 shares issued and
outstanding, (ii) 575,000 shares reserved for future issuance pursuant to
outstanding options granted under the Company’s 1995 Stock Option Plan, and
(iii) 1,500,000 shares reserved for future issuance pursuant to outstanding
warrants granted by the Company in connection with a private placement. If
this
proposal is approved, taking into account the number of shares reserved for
issuance, the Board will have the authority to issue approximately 55,094,810
shares of common stock without further stockholder approval, except as may
be
required for a particular transaction by applicable law, regulatory agencies
or
the rules of any securities exchange on which the Company’s securities may then
be listed.
The
additional authorized shares of common stock may be used for such corporate
purposes as may be determined by the Board from time to time to be necessary
or
desirable. These purposes may include, without limitation: raising capital
through the sale of common stock; effecting a stock split or issuing a stock
dividend; acquiring other businesses in exchange for shares of common stock;
and
attracting and retaining employees by the issuance of additional securities
under the 2006 Stock Incentive Plan. At the present time, the Company has no
commitments, agreements or undertakings to issue any such additional shares.
The
Board believes that the authorized number of shares of common stock should
be
increased to provide the Board with the ability to issue additional shares
of
common stock for the potential corporate purposes described above, without
having to incur the delay and expense incident to holding a special meeting
of
the stockholders to approve an increase in the authorized shares of common
stock
at that time.
The
authorization of the additional shares by this proposal would not have any
immediate dilutive effect on the proportionate voting power or other rights
of
existing stockholders, but, to the extent that the additional authorized shares
are issued in the future, they may decrease existing stockholders’ percentage
equity ownership and, depending on the price at which they are issued, could
be
dilutive to existing stockholders and have a negative effect on the market
price
of the Company’s common stock. Under the Company’s Certificate of Incorporation,
stockholders do not have preemptive rights with respect to the issuance of
shares of common stock, which means that current stockholders do not have a
prior right to
10
purchase
shares in any new issue of common stock in order to maintain their proportionate
ownership of common stock.
The
increase in the number of authorized shares of common stock could have an
anti-takeover effect, although this is not the intent of the Board. For example,
if the Board issues additional shares in the future, such issuance could dilute
the stock ownership and voting power of, or increase the cost to, a person
seeking to obtain control of the Company, thereby deterring or rendering more
difficult a merger, tender offer, proxy contest or other extraordinary
transaction. To the extent that it impedes any such attempts, the proposed
Authorized
Amendment
may
serve to perpetuate the Board and the Company’s management. The proposed
Authorized
Amendment
is not
being proposed in response to any known effort or threat to acquire control
of
the Company and is not part of a plan by management to adopt a series of
amendments to the Certificate of Incorporation and the Company’s bylaws having
an anti-takeover effect.
The
Board of Directors recommends that stockholders vote FOR
the Amendment to the Certificate of Incorporation.
PROPOSAL
FOUR
RATIFICATION
OF APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
The
Board
of Directors has selected Tullius Taylor Sartain & Sartain LLP as the
Company’s independent registered public accounting firm for fiscal 2006. Tullius
Taylor Sartain & Sartain LLP served as the Company’s independent registered
public accounting firm during fiscal 2005.
A
proposal will be presented at the Annual Meeting asking the stockholders to
ratify the appointment of Tullius Taylor Sartain & Sartain LLP as the
Company’s independent registered public accounting firm. If the stockholders do
not ratify the appointment of Tullius Taylor Sartain & Sartain LLP, the
Board will reconsider the appointment.
The
affirmative vote of the holders of a majority of the shares present in person
or
by proxy at the Annual Meeting and entitled to vote is required for the adoption
of this proposal.
The
Company expects that a representative of Tullius Taylor Sartain & Sartain
LLP will be present at the Annual Meeting. The representative will be given
the
opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions.
The
Board of Directors recommends a vote “FOR”
the ratification
of Tullius Taylor Sartain & Sartain LLP as the Company’s independent
registered public accounting firm for fiscal year 2006.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of
the
Company’s common stock as of May 6, 2006 for: (i) each
person who is known to own beneficially more than 5% of the Company’s
outstanding common stock; (ii) each of the Company’s executive officers and
directors; and (iii) all executive officers and directors as a group. The
percentage of beneficial ownership for the following table is based on
42,830,190 shares of Common Stock outstanding as of May 6, 2006. Unless
otherwise indicated below, to the Company’s knowledge, all persons and entities
listed below have sole voting and investment power over their shares of Common
Stock.
11
|
Name and address of beneficial owner
ownership
|
Amount
and
nature
of
beneficial
|
Percent
of
class
(1)
|
|||||
|
Albert
E. Whitehead,
|
14,168,025(2
|
)
|
33.08
|
%
|
|||
|
Chairman
of the Board and
|
|||||||
|
Chief
Executive Officer
|
|||||||
|
3214
E. 73rd Street
|
|||||||
|
Tulsa,
OK 74136-5927
|
|||||||
|
John
C. Kinard,
|
631,331(3
|
)
|
1.47
|
%
|
|||
|
Director
|
|||||||
|
240
Cook Street
|
|||||||
|
Denver,
CO 80206-0590
|
|||||||
|
All
current directors and executive officers as a group (2
persons)
|
14,799,356(4
|
)
|
34.55
|
%
|
(1)
The percentage ownership for each person is calculated in accordance with the
rules of the SEC, which provide that any shares a person is deemed to
beneficially own by virtue of having a right to acquire shares upon the
conversion of options or other rights are considered outstanding solely for
purposes of calculating such person’s percentage ownership.
(2) This
number includes: (i) 11,332,742 shares directly owned by the Albert E. Whitehead
Living Trust, of which Mr. Whitehead is the trustee; and (ii) 2,835,283 shares
directly owned by the Lacy E. Whitehead Living Trust, of which Ms. Whitehead,
Mr. Whitehead’s wife, is trustee. Mr. Whitehead disclaims any interest in the
shares owned by the Lacy E. Whitehead Living Trust.
(3)
This number includes: (i) 161,331 shares directly owned by Mr. Kinard;(ii)
320,000 shares Mr. Kinard has the right to acquire pursuant to options granted
to him under the 1995 Stock Option Plan; and (iii) 150,000 shares directly
owned
by Mr. Kinard’s wife, of which Mr. Kinard disclaims any interest.
(4) This
number includes 320,000 shares issuable upon the exercise of options granted
under the 1995 Stock Option Plan.
EXECUTIVE
COMPENSATION
During
the last three completed fiscal years, no executive officer received a salary
or
any other benefits as a part of executive compensation.
Mr.
Albert E. Whitehead, Chairman and Chief Executive Officer, the sole
executive officer of the Company, devotes a considerable amount of time to
the
affairs of the Company and receives no compensation. For financial statement
purposes, Mr. Whitehead’s services have been recorded as contributed capital and
expense in the amount of $50,000 for the year ended December 31, 2005. During
the last three completed fiscal years, the Company did not grant any options
to
Mr. Whitehead.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
During
the fiscal years ended December 31, 2005 and December 31, 2004, Mr. Whitehead
advanced the Company an additional $60,190 and $84,312, respectively, to finance
the operating expenses of the Company. As of December 31, 2005, the Company
owed
Mr. Whitehead $274,682 in connection with advances made to the
Company.
12
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires the Company’s directors, executive officers,
and persons who beneficially own more than 10 percent of a registered class
of
the Company’s equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. SEC regulations impose specific due dates
for such reports, and the Company is required to disclose in this Proxy
Statement any failure to file by these dates during and with respect to fiscal
2005.
Based
solely on review of the copies of such reports furnished to the Company and
any
written representations that no other reports were required during the year
ended December 31, 2005, to the Company’s knowledge, all Section 16(a) filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners during the year ended December 31, 2005 were complied with
on
a timely basis.
STOCKHOLDER
PROPOSALS
Any
stockholder proposal intended to be considered by the Company for inclusion
in
the proxy materials for the Company for the Company’s 2007 Annual Meeting of
Stockholders must be submitted in accordance with the applicable regulations
of
the SEC and received by the Company at its principal executive offices no later
than January 9, 2007.
HOUSEHOLDING
The
proxy
rules of the SEC permit companies and intermediaries, such as brokers and banks,
to satisfy delivery requirements for proxy statements with respect to two or
more stockholders sharing the same address by delivering a single proxy
statement to those stockholders. This method of delivery, often referred to
as
householding, should reduce the amount of duplicate information that
stockholders receive and lower printing and mailing costs for companies. The
Company is not householding proxy materials for its stockholders of record
in
connection with the Annual Meeting. However, the Company is aware that certain
intermediaries will household proxy materials. If you hold your shares of common
stock through a broker or bank that has determined to household proxy
materials:
| · |
Only
one annual report and proxy statement will be delivered to multiple
stockholders sharing an address;
|
| · |
You
may request a separate copy of the annual report and proxy statement
for
the Annual Meeting and for future meetings by calling (918) 488-8068
or by
writing to Empire Petroleum Corporation, 8801 S. Yale, Suite 120,
Tulsa,
Oklahoma 74137, or by contacting your bank or broker to make a similar
request; and
|
| · |
You
may request to discontinue householding by notifying your broker
or
bank.
|
OTHER
MATTERS
Matters
That May Come Before the Annual Meeting
The
Board
of Directors knows of no matters other than those described in this Proxy
Statement which will be brought before the Annual Meeting for a vote of the
stockholders. If, however, any other matter requiring a vote of stockholders
arises, the persons named in the accompanying proxy will vote thereon in
accordance with their best judgment. The enclosed proxy confers discretionary
authority to take action with respect to any additional matters that may come
before the meeting.
13
Annual
Report on Form 10-KSB
Stockholders
may obtain a copy of the Company’s Annual Report on Form 10-KSB for fiscal 2005
(without exhibits or documents incorporated by reference) without charge by
writing to the Empire Petroleum Corporation, 8801 S. Yale, Suite 120, Tulsa,
Oklahoma 74137or by calling (918) 488-8068.
| By Order of the Board of Directors, | ||
| |
|
|
| /s/ Albert E. Whitehead | ||
|
Albert E. Whitehead |
||
| Chairman and Chief Executive Officer | ||
Tulsa,
Oklahoma
May
10,
2006
14
PROXY
EMPIRE
PETROLEUM CORPORATION
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The
undersigned hereby appoints Albert E. Whitehead, as proxy, with the power to
appoint his substitute, and hereby authorizes him to represent and to vote,
as
designated below, all the shares of Common Stock of Empire Petroleum Corporation
(the “Company”) held of record by the undersigned on May 4, 2006, at the Annual
Meeting of Stockholders of the Company to be held on June 5, 2006, and at any
and all adjournments or postponements thereof.
| 1. |
Election
of directors.
|
| ¨ |
FOR
all nominees listed below (except as indicated to the contrary below
and
subject to the discretion of the proxy as provided
herein).
|
John
C.
Kinard, Albert E. Whitehead
| ¨ |
WITHHOLD
AUTHORITY to vote for all the nominees
above.
|
Instructions:
To withhold authority for any individual nominee or nominees, write their
name(s) here:
(Continued
and to be signed on the reverse side)
| 2. |
Proposal
to approve the adoption of the Company’s 2006 Stock Incentive
Plan.
|
¨
FOR ¨
AGAINST ¨
ABSTAIN
| 3. |
Proposal
to approve the amendment to the Company’s Certificate of
Incorporation.
|
¨
FOR ¨
AGAINST ¨
ABSTAIN
| 4. |
Proposal
to ratify the appointment of Tullius Taylor Sartain & Sartain, LLP as
our independent auditors.
|
¨
FOR ¨
AGAINST ¨
ABSTAIN
| 5. |
In
his discretion, the Proxy is authorized to vote upon such other business
as may properly come before the
meeting.
|
This
Proxy when properly executed will be voted at the Annual Meeting or any
adjournments or postponements thereof as directed herein by the undersigned
stockholder. If no specifications are made, this Proxy will be voted
For
Proposals 1, 2, 3 and 4. This Proxy is revocable at any time before it is
exercised.
IMPORTANT:
Please date this and sign this Proxy exactly as name appears to the left. If
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give title as such. If
a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
| Dated: , 2006 | |||
| Signature(s) | |||
| Signature(s) | |||
PLEASE
MARK, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
NO
POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
APPENDIX
A
EMPIRE
PETROLEUM CORPORATION
2006
STOCK INCENTIVE PLAN
1. Purposes.
The
purposes of the Empire Petroleum Corporation 2006 Stock Incentive Plan
are:
(a) To
further the growth, development and success of the Company and its Affiliates
by
enabling the executive and other employees and directors of, and consultants
to,
the Company and its Affiliates to acquire a continuing equity interest in the
Company, thereby increasing their personal interests in such growth, development
and success and motivating such employees, directors and consultants to exert
their best efforts on behalf of the Company and its Affiliates; and
(b) To
maintain the ability of the Company and its Affiliates to attract and retain
employees, directors and consultants of outstanding ability by offering them
an
opportunity to acquire a continuing equity interest in the Company and its
Affiliates which will reflect the growth, development and success of the Company
and its Affiliates.
Toward
these objectives, the Committee may grant (i) Options and/or (ii)
Restricted Stock to such employees, directors and consultants, all pursuant
to
the terms and conditions of the Plan.
2. Definitions.
As used
in the Plan, the following capitalized terms shall have the meanings set forth
below:
(a) “Affiliate”
means, other than
the Company, (i) any corporation or limited liability company in an
unbroken chain of corporations or limited liability companies ending with the
Company if each corporation or limited liability company owns stock or
membership interests (as applicable) possessing more than fifty percent (50%)
of
the total combined voting power of all classes of stock in one of the other
corporations or limited liability companies in such chain; (ii) any
corporation, trade or business (including, without limitation, a partnership
or
limited liability company) which is more than fifty percent (50%) controlled
(whether by ownership of stock, assets or an equivalent ownership interest
or
voting interest) by the Company or one of its Affiliates; or (iii) any
other entity, approved by the Committee as an Affiliate under the Plan, in
which
the Company or any of its Affiliates has a material equity
interest.
(b) “Award”
shall
mean any Option or Restricted Stock granted under the Plan.
(c) “Award
Agreement”
shall
mean a written agreement between the Company and an Award recipient
memorializing the terms and conditions of an Award granted pursuant to the
Plan.
A-1
(d) “Award
Limit”
shall
mean Options, subject to which the aggregate number of shares of Stock equals
500,000 (as adjusted in accordance with Section 11).
(e) “Beneficial
Ownership”
(including correlative terms) shall have the same meaning given such term in
Rule 13d-3 promulgated under the Exchange Act.
(f) “Board”
means
the Board of Directors of the Company.
(g) Unless
otherwise determined by the Committee and set forth in the applicable Agreement,
“Change
in Control”
means
the occurrence of any of the following:
(i) an
acquisition (other than directly from the Company) of any Voting Securities
by
any Person, immediately after which such Person has Beneficial Ownership of
more
than fifty percent (50%) of the combined voting power of the Company’s then
outstanding Voting Securities; provided,
however,
in
determining whether a Change in Control has occurred, Voting Securities which
are acquired in a Non-Control Acquisition (as defined in Section 2(p))
shall not constitute an acquisition that would cause a Change in
Control;
(ii) the
individuals who, as of the Effective Date, are members of the Board (the
“Incumbent
Board”),
cease
for any reason to constitute at least a majority of the members of the Board;
provided,
however,
that if
the election, or nomination for election, by the Company’s common stockholders,
of any new director was approved by a vote of at least a majority of the
Incumbent Board, such new director shall, for purposes of the Plan, be
considered as a member of the Incumbent Board; provided
further,
however,
that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened “Election
Contest”
(as
described in Rule 14a-11 promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of
a
Person other than the Board (a “Proxy
Contest”)
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest; or
(iii) the
consummation of:
(A) a
merger,
consolidation or reorganization with or into the Company or in which securities
of the Company are issued (a “Merger”),
unless such Merger is a “Non-Control Transaction;” a “Non-Control
Transaction”
shall
mean a Merger if:
(1) the
stockholders of the Company, immediately before such Merger own, directly or
indirectly, immediately following such Merger, at least fifty-one percent (51%)
of the combined voting power of the outstanding voting securities of the
corporation resulting from such Merger (the “Surviving
Corporation”)
in
substantially the same proportion as their ownership of the Voting Securities
immediately before such Merger;
A-2
(2) the
individuals who were members of the Incumbent Board immediately prior to the
execution of the agreement providing for such Merger constitute at least a
majority of the members of the board of directors of the Surviving Corporation,
or a corporation beneficially owning, directly or indirectly, a majority of
the
voting securities of the Surviving Corporation; and
(3) no
Person, other
than
(i) the Company, (ii) any Related Entity (as defined in
Section 2(p)), (iii) any employee benefit plan (or any trust forming a
part thereof) that, immediately prior to such Merger, was maintained by the
Company or any Related Entity, or (iv) any Person who immediately prior to
such Merger had Beneficial Ownership of more than fifty percent (50%) of the
then outstanding Voting Securities, has Beneficial Ownership of more than fifty
percent (50%) of the combined voting power of the Surviving Corporation’s then
outstanding voting securities or its common stock;
(B) a
complete liquidation or dissolution of the Company (not including a “Non-Control
Transaction”); or
(C) the
sale
or other disposition of all or substantially all of the assets of the Company
to
any Person (other than a transfer to a Related Entity or the distribution to
the
Company’s stockholders of the stock of a Subsidiary or any other
assets).
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
any Person (the “Subject
Person”)
acquired Beneficial Ownership of more than the permitted amount of the then
outstanding Voting Securities as a result of the acquisition of Voting
Securities by the Company which, by reducing the number of Voting Securities
then outstanding, increases the proportional number of shares Beneficially
Owned
by the Subject Persons, provided
that if
a Change in Control would occur (but for the operation of this sentence) as
a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company the Subject Person becomes the Beneficial
Owner
of any new or additional Voting Securities which increases the percentage of
the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur. Solely for purposes of this
Section 2(g), (x) “Affiliate”
shall
mean, with respect to any Person, any other Person that, directly or indirectly,
controls, is controlled by, or is under common control with, such Person;
(y) any “Relative” (for this purpose, “Relative”
means
a
spouse, child, parent, parent of spouse, sibling or grandchild) of an individual
shall be deemed to be an Affiliate of such individual for this purpose; and
(z) neither the Company nor any Person controlled by the Company shall be
deemed to be an Affiliate of any holder of Stock.
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(h) “Code”
means
the Internal Revenue Code of 1986, as it may be amended from time to time,
including regulations and rules thereunder and successor provisions and
regulations and rules thereto.
(i) “Committee”
shall
mean the Board unless and until such time as the Board appoints a Compensation
Committee of the Board or, in the event that the Board appoints a Compensation
Committee of the Board, such subcommittee of the Compensation Committee as
determined by the Compensation Committee.
(j) “Company”
means
Empire Petroleum Corporation, a Delaware corporation, or any successor
entity.
(k) “Disability”
shall
mean the inability of an employee to perform substantially all the duties of
his
or her employment position with the Company or Subsidiary by reason of any
medically determinable physical or mental impairment which is expected to be
permanent and continues for more than 180 days. The Committee may require
such proof of Disability as the Committee in its sole discretion deems
appropriate and the Committee’s determination as to whether the award recipient
is disabled shall be conclusive, final, and binding on all parties
concerned.
(l) “Effective
Date”
means
the date on which the Plan is effective, as determined pursuant to
Section 16.
(m) “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
(n) “Fair
Market Value”
of
a
share of Stock as of a given date shall be the mean of the average of the high
and low bid information for a share of Stock as reported by the the National
Association of Securities Dealers Automatic Quotation (NASDAQ) over-the-counter
bulletin board system (or, if not so reported, such other recognized reporting
source as the Board shall select) for such date, or, if no such information
is
reported for such date, the most recent day for which such prices are available
shall be used.
(o) “ISO”
or
“Incentive
Stock Option”
means
a
right to purchase Stock granted to an Optionee under the Plan in accordance
with
the terms and conditions set forth in Section 6 and which conforms to the
applicable provisions of Section 422 of the Code.
(p) “Non-Control
Acquisition”
means
an acquisition by (i) an employee benefit plan (or a trust forming a part
thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interests is owned, directly or indirectly, by the Company (a
“Related
Entity”);
(ii) the Company or any Related Entity; or (iii) any Person in
connection with a Non-Control Transaction.
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(q) “Notice”
means
written notice actually received by the Company at its executive offices on
the
day of such receipt, if received on or before 1:30 p.m. (CST), on a day
when the Company’s executive offices are open for business, or, if received
after such time, such notice shall be deemed received on the next such day,
which notice may be delivered in person to the Company’s Secretary or sent to
the Company in accordance with an Award Agreement at the address indicated
in
such Award Agreement.
(r) “Option”
means
a
right to purchase Stock granted to an Optionee under the Plan in accordance
with
the terms and conditions set forth in Section 6. Options may be either ISOs
or stock options other than ISOs.
(s) “Optionee”
means
an individual who is eligible, pursuant to Section 5, and who has been
selected to participate in the Plan, and who holds an outstanding Option granted
to such individual under the Plan in accordance with the terms and conditions
set forth in Section 6.
(t) “Participant”
shall
mean an individual who has received a grant of an Award under the
Plan.
(u) “Performance
Cycle”
shall
mean the period of one year or longer established by the Committee in connection
with the grant of Performance Shares.
(v) “Performance
Goals”
shall
mean a target or targets of objective performance established by the Committee
in its sole discretion. A Performance Goal shall be based on one or more of
the
following criteria: (i) total shareholder return, (ii) return on
invested capital, equity, or assets, (iii) operating profit, (iv) earnings
per share, (v) sales or revenues, (vi) operating expenses,
(vii) Stock price appreciation; (viii) cash flow; (ix) increase
in economic value of a Subsidiary, division, business unit, or asset or group
of
assets of the Company or any Subsidiary, division, or business unit;
(x) pre-tax income or after-tax income, or (xi) reductions in
expenses, which reductions may be expressed in terms of absolute numbers and/or
as a percentage decrease. Where applicable, the Performance Goals may be
expressed in terms of attaining a specified level of the particular criteria
or
the attainment of a percentage increase or decrease in the particular criteria,
may be a comparison of actual performance during a performance period against
budget for such period, and may be applied to one or more of the Company, or
Subsidiary, or a division or strategic business unit of the Company, or may
be
applied to the performance of the Company relative to a market index, a group
of
other companies or a combination thereof, all as determined by the Committee.
The Performance Goals may include a threshold level of performance below which
no award will be earned, levels of performance at which specified awards will
be
earned, and a maximum level of performance at which the maximum level of awards
will be earned. Each of the foregoing Performance Goals shall be determined
in
accordance with generally accepted accounting principles and shall be subject
to
certification by the Committee; provided that the Committee shall have the
authority, to the extent consistent with the “qualified performance-based
compensation” exception of Section 162(m) of the Internal Revenue Code and
Section 1.162-27(e) of the Income Tax Regulations, to make equitable
adjustments to the Performance Goals in recognition of unusual
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or
non-recurring events affecting the Company or any Subsidiary or the financial
statements of the Company or any Subsidiary in response to changes in applicable
laws or regulations, or to account for items of gain, loss or expense determined
to be extraordinary or unusual in nature or infrequent in occurrence or related
to the disposal of a segment of a business or related to a change in accounting
principles. Once a Performance Goal is established and Performance Shares are
granted to a Participant with respect to a Performance Cycle, the Committee
shall have no discretion to increase the amount of compensation that would
otherwise be payable to a Participant upon attainment of the Performance
Goal.
(w) “Performance
Share”
shall
mean a contingent right to receive a share of Stock in the future pursuant
to
the terms of a grant made under Section 8 and the relevant Award
Agreement.
(x) “Performance
Share Award”
shall
mean a grant or one or more Performance Shares pursuant to the terms of
Section 8 and the relevant Award Agreement.
(y) “Person”
-
“person” as such term is used for purposes of Section 13(d) or 14(d) of the
Exchange Act, including, without limitation, any individual, corporation,
limited liability company, partnership, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any other entity
or any group of such persons.
(z) “Plan”
means
this Empire Petroleum Corporation 2006 Stock Incentive Plan.
(aa) “Plan
Year”
shall
mean the Company’s fiscal year.
(bb) “Restricted
Stock”
shall
mean a share of Stock which is granted pursuant to, and subject to the terms
of
Section 7 and is subject to such additional terms and restrictions as set
forth in the relevant Award Agreement.
(cc) “Restricted
Stock Award”
shall
mean a grant of one or more shares of Restricted Stock pursuant to the terms
of
Section 7 and the relevant Award Agreement.
(dd) “Rule 16b-3”
shall
mean Rule 16b-3 as in effect under the Exchange Act on the effective date
of the Plan, or any successor provision prescribing conditions necessary to
exempt the issuance of securities under the Plan (and further transactions
in
such securities) from Section 16(b) of the Exchange Act.
(ee) “Target
Level”
shall
mean, with respect to one or more Performance Goals established by the Committee
in connection with an award under the Plan, the level of achievement designated
by the Committee as the target level of performance.
(ff) “Securities
Act”
means
the Securities Act of 1933, as it may be amended from time to time, including
the regulations and rules promulgated thereunder and successor provisions and
regulations and rules thereto.
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(gg) “Stock”
means
the common stock, par value $.001 per share, of the Company.
(hh) “Subsidiary”
shall
mean any present or future corporation which is or would be a “subsidiary
corporation” of the Company as the term is defined in Section 424(f) of the
Code.
(ii) “Voting
Securities”
means
all the outstanding voting securities of the Company entitled to vote generally
in the election of the Board.
3. Administration
of the Plan.
(a) The Committee shall have exclusive authority to operate, manage and
administer the Plan in accordance with its terms and conditions. Notwithstanding
the foregoing, in its absolute discretion, the Board may at any time and from
time to time exercise any and all rights, duties and responsibilities of the
Committee under the Plan, including, but not limited to, establishing procedures
to be followed by the Committee, except with respect to matters which under
any
applicable law, regulation or rule, are required to be determined in the sole
discretion of the Committee.
(b) At
such
time as the Board appoints a Committee, it shall consist of two or more members
of the Board each of whom shall be a “non-employee director” within the meaning
of Rule 16b-3, an “independent director” within the meaning of any applicable
stock exchange rule and, to the extent that the Board has resolved to take
actions necessary to enable compensation arising with respect to awards under
the Plan to constitute performance-based compensation for purposes of Section
162(m) of the Code, an “outside director” within the meaning of Section 162(m)
of the Code. Appointment of Committee members shall be effective upon their
acceptance of such appointment. Committee members may be removed by the Board
at
any time either with or without cause, and such members may resign at any time
by delivering notice thereof to the Board. Any vacancy on the Committee, whether
due to action of the Board or any other reason, shall be filled by the
Board.
(c) The
Committee shall have full authority to grant, pursuant to the terms of the
Plan,
Awards to those individuals who are eligible to receive Awards under the Plan.
In particular, the Committee shall have discretionary authority, in accordance
with the terms of the Plan, to: determine eligibility for participation in
the
Plan; select, from time to time, from among those eligible, the employees,
directors and consultants to whom Awards shall be granted under the Plan, which
selection may be based upon information furnished to the Committee by the
Company’s or an Affiliate’s management; determine whether an Award shall take
the form of Performance Shares, Restricted Stock, an ISO or an Option other
than
an ISO; determine the number of shares of Stock to be included in any Award,
the
periods for which Options will be outstanding, the Performance Goals and Target
Levels to be attained to earn Performance Shares, and the restrictions to be
placed on shares of Restricted Stock; establish and administer any terms,
conditions, performance criteria, restrictions, limitations, forfeiture, vesting
or exercise schedule, and other provisions of or relating to any Award; grant
waivers of terms, conditions, restrictions and limitations under the Plan or
applicable to any Award, or accelerate the vesting or
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exercisability
of any Option; amend or adjust the terms and conditions of any outstanding
Award
and/or adjust the number and/or class of shares of Stock subject to any
outstanding Award; at any time and from time to time after the granting of
an
Award, specify such additional terms, conditions and restrictions with respect
to any such Award as may be deemed necessary or appropriate to ensure compliance
with any and all applicable laws or rules, including, but not limited to, terms,
restrictions and conditions for compliance with applicable securities laws,
regarding an Optionee’s exercise of Options by tendering shares of Stock or
under any “cashless exercise” program established by the Committee, and methods
of withholding or providing for the payment of required taxes; offer to buy
out
an Award previously granted, based on such terms and conditions as the Committee
shall establish with and communicate to the Participant at the time such offer
is made; and, to the extent permitted under the applicable Award Agreement,
permit the transfer of an Award or the exercise of an Option by one other than
the Participant who received the grant of such Award (other than any such
transfer or exercise which would cause any ISO to fail to qualify as an
“incentive stock option” under Section 422 of the Code unless the
Participant acknowledges and consents in writing to such
consequence).
(d) The
Committee shall have all authority that may be necessary or helpful to enable
it
to discharge its responsibilities with respect to the Plan. Without limiting
the
generality of the foregoing sentence or Section 3(a), and in addition to
the powers otherwise expressly designated to the Committee in the Plan, the
Committee shall have the exclusive right and discretionary authority to
interpret the Plan and the Award Agreements; construe any ambiguous provision
of
the Plan and/or the Award Agreements and decide all questions concerning
eligibility for and the amount of Awards granted under the Plan. The Committee
may establish, amend, waive and/or rescind rules and regulations and
administrative guidelines for carrying out the Plan and may correct any errors,
supply any omissions or reconcile any inconsistencies in the Plan and/or any
Award Agreement or any other instrument relating to any Award. The Committee
shall have the authority to adopt such procedures and subplans and grant Awards
on such terms and conditions as the Committee determines necessary or
appropriate to permit participation in the Plan by individuals otherwise
eligible to so participate who are foreign nationals or employed outside of
the
United States, or otherwise to conform to applicable requirements or practices
of jurisdictions outside of the United States; and take any and all such other
actions it deems necessary or advisable for the proper operation and/or
administration of the Plan. The Committee shall have full discretionary
authority in all matters related to the discharge of its responsibilities and
the exercise of its authority under the Plan. Decisions and actions by the
Committee with respect to the Plan and any Award Agreement shall be final,
conclusive and binding on all persons having or claiming to have any right
or
interest in or under the Plan and/or any Award Agreement.
(e) Each
Award shall be evidenced by an Award Agreement, which shall be executed by
the
Company and the Participant to whom such Award has been granted, unless the
Award Agreement provides otherwise; two or more Awards granted to a single
Participant may, however, be combined in a single Award Agreement. An Award
Agreement shall not be a precondition to the granting of an Award; no person
shall have any rights under any Award, however, unless and until the Participant
to whom the Award shall have been granted (i) shall have executed and
delivered to the Company an Award Agreement or other instrument
A-8
evidencing
the Award, unless such Award Agreement provides otherwise, and (ii) has
otherwise complied with the applicable terms and conditions of the Award. The
Committee shall prescribe the form of all Award Agreements, and, subject to
the
terms and conditions of the Plan, shall determine the content of all Award
Agreements. Any Award Agreement may be supplemented or amended in writing from
time to time as approved by the Committee; provided
that the
terms and conditions of any such Award Agreement as supplemented or amended
are
not inconsistent with the provisions of the Plan.
(f) A
majority of the members of the entire Committee shall constitute a quorum and
the actions of a majority of the members of the Committee in attendance at
a
meeting at which a quorum is present, or actions by a written instrument signed
by all members of the Committee, shall be the actions of the
Committee.
(g) The
Committee may consult with counsel who may be counsel to the Company. The
Committee may, with the approval of the Board, employ such other attorneys
and/or consultants, accountants, appraisers, brokers and other persons as it
deems necessary or appropriate. Neither the Committee nor any member thereof
shall incur any liability for any action taken in good faith in reliance upon
the advice of such counsel or other persons.
(h) In
serving on the Committee, the members thereof shall be entitled to
indemnification as directors of the Company, and to any limitation of liability
and reimbursement as directors with respect to their services as members of
the
Committee.
(i) Except
to
the extent prohibited by applicable law, including, without limitation, the
requirements applicable under Section 162(m) of the Code to any Award
intended to be “qualified performance-based compensation,” or the requirements
for any Award granted to an officer or director to be covered by any exemptive
rule under Section 16 of the Exchange Act (including Rule 16b-3, or
any successor rule, as the same may be amended from time to time), or the
applicable rules of a stock exchange, the Committee may, in its discretion,
allocate all or any portion of its responsibilities and powers under this
Section 3 to any one or more of its members and/or delegate all or any part
of its responsibilities and powers under this Section 3 to any person or
persons selected by it; provided,
however,
that
the Committee may not delegate its authority to correct errors, omissions or
inconsistencies in the Plan. Any such authority delegated or allocated by the
Committee under this paragraph (i) of Section 3 shall be exercised in
accordance with the terms and conditions of the Plan and any rules, regulations
or administrative guidelines that may from time to time be established by the
Committee, and any such allocation or delegation may be revoked by the Committee
at any time.
4. Shares
of Stock Subject to the Plan.
(a) The shares of stock subject to Awards granted under the Plan shall be
shares of Stock. Such shares of Stock subject to the Plan may be either
authorized and unissued shares or previously issued shares acquired by the
Company or any Subsidiary. The total number of shares of Stock reserved and
available for distribution pursuant to Awards granted under the Plan is
5,000,000 shares.
A-9
(b) Notwithstanding
any of the foregoing limitations set forth in this Section 4, the number of
shares of Stock specified in this Section 4 shall be adjusted as provided
in Section 11.
(c) Shares
of
Stock covered by an Award shall only be counted as used to the extent they
are
actually issued and delivered to Participant. Any shares of Stock subject to
an
Award which for any reason expires or is terminated or forfeited without having
been fully earned, vested or exercised, or payment is made to the Participant
with respect to such shares in the form of cash or other property other than
Stock, may again be granted pursuant to an Award under the Plan, subject to
the
limitations of this Section 4.
(d) If
any
portion of the exercise price of an Option or other Award or tax withholding
requirements with respect to any Awards are paid by tendering to the Company
shares of Stock already owned by the holder (or such holder and his or her
spouse jointly), or, with respect to tax withholdings only, if shares are
withheld to satisfy such requirements from the shares that would otherwise
be
delivered to a Participant, only the number of shares of Stock issued net of
the
shares of Stock so tendered or withheld, if any, shall be deemed delivered
for
purposes of determining the total number of shares of Stock that may be
delivered under the Plan.
(e) Any
shares of Stock delivered under the Plan in assumption or substitution of
outstanding stock options, or obligations to grant future stock options, under
plans or arrangements of an entity other than the Company or an Affiliate in
connection with the Company or an Affiliate acquiring such another entity,
or an
interest in such an entity, or a transaction otherwise described in
Section 6(j), shall not reduce the maximum number of shares of Stock
available for delivery under the Plan; provided,
however,
that
the maximum number of shares of Stock that may be delivered pursuant to
Incentive Stock Options granted under the Plan shall be the number of shares
set
forth in paragraph (a) of this Section 4, as adjusted pursuant to
paragraphs (b) and (c) of this Section 4.
5. Eligibility.
Executive employees and other employees, including officers, of the Company
and
the Affiliates, directors (whether or not also employees), and consultants
of
the Company and the Affiliates, shall be eligible to become Participants and
receive Awards in accordance with the terms and conditions of the Plan, subject
to the limitations on the granting of ISOs set forth in
Section 6(h).
6. Stock
Options.
The
Committee may make grants of Options to eligible persons, which grants may
be
either alone or in addition to other awards granted under the Plan. All Options
to purchase Stock granted under the Plan shall be either ISOs or Options other
than ISOs. To the extent that any Option does not qualify as an ISO (whether
because of its provisions or the time or manner of its exercise or otherwise),
such Option, or the portion thereof which does not so qualify, shall constitute
a separate Option other than an ISO. Each Option shall be subject to all the
applicable provisions of the Plan, including the following terms and conditions,
and to such other terms and conditions not inconsistent therewith as the
Committee
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shall
determine and which are set forth in the applicable Award Agreement. Options
need not be uniform as to all grants and recipients thereof.
(a)
The
exercise price per share of shares of Stock subject to each Option shall be
determined by the Committee and stated in the Award Agreement; provided,
however,
that,
subject to paragraph (h)(iii) and/or (j) of this Section 6, if applicable,
such
exercise price applicable to any Option shall not be less than one hundred
percent (100%) of the Fair Market Value of a share of Stock at the time that
the
Option is granted.
(b)
Each
Option shall be exercisable in whole or in such installments, at such times
and
under such conditions, as may be determined by the Committee in its discretion
in accordance with the Plan and stated in the Award Agreement, and, in any
event, over a period of time ending not later than ten (10) years from the
date
such Option was granted, subject to paragraph (h)(iii) of this Section 6.
(c)
An
Option shall not be exercisable with respect to a fractional share of Stock
or
the lesser of one hundred (100) shares and the full number of shares of Stock
then subject to the Option. No fractional shares of Stock shall be issued upon
the exercise of an Option.
(d)
Each
Option may be exercised by giving Notice to the Company specifying the number
of
shares of Stock to be purchased, which shall be accompanied by payment in full
including applicable taxes, if any, in accordance with Section 10. Payment
shall
be in any manner permitted by applicable law and prescribed by the Committee,
in
its discretion, and set forth in the Award Agreement, including, in the
Committee’s discretion, and subject to such terms, conditions and limitations as
the Committee may prescribe, payment in accordance with a ‘cashless
exercise’
program (through broker accommodation) established by the Committee and/or
in
Stock owned by the Optionee or by the Optionee and his or her spouse jointly.
(e)
No
Optionee or other person shall become the beneficial owner of any shares of
Stock subject to an Option, nor have any rights to dividends or other rights
of
a shareholder with respect to any such shares until he or she has exercised
his
or her Option in accordance with the provisions of the Plan and the applicable
Award Agreement.
(f)
An
Option may be exercised only if at all times during the period beginning with
the date of the granting of the Option and ending on the date of such exercise,
the Optionee was an employee, director or consultant of the Company or an
Affiliate, as applicable. Notwithstanding the preceding sentence, the Committee
may determine in its discretion that an Option may be exercised prior to
expiration of such Option or following termination of such continuous
employment, directorship or consultancy, whether or not exercisable at the
time
of such termination, to the extent provided in the applicable Award Agreement.
(g)
Subject to the terms and conditions and within the limitations of the Plan,
the
Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding Options (up to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
therefor (to the extent not theretofore exercised).
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(h) (i)
Each Award Agreement relating to an Option shall state whether such Option
will
or will not be treated as an ISO. No ISO shall be granted unless such Option,
when granted, qualifies as an ‘incentive
stock
option’ under Section 422 of the Code. No ISO shall be granted to any individual
otherwise eligible to participate in the Plan who is not an employee of the
Company or a Subsidiary on the date of granting of such Option. Any ISO granted
under the Plan shall contain such terms and conditions, consistent with the
Plan, as the Committee may determine to be necessary to qualify such Option
as
an ‘incentive
stock option’ under Section 422 of the Code. Any ISO granted under the Plan may
be modified by the Committee to disqualify such Option from treatment as an
‘incentive
stock option’ under Section 422 of the Code.
(ii)
Notwithstanding any intent to grant ISOs, an Option granted under the Plan
will
not be considered an ISO to the extent that it, together with any other ‘incentive
stock
options’ (within the meaning of Section 422 of the Code, but without regard to
subsection (d) of such Section) under the Plan and any other ‘incentive
stock
option’ plans of the Company, any Subsidiary and any ‘parent
corporation’ of the Company within the meaning of Section 424(e) of the Code,
are exercisable for the first time by any Optionee during any calendar year
with
respect to Stock having an aggregate Fair Market Value in excess of $100,000
(or
such other limit as may be required by the Code) as of the time the Option
with
respect to such Stock is granted. The rule set forth in the preceding sentence
shall be applied by taking Options into account in the order in which they
were
granted.
(iii)
No
ISO shall be granted to an individual otherwise eligible to participate in
the
Plan who owns (within the meaning of Section 424(d) of the Code), at the time
the Option is granted, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or a Subsidiary or any ‘parent
corporation’ of the Company within the meaning of Section 424(e) of the Code.
This restriction does not apply if at the time such ISO is granted the Option
exercise price per share of Stock subject to the Option is at least 110% of
the
Fair Market Value of a share of Stock on the date such ISO is granted, and
the
ISO by its terms is not exercisable after the expiration of five years from
such
date of grant.
(i)
An
Option and any shares of Stock received upon the exercise of an Option shall
be
subject to such other transfer and/or ownership restrictions and/or legending
requirements as the Committee may establish in its discretion and which are
specified in the Award Agreement and may be referred to on the certificates
evidencing such shares of Stock. The Committee may require an Optionee to give
prompt Notice to the Company concerning any disposition of shares of Stock
received upon the exercise of an ISO within: (i) two (2) years from the date
of
granting such ISO to such Optionee or (ii) one (1) year from the transfer of
such shares of Stock to such Optionee or (iii) such other period as the
Committee may from time to time determine. The Committee may direct that an
Optionee with respect to an ISO undertake in the applicable Award Agreement
to
give such Notice described in the preceding sentence, at such time and
containing such information as the Committee may prescribe, and/or that the
certificates evidencing shares of Stock acquired by exercise of an ISO refer
to
such requirement to give such Notice.
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(j)
In
the event that a transaction described in Section 424(a) of the Code involving
the Company or a Subsidiary is consummated, such as the acquisition of property
or stock from an unrelated corporation, individuals who become eligible to
participate in the Plan in connection with such transaction, as determined
by
the Committee, may be granted Options in substitution for options granted by
another corporation that is a party to such transaction. If such substitute
Options are granted, the Committee, in its discretion and consistent with
Section 424(a) of the Code, if applicable, and the terms of the Plan, though
notwithstanding paragraph (a) of this Section 6, shall determine the exercise
price and other terms and conditions of such substitute Options.
(k)
The
Committee shall not grant Options to any individual Participant in any fiscal
year that exceeds the Award Limit. To the extent required by Section 162(m)
of
the Code, shares of Stock subject to Options which are canceled shall continue
to be counted against the Award Limit and if, after the grant of an Option,
the
exercise price is reduced and the transaction is treated as a cancellation
of
the Option and a grant of a new Option, both the Option deemed to be canceled
and the Option deemed to be granted shall be counted against the Award
Limit.
7. Restricted
Stock.
The
Committee may make grants of Restricted Stock to eligible persons, which grants
may be made either alone or in addition to other Awards granted under the Plan.
Each grant of Restricted Stock under the Plan shall be evidenced by an Award
Agreement which shall comply with and be subject to the following terms and
conditions:
(a)
Shares of Stock covered by an Award Agreement shall not be sold, assigned,
transferred or otherwise disposed of, mortgaged, pledged or otherwise encumbered
until such shares or have become fully vested pursuant to the Plan and the
applicable Award Agreement.
(b)
Except as provided in this Section 7 and unless the Committee provides otherwise
in the applicable Award Agreement, the Participant shall have, with respect
to
the shares of Restricted Stock, all of the rights of a stockholder of the
Company holding the Stock that is the subject of the Restricted Stock,
including, if applicable, the right to vote the shares and the right to receive
any cash dividends.
(c)
Restricted Stock shall be issued in such form as the Committee may deem
appropriate, including book-entry registration or issuance of one or more stock
certificates. Any stock certificate issued in respect of shares of Restricted
Stock shall be registered in the name of such Participant and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award, substantially in the following form:
“The
transferability of this certificate and the shares of stock represented hereby
are subject to the terms and conditions (including forfeiture) of the Empire
Petroleum Corporation 2006 Incentive Stock Plan and an Award Agreement. Copies
of such Plan and Award Agreement are on file at the headquarters offices of
Empire Petroleum Corporation”
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The
Committee may require that the certificates evidencing such shares be held
in
custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any grant of a Restricted Stock Award, the Participant
shall have delivered a stock power, endorsed in blank, relating to the Stock
covered by such Restricted Stock Award.
(d)
Shares of Stock covered by an Award Agreement granted to a Participant shall
vest in accordance with the terms and conditions specified in the applicable
Award Agreement. In addition, the Committee may, in its sole discretion,
accelerate the vesting of any or all grants of Restricted Stock under the Plan.
(e)
In
the event of the termination of employment of the recipient of a grant of
Restricted Stock, the recipient shall forfeit the shares of Stock covered by
such grant which are not vested as of the date of termination.
(f)
Restricted Stock granted under the Plan shall be subject to such additional
provisions as may be deemed advisable by the Committee.
8. Performance
Shares. The
Committee may make grants of Performance Shares to eligible persons, which
grants may be made either alone or in addition to other Awards granted under
the
Plan. Each grant of Performance Shares under the Plan shall be evidenced by
an
Award Agreement, which shall comply with and be subject to the following terms
and conditions:
(a) For
each
grant of Performance Shares, the Committee shall establish a Performance Cycle
and Performance Goals. The attainment of the Performance Goals determined as
of
the last day of the Performance Cycle shall be a condition to the settlement
for
Stock of the Performance Shares so granted.
(b) Upon
the
expiration of the Performance Cycle, the Committee shall determine and certify
the extent to which the Performance Goals have been achieved and shall determine
the number of Performance Shares granted to a recipient that shall have been
earned, and the Committee shall then cause to be delivered to the recipient
the
number of shares of Stock equal to the number of Performance Shares determined
by the Committee to have been earned as soon as practicable thereafter or such
later date as may be specified by the Committee.
(c) With
respect to any grant of Performance Shares, the recipient of such Performance
Shares shall acquire no rights of a shareholder of Stock unless and until the
recipient becomes the holder of shares of Stock delivered to such recipient
in
settlement of such Performance Shares.
(d) Unless
otherwise specified in the applicable Award Agreement, in the event of the
termination of employment of a recipient of Performance Shares on or before
the
last day of the relevant Performance Cycle, the recipient will forfeit the
Performance Shares granted with respect to such Performance Cycle.
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(e) Upon
the
occurrence of a Change of Control, the Performance Goals of all then outstanding
Performance Shares granted under the Plan shall be deemed to have been achieved
at Target Levels, all other terms and conditions related thereto shall be deemed
to have been satisfied, and a recipient shall be entitled to a pro rata
distribution of shares of Stock in settlement of the recipient’s outstanding
Performance Share Awards. The pro rata distribution of shares of Stock to a
recipient shall be determined by multiplying the number of shares of Stock
that
would be deliverable to the recipient in settlement of the recipient’s
Performance Shares, at Target Level achievement, by a fraction, the numerator
of
which is equal to the number of full calendar months of the Performance Cycle
that have elapsed on or before the date on which the Change of Control occurs
and during which the recipient was a key employee, and the denominator of which
is the number of months in the Performance Cycle. The Performance Shares of
a
recipient for which no delivery of common stock has been made shall be
forfeited.
(f) A
Performance Share may not be sold, assigned, transferred or otherwise disposed
of, or mortgaged, pledged or otherwise encumbered; shares of Stock covered
by a
Performance Share Award may not be sold, assigned, transferred or otherwise
disposed of, or mortgaged, pledged or otherwise encumbered until such shares
have been actually delivered to the recipient in settlement of the Performance
Share Award to which they relate.
(g) Performance
Shares granted under this Plan shall be subject to such additional provisions
as
may be deemed advisable by the Committee.
10. Rights
of Employees and Other Persons.
(a) No
person
shall have any rights or claims under the Plan except in accordance with the
provisions of the Plan and the applicable Award Agreement.
(b) Nothing
contained in the Plan or in any Award Agreement shall be deemed to (i) give
any employee or director the right to be retained in the service of the Company
or any Affiliate nor restrict in any way the right of the Company or any
Affiliate to terminate any employee’s employment or any director’s directorship
at any time with or without cause or (ii) confer on any consultant any
right of continued relationship with the Company or any Affiliate, or alter
any
relationship between them, including any right of the Company or an Affiliate
to
terminate its relationship with such consultant.
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(c) The
adoption of the Plan shall not be deemed to give any employee of the Company
or
any Affiliate or any other person any right to be selected to participate in
the
Plan or to be granted an Award.
(d) Nothing
contained in the Plan or in any Award Agreement shall be deemed to give any
employee the right to receive any bonus, whether payable in cash or in Stock,
or
in any combination thereof, from the Company or any Affiliate, nor be construed
as limiting in any way the right of the Company or any Affiliate to determine,
in its sole discretion, whether or not it shall pay any employee bonuses, and,
if so paid, the amount thereof and the manner of such payment.
11. Tax
Withholding Obligations.
(a) The
Company and/or any Affiliate are authorized to take whatever actions are
necessary and proper to satisfy all obligations of Participants (including,
for
purposes of this Section 10, any other person entitled to exercise an
Option pursuant to the Plan or an Award Agreement) for the payment of all
Federal, state, local and foreign taxes in connection with any Awards
(including, but not limited to, actions pursuant to the following
paragraph (b) of this Section 10).
(b) Each
Participant shall (and in no event shall Stock be delivered to such Participant
with respect to an Award until), no later than the date as of which the value
of
the Award first becomes includible in the gross income of the Participant for
income tax purposes, pay to the Company in cash, or make arrangements
satisfactory to the Company, as determined in the Committee’s discretion,
regarding payment to the Company of, any taxes of any kind required by law
to be
withheld with respect to the Stock or other property subject to such Award,
and
the Company and any Affiliate shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to
such Participant. Notwithstanding the above, the Committee may, in its
discretion and pursuant to procedures approved by the Committee, permit the
Participant to (i) elect withholding by the Company of Stock otherwise
deliverable to such Participant pursuant to his or her Award (provided,
however,
that
the amount of any Stock so withheld shall not exceed the amount necessary to
satisfy the Company’s or any Affiliate’s required tax withholding obligations
using the minimum statutory withholding rates for Federal, state and/or local
tax purposes, including payroll taxes, that are applicable to supplemental
taxable income) and/or (ii) tender to the Company Stock owned by such
Participant (or by such Participant and his or her spouse jointly) and acquired
more than six (6) months prior to such tender in full or partial satisfaction
of
such tax obligations, based, in each case, on the Fair Market Value of the
Stock
on the payment date as determined by the Committee.
12. Changes
in Capital.
(a) The existence of the Plan and any Awards 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 or an Affiliate, any issue of debt, preferred
or
prior preference stock ahead of or affecting Stock, the authorization or
issuance of additional shares of Stock, the dissolution or liquidation of the
Company or its Affiliates, any sale or transfer of all or part of its assets
or
business or any other corporate act or proceeding.
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(b)
(i) Upon
changes in the outstanding Stock by reason of a stock dividend, stock split,
reverse stock split, subdivision, recapitalization, reclassification, merger,
consolidation (whether or not the Company is a surviving corporation),
combination or exchange of shares of Stock, separation, or reorganization,
or in
the event of an extraordinary dividend, “spin-off,” liquidation, other
substantial distribution of assets of the Company or acquisition of property
or
stock or other change in capital of the Company, or the issuance by the Company
of shares of its capital stock without receipt of full consideration therefor,
or rights or securities exercisable, convertible or exchangeable for shares
of
such capital stock, or any similar change affecting the Company’s capital
structure, the aggregate number, class and kind of shares of stock available
under the Plan as to which Awards may be granted, the Award Limit and the
number, class and kind of shares under each outstanding Award and the exercise
price per share applicable to any outstanding Options shall be appropriately
adjusted by the Committee in its discretion to preserve the benefits or
potential benefits intended to be made available under the Plan or with respect
to any outstanding Awards or otherwise necessary to reflect any such
change.
(ii) Fractional
shares of Stock resulting from any adjustment in Awards pursuant to
Section 12(b)(i) shall be aggregated until, and eliminated at, the time of
settlement of the Awards or, in the case of affected Options, exercise. Notice
of any adjustment shall be given by the Committee to each Participant whose
Award has been adjusted and such adjustment (whether or not such Notice is
given) shall be effective and binding for all purposes of the Plan.
(c) In
the
event of a Change in Control:
(i) Except
as
provided in Section 8(e), immediately prior thereto, all outstanding Awards
shall automatically be accelerated and become immediately exercisable as to
all
of the shares of Stock covered thereby.
(ii) In
its
discretion, and on such terms and conditions as it deems appropriate, the
Committee may provide, either by the terms of the Award Agreement applicable
to
any Award or by resolution adopted prior to the occurrence of the Change in
Control, that any outstanding Award shall be adjusted by substituting for each
share of Stock subject to such Award immediately prior to the transaction
resulting in the Change in Control the consideration (whether stock or other
securities of the surviving corporation or any successor corporation to the
Company, or a parent or subsidiary thereof, or that may be issuable by another
corporation that is a party to the transaction resulting in the Change in
Control, or other property) received in such transaction by holders of Stock
for
each share of Stock held on the closing or effective date of such transaction,
in which event, in the case of an Option, the aggregate exercise price thereof
shall remain the same; provided,
however,
that if
such consideration received in the transaction is not solely stock of a
successor, surviving or other corporation, the
A-17
Committee
may provide for the consideration to be received upon settlement of an Award,
for each share of Stock subject to the Award, to be solely stock of the
successor, surviving or other corporation, as applicable, equal in fair market
value, as determined by the Committee, to the per share consideration received
by holders of Stock in the Change in Control transaction.
(iii) In
its
discretion, and on such terms and conditions as it deems appropriate, the
Committee may provide, either by the terms of the Award Agreement applicable
to
any Award or by resolution adopted prior to the occurrence of the Change in
Control, that any outstanding Award shall be converted into a right to receive
cash on or following the closing date or expiration date of the transaction
resulting in the Change in Control in an amount equal to the highest value
of
the consideration to be received in connection with such transaction for one
share of Stock, or, if higher, the highest Fair Market Value of the Stock during
the thirty (30) consecutive business days immediately prior to the closing
date
or expiration date of such transaction, less, in the case of an Option, the
per
share exercise price of such Option, multiplied by the number of shares of
Stock
subject to such Option, or a portion thereof.
(iv) The
Committee may, in its discretion, provide that an Option cannot be exercised
after such a Change in Control, to the extent that such Option is or becomes
fully exercisable on or before such Change in Control or is subject to any
acceleration, adjustment or conversion in accordance with the foregoing
paragraphs (i), (ii) or (iii) of this Section 12.
No
Participant shall have any right to prevent the consummation of any of the
foregoing acts affecting the number of shares of Stock available to such
Participant. Any actions or determinations of the Committee under this
subsection 12(c) need not be uniform as to all outstanding Awards, nor
treat all Participants identically. Notwithstanding the foregoing adjustments,
in no event may any Option be exercised after ten (10) years from the date
it
was originally granted, and any changes to ISOs pursuant to this Section 12
shall, unless the Committee determines otherwise, only be effective to the
extent such adjustments or changes do not cause a “modification” (within the
meaning of Section 424(h)(3) of the Code) of such ISOs or adversely affect
the tax status of such ISOs.
13. Miscellaneous
Provisions.
(a) The
Plan shall be unfunded. The Company shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure
the issuance of shares of Stock or the payment of cash upon exercise or payment
of any Award. Proceeds from the sale of shares of Stock pursuant to Awards
granted under the Plan shall constitute general funds of the
Company.
(b) Except
as
otherwise provided in this paragraph (b) of Section 13 or by the
Committee, an Award by its terms shall be personal and may not be sold,
transferred, pledged, assigned, encumbered or otherwise alienated or
hypothecated otherwise than by will or by the laws of descent and distribution
and shall be exercisable during the lifetime of a Participant only by him or
her. An Award Agreement may permit the exercise or payment of an Participant’s
A-18
Option
or
settlement of an Award (or any portion thereof) after his or her death by or
to
the beneficiary most recently named by such Participant in a written designation
thereof filed with the Company, or, in lieu of any such surviving beneficiary,
as designated by the Participant by will or by the laws of descent and
distribution. In the event any Option is exercised by the executors,
administrators, heirs or distributees of the estate of a deceased Optionee,
or
such an Optionee’s beneficiary, or the transferee of an Option, in any such case
pursuant to the terms and conditions of the Plan and the applicable Award
Agreement and in accordance with such terms and conditions as may be specified
from time to time by the Committee, the Company shall be under no obligation
to
issue Stock thereunder unless and until the Committee is satisfied that the
person or persons exercising such Option is the duly appointed legal
representative of the deceased Optionee’s estate or the proper legatee or
distribute thereof or the named beneficiary of such Optionee, or the valid
transferee of such Option, as applicable. The Company shall be under no
obligation to issue Stock in satisfaction of an Award unless and until the
Committee is satisfied that the person or persons requesting settlement of
such
Award is the duly appointed legal representative of the deceased Participant’s
estate or the proper legatee or distribute thereof or the named beneficiary
of
such Participant, or the valid transferee of such Award, as
applicable.
(c)(i) If
at any
time the Committee shall determine, in its discretion, that the listing,
registration and/or qualification of shares of Stock upon any securities
exchange or under any state or Federal or foreign law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a
condition of, or in connection with, the sale or purchase of shares of Stock
hereunder, no Award may be granted, exercised or paid in whole or in part unless
and until such listing, registration, qualification, consent and/or approval
shall have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Committee.
(ii) If
at any
time counsel to the Company shall be of the opinion that any sale or delivery
of
shares of Stock pursuant to an Award is or may be in the circumstances unlawful
or result in the imposition of excise taxes on the Company or any Affiliate
under the statutes, rules or regulations of any applicable jurisdiction, the
Company shall have no obligation to make such sale or delivery, or to make
any
application or to effect or to maintain any qualification or registration under
the Securities Act, or otherwise with respect to shares of Stock or Options
and
the right to exercise any Option or settlement of any Award shall be suspended
until, in the opinion of such counsel, such sale or delivery shall be lawful
or
will not result in the imposition of excise taxes on the Company or any
Affiliate.
(iii) Upon
termination of any period of suspension under this Section 13(c), any Award
affected by such suspension which shall not then have expired or terminated
shall be reinstated as to all shares available before such suspension and as
to
the shares of Stock which would otherwise have become available during the
period of such suspension, but no suspension shall extend the term of any
Award.
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(d) The
Committee may require each person receiving Stock in connection with any Award
under the Plan to represent and agree with the Company in writing that such
person is acquiring the shares of Stock for investment without a view to the
distribution thereof. All
certificates for shares of Stock delivered under the Plan shall be subject
to
such stock transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the Securities
and Exchange Commission, any securities exchange upon which the Stock is then
listed, and any applicable Federal or state securities laws, and the Committee
may cause any legend to be put on any such certificates to reference any such
restrictions.
(e) By
accepting any benefit under the Plan, each Participant and each person claiming
under or through such Participant shall be conclusively deemed to have indicated
their acceptance and ratification of, and consent to, all of the terms and
conditions of the Plan and any action taken under the Plan by the Committee,
the
Company or the Board, in any case in accordance with the terms and conditions
of
the Plan.
(f) In
the
discretion of the Committee, a Participant may elect irrevocably (at a time
and
in a manner determined by the Committee) prior to settlement of an Award or
exercising an Option that delivery of shares of Stock upon such settlement
or
exercise shall be deferred until a future date and/or the occurrence of a future
event or events, specified in such election. Upon the settlement of an such
Award or the exercise of any such Option and until the delivery of any deferred
shares under this paragraph (f) of Section 13, the number of shares
otherwise issuable to the Participant shall be credited to a memorandum account
in the records of the Company or its designee and any dividends or other
distributions payable on such shares shall be deemed reinvested in additional
shares of Stock, in a manner determined by the Committee, until all shares
of
Stock credited to such Participant’s memorandum account shall become issuable
pursuant to the Participant’s election.
(g) Except
as
prohibited by applicable law, the Committee may, in its discretion, extend
one
or more loans to Participants who are directors, key employees or consultants
of
the Company or an Affiliate in connection with the exercise or receipt of an
Award granted to any such individual. The terms and conditions of any such
loan
shall be established by the Committee.
(h) Neither
the adoption of the Plan nor anything contained herein shall affect any other
compensation or incentive plans or arrangements of the Company or any Affiliate,
or prevent or limit the right of the Company or any Affiliate to establish
any
other forms of incentives or compensation for their directors, employees or
consultants or grant or assume options or other rights otherwise than under
the
Plan.
(i) The
Plan
shall be governed by and construed in accordance with the laws of the State
of
Delaware, without regard to such state’s conflict of law provisions, and, in any
event, except as superseded by applicable Federal law.
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(j) The
words
“Section,” “subsection” and “paragraph” herein shall refer to provisions of the
Plan, unless expressly indicated otherwise. Wherever any words are used in
the
Plan or any Award Agreement in the masculine gender they shall be construed
as
though they were also used in the feminine gender in all cases where they would
so apply, and wherever any words are used herein in the singular form they
shall
be construed as though they were also used in the plural form in all cases
where
they would so apply.
(k) The
Company shall bear all costs and expenses incurred in administering the Plan,
including expenses of issuing Stock pursuant to any Awards granted
hereunder.
14. Limits
of Liability.
(a) Any liability of the Company or an Affiliate to any Participant with
respect to any Award shall be based solely upon contractual obligations created
by the Plan and the Award Agreement.
(b) None
of
the Company, any Affiliate, any member of the Committee or the Board or any
other person participating in any determination of any question under the Plan,
or in the interpretation, administration or application of the Plan, shall
have
any liability, in the absence of bad faith, to any party for any action taken
or
not taken in connection with the Plan, except as may expressly be provided
by
statute.
15. Limitations
Applicable to Certain Options Subject to Exchange Act Section 16 and Code
Section 162(m).
Unless
stated otherwise in a Participant’s Award Agreement, notwithstanding any other
provision of the Plan, any Award granted to an officer or director of the
Company who is then subject to Section 16 of the Exchange Act, shall be subject
to any additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including Rule 16b-3, or any successor
rule, as the same may be amended from time to time) that are requirements for
the application of such exemptive rule, and the Plan and applicable Award
Agreement shall be deemed amended to the extent necessary to conform to such
limitations. Furthermore, unless stated otherwise in a Participant’s Award
Agreement, notwithstanding any other provision of the Plan, any Award granted
to
an employee of the Company or an Affiliate intended to qualify as “other
performance-based compensation” as described in Section 162(m)(4)(C) of the
Code shall be subject to any additional limitations set forth in
Section 162(m) of the Code or any regulations or rulings issued thereunder
(including any amendment to any of the foregoing) that are requirements for
qualification as “other performance-based compensation” as described in
Section 162(m)(4)(C) of the Code, and the Plan and applicable Award
Agreement shall be deemed amended to the extent necessary to conform to such
requirements.
16. Amendments
and Termination.
The
Board may, at any time and with or without prior notice, amend, alter, suspend
or terminate the Plan, retroactively or otherwise; provided,
however,
unless
otherwise required by law or specifically provided herein, no such amendment,
alteration, suspension or termination shall be made which would impair the
previously accrued rights of any holder of an Award theretofore granted without
his or her written consent, or which, without first obtaining approval of the
stockholders of the Company (where such approval is necessary to satisfy
(i) any applicable requirements under the Code relating to ISOs or for
A-21
exemption
from Section 162(m) of the Code: (ii) the then-applicable requirements
of Rule 16b-3 promulgated under the Exchange Act, or any successor rule, as
the same may be amended from time to time; or (iii) any other applicable
law, regulation or rule), would:
(a) except
as
is provided in Section 12, increase the maximum number of shares of Stock
which may be sold or awarded under the Plan or increase the limitations set
forth in Section 6(k) on the maximum number of shares of Stock that may be
subject to Options granted to a Participant;
(b) except
as
is provided in Section 12, decrease the minimum option exercise price
requirements of Section 6(a);
(c) change
the class of persons eligible to receive Awards under the Plan; or
(d) extend
the duration of the Plan or the period during which Options may be exercised
under Section 6(b).
The
Committee may amend the terms of any Award theretofore granted, including any
Award Agreement, retroactively or prospectively, but no such amendment shall
impair the previously accrued rights of any Participant without his or her
written consent. Notwithstanding the foregoing, without the consent of affected
Participants, Awards may be amended, revised or revoked to the extent necessary
to avoid any penalties under Section 409A of the Code.
17. Effective
Date and Term.
Following adoption of the Plan by the Board, the Plan shall become effective
when it is approved by the holders of a majority of the Company’s outstanding
Stock which is present and voted at a meeting, or by written consent in lieu
of
a meeting, which approval must occur within the period ending twelve (12) months
after the date the Plan is adopted by the Board. The effectiveness of any Awards
granted prior to such stockholder approval shall be specifically subject to
and
conditioned upon, and no such Award shall be vested or, in the case of Options,
exercisable until, such stockholder approval. If the Plan is not so approved
by
the Company’s stockholders, the Plan shall not become effective and shall
terminate immediately, and any Awards previously granted shall thereupon be
automatically canceled and deemed to have been null and void ab
initio.
The
Plan shall terminate upon the earliest to occur of:
(a) the
effective date of a resolution adopted by the Board terminating the Plan;
(b) the
date
all shares of Stock subject to the Plan are delivered pursuant to the Plan’s
provisions; or
(c) ten
(10)
years from the date the Plan is approved by the Company’s
stockholders.
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No
Award
may be granted under the Plan after the Plan’s termination; however,
Awards
theretofore granted may extend beyond such date. No such termination of the
Plan
shall affect the previously accrued rights of any Participant hereunder and
all
Awards previously granted hereunder shall continue in force and in operation
after the termination of the Plan, except as they may be otherwise terminated
in
accordance with the terms of the Plan or the Award Agreement.
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