EXHIBIT 10.9

MARATHON OIL CORPORATION

2003 INCENTIVE COMPENSATION PLAN

Plan. The Marathon Oil Corporation 2003 Incentive Compensation Plan (the “Plan”)
was adopted by the Corporation to reward certain key Employees of the
Corporation and its Affiliates and Non-employee Directors of the Corporation by
providing for certain cash benefits and by enabling them to acquire shares of
Common Stock of the Corporation.

Objectives. The purpose of this Marathon Oil Corporation 2003 Incentive
Compensation Plan is to further the interests of the Corporation and its
stockholders by providing incentives in the form of Awards to key Employees and
Non-employee Directors who can contribute materially to the success and
profitability of the Corporation and its Affiliates. Such Awards will recognize
and reward outstanding performances and individual contributions and give
Participants in the Plan an interest in the Corporation parallel to that of the
stockholders, thus enhancing the proprietary and personal interest of such
Participants in the Corporation’s continued success and progress. This Plan will
also enable the Corporation and its Affiliates to attract and retain such
Employees and Non-employee Directors.

Definitions. As used herein, the terms set forth below shall have the following
respective meanings:

“Administrator” means (i) with respect to Employee Awards, the Committee, and
(ii) with respect to Director Awards, the Board.

“Affiliate” means a Subsidiary or Joint Venture.

“Authorized Officer” means the Chief Executive Officer of the Corporation (or
any other senior officer of the Corporation to whom he or she shall delegate the
authority to execute any Award Agreement, where applicable).

“Award” means an Employee Award or a Director Award.

“Award Agreement” means any Employee Award Agreement or Director Award
Agreement.

“Board” means the Board of Directors of the Corporation.

“Cash Award” means an award denominated in cash.

“Change in Control,” unless otherwise defined by the Committee, means a change
in 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 Securities
Exchange Act of 1934, as amended, whether or not the Corporation is then subject
to such reporting requirement; provided, that, without limitation, such a change
in control shall be deemed to have occurred if:

(i)     any person (as defined in Sections 13(d) and 14(d) of the Exchange Act)
(a “Person”) is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation (not including in the amount of the securities beneficially owned by
such person any such securities acquired directly from the Corporation or its
affiliates) representing twenty percent (20%) or more of the combined voting
power of the Corporation’s then outstanding voting securities; provided,
however, that for purposes of this Plan the term “Person” shall not include
(A) the Corporation or any of its subsidiaries, (B) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its subsidiaries, (C) an underwriter temporarily holding securities pursuant to
an offering of such securities, or (D) a corporation owned, directly or
indirectly, by the stockholders of the Corporation in substantially the

 

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same proportions as their ownership of stock of the Corporation; and provided,
further, however, that for purposes of this paragraph (i), there shall be
excluded any Person who becomes such a beneficial owner in connection with an
Excluded Transaction (as defined in paragraph (iii) below);

(ii)     the following individuals cease for any reason to constitute a majority
of the number of Directors then serving: individuals who, on the date hereof,
constitute the Board and any new Director (other than a Director whose initial
assumption of office is in connection with an actual or threatened election
contest including but not limited to a consent solicitation, relating to the
election of Directors of the Corporation) whose appointment or election by the
Board or nomination for election by the Corporation’s stockholders was approved
or recommended by a vote of at least two-thirds (2/3) of the directors then
still in office who either were Directors on the date hereof or whose
appointment, election or nomination for election was previously so approved; or

(iii)     there is consummated a merger or consolidation of the Corporation or
any direct or indirect subsidiary thereof with any other corporation, other than
a merger or consolidation (an “Excluded Transaction”) which would result in the
holders of the voting securities of the Corporation outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving corporation or any
parent thereof) at least 50% of the combined voting power of the voting
securities of the entity surviving the merger or consolidation (or the parent of
such surviving entity) immediately after such merger or consolidation, or the
stockholders of the Corporation approve a plan of complete liquidation of the
Corporation, or there is consummated the sale or other disposition of all or
substantially all of the Corporation’s assets.

Notwithstanding any other provision to the contrary, in no event shall the
transfer of ownership interests in the Corporation in and of itself constitute a
Change in Control under this Plan.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Committee” means the independent Committee of the Board as is designated by the
Board to administer the Plan.

“Common Stock” means Marathon Oil Corporation common stock, par value $1.00 per
share.

“Corporation” means Marathon Oil Corporation, a Delaware corporation, or any
successor thereto.

“Director Award” means any Stock Award or Performance Award granted, whether
singly, in combination or in tandem, to a Participant who is a Non-employee
Director pursuant to such applicable terms, conditions and limitations
(including treatment as a Performance Award) as the Board may establish in order
to fulfill the objectives of the Plan.

“Director Award Agreement” means a written agreement setting forth the terms,
conditions and limitations applicable to a Director Award, to the extent the
Board determines such agreement is necessary.

“Disability” means a disability that renders the Participant unable to engage in
any occupation in accordance with the terms of the Long Term Disability Plan of
Marathon Oil Company, the Long Term Disability Plan of Marathon Ashland
Petroleum LLC, or the Speedway SuperAmerica LLC Long Term Disability Plan, as
applicable.

“Dividend Equivalents” means, with respect to Stock Units or shares of
Restricted Stock that are to be issued at the end of the Restriction Period, an
amount equal to all dividends and other distributions (or the economic
equivalent thereof) that are payable to stockholders of record during the
Restriction Period on a like number of shares of Common Stock.

“Employee” means an employee of the Corporation or any of its Affiliates.

 

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“Employee Award” means any Option, SAR, Stock Award, Cash Award or Performance
Award granted, whether singly, in combination or in tandem, to a Participant who
is an Employee pursuant to such applicable terms, conditions and limitations
(including treatment as a Performance Award) as the Committee may establish in
order to fulfill the objectives of the Plan.

“Employee Award Agreement” means a written agreement setting forth the terms,
conditions and limitations applicable to an Employee Award, to the extent the
Committee determines such agreement is necessary.

“Equity Award” means any Option, SAR, Stock Award, or Performance Award (other
than a Performance Award denominated in cash) granted to a Participant under the
Plan.

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

“Fair Market Value” of a share of Common Stock means, as of a particular date,
(i) (A) if Common Stock is listed on a national securities exchange, the mean
between the highest and lowest sales price per share of such Common Stock on the
consolidated transaction reporting system for the principal national securities
exchange on which shares of Common Stock are listed on that date, or, if there
shall have been no such sale so reported on that date, on the next succeeding
date on which such a sale was so reported, or, at the discretion of the
Committee, the price prevailing on the exchange at the time of exercise, (B) if
Common Stock is not so listed but is quoted on the NASDAQ National Market, the
mean between the highest and lowest sales price per share of Common Stock
reported by the NASDAQ National Market on that date, or, if there shall have
been no such sale so reported on that date, on the next succeeding date on which
such a sale was so reported or, at the discretion of the Committee, the price
prevailing on the NASDAQ National Market at the time of exercise, (C) if Common
Stock is not so listed or quoted, the mean between the closing bid and asked
price on that date, or, if there are no quotations available for such date, on
the next succeeding date on which such quotations shall be available, as
reported by the NASDAQ Stock Market, or, if not reported by the NASDAQ Stock
Market, by the National Quotation Bureau Incorporated or (D) if Common Stock is
not publicly traded, the most recent value determined by an independent
appraiser appointed by the Corporation for such purpose, or (ii) if applicable,
the price per share as determined in accordance with the procedures of a third
party administrator retained by the Corporation to administer the Plan.

“Grant Date” means the date an Award is granted to a Participant pursuant to the
Plan. The Grant Date for a substituted award is the Grant Date of the original
award.

“Grant Price” means the price at which a Participant may exercise his or her
right to receive cash or Common Stock, as applicable, under the terms of an
Award.

“Incentive Stock Option” means an Option that is intended to comply with the
requirements set forth in Section 422 of the Code.

“Joint Venture” means Marathon Ashland Petroleum, LLC and any other joint
venture or partnership in which the Corporation has at least 50% ownership,
voting, capital or profit interests (in whatever form).

“Non-employee Director” means an individual serving as a member of the Board who
is not an Employee of the Corporation or any of its Affiliates.

“Non-qualified Stock Option” means an Option that is not an Incentive Stock
Option.

“Option” means a right to purchase a specified number of shares of Common Stock
at a specified Grant Price, which may be an Incentive Stock Option or a
Non-qualified Stock Option.

“Participant” means an Employee or Non-employee Director to whom an Award has
been granted under this Plan.

“Performance Award” means an Award made pursuant to this Plan that is subject to
the attainment of one or more performance goals.

 

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“Performance Goal” means a standard established by the Committee to determine in
whole or in part whether a Qualified Performance Award shall be earned.

“Qualified Performance Award” means a Performance Award made to a Participant
who is an Employee that is intended to qualify as qualified performance-based
compensation under Section 162(m) of the Code, as described in Section 8(v)(B)
of the Plan.

“Restricted Stock” means Common Stock that is restricted or subject to
forfeiture provisions.

“Restriction Period” means a period of time beginning as of the Grant Date of an
Award of Restricted Stock and ending as of the date upon which the Common Stock
subject to such Award is no longer restricted or subject to forfeiture
provisions.

“Retirement” means termination on or after the time at which the Employee is
eligible for retirement under the Retirement Plan of Marathon Oil Company or the
Marathon Ashland Petroleum LLC Retirement Plan, as applicable.

“Stock Appreciation Right” or “SAR” means a right to receive a payment, in cash
or Common Stock, equal to the excess of the Fair Market Value or other specified
valuation of a specified number of shares of Common Stock on the date the right
is exercised over a specified Grant Price, in each case, as determined by the
Committee.

“Stock Award” means an Award in the form of shares of Common Stock or Stock
Units, including an award of Restricted Stock.

“Stock Unit” means a unit equal to one share of Common Stock (as determined by
the Committee) granted to either an Employee or a Non-employee Director.

“Subsidiary” means any corporation of which the Corporation directly or
indirectly owns shares representing 50% or more of the combined voting power of
the shares of all classes or series of capital stock of such corporation which
have the right to vote generally on matters submitted to a vote of the
stockholders of such corporation.

4. Eligibility.

Employees. Employees eligible for the grant of Employee Awards under this Plan
are those who hold positions of responsibility and whose performance, in the
judgment of the Committee, can have a significant effect on the success of the
Corporation and its Affiliates.

Directors. Members of the Board eligible for the grant of Director Awards under
this Plan are those who are Non-employee Directors.

5. Common Stock Available for Awards. Subject to the provisions of paragraph 17
hereof, no Award shall be granted if it shall result in the aggregate number of
shares of Common Stock issued under the Plan plus the number of shares of Common
Stock covered by or subject to Awards then outstanding (after giving effect to
the grant of the Award in question) to exceed 20,000,000 shares. No more than
8,500,000 shares of Common Stock shall be available for Awards other than
Options or SARs. The number of shares of Common Stock that are the subject of
Awards under this Plan that are forfeited or terminated, expire unexercised, are
settled in cash in lieu of Common Stock or in a manner such that all or some of
the shares covered by an Award are not issued to a Participant or are exchanged
for Awards that do not involve Common Stock, shall again immediately become
available for Awards hereunder. If the Grant Price or other purchase price of
any Option or other Award granted under the Plan is satisfied by tendering
shares of Common Stock to the Company by either actual delivery or by
attestation, or if the tax withholding obligation resulting from the settlement
of any such Option or other Award is satisfied by tendering or withholding
shares of Common Stock, only the number of shares of Common Stock issued net of
the shares of Common Stock tendered or withheld shall be deemed delivered for

 

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purposes of determining the maximum number of shares of Common Stock available
for delivery under the Plan. Shares of Common Stock delivered under the Plan in
settlement, assumption or substitution of outstanding awards or obligations to
grant future awards under the plans or arrangements of another entity shall not
reduce the maximum number of shares of Common Stock available for delivery under
the Plan, to the extent that such settlement, assumption or substitution is a
result of the Company or an Affiliate acquiring another entity or an interest in
another entity. The Committee may from time to time adopt and observe such
procedures concerning the counting of shares against the Plan maximum as it may
deem appropriate. The Board and the appropriate officers of the Corporation
shall from time to time take whatever actions are necessary to file any required
documents with governmental authorities, stock exchanges and transaction
reporting systems to ensure that shares of Common Stock are available for
issuance pursuant to Awards.

6. Administration.

This Plan shall be administered by the Committee except as otherwise provided
herein.

Subject to the provisions hereof, the Committee shall have full and exclusive
power and authority to administer this Plan and to take all actions that are
specifically contemplated hereby or are necessary or appropriate in connection
with the administration hereof. The Committee shall also have full and exclusive
power to interpret this Plan and to adopt such rules, regulations and guidelines
for carrying out this Plan as it may deem necessary or proper, all of which
powers shall be exercised in the best interests of the Corporation and in
keeping with the objectives of this Plan. The Committee may, in its discretion,
provide for the extension of the exercisability of an Employee Award, accelerate
the vesting or exercisability of an Employee Award, eliminate or make less
restrictive any restrictions applicable to an Employee Award, waive any
restriction or other provision of this Plan (insofar as such provision relates
to Employee Awards) or an Employee Award or otherwise amend or modify an
Employee Award in any manner that is either (i) not adverse to the Participant
to whom such Employee Award was granted or (ii) consented to by such
Participant. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan or in any Award in the manner and to
the extent the Committee deems necessary or desirable to further the Plan
purposes. Any decision of the Committee, with respect to Employee Awards, in the
interpretation and administration of this Plan shall lie within its sole and
absolute discretion and shall be final, conclusive and binding on all parties
concerned.

No member of the Committee or officer of the Corporation to whom the Committee
has delegated authority in accordance with the provisions of paragraph 7 of this
Plan shall be liable for anything done or omitted to be done by him or her, by
any member of the Committee or by any officer of the Corporation in connection
with the performance of any duties under this Plan, except for his or her own
willful misconduct or as expressly provided by statute.

The Board shall have the same powers, duties, and authority to administer the
Plan with respect to Director Awards as the Committee retains with respect to
Employee Awards as described above.

7. Delegation of Authority. Following the authorization of a pool of cash or
shares of Common Stock to be available for Awards, the Committee may authorize
the Chief Executive Officer of the Corporation or a committee consisting solely
of members of the Board to grant individual Employee Awards from such pool
pursuant to such conditions or limitations as the Committee may establish. The
Committee may also delegate to the Chief Executive Officer and to other
executive officers of the Corporation its administrative duties under this Plan
(excluding its granting authority) pursuant to such conditions or limitations as
the Committee may establish. The Committee may engage or authorize the
engagement of a third party administrator to carry out administrative functions
under the Plan.

 

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8. Employee Awards.

(a) The Committee shall determine the type or types of Employee Awards to be
made under this Plan and shall designate from time to time the Employees who are
to be the recipients of such Awards. Each Employee Award may, in the discretion
of the Committee, be embodied in an Employee Award Agreement, which shall
contain such terms, conditions and limitations as shall be determined by the
Committee in its sole discretion and, if required by the Committee, shall be
accepted by the Participant to whom the Employee Award is granted and signed by
an Authorized Officer for and on behalf of the Corporation. Employee Awards may
consist of those listed in this paragraph 8(a) and may be granted singly, in
combination or in tandem. Employee Awards may also be granted in combination or
in tandem with, in replacement of, or as alternatives to, grants or rights under
this Plan or any other employee plan of the Corporation or any of its
Affiliates, including the plan of any acquired entity. An Employee Award may
provide for the grant or issuance of additional, replacement or alternative
Employee Awards upon the occurrence of specified events. All or part of an
Employee Award may be subject to conditions established by the Committee, which
may include, but are not limited to, continuous service with the Corporation and
its Affiliates, achievement of specific business objectives, increases in
specified indices, attainment of specified growth rates and other comparable
measurements of performance. Upon the termination of employment by a Participant
who is an Employee, any unexercised, deferred, unvested or unpaid Employee
Awards shall be treated as set forth in the applicable Employee Award Agreement
or as otherwise specified by the Committee.

(i) Option. An Employee Award may be in the form of an Option. On the Grant
Date, the Grant Price of an Option shall be not less than the Fair Market Value
of the Common Stock subject to such Option. The term of the Option shall extend
no more than 10 years after the Grant Date. Options may not include provisions
that “reload” the option upon exercise. Subject to the foregoing provisions, the
terms, conditions and limitations applicable to any Options awarded to Employees
pursuant to this Plan, including the Grant Price, the term of the Options, the
number of shares subject to the Option and the date or dates upon which they
become exercisable, shall be determined by the Committee.

(ii) Stock Appreciation Rights. An Employee Award may be in the form of an SAR.
On the Grant Date, the Grant Price of an SAR shall be not less than the Fair
Market Value of the Common Stock subject to such SAR. The holder of a tandem SAR
may elect to exercise either the option or the SAR, but not both. The exercise
period for an SAR shall extend no more than 10 years after the Grant Date.
Subject to the foregoing provisions, the terms, conditions and limitations
applicable to any SARs awarded to Employees pursuant to this Plan, including the
Grant Price, the term of any SARs and the date or dates upon which they become
exercisable, shall be determined by the Committee.

(iii) Stock Award. An Employee Award may be in the form of a Stock Award. The
terms, conditions and limitations applicable to any Stock Awards granted to
Employees pursuant to this Plan shall be determined by the Committee; provided
that any Stock Award which is not a Performance Award shall have a minimum
Restriction Period of three years from the Grant Date, provided that (i) the
Committee may provide for earlier vesting upon a termination of employment by
reason of death, Disability or Retirement, and (ii) such three-year minimum
Restriction Period shall not apply to a Stock Award that is granted in lieu of
salary or bonus.

(iv) Cash Award. An Employee Award may be in the form of a Cash Award. The
terms, conditions and limitations applicable to any Cash Awards granted to
Employees pursuant to this Plan shall be determined by the Committee.

 

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(v) Performance Award. Without limiting the type or number of Employee Awards
that may be made under the other provisions of this Plan, an Employee Award may
be in the form of a Performance Award. The terms, conditions and limitations
applicable to any Performance Awards granted to Employees pursuant to this Plan
shall be determined by the Committee; provided that any Stock Award which is a
Performance Award shall have a minimum Restriction Period of one year from the
Grant Date, provided that the Committee may provide for earlier vesting upon a
termination of employment by reason of death, Disability or Retirement. The
Committee shall set performance goals in its discretion which, depending on the
extent to which they are met, will determine the value and/or amount of
Performance Awards that will be paid out to the Employee.

(A)     Non-qualified Performance Awards. Performance Awards granted to
Employees that are not intended to qualify as qualified performance-based
compensation under Section 162(m) of the Code shall be based on achievement of
such goals and be subject to such terms, conditions and restrictions as the
Committee or its delegate shall determine.

(B)     Qualified Performance Awards. Performance Awards granted to Employees
under the Plan that are intended to qualify as qualified performance-based
compensation under Section 162(m) of the Code shall be paid, vested or otherwise
deliverable solely on account of the attainment of one or more pre-established,
objective Performance Goals established by the Committee prior to the earlier to
occur of (x) 90 days after the commencement of the period of service to which
the Performance Goal relates or (y) the lapse of 25% of the period of service
(as scheduled in good faith at the time the goal is established), and in any
event while the outcome is substantially uncertain. A Performance Goal is
objective if a third party having knowledge of the relevant facts could
determine whether the goal is met. Such a Performance Goal may be based on one
or more business criteria that apply to the Employee, one or more business
segments, units, or divisions of the Corporation, or the Corporation as a whole,
and if so desired by the Committee, by comparison with a peer group of
companies. A Performance Goal may include one or more of the following:

 

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Stock price measures (including but not limited to growth measures and total
stockholder return);

  •  

Earnings per share (actual or targeted growth);

  •  

Earnings before interest, taxes, depreciation, and amortization (“EBITDA”);

  •  

Economic value added (“EVA”);

  •  

Net income measures (including but not limited to income after capital costs and
income before or after taxes);

  •  

Operating income;

  •  

Cash flow measures;

  •  

Return measures (including but not limited to return on capital employed);

  •  

Operating measures (including but not limited to refinery throughput, oil and
gas reserves, and production);

  •  

Expense targets (including but not limited to finding and development costs and
general and administrative expenses);

  •  

Margins;

  •  

Reserve replacement ratio;

  •  

Refined product measures; and

 

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  •  

Corporate values measures (including but not limited to diversity commitment,
ethics compliance, environmental, and safety).

Unless otherwise stated, such a Performance Goal need not be based upon an
increase under a particular business criterion and could include, for example,
maintaining the status quo or limiting economic losses (measured, in each case,
by reference to specific business criteria). In interpreting Plan provisions
applicable to Performance Goals and Qualified Performance Awards, it is the
intent of the Plan to conform with the standards of Section 162(m) of the Code
and Treasury Regulation §1.162-27(e)(2)(i), as to grants to those Employees
whose compensation is, or is likely to be, subject to Section 162(m) of the
Code, and the Committee in establishing such goals and interpreting the Plan
shall be guided by such provisions. Prior to the payment of any compensation
based on the achievement of Performance Goals, the Committee must certify in
writing that applicable Performance Goals and any of the material terms thereof
were, in fact, satisfied. Subject to the foregoing provisions, the terms,
conditions and limitations applicable to any Qualified Performance Awards made
pursuant to this Plan shall be determined by the Committee.

(b) Notwithstanding anything to the contrary contained in this Plan, the
following limitations shall apply to any Employee Awards made hereunder:

no Participant may be granted, during any calendar year, Employee Awards
consisting of Options or SARs (including Options or SARs that are granted as
Performance Awards) that are exercisable for more than 3,000,000 shares of
Common Stock;

no Participant may be granted, during any calendar year, Employee Awards
consisting of Stock Awards (including Stock Awards that are granted as
Performance Awards) covering or relating to more than 1,000,000 shares of Common
Stock (the limitation set forth in this clause (ii), together with the
limitation set forth in clause (i) above, being hereinafter collectively
referred to as “Stock Based Awards Limitations”); and

no Participant may be granted Employee Awards consisting of cash (including Cash
Awards that are granted as Performance Awards) in respect of any calendar year
having a value determined on the Grant Date in excess of $5,000,000.

9. Director Awards.

(a) The Board may grant Director Awards to the Non-employee Directors of the
Corporation from time to time in accordance with this paragraph 9. Director
Awards may consist of those listed in this paragraph 9 and may be granted
singly, in combination or in tandem. Each Director Award may, in the discretion
of the Board, be embodied in a Director Award Agreement, which shall contain
such terms, conditions and limitations as shall be determined by the Board in
its sole discretion and, if required by the Board, shall be accepted by the
Participant to whom the Director Award is granted and signed by an Authorized
Officer for and on behalf of the Corporation.

(i) Stock Awards. A Director Award may be in the form of a Stock Award. A
Non-employee Director may not sell, transfer, assign, pledge or otherwise
encumber or dispose of any portion of a Stock Award until he or she terminates
service as a Non-employee Director, and any attempt to sell, transfer, assign,
pledge or encumber any portion of the Stock Award prior to such time shall have
no effect. Any additional terms, conditions and limitations applicable to any

 

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Stock Awards granted to a Non-employee Director pursuant to this Plan shall be
determined by the Board.

(ii) Performance Awards. Without limiting the type or number of Director Awards
that may be made under the other provisions of this Plan, a Director Award may
be in the form of a Performance Award. A Non-employee Director may not sell,
transfer, assign, pledge or otherwise encumber or dispose of any portion of the
Performance Award until he or she terminates service as a Non-employee Director,
and any attempt to sell, transfer, assign, pledge or encumber any portion of the
Performance Award prior to such time shall have no effect. Any additional terms,
conditions and limitations applicable to any Performance Awards granted to a
Non-employee Director pursuant to this Plan shall be determined by the Board.
The Board shall set performance goals in its discretion which, depending on the
extent to which they are met, will determine the value and/or amount of
Performance Awards that will be paid out to the Non-employee Director.

(b) Notwithstanding anything to the contrary contained in this Plan, no
Participant may be granted, during any calendar year, Director Awards consisting
of Stock Awards (including Stock Awards that are granted as Performance Awards)
covering or relating to more than 5,000 shares of Common Stock (the limitation
set forth in this paragraph (b) being hereinafter referred to as a “Stock Based
Awards Limitation”).

10. Change in Control. Notwithstanding the provisions of paragraphs 8 and 9
hereof, unless otherwise expressly provided in the applicable Award Agreement,
or as otherwise specified in the terms of an Equity Award, in the event of a
Change in Control during a Participant’s employment (or service as a
Non-employee Director) with the Corporation or one of its Affiliates, each
Equity Award granted under this Plan to the Participant shall become immediately
vested and fully exercisable, with performance-based equity awards vested at
target level (regardless of the otherwise applicable vesting or exercise
schedules or performance goals provided for under the Award Agreement or the
terms of the Equity Award).

11. Non-United States Participants. The Committee may grant awards to persons
outside the United States under such terms and conditions as may, in the
judgment of the Committee, be necessary or advisable to comply with the laws of
the applicable foreign jurisdictions and, to that end, may establish sub-plans,
modified option exercise procedures and other terms and procedures.
Notwithstanding the above, the Committee may not take any actions hereunder, and
no Awards shall be granted, that would violate the Exchange Act, the Code, any
securities law, any governing statute, or any other applicable law.

12. Payment of Awards.

(a) General. Payment made to a Participant pursuant to an Award may be made in
the form of cash or Common Stock, or a combination thereof, and may include such
restrictions as the Administrator shall determine, including, in the case of
Common Stock, restrictions on transfer and forfeiture provisions. If such
payment is made in the form of Restricted Stock, the Administrator shall specify
whether the underlying shares are to be issued at the beginning or end of the
Restriction Period. In the event that shares of Restricted Stock are to be
issued at the beginning of the Restriction Period, the certificates evidencing
such shares (to the extent that such shares are so evidenced) shall contain
appropriate legends and restrictions that describe the terms and conditions of
the restrictions applicable thereto. In the event that shares of Restricted
Stock are to be issued at the end of the Restricted Period, the right to receive
such shares shall be evidenced by book entry registration or in such other
manner as the Administrator may determine.

 

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(b) Deferral. With the approval of the Administrator, amounts payable in respect
of Awards may be deferred and paid either in the form of installments or as a
lump-sum payment. The Administrator may permit selected Participants to elect to
defer payments of some or all types of Awards or any other compensation
otherwise payable by the Corporation in accordance with procedures established
by the Administrator and may provide that such deferred compensation may be
payable in shares of Common Stock. Any deferred payment pursuant to an Award,
whether elected by the Participant or specified by the Award Agreement or the
terms of the Award or by the Administrator, may be forfeited if and to the
extent that the Award Agreement or the terms of the Award so provide.

(c) Dividends, Earnings and Interest. Rights to dividends or Dividend
Equivalents may be extended to and made part of any Stock Award, subject to such
terms, conditions and restrictions as the Administrator may establish. The
Administrator may also establish rules and procedures for the crediting of
interest or other earnings on deferred cash payments and Dividend Equivalents
for Stock Awards.

(d) Substitution of Awards. Subject to paragraphs 15 and 17, at the discretion
of the Committee, a Participant who is an Employee may be offered an election to
substitute an Employee Award for another Employee Award or Employee Awards of
the same or different type.

13. Option Exercise. The Grant Price shall be paid in full at the time of
exercise in cash or, if permitted by the Committee and elected by the optionee,
the optionee may purchase such shares by means of tendering Common Stock valued
at Fair Market Value on the date of exercise, or any combination thereof. The
Committee shall determine acceptable methods for Participants to tender Common
Stock or other Awards. The Committee may provide for procedures to permit the
exercise or purchase of such Awards by use of the proceeds to be received from
the sale of Common Stock issuable pursuant to an Award. The Committee may adopt
additional rules and procedures regarding the exercise of Options from time to
time, provided that such rules and procedures are not inconsistent with the
provisions of this paragraph.

An optionee desiring to pay the Grant Price of an Option by tendering Common
Stock using the method of attestation may, subject to any such conditions and in
compliance with any such procedures as the Committee may adopt, do so by
attesting to the ownership of Common Stock of the requisite value in which case
the Corporation shall issue or otherwise deliver to the optionee upon such
exercise a number of shares of Common Stock subject to the Option equal to the
result obtained by dividing (a) the excess of the aggregate Fair Market Value of
the shares of Common Stock subject to the Option for which the Option (or
portion thereof) is being exercised over the Grant Price payable in respect of
such exercise by (b) the Fair Market Value per share of Common Stock subject to
the Option, and the optionee may retain the shares of Common Stock the ownership
of which is attested.

14. Taxes. The Corporation or its designated third party administrator shall
have the right to deduct applicable taxes from any Employee Award payment and
withhold, at the time of delivery or vesting of cash or shares of Common Stock
under this Plan, an appropriate amount of cash or number of shares of Common
Stock or a combination thereof for payment of taxes or other amounts required by
law or to take such other action as may be necessary in the opinion of the
Corporation to satisfy all obligations for withholding of such taxes. The
Committee may also permit withholding to be satisfied by the transfer to the
Corporation of shares of Common Stock theretofore owned by the holder of the
Employee Award with respect to which withholding is required. If shares of
Common Stock are used to satisfy tax withholding, such shares shall be valued
based on the Fair Market Value when the tax withholding is required to be made.

15. Amendment, Modification, Suspension or Termination of the Plan. The
Committee may amend, modify, suspend or terminate this Plan for the purpose of
meeting or addressing any changes in legal requirements or for

 

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any other purpose permitted by law, except that (i) any amendment, modification,
suspension, or termination of paragraph 9 of this Plan shall be approved by the
Board, (ii) no amendment or alteration that would adversely affect the rights of
any Participant under any Award previously granted to such Participant shall be
made without the consent of such Participant and (iii) no amendment or
alteration shall be effective prior to its approval by the stockholders of the
Corporation to the extent such approval is required by applicable legal
requirements or the requirements of the securities exchange on which the
Corporation’s stock is listed. Notwithstanding anything herein to the contrary,
without the prior approval of the Company’s stockholders, Options issued under
the Plan will not be repriced, replaced, or regranted through cancellation or by
decreasing the exercise price of a previously granted Option.

16. Assignability. Unless otherwise determined by the Administrator and provided
in the Award Agreement or the terms of the Award, no Award or any other benefit
under this Plan shall be assignable or otherwise transferable except by will,
beneficiary designation or the laws of descent and distribution. In the event
that a beneficiary designation conflicts with an assignment by will, the
beneficiary designation will prevail. The Administrator may prescribe and
include in applicable Award Agreements or the terms of the Award other
restrictions on transfer. Any attempted assignment of an Award or any other
benefit under this Plan in violation of this paragraph 16 shall be null and
void.

17. Adjustments.

(a) The existence of outstanding Awards shall not affect in any manner the right
or power of the Corporation or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the capital
stock of the Corporation or its business or any merger or consolidation of the
Corporation, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to the
existing Common Stock) or the dissolution or liquidation of the Corporation, or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding of any kind, whether or not of a character similar
to that of the acts or proceedings enumerated above.

(b) In the event of any subdivision or consolidation of outstanding shares of
Common Stock, declaration of a dividend payable in shares of Common Stock or
other stock split, then (i) the number of shares of Common Stock reserved under
this Plan, (ii) the number of shares of Common Stock covered by outstanding
Awards, (iii) the Grant Price or other price in respect of such Awards, (iv) the
appropriate Fair Market Value and other price determinations for such Awards,
and (v) the Stock Based Awards Limitations shall each be proportionately
adjusted by the Board as appropriate to reflect such transaction. In the event
of any other recapitalization or capital reorganization of the Corporation, any
consolidation or merger of the Corporation with another corporation or entity,
the adoption by the Corporation of any plan of exchange affecting Common Stock
or any distribution to holders of Common Stock of securities or property (other
than normal cash dividends or dividends payable in Common Stock), the Board
shall make appropriate adjustments to (i) the number of shares of Common Stock
covered by Awards, (ii) the Grant Price or other price in respect of such
Awards, (iii) the appropriate Fair Market Value and other price determinations
for such Awards, and (iv) the Stock Based Awards Limitations to reflect such
transaction; provided that such adjustments shall only be such as are necessary
to maintain the proportionate interest of the holders of the Awards and
preserve, without increasing, the value of such Awards. In the event of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board shall be authorized (i) to assume under
the Plan previously issued compensatory awards, or to substitute new Awards for
previously issued compensatory awards, including Awards, as part of such
adjustment or (ii) to cancel Awards that are Options or SARs and give the
Participants who are the holders of such Awards notice and opportunity to
exercise for 30 days prior to such cancellation.

 

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18. Restrictions. No Common Stock or other form of payment shall be issued with
respect to any Award unless the Corporation shall be satisfied based on the
advice of its counsel that such issuance will be in compliance with applicable
federal and state securities laws. Certificates evidencing shares of Common
Stock delivered under this Plan (to the extent that such shares are so
evidenced) may be subject to such stop transfer orders and other restrictions as
the Administrator may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any securities exchange
or transaction reporting system upon which the Common Stock is then listed or to
which it is admitted for quotation and any applicable federal or state
securities law. The Administrator may cause a legend or legends to be placed
upon such certificates (if any) to make appropriate reference to such
restrictions.

19. Unfunded Plan. This Plan shall be unfunded. Although bookkeeping accounts
may be established with respect to Participants under this Plan, any such
accounts shall be used merely as a bookkeeping convenience, including
bookkeeping accounts established by a third party administrator retained by the
Corporation to administer the Plan. The Corporation shall not be required to
segregate any assets for purposes of this Plan or Awards hereunder, nor shall
the Corporation, the Board or the Committee be deemed to be a trustee of any
benefit to be granted under this Plan. Any liability or obligation of the
Corporation to any Participant with respect to an Award under this Plan shall be
based solely upon any contractual obligations that may be created by this Plan
and any Award Agreement or the terms of the Award, and no such liability or
obligation of the Corporation shall be deemed to be secured by any pledge or
other encumbrance on any property of the Corporation. Neither the Corporation
nor the Board nor the Committee shall be required to give any security or bond
for the performance of any obligation that may be created by this Plan.

20. Right to Employment. Nothing in the Plan or an Award Agreement shall
interfere with or limit in any way the right of the Corporation to terminate any
Participant’s employment or other service relationship at any time, nor confer
upon any Participant any right to continue in the capacity in which he or she is
employed or otherwise serves the Corporation.

21. Successors. All obligations of the Corporation under the Plan with respect
to Awards granted hereunder shall be binding on any successor to the
Corporation, whether the existence of such successor is the result of a direct
or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Corporation.

22. Governing Law. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions of
the Code or the securities laws of the United States, shall be governed by and
construed in accordance with the laws of the State of Texas.

23. Effectiveness. The Plan will be submitted to the stockholders of the
Corporation for approval at the 2003 annual meeting of stockholders and, if
approved, will become retroactively effective as of January 1, 2003.

 

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