Exhibit 10.11
VALERO ENERGY CORPORATION
2003 EMPLOYEE STOCK INCENTIVE PLAN
Amended and Restated as of October 1, 2005

 

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Table of Contents

              Page  
 
       
SECTION 1. Purpose
    1  
 
       
SECTION 2. Definitions
    1  
 
       
SECTION 3. Administration
    3  
 
       
SECTION 4. Shares and Other Property Available For Awards
    4  
 
       
SECTION 5. Eligibility
    6  
 
       
SECTION 6. Awards
    6  
 
       
SECTION 7. Amendment and Termination
    12  
 
       
SECTION 8. Change Of Control
    13  
 
       
SECTION 9. General Provisions
    15  
 
       
SECTION 10. Effective Date of the Plan
    16  
 
       
SECTION 11. Term of the Plan
    16  

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2003 EMPLOYEE STOCK INCENTIVE PLAN
SECTION 1. Purpose.
          The purpose of this 2003 Employee Stock Incentive Plan (the “Plan”) is
to promote the interests of the Company and its stockholders by (i) attracting
and retaining employees of the Company and its affiliates; (ii) motivating these
employees by using performance-related incentives to achieve longer range
performance goals; and (iii) enabling these employees to participate in the
long-term growth and financial success of the Company.
SECTION 2. Definitions.
          As used in the Plan, the following terms shall have the meanings set
forth below:
     (a) “Affiliate” shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in which
the Company has a significant equity interest, as determined by the Committee.
     (b) “Award” shall mean any Option, Stock Appreciation Right, Restricted
Stock, Performance Award, Stock Compensation Award or Other Stock-Based Award.
     (c) “Award Agreement” shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
     (d) “Board” shall mean the Board of Directors of the Company.
     (e) “Cause” shall mean the (i) conviction of the Participant by a state or
federal court of a felony involving moral turpitude, (ii) conviction of the
Participant by a state or federal court of embezzlement or misappropriation of
funds of the Company, (iii) the Company’s (or applicable Affiliate’s) reasonable
determination that the Participant has committed an act of fraud, embezzlement,
theft, or misappropriation of funds in connection with such Participant’s duties
in the course of his or her employment with the Company (or applicable
Affiliate), (iv) the Company’s (or its applicable Affiliate’s) reasonable
determination that the Participant has engaged in gross mismanagement,
negligence or misconduct which causes or could potentially cause material loss,
damage or injury to the Company, any of its Affiliates or their respective
employees, or (v) the Company’s (or applicable Affiliate’s) reasonable
determination that (a) the Participant has violated any policy of the Company
(or applicable Affiliate), including but not limited to, policies regarding
sexual harassment, insider trading, confidentiality, substance abuse and/or
conflicts of interest, which violation could result in the termination of the
Participant’s employment, or (b) the Participant has failed to satisfactorily
perform the material duties of Participant’s position with the Company or any of
its Affiliates.
     (f) “Change of Control” is defined in Section 8(b) of the Plan.

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     (g) “Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time.
     (h) “Committee” shall mean the Committee appointed to administer the Plan,
as further described in Section 3 of the Plan.
     (i) “Company” shall mean Valero Energy Corporation, a Delaware corporation,
formerly known as “Valero Refining and Marketing Company”.
     (j) “Employee” shall mean any employee of the Company or of any Affiliate
other than officers and directors within the meaning of Rule 16a-1(f) of the
Exchange Act.
     (k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.
     (l) “Exercisable Award” is defined in Section 6(h)(vii)(A).
     (m) “Exercise Notice” is defined in Section 6(g)(i) of the Plan.
     (n) “Fair Market Value” shall mean the average of the “high” and “low”
reported sales price per Share (as reported in the NYSE — Composite Transactions
listing) as of the relevant measuring date, or if there are no sales on the NYSE
on that measuring date, then as of the next day on which there were sales.
     (o) “Notice Date” is defined in Section 6(g)(i) of the Plan.
     (p) “Option” shall mean an option granted under Section 6(a) of the Plan
that is not intended to be an Incentive Stock Option, within the meaning of
Section 422 of the Code or any successor provision thereto.
     (q) “Other Stock-Based Award” shall mean any right granted under Section
6(f) of the Plan.
     (r) “Participant” shall mean any Employee granted an Award under the Plan.
     (s) “Performance Award” shall mean any right granted under Section 6(d) of
the Plan.
     (t) “Person” shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, government
or political subdivision thereof or other entity.
     (u) “Preference Share Purchase Right” shall mean one of the rights
distributed pursuant to the Rights Agreement to purchase 1/100 share of the
Junior Participating Preferred Stock, Series I, of Valero.

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     (v) “Reorganization Event” is defined in Section 4(c) of the Plan.
     (w) “Restricted Stock” shall mean any Share, prior to the lapse of
restrictions thereon, granted under Section 6(c) of the Plan.
     (x) “Rights Agreement” shall mean the Rights Agreement, dated as of
June 18, 1997, between the Company and Computershare Investor Services, L.L.C.,
as Rights Agent (successor Rights Agent to Harris Trust and Savings Bank), as
amended.
     (y) “SAR” or “stock appreciation right” is further described in Section
6(b) of the Plan and shall mean the right, subject to the provisions of this
Plan, to receive a payment in cash equal to the difference between the specified
exercise price of the SAR and the Fair Market Value of one Share.
     (z) “SEC” shall mean the Securities and Exchange Commission.
     (aa) “Settlement Date” is defined in Section 6(g)(i) of the Plan.
     (bb) “Share” or “Shares” shall mean the common stock of the Company, $0.01
par value, and other securities or property that may become the subject of
Awards or become subject to Awards pursuant to an adjustment made under Section
4(c) of the Plan.
     (cc) “Stock Compensation” shall mean any right granted under Section 6(e)
of the Plan.
     (dd) “Tax Payment" is defined in Section 6(g)(ii) of the Plan.
SECTION 3. Administration.
          The Plan shall be administered by a committee of the Board appointed
by the Board to act for purposes of administering this Plan. Subject to the
terms of the Plan and applicable law, and in addition to other express powers
and authorizations conferred on the Committee by the Plan, the Committee shall
have authority to:
     (a) designate Participants;
     (b) determine the type or types of Awards to be granted to an Employee;
     (c) determine the number of Shares to be covered by, or with respect to
which payments, rights, or other matters are to be calculated in connection
with, Awards;
     (d) determine the terms and conditions of any Award and any subsequent
amendments thereto;

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     (e) determine to what extent and under what circumstances Awards may be
settled or exercised in cash, Shares, other securities, other Awards or other
property, or canceled, forfeited, or suspended, and the method or methods by
which Awards may be settled, exercised, canceled, forfeited, or suspended;
     (f) provide for the acceleration of any time period relating to the
vesting, exercise or realization of any Award so that the Award may be exercised
or realized in full on or before a date fixed by the Committee; the Committee
may, in its discretion, include other provisions and limitations in any Award
Agreement as the Committee may deem equitable and in the best interests of the
Company;
     (g) interpret and administer the Plan and any instrument or agreement
relating to the Plan, including Award Agreements;
     (h) establish, amend, suspend, or waive any rules or regulations regarding
the Plan, and appoint any agent the Committee shall deem appropriate for the
proper administration of the Plan; and
     (i) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions with respect to the Plan or
any Award shall be within the sole discretion of the Committee, may be made at
any time, and shall be final, conclusive, and binding upon all Persons,
including the Company, any Affiliate, any Participant, any holder or beneficiary
of any Award, any stockholder of the Company and any Employee.
SECTION 4. Shares and Other Property Available For Awards.
          (a) Shares Available. Subject to adjustment as provided in
Section 4(c), the number of Shares with respect to which Awards may be granted
under the Plan shall be 5,000,000.
          (b) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares, Shares held by the Company in its treasury or Shares purchased
by the Company on the open market or otherwise.
          (c) Adjustments.
     (i) If all or any portion of an Award vests or is exercised subsequent to
any stock dividend, rights distribution, split-up, recapitalization, combination
or exchange of shares, merger, consolidation, acquisition of property or stock,
spin-off or separation, reorganization, liquidation or other similar event (any
one of which being hereafter referred to as a “Reorganization Event”), as a
result of which shares or other securities of any class or rights shall be
issued in respect of outstanding Shares, or Shares shall be changed into the
same or a different number of shares of the same or another class or

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classes or other securities, the person exercising or otherwise entitled to such
Award shall receive, except as may be otherwise determined by the Committee:
     (A) for the aggregate price payable upon such exercise of an Option, or
upon vesting of an Award (other than an Option) denominated in Shares (1) the
aggregate number and class of shares, rights or other securities for which a
recognized market exists, and (2) a cash amount equal to the fair market value
(as reasonably determined by the Committee) on such exercise or vesting date of
any other property (other than regular cash dividend payments) and of any
shares, rights or other securities for which no recognized market exists, which,
if Shares (as authorized at the date of the granting of such Award) had been
acquired at the date of granting of the Award for the same aggregate price (on
the basis of the price per share, if any, provided in the Award) and had not
been disposed of, such person or persons would be holding at the time of such
exercise or vesting as a result of such acquisition and any such Reorganization
Event, and
     (B) a cash amount upon the exercise of any SARs equal to the difference
between the aggregate grant price of such SARs and the aggregate of (1) the fair
market value on the exercise date of any whole shares, rights or other
securities for which a recognized market exists, and (2) the fair market value
(as reasonably determined by the Committee) on such date of any other property
(other than regular cash dividend payments) which the holder of a number of
Shares equal to the number of such SARs, if such Shares had been purchased at
the date of granting of such SARs and not otherwise disposed of, would be
holding at the time of exercise of such SARs as a result of such purchase and
any such Reorganization Event;
provided, however, that no fractional Share, fractional right or other
fractional security shall be issued upon any such exercise or vesting, and the
aggregate price paid shall be appropriately reduced to reflect any fractional
Share, fractional right or other fractional security not issued; and provided
further, however, that if the exercise or vesting of any Award subsequent to any
Reorganization Event would, pursuant to clause (A) of this Section 4(c)(i),
require the delivery of shares, rights or other securities that the Company is
not then authorized to issue or that in the sole judgment of the Committee
cannot be issued without undue effort or expense, the person exercising or
vesting in such Award shall receive, in lieu of such shares, rights or other
securities, a cash payment equal to the Fair Market Value on the exercise or
vesting date, as the case may be, as reasonably determined by the Committee, of
such shares, rights or other securities. For purposes of applying the provisions
of this Plan, the Preference Share Purchase Rights distributed to stockholders
of the Company pursuant to the Rights Agreement shall be deemed not to have been
distributed until the Distribution Date (as defined in the Rights Agreement).

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     (ii) In the event of any change in the number of Shares outstanding
resulting from a Reorganization Event, the aggregate number and class of Shares
remaining available to be awarded under this Plan shall be that number and class
which a person, to whom an Award had been granted for all of the available
Shares under this Plan on the date preceding such change, would be entitled to
receive as provided in Section 4(c)(i).
     (iii) Upon the occurrence of any Reorganization Event, the Committee shall
be entitled (but shall not be required) to determine that new Award Agreements
shall be entered into with Participants reflecting such event.
     (d) Share Counting. For purposes of determining at any time the number of
Shares that remain available for grant under this Plan, the number of Shares
then authorized pursuant to Section 4 of the Plan shall be (i) decreased by the
“gross” number of Shares issued pursuant to exercised Awards, (ii) decreased by
the “gross” number of Shares issuable pursuant to outstanding unexercised
Awards, and (iii) increased by the number of Shares to which a Participant shall
have forfeited, voluntarily surrendered or otherwise permanently lost his or her
right to exercise or vest in an Award under any provision of this Plan or
otherwise. As used herein, the “gross” number of Shares refers to the maximum
number of Shares that may be issued upon the exercise of an Award. Should the
exercise price of an Award under the Plan be paid with Shares or should Shares
otherwise issuable under the Plan be withheld by the Company in satisfaction of
the withholding taxes incurred in connection with the exercise or vesting of an
Award, then the number of Shares available for issuance under the Plan shall be
reduced by the net number of Shares issued to the holder of such option. In the
event that property other than Shares is tendered for payment of the exercise
price, the number of Shares available for issuance under the Plan shall be
reduced by the gross number of Shares for which the Award is exercised or which
vest under the stock issuance, and not the net number of Shares issued to the
holder of such option.
SECTION 5. Eligibility.
     Any Employee shall be eligible to be designated a Participant by the
Committee.
SECTION 6. Awards.
     (a) Options. In determining that an eligible Employee shall be granted an
Option, the Committee shall determine, subject to the provisions of the Plan,
the number of Shares to be covered by each Option, the exercise price therefor
and the conditions and limitations applicable to the exercise of the Option. The
exercise price per Share purchasable under an Option shall be determined by the
Committee at the time each Option is granted; provided, that the exercise price
per Share shall not be less than 100% of Fair Market Value on the date of such
grant, and once established, the exercise price under an Option shall not be
reduced.

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     (b) Stock Appreciation Rights. Subject to the provisions of the Plan, in
determining that an eligible Employee shall be awarded SARs, the Committee shall
determine the number of Shares to be covered by each SAR Award, the grant price
thereof and the conditions and limitations applicable to the exercise thereof.
SAR Awards shall be payable in cash or in stock, as determined by the Committee,
and may be granted in tandem with another Award, in addition to another Award,
or freestanding and unrelated to another Award. SARs granted in tandem with or
in addition to another Award may be granted either at the same time as the other
Award or at a later time.
     (i) Grant Price. The grant price (strike price) of an SAR shall be
determined by the Committee, provided, that the grant price shall not be less
than 100% of Fair Market Value on the date of such grant, and, once established,
the grant price shall not be reduced.
     (ii) Other Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine, at or after the grant
of an SAR, the term, methods of exercise, and any other terms and conditions of
any SAR.
     (c) Restricted Stock. Subject to the provisions of the Plan, in determining
that an eligible Employee shall be awarded Restricted Stock, the Committee shall
determine the number of Shares of Restricted Stock to be granted to each
Participant, the duration of the restriction period during which, and the
conditions under which, the Restricted Stock may be forfeited to the Company,
and the other terms and conditions of the Awards.
     (i) Dividends. Unless otherwise determined by the Committee, a Restricted
Stock Award shall provide for the payment of dividends during its restriction
period. Dividends paid on Restricted Stock may be paid directly to the
Participant, may be subject to risk of forfeiture, or may be subject to transfer
restrictions during any period established by the Committee, all as determined
by the Committee in its discretion.
     (ii) Registration. Any Restricted Stock may be evidenced in any manner
deemed appropriate by the Committee, including book-entry registration or the
issuance of stock certificates. If any stock certificate is issued with respect
to Restricted Stock, the certificate shall be registered in the name of the
Participant and may bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to the Restricted Stock. The Participant
shall be entitled to exercise all voting rights with respect to the Restricted
Stock during the restriction period.
     (iii) Forfeiture. Except as otherwise determined by the Committee or the
Chief Executive Officer, subject to Section 6(h)(vii)(D), upon termination of a
Participant’s employment with the Company for any reason, the provisions of
Section 6(h)(vii)(B) and (C) shall apply with respect to Restricted Stock
granted hereunder.

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     (iv) Issuance of Shares. Unrestricted Shares, evidenced in any manner as
the Committee shall deem appropriate, shall be nonforfeitable and shall be
issued to the Participant promptly after the applicable restrictions have lapsed
or otherwise terminated or been satisfied.
     (d) Performance Awards. The Committee shall have authority to determine the
Employees who may receive a Performance Award, which shall consist of a right,
denominated or payable in cash, Shares, other securities or other property
(including Restricted Stock), and that shall confer on the holder thereof,
rights valued at an amount determined by the Committee and payable to or
exercisable by the holder thereof, in whole or in part, upon the achievement of
prescribed performance goals during prescribed performance periods as the
Committee shall establish. Performance Awards shall be based upon achievement of
a specified performance goal or goals established by the Committee. The
Committee, in its sole discretion, may provide for a reduction in the value of a
Performance Award during the performance period and prior to certification that
the established performance goal(s) has been met. When earned, Performance
Awards may be paid in a lump sum or in installments following the close of the
performance period or, in accordance with procedures established by the
Committee, on a deferred basis.
     (e) Stock Compensation. The Committee shall have authority to pay in Shares
all or any portion of the amounts payable under any compensation program of the
Company. The number and type of Shares to be distributed in lieu of the cash
compensation applicable to any Award, as well as the terms and conditions of any
bonus awards, shall be determined by the Committee.
     (f) Other Stock-Based Awards. The Committee is hereby authorized to grant
to eligible Employees an “Other Stock-Based Award,” which shall consist of a
right
     (i) that is not an Award or right described in Section 6(a), (b), (c), (d),
or (e) above, and
     (ii) that is denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including securities
convertible into Shares), as are deemed by the Committee to be consistent with
the purposes of the Plan. Subject to the terms of the Plan and any applicable
Award Agreement, the Committee shall determine the terms and conditions of any
Other Stock-Based Award.
     (g) Exercise of Option or SAR Awards.
     (i) Notice. Unless otherwise prescribed by the Committee, Awards may be
exercised only by written notice of exercise (the “Exercise Notice”), in the
form prescribed by the Committee, delivered to the Company to the Financial
Benefit Plan Administration Manager or other Company official administering the
Plan, and signed by the Participant or the representative or transferee thereof.
The date on which the Exercise Notice is delivered to the Company shall be the
“Notice Date.” The Exercise

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Notice shall specify a date (the “Settlement Date”), not less than three
business days nor more than ten business days following the Notice Date, upon
which the Shares or other rights shall be issued or transferred to the
Participant (or other person entitled to exercise the Award) and the Award’s
exercise price shall be paid to the Company.
     (ii) Payment. Unless otherwise prescribed by the Committee, on the
Settlement Date, the person exercising an Award shall tender to the Company full
payment for the Shares or other rights with respect to which the Award is
exercised, together with an additional amount equal to the amount of any taxes
required to be collected or withheld by the Company in connection with the
exercise of the Award (the “Tax Payment”).
     (iii) Tax Payment Election. Subject to the approval of the Committee, and
to any rules and limitations as the Committee may adopt, a person exercising an
Award may make the Tax Payment in whole or in part by electing, at or before the
time of exercise of the Award, either (A) to have the Company withhold from the
number of Shares otherwise deliverable a number of Shares whose value equals the
Tax Payment, or (B) to deliver certificates for other Shares owned by the person
exercising the Award, endorsed in blank with appropriate signature guarantee,
having a value equal to the amount otherwise to be collected or withheld.
     (iv) Payment with Stock. Subject to approval by the Committee, a person
exercising an Award for the receipt of Shares may pay for the Shares by
tendering to the Company other Shares legally and beneficially owned by that
person at the time of the exercise of the Award. The certificate(s) representing
any Shares tendered in payment of an Award’s exercise price must be accompanied
by a stock power duly executed with appropriate signature guarantees. The
Committee may, in its sole discretion, refuse any tender of Shares. If the
person elects to rescind his or her Exercise Notice, the person may again
(subject to the other terms of this Plan) deliver an Exercise Notice with
respect to the Award at any time prior to its expiration date.
     (v) Valuation. Any calculation with respect to a Participant’s income,
required tax withholding or other matters required to be made by the Company
upon the exercise of an Award shall be made using the Fair Market Value of the
Shares on the Notice Date, whether or not the Exercise Notice is delivered to
the Company before or after the close of trading on that date, unless otherwise
specified by the Committee. Notwithstanding the foregoing, for Option exercises
using the Company’s “same-day-sale for cash method” or “broker sale for stock
method,” a Participant’s taxable gain and related tax withholding on the
exercise will be calculated using the actual market price at which Shares were
sold in the transaction.
     (vi) Rights as Stockholder . Except as provided in Section 6(c) of this
Plan, until the issuance of the stock certificate(s) for Shares purchased
hereunder (as evidenced by the appropriate entry on the books of the Company or
any authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights

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as a stockholder of the Company shall exist with respect to such Shares,
notwithstanding the exercise of any Award. No adjustment will be made for a
dividend or other rights for which the record date is prior to the date the
stock certificates evidencing such Shares are issued, except as otherwise
provided in this Plan.
     (h) General.
     (i) Grants. Awards may be granted, in the discretion of the Committee,
either alone or in addition to, in tandem with, or in substitution for any other
Award granted under the Plan or any award granted under any other plan of the
Company or any Affiliate. Awards granted in addition to or in tandem with other
Awards or awards granted under any other plan of the Company or any Affiliate
may be granted either at the same time as or at a different time from the grant
of other Awards or awards. The Committee shall not have the authority to reprice
an Award once granted, or to cancel and reissue an Award at a lower price.
     (ii) Forms of Payment by Company. Subject to the terms of the Plan and of
any applicable Award Agreement, payments or transfers to be made by the Company
or an Affiliate upon the grant, exercise or payment of an Award may be made in
any form as the Committee shall determine, including cash, Shares, other
securities, other Awards or other property, or any combination thereof, and
shall be made in a single payment.
     (iii) Nonassignability. Without prior written approval from the Committee,
no Award granted under this Plan shall be transferable by the Participant,
except upon Participant’s death and then the same shall be transferred to the
Participant’s beneficiary designated under the Valero Energy Corporation
Beneficiary Designation Form, or if there is no such designation, then the same
shall be transferred pursuant to the will of the Participant and if there is no
will, then pursuant to the applicable laws of descent and distribution, and no
Participant or other person claiming by, through or under a Participant shall
have any right to sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual receipt
any Award payable hereunder, or any part thereof, all of which are, and all
rights in and to which are, hereby expressly declared to be nonassignable and
nontransferable; any such purported sale, assignment or conveyance without the
Committee’s prior approval shall be void and of no force or effect. No Award
shall, prior to actual payment or delivery, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant, or other person claiming by, through or under
a Participant, or be transferable by operation of law in the event of bankruptcy
or insolvency.
     (iv) Term of Awards. The term of each Award shall be for the period
determined by the Committee, provided, that, in no event shall the term of any
Award exceed a period of 10 years.

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     (v) Share Certificates. All certificates for Shares or other securities of
the Company or any Affiliate delivered under the Plan pursuant to any Award or
the exercise thereof shall be subject to (A) all stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan, (B) the rules,
regulations, and other requirements of the SEC and any stock exchange upon which
the Shares or other securities are then listed and (C) any applicable federal or
state laws. The Committee may cause a legend or legends to be put on any stock
certificates to make appropriate reference to applicable restrictions.
     (vi) Delivery of Shares or Other Securities and Payment of Consideration.
No Shares or other securities shall be delivered pursuant to any Award until
payment in full of any amount required to be paid pursuant to the Plan or the
applicable Award Agreement is received by the Company. Payment may be made in
any form or method prescribed by the Committee, including cash, Shares, other
securities, other Awards or other property, or any combination thereof, provided
that the combined value, as determined by the Committee, of all cash and cash
equivalents and the Fair Market Value of any Shares or other property tendered
to the Company as of the date of such tender, is at least equal to the full
amount required to be paid.
     (vii) Termination of Employment.
     (A) Except as otherwise provided in the Plan, or otherwise determined by
the Committee and included in the applicable Award Agreement, an Option, SAR or
Other Stock-Based Award having an exercise provision (each, an “Exercisable
Award”) vests in and may be exercised by a Participant only while the
Participant is and has continually been since the date of the grant of the
Exercisable Award an Employee. If a Participant’s employment with the Company is
voluntarily terminated by the Participant (other than through retirement, death
or disability; see subsection (C) below), then: (i) that portion of any
Exercisable Award that has not vested on or prior to such date of termination
shall automatically lapse and be forfeited, and (ii) all vested but unexercised
Exercisable Awards previously granted to that Participant under the Plan shall
automatically lapse and be forfeited at the close of business on the 30th day
following that date of such Participant’s termination, unless an Exercisable
Award expires earlier according to its original terms. If a Participant’s
employment is involuntarily terminated by the Company for Cause: (i) that
portion of any Exercisable Award that has not vested on or prior to such date of
termination shall automatically lapse and be forfeited, and (ii) all vested but
unexercised Exercisable Awards previously granted to that Participant under the
Plan shall automatically lapse and be forfeited at the close of business on the
30th day following that date of such Participant’s termination, unless an
Exercisable Award expires earlier according to its original terms. If a
Participant’s employment is involuntarily terminated by the Company other than
for Cause: (i) that portion of any Exercisable Award which has not vested on or
prior to such date of termination shall automatically lapse and be forfeited,
and (ii) all

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vested but unexercised Exercisable Awards previously granted to that Participant
under the Plan shall automatically lapse and be forfeited at the close of
business on the last business day of the twelfth month following the date of the
Participant’s termination, unless an Exercisable Award sooner expires according
to its original terms.
     (B) Except as otherwise provided in the Plan, or otherwise determined by
the Committee and included in the applicable Award Agreement, if a Participant’s
employment with the Company is voluntarily terminated by the Participant (other
than through retirement, death or disability; see subsection (C) below), or is
terminated by the Company with or without Cause, then any Restricted Stock or
Performance Award previously granted to that Participant under the Plan which
remains unvested shall automatically lapse and be forfeited at the close of
business on the date of the Participant’s termination of employment.
     (C) Except as otherwise provided in the Plan, or otherwise determined by
the Committee and included in the applicable Award Agreement, if a Participant’s
employment is terminated because of retirement, death or disability (with the
determination of disability to be made within the sole discretion of the
Committee), any Award held by the Participant shall remain outstanding and vest
or become exercisable according to the Award’s original terms; provided,
however, that any Restricted Stock held by the Participant which remains
unvested as of the date of retirement, death or disability shall immediately
vest and become non-forfeitable as of such date.
     (D) The Committee or the Chief Executive Officer may prescribe new or
additional terms for the vesting, exercise or realization of any Award;
provided, however, that no such action shall deprive a Participant or
beneficiary, without his or her consent, of the right to any benefit accrued to
his or her credit at the time of such action.
     (viii) Award Agreements. Awards shall be evidenced by Award Agreements
having terms and conditions, not inconsistent with the Plan, as prescribed by
the Committee. Award Agreements need not be uniform.
SECTION 7. Amendment and Termination.
     Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
     (a) Amendments to the Plan. The Committee or the Board may amend, suspend
or terminate the Plan without the consent of any stockholder, Participant, other
holder or beneficiary of an Award, or other Person.

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     (b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter any Award theretofore granted; provided
that, no change in any Award shall reduce the benefit accruing to any
Participant without the consent of the Participant.
     (c) Unusual or Nonrecurring Events. The Committee is hereby authorized to
make adjustments in the terms, conditions, and criteria of Awards in recognition
of unusual or nonrecurring events (including the events described in Section
4(c) of the Plan) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or in recognition of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
SECTION 8. Change Of Control.
     (a) Effect. If a Change of Control shall occur, each Award held by a
Participant pursuant to the Plan shall remain in full force and effect until the
earlier of (i) the expiration date of the Award, or (ii) 90 days following the
Participant’s date of termination of employment with the Company.
     (b) Defined. A Change of Control shall be deemed to occur when:
     (i) the stockholders of the Company approve any agreement or transaction
pursuant to which: (A) the Company will merge or consolidate with any other
Person (other than a wholly owned subsidiary of the Company) and will not be the
surviving entity (or in which the Company survives only as the subsidiary of
another entity); (B) the Company will sell all or substantially all of its
assets to any other Person (other than a wholly owned subsidiary of the
Company); or (C) the Company will be liquidated or dissolved; or
     (ii) any “person” or “group” (as these terms are used in Section 13(d) and
14(d) of the Exchange Act) other than the Company, any subsidiary of the
Company, any employee benefit plan of the Company or its subsidiaries, or any
entity holding Shares for or pursuant to the terms of such employee benefit
plans, is or becomes an “Acquiring Person” as defined in the Rights Agreement
(or any successor rights agreement) (or, if no Rights Agreement is then in
effect, such person or group acquires or holds such number of shares as, under
the terms and conditions of the most recent such rights agreement to be in force
and effect, would have caused such person or group to be an “Acquiring Person”
thereunder); or
     (iii) any “person” or “group” shall commence a tender offer or exchange
offer for 15% or more of the Shares then outstanding, or for any number or
amount of Shares which, if the tender or exchange offer were to be fully
subscribed and all Shares for which the tender or exchange offer is made were to
be purchased or exchanged

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pursuant to the offer, would result in the acquiring person or group directly or
indirectly beneficially owning 50% or more of the Shares then outstanding; or
     (iv) individuals who, as of any date, constitute the Board (the “Incumbent
Board”) thereafter cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director whose
election, or nomination for election by the Company’s stockholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person or group other than the Board; or
     (v) the occurrence of the Distribution Date (as defined in the Rights
Agreement); or
     (vi) any other event determined by the Board or the Committee to constitute
a “Change of Control” hereunder.
     (c) Actions of Committee. In addition to the Committee’s authority set
forth in Section 7(c) of the Plan, in order to maintain the Participants’ rights
in the event of any Change of Control, the Committee, as constituted before the
Change of Control, is hereby authorized, and has sole discretion, as to any
Award, either at the time the Award is made hereunder or any time thereafter, to
take any one or more of the following actions:
     (i) provide for the acceleration of any time periods relating to the
vesting, exercise or realization of the Award so that the Award may be exercised
or realized in full on or before a date fixed by the Committee;
     (ii) provide for the purchase of any Award, upon the Participant’s request,
for an amount of cash equal to the amount that could have been attained upon the
exercise of the Award or realization of the Participant’s rights in the Award
had the Award been currently exercisable or payable;
     (iii) adjust any outstanding Award as the Committee deems appropriate to
reflect the Change of Control; or
     (iv) cause any outstanding Award to be assumed, or new rights substituted
therefor, by the acquiring or surviving corporation after the Change of Control.
The Committee may in its discretion include other provisions and limitations in
any Award Agreement as it may deem equitable and in the best interests of the
Company.

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SECTION 9. General Provisions.
     (a) No Rights to Awards. No Employee, Participant or other Person shall
have any claim to be granted any Award. The Committee is not required to treat
uniformly the Employees, Participants, or holders or beneficiaries of Awards
when making grants of Awards under the Plan. The terms and conditions of Awards
are not required to be the same with respect to each recipient.
     (b) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company or any
Affiliate, or to a committee of such officers or managers, the authority,
subject to the terms and limitations the Committee shall determine, to grant
Awards or to cancel, modify or waive rights with respect to, or to amend,
suspend, or terminate Awards.
     (c) Withholding. The Company or any Affiliate is hereby authorized to
withhold from any Award, from any payment due or transfer made under any Award
or under the Plan or from any compensation or other amount owing to a
Participant the amount (in cash, Shares, other securities, other Awards or other
property) of any applicable withholding taxes with respect to an Award, its
exercise, the lapse of restrictions thereon, payment or transfer under an Award
or under the Plan, and to take any other action necessary in the opinion of the
Company to satisfy all obligations for the payment of the taxes.
     (d) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect any other compensation arrangements.
     (e) No Right to Employment. The grant of an Award shall not be construed as
creating a contract of employment or giving Participant the right to be retained
in the employ of the Company or any Affiliate. Further, the Company or an
Affiliate may at any time dismiss a Participant from employment, free from any
liability or any claim under the Plan, unless otherwise expressly provided in
the Plan or in any Award Agreement.
     (f) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Texas and applicable federal law.
     (g) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction as to
any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award and the remainder of the Plan and any such Award
shall remain in full force and effect.

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     (h) NYSE Listing and Other Laws and Regulations. Notwithstanding anything
to the contrary contained in this Plan, in any Award, or any Award Agreement or
other agreement entered into under this Plan, the grant or making of any Award
shall be conditional and shall be granted or awarded subject to acceptance of
the Shares deliverable pursuant to the Award for listing on the NYSE. The
Committee may refuse to issue or transfer any Shares or other consideration
under an Award if, acting in its sole discretion, it determines that the
issuance or transfer of the Shares or other consideration might violate any
applicable law or regulation, violate any regulation for admission or trading on
the NYSE, or entitle the Company to recover any consideration or proceeds under
Section 16 of the Exchange Act, and any payment tendered to the Company by a
Participant, other holder or beneficiary in connection with the exercise of such
Award shall be promptly refunded.
     (i) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or any fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
     (j) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares or whether fractional Shares or any rights thereto
shall be canceled, terminated, or otherwise eliminated.
     (k) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. The headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
     (l) Construction. Use of the term “including” in this Plan shall be
construed to mean “including but not limited to.”
SECTION 10. Effective Date of the Plan.
     The Plan shall be effective April 23, 2003, following its approval by the
Compensation Committee of the Board.
SECTION 11. Term of the Plan.
     The Plan shall expire on April 23, 2013. However, unless otherwise
expressly provided in the Plan or in an applicable Award Agreement, any Award
made prior to, and outstanding on such date, shall remain valid in accordance
with its terms and conditions, and the authority of the Board or the Committee
to amend, suspend, or terminate any such Award or to waive any conditions or
rights under any such Award in accordance with the Plan, shall extend beyond
such date.

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