Exhibit 10.4
HOLLY CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
As Amended and Restated as of May 24, 2007
(Formerly designated the Holly Corporation 2000 Stock Option Plan)
     1. Purpose. The purpose of the Holly Corporation Long-Term Incentive
Compensation Plan as amended and restated as of May 24, 2007 (formerly
designated the Holly Corporation 2000 Stock Option Plan) (the “Plan”) is to
advance the interests of Holly Corporation (the “Company”) by strengthening the
ability of the Company and its subsidiaries to attract, retain and motivate able
people of high caliber as employees, directors and consultants through
arrangements that relate the compensation for such persons to the long-term
performance of the Company. Accordingly, the Plan provides for granting
Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards,
Bonus Stock Awards, Stock Appreciation Rights, Phantom Stock Awards, Performance
Awards or any combination of the foregoing, as the Committee shall determine.
     2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
          (a) “Amendment Effective Date” means December 12, 2002. The Plan prior
to amendment was effective January 1, 2001.
          (b) “Award” means any Option, Restricted Stock Award, Bonus Stock
Award, Stock Appreciation Right, Phantom Stock Award, or Performance Award,
together with any other right or interest granted to a Participant under the
Plan.
          (c) “Beneficiary” means one or more persons, trusts or other entities
that have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant’s death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(d)
hereof. If, upon a Participant’s death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the persons,
trusts or other entities entitled by will or the laws of descent and
distribution to receive such benefits.
          (d) “Board” means the Company’s board of directors.
          (e) “Bonus Stock Award” means Shares granted to a Participant under
Section 6(c) hereof.
          (f) “Code” means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
          (g) “Committee” means a committee of two or more directors designated
by the Board to administer the Plan; provided, however, that, unless otherwise
determined by the Board, the Committee shall consist solely of two or more
directors, each of whom shall be (i) a “nonemployee director” within the meaning
of Rule 16b-3 under the Exchange Act, and (ii) an

 

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“outside director” as defined under Section 162(m) of the Code, unless
administration of the Plan by “outside directors” is not then required in order
to qualify for tax deductibility under Section 162(m) of the Code.
          (h) “Covered Employee” means an Eligible Person who is a Covered
Employee as specified in Section 8(b)(vi) of the Plan.
          (i) “Disability” means, as determined by the Board in the sole
discretion exercised in good faith of the Board, a physical or mental impairment
of sufficient severity that either the Participant is unable to continue
performing the duties he performed before such impairment or the Participant’s
condition entitles him to disability benefits under any insurance or employee
benefit plan of the Company or its Subsidiaries and that impairment or condition
is cited by the Company as the reason for termination of the Participant’s
employment or participation as a member of the Board.
          (j) “Eligible Person” means any current or proposed officer, director,
or key employee or consultant whose services are deemed to be of potential
benefit to the Company or any of its Subsidiaries. An employee on leave of
absence may be considered as still in the employ of the Company or a Subsidiary
for purposes of eligibility for participation in the Plan.
          (k) “Exchange Act” means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules relating thereto.
          (l) “Fair Market Value” means the fair market value as determined by
the Committee. Unless otherwise determined by the Committee, the Fair Market
Value of a Share shall be the closing price of a Share, on the date on which the
determination of Fair Market Value is being made or if no Shares were traded on
such date then the last trading date prior thereto, as quoted on the composite
transactions table for the American Stock Exchange or, if the Shares are not
then subject to trading on the American Stock Exchange, then as quoted in a
comparable manner on any other national stock exchange or, if not so quoted,
then as reported for the over-the-counter market on which the largest volume of
trading of Shares has occurred in the 30 trading days prior to the date for
which a determination is made.
          (m) “Incentive Stock Option” means any Option intended to be and
designated as an incentive stock option within the meaning of Section 422 of the
Code or any successor provision thereto.
          (n) “Non-Qualified Stock Option” means any Option that does not
constitute an Incentive Stock Option.
          (o) “Option” means a right granted to a Participant under Section 6(a)
hereof to purchase Shares or other Awards at a specified price during specified
time periods.
          (p) “Participant” means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
          (q) “Performance Award” means a right granted to a Participant under
Section 8 hereof to receive cash and/or other consideration other than Shares
based on performance conditions, as provided in Section 8, measured over a
period of not less than six months nor more than ten years.

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          (r) “Phantom Stock Award” means a right granted to a Participant under
Section 7(b) hereof.
          (s) “Qualified Member” means a member of the Committee who is a
“Non-Employee Director” within the meaning of Rule 16b-3(b)(3) and an “outside
director” within the meaning of regulation 1.162-27 under Section 162(m) of the
Code.
          (t) “Restricted Stock Award” means Shares granted to a Participant
under Section 6(b) hereof that are subject to certain restrictions and to a risk
of forfeiture.
          (u) “Rule 16b-3” means Rule 16b-3, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, as from time to time
in effect and applicable to the Plan and Participants.
          (v) “Securities Act” means the Securities Act of 1933 and the rules
and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.
          (w) “Shares” means shares of the Company’s common stock, par value
$.01 per share, and such other securities as may be substituted (or
resubstituted) for shares of the Company’s common stock, par value $.01 per
share, pursuant to Section 10 hereof.
          (x) “Stock Appreciation Right” means a right granted to a Participant
under Section 7(a) hereof.
          (y) “Subsidiary” means with respect to the Company, any corporation or
other entity of which at least 50% of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by the Company
or any other entity determined by the Committee to constitute a Subsidiary due
to its relationship to the Company.
     3. Administration.
          (a) Authority of the Committee. The Plan shall be administered by the
Committee except to the extent the Board elects to administer all or part of the
Plan or except to the extent the Board appoints a separate committee other than
the Committee to administer all or part of the Plan, in which case references
herein to the “Committee” shall be deemed to include references to the “Board”
and/or such additional committee, as applicable. To the extent a portion of the
Plan is administered by the Committee, and another portion of the Plan is
administered by the Board and/or a separate committee, references herein to
“Committee” shall be deemed to be references to the “Board” or such additional
committee, as applicable, but only to the extent the Board or additional
committee administers a portion of the Plan and only with respect to those
portions of the Plan that the Board has elected to administer or over which the
separate committee has been delegated authority. Subject to the express
provisions of the Plan and Rule 16b-3, the Committee shall have the authority,
in its sole and absolute discretion, to (i) adopt, amend, and rescind
administrative and interpretive rules and regulations relating to the

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Plan; (ii) determine the Eligible Persons to whom, and the time or times at
which, Awards shall be granted; (iii) determine the amount of cash and the
number of Options, Restricted Stock Awards, Bonus Stock Awards, Stock
Appreciation Rights, Phantom Stock Awards, or Performance Awards, or any
combination thereof, that shall be the subject of each Award; (iv) determine the
terms and provisions of each Award agreement (which need not be identical),
including provisions defining or otherwise relating to (A) the term and the
period or periods and extent of exercisability of Options, (B) the extent to
which the transferability of Shares and Awards is restricted, (C) the effect of
termination of employment of a Participant on the Award, and (D) the effect of
approved leaves of absence (consistent with any applicable regulations of the
Internal Revenue Service); (v) accelerate the time of exercisability of any
Option that has been granted; (vi) construe the respective Award agreements and
the Plan; (vii) make determinations of the Fair Market Value of the Shares
pursuant to the Plan; (viii) delegate its duties under the Plan to such agents
as it may appoint from time to time, provided that the Committee may not
delegate its duties with respect to making Awards to, or otherwise with respect
to Awards granted to, Eligible Persons who are subject to Section 16(b) of the
Exchange Act or Section 162(m) of the Code; (ix) subject to ratification by the
Board, terminate, modify, or amend the Plan; and (x) make all other
determinations, perform all other acts, and exercise all other powers and
authority necessary or advisable for administering the Plan, including the
delegation of those ministerial acts and responsibilities as the Committee deems
appropriate. Subject to Rule 16b-3 and Section 162(m) of the Code, the Committee
may correct any defect, supply any omission, or reconcile any inconsistency in
the Plan, in any Award, or in any Award agreement in the manner and to the
extent it deems necessary or desirable to carry the Plan into effect, and the
Committee shall be the sole and final judge of that necessity or desirability.
The determinations of the Committee on the matters referred to in this Section
3(a) shall be final and conclusive.
          (b) Manner of Exercise of Committee Authority. At any time that a
member of the Committee is not a Qualified Member, any action of the Committee
relating to an Award granted or to be granted to a Participant who is then
subject to Section 16 of the Exchange Act in respect of the Company, or relating
to an Award intended by the Committee to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code and regulations
thereunder, may be taken either (i) by a subcommittee, designated by the
Committee, composed solely of two or more Qualified Members, or (ii) by the
Committee but with each such member who is not a Qualified Member abstaining or
recusing himself or herself from such action; provided, however, that, upon such
abstention or recusal, the Committee remains composed solely of two or more
Qualified Members. Such action, authorized by such a subcommittee or by the
Committee upon the abstention or recusal of such non-Qualified Member(s), shall
be the action of the Committee for purposes of the Plan. Any action of the
Committee shall be final, conclusive and binding on all persons, including the
Company, its Subsidiaries, stockholders, Participants, Beneficiaries, and
transferees under Section 10(d) hereof or other persons claiming rights from or
through a Participant. The express grant of any specific power to the Committee,
and the taking of any action by the Committee, shall not be construed as
limiting any power or authority of the Committee. The Committee may delegate to
officers or managers of the Company or any Subsidiary, or committees thereof,
the authority, subject to such terms as the Committee shall determine, to
perform such functions, including administrative functions, as the Committee may
determine, to the extent that such delegation will not result in the loss of an
exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to

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Section 16 of the Exchange Act in respect of the Company and will not cause
Awards intended to qualify as “performance-based compensation” under Section
162(m) of the Code to fail to so qualify. The Committee may appoint agents to
assist it in administering the Plan.
          (c) Limitation of Liability. The Committee and each member thereof
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any officer or employee of the Company or
a Subsidiary, the Company’s legal counsel, independent auditors, consultants or
any other agents assisting in the administration of the Plan. Members of the
Committee and any officer or employee of the Company or a Subsidiary acting at
the direction or on behalf of the Committee shall not be personally liable for
any action or determination taken or made in good faith with respect to the
Plan, and shall, to the fullest extent permitted by law, be indemnified and held
harmless by the Company with respect to any such action or determination.
     4. Shares Subject to Plan.
          (a) Overall Number of Shares Available for Delivery. Subject to
adjustment in a manner consistent with any adjustment made pursuant to
Section 10 of the Plan, the total number of Shares that may be delivered in
connection with Awards under the Plan shall not exceed 1,500,000, including all
Shares delivered with respect to Options granted under the Plan prior to the
Amendment Effective Date.
          (b) Application of Limitation to Grants of Awards. No Award may be
granted if (i) the number of Shares to be delivered in connection with such
Award exceeds (ii) the number of Shares remaining available under the Plan minus
the number of Shares issuable in settlement of or relating to then-outstanding
Awards. The Committee may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in the case of
tandem or substitute awards) and make adjustments if the number of Shares
actually delivered differs from the number of Shares previously counted in
connection with an Award.
          (c) Availability of Shares Not Delivered under Awards. Shares subject
to an Award under the Plan that expires or is canceled, forfeited, settled in
cash or otherwise terminated without a delivery of Shares to the Participant,
including (i) the number of Shares withheld in payment of any exercise price of
an Award or taxes relating to Awards, and (ii) the number of Shares surrendered
in payment of any exercise price of an Award or taxes relating to any Award,
will again be available for Awards under the Plan, except that if any such
Shares could not again be available for Awards to a particular Participant under
any applicable law or regulation, such Shares shall be available exclusively for
Awards to Participants who are not subject to such limitation.
          (d) Shares Offered. The Shares to be delivered under the Plan shall be
made available from (i) authorized but unissued Shares, or (ii) previously
issued Shares reacquired by the Company.
     5. Eligibility; Per Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year or 12-month period, as
applicable, during any part of which the Plan is in effect, an Eligible Person
may not be granted (a) Awards, provided

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for in Sections 6 and 7 of the Plan, relating to more than 150,000 Shares,
subject to adjustment in a manner consistent with any adjustment made pursuant
to Section 10 of the Plan, or (b) Awards, provided for in Section 8 of the Plan,
with a value at the time of payment which exceeds the Fair Market Value of
150,000 Shares as of the date of the grant of the Award.
     6. Options, Restricted Stock and Bonus Stock.
          (a) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
          (i) Exercise Price. The exercise price or prices for Shares under each
Option shall be determined by the Committee at the time the Option is granted,
and may be less than, equal to or greater than, the Fair Market Value of the
Shares at the time of the granting of the Option, provided that the exercise
price per Share for any Option that is intended to be performance-based
compensation under Section 162(m)(4)(C) of the Code or an Incentive Stock Option
under Section 422 of the Code shall not be less than the Fair Market Value of a
Share as of the effective date of grant of the Option; provided, however, that
in the case of an individual who owns stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Company or its
parent or any Subsidiary, the exercise price per Share of any Incentive Stock
Option under Section 422 of the Code shall not be less than 110% of the Fair
Market Value of a Share as of the effective date of grant of the Incentive Stock
Option.
          (ii) Time and Method of Exercise. The Committee shall determine the
time or times at which or the circumstances under which an Option may be
exercised in whole or in part (including based on achievement of performance
goals and/or future service requirements), the methods by which such exercise
price may be paid or deemed to be paid, the form of such payment, including,
without limitation, cash, Shares, other Awards or awards granted under other
plans of the Company or any Subsidiary, or other property (including notes, to
the extent permitted under applicable law, or other contractual obligations of
Participants to make payment on a deferred basis), and the methods by or forms
in which Shares will be delivered or deemed to be delivered to Participants,
including, but not limited to, the delivery of Restricted Stock Awards subject
to Section 6(b) hereof. In the case of an exercise whereby the exercise price is
paid with Shares, the value of such Shares for purposes of calculating the
exercise price paid shall be the Fair Market Value. Notwithstanding anything to
the contrary herein, unless otherwise provided in any agreement evidencing an
Option, in the event of the death of a Participant while in the employ of the
Company or one of its Subsidiaries, an Option theretofore granted to the
Participant shall be exercisable within the year succeeding such death (even if
the Option would otherwise expire prior to one year from the date of death) but
only to the extent that the optionee was entitled to exercise the Option as of
the date of death.
          (iii) Incentive Stock Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions of
Section 422 of the Code. Anything in the Plan to the contrary notwithstanding,
no term of the Plan relating to Incentive Stock Options (including any Stock
Appreciation Right in tandem

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therewith) shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to disqualify either the
Plan or any Incentive Stock Option under Section 422 of the Code, unless the
Participant has first requested the change that will result in such
disqualification. Incentive Stock Options shall not be granted more than ten
years after the earlier of the adoption of the Plan or the approval of the Plan
by the Company’s stockholders. Notwithstanding the foregoing, the Fair Market
Value of Shares subject to an Incentive Stock Option and the aggregate Fair
Market Value of shares of stock of any parent or Subsidiary corporation (within
the meaning of Sections 424(e) and (f) of the Code) subject to any other
incentive stock option (within the meaning of Section 422 of the Code) of the
Company or a parent or Subsidiary corporation (within the meaning of Sections
424(e) and (f) of the Code) that first becomes purchasable by a Participant in
any calendar year may not (with respect to that Participant) exceed $100,000, or
such other amount as may be prescribed under Section 422 of the Code or
applicable regulations or rulings from time to time. As used in the previous
sentence, Fair Market Value shall be determined as of the date the Incentive
Stock Options are granted. Failure to comply with this provision shall not
impair the enforceability or exercisability of any Option, but shall cause the
excess amount of Shares to be reclassified in accordance with the Code. No
Incentive Stock Option may be granted after December 13, 2010.
          (b) Restricted Stock Awards. The Committee is authorized to grant
Restricted Stock Awards to Participants on the following terms and conditions:
          (i) Grant and Restrictions. Restricted Stock Awards shall be subject
to such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions may lapse
separately or in combination at such times, under such circumstances (including
based on achievement of performance goals and/or future service requirements),
in such installments or otherwise, as the Committee may determine at the date of
grant or thereafter. Except to the extent restricted under the terms of the Plan
and any Award agreement relating to the Restricted Stock Award, a Participant
granted a Restricted Stock Award shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock Award and the right to receive
dividends thereon (subject to any mandatory reinvestment or other requirement
imposed by the Committee). During the restricted period applicable to the
Restricted Stock Award, the Restricted Stock Award may not be sold, transferred,
pledged, hypothecated, margined or otherwise encumbered by the Participant.
          (ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable restriction period, Restricted
Stock Awards that are at that time subject to restrictions shall be forfeited
and reacquired by the Company; provided that the Committee may provide, by rule
or regulation or in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to Restricted Stock
Awards shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases waive in
whole or in part the forfeiture of Restricted Stock Awards.

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          (iii) Certificates for Shares. Restricted Stock Awards granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates for Shares relating to Restricted Stock Awards are registered in
the name of the Participant, the Committee may require that such certificates
bear an appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock Awards, that the Company retain physical
possession of the certificates, and that the Participant deliver a stock power
to the Company, endorsed in blank, relating to such Shares.
          (iv) Dividends and Splits. As a condition to the grant of a Restricted
Stock Award, the Committee may require or permit a Participant to elect that any
cash dividends paid on a Share related to the Restricted Stock Award be
automatically reinvested in additional Shares related to the Restricted Stock
Award or applied to the purchase of additional Awards under the Plan. Unless
otherwise determined by the Committee, Shares distributed in connection with a
stock split or stock dividend, and other property distributed as a dividend,
shall be subject to restrictions and a risk of forfeiture to the same extent as
the Restricted Stock Award with respect to which such Shares or other property
has been distributed.
          (c) Bonus Stock Awards. The Committee is authorized to grant Awards of
Shares as bonuses, provided that, in the case of Participants subject to
Section 16 of the Exchange Act, the amount of such grants remains within the
discretion of the Committee to the extent necessary to ensure that such Awards
are exempt from liability under Section 16(b) of the Exchange Act. Bonus Stock
Awards shall be subject to such other terms as shall be determined by the
Committee.
          (d) Performance Goals. To the extent the Committee determines that any
Award granted pursuant to this Section 6 shall constitute performance-based
compensation for purposes of Section 162(m) of the Code, the grant or settlement
of the Award shall, in the Committee’s discretion, be subject to the achievement
of performance goals determined and applied in a manner consistent with
Section 8(b).
     7. Stock Appreciation Rights and Phantom Stock.
          (a) Stock Appreciation Rights. The Committee is authorized to grant
Stock Appreciation Rights to Participants on the following terms and conditions:
          (i) Right to Payment. A Stock Appreciation Right shall confer on the
Participant to whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one Share on the date of exercise over
(B) the grant price of the Stock Appreciation Right as determined by the
Committee.
          (ii) Rights Related to Options. A Stock Appreciation Right granted in
connection with an Option shall entitle a Participant, upon exercise thereof, to
surrender that Option or any portion thereof, to the extent unexercised, and to
receive payment of an amount computed pursuant to Subsection 7(a)(i) hereof.
That Option shall then cease to be exercisable to the extent surrendered. A
Stock Appreciation Right granted in

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connection with an Option shall be exercisable only at such time or times and
only to the extent that the related Option is exercisable and shall not be
transferable except to the extent that the related Option is transferable.
          (iii) Right Without Option. A Stock Appreciation Right granted
independent of an Option shall be exercisable as determined by the Committee and
set forth in the Award agreement governing the Stock Appreciation Right.
          (iv) Terms. The Committee shall determine at the date of grant the
time or times at which and the circumstances under which a Stock Appreciation
Right may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the method of exercise,
whether or not a Stock Appreciation Right shall be in tandem or in combination
with any other Award, and any other terms and conditions of any Stock
Appreciation Right.
          (b) Phantom Stock Awards. The Committee is authorized to grant Phantom
Stock Awards to Participants, which are rights to receive cash at the end of a
specified deferral period, subject to the following terms and conditions:
          (i) Award and Restrictions. Satisfaction of a Phantom Stock Award
shall occur upon expiration of the deferral period specified for such Phantom
Stock Award by the Committee (or, if permitted by the Committee, as elected by
the Participant). In addition, Phantom Stock Awards shall be subject to such
restrictions (which may include a risk of forfeiture), if any, as the Committee
may impose, which restrictions may lapse at the expiration of the deferral
period or at earlier specified times (including based on achievement of
performance goals and/or future service requirements), separately or in
combination, in installments or otherwise, as the Committee may determine.
          (ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable deferral period or portion
thereof to which forfeiture conditions apply (as provided in any Award agreement
evidencing the Phantom Stock Awards), all Phantom Stock Awards that are at that
time subject to deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee may provide, by
rule or regulation or in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to Phantom Stock
Awards shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases waive in
whole or in part the forfeiture of Phantom Stock Awards.
          (c) Performance Goals. To the extent the Committee determines that any
Award granted pursuant to this Section 7 shall constitute performance-based
compensation for purposes of Section 162(m) of the Code, the grant or settlement
of the Award shall, in the Committee’s discretion, be subject to the achievement
of performance goals determined and applied in a manner consistent with
Section 8(b).

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     8. Performance Awards.
          (a) Performance Awards. The Committee may grant Performance Awards
based on performance criteria measured over a period of not less than six months
and not more than ten years. The Committee may use such business criteria and
other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to increase the amounts
payable under any Award subject to performance conditions except as limited
under Section 8(b) in the case of a Performance Award granted to a Covered
Employee.
          (b) Performance Goals. The grant and/or settlement of a Performance
Award shall be contingent upon terms set forth in this Section 8(b).
          (i) General. The performance goals for Performance Awards shall
consist of one or more business criteria and a targeted level or levels of
performance with respect to each of such criteria, as specified by the
Committee. In the case of any Award granted to a Covered Employee, performance
goals shall be designed to be objective and shall otherwise meet the
requirements of Section 162(m) of the Code and regulations thereunder (including
Treasury Regulation §1.162-27 and successor regulations thereto), including the
requirement that the level or levels of performance targeted by the Committee
are such that the achievement of performance goals is “substantially uncertain”
at the time of grant. The Committee may determine that such Performance Awards
shall be granted and/or settled upon achievement of any one performance goal or
that two or more of the performance goals must be achieved as a condition to the
grant and/or settlement of such Performance Awards. Performance goals may differ
among Performance Awards granted to any one Participant or for Performance
Awards granted to different Participants.
          (ii) Business Criteria. One or more of the following business criteria
for the Company, on a consolidated basis, and/or for specified Subsidiaries,
divisions or business or geographical units of the Company (except with respect
to the total stockholder return and earnings per share criteria), shall be used
by the Committee in establishing performance goals for Performance Awards
granted to a Covered Employee: (A) earnings per share; (B) increase in revenues;
(C) increase in cash flow; (D) increase in cash flow return; (E) return on net
assets; (F) return on assets; (G) return on investment; (H) return on capital;
(I) return on equity; (J) economic value added; (K) gross margin; (L) net
income; (M) pretax earnings; (N) pretax earnings before interest, depreciation
and amortization; (O) pretax operating earnings after interest expense and
before incentives, service fees, and extraordinary or special items;
(P) operating income; (Q) total stockholder return; (R) debt reduction; (S) net
profit margin; and (T) any of the above goals determined on an absolute or
relative basis or as compared to the performance of a published or special index
deemed applicable by the Committee including, but not limited to, the Standard &
Poor’s 500 Stock Index or a group of comparable companies.

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          (iii) Performance Period; Timing for Establishing Performance Goals.
Achievement of performance goals in respect of Performance Awards shall be
measured over a performance period of not less than one year and not more than
ten years, as specified by the Committee. Performance goals in the case of any
Award granted to a Covered Employee shall be established not later than 90 days
after the beginning of any performance period applicable to such Performance
Awards, or at such other date as may be required or permitted for
“performance-based compensation” under Section 162(m) of the Code.
          (iv) Settlement of Performance Awards; Other Terms. After the end of
each performance period, the Committee shall determine the amount, if any, of
Performance Awards payable to each Participant based upon achievement of
business criteria over a performance period. The Committee may not exercise
discretion to increase any such amount payable in respect of a Performance Award
designed to comply with Section 162(m) of the Code. The Committee shall specify
the circumstances in which such Performance Awards shall be paid or forfeited in
the event of termination of employment by the Participant prior to the end of a
performance period or settlement of Performance Awards.
          (v) Written Determinations. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance Award, and
the achievement of performance goals relating to Performance Awards shall be
made in writing in the case of any Award granted to a Covered Employee. The
Committee may not delegate any responsibility relating to such Performance
Awards.
          (vi) Status of Performance Awards under Section 162(m) of the Code. It
is the intent of the Company that Performance Awards granted to persons who are
designated by the Committee as likely to be Covered Employees within the meaning
of Section 162(m) of the Code and regulations thereunder (including Treasury
Regulation §1.162-27 and successor regulations thereto) shall, if so designated
by the Committee, constitute “performance-based compensation” within the meaning
of Section 162(m) of the Code and regulations thereunder. Accordingly, the terms
of this Section 8(b) shall be interpreted in a manner consistent with Section
162(m) of the Code and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given
Participant will be a Covered Employee with respect to a fiscal year that has
not yet been completed, the term Covered Employee as used herein shall mean only
a person designated by the Committee, at the time of grant of a Performance
Award, who is likely to be a Covered Employee with respect to that fiscal year.
If any provision of the Plan as in effect on the date of adoption or any
agreements relating to Performance Awards that are designated as intended to
comply with Section 162(m) of the Code does not comply or is inconsistent with
the requirements of Section 162(m) of the Code or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.
     9. Certain Provisions Applicable to All Awards.
          (a) General. Awards may be granted on the terms and conditions set
forth in Sections 6, 7 and 8 hereof and this Section 9. In addition, the
Committee may impose on any Award or the exercise thereof, such additional terms
and conditions, not inconsistent with the

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provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment by the
Participant and terms permitting a Participant to make elections relating to his
or her Award. The Committee shall retain full power and discretion to accelerate
or waive, at any time, any term or condition of an Award that is not mandatory
under the Plan; provided, however, that the Committee shall not have any
discretion to accelerate or waive any term or condition of an Award that is
intended to qualify as “performance-based compensation” for purposes of Section
162(m) of the Code if such discretion would cause the Award not to so qualify.
Except in cases in which the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of consideration must
be paid to satisfy the requirements of the Delaware General Corporation Law, no
consideration other than services may be required for the grant of any Award.
          (b) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Company, any
Subsidiary, or any business entity to be acquired by the Company or a
Subsidiary, or any other right of a Participant to receive payment from the
Company or any Subsidiary. Such additional, tandem and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award, the Committee shall require the surrender of such
other Award in consideration for the grant of the new Award. In addition, Awards
may be granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any Subsidiary.
          (c) Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided that in no event shall the term of
any Option or Stock Appreciation Right exceed a period of ten years (or such
shorter term as may be required in respect of an Incentive Stock Option under
Section 422 of the Code).
          (d) Form and Timing of Payment under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made by the
Company or a Subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may, subject
to any limitations set forth in the Award agreement, be accelerated and cash
paid in lieu of Shares in connection with such settlement, in the discretion of
the Committee or upon occurrence of one or more specified events. In the
discretion of the Committee, Awards granted pursuant to Sections 7 or 8 of the
Plan may be payable in Shares to the extent permitted by the terms of the
applicable Award agreement. Installment or deferred payments may be required by
the Committee (subject to Section 10(f) of the Plan, including the consent
provisions thereof in the case of any deferral of an outstanding Award not
provided for in the original Award agreement) or permitted at the election of
the Participant on terms and conditions established by the Committee. Payments
may include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of amounts in respect of installment or deferred payments denominated
in Shares. Any deferral shall only be allowed as is provided in a separate
deferred compensation plan adopted by the Company. The Plan shall not constitute
an “employee benefit plan” for purposes of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.

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          (e) Exemptions from Section 16(b) Liability. It is the intent of the
Company that the grant of any Awards to or other transaction by a Participant
who is subject to Section 16 of the Exchange Act shall be exempt from Section
16(b) of the Exchange Act pursuant to an applicable exemption (except for
transactions acknowledged by the Participant in writing to be non-exempt).
Accordingly, if any provision of this Plan or any Award agreement does not
comply with the requirements of Rule 16b-3 as then applicable to any such
transaction, such provision shall be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 so that such
Participant shall avoid liability under Section 16(b) of the Exchange Act.
     10. General Provisions.
          (a) Company’s Right to Terminate or Modify Awards in Certain
Circumstances. Except to the extent that an Award agreement provides otherwise
with specific reference to this Section 10(a), in the event of (i) an
acquisition of substantially all of the assets of the Company or of a greater
than 80% stock interest in the Company by an entity in which the Company does
not have a 50% or greater interest prior to such acquisition, or (ii) a merger,
consolidation, or recapitalization involving a fundamental change in the capital
structure of the Company, the Company shall have the right to terminate any
Award upon the payment of an amount equal to the then value of the Award,
without regard to vesting or forfeiture provisions of the Award, as determined
by the Committee, taking into account to the extent determined by the Committee
to be appropriate the Fair Market Value of Shares at the time of termination and
the performance of the Company up to the time of termination. Upon tender of
payment by the Company to a holder of the amount determined by the Committee
pursuant to this provision, the Award held by such holder shall automatically
terminate. Alternatively, in such circumstances, the Company, in the discretion
of the Board, may make arrangements for the acquiring or surviving corporation
to assume any or all outstanding Awards and substitute on equitable terms Awards
relating to the stock or performance of such acquiring or surviving corporation.
The determinations of the Board and/or the Committee pursuant to this Section
10(a) shall be final, binding and conclusive.
          (b) No Limitation on Other Company Transactions. 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
capital structure or its business, any merger or consolidation of the Company,
any issue of debt or equity securities affecting Shares or the rights thereof,
the dissolution or liquidation of the Company 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.
          (c) Dilution or Other Adjustments. In the event that there is any
change in the Shares through merger, consolidation, reorganization or
recapitalization or in the event of any stock split or dividend to holders of
Shares payable in Shares or the issuance to such holders of rights to subscribe
to Shares, or in the event of any change in the capital structure of the
Company, the Board shall, subject to any requirements of applicable law,
regulations and rules, make such adjustments with respect to any provision or
provisions of the Plan, including but not limited to the limitations on Awards
that may be granted under the Plan as set forth in Sections 4 and 5, and with
respect to Awards theretofore granted under the Plan as the Board deems

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appropriate to prevent dilution or enlargement of Award rights. The
determinations of the Board pursuant to this Section 10(b) shall be final,
binding and conclusive. 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 relating to Awards theretofore granted or the exercise price
per Share in the case of Options.
          (d) Transferability.
          (i) Permitted Transferees. The Committee may, in its discretion,
permit a Participant to transfer all or any portion of an Award or authorize all
or a portion of an Award to be granted to an Eligible Person on terms which
permit transfer by such Participant; provided that, in either case a transferee
may only be a child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, in each case with respect to the Participant, a trust in
which these persons have more than fifty percent of the beneficial interest, a
foundation in which these persons (or the Participant) control the management of
assets, and any other entity in which these persons (or the Participant) own
more than fifty percent of the voting interests (collectively, “Permitted
Transferees”); provided further that, (A) there may be no consideration for any
such transfer and (B) subsequent transfers of Awards transferred as provided
above shall be prohibited except subsequent transfers back to the original
holder of the Award and transfers to other Permitted Transferees of the original
holder. Agreements evidencing Awards with respect to which such transferability
is authorized at the time of grant must be approved by the Committee, and must
expressly provide for transferability in a manner consistent with this
Subsection 10(d)(i).
          (ii) Qualified Domestic Relations Orders. An Award may be transferred,
to a Permitted Transferee, pursuant to a domestic relations order entered or
approved by a court of competent jurisdiction upon delivery to the Company of
written notice of such transfer and a certified copy of such order.
          (iii) Other Transfers. Except as expressly permitted by Subsections
10(d)(i) and 10(d)(ii) above, Awards shall not be transferable other than by
will or the laws of descent and distribution. Notwithstanding anything to the
contrary in this Section 10, an Incentive Stock Option shall not be transferable
other than by will or the laws of descent and distribution.
          (iv) Effect of Transfer. Following the transfer of any Award as
contemplated by Subsections 10(d)(i), 10(d)(ii) and 10(d)(iii) above, (A) such
Award shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that the term “Participant”
shall be deemed to refer to the Permitted Transferee, the recipient under a
qualified domestic relations order,

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the estate or heirs of a deceased Participant, or other transferee, as
applicable, to the extent appropriate to enable the Permitted Transferee to
exercise the transferred Award in accordance with the terms of the Plan and
applicable law and (B) the provisions of the Award relating to exercisability
thereof shall continue to be applied with respect to the original Participant
and, following the occurrence of any such events described therein, the Awards
shall be exercisable by the Permitted Transferee, the recipient under a
qualified domestic relations order, the estate or heirs of a deceased
Participant, or other transferee, as applicable, only to the extent and for the
periods that would have been applicable in the absence of the transfer.
          (v) Procedures and Restrictions. Any Participant desiring to transfer
an Award as permitted under Subsections 10(d)(i), 10(d)(ii) or 10(d)(iii) above
shall make application therefor in the manner and time specified by the
Committee and shall comply with such other requirements as the Committee may
require to assure compliance with all applicable securities laws. The Committee
shall not give permission for such a transfer if (A) it would give rise to
short-swing liability under Section 16(b) of the Exchange Act or (B) it may not
be made in compliance with all applicable federal, state and foreign securities
laws.
          (vi) Registration. To the extent the issuance to any Permitted
Transferee of any Shares issuable pursuant to Awards transferred as permitted in
this Section 10(d) is not registered pursuant to the effective registration
statement of the Company generally covering the Shares to be issued pursuant to
the Plan to initial holders of Awards, the Company shall not have any obligation
to register the issuance of any such Shares to any such transferee.
          (e) Taxes. The Company and any Subsidiary are authorized to withhold
from any Award granted, or any payment relating to an Award under the Plan,
including from a distribution of Shares, amounts of withholding and other taxes
due or potentially payable in connection with any transaction involving an
Award, and to take such other action as the Committee may deem advisable to
enable the Company and Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Award. This
authority shall include authority to withhold or receive Shares or other
property and to make cash payments in respect thereof in satisfaction of a
Participant’s tax obligations, either on a mandatory or elective basis in the
discretion of the Committee.
          (f) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee’s authority to grant
Awards under the Plan without the consent of stockholders or Participants,
except that any amendment or alteration to the Plan, including any increase in
any Share limitation, shall be subject to the approval of the Company’s
stockholders not later than the annual meeting next following such Board action
if such stockholder approval is required by any federal or state law or
regulation or the rules of any stock exchange or automated quotation system on
which the Shares may then be listed or quoted, and the Board may otherwise, in
its discretion, determine to submit other such changes in this Plan to
stockholders for approval; provided that, without the consent of an affected
Participant, no such Board action may materially and adversely affect the rights
of such Participant under any previously granted and outstanding Award. The
Committee may waive any conditions or

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rights under, or amend, alter, suspend, discontinue or terminate any Award
theretofore granted and any Award agreement relating thereto, except as
otherwise provided in the Plan; provided that, without the consent of an
affected Participant, no such Committee action may materially and adversely
affect the rights of such Participant under such Award.
          (g) Limitation on Rights Conferred under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible Person
or Participant the right to continue as an Eligible Person or Participant or in
the employ or service of the Company or a Subsidiary, (ii) interfering in any
way with the right of the Company or a Subsidiary to terminate any Eligible
Person’s or Participant’s employment or service at any time, (iii) giving an
Eligible Person or Participant any claim to be granted any Award under the Plan
or to be treated uniformly with other Participants and employees, or
(iv) conferring on a Participant any of the rights of a stockholder of the
Company unless and until the Participant is duly issued or transferred Shares in
accordance with the terms of an Award.
          (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable, including incentive arrangements and awards which do not qualify
under Section 162(m) of the Code. Nothing contained in the Plan shall be
construed to prevent the Company or any Subsidiary from taking any corporate
action which is deemed by the Company or such Subsidiary 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 employee, beneficiary or other
person shall have any claim against the Company or any Subsidiary as a result of
any such action.
          (i) Payments in the Event of Forfeitures; Fractional Shares; Share
Allotments. Unless otherwise determined by the Committee, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration to the Company in exchange for such Award, the Participant shall
be repaid the amount of such cash or other consideration. Unless otherwise
determined by the Committee, no fractional Shares, or Shares in lots of less
than 100 Shares, shall be issued or delivered pursuant to the Plan or any Award.
The Committee shall determine whether cash, other Awards or other property shall
be issued or paid in lieu of such fractional Shares, or lots of less than 100
Shares, and whether fractional Shares or any rights thereto shall be forfeited
or otherwise eliminated.
          (j) Severability. If any provision of the Plan is held to be illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions hereof, but such provision shall be fully severable and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included herein. If any of the terms or provisions of the Plan or any
Award agreement conflict with the requirements of Rule 16b-3 (as those terms or
provisions are applied to Eligible Persons who are subject to Section 16(b) of
the Exchange Act) or Section 422 of the Code (with respect to Incentive Stock
Options), then those conflicting terms or provisions shall be deemed inoperative
to the extent they so conflict with the requirements of Rule 16b-3 (unless the
Board or the Committee, as appropriate, has expressly determined that the Plan
or such Award should not comply with Rule 16b-3) or Section 422 of the Code.
With respect to Incentive Stock Options, if the Plan does not contain any
provision required to be

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included herein under Section 422 of the Code, that provision shall be deemed to
be incorporated herein with the same force and effect as if that provision had
been set out at length herein; provided, further, that, to the extent any Option
that is intended to qualify as an Incentive Stock Option cannot so qualify, such
Option (to that extent) shall be deemed a Non-Qualified Stock Option for all
purposes of the Plan.
          (k) Governing Law. All questions arising with respect to the
provisions of the Plan and Awards shall be determined by application of the laws
of the State of Texas, without giving effect to any conflict of law provisions
thereof, except to the extent Texas law is preempted by federal law or where the
law of the state of incorporation of the Company shall be mandatorily applied.
The obligation of the Company to sell and deliver Shares hereunder is subject to
applicable federal and state laws and to the approval of any governmental
authority required in connection with the authorization, issuance, sale, or
delivery of such Shares.
          (l) Conditions to Delivery of Shares. Nothing herein or in any Award
granted hereunder or any Award agreement shall require the Company to issue any
Shares with respect to any Award if that issuance would, in the opinion of
counsel for the Company, constitute a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option or
Stock Appreciation Right, or at the time of any grant of a Restricted Stock
Award, Bonus Stock Award or Phantom Stock Award, the Company may, as a condition
precedent to the exercise of such Option or Stock Appreciation Right, vesting of
any Restricted Stock Award or Phantom Stock Award, or grant of any Bonus Stock
Award, require from the Participant (or in the event of his death, his legal
representatives, heirs, legatees, or distributees) such written representations,
if any, concerning the holder’s intentions with regard to the retention or
disposition of the Shares being acquired pursuant to the Award and such written
covenants and agreements, if any, as to the manner of disposal of such Shares
as, in the opinion of counsel to the Company, may be necessary to ensure that
any disposition by that holder (or in the event of the holder’s death, his legal
representatives, heirs, legatees, or distributees) will not involve a violation
of the Securities Act or any similar or superseding statute or statutes, any
other applicable state or federal statute or regulation, or any rule of any
applicable securities exchange or securities association, as then in effect.
          (m) Plan Effective Date, Stockholder Approval and Plan Duration. The
Plan has been adopted by the Board originally effective as of January 1, 2001
and as amended and restated effective as of December 12, 2002 contingent upon
the approval of the stockholders of the Company. If the stockholders of the
Company do not approve the Plan as amended and restated, the Plan shall continue
in effect as originally adopted effective January 1, 2001. No Award, other than
an Incentive Stock Option, shall be granted under the Plan after December 31,
2010 and no Incentive Stock Option shall be granted under the Plan after
December 13, 2010.

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