Exhibit 10.9

BMC SOFTWARE, INC.

2002 EMPLOYEE INCENTIVE PLAN

(Conformed Version)

I. PURPOSE

The purpose of the BMC SOFTWARE, INC. 2002 EMPLOYEE INCENTIVE PLAN (the “Plan”)
is to provide a means through which BMC SOFTWARE, INC., a Delaware corporation
(the “Company”), and its Affiliates may attract able persons to enter the employ
of the Company and its Affiliates and to provide a means whereby those
individuals upon whom the responsibilities of the successful administration and
management of the Company and its Affiliates rest, and whose present and
potential contributions to the Company and its Affiliates are of importance, can
acquire and maintain stock ownership, thereby strengthening their concern for
the welfare of the Company and its Affiliates. A further purpose of the Plan is
to provide such individuals with additional incentive and reward opportunities
designed to enhance the profitable growth of the Company and its Affiliates.
Accordingly, the Plan provides for the granting of Incentive Stock Options,
options that do not constitute Incentive Stock Options, Performance Awards, and
Phantom Stock Awards, or any combination of the foregoing, as is best suited to
the circumstances of the particular employee as provided herein.

II. DEFINITIONS

The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:

(a) “Affiliate” means any corporation, partnership, limited liability company or
partnership, association, trust or other organization which, directly or
indirectly, controls, is controlled by, or is under common control with, the
Company.

(b) “Award” means, individually or collectively, any Option, Performance Award
or Phantom Stock Award.

(c) “Board” means the Board of Directors of the Company.

(d) “Code” means the Internal Revenue Code of 1986, as amended. Reference in the
Plan to any section of the Code shall be deemed to include any amendments or
successor provisions to such section and any regulations under such section.

(e) “Committee” means a committee of the Board that is selected by the Board as
provided in Paragraph IV(a).

(f) “Common Stock” means the common stock, par value $.01 per share, of the
Company, or any security into which such common stock may be changed by reason
of any transaction or event of the type described in Paragraph X.

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(g) “Company” means BMC Software, Inc., a Delaware corporation.

(h) “Corporate Change” shall have the meaning assigned to such term in Paragraph
X(c) of the Plan.

(i) “Director” means an individual who is a member of the Board.

(j) An “employee” means any person (including a Director) in an employment
relationship with the Company or any Affiliate.

(k) “Fair Market Value” means, as of any specified date, the mean of the high
and low sales prices of the Common Stock (i) reported on the stock exchange
composite tape on that date or (ii) if the Common Stock is not listed on a
national stock exchange, reported by the National Market System of NASDAQ on
that date (or such other reporting service approved by the Committee); or, in
either case, if no prices are reported on that date, on the last preceding date
on which such prices of the Common Stock are so reported. If the Common Stock is
traded over the counter at the time a determination of its fair market value is
required to be made hereunder, its fair market value shall be deemed to be equal
to the average between the reported high and low or closing bid and asked prices
of Common Stock on the most recent date on which Common Stock was publicly
traded. In the event Common Stock is not publicly traded at the time a
determination of its value is required to be made hereunder, the determination
of its fair market value shall be made by the Committee in such manner as it
deems appropriate.

(l) “Incentive Stock Option” means an incentive stock option within the meaning
of section 422 of the Code

(m) “1934 Act” means the Securities Exchange Act of 1934, as amended.

(n) “Option” means an Award granted under Paragraph VII of the Plan and includes
both Incentive Stock Options to purchase Common Stock and Options that do not
constitute Incentive Stock Options to purchase Common Stock.

(o) “Option Agreement” means a written agreement between the Company and a
Participant with respect to an Option.

(p) “Participant” means an employee who has been granted an Award.

(q) “Performance Award” means an Award granted under Paragraph VIII of the Plan.

(r) “Performance Award Agreement” means a written agreement between the Company
and a Participant with respect to a Performance Award.

(s) “Phantom Stock Award” means an Award granted under Paragraph IX of the Plan.

(t) “Phantom Stock Award Agreement” means a written agreement between the
Company and a Participant with respect to a Phantom Stock Award.

 

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(u) “Plan” means the BMC Software, Inc. 2002 Employee Incentive Plan, as amended
from time to time.

(v) “Rule 16b-3” means SEC Rule 16b-3 promulgated under the 1934 Act, as such
may be amended from time to time, and any successor rule, regulation or statute
fulfilling the same or a similar function.

(w) “Stock Appreciation Right” shall have the meaning assigned to such term in
Paragraph VII(d) of the Plan.

III. EFFECTIVE DATE AND DURATION OF THE PLAN

The Plan shall become effective upon the date of its adoption by the Board,
provided the Plan is approved by the stockholders of the Company within 12
months thereafter. Notwithstanding any provision in the Plan, no Option shall be
exercisable and no Performance Award or Phantom Stock Award shall vest or become
satisfiable prior to such stockholder approval. No further Awards may be granted
under the Plan after 10 years from the date the Plan is adopted by the Board.
The Plan shall remain in effect until all Options granted under the Plan have
been exercised or expired and all Performance Awards and Phantom Stock Awards
have been satisfied or expired.

IV. ADMINISTRATION

(a) Composition of Committee. The Plan shall be administered by a committee of,
and appointed by, the Board that shall be comprised solely of two or more
outside Directors (within the meaning of the term “outside directors” as used in
section 162(m) of the Code and applicable interpretive authority thereunder and
within the meaning of the term “Non-Employee Director” as defined in Rule
16b-3).

(b) Powers. Subject to the express provisions of the Plan, the Committee shall
have authority, in its discretion, to determine which employees shall receive an
Award, the time or times when such Award shall be made, the type of Award that
shall be made, the number of shares to be subject to each Option, the number of
shares subject to or the value of each Performance Award, and the value of each
Phantom Stock Award. In making such determinations, the Committee shall take
into account the nature of the services rendered by the respective employees,
their present and potential contribution to the Company’s success and such other
factors as the Committee in its sole discretion shall deem relevant.

(c) Additional Powers. The Committee shall have such additional powers as are
delegated to it by the other provisions of the Plan. Subject to the express
provisions of the Plan, this shall include the power to construe the Plan and
the respective agreements executed hereunder, to prescribe rules and regulations
relating to the Plan, and to determine the terms, restrictions and provisions of
the agreement relating to each Award, including such terms, restrictions and
provisions as shall be requisite in the judgment of the Committee to cause
designated Options to qualify as Incentive Stock Options, and to make all other
determinations necessary or advisable for administering the Plan. The Committee
may correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any agreement relating to an Award in the manner and to the
extent it shall deem expedient to carry it into effect. The

 

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determinations of the Committee on the matters referred to in this Paragraph IV
shall be conclusive.

(d) Delegation of Authority by the Committee. Notwithstanding the preceding
provisions of this Paragraph IV or any other provision of the Plan to the
contrary, the Committee may from time to time, in its sole discretion, delegate
to the Chief Executive Officer of the Company the administration (or
interpretation of any provision) of the Plan, and the right to grant Awards
under the Plan, insofar as such administration (and interpretation) and power to
grant Awards relates to any person who is not subject to Section 16 of the 1934
Act (including any successor section to the same or similar effect). Any such
delegation may be effective only so long as the Chief Executive Officer of the
Company is a Director, and the Committee may revoke such delegation at any time.
The Committee may put any conditions and restrictions on the powers that may be
exercised by the Chief Executive Officer of the Company upon such delegation as
the Committee determines in its sole discretion. In the event of any conflict in
a determination or interpretation under the Plan as between the Committee and
the Chief Executive Officer of the Company, the determination or interpretation,
as applicable, of the Committee shall be conclusive.

V. SHARES SUBJECT TO THE PLAN; AWARD LIMITS;

GRANT OF AWARDS

(a) Shares Subject to the Plan and Award Limits. Subject to adjustment in the
same manner as provided in Paragraph X with respect to shares of Common Stock
subject to Options then outstanding, the aggregate number of shares of Common
Stock that may be issued under the Plan shall not exceed 3,000,000 shares;
provided, however, that the maximum number of shares shall be reduced effective
August 21, 2007, by the number of shares remaining subject to the Plan
immediately prior to such date that are not then subject to outstanding grants.
Shares shall be deemed to have been issued under the Plan only (i) to the extent
actually issued and delivered pursuant to an Award or (ii) to the extent an
Award denominated in shares of Common Stock is settled in cash. To the extent
that an Award lapses or the rights of its holder terminate, any shares of Common
Stock subject to such Award shall again be available for the grant of an Award
under the Plan. Notwithstanding any provision in the Plan to the contrary,
(1) the maximum number of shares of Common Stock that may be subject to Awards
(other than Options) denominated in shares of Common Stock is 1,500,000 shares
of Common Stock (subject to adjustment in the same manner as provided in
Paragraph X with respect to shares of Common Stock subject to Options then
outstanding), (2) the maximum number of shares of Common Stock that may be
subject to Awards denominated in shares of Common Stock granted to any one
individual during the term of the Plan may not exceed 1,500,000 shares of Common
Stock (subject to adjustment in the same manner as provided in Paragraph X with
respect to shares of Common Stock subject to Options then outstanding), and
(3) the maximum amount of compensation that may be paid under all Performance
Awards denominated in cash (including the Fair Market Value of any shares of
Common Stock paid in satisfaction of such Performance Awards) granted to any one
individual during any calendar year may not exceed $5,000,000, and any payment
due with respect to a Performance Award shall be paid no later than 10 years
after the date of grant of such Performance Award. The limitations set forth in
clauses (2) and (3) of the preceding sentence shall be applied in a manner that
will permit compensation generated under the Plan to constitute
“performance-based” compensation for purposes of section 162(m)

 

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of the Code, including, without limitation, counting against such maximum number
of shares, to the extent required under section 162(m) of the Code and
applicable interpretive authority thereunder, any shares subject to Options that
are canceled or repriced.

(b) Grant of Awards. The Committee may from time to time grant Awards to one or
more employees determined by it to be eligible for participation in the Plan in
accordance with the terms of the Plan.

(c) Stock Offered. Subject to the limitations set forth in Paragraph V(a), the
stock to be offered pursuant to the grant of an Award may be authorized but
unissued Common Stock or Common Stock previously issued and outstanding and
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Awards at the termination of the Plan shall cease
to be subject to the Plan but, until termination of the Plan, the Company shall
at all times make available a sufficient number of shares to meet the
requirements of the Plan.

VI. ELIGIBILITY

Awards may be granted only to persons who, at the time of grant, are employees.
An Award may be granted on more than one occasion to the same person, and,
subject to the limitations set forth in the Plan, such Award may include an
Incentive Stock Option, an Option that is not an Incentive Stock Option, a
Performance Award, a Phantom Stock Award, or any combination thereof.

VII. STOCK OPTIONS

(a) Option Period. The term of each Option shall be as specified by the
Committee at the date of grant, but in no event shall an Option be exercisable
after the expiration of 10 years from the date of grant.

(b) Limitations on Exercise of Option. An Option shall be exercisable in whole
or in such installments and at such times as determined by the Committee.

(c) Special Limitations on Incentive Stock Options. An Incentive Stock Option
may be granted only to an individual who is employed by the Company or any
parent or subsidiary corporation (as defined in section 424 of the Code) at the
time the Option is granted. To the extent that the aggregate Fair Market Value
(determined at the time the respective Incentive Stock Option is granted) of
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by an individual during any calendar year under all incentive
stock option plans of the Company and its parent and subsidiary corporations
exceeds $100,000, such Incentive Stock Options shall be treated as Options which
do not constitute Incentive Stock Options. The Committee shall determine, in
accordance with applicable provisions of the Code, Treasury Regulations and
other administrative pronouncements, which of a Participant’s Incentive Stock
Options will not constitute Incentive Stock Options because of such limitation
and shall notify the Participant of such determination as soon as practicable
after such determination. No Incentive Stock Option shall be granted to an
individual if, at the time the Option is granted, such individual owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of its parent or subsidiary

 

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corporation, within the meaning of section 422(b)(6) of the Code, unless (i) at
the time such Option is granted the option price is at least 110% of the Fair
Market Value of the Common Stock subject to the Option and (ii) such Option by
its terms is not exercisable after the expiration of five years from the date of
grant. An Incentive Stock Option shall be exercisable during the Participant’s
lifetime only by such Participant or the Participant’s guardian or legal
representative.

(d) Option Agreement. Each Option shall be evidenced by an Option Agreement in
such form and containing such provisions not inconsistent with the provisions of
the Plan as the Committee from time to time shall approve, including, without
limitation, provisions to qualify an Incentive Stock Option under section 422 of
the Code. Each Option Agreement shall specify the effect of termination of
employment on the exercisability of the Option. An Option Agreement may provide
for the payment of the option price, in whole or in part, by the delivery of a
number of shares of Common Stock (plus cash if necessary) having a Fair Market
Value equal to such option price. Moreover, an Option Agreement may provide for
a “cashless exercise” of the Option by establishing procedures satisfactory to
the Committee with respect thereto. Further, an Option Agreement may provide for
the surrender of the right to purchase shares under the Option in return for a
payment in cash or shares of Common Stock or a combination of cash and shares of
Common Stock equal in value to the excess of the Fair Market Value of the shares
with respect to which the right to purchase is surrendered over the option price
therefor (“Stock Appreciation Rights”), on such terms and conditions as the
Committee in its sole discretion may prescribe. In the case of any such Stock
Appreciation Right that is granted in connection with an Incentive Stock Option,
such right shall be exercisable only when the Fair Market Value of the Common
Stock exceeds the price specified therefor in the Option or the portion thereof
to be surrendered. The terms and conditions of the respective Option Agreements
need not be identical. Subject to the consent of the Participant, the Committee
may, in its sole discretion, amend an outstanding Option Agreement from time to
time in any manner that is not inconsistent with the provisions of the Plan
(including, without limitation, an amendment that accelerates the time at which
the Option, or a portion thereof, may be exercisable).

(e) Option Price and Payment. The price at which a share of Common Stock may be
purchased upon exercise of an Option shall be determined by the Committee but,
subject to adjustment as provided in Paragraph X, such purchase price shall not
be less than the Fair Market Value of a share of Common Stock on the date such
Option is granted. The Option or portion thereof may be exercised by delivery of
an irrevocable notice of exercise to the Company, as specified by the Committee.
The purchase price of the Option or portion thereof shall be paid in full in the
manner prescribed by the Committee. Separate stock certificates shall be issued
by the Company for those shares acquired pursuant to the exercise of an
Incentive Stock Option and for those shares acquired pursuant to the exercise of
any Option that does not constitute an Incentive Stock Option.

(f) Restrictions on Repricing of Options. Except as provided in Paragraph X, the
Committee may not, without approval of the stockholders of the Company, amend
any outstanding Option Agreement to lower the option price (or cancel and
replace any outstanding Option Agreement with Option Agreements having a lower
option price).

 

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(g) Stockholder Rights and Privileges. The Participant shall be entitled to all
the privileges and rights of a stockholder only with respect to such shares of
Common Stock as have been purchased under the Option and for which certificates
of stock have been registered in the Participant’s name.

(h) Options and Rights in Substitution for Options Granted by Other Employers.
Options and Stock Appreciation Rights may be granted under the Plan from time to
time in substitution for options held by individuals providing services to
corporations or other entities who become employees as a result of a merger or
consolidation or other business transaction with the Company or any Affiliate.

VIII. PERFORMANCE AWARDS

(a) Performance Period. The Committee shall establish, with respect to and at
the time of each Performance Award, the number of shares of Common Stock subject
to, or the maximum value of, the Performance Award and the performance period
over which the performance applicable to the Performance Award shall be
measured.

(b) Performance Measures. A Performance Award shall be awarded to a Participant
contingent upon future performance of the Company or any Affiliate, division, or
department thereof during the performance period. The Committee shall establish
the performance measures applicable to such performance either (i) prior to the
beginning of the performance period or (ii) within 90 days after the beginning
of the performance period if the outcome of the performance targets is
substantially uncertain at the time such targets are established, but not later
than the date that 25% of the performance period has elapsed; provided such
measures may be made subject to adjustment for specified significant
extraordinary items or events. The performance measures may be absolute,
relative to one or more other companies, or relative to one or more indexes. The
performance measures established by the Committee may be based upon (1) the
price of a share of Common Stock, (2) the Company’s earnings per share, (3) the
Company’s market share, (4) the market share of a business unit of the Company
designated by the Committee, (5) the Company’s sales, (6) the sales of a
business unit of the Company designated by the Committee, (7) the maintenance
revenue or deferred revenue of the Company or of a business unit of the Company
designated by the Committee, (8) the ratable license revenue of the Company or
of a business unit of the Company designated by the Committee, (9) the linearity
of sales or the percentage of sales of the Company, or of a business unit of the
Company designated by the Committee, before a specified time period in a quarter
or fiscal year, (10) the return on capital employed by the Company, (11) the
Company’s margin or the margin of a business unit of the Company designated by
the Committee, (12) the return on capital employed by a business unit of the
Company designated by the Committee, (13) the net income (before or after taxes)
of the Company or any business unit of the Company designated by the Committee,
(14) the cash flow of the Company or any business unit of the Company designated
by the Committee, (15) the earnings before or after interest, taxes,
depreciation, and/or amortization of the Company or any business unit of the
Company designated by the Committee, (16) the economic value added, (17) the
return on stockholders’ equity achieved by the Company, (18) the total
stockholders’ return achieved by the Company, (19) the productivity of employees
of the Company or of a business unit of the Company designated by the Committee
as measured by revenues, costs or earnings per employee, (20) the expenses or
operating expenses

 

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of the Company or any business unit of the Company designated by the Committee,
or (21) a combination of any of the foregoing. The Committee, in its sole
discretion, may provide for an adjustable Performance Award value based upon the
level of achievement of performance measures.

(c) Awards Criteria. In determining the value of Performance Awards, the
Committee shall take into account a Participant’s responsibility level,
performance, potential, other Awards, and such other considerations as it deems
appropriate. The Committee, in its sole discretion, may provide for a reduction
in the value of a Participant’s Performance Award during the performance period.

(d) Payment. Following the end of the performance period, the holder of a
Performance Award shall be entitled to receive payment of an amount not
exceeding the number of shares of Common Stock subject to, or the maximum value
of, the Performance Award, based on the achievement of the performance measures
for such performance period, as determined and certified in writing by the
Committee. Payment of a Performance Award may be made in cash, Common Stock, or
a combination thereof, as determined by the Committee. Payment shall be made in
a lump sum or in installments as prescribed by the Committee. If a Performance
Award covering shares of Common Stock is to be paid in cash, such payment shall
be based on the Fair Market Value of the Common Stock on the payment date.

(e) Termination of Award. A Performance Award shall terminate if the Participant
does not remain continuously in the employ of the Company and its Affiliates at
all times during the applicable performance period, except as may be determined
by the Committee.

(f) Performance Award Agreements. At the time any Award is made under this
Paragraph VIII, the Company and the Participant shall enter into a Performance
Award Agreement setting forth each of the matters contemplated hereby, and such
additional matters as the Committee may determine to be appropriate. The terms
and provisions of the respective Performance Award Agreements need not be
identical.

IX. PHANTOM STOCK AWARDS

(a) Phantom Stock Awards. Phantom Stock Awards are rights to receive shares of
Common Stock (or the Fair Market Value thereof), or rights to receive an amount
equal to any appreciation or increase in the Fair Market Value of Common Stock
over a specified period of time, which vest over a period of time as established
by the Committee, without satisfaction of any performance criteria or
objectives. The Committee may, in its discretion, require payment or other
conditions of the Participant respecting any Phantom Stock Award.

(b) Award Period. The Committee shall establish, with respect to and at the time
of each Phantom Stock Award, a period over which the Award shall vest with
respect to the Participant.

(c) Awards Criteria. In determining the value of Phantom Stock Awards, the
Committee shall take into account a Participant’s responsibility level,
performance, potential, other Awards, and such other considerations as it deems
appropriate.

 

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(d) Payment. Following the end of the vesting period for a Phantom Stock Award
(or at such other time as the applicable Phantom Stock Award Agreement may
provide), the holder of a Phantom Stock Award shall be entitled to receive
payment of an amount, not exceeding the maximum value of the Phantom Stock
Award, based on the then vested value of the Award. Payment of a Phantom Stock
Award may be made in cash, Common Stock, or a combination thereof as determined
by the Committee. Payment shall be made in a lump sum or in installments as
prescribed by the Committee. Any payment to be made in cash shall be based on
the Fair Market Value of the Common Stock on the payment date. Cash dividend
equivalents may be paid during or after the vesting period with respect to a
Phantom Stock Award, as determined by the Committee.

(e) Termination of Award. A Phantom Stock Award shall terminate if the
Participant does not remain continuously in the employ of the Company and its
Affiliates at all times during the applicable vesting period, except as may be
otherwise determined by the Committee.

(f) Phantom Stock Award Agreements. At the time any Award is made under this
Paragraph IX, the Company and the Participant shall enter into a Phantom Stock
Award Agreement setting forth each of the matters contemplated hereby, and such
additional matters as the Committee may determine to be appropriate. The terms
and provisions of the respective Phantom Stock Award Agreements need not be
identical.

X. RECAPITALIZATION OR REORGANIZATION

(a) No Effect on Right or Power. The existence of the Plan and the 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 or any
Affiliate’s capital structure or its business, any merger or consolidation of
the Company or any Affiliate, any issue of debt or equity securities ahead of or
affecting Common Stock or the rights thereof, the dissolution or liquidation of
the Company or any Affiliate or any sale, lease, exchange or other disposition
of all or any part of its assets or business or any other corporate act or
proceeding.

(b) Subdivision or Consolidation of Shares; Stock Dividends. The shares with
respect to which Awards may be granted are shares of Common Stock as presently
constituted, but if, and whenever, prior to the expiration of an Award
theretofore granted, the Company shall effect a subdivision or consolidation of
shares of Common Stock or the payment of a stock dividend on Common Stock
without receipt of consideration by the Company, the number of shares of Common
Stock with respect to which such Award may thereafter be exercised or satisfied,
as applicable (i) in the event of an increase in the number of outstanding
shares shall be proportionately increased, and the purchase price per share
shall be proportionately reduced, and (ii) in the event of a reduction in the
number of outstanding shares shall be proportionately reduced, and the purchase
price per share shall be proportionately increased. Any fractional share
resulting from such adjustment shall be rounded up to the next whole share.

(c) Recapitalizations and Corporate Changes. If the Company recapitalizes,
reclassifies its capital stock, or otherwise changes its capital structure (a
“recapitalization”), the

 

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number and class of shares of Common Stock covered by an Award theretofore
granted shall be adjusted so that such Award shall thereafter cover the number
and class of shares of stock and securities to which the Participant would have
been entitled pursuant to the terms of the recapitalization if, immediately
prior to the recapitalization, the Participant had been the holder of record of
the number of shares of Common Stock then covered by such Award. If (i) the
Company shall not be the surviving entity in any merger or consolidation (or
survives only as a subsidiary of an entity), (ii) the Company sells, leases or
exchanges or agrees to sell, lease or exchange all or substantially all of its
assets to any other person or entity, (iii) the Company is to be dissolved and
liquidated, (iv) any person or entity, including a “group” as contemplated by
Section 13(d)(3) of the 1934 Act, acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of the Company’s voting stock (based upon voting power), or
(v) as a result of or in connection with a contested election of Directors, the
persons who were Directors of the Company before such election shall cease to
constitute a majority of the Board (each such event is referred to herein as a
“Corporate Change”), no later than (x) 10 days after the approval by the
stockholders of the Company of such merger, consolidation, reorganization, sale,
lease or exchange of assets or dissolution or such election of Directors or
(y) 30 days after a Corporate Change of the type described in clause (iv), the
Committee, acting in its sole discretion without the consent or approval of any
Participant, shall effect one or more of the following alternatives, which
alternatives may vary among individual Participants and which may vary among
Options held by any individual Participant: (1) accelerate the time at which
Options then outstanding may be exercised so that such Options may be exercised
in full for a limited period of time on or before a specified date (before or
after such Corporate Change) fixed by the Committee, after which specified date
all unexercised Options and all rights of Participants thereunder shall
terminate, (2) require the mandatory surrender to the Company by selected
Participants of some or all of the outstanding Options held by such Participants
(irrespective of whether such Options are then exercisable under the provisions
of the Plan) as of a date, before or after such Corporate Change, specified by
the Committee, in which event the Committee shall thereupon cancel such Options
and the Company shall pay (or cause to be paid) to each Participant an amount of
cash per share equal to the excess, if any, of the amount calculated in
Subparagraph (d) below (the “Change of Control Value”) of the shares subject to
such Option over the exercise price(s) under such Options for such shares, or
(3) make such adjustments to Options then outstanding as the Committee deems
appropriate to reflect such Corporate Change (provided, however, that the
Committee may determine in its sole discretion that no adjustment is necessary
to Options then outstanding), including, without limitation, adjusting an Option
to provide that the number and class of shares of Common Stock covered by such
Option shall be adjusted so that such Option shall thereafter cover securities
of the surviving or acquiring corporation or other property (including, without
limitation, cash) as determined by the Committee in its sole discretion.

(d) Change of Control Value. For the purposes of clause (2) in Subparagraph
(c) above, the “Change of Control Value” shall equal the amount determined in
clause (i), (ii) or (iii), whichever is applicable, as follows: (i) the per
share price offered to stockholders of the Company in any such merger,
consolidation, sale of assets or dissolution transaction, (ii) the price per
share offered to stockholders of the Company in any tender offer or exchange
offer whereby a Corporate Change takes place, or (iii) if such Corporate Change
occurs other than pursuant to a tender or exchange offer, the fair market value
per share of the shares into which such Options being surrendered are
exercisable, as determined by the Committee as of the date

 

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determined by the Committee to be the date of cancellation and surrender of such
Options. In the event that the consideration offered to stockholders of the
Company in any transaction described in this Subparagraph (d) or Subparagraph
(c) above consists of anything other than cash, the Committee shall determine
the fair cash equivalent of the portion of the consideration offered which is
other than cash.

(e) Other Changes in the Common Stock. In the event of changes in the
outstanding Common Stock by reason of recapitalizations, reorganizations,
mergers, consolidations, combinations, split-ups, split-offs, spin-offs,
exchanges or other relevant changes in capitalization or distributions to the
holders of Common Stock occurring after the date of the grant of any Award and
not otherwise provided for by this Paragraph X, such Award and any agreement
evidencing such Award shall be subject to adjustment by the Committee at its
sole discretion as to the number and price of shares of Common Stock or other
consideration subject to such Award. In the event of any such change in the
outstanding Common Stock or distribution to the holders of Common Stock, or upon
the occurrence of any other event described in this Paragraph X, the aggregate
number of shares available under the Plan, the maximum number of shares that may
be subject to Performance Awards denominated in shares, and the maximum number
of shares that may be subject to Awards granted to any one individual shall be
appropriately adjusted to the extent, if any, determined by the Committee, whose
determination shall be conclusive. Notwithstanding the foregoing, except as
otherwise provided by the Committee, upon the occurrence of a Corporate Change,
the Committee, acting in its sole discretion without the consent or approval of
any Participant, may require the mandatory surrender to the Company by selected
Participants of some or all of the outstanding Performance Awards and Phantom
Stock Awards as of a date, before or after such Corporate Change, specified by
the Committee, in which event the Committee shall thereupon cancel such
Performance Awards and Phantom Stock Awards and the Company shall pay (or cause
to be paid) to each Participant an amount of cash equal to the maximum value of
such Performance Award or Phantom Stock Award which, in the event the applicable
performance or vesting period set forth in such Performance Award or Phantom
Stock Award has not been completed, shall be multiplied by a fraction, the
numerator of which is the number of days during the period beginning on the
first day of the applicable performance or vesting period and ending on the date
of the surrender, and the denominator of which is the aggregate number of days
in the applicable performance or vesting period.

(f) Stockholder Action. Any adjustment provided for in the above Subparagraphs
shall be subject to any required stockholder action.

(g) No Adjustments unless Otherwise Provided. Except as hereinbefore expressly
provided, the issuance by the Company of shares of stock of any class or
securities convertible into shares of stock of any class, for cash, property,
labor or services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case whether or not
for fair value, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of shares of Common Stock subject to Awards
theretofore granted or the purchase price per share, if applicable.

 

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XI. AMENDMENT AND TERMINATION OF THE PLAN

The Board in its discretion may terminate the Plan at any time with respect to
any shares of Common Stock for which Awards have not theretofore been granted.
The Board shall have the right to alter or amend the Plan or any part thereof
from time to time; provided that no change in the Plan may be made that would
impair the rights of a Participant with respect to an Award theretofore granted
without the consent of the Participant, and provided, further, that the Board
may not, without approval of the stockholders of the Company, (a) amend the Plan
to increase the maximum aggregate number of shares that may be issued under the
Plan or change the class of individuals eligible to receive Awards under the
Plan, or (b) amend or delete Paragraph VII(f).

XII. MISCELLANEOUS

(a) No Right To An Award. Neither the adoption of the Plan nor any action of the
Board or of the Committee shall be deemed to give any individual any right to be
granted an Option, a right to a Performance Award or a right to a Phantom Stock
Award, or any other rights hereunder except as may be evidenced by an Award
agreement duly executed on behalf of the Company, and then only to the extent
and on the terms and conditions expressly set forth therein. 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 funds or assets to assure the
performance of its obligations under any Award.

(b) No Employment Rights Conferred. Nothing contained in the Plan shall
(i) confer upon any employee any right with respect to continuation of
employment with the Company or any Affiliate or (ii) interfere in any way with
the right of the Company or any Affiliate to terminate his or her employment at
any time.

(c) Other Laws; Withholding. The Company shall not be obligated to issue any
Common Stock pursuant to any Award granted under the Plan at any time when the
shares covered by such Award have not been registered under the Securities Act
of 1933, as amended, and such other state and federal laws, rules and
regulations as the Company or the Committee deems applicable and, in the opinion
of legal counsel for the Company, there is no exemption from the registration
requirements of such laws, rules and regulations available for the issuance and
sale of such shares. No fractional shares of Common Stock shall be delivered,
nor shall any cash in lieu of fractional shares be paid. The Company shall have
the right to deduct in connection with all Awards any taxes required by law to
be withheld and to require any payments required to enable it to satisfy its
withholding obligations.

(d) No Restriction on Corporate Action. Nothing contained in the Plan shall be
construed to prevent the Company or any Affiliate from taking any action which
is deemed by the Company or such Affiliate to be appropriate or in its best
interest, whether or not such action would have an adverse effect on the Plan or
any Award made under the Plan. No Participant, beneficiary or other person shall
have any claim against the Company or any Affiliate as a result of any such
action.

 

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(e) Restrictions on Transfer. An Incentive Stock Option shall not be
transferable otherwise than by will or the laws of descent and distribution. An
Award that does not constitute an Incentive Stock Option shall not be
transferable otherwise than (i) by will or the laws of descent and distribution,
(ii) pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder, or (iii) with the consent of the Committee.

(f) Governing Law. The Plan shall be governed by, and construed in accordance
with, the laws of the State of Texas, without regard to conflicts of laws
principles thereof.

 

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