Exhibit 10.2

 

TRICO MARINE SERVICES, INC.

 

2004 STOCK INCENTIVE PLAN

 

I. PURPOSE

 

The purpose of the TRICO MARINE SERVICES, INC. 2004 STOCK INCENTIVE PLAN (the
“Plan”) is to provide a means through which TRICO MARINE SERVICES, INC., a
Delaware corporation (the “Company”), and its Affiliates may attract able
persons to serve as Directors or Consultants or 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 granting Incentive Stock Options, options that do not
constitute Incentive Stock Options, Restricted Stock Awards, Performance Awards,
and Phantom Stock Awards, or any combination of the foregoing, as is best suited
to the circumstances of the particular employee, Consultant, or Director 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. For purposes of the preceding sentence, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control
with”), as used with respect to any entity or organization, shall mean the
possession, directly or indirectly, of the power (i) to vote more than 50% of
the securities having ordinary voting power for the election of directors of the
controlled entity or organization, or (ii) to direct or cause the direction of
the management and policies of the controlled entity or organization, whether
through the ownership of voting securities or by contract or otherwise.

 

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

 

(c) “Bankruptcy Court” means The United States Bankruptcy Court for the Southern
District of New York or any other court with jurisdiction over the restructuring
of the Company.

 

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

--------------------------------------------------------------------------------

(e) “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.

 

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

 

(g) “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 XI.

 

(h) “Company” means Trico Marine Services, Inc., a Delaware corporation.

 

(i) “Consultant” means any person who is not an employee or a Director and who
is providing advisory or consulting services to the Company or any Affiliate.

 

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

 

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

 

(l) “Effective Date” shall have the meaning set forth in the POR.

 

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

 

(n) “Fair Market Value” means, as of any specified date, the mean of the high
and low sales prices of the Common Stock (i) reported by the National Market
System of NASDAQ on that date or (ii) if the Common Stock is listed on a
national stock exchange, reported on the stock exchange composite tape 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. Notwithstanding the foregoing, if a determination of the fair
market value of Common Stock is required to be made on the Effective Date, then
such determination shall be made by the Committee based on the most recently
determined value of the Company in the POR on a per share as issued basis.

 

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

 

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

 

- 2 -

--------------------------------------------------------------------------------

(q) “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.

 

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

 

(s) “Participant” means an employee, Consultant, or Director who has been
granted an Award.

 

(t) “Performance Award” means an Award granted under Paragraph IX of the Plan.

 

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

 

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

 

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

 

(x) “Plan” means the Trico Marine Services, Inc. 2004 Stock Incentive Plan, as
amended from time to time.

 

(y) “POR” shall mean the Joint Prepackaged Plan Of Reorganization Of Trico
Marine Services, Inc., Trico Marine Assets, Inc., And Trico Marine Operators,
Inc. Under Chapter 11 Of the Bankruptcy Code, as confirmed by the Bankruptcy
Court.

 

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

 

(aa) “Restricted Stock Award” means an Award granted under Paragraph VIII of the
Plan.

 

(bb) “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.

 

(cc) “Stock Appreciation Right” means a right to receive, upon exercise of the
right, Common Stock and/or, in the sole discretion of the Committee, cash having
an aggregate value equal to the then excess of the Fair Market Value of the
specified number of shares with respect to which the right is exercised over the
exercise price therefor.

 

III. EFFECTIVE DATE AND DURATION OF THE PLAN

 

The Plan shall become effective upon the Effective Date, provided the Plan is
approved by the stockholders of the Company or the Bankruptcy Court concurrently
or within 12 months thereafter. Notwithstanding any provision in the Plan, no
Option shall be exercisable, no

 

- 3 -

--------------------------------------------------------------------------------

Restricted Stock Award shall be granted, 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
Effective Date. The Plan shall remain in effect until all Options granted under
the Plan have been exercised or expired, all Restricted Stock Awards granted
under the Plan have vested or been forfeited, 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, Consultants or
Directors 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 or Restricted Stock Award, 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, Consultants, or Directors,
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 or in relation hereto, 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 determinations of the Committee on the matters referred to in this Paragraph
IV 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 XI 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, and the aggregate maximum number of
shares of Common Stock that may be issued under the Plan through Incentive Stock
Options, shall not exceed 7.5% of the number of fully diluted shares of Common
Stock outstanding as of the Effective Date. Shares shall be

 

- 4 -

--------------------------------------------------------------------------------

deemed to have been issued under the Plan only to the extent actually issued and
delivered pursuant to an Award. 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. In addition, shares
issued under the Plan and forfeited back to the Plan, shares surrendered in
payment of the exercise price or purchase price of an Award, and shares withheld
for payment of applicable employment taxes and/or withholding obligations
associated with an Award shall again be available for the grant of an Award
under the Plan. Notwithstanding any provision in the Plan to the contrary, the
maximum number of shares of Common Stock that may be subject to Options,
Restricted Stock Awards and Performance Awards denominated in shares of Common
Stock granted to any one individual during any calendar year may not exceed 50%
of the aggregate maximum number of shares of Common Stock that may be issued
under the Plan (subject to adjustment in the same manner as provided in
Paragraph XI with respect to shares of Common Stock subject to Options then
outstanding), and 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 the preceding sentence shall be applied in a manner that will permit
Awards that are intended to provide “performance-based” compensation for
purposes of section 162(m) of the Code to satisfy the requirements of such
section, 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, Consultants, or Directors determined by it to be eligible for
participation in the Plan in accordance with the terms of the Plan.
Notwithstanding the foregoing, on the Effective Date: (i) Thomas Fairley shall
receive an Option exercisable for 2.5% of the number of fully diluted shares of
Common Stock outstanding as of such date, (ii) Joseph Compofelice shall receive
an Option exercisable for 2.0% of the number of fully diluted shares of Common
Stock outstanding as of such date, and (iii) Trevor Turbidy shall receive an
Option exercisable for 1.5% of the number of fully diluted shares of Common
Stock outstanding as of such date. The Options awarded to Mr. Fairley, Mr.
Compofelice, and Mr. Turbidy on the Effective Date shall have an exercise price
per share of Common Stock equal to the Fair Market Value of a share of Common
Stock on the date such Options are granted.

 

(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.

 

- 5 -

--------------------------------------------------------------------------------

VI. ELIGIBILITY

 

Awards may be granted only to persons who, at the time of grant, are employees,
Consultants, or Directors. 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 Restricted Stock Award, 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
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 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 not be transferable otherwise than by will or the laws of descent and
distribution, and 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 (i)
employment, (ii) the consulting or advisory relationship, or (iii) membership on
the Board, as applicable, 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

 

- 6 -

--------------------------------------------------------------------------------

equal to such option price. Moreover, an Option Agreement may provide for a
“broker-assisted cashless exercise” of the Option by establishing procedures
satisfactory to the Committee with respect thereto. Further, an Option Agreement
may provide, on such terms and conditions as the Committee in its sole
discretion may prescribe, for the grant of a Stock Appreciation Right in
connection with the grant of an Option and, in such case, the exercise of the
Stock Appreciation Right shall result in the surrender of the right to purchase
a number of shares under the Option equal to the number of shares with respect
to which the Stock Appreciation Right is exercised (and vice versa). In the case
of any 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 XI, 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 XI,
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); provided, that any increase in the option price in any Option
Agreement made to avoid a deferral of compensation subject to section 409A of
the Code, pursuant to the terms of such Option Agreement, and any change to any
other provision of such Option Agreement made in connection therewith, shall be
expressly permitted and shall not require the approval of the stockholders of
the Company, regardless of whether such change in the option price constitutes a
repricing under generally accepted accounting principles or for any other
purpose.

 

(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 and such rights held by individuals providing
services to corporations or other entities who become employees, Consultants, or
Directors as a result of a merger or consolidation or other business transaction
with the Company or any Affiliate.

 

- 7 -

--------------------------------------------------------------------------------

VIII. RESTRICTED STOCK AWARDS

 

(a) Forfeiture Restrictions To Be Established by the Committee. Shares of Common
Stock that are the subject of a Restricted Stock Award shall be subject to
restrictions on disposition by the Participant and an obligation of the
Participant to forfeit and surrender the shares to the Company under certain
circumstances (the “Forfeiture Restrictions”). The Forfeiture Restrictions shall
be determined by the Committee in its sole discretion, and the Committee may
provide that the Forfeiture Restrictions shall lapse upon (i) the attainment of
one or more performance measures established by the Committee that are based on
(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 net income
(before or after taxes) of the Company or any business unit of the Company
designated by the Committee, (8) the cash flow return on investment of the
Company or any business unit of the Company designated by the Committee, (9) 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,
(10) the economic value added, (11) the return on stockholders’ equity achieved
by the Company, or (12) the total stockholders’ return achieved by the Company,
(ii) the Participant’s continued employment with the Company or continued
service as a Consultant or Director for a specified period of time, (iii) the
occurrence of any event or the satisfaction of any other condition specified by
the Committee in its sole discretion, or (iv) a combination of any of the
foregoing. The performance measures described in clause (i) of the preceding
sentence may be subject to adjustment for specified significant extraordinary
items or events, and may be absolute, relative to one or more other companies,
or relative to one or more indexes, and may be contingent upon future
performance of the Company or any Affiliate, division, or department thereof.
Each Restricted Stock Award may have different Forfeiture Restrictions, in the
discretion of the Committee.

 

(b) Other Terms and Conditions. Common Stock awarded pursuant to a Restricted
Stock Award shall be represented by a stock certificate registered in the name
of the Participant. Unless provided otherwise in a Restricted Stock Agreement,
the Participant shall have the right to receive dividends with respect to Common
Stock subject to a Restricted Stock Award, to vote Common Stock subject thereto
and to enjoy all other stockholder rights, except that (i) the Participant shall
not be entitled to delivery of the stock certificate until the Forfeiture
Restrictions have expired, (ii) the Company shall retain custody of the stock
until the Forfeiture Restrictions have expired, (iii) the Participant may not
sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the stock
until the Forfeiture Restrictions have expired, and (iv) a breach of the terms
and conditions established by the Committee pursuant to the Restricted Stock
Agreement shall cause a forfeiture of the Restricted Stock Award. At the time of
such Award, the Committee may, in its sole discretion, prescribe additional
terms, conditions or restrictions relating to Restricted Stock Awards,
including, but not limited to, rules pertaining to the termination of employment
or service as a Consultant or Director (by retirement, disability, death or
otherwise) of a Participant prior to expiration of the Forfeitures Restrictions.
Such additional terms, conditions or restrictions shall be set forth in a
Restricted Stock Agreement made in conjunction with the Award.

 

- 8 -

--------------------------------------------------------------------------------

(c) Payment for Restricted Stock. The Committee shall determine the amount and
form of any payment for Common Stock received pursuant to a Restricted Stock
Award, provided that in the absence of such a determination, a Participant shall
not be required to make any payment for Common Stock received pursuant to a
Restricted Stock Award, except to the extent otherwise required by law.

 

(d) Committee’s Discretion to Accelerate Vesting of Restricted Stock Awards. The
Committee may, in its discretion and as of a date determined by the Committee,
fully vest any or all Common Stock awarded to a Participant pursuant to a
Restricted Stock Award and, upon such vesting, all restrictions applicable to
such Restricted Stock Award shall terminate as of such date. Any action by the
Committee pursuant to this Subparagraph may vary among individual Participants
and may vary among the Restricted Stock Awards held by any individual
Participant. Notwithstanding the preceding provisions of this Subparagraph, the
Committee may not take any action described in this Subparagraph with respect to
a Restricted Stock Award that has been granted to a “covered employee” (within
the meaning of Treasury Regulation section 1.162-27(c)(2)) if such Award has
been designed to meet the exception for performance-based compensation under
section 162(m) of the Code.

 

(e) Restricted Stock Agreements. At the time any Award is made under this
Paragraph VIII, the Company and the Participant shall enter into a Restricted
Stock Agreement setting forth each of the matters contemplated hereby and such
other matters as the Committee may determine to be appropriate. The terms and
provisions of the respective Restricted Stock Agreements need not be identical.
Subject to the consent of the Participant and the restriction set forth in the
last sentence of Subparagraph (d) above, the Committee may, in its sole
discretion, amend an outstanding Restricted Stock Agreement from time to time in
any manner that is not inconsistent with the provisions of the Plan.

 

IX. 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

 

- 9 -

--------------------------------------------------------------------------------

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 net
income (before or after taxes) of the Company or any business unit of the
Company designated by the Committee, (8) the cash flow return on investment of
the Company or any business unit of the Company designated by the Committee, (9)
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,
(10) the economic value added, (11) the return on stockholders’ equity achieved
by the Company, (12) the total stockholders’ return achieved by the Company, or
(13) 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 or
such other date as may be specified by the Committee in the Performance Award
Agreement.

 

(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 or
does not continue to perform services as a Consultant or a Director for 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 IX, 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.

 

X. 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

 

- 10 -

--------------------------------------------------------------------------------

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. A Phantom Stock Award may include, without
limitation, a Stock Appreciation Right that is granted independently of an
Option.

 

(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.

 

(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 or such other date
as may be specified by the Committee in the Phantom Stock Award Agreement. 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 or does not continue to perform services as a Consultant or a
Director for 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 X, 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.

 

XI. 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.

 

- 11 -

--------------------------------------------------------------------------------

(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 down 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 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

 

- 12 -

--------------------------------------------------------------------------------

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 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 XI, 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 XI, the aggregate
number of shares available under the Plan, the aggregate number of shares that
may be issued under the Plan through Incentive Stock Options, and the maximum
number of shares that may be subject to Awards granted to any one individual may
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 (which maximum value may be determined, if applicable and in the
discretion of the Committee, based on the then Fair Market Value of the Common
Stock) of such Performance Award or Phantom Stock Award which, in the event the
applicable performance or vesting period set forth in such Performance

 

- 13 -

--------------------------------------------------------------------------------

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.

 

XII. 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, increase the maximum number of shares that may be issued under the Plan
through Incentive Stock Options or change the class of individuals eligible to
receive Awards under the Plan, or (b) amend or delete Paragraph VII(f).

 

XIII. 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 Restricted Stock Award, 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/Membership Rights Conferred. Nothing contained in the Plan
shall (i) confer upon any employee or Consultant any right with respect to
continuation of employment or of a consulting or advisory relationship 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 or consulting or
advisory relationship at any time. Nothing contained in the Plan shall confer
upon any Director any right with respect to continuation of membership on the
Board.

 

- 14 -

--------------------------------------------------------------------------------

(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. Further, the Company shall not be obligated to issue any
Common Stock pursuant to any Award granted under the Plan at any time if in the
sole determination of the Company such issuance would cause the percentage of
shares of Common Stock then outstanding that is owned by “aliens” (as that term
is defined in the Company’s Certificate of Incorporation) to exceed the
“permitted percentage” (also as defined in the Company’s Certificate of
Incorporation). Prior to any such issuance, the Company may in its discretion
require such proof of citizenship as the Company may require in order to
determine that such issuance would not cause the percentage of shares of Common
Stock then outstanding that is owned by aliens to exceed the permitted
percentage. 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.

 

(e) Restrictions on Transfer. An Award (other than an Incentive Stock Option,
which shall be subject to the transfer restrictions set forth in Paragraph
VII(c)) 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.

 

 

- 15 -