<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1999
REGISTRATION NO. 333-
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PENNACO ENERGY, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0384598
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1050 17TH STREET, SUITE 700
DENVER, COLORADO 80265
(Address, including zip code, of Principal Executive Offices)
PENNACO ENERGY, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
(Full title of the plan)
PAUL M. RADY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
1050 17TH STREET, SUITE 700
DENVER, COLORADO 80265
(303) 629-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------------------
COPY TO:
DAVID P. OELMAN
ANDREWS & KURTH L.L.P.
600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77002
(713) 220-4200
-------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
TITLE OF SECURITIES TO BE REGISTERED AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED (1) PER SHARE (2) PRICE (2) FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, Par Value $.001 Per Share (3) 4,500,000 $12.375 $55,687,500 $15,481.13
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The number of shares of common stock registered hereby is subject to
adjustment to prevent dilution resulting from stock splits, stock dividends
or similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h), based upon the average of the high and low prices
of a share of the Company's common stock for June 25, 1999 on the American
Stock Exchange as reported in THE WALL STREET JOURNAL on June 28, 1999.
(3) The securities include certain rights associated with the common stock
issued pursuant to the Rights Agreement dated February 24, 1999.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The Company incorporates herein by reference the following documents,
or portions of documents, as of their respective dates as filed with the
Securities and Exchange Commission:
(1) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998;
(2) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1999; and
(3) The descriptions of the Company's common stock, par value $.001 per
share (the "Common Stock"), and certain rights associated with such
Common Stock (the "Rights") contained in the Company's registration
statement on Form 8-A, dated April 16, 1999, filed pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (No.
0-24881), including any amendments or reports filed for the purpose of
updating such descriptions.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act after the date of this Registration Statement
and prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all such
securities then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and to be a part hereof from the date
of filing such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
The information required by Item 4 is not applicable to this
Registration Statement since the class of securities to be offered is registered
under Section 12 of the Exchange Act.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The information required by Item 5 is not applicable to this
Registration Statement.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Nevada Revised Statutes and certain provisions of the Company's
By-Laws under certain circumstances provide for indemnification of the Company's
Officers, Directors and controlling persons against liabilities that they may
incur in such capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but this description is
qualified in its entirety by reference to the Company's By-Laws and to the
statutory provisions.
In general, any Officer, Director, employee or agent may be indemnified
against expenses, fines, settlements or judgments arising in connection with a
legal proceeding to which such person is a party, if that person's actions were
in good faith, were believed to be in the Company's best interest, and were not
unlawful. Unless such person is successful upon the merits in such an action,
indemnification may be awarded only after a determination by independent
decision of the Board of Directors, by legal counsel, or by a vote of the
shareholders, that the applicable standard of conduct was met by the person to
be indemnified.
II-2
<PAGE>
The circumstances under which indemnification is granted in connection
with an action brought on behalf of the Company is generally the same as those
set forth above; however, with respect to such actions, indemnification is
granted only with respect to expenses actually incurred in connection with the
defense or settlement of the action. In such actions, the person to be
indemnified must have acted in good faith and in a manner believed to have been
in the Company's best interest, and must not have been adjudged liable for
negligence or misconduct.
Indemnification may also be granted pursuant to the terms of agreements
that may be entered in the future or pursuant to a vote of shareholders or
Directors. The statutory provision cited above also grants the power to the
Company to purchase and maintain insurance which protects its Officers and
Directors against any liabilities incurred in connection with their service in
such a position, and such a policy may be obtained by the Company.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The information required by Item 7 is not applicable to this
Registration Statement.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
5.1 Opinion of Gibson, Haglund & Johnson.
23.1 Consent of KPMG LLP.
23.2 Consent of Gibson, Haglund & Johnson (included in Exhibit 5.1).
24.1 Power of Attorney (included in Part II of the Registration Statement).
99.1 Pennaco Energy, Inc. 1998 Stock Option and Incentive Plan.
</TABLE>
ITEM 9. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information in the
registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) Include any additional or changed material
information on the plan of distribution.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona
fide offering.
II-3
<PAGE>
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the
end of the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, State of Colorado, on the
29th day of June, 1999.
PENNACO ENERGY, INC.
(Registrant)
By: /s/ Paul M. Rady
---------------------------------------
Paul M. Rady
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers
and directors of Pennaco Energy, Inc. (the "Company") hereby constitutes and
appoints Paul M. Rady and Glen C. Warren, Jr., or either of them (with full
power to each of them to act alone), his true and lawful attorney-in-fact and
agent, with full power of substitution, for him and on his behalf and in his
name, place and stead, in any and all capacities, to sign, execute and file
this Registration Statement under the Securities Act of 1933, as amended, and
any or all amendments (including, without limitation, post-effective
amendments), with all exhibits and any and all documents required to be filed
with respect thereto, with the Securities and Exchange Commission or any
regulatory authority, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as he
himself might or could do, if personally present, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their substitute or substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on June 29,
1999 in the capacities indicated.
SIGNATURE TITLE
/s/ Paul M. Rady President, Chief Executive Officer and Director
- --------------------------- (Principal Executive Officer)
Paul M. Rady
/s/ Jeffrey L. Taylor Chairman of the Board of Directors
- ---------------------------
Jeffrey L. Taylor
/s/ Glen C. Warren, Jr. Executive Vice President, Chief Financial
- --------------------------- Officer and Director (Principal Financial
Glen C. Warren, Jr. Officer)
/s/ Gregory V. Gibson Vice President, Legal, Secretary and Director
- ---------------------------
Gregory V. Gibson
/s/ David W. Lanza Director
- ---------------------------
David W. Lanza
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Location of
Number Exhibit
- ------- --------
<S> <C> <C>
5.1 Opinion of Gibson, Haglund & Johnson.
23.1 Consent of KPMG LLP.
23.2 Consent of Gibson, Haglund & Johnson (included in Exhibit 5.1).
24.1 Power of Attorney (included in Part II of the Registration Statement).
99.1 Pennaco Energy, Inc. 1998 Stock Option and Incentive Plan.
</TABLE>
II-6
<PAGE>
EXHIBIT 5.1
[Letterhead of Gibson, Haglund & Johnson]
June 25, 1999
Board of Directors
Pennaco Energy, Inc.
1050 17th Street, Suite 700
Denver, Colorado 80265
Gentlemen:
We have acted as counsel to Pennaco Energy, Inc., a Nevada
corporation (the "Company"), in connection with the preparation and filing
with the Securities and Exchange Commission (the Commission") under the
Securities Act of 1933, as amended (the Act"), of the registration statement
on Form S-8 filed by the Company with the Commission on June , 1999 (the
Registration Statement"), with respect to the offering and sale by the
Company of up to 4,500,000 shares (the Shares") of the Company's common
stock, par value $.001 per share, in connection with the Pennaco Energy, Inc.
Stock Option and Incentive Plan (the "Plan").
In arriving at the opinion expressed below, we have
examined the Company's Articles of Incorporation and By-Laws, each as amended
to date, the Registration Statement, and the originals or copies certified or
otherwise identified to our satisfaction of such other instruments and other
certificates of public officials, officers and representatives of the Company
and such other persons, and we have made such investigations of law, as we
have deemed appropriate as a basis for the opinions expressed below.
Based on the foregoing, and subject to the limitations and
exceptions set forth below, it is our opinion that the Shares will, when
issued and paid for in accordance with the terms of the Plan, be duly
authorized, validly issued, fully paid and nonassessable.
For the purposes of the opinion expressed above, we have
assumed that the Registration Statement, and any amendments thereto (including
post-effective amendments), will have become effective.
We express no opinion other than as to the federal laws of
the United States of America and the Nevada General Corporation laws. We
consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm in the prospectus forming part of
the Registration Statement. This opinion is rendered solely for your benefit
in connection with the above matter and may not be relied upon in any manner
by any other person or entity without our express written consent.
Very truly yours,
GIBSON, HAGLUND & JOHNSON
by: /s/ Gregory V. Gibson
------------------------
Gregory V. Gibson
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 relating to the Pennaco Energy, Inc. 1998 Stock Option and Incentive
Plan our report dated March 12, 1999, relating to the balance sheet of Pennaco
Energy, Inc. as of December 31, 1998 and the related statements of operations,
stockholders' equity and cash flows for the period from January 26, 1998
(inception) to December 31, 1998, which report appears in the December 31,
1998 Annual Report on Form 10-KSB of Pennaco Energy, Inc.
KPMG LLP
Denver, Colorado
June 28, 1999
<PAGE>
PENNACO ENERGY, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
(SECOND AMENDMENT)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
III. EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
IV. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
V. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
5.1 Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
5.2 Ten-Percent Shareholders . . . . . . . . . . . . . . . . . . . . . . . . .5
5.3 Stock Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
5.4 Outstanding Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
VI. STOCK SUBJECT TO THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . .5
VII. OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
7.1 Stock Option Agreements. . . . . . . . . . . . . . . . . . . . . . . . . .6
7.2 Type and Number of Shares. . . . . . . . . . . . . . . . . . . . . . . . .6
7.3 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
7.4 Medium and Time of Payment . . . . . . . . . . . . . . . . . . . . . . . .6
7.5 Terms and Nontransferability of Options. . . . . . . . . . . . . . . . . .6
7.6 Modification, Extension, and Renewal of Option . . . . . . . . . . . . . .7
7.7 Limitation on Grant of Incentive Stock Options . . . . . . . . . . . . . .7
7.8 Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
VIII. RIGHTS OF ELIG1BLE EMPLOYEES, PARTICIPANTS, AND BENEFICIARIES. . . . . . . . .7
8.1 Employee Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
8.2 No Employment Contract . . . . . . . . . . . . . . . . . . . . . . . . . .7
8.3 No Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
8.4 Plan Not Funded. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
8.5 Adjustment Upon Recapitalization and Corporate Changes . . . . . . . . . .8
8.6 Termination of Employment, Except by Death or Disability . . . . . . . . .8
8.7 Termination of Employment by Death of Participant. . . . . . . . . . . . .9
8.8 Termination of Employment by Disability of Participant . . . . . . . . . .9
8.9 Rights as a Stockholder. . . . . . . . . . . . . . . . . . . . . . . . . .9
8.10 Deferral of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . .9
ii
<PAGE>
8.11 Acceleration of Awards . . . . . . . . . . . . . . . . . . . . . . . . . .9
IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 Termination, Suspension, and Amendment . . . . . . . . . . . . . . . . . 10
9.2 No Fractional Share. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.3 Tax Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.4 Limitations on the Corporation's Obligations . . . . . . . . . . . . . . 11
9.5 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.6 Governing Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.7 Securities Law Requirements. . . . . . . . . . . . . . . . . . . . . . . 11
9.8 Execution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
iii
<PAGE>
PENNACO ENERGY, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
I. PURPOSE
The Plan is intended to provide incentive to key employees and directors
of, and key consultants, vendors, customers, and others expected to provide
significant services to, the Corporation, to encourage proprietary interest in
the Corporation, to encourage such key employees to remain in the employ of the
Corporation and its Subsidiaries, to attract new employees with outstanding
qualifications, and to afford additional incentive to consultants, vendors,
customers, and others to increase their efforts in providing significant
services to the Corporation.
II. DEFINITIONS
2.1 "Award" shall mean an Option, which may be designated an Incentive
Stock Option or Nonstatutory Stock Option, in each case as granted pursuant to
the Plan.
2.2 "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing an Award.
2.3 "Beneficiary" shall mean the person, persons, trust or trusts entitled
by will or the laws of descent and distribution to receive the benefits
specified under the Plan in the event of a Participant's death.
2.4 "Board" shall mean the Board of Directors of the Corporation.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Committee" shall mean the committee, if any, appointed by the Board
in accordance with Section 4 of the Plan, or the Board if no Committee has been
appointed.
2.7 "Common Stock" shall mean the Common Stock, $.001 par value, of the
Corporation.
2.8 "Corporation" shall mean Pennaco Energy, Inc., a Nevada corporation,
and its Subsidiaries.
2.9 "Disability" shall mean the condition of a Participant who is unable
to perform his or her substantial and material job duties due to injury or
sickness or such other condition as the Board or Committee may determine in its
sole discretion and/or engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months.
<PAGE>
2.10 "Effective Date" shall mean March 24, 1998.
2.11 "Eligible Employee" shall mean an individual who is employed (within
the meaning of Code Section 3401 and the regulations thereunder) by the
Corporation or a Subsidiary. Additionally for purposes of this Plan, a
Participant who is a director or a consultant, vendor, customer, or other
provider of significant services to the Corporation or a Subsidiary shall be
deemed to be an Eligible Employee, and service as a director, consultant,
vendor, customer, or other provider of significant services to the Corporation
or a Subsidiary shall be deemed to be employment, except that no Incentive Stock
Option may be granted to a non-employee director or non-employee consultant,
vendor, customer, or other provider of significant services to the Corporation
or a Subsidiary.
2.12 "Event" or "Change in Control Event" shall mean the occurrence of any
of the following: (i) there shall be consummated (x) any consolidation or merger
of the Corporation with another corporation or entity and as a result of such
consolidation or merger less than 50% of the outstanding voting securities of
the surviving or resulting corporation or entity shall be owned in the aggregate
by the stockholders of the Corporation, other than "affiliates" (as defined in
the Exchange Act) of any party to such consolidation or merger, as the same
shall have existed immediately prior to such consolidation or merger, or (y) any
sale, lease, exchange or other transfer (or in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Corporation; (ii) the stockholders of the Corporation shall have approved any
plan or proposal for the liquidation or dissolution of the Corporation; (iii)
any "person" (as such term is used in the Section 13(d) and 14)d)(2) of the
Exchange Act) shall have become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of 25% or more of the Corporation's outstanding
common stock, without the prior approval of the Board of Directors; (iv) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the entire Board of Directors shall have ceased for any
reason to constitute a majority thereof unless the election, or the nomination
for election by the Corporation's stockholders, of each new director was
approved by vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period; or (v) a change of control of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act shall have
occurred.
2.13 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
2.14 "Exercise Price" shall mean the price per share of Common Stock,
determined by the Board or the Committee, at which an Award may be exercised.
2.15 "Fair Market Value" shall mean the value of one share of Common Stock,
determined as follows:
-2-
<PAGE>
(i) If the Shares are traded on an exchange, the price at which
Shares traded at the close of business on the date of valuation; or
(ii) If the Shares are traded on the NASDAQ Stock Market, the closing
price if one is available, or the mean between the bid and asked prices on said
market at the close of business on the date of valuation; or
(iii) If neither (i) nor (ii) above applies, the fair market value
as determined by the Board or the Committee in good faith. Such
determination shall be conclusive and binding on all persons.
2.16 "Incentive Stock Option" shall mean an option described in Section
422A(b) of the Code.
2.17 "Nonstatutory Stock Option" shall mean an option that is not an
Incentive Stock Option.
2.18 "Option" shall mean either an Incentive Stock Option or a Nonstatutory
Stock Option granted pursuant to the Plan.
2.19 "Participant" shall mean an Eligible Employee who has received an
Award under the Plan.
2.20 "Plan" shall mean the Pennaco Energy, Inc. 1998 Stock Option and
Incentive Plan, as it may be amended from time to time.
2.21 "Purchase Price" shall mean the Exercise Price multiplied by the
number of Shares with respect to which an Award is exercised.
2.22 "Rule 16b" shall mean Rule l6b of the Exchange Act.
2.23 "Share" shall mean one share of Common Stock, adjusted in accordance
with Section 8.5 of the Plan (if applicable).
2.24 "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
2.25 "Stock Option Agreements" shall mean an Award Agreement granting
Options under the Plan.
2.26 "Stock Purchase Agreement" shall mean an agreement to exercise Options
under the Plan.
2.27 "Subsidiary" shall have the meaning as set forth in Section 424 of the
Code.
-3-
<PAGE>
2.28 "Tax Date" shall have the meaning set forth in Section 9.3 hereof.
III. EFFECTIVE DATE
The plan was adopted by the Board on March 24, 1998, and approved by
the Corporation's shareholders by written consent as of March 24, 1998. As
of June 29, 1998, the Corporation shareholders approved by written consent
the First Amendment to the Plan increasing the number of Shares authorized
to 4,500,000.
IV. ADMINISTRATION
The Plan shall be administered by the Board or by a Committee
appointed by the Board, which shall consist of no less than two members.
The Board shall appoint one of the members of the Committee, if there be
one, as Chairman of the Committee. If a Committee has been appointed, the
Committee shall hold meetings at such times and places as it may determine.
Acts of a majority of the Committee at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee. The Board, or the
Committee if there be one, shall from time to time at its discretion select
the Eligible Employees and consultants who are to be granted Awards,
determine the number of Shares to be applicable to such Award, and
designate any Options as Incentive Stock Options or Nonstatutory Stock
Options, except that an Incentive Stock Option may only be granted to an
employee of the Corporation or a Subsidiary. A member of the Board or a
Committee member shall in no event participate in any determination
relating to Awards held by or to be granted to such Board or a Committee
member; however, a member of the Board or Committee member shall be
entitled to receive Awards. The interpretation and construction by the
Board, or by the Committee if there be one, of any provision of the Plan or
any Award granted thereunder shall be final. No member of the Board or of
the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Award granted thereunder. In
addition to any right of indemnification provided by the Articles of
Incorporation or Bylaws of the Corporation, such person shall be
indemnified and held harmless by the Corporation from any loss, cost,
liability or expense that may be imposed upon or reasonably incurred by him
in connection with any claim, suit, action or proceeding to which he may be
a party by reason of any action or omission under the Plan.
V. PARTICIPATION
5.1 ELIGIBILITY. Subject to the terms and conditions of Section 5.2
below, the Participants shall be such persons as the Board or the Committee
may select from among the following classes of persons: (i) employees of
the Corporation or of a Subsidiary (who may be officers, whether or not
they are directors); and (ii) consultants, vendors, customers, and others
expected to provide significant services to the Corporation or the
Subsidiary.
-4-
<PAGE>
For purposes of this Plan, a Participant who is a director,
consultant, vendor, customer or other provider of significant services to
the Corporation or a Subsidiary shall be deemed to be an Eligible Employee,
and service as a director, consultant, vendor, customer, or other provider
of significant services to the Corporation or a Subsidiary shall be deemed
to be employment, except that no Incentive Stock Option may be granted to a
non-employee director or non-employee.
5.2 TEN-PERCENT SHAREHOLDERS. An Eligible Employee who owns more
than 10% of the total combined voting power of all classes of outstanding
stock of the Corporation, its parent or any of its Subsidiaries shall not
be eligible to receive an Award for an Incentive Stock Option unless (i)
the Exercise Price of the Shares subject to such Award is at least 110% of
the Fair Market Value of such Shares on the date of grant; and (ii) such
Award by its terms is not exercisable after the expiration of 5 years from
the date of grant.
5.3 STOCK OWNERSHIP. For purposes of Section 5.2 above, in
determining stock ownership an Eligible Employee shall be considered as
owning the stock owned, directly or indirectly, by or for his brothers,
sisters, spouses, ancestors, and lineal descendants. Stock owned, directly
or indirectly, by or for a corporation, partnership, estate, or trust shall
be considered as being owned proportionately by or for its shareholders,
partners, or beneficiaries. Stock with respect to which such Eligible
Employee holds an Award shall not be counted.
5.4 OUTSTANDING STOCK. For purposes of Section 5.2 above
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant of the Award to the Participant. "Outstanding
Stock" shall not include shares authorized for issue under outstanding
Options or Purchase Rights held by the Participant or by any other person.
VI. STOCK SUBJECT TO THE PLAN
The stock subject to Awards granted under the Plan shall be Shares of
the Corporation's authorized but unissued or reacquired Common Stock. The
aggregate number of Shares which may be issued as Awards or upon exercise
of Awards under the Plan shall not exceed 4,500,000 shares. The number of
Shares subject to unexercised Options (plus the number of Shares previously
issued under the Plan) shall not at any time exceed the number of Shares
available for issuance under the Plan. In the event that any unexercised
Option, or any portion thereof, for any reason expires or is terminated,
the unexercised or unvested Shares allocable to such Option may again be
made subject to any Award. The number of withheld Shares shall be deducted
from the applicable Award and shall not entitle the Participant to receive
additional Shares. The limitations established by this Article VI shall be
subject to adjustment in the manner provided in Section 8.5 hereof upon the
occurrence of an event specified therein.
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VII. OPTIONS
7.1 STOCK OPTIONS AGREEMENTS. Options shall be evidenced by written
Stock Option Agreements or Grants in such form as the Board or the Committee
shall from time to time determine. Such agreements shall comply with and be
subject to the terms and conditions set forth below.
7.2 TYPE AND NUMBER OF SHARES. Each Option shall state the type of Award
and the number of Shares to which it pertains and shall provide for the
adjustment thereof in accordance with the provisions of Section 8.5 hereof.
7.3 EXERCISE PRICE. Each Option shall state the Exercise Price thereof.
The Exercise Price in the case of any Incentive Stock Option shall not be less
than the Fair Market Value on the date of grant and, in the case of any Option
granted to an Optionee described in Section 5.2 hereof, shall not be less than
110% of the Fair Market Value on the date of grant. The Exercise price in the
case of any Nonstatutory Stock Option shall not be less than 85% of the Fair
Market Value on the date of grant.
7.4 MEDIUM AND TIME OF PAYMENT. The Purchase Price shall be payable in
full in United States dollars upon the exercise of the Option; provided,
however, that if the applicable Stock Option Agreement so provides the Purchase
Price may be paid (i) by the "constructive" surrender of Shares owned by the
Participant (for more than six months if such Shares were acquired pursuant to
the exercise of an option granted under a plan of the Corporation or a
Subsidiary) and having a Fair Market Value on the date of exercise equal to the
Purchase Price, or in any combination of cash and Shares, as long as the sum of
the cash so paid and the Fair Market Value of the Shares so surrendered equal
the Purchase Price, (ii) by cancellation of indebtedness owed by the Corporation
to the Participant, (iii) at the discretion of the Board of Directors, with a
full recourse promissory note executed by the Participant, (iv) through a
"cashless-broker" program (a broker financed exercise pursuant to the provisions
of Regulation T of the Federal Reserve Board) approved by the Corporation, or
(v) any combination of the foregoing. The interest rate and other terms and
conditions of such note shall be determined by the Board of Directors or the
Committee. The Board of Directors or the Committee may require that the
Participant pledge his or her Shares to the Corporation for the purposes of
securing the payment of such note. In no event shall the stock certificates(s)
representing such Shares be released to the Participant until such note is paid
in full.
7.5 TERMS AND NONTRANSFERABILITY OF OPTIONS. Each Option shall state the
time or times which all or part thereof becomes exercisable. No Option shall be
exercisable after the expiration of 10 years from the date it was granted, and
no Option granted to a Participant described in Section 5.2 hereof shall be
exercisable after the expiration of five years from the date it was granted.
During the lifetime of the Participant, the Option shall be exercisable only by
the Participant and shall not be assignable or transferable except as provided
in Section 8.3. In the event of the Participant's death, the Option shall not be
transferable by the Participant other than by will or the laws of descent and
distribution.
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7.6 MODIFICATION. EXTENSION, AND RENEWAL OF OPTION. Within the
limitations of the Plan, the Board of Directors may modify, extend or renew
outstanding Options or accept the cancellation of outstanding Options (to the
extent not previously exercised) for the granting of new Options in substitution
therefor. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Participant, alter or impair any rights or
obligations under any Option previously granted.
7.7 LIMITATION ON GRANT OF INCENTIVE STOCK OPTIONS. In the case of
Incentive Stock Options granted hereunder, the aggregate Fair Market Value
(determined as of the date of the grant thereof) of the Shares with respect to
which Incentive Stock Options become exercisable by any Participant for the
first time during any calendar year (under this Plan and all other Plans
maintained by the Corporation, its parent, or its Subsidiaries) shall not exceed
$100,000. The Board or Committee may, however, with the Participant's consent
authorize an amendment to the Incentive Stock Option which renders it a
Nonstatutory Stock Option.
7.8 OTHER PROVISIONS. The Stock Option Agreements authorized under the
Plan may contain such other provisions not inconsistent with the terms of the
Plan (including, without limitation, restrictions upon the exercise of the
Option) as the Board of Directors shall deem advisable.
VIII. RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS, AND BENEFICIARIES
8.1 EMPLOYEE STATUS. Status of an Eligible Employee shall not be
construed as a commitment that any Award will be made under the Plan to an
Eligible Employee or to Eligible Employees generally.
8.2 NO EMPLOYMENT CONTRACT. Nothing contained in the Plan (or in the
Award Agreements or in any other documents related to the Plan or to Awards)
shall confer upon any Eligible Employee or any Participant any right to continue
in the employ of the Corporation or constitute any contract or agreement of
employment, or interfere in any way with the right of the Corporation to reduce
such Person's compensation or to terminate the employment of such Eligible
Employee or Participant, with or without cause, but nothing contained in the
Plan or any document related thereto shall affect any other contractual right of
an Eligible Employee or Participant. Nothing contained in the Plan (or in the
Award Agreements or in any other documents related to the Plan or the Awards)
shall confer upon any director of the Corporation any right to continue as a
director of the Corporation.
8.3 NO TRANSFERABILITY. Awards may be exercised only by, and amounts
payable or shares issuable pursuant to an Award shall be paid only to or
registered only in the name of, the Participant or, in the event of the
Participant's death, to the Participant's Beneficiary or, in the event of the
Participant's Disability, to the Participant's personal representative or, if
there is none, to the Participant. Other than by will or the laws of descent
and distribution, no right or benefit under the Plan or any Award, including,
without limitation, any Option that has not vested, shall be subject
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in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or change and any such attempted action shall be void and no such
night or benefit shall be, in any manner, liable for, or subject to, debts,
contract, liabilities, engagements, or torts of any Eligible Employee,
Participant, or Beneficiary, in any case except as may otherwise be expressly
required by applicable law. The Board or the Committee shall disregard any
attempt at transfer, assignment, or other alienation prohibited by the preceding
sentence and shall pay or deliver such cash or shares of Common Stock in
accordance with the provisions of the Plan. Notwithstanding the foregoing, to
the extent specifically provided by the Board or the Committee with respect to a
grant, a Nonstatutory Stock Option may be transferred by a Participant to an
immediate family member or related family trust, limited partnership or similar
entities on such terms and conditions as the Board or Committee may establish.
8.4 PLAN NOT FUNDED. No Participant, Beneficiary, or other person shall
have any right, title, or interest in any fund or in any specified asset
(including shares of Common Stock) of the Corporation by reason of any Award
granted hereunder. There shall be no funding of any benefits which may become
payable hereunder. Neither the provisions of the Plan (or of any documents
related hereto), nor the creation or adoption of the Plan, nor any action taken
pursuant to the provisions of the Plan shall create, or be construed to create,
a trust of any kind or a fiduciary relationship between the Corporation and any
Participant, Beneficiary, or other person. To the extent that a Participant, a
Beneficiary, or other person acquires a right to receive an Award hereunder,
such right shall be no greater than the right of any unsecured general creditor
of the Corporation. Awards payable under the Plan shall be paid in shares of
Common Stock or from the general assets of the Corporation, and no special or
separate fund or deposit shall be established and no segregation of assets or
shares shall be made to assure payment of such Awards.
8.5 ADJUSTMENT UPON RECAPITALIZATION AND CORPORATE CHANGES. If the
outstanding shares of Common Stock are changed into or exchanged for cash or a
different number or kind of shares or securities of the Corporation, or if the
outstanding shares of the Common Stock are increased, decreased, exchanged for,
or otherwise changed, or if additional shares or new or different shares or
securities are distributed with respect to the outstanding shares of the Common
Stock, through a reorganization or merger in which the Corporation is the
surviving entity or through a combination, consolidation, recapitalization,
reclassification, stock split, stock dividend, reverse stock split, stock
consolidation, or other capital change or adjustment, an appropriate adjustment
shall be made in the number and kind of shares of other consideration that is
subject to or may be delivered under the Plan and pursuant to outstanding
Awards. A corresponding adjustment to the Exercise Price payable with respect
to Awards granted prior to any such change shall be made as appropriate. In
addition, the Board or the Committee may grant such additional rights in the
foregoing circumstances as the Board or the Committee deems to be in the best
interest of any Participant and the Corporation in order to preserve for the
Participant the benefits of an Award.
8.6 TERMINATION OF EMPLOYMENT, EXCEPT BY DEATH OR DISABILITY. If a
Participant ceases to be an Employee for any reason other than his or her death
or Disability, such Participant shall have the right, subject to the
restrictions of Section 8.3 above, to exercise any Award at any time
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within ninety days after termination of employment, but only to the extent
that, at the date of termination of employment, the Participant's right to
exercise such Award had accrued pursuant to the terms of the applicable
agreement and had not previously been exercised; provided, however, that if
the Participant was terminated for cause (as determined in good faith by the
Committee), any Award not exercised in full prior to such termination shall
be canceled. For this purpose, the employment relationship shall be treated
as continuing intact while the Participant is on military leave, sick leave,
or other bona fide leave of absence (to be determined in the sole discretion
of the Board or the Committee). The foregoing notwithstanding, in the case of
an Incentive Stock Option, employment shall not be deemed to continue beyond
the 90th day after the Participant's reemployment rights are guaranteed by
statute or by contract.
8.7 TERMINATION OF EMPLOYMENT BY DEATH OF PARTICIPANT. Except as may
otherwise be provided in an Award Agreement, if a Participant dies while an
Eligible Employee, or after ceasing to be an Eligible Employee but during the
period while he or she could have exercised the Award, then the Award shall be
fully vested on such date and may be exercised at any time within 12 months
after the Participant's death (but not later than the earlier of the date of
termination fixed in the applicable Award Agreement or the 10th anniversary of
its date of grant), by the executors or administrators of his or her estate or
by any person or persons who have acquired the Award directly from the
Participant by bequest or inheritance.
8.8 TERMINATION OF EMPLOYMENT BY DISABILITY OF PARTICIPANT. Except as may
otherwise be provided in an Award Agreement, if a Participant ceases to be an
Eligible Employee by reason of Disability, then the Award shall be fully vested
on such date and such Participant shall have the right to exercise the Award at
any time within 12 months after termination of employment (but not later than
the earlier of the termination date fixed in the applicable Award Agreement or
the 10th anniversary of its date of grant).
8.9 RIGHTS AS A STOCKHOLDER. A Participant, or a transferee of a
Participant, shall have no rights as a stockholder with respect to any Shares
covered by his or her Award until the date of the issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities, or other property),
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 8.5 hereof
8.10 DEFERRAL OF PAYMENTS. The Board or the Committee may approve the
deferral of any payments that may become due under the Plan. Such deferrals
shall be subject to any conditions, restrictions, or requirements as the Board
or the Committee may determine.
8.11 ACCELERATION OF AWARDS. Immediately prior to the occurrence of an
Event, each Award outstanding under the Plan shall become exercisable in
full; and unless in connection with such Event either (i) the Board provides
(A) for the assumption of such Awards theretofore granted, or (B) for the
substitution for such Awards of new awards covering securities or obligations
(or any combination thereof) of a successor corporation, or a parent or
subsidiary thereof, with appropriate
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adjustments as to number and kind of shares and prices; or (ii) the Shares
continue to remain readily tradable on a national securities market following
such Event, then the Awards shall automatically terminate on such event and
the Corporation shall pay the holder the Black-Scholes value (as determined
by the Board) of the Awards. In addition, the Board or the Committee may
grant such additional rights in the foregoing circumstances as the Board or
the Committee deems to be in the best interest of the Participant and the
Corporation in order to preserve for the Participant the benefits of an
Award. For purposes of this Section 8.11 only, Board shall mean the Board of
Directors of the Corporation as constituted immediately prior to the Event.
In addition, the Board may in its sole discretion accelerate the
exercisability or vesting of any or all Awards outstanding under the Plan in
circumstances under which the Board or the Committee determines such
acceleration appropriate.
IX. MISCELLANEOUS
9.1 TERMINATION, SUSPENSION, AND AMENDMENT. The Board or the Committee
may, at any time, suspend, amend, modify, or terminate the Plan (or any part
thereof) and may, with the consent of a Participant, authorize such
modifications of the terms and conditions of such Participant's Award as it
shall deem advisable; provided that, except as permitted under the provisions of
Section 8.5 hereof, no amendment or modification of the Plan may be adopted
without approval by a majority of the outstanding shares of Common Stock
pursuant to a shareholder's action taken without a meeting or by a majority of
the shares of the Common Stock represented (in person or by proxy) at a meeting
of stockholders at which a quorum is present and entitled to vote thereat, if
such amendment or modification would:
(i) materially increase the benefits accruing to Participants
under the Plan,
(ii) materially increase the aggregate number of Shares which may
be delivered pursuant to Awards granted under the Plan; or
(iii) materially modify the requirements of eligibility for
participation in the Plan.
Neither adoption of the Plan nor the provisions hereof shall limit the
authority of the Board to adopt other plans or to authorize other payments of
compensation and benefits under applicable law. No Awards under the Plan may be
granted or amended during any suspension of the Plan or after its termination.
The amendment, suspension or termination of the Plan shall not, without the
consent of the Participant, alter or impair any rights or obligations pertaining
to any Awards granted under the Plan prior to such amendment, suspension, or
termination.
9.2 NO FRACTIONAL SHARE. No Award or installment thereof shall be
exercisable except in respect of whole shares, and fractional share interests
shall be disregarded.
9.3 TAX WITHHOLDING. As required by law, federal, state, or local taxes
that are subject to the withholding of tax at the source shall be withheld by
the Corporation as necessary to satisfy
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such requirements. The Corporation is entitled to require deduction from
other compensation payable to each Participant or, in the alternative: (1)
the Corporation may require the Participant to advance such sums; or (ii) if
a Participant who is subject to Section l6b of the Exchange Act elects, the
Corporation shall withhold Shares having the Fair Market Value equal to the
sums required to be withheld by the Corporation. If the Participant elects
to advance such sums directly, written notice of that election shall be
delivered prior to such exercise and, whether pursuant to such election or
pursuant to a requirement imposed by the Corporation, payment in cash or by
check of such sums for taxes shall be delivered within 10 days after the
exercise date. If the Participant elects to have the Corporation withhold
Shares (or be entitled to the return of Shares) having a Fair Market Value
equal to the sums required to be withheld, the value of the Shares to be
withheld (or returned) will be equal to the Fair Market Value on the date the
amount of tax to be withheld (or subject to return) is to be determined (the
"Tax Date").
9.4 LIMITATIONS ON THE CORPORATION'S OBLIGATIONS. The Corporation shall
not be obligated to issue shares and/or distribute cash to the Participant upon
any Award exercise until such payment has been received or Shares have been
withheld, unless withholding (or offset against a cash payment) as of or prior
to the exercise date is sufficient to cover all such sums due or which may be
due with respect to such exercise. In addition, the Board or the Committee may
grant to a Participant a cash bonus in any amount required by federal, state, or
local tax law to be withheld with respect to an Award.
9.5 COMPLIANCE WITH LAWS. The Plan, the granting of Awards under the
Plan, the Stock Option Agreements and Stock Purchase Agreements and the delivery
of Options, Shares and Awards (and/or the payment of money or Common Stock)
pursuant thereto and the extension of any loans hereunder are subject to such
additional requirements as the Board or the Committee may impose to assure or
facilitate compliance with all applicable federal and state laws, rules and
regulations (including, without limitation, securities laws and margin
requirements) and to such approvals by any regulatory or governmental agency
which may be necessary or advisable in connection therewith. In connection with
the administration of the Plan or the grant of any Award, the Board or the
Committee may impose such further limitations or conditions as in its opinion
may be required or advisable to satisfy, or secure the benefits of, applicable
regulatory requirements (including those rules promulgated under Section 16 of
the Exchange Act or those rules that facilitate exemption from or compliance
with the Securities Act or the Exchange Act), the requirements of any stock
exchange upon which such shares or shares of the same class are then listed, and
any blue sky or other securities laws applicable to such shares.
9.6 GOVERNING LAWS. The Plan and all Awards granted under the Plan and
the documents evidencing Awards shall be governed by, and construed in
accordance with, the laws of the State of Nevada as the Corporation's principle
place of business.
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9.7 SECURITIES LAW REQUIREMENTS.
(a) LEGALITY OF ISSUANCE. The issuance of any Shares upon the exercise of
any Option and the grant of any Option shall be contingent upon the following:
(i) the Corporation and the Participant shall have taken all
actions required to register the Shares under the Securities Act, and to
qualify the Option and the Shares under any and all applicable state
securities or "blue sky" laws or regulations, or to perfect an exemption
from the respective registration and qualification requirements thereof;
(ii) any applicable listing requirement of any stock exchange on
which the Common Stock is listed shall have been satisfied; and
(iii) any other applicable provision of state or Federal law shall
have been satisfied.
(b) RESTRICTIONS ON TRANSFER. Regardless of whether the offering and sale
of Shares under the Plan has been registered under the Securities Act or has
been registered or qualified under the securities laws of any state, the
Corporation may impose restrictions on the sale, pledge, or other transfer of
such Shares (including the placement of appropriate legends on stock
certificates) if, in the judgment of the Corporation and its counsel, such
restrictions are necessary or desirable in order to achieve compliance with the
provisions of the Securities Act, the securities laws of any state, or any other
law. In the event that the sale of Shares under the Plan is not registered
under the Securities Act but an exemption is available which required an
investment representation or other representation, each Participant shall be
required to represent that such Shares are being acquired for investment, and
not with a view to the sale or distribution thereof, and to make such other
representations as are deemed necessary or appropriate by the Corporation and
its counsel. Any determination by the Corporation and its counsel in connection
with any of the matters set forth in this Section 9.7(b) shall be conclusive and
binding on all persons. Stock certificates evidencing Shares acquired under the
Plan pursuant to an unregistered transaction shall bear the following
restrictive legend and such other restrictive legends as are required or deemed
advisable under the provisions of any applicable law:
THESE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE
UPON EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. THESE SHARES OR
ANY INTEREST HEREIN MAY NOT BE OFFERED, SOLD OR TRANSFERRED UNLESS
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE
STATE SECURITIES LAWS IS AVAILABLE.
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(c) REGISTRATION OR QUALIFICATION OF SECURITIES. The Corporation may, but
shall not be obligated to register or qualify the issuance of Awards and/or the
sale of Shares under the Securities Act or any other applicable law. The
Corporation shall not be obligated to take any affirmative action in order to
cause the issuance of Awards or the sale of Shares under the Plan to comply with
any law.
(d) EXCHANGE OF CERTIFICATES. If, in the opinion of the Corporation and
its counsel, any legend placed on a stock certificate representing shares issued
under the Plan is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
9.8 EXECUTION. To record the adoption of the Second Amendment of the Plan
in the form set forth above by the Board effective as of June 15, 1999, the
Corporation has caused this Second Amendment to be executed in the name and on
behalf of the Corporation where provided below by an officer of the Corporation
thereunto duly authorized.
PENNACO ENERGY, INC.
By: /s/ Paul M. Rady
-----------------------------------------
Its President and Chief Executive Officer
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