exv10w2



 





Exhibit
10.2




RIATA 2005 STOCK PLAN




     1. Purpose of the Plan. The purposes of this RIATA 2005 Stock Plan are to attract and
retain the best available individuals for positions of substantial responsibility, to provide
additional incentive to such individuals, and to promote the success of the Company’s business by
aligning the financial interests of Employees and Consultants providing personal services to the
Company or to any Subsidiary of the Company with long-term shareholder value.




     Awards granted hereunder may be Incentive Stock Options, Nonqualified Stock Options,
Stock Awards, or SARs, at the discretion of the Board and as reflected in the terms of the
Award Agreement.



     2. Definitions. As used herein, the following definitions shall apply:




     (a) “Award” shall mean any award or benefits granted under the Plan.




     (b) “Award Agreement” shall mean a written or electronic agreement between
the Company and the Awardee setting forth the terms of the Award.




     (c) “Awardee” shall mean the holder of an outstanding Award.




     (d) “Board” shall mean (i) the Board of Directors of the Company or (ii)
both the Board and the Committee, if a Committee has been appointed in accordance with Section
4(a) of the Plan.




     (e) “Code” shall mean the Internal Revenue Code of 1986, as amended.




     (f) “Committee” shall mean the Compensation Committee appointed by the
Board of Directors in accordance with Section 4(a) of the Plan, if one is appointed; provided,
however, if the Board of Directors appoints more than one Committee pursuant to Section 4(a),
then “Committee” shall refer to the appropriate Committee, as indicated by the context of the
reference.













 






     (g) “Common Shares” shall mean the common shares of Riata Energy, Inc.




     (h) “Company” shall mean Riata Energy, Inc., a Texas corporation and any
successor thereto.




     (i) “Consultant” shall mean any person, except an Employee, engaged by the
Company or Subsidiary of the Company, to render personal services to such entity, including as
an advisor.




     (j) “Continuous Status as a Participant” shall mean as the Awardee’s
continuation as an Employee, Consultant, or Director, as provided in the regulations under
Section 409A of the Code. Continuous Status as a Participant shall not be considered
interrupted (i) for an Employee in the case of sick leave, maternity leave, infant care leave,
medical emergency leave, military leave, or any other leave of absence for which Continuous
Status is not considered interrupted in accordance with the Company’s policies on such
matters, and (ii) for a Consultant, in the case of any temporary interruption in such person’s
availability to provide services to the Company which has been authorized in writing by a Vice
President of the Company prior to its commencement.




     (k) “Conversion Options” shall mean the Options described in Section 6(c)
of the Plan.




     (l) “Director” shall mean any person serving on the Board of Directors of
the Company.




     (m) “Employee” shall mean any person, including an officer, who is a common law
employee of, receives remuneration for personal services to, is reflected on the official
human resources database as an employee of, and is on the payroll of the Company or Subsidiary
of the Company. A person is on the payroll if he or she is paid from the payroll department of
the Company, or Subsidiary of the Company. Persons providing services to the Company, or to
any Subsidiary of the Company, pursuant to an agreement with a staff leasing organization,
temporary workers engaged through or employed by temporary or leasing agencies, and workers
who hold themselves out to the Company, or Subsidiary to which they are providing services as
being independent contractors, or as being employed by or engaged through another company
while providing the services are not Employees for purposes of this Plan, whether or not such
persons are, or may be reclassified by the courts, the Internal Revenue Service, the U. S.
Department of Labor, or other person or entity as, common law employees of the Company,
Parent, or Subsidiary, either solely or jointly with another person or entity.




     (n) “Effective Date” shall mean September 23, 2005.














 






     (o) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.




     (p) “Incentive Stock Option” shall mean any Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.




     (q) “Maximum Annual Participant Award” shall have the meaning set forth in
Section 5(b).




     (r) “Nonqualified Stock Option” shall mean an Option not intended to
qualify as an Incentive Stock Option.




     (s) “Option” shall mean a stock option granted pursuant to Section 6 of
the Plan.




     (t) “Participant” shall mean an Employee, Consultant, or Director.




     (u) “Performance Goals” shall mean goals established by the Board in connection
with any proposed Award pursuant to Section 4 of the Plan.




     (v) “Performance Year” with respect to an Award shall be the
calendar year within which the Performance Goals relating to that Award are to be
achieved.




     (w) “Phantom Stock” means an Award of the right to receive the value of a Share.




     (x) “Plan” shall mean this RIATA 2005 Stock Plan, including any amendments
thereto.




     (y) “Restricted Stock” shall mean a Share subject to a “substantial risk of
forfeiture” within the meaning of Section 83 of the Code.




     (z) “Share” shall mean one Common Share, as adjusted in accordance
with Section 14 of the Plan.




     (aa) “SAR” shall mean a stock appreciation right awarded pursuant to
Section 8 of the Plan.




     (bb) “Stock Award” shall mean a grant of Shares or of a right to
receive Shares or their cash equivalent (or both) pursuant to Section 7 of the
Plan, whether as Stock Option, Phantom Stock, SARS, Restricted Stock, or other
Stock Based Award.




     (cc) “Stock Based Award” means a Stock based Award other than a Stock Option, a
SAR or














 






     Phantom Stock.




     (dd) “Stock Option” means Incentive Stock Options and Non-Qualified Stock
Options.




     (ee) “Subsidiary” shall mean (i) in the case of an Incentive Stock Option a
“subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of
the Code, and (ii) in the case of a Nonqualified Stock Option, a Stock Award or an SAR, in
addition to a subsidiary corporation as defined in (i), a limited liability company,
partnership or other entity in which the Company controls 50 percent or more of the voting
power or equity interests.



     3. Shares Subject to the Plan. Subject to the provisions of Sections 15 and 17 of
the Plan, the maximum aggregate number of Shares (increased, proportionately, in the event of any
stock split, stock dividend or similar event with respect to the Shares) which may be awarded and
delivered under the Plan are 25,125 Shares. The Shares may be authorized, but unissued, or
reacquired Shares, including shares used to pay any exercise price, withholding tax or other
expense.


Subject to the provisions of the following sentence, if an Award should expire or become
unexercisable for any reason without having been exercised in full, the undelivered Shares which
were subject thereto shall, unless the Plan shall have been terminated, become available for future
Awards under the Plan.




     4. Administration of the Plan.




     (a) Procedure. The Plan shall be administered by the Board of Directors of
the Company.




     (i) The Board of Directors may appoint one or more Committees each consisting
of not less than two members of the Board of Directors to administer the Plan on behalf
of the Board of Directors, subject to such terms and conditions as the Board of
Directors may prescribe. Once appointed, such Committees shall continue to serve until
otherwise directed by the Board of Directors.




     (ii) From time to time the Board of Directors may increase the size of the
Committee(s) and appoint additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, or fill vacancies however
caused.




     (b) Powers of the Board. Subject to the provisions of the Plan, the Board
shall have the authority, in its discretion: (i) to grant Incentive Stock Options,
Nonqualified Stock Options, SARS,














 







Phantom Stock, Restricted Stock or other Stock Awards, (ii) cash denominated Awards that
may be paid in Shares, cash or both, (iii) to determine, in accordance with Section 11(b) of
the Plan, the fair market value of the Shares; (iv) to determine, in accordance with Section
11(a) of the Plan, the exercise price per Share of Awards to be granted; (v) to establish
Performance Goals and determine whether such goals have been achieved; (vi) to determine the
Participants to whom, and the time or times at which, Awards shall be granted and the number
of Shares to be represented by each Award; (vii) to interpret the Plan and the terms of
Awards; (viii) to prescribe, amend, and rescind rules and regulations relating to the Plan;
including the form of Award Agreement, and manner of acceptance of an Award, (ix) to determine
the terms and provisions of each Award to be granted (which need not be identical) and, with
the consent of the Awardee, modify or amend any Award; (x) to authorize conversion or
substitution under the Plan of any or all Conversion Options; (xi) to accelerate or defer
(with the consent of the Awardee) the vesting or exercise date of any Award; (xii) to
authorize any person to execute on behalf of the Company any instrument required to effectuate
the grant of an Award previously granted by the Board; (xiii) delegate to the President of the
Company the ability to make Awards subject to such limitations as the Committee may proscribe
and subject to any legal restrictions; and (xiv) to make all other determinations deemed
necessary or advisable for the administration of the Plan; provided that, no consent of an
Awardee is necessary under clauses (xi) if the modification, amendment, acceleration, or
deferral, in the reasonable judgment of the Board confers a benefit on the Awardee, or is made
pursuant to an adjustment in accordance with Section 15.




     (c) The Board may, but need not, determine that an Award shall vest or be granted
subject to the satisfaction of one or more Performance Goals. Performance Goals for awards
will be determined by the Compensation Committee of the Board and will be designed to support
the business strategy, and align executives’ interests with customer and shareholder
interests. For awards that are intended to qualify as performance-based compensation under
Section 162(m) of the Code, Performance Goals will be based on one or more of the following
business criteria:




(i) Company earnings per share;




(ii) Cash distributions to shareholders;




(iii) Company or Subsidiary earnings before interest and taxes or earnings before
interest, taxes and corporate charges;




(iv) Company or Subsidiary net income;














 






(v) Company or Subsidiary revenues;




(vi) Company or Subsidiary unit revenues minus unit variable costs;




(vii) Company or Subsidiary return on capital, return on equity, return on assets, or
return on invested capital;




(viii) Company or Subsidiary cash flow return on assets or cash flows from operating
activities;




(ix) Company or Subsidiary capital expenditures;




(x) Company or Subsidiary operations and maintenance expense or general and
administrative expense;




(xi) Company or Subsidiary debt-equity ratios and key profitability ratios;




(xii) Company stock price;




(xiii) Company or Subsidiary proven reserves




(xiv) the Company or Subsidiary production; and




(xv)the Company or Subsidiary finding costs.




     (d) At the time of establishing the Performance Goals, the Committee shall specify (i)
the formula to be used in calculating the compensation payable to a Participant if the
Performance Goals are obtained, and (ii) the individual employee or class of employees to
which the formula applies. The Award shall be expressed as an amount of cash. The Committee
may also specify a minimum acceptable level of achievement of the relevant Performance Goals,
as well as one or more additional levels of achievement, and a formula to determine the
percentage of the Award opportunity deemed to have been earned by the Participant upon
attainment of each such level of achievement. The Performance Goals and opportunity relating
to any particular Award need not be the same as those relating to any other Award, whether
made at the same or a different time.














 






     (e) Earning and Certification of Award. Promptly after the date on which the
necessary information for a particular Performance Year becomes available, the Committee shall
determine, and certify in writing (with respect to each Participant who is a “covered
employee”), the extent to which the Award for such Performance Year has been earned, through
the achievement of the relevant Performance Goals, by each Participant for such Performance
Year.




     (f) These criteria may be measured: individually, alternatively or in any combination;
with respect to the Company, a Subsidiary, division, business unit, product line, product or
any combination of the foregoing; on an absolute basis, or relative to the Performance Goal,
to a designated comparison group, to results in other periods or to other external measures;
and including or excluding items that could affect the measurement, such as extraordinary or
unusual and nonrecurring gains or losses, litigation or claim judgments or settlements,
material changes in tax laws, acquisitions or divestitures, the cumulative effect of
accounting changes, asset write-downs, restructuring charges, or the results of discontinued
operations.




     (g) Effect of Board’s Decision. All decisions, determinations, and
interpretations of the Board shall be final and binding on all Participants and Awardees.




     (h) Discretionary Downward Adjustments. Notwithstanding the terms of any Award,
the Committee, in its sole and absolute discretion, may reduce the amount of the Award payable
to any Participant for any reason, including the Committee’s judgment that the Performance
Goals have become an inappropriate measure of achievement, a change in the employment status,
position or duties of the Participant, unsatisfactory performance of the Participant, or the
Participant’s service for less than the entire Performance Year. Notwithstanding the
foregoing, the reduction of an Award payable to a Participant may not result in an increase in
the amount of an Award payable to another Participant.




5. Eligibility.




     (a) Awards may be granted to Participants and to persons to whom offers of
employment as an Employee have been extended; provided that Incentive Stock Options may only
be granted to Employees.




     (b) The maximum number of Shares-denominated Awards that may be granted to any
Participant in any one calendar year (the “Maximum Annual Participant Award”) shall not exceed














 






7,500 Common Shares, subject to adjustment as provided in Section 15. The maximum amount
of dollar-denominated Awards that may be granted to any Participant in any calendar year may
not exceed $5,000,000.




6. Options.




     (a) Each Option shall be designated in the written or electronic option agreement as
either an Incentive Stock Option or a Nonqualified Stock Option. However, notwithstanding such
designations, to the extent that the aggregate fair market value of the Shares with respect to
which Options designated as Incentive Stock Options are exercisable for the first time by any
Employee during any calendar year (under all plans of the Company) exceeds $100,000, such
Options shall be treated as Nonqualified Stock Options.




     (b) For purposes of Section 6(a), Options shall be taken into account in the order
in which they were granted, and the fair market value of the Shares shall be determined as of
the time the Option with respect to such Shares is granted.




     (c) Options converted or substituted under the Plan for any or all outstanding stock
options and stock appreciation rights held by employees, consultants, advisors or other option
holders granted by entities subsequently acquired by the Company or a subsidiary or affiliate
of the Company (“Conversion Options”) shall be effective as of the close of the respective
mergers and acquisitions of such entities by the Company. The Conversion Options may be
Incentive Stock Options or Nonqualified Stock Options, as determined by the Committee;
provided, however, that stock appreciation rights in the acquired entity shall only be
converted to or substituted with Nonqualified Stock Options. The Conversion Options shall be
options to purchase the number of Common Shares determined by multiplying the number of shares
of the acquired entity’s common stock underlying each such stock option or stock appreciation
right immediately prior to the closing of such merger or acquisition by the number specified
in the applicable merger or acquisition agreement for conversion of each share of such
entity’s common stock to a Common Share (the “Merger Ratio”). Such Conversion Options shall be
exercisable at an exercise price per Common Share (increased to the nearest whole cent) equal
to the exercise price per share of the acquired entity’s common stock under each such stock
option or stock appreciation right immediately prior to closing divided by the Merger Ratio.
No fractional Common Shares will be issued upon exercise of Conversion Options. In lieu of
such issuance, the Common Shares issued pursuant to each such exercise shall be rounded to the
closest whole Share. All other terms and conditions applicable to such stock options and stock
appreciation rights prior to closing of the acquisition, including vesting, shall remain
unchanged














 







under the Conversion Options.




     (d) Subject to adjustment pursuant to Section 15, no more than 12,500 Shares may be
issued with respect to Incentive Stock Options.




7. Stock Awards.




     (a) Stock Awards may be granted either alone, in addition to, or in tandem with
other Awards granted under the Plan. After the Committee determines that it will offer a Stock
Award, it will advise the Awardee in writing or electronically, by means of an Award
Agreement, of the terms, conditions and restrictions, including vesting, if any, related to
the offer, including the number of Shares that the Awardee shall be entitled to receive or
purchase, the price to be paid, if any, and, if applicable, the time within which the Awardee
must accept the offer. The offer shall be accepted by execution of an Award Agreement in the
manner determined by the Committee.




     (b) Unless the Committee determines otherwise, the Award Agreement shall provide for
the forfeiture of the non-vested Common Shares underlying such Stock Award upon the Awardee
ceasing to be a Participant. To the extent that the Awardee purchased the Shares granted under
such Stock Award and any such Shares remain non-vested at the time the Awardee ceases to be a
Participant, the cessation of Participant status shall cause an immediate sale of such
non-vested Shares to the Company at the original price per Common Share paid by the Awardee.




8. SARs.




     (a) The Committee shall have the full power and authority, exercisable in its sole
discretion, to grant SARs to selected Awardees. The Committee is authorized to grant both
tandem stock appreciation rights (“Tandem SARs”) and stand-alone stock appreciation rights
(“Stand-Alone SARs”) as described below.




     (b) Tandem SARs.




     (i) Awardees may be granted a Tandem SAR, exercisable upon such terms and
conditions as the Committee shall establish, to elect between the exercise of the
underlying Section 6 Option for Common Shares or the surrender of the Option in exchange
for a distribution from the Company in an amount equal to the excess of (A) the fair
market value (on the Option surrender date) of the number of Shares in which the Awardee
is at the time














 







vested under the surrendered Option (or surrendered portion thereof) over (B) the
aggregate exercise price payable for such vested Shares.




     (ii) No such Option surrender shall be effective unless it is approved by the
Committee, either at the time of the actual Option surrender or at any earlier time. If
the surrender is so approved, then the distributions to which the Awardee shall become
entitled under this Section 8(b) may be made in Common Shares valued at fair market
value on the Option surrender date, in cash, or partly in Shares and partly in cash, as
the Committee shall deem appropriate.




     (iii) If the surrender of an Option is not approved by the Committee, then the
Awardee shall retain whatever rights he or she had under the surrendered Option (or
surrendered portion thereof) on the Option surrender date and may exercise such rights
at any time prior to the later of (A) five (5) business days after the receipt of the
rejection notice or (B) the last day on which the Option is otherwise exercisable in
accordance with the terms of the instrument evidencing such Option, but in no event may
such rights be exercised more than ten (10) years after the date of the Option grant.




     (c) Stand-Alone SARs.




     (i) An Awardee may be granted a Stand-Alone SAR not tied to any underlying
Option under Section 6 of the Plan. The Stand-Alone SAR shall cover a specified number
of Common Shares and shall be exercisable upon such terms and conditions as the
Committee shall establish. Upon exercise of the Stand-Alone SAR, the holder shall be
entitled to receive a distribution from the Company in an amount equal to the excess of
(A) the aggregate fair market value (on the exercise date) of the Common Shares
underlying the exercised right over (B) the aggregate base price in effect for those
Shares.




     (ii) The number of Common Shares underlying each Stand-Alone SAR and the base
price in effect for those Shares shall be determined by the Committee at the time the
Stand-Alone SAR is granted. In no event, however, may the base price per Share be less
than the fair market value per underlying Common Share on the grant date.




     (iii) The distribution with respect to an exercised Stand-Alone SAR may be
made in Common Shares valued at fair market value on the exercise date, in cash, or
partly in Shares and partly in cash, as the Committee shall deem appropriate.



Page 10 of 3









 






     (d) The Common Shares underlying any SARs exercised under this Section 8 shall not
be available for subsequent issuance under the Plan.



     9. Term of Plan. The Plan shall become effective as of the Effective Date. It
shall continue in effect until terminated under Section 17 of the Plan.



     10. Term of Award; Limitations on Vesting and Repricing.




     (a) The term of each Award shall be no more than ten (10) years from the date of
grant. However, in the case of an Incentive Stock Option granted to a Participant who, at the
time the Option is granted, owns Shares representing more than ten percent (10%) of the voting
power of all classes of shares of the Company or any Parent or Subsidiary, the term of the
Option shall be no more than five (5) years from the date of grant.




     (b) Each award shall vest over a period of time set forth in the Award Agreement.




     (c) No Award may be repriced, replaced, regranted through cancellation, or modified
without approval of the shareholders of the Company (except in connection with an adjustment
pursuant to Section 15 if the effect would be to reduce the exercise price for the Shares
underlying such Award.



     11. Exercise Price and Consideration.




     (a) The per Share exercise price under each Award shall be such price as is
determined by the Board, subject to the following:




     (i) In the case of an Incentive Stock Option




     (A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns shares representing more than ten percent (10%) of
the voting power of all classes of shares of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the fair
market value per Share on the date of grant.




     (B) granted to any other Employee, the per Share exercise price shall
be no less than 100% of the fair market value per Share on the date of grant.




     (ii) Except for Conversion Options under Section 6(c), the per Share exercise
price under



Page 11 of 3









 






a Nonqualified Stock Option or SAR shall be no less than seventy-five percent (75%)
of the fair market value per Share on the date of grant.




     (iii) The maximum aggregate number of Shares underlying all Nonqualified Stock
Options and SARs with a per Share exercise price of less than fair market value on any
grant date that may be granted under this Plan is 1,000 Shares (increased,
proportionately, in the event of any stock split, or stock dividend or similar event
with respect to the Shares); provided that Conversion Options shall not count against
the limit of this Section 11(a)(iii).




     (b) The fair market value per Share shall be the closing price per share of the
Common Share on the national market exchange on which the Shares are listed on the date of
grant. If the Shares are not listed on a national market exchange, the Board shall designate
an alternative method of determining the fair market value of the Shares.




     (c) The consideration to be paid for the Shares to be issued upon exercise of an
Award, including the method of payment, shall be determined by the Board from time to time and
may consist of cash and/or check, surrender of Shares, withholding Shares upon the exercise or
payment of the Award, surrender of Awards (either fully or partially) or such other method as
the Board may determine. Payment may also be made by delivering a properly executed exercise
notice together with irrevocable instructions to a broker to promptly deliver to the Company
the amount of sale proceeds necessary to pay the exercise price.




     (d) Prior to issuance of the Shares upon exercise of an Award, the Awardee shall pay
or cause to be paid all tax withholding obligations applicable to such Award, and payment may
be made in such manor authorized by the Board. If an Awardee is an officer of the Company
within the meaning of Section 16 of the Exchange Act, he may elect to pay such withholding tax
obligations by having the Company withhold Shares having a value equal to the amount required
to be withheld, and any Award under the Plan may permit or require that such withholding tax
obligations be paid by having the Company withhold Shares having a value equal to the amount
required to be withheld. The value of the Shares to be withheld shall equal the fair market
value of the Shares on the day the Award is exercised. The right of an officer to dispose of
Shares to the Company in satisfaction of withholding tax obligations shall be deemed to be
approved as part of the initial grant of an Award, unless thereafter rescinded, and shall
otherwise be made in compliance with Rule 16b-3 and other applicable regulations, and any
Award under the Plan may permit or require that such withholding tax obligations be paid by
having the Company withhold Shares having a value equal to the amount required to be withheld.



Page 12 of 3









 





     12. Exercise of Award.




     (a) Procedure for Exercise; Rights as a Shareholder. Any Award granted
hereunder shall be exercisable at such times and under such conditions as determined by the
Board at the time of grant, and as shall be permissible under the terms of the Plan.




     An Award may not be exercised for a fraction of a Share.




     An Award shall be deemed to be exercised when written or electronic notice of such
exercise has been given to the Company in accordance with the terms of the Award by the person
entitled to exercise the Award and full payment for the Shares with respect to which the Award
is exercised has been received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section 11(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company) of the share certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares subject to the Award, notwithstanding the exercise of the Award.
The Company shall issue (or cause to be issued) such share certificate promptly upon exercise
of the Award. In the event that the exercise of an Award is treated in part as the exercise of
an Incentive Stock Option and in part as the exercise of a Nonqualified Stock Option pursuant
to Section 6(a), the Company shall issue a share certificate evidencing the Shares treated as
acquired upon the exercise of an Incentive Stock Option and a separate share certificate
evidencing the Shares treated as acquired upon the exercise of a Nonqualified Stock Option,
and shall identify each such certificate accordingly in its share transfer records. No
adjustment will be made for a dividend or other right for which the record date is prior to
the date the share certificate is issued, except as provided in Section 15 of the Plan.




     Exercise of an Award in any manner and delivery of the Shares subject to such Award
shall result in a decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Award, by the number of Shares as to which the
Award is exercised.




     (b) Termination of Status as a Participant. In the event of termination of
an Awardee’s Continuous Status as a Participant, such Awardee may exercise his or her rights
under any outstanding Awards to the extent exercisable on the date of termination (but in no
event later than the date of expiration of the term of such Award as set forth in the Award
Agreement). To the extent that the Awardee was not entitled to exercise his or her rights
under such Awards at the date of such



Page 13 of 3









 






termination, or does not exercise such rights within the time specified in the individual
Award Agreements, the Awards shall terminate.




     (c) Disability of Awardee. Notwithstanding the provisions of Section 12(b)
above, to the extent not provided otherwise in an Award Agreement, in the event of termination
of an Awardee’s Continuous Status as a Participant as a result of total and permanent
disability (i.e., the inability to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period of twelve (12) months),
the Awardee will vest in the Award, but only to the extent of the vesting that would have
occurred had the Awardee remained in Continuous Status as a Participant for a period of twelve
(12) months after the date on which the Participant ceased performing services as a result of
the total and permanent disability. An Option or SAR that is vested pursuant to this Section
12(c) must be exercised within eighteen (18) months (or such shorter time as is specified in
the grant) from the date on which the Participant ceased performing services as a result of
the total and permanent disability (but in no event later than the date of expiration of the
term of such Option or SAR as set forth in the Award Agreement). To the extent that the
Awardee was not entitled to exercise such Option or SAR within the time specified herein, the
Award shall terminate.




     (d) Death of Awardee. Notwithstanding the provisions of Section 12(b) above,
to the extent not provided otherwise in an Award Agreement, in the event of the death of an
Awardee:




     (i) who is at the time of death a Participant, the Award will vest, but only
to the extent of the vesting that would have occurred had the Awardee continued living
and remained in Continuous Status as a Participant twelve (12) months following the date
of death. An Option or SAR that is vested pursuant to this Section 12(d)(i) may be
exercised, at any time within twelve (12) months following the date of death, by the
Awardee’s estate or by a person who acquired the right to exercise the Award by bequest
or inheritance; or




     (ii) whose Option or SAR has not yet expired but whose Continuous Status as a
Participant terminated prior to the date of death, the Option or SAR may be exercised,
at any time within twelve (12) months following the date of death, by the Awardee’s
estate or by a person who acquired the right to exercise the Option or SAR by bequest or
inheritance, but only to the extent of the right to exercise that had vested at the date
of termination.




     (e) Notwithstanding subsections (b), (c), and (d) of this Section 12, the Board
shall have the authority to extend the expiration date of any outstanding Option in
circumstances in which it deems



Page 14 of 3









 






such action to be appropriate (provided that no such extension shall extend the term of
an Award beyond the date on which the Award would have expired if no termination of the
Awardee’s Continuous Status as a Participant had occurred).



     13. Non-Transferability of Awards. An Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the Awardee, only by the
Awardee; provided that the Board may permit further transferability, on a general or specific
basis, and may impose conditions and limitations on any permitted transferability.



14. Change in Control.




     (a) Notwithstanding any other provision of this Plan or contained in any Award granted
hereunder (including any provision for deferred payment thereof), upon the occurrence of a
Change in Control, the Board, in its discretion, may take any action with respect to
outstanding Awards that it deems appropriate, which action may vary among Awards granted to
individual Participants. If a Change in Control occurs and, in connection with or as a result
of such Change in Control, N. Malone Mitchell 3rd no longer holds or does not
continue to hold the office of Chairman of the Company, each Participant shall be deemed to
have earned 100% of the bonus opportunities contained in any outstanding Awards for which the
determinations have not been made, and the amount of such bonus opportunities shall be paid
promptly and no later than 30 days after the Change of Control) in a cash lump sum.
Notwithstanding the provisions of Section 2.3, following a Change in Control the Board shall
not adjust the bonus opportunity specified in an Award from that in effect immediately prior
to the Change in Control in a manner adverse to the Participant.




     (b) A “Change in Control” shall be deemed to have occurred if the conditions set forth in
any one or more of the following shall have been satisfied:




     (i) any “person,” as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the “Exchange Act”) (other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan of the
Company or any corporation owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of stock of the
Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting



Page 15 of 3









 






         power of the Company’s then outstanding securities;





     (ii) during any period of two consecutive years (not including any period prior to
the Effective Date of the Plan), individuals who at the beginning of such period
constitute the Board of Directors, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to effect a
transaction described in paragraph (a), (c) or (d) of this Section 14(b)) whose election
by the Board of Directors or nomination for election by the Company’s shareholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason other than normal
retirement, death or disability to constitute at least a majority thereof;




     (iii) completion of a merger or consolidation of the Company with any other person,
other than (i) a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities for the surviving
entity) more than fifty percent (50%) of the combined voting power of the voting
securities of the Company or surviving entity outstanding immediately after such merger
or consolidation, or (ii) a merger in which the Company is the surviving entity but no
“person” (as defined above) acquires more than fifty percent (50%) of the combined
voting power of the Company’s then outstanding securities; or




     (iv) the shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets (or any transaction having a similar effect).




     (c) Notwithstanding the foregoing, to the extent that an Award is subject to Code
Section 409A, the provisions of Code Section 409A and regulations promulgated thereunder shall
define a “Change in Control” for the purpose of such Award.



     15. Adjustments to Shares Subject to the Plan. If any change is made to the
Shares by reason of any stock split, stock dividend, capitalization, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Shares as a class without
the Company’s receipt of consideration, appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the number and/or class of
securities and/or the price per Share covered by outstanding Awards under the Plan, (iii) the
Maximum Annual Participant Award, and (iv) the maximum aggregate



Page 16 of 3









 




number of Shares underlying all Nonqualified Stock Options and SARs with a per Share exercise
price of less than fair market value on any grant date that may be granted under the Plan. The
Board may also make adjustments described in (i)-(v) of the previous sentence in the event of any
distribution of assets to shareholders other than a normal cash dividend. In determining
adjustments to be made under this Section 15, the Board may take into account such factors as it
deems appropriate, including (i) the restrictions of applicable law, (ii) the potential tax
consequences of an adjustment and (iii) the possibility that some Awardees might receive an
adjustment and a distribution or other unintended benefit, and in light of such factors or
circumstances may make adjustments that are not uniform or proportionate among outstanding Awards,
modify vesting dates, defer the delivery of stock certificates or make other equitable adjustments.
Any such adjustments to outstanding Awards will be effected in a manner that precludes the
enlargement of rights and benefits under such Awards. Adjustments, if any, and any determinations
or interpretations, including any determination of whether a distribution is other than a normal
cash dividend, made by the Board shall be final, binding and conclusive. For purposes of this
Section 15, conversion of any convertible securities of the Company shall not be deemed to have
been effected without receipt of consideration. Except as expressly provided herein, no issuance by
the Company of shares of any class, or securities convertible into shares of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the number or price of
Shares subject to an Award.




     In the event of the proposed dissolution or liquidation of the Company, the Award will
terminate immediately prior to the consummation of such proposed action, unless otherwise provided
by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that
any Award shall terminate as of a date fixed by the Board and give each Awardee the right to
exercise an Award as to all or any part of the Shares subject to an Award, including Shares as to
which the Award would not otherwise be exercisable. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company with or into another
corporation, each Award shall be assumed or an equivalent award shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation, unless such
successor corporation does not agree to assume the Award or to substitute an equivalent award, in
which case the Board shall, in lieu of such assumption or substitution, provide for the Awardee to
have the right to exercise the Award as to all of the Shares subject to Awards, including Shares as
to which the Award would not otherwise be exercisable. If the Board makes an Award fully
exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the
Board shall notify the Awardee that the Award shall be fully exercisable for a period of fifteen
(15) days from the date of such notice, and the Award will terminate upon the expiration of such
period.



     16. Time of Granting Awards. The date of grant of an Award shall, for all
purposes, be the date on which the Company completes the corporate action relating to the grant of
such Award and all conditions to



Page 17 of 3









 




the grant have been satisfied, provided that conditions to the grant, exercise or vesting of
an Award shall not defer the date of grant. Notice of a grant shall be given to each Participant to
whom an Award is so granted within a reasonable time after the determination has been made.




     17. Substitutions and Assumptions. The Board shall have the right to substitute
or assume Awards in connection with mergers, reorganizations, separations, or other transactions to
which Section 424(a) of the Code applies, provided such substitutions and assumptions are permitted
by Section 424 of the Code and the regulations promulgated thereunder. The number of Shares
reserved pursuant to Section 3 may be increased by the corresponding number of Awards assumed and,
in the case of a substitution, by the net increase in the number of Shares subject to Awards before
and after the substitution.



     18. Amendment and Termination of the Plan.




     (a) Amendment and Termination. The Board, in its sole discretion, may amend
or terminate the Plan from time to time in such respects as the Board may deem advisable
(including, but not limited to amendments which the Board deems appropriate to enhance the
Company’s ability to claim deductions related to stock option exercises) without shareholder
approval, except that any increase in the number of Shares subject to the Plan, other than in
connection with an adjustment under Section 15 of the Plan, and shall require approval of or
ratification by the shareholders of the Company.




     (b) Effect of Amendment or Termination. Except as otherwise provided in
Sections 4 and 14, any such amendment or termination of the Plan shall not affect Awards
already granted and such Awards shall remain in full force and effect as if this Plan had not
been amended or terminated, unless mutually agreed otherwise between the Awardee and the
Board, which agreement must be in writing and signed by the Awardee and the Company.



     19. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
the exercise of an Award unless the exercise of such Award and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then
be listed, and shall be further subject to the approval of counsel for the Company with respect to
such compliance.



     20. Reservation of Shares. The Company, during the term of this Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.



Page 18 of 3









 





     21. No Employment/Service Rights. Nothing in the Plan shall confer upon any
Participant the right to an Award or to continue in service as an Employee, Director, or Consultant
for any period of specific duration, or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining such person), or of any
Participant or Awardee, which rights are hereby expressly reserved by each, to terminate such
person’s services at any time for any reason, with or without cause.



     22. Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute
an “unfunded” plan. With respect to any amounts payable to a Participant pursuant to an Award,
nothing contained in the Plan (or in any documents related thereto), nor the creation or adoption
of the Plan, the grant of any Award, or the taking of any other action pursuant to the plan, shall
give any such Participant any rights that are greater than those of a general creditor of the
Company. The Committee may authorize the creation of trusts or make other arrangements to meet the
Company’s obligations under the Plan; however, such trusts or other arrangements shall be
consistent with the “unfunded” status of the Plan.



     23. Section 162(m). It is intended that the Plan comply fully with and meet all the
requirements of Code Section 162(m) with respect to “covered employees” so that Awards granted
hereunder to “covered employees” shall constitute “qualified performance-based compensation” within
the meaning of Code Section 162(m). If any provision of the Plan would disqualify the Plan or
would not otherwise permit the Plan to comply with Code Section 162(m) as so intended, such
provision shall be construed or deemed amended to conform to the requirements or provisions of Code
Section 162(m).




Page 19 of 3