exv10w1






Exhibit 10.1




WASTE MANAGEMENT, INC.




2009 STOCK INCENTIVE PLAN




     1. Purpose of the Plan. The Waste Management, Inc. 2009 Stock Incentive Plan (the “Plan”),
is intended to advance the best interests of the Company, its Subsidiaries and Affiliates by
providing certain Employees and Non-Employee Directors of the Company, its Subsidiaries and
Affiliates with additional incentives through the grant of Options, Stock Awards, Stock
Appreciation Rights and Cash Awards, thereby increasing the personal stake of such Non-Employee
Directors and Employees in the continued success and growth of the Company.



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




     “Affiliate” means any person or entity which directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with the Company.




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




     “Award Agreement” means a written agreement between the Company and a Participant setting
forth the terms, conditions and limitations applicable to an Award.




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




     “Cash Award” means an Award denominated in cash.




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




     “Committee” means the Compensation Committee of the Board or such other committee of the
Board as is designated by the Board to administer the Plan.




     “Common Stock” means common stock of the Company, par value $.01 per share.




     “Company” means Waste Management, Inc., a Delaware corporation.




     “Deferred Stock Unit” means a phantom share unit with a value equal to one share of
Common Stock (as determined by the Committee).




     “Dividend Equivalents” means an amount equal to all dividends and other distributions (or
the economic equivalent thereof) that are payable by the Company on one share of Common Stock
to stockholders of record, which, in the discretion of the Committee, may be awarded (a) in
connection with any Award under the Plan while such Award is outstanding or otherwise subject
to a Restriction Period and on a like number of shares of Common Stock under such Award or (b)
singly.




     “Effective Date” means the first date upon which the Plan has been approved both (a) by
the Board and (b) by a majority of the votes cast at a duly held stockholders’ meeting at
which the requisite quorum of outstanding voting stock of the Company is, either in person or
by proxy, present and voting on the Plan.




     “Employee” means (a) an employee of the Company or any of its Subsidiaries or Affiliates
and (b) an individual (i) who has agreed to become an employee of the Company or any of its
Subsidiaries or Affiliates (ii) and who is expected to become such an employee within the
six-month period immediately following the acceptance of an offer of employment, and (iii) who
actually becomes so employed within the period described in clause (ii) hereof.




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





 









 






     “Fair Market Value” of a share of Common Stock means, as of a particular date, (a) if
shares of Common Stock are listed on a national securities exchange, the average of the
highest and lowest sales price per share of such Common Stock on the consolidated transaction
reporting system for the principal national securities exchange on which shares of Common
Stock are listed on that date, or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so reported, (b) if shares of Common
Stock are not so listed but are quoted by The Nasdaq Stock Market, Inc., the average of the
highest and lowest sales price per share of Common Stock reported on the consolidated
transaction reporting system for The Nasdaq Stock Market, Inc., or, if there shall have been
no such sale so reported on that date, on the last preceding date on which such a sale was so
reported, or, at the discretion of the Committee, the price prevailing as quoted by The Nasdaq
Stock Market, Inc. at the time of exercise, (c) if the Common Stock is not so listed or
quoted, the average of the closing bid and asked price on that date, or, if there are no
quotations available for such date, on the last preceding date on which such quotations are
available, as reported by The Nasdaq Stock Market, Inc., or, if not reported by The Nasdaq
Stock Market, Inc., by the National Quotation Bureau Incorporated or (d) if shares of Common
Stock are not publicly traded, the most recent value determined by an independent appraiser
appointed by the Company for such purpose.




     “Grant Date” means the date an Award is granted to a Participant pursuant to the Plan as
determined by the Committee. The Grant Date for any Award granted pursuant to the substitution
provision of Section 9(d) will be the Grant Date of the original award.




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




     “Non-Employee Director” means an individual serving as a member of the Board who is not
an Employee.




     “Non-Qualified Performance Share Award” means a grant of Stock Units made pursuant to
this Plan to a Participant who is an Employee that is subject to the attainment of one or more
Performance Goals and otherwise satisfies the requirements of Section 7(a)(v)(A), but does not
satisfy the requirements of Section 7(a)(v)(B).




     “Option” means a right to purchase a specified number of shares of Common Stock at a
specified Grant Price, which is not intended to comply with the requirements of Section 422 of
the Code.




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




     “Performance Share Award” means either a Qualified Performance Share Award or a
Non-Qualified Performance Share Award.




     “Performance Goal” means one or more standards established by the Committee, to determine
in whole or in part whether a Performance Share Award shall be earned.




     “Plan” has the meaning assigned in Section 1.




     “Pool Limit” has the meaning assigned in Section 4(a).




     “Prior Plan” means the Waste Management, Inc. 2004 Stock Incentive Plan.




     “Qualified Performance Share Award” means a grant of Stock Units made pursuant to this
Plan to a Participant who is an Employee that is subject to the attainment of one or more
Performance Goals and otherwise satisfies the requirements of Section 7(a)(v)(B).




     “Restricted Stock” means any Common Stock that is restricted as to transferability and
subject to forfeiture provisions.





 









 






     “Restriction Period” means a period of time (a) beginning as of the Grant Date of an
Award of Restricted Stock and ending as of the date upon which the Common Stock subject to
such Award is no longer restricted or subject to forfeiture provisions or (b) beginning as of
the Grant Date of an Award of Stock Units, a Cash Award or a Performance Share Award, as the
case may be, and ending with respect to all or part of an Award when such Award, or part
thereof, is vested.




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




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




     “Stock Based Awards Limitations” has the meaning assigned in Section 7(b)(iii).




     “Stock Unit” means a phantom share unit equal to the value of one share of Common Stock
(as determined by the Committee), which, in the discretion of the Committee, may be restricted
and subject to forfeiture provisions.




     “Subsidiary” means (a) in the case of a corporation, any corporation of which the Company
directly or indirectly owns shares representing more than 50% of the combined voting power of
the shares of all classes or series of capital stock of such corporation which have the right
to vote generally on matters submitted to a vote of the stockholders of such corporation and
(b) in the case of a partnership or other business entity not organized as a corporation, any
such business entity of which the Company directly or indirectly owns 50% or more of the
voting, capital or profits interests (whether in the form of partnership interests, membership
interests or otherwise).




     3. Eligibility.



     Employees eligible for the grant of Awards under this Plan are those selected by the Committee
who hold positions of responsibility and whose performance, in the judgment of the Committee, can
have a significant effect on the success of the Company, its Subsidiaries and Affiliates.
Non-Employee Directors eligible for the grant of Awards are those that may be designated by the
Board.



     4. Common Stock Available for Awards.





     (a) Subject to the provisions of Section 4(b) and Section 14 hereof, the number of shares
of Common Stock available for Awards shall be 18,824,494, an amount equal to the shares of
Common Stock which were available for future issuance of Awards under the Prior Plan as of
March 11, 2009, plus an amount equal to any shares of Common Stock that may subsequently
become available under the Prior Plan (collectively, the “Pool Limit”); provided, however,
that in no event will more than 26,231,388 shares be issued under the Plan in settlement of
Awards.




     (b) The number of shares of Common Stock that are the subject of Awards under this Plan,
and the number of shares of Common Stock that are subject to outstanding awards under the
Prior Plan, that are forfeited or terminated, expire unexercised, are settled in cash in lieu
of Common Stock or in a manner such that all or some of the shares covered by an Award are not
issued to a Participant or are exchanged for Awards that do not involve Common Stock, shall
again immediately become available for Awards hereunder. If the Grant Price or other purchase
price of any Award other than a SAR granted under the Plan or the Prior Plan is satisfied by
tendering shares of Common Stock to the Company, or if the tax withholding obligation
resulting from the settlement of any such Award is satisfied by tendering or withholding
shares of Common Stock, only the number of shares of Common Stock issued net of the shares of
Common Stock tendered or withheld shall be deemed delivered for purposes of determining usage
of shares against the maximum number of shares of Common Stock available for delivery under
the Plan or any sublimit set forth above. If the Grant Price or other purchase price of an
Option under the Plan or the Prior Plans is satisfied by a payment



 









 







of cash to the Company by the Participant or by or for the account of a Participant, any
shares purchased by the Company with such cash proceeds shall immediately be added to the
shares available for future Awards. Shares of Common Stock delivered under the Prior Plan or
the Plan as an Award or in settlement of an Award issued or made (i) upon the assumption,
substitution, conversion or replacement of outstanding awards under a plan or arrangement of
an entity acquired in a merger or other acquisition or (ii) as a post-transaction grant under
such a plan or arrangement of an acquired entity shall not reduce or be counted against the
maximum number of shares of Common Stock available for delivery under the Plan, to the extent
that the exemption for transactions in connection with mergers and acquisitions from the
stockholder approval requirements of the New York Stock Exchange for equity compensation plans
applies. Deferred Stock Units granted at the Employee or Non-Employee Director’s election as
payment in lieu of cash incentives otherwise earned and payable to an employee or director
under another plan or arrangement shall not count against the Pool Limit. The Committee may
from time to time adopt and observe such rules and procedures concerning the counting of
shares against the Plan maximum or any sublimit as it may deem appropriate, including rules
more restrictive than those set forth above to the extent necessary to satisfy the
requirements of any national stock exchange on which the Common Stock is listed or any
applicable regulatory requirement. The Board and the appropriate officers of the Company
shall from time to time take whatever actions are necessary to file any required documents
with governmental authorities, stock exchanges and transaction reporting systems to ensure
that shares of Common Stock are available for issuance pursuant to Awards.




     5. Administration.




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




     (b) Subject to the provisions hereof, the Committee shall have full and exclusive power
and authority to administer this Plan and to take all actions that are specifically
contemplated hereby or are necessary or appropriate in connection with the administration
hereof. The Committee shall also have full and exclusive power to interpret this Plan and to
adopt such rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best interests of the
Company and in keeping with the objectives of this Plan. The Committee may, in its discretion,
provide for the extension of the exercisability of an Award, accelerate the vesting or
exercisability of an Award, eliminate or make less restrictive any restrictions applicable to
an Award, waive any restriction or other provision of this Plan (insofar as such provision
relates to Awards) or an Award or otherwise amend or modify an Award in any manner that is
either (i) not adverse to the Participant to whom such Award was granted or (ii) consented to
by such Participant; provided that no such extension may result in term for an Option or an
SAR that extends more than 10 years from the Grant Date. Notwithstanding anything herein to
the contrary, Options or Stock Appreciation Rights granted under the Plan will not be
repriced, replaced, or regranted through cancellation or by decreasing the exercise price of a
previously granted Option or Stock Appreciation Right except as expressly provided by the
adjustment provisions of Section 14. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the
extent the Committee deems necessary or desirable to further the Plan purposes. Any decision
of the Committee in the interpretation and administration of this Plan shall lie within its
sole and absolute discretion and shall be final, conclusive and binding on all parties
concerned.




     (c) In accordance with the Company’s Corporate Governance Guidelines, compensation of
Non-Employee Directors is recommended by the Company’s Nominating & Governance Committee and
approved by the Board. Therefore, with respect to any Awards granted to Non-Employee
Directors, the Committee’s authority as provided in this Plan shall be solely to carry out or
otherwise take such actions as necessary to effect the grants of Awards as approved by the
Board and communicated to the Compensation Committee as payable or issuable to Non-Employee
Directors.




     (d) No member of the Committee or any Employee or committee of the Company to whom the
Committee has delegated authority in accordance with the provisions of Section 6 of this Plan
shall be liable for anything done or omitted to be done by him or her, by any member of the
Committee or



 









 






by any Employee of the Company in connection with the performance of any duties under
this Plan, except for his or her own willful misconduct or as expressly provided by statute.



     6. Delegation of Authority. Following the authorization of a pool of cash or shares of
Common Stock to be available for Awards, the Committee may delegate any or all of its power and
duties under the Plan to the Chief Executive Officer and/or one or more other committees that it
shall appoint, pursuant to such conditions or limitations as the Committee may establish; provided,
however, that the Committee shall not delegate its authority to (a) amend or modify the Plan
pursuant to Section 12 or (b) act on matters affecting any Participant who is subject to (i) the
reporting requirements of Section 16(a) of the Exchange Act, or (ii) the liability provisions of
Section 16(b) of the Exchange Act.



     7. Awards.





     (a) The Committee shall determine the type or types of Awards to be made under this Plan
and shall designate from time to time the Employees and Non-Employee Directors who are to be
the recipients of such Awards. Each Award may, in the discretion of the Committee, be embodied
in an Award Agreement, which shall contain such terms, conditions and limitations as shall be
determined by the Committee in its sole discretion and, if required by the Committee, shall be
signed by the Participant to whom the Award is made. Awards may consist of those listed in
this Section 7(a) and may be granted singly, in combination or in tandem. All or part of an
Award may be subject to conditions established by the Committee, which may include, but are
not limited to, continuous service with the Company, its Subsidiaries or Affiliates,
achievement of specific business objectives, increases in specified indices, attainment of
specified growth rates and other comparable measurements of performance. Upon separation of
employment or affiliation with the Company, its Subsidiaries or Affiliates, a Participant’s
unexercised, deferred, unvested or unpaid Awards, if any, shall be treated as set forth in the
applicable Award Agreement or as otherwise specified by the Committee.




     (i) Option. An Award may be in the form of an Option. The Grant Price of an
Option shall be determined by the Committee but shall not be less than 100% of the Fair
Market Value of the Common Stock subject to such Option on the Grant Date. The term of
the Option shall extend no more than 10 years after the Grant Date. Subject to the
foregoing provisions, the terms, conditions and limitations applicable to any Options
awarded to Employees pursuant to this Plan, including the Grant Price, minimum vesting,
the number of shares subject to the Option and the date or dates upon which they become
exercisable, shall be determined by the Committee.




     (ii) Stock Appreciation Rights. An Award may be in the form of a SAR. SARs may
be granted in tandem with an Option or other Award, either at the time of grant or by
later amendment thereto, or on a freestanding basis not related to any other Award. The
Grant Price of a SAR shall be determined by the Committee but shall not be less than the
Fair Market Value of the Common Stock subject to such SAR on the Grant Date or the Grant
Price of a tandem Option to which such SAR relates. The holder of a tandem SAR may elect
to exercise either the Option or the SAR, but not both. The exercise period for a SAR
shall extend no more than 10 years after the Grant Date. Subject to the foregoing
provisions, the terms, conditions and limitations applicable to any SARs awarded to
Participants pursuant to this Plan, including the Grant Price, the term of any SARs and
the date or dates upon which they become exercisable, shall be determined by the
Committee.




     (iii) Stock Award. An Award may be in the form of a Stock Award. The terms,
conditions and limitations applicable to any Stock Awards granted pursuant to this Plan
shall be determined by the Committee and set forth in an Award Agreement. Stock Units or
shares of Restricted Stock granted under this Section will vest no sooner than one-third
on each of the first three anniversaries of the Grant Date. Notwithstanding the above, a
newly hired Employee may, upon commencement of employment with the Company or any
Subsidiary or Affiliate, be immediately vested in any Stock Award made to replace
forfeited awards from a prior employer. Furthermore, the Committee may provide for
earlier vesting of any Stock Award



 









 






upon a Participant’s termination of employment by reason of retirement or
disability, each as determined by the Committee, or termination of employment due to
death. Stock Awards granted as Performance Share Awards are governed by Section 7(a)(v)
below.





     (iv) Cash Award. An Award may be in the form of a Cash Award. The terms,
conditions and limitations applicable to any Cash Awards granted pursuant to this Plan
shall be determined by the Committee. Cash Awards intended to qualify as
performance-based compensation under Section 162(m) of the Code shall be subject to the
same terms and conditions as described in (a)(v)(B), Qualified Performance Share Awards,
of this Section 7.




     (v) Performance Share Award. Without limiting the type or number of Awards that
may be made under the other provisions of this Plan, an Employee may be granted a
Performance Share Award. The terms, conditions and limitations applicable to any
Performance Share Awards granted to Participants pursuant to this Plan shall be
determined by the Committee; provided that any Performance Share Award shall have a
minimum Restriction Period of one year from the Grant Date unless the Committee provides
for earlier vesting upon a termination of employment by reason of retirement or
disability, each as determined by the Committee, or termination of employment due to
death. The Committee shall set Performance Goals in its discretion which, depending on
the extent to which they are met, will determine the number of Performance Share Awards
that may be paid out to the Participant. As described below, there are two possible
forms of Performance Share Awards under this Plan: Non-Qualified Performance Share
Awards and Qualified Performance Share Awards.





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




     (B) Qualified Performance Share Awards. Performance Share Awards granted
to Employees under the Plan that are intended to qualify as qualified
performance-based compensation under Section 162(m) of the Code shall be paid,
vested or otherwise deliverable solely on account of the attainment of one or
more pre-established, objective Performance Goals established by the Committee
prior to the earlier to occur of (1) 90 days after the commencement of the period
of service to which the Performance Goal relates and (2) the lapse of 25% of the
period of service (as scheduled in good faith at the time the goal is
established), and in any event while the outcome is substantially uncertain. The
period over which a Performance Goal is measured shall be no less than 1 year and
no more than 5 years. A Performance Goal is objective if a third party having
knowledge of the relevant facts could determine whether the goal is met. Such a
Performance Goal may be based on one or more business criteria that apply to the
Employee, one or more business units or divisions of the Company or the
applicable sector, or the Company as a whole, and if so desired by the Committee,
by comparison with a peer group of companies. A Performance Goal may include one
or more of the following: revenue growth; earnings before interest, taxes,
depreciation and amortization (“EBITDA”); earnings before interest, taxes and
amortization (“EBITA”); operating income; net operating income after tax; pre-tax
or after-tax income; cash flow; cash flow per share; net earnings; earnings per
share; return on equity; return on capital employed; return on assets; economic
value added (or an equivalent metric); share price performance; total stockholder
return; improvement in or attainment of expense levels; improvement in or
attainment of working capital levels; or debt reduction.




     Unless otherwise stated, such a Performance Goal need not be based upon an
increase or positive result under a particular business criterion and could
include, for example, maintaining the status quo or limiting economic losses
(measured, in each case, by reference to specific business criteria). In
measuring a Performance Goal, the



 









 






Committee may exclude certain extraordinary, unusual or non-recurring items,
provided that such exclusions are stated by the Committee at the time the
Performance Goals are determined. In interpreting Plan provisions applicable to
Qualified Performance Share Awards, it is the intent of the Plan to conform with
the standards of Section 162(m) of the Code and Treasury Regulation
§1.162-27(e)(2)(i), as to grants to those Employees whose compensation is, or is
likely to be, subject to Section 162(m) of the Code, and the Committee in
establishing such goals and interpreting the Plan shall be guided by such
provisions. Prior to the payment of any compensation based on the achievement of
Performance Goals for Qualified Performance Share Awards, the Committee must
certify in writing that applicable Performance Goals and any of the material
terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the
terms, conditions and limitations applicable to any Qualified Performance Share
Awards made pursuant to this Plan shall be determined by the Committee.




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





     (i) no Participant who is an Employee as of the Effective Date may be granted,
during any calendar year, Awards consisting of Options or SARs that are exercisable for,
or otherwise relate to, in the aggregate, more than 1 million shares of Common Stock;




     (ii) no Participant who becomes an Employee subsequent to the Effective Date may be
granted, during any calendar year, Awards consisting of Options or SARs that are
exercisable for, or otherwise relate to, in the aggregate, more than 1.5 million shares
of Common Stock;




     (iii) no Participant may be granted, during any calendar year, Stock Awards
covering or relating to more than 300,000 shares of Common Stock (the limitation set
forth in this clause (iii), together with the limitation set forth in clause (i) and
clause (ii) above, being hereinafter collectively referred to as the “Stock Based Awards
Limitations”); and




     (iv) no Participant may be granted Cash Awards that are intended to constitute
performance-based awards subject to Section 7(a)(v)(B) having a maximum payment value in
any calendar year in excess of $5 million.



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



     9. Payment of Awards.





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




     (b) Deferral. With the approval of the Committee, amounts payable in respect of Awards
may be deferred and paid either in the form of installments or as a lump-sum payment in the
form of cash or Common Stock. The Committee may permit selected Participants to elect to defer
payments of some or all types of Awards or any other compensation otherwise payable by the
Company in accordance with procedures established by the Committee and may provide that such
deferred



 









 




compensation may be payable in shares of Common Stock. Any deferred payment pursuant to
an Award, whether elected by the Participant or specified by the Award Agreement or the terms
of the Award or by the Committee, may be forfeited if and to the extent that the Award
Agreement or the terms of the Award so provide. Amounts payable in respect of Stock Awards
may be deferred in accordance with the provisions of the Waste Management, Inc. 409A Deferral
Savings Plan.





     (c) Dividends. Rights to dividends or Dividend Equivalents may be granted singly or
extended to and made part of any Award subject to such terms, conditions and restrictions as
the Committee may establish. As determined by the Committee, Dividend Equivalents may be (i)
paid to Participants currently, (ii) deferred, and (iii) subject to the same vesting as the
Award to which the Dividend Equivalents relate, if applicable. Where Dividend Equivalents are
deferred or subject to vesting, the Committee may permit for, or require, the conversion of
Dividend Equivalents into Deferred Stock Units. Deferred Stock Units arising from such a
conversion of Dividend Equivalents that is at election of the Employee or Non-Employee
Director shall not count against the Pool Limit. Deferred Stock Units arising from a
conversion of Dividend Equivalents that is required by the Committee will count against the
Pool Limit.




     (d) Substitution of Awards. Subject to Sections 5, 12 and 14, at the discretion of the
Committee, a Participant who is an Employee may be offered an election to substitute an Award
for another Award or Awards of the same or different type. The Grant Date for any Award
granted pursuant to the substitution provisions of this Section 9(d) will have the Grant Date
of the original Award.




     (e) Cash-out of Awards. At the discretion of the Committee, an Award that is an Option
or SAR may be settled by a cash payment equal to the difference between the Fair Market Value
per share of Common Stock on the date of exercise and the Grant Price of the Award, multiplied
by the number of shares with respect to which the Award is exercised.




     10. Option Exercise. The Grant Price shall be paid in full at the time of exercise in cash
or, if permitted by the Committee and elected by the optionee, the optionee may purchase such
shares by means of tendering Common Stock or surrendering another Award valued at Fair Market Value
on the date of exercise, or any combination thereof. The Committee shall determine acceptable
methods and requirements for Participants to tender Common Stock or other Awards. The Committee may
provide for procedures to permit the exercise or purchase of such Awards by use of the proceeds to
be received from the sale of Common Stock issuable pursuant to an Award. The Committee may adopt
additional rules and procedures regarding the exercise of Options from time to time, provided that
such rules and procedures are not inconsistent with the provisions of this Section 10.



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



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




 









 





     12. Amendment, Modification, Suspension or Termination of the Plan. The Committee may
amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes
in legal requirements or for any other purpose permitted by law, except that (a) no amendment or
alteration that would adversely affect the rights of any Participant under any Award previously
granted to such Participant shall be made without the consent of such Participant and (b) no
amendment or alteration shall be effective prior to its approval by the stockholders of the Company
to the extent such approval is required by applicable legal requirements or the requirements of the
securities exchange on which the Company’s stock is listed. Notwithstanding anything herein to the
contrary, Options and SARs granted under the Plan will not be repriced, replaced, or regranted
through cancellation or by decreasing the exercise price of a previously granted Option or SAR
except as expressly provided by the adjustment provisions of Section 14.



     13. Assignability. Unless otherwise determined by the Committee, no Award or any other
benefit under this Plan shall be assignable or otherwise transferable except by will, by
beneficiary designation or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement Income Securities Act,
or the rules thereunder. In the event that a beneficiary designation conflicts with an assignment
by will, the beneficiary designation will prevail. The Committee may prescribe and include in
applicable Award Agreements or the terms of the Award other restrictions on transfer. Any attempted
assignment of an Award or any other benefit under this Plan in violation of this Section 13 shall
be null and void.



     14. Adjustments.




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




     (b) In the event of any subdivision or consolidation of outstanding shares of Common
Stock, declaration of a dividend payable in shares of Common Stock or a special dividend
payable in cash or other stock split, or spin-off then (i) the number of shares of Common
Stock reserved under this Plan and available for grant pursuant to specific types of Awards as
described in Section 4, (ii) the number of shares of Common Stock covered by outstanding
Awards, (iii) the Grant Price or other price in respect of such Awards, (iv) the appropriate
Fair Market Value and other price determinations for such Awards, and (v) the share
limitations described in Section 7(b) shall each be proportionately adjusted by the Committee
as appropriate to reflect such transaction. In the event of any other recapitalization or
capital reorganization of the Company, any consolidation or merger of the Company with another
corporation or entity, the adoption by the Company of any plan of exchange affecting Common
Stock or any distribution to holders of Common Stock of securities or property (other than
normal cash dividends or dividends payable in Common Stock), the Committee shall make
appropriate adjustments to (x) the number of shares of Common Stock reserved under this Plan
and (y)(i) the number of shares of Common Stock covered by Awards, (ii) the Grant Price or
other price in respect of such Awards, (iii) the appropriate Fair Market Value and other price
determinations for such Awards, and (iv) the Stock Based Awards Limitations to reflect such
transaction; provided that such adjustments shall only be such as are necessary to maintain
the proportionate interest of the holders of the Awards and preserve, without increasing, the
value of such Awards. In the event of a corporate merger, consolidation, reorganization or
liquidation of the Company, or the sale of all or substantially all of the Company’s assets or
common stock, the Board shall be authorized (x) subject to the provisions of Section 4 above,
to assume under the Plan previously granted compensatory awards, or to substitute new Awards
for previously granted compensatory awards, including Awards, as part of such adjustment; (y)
to cancel Awards that are Options or SARs and give the Participants who are the holders of
such Awards notice and opportunity to exercise for 30 days prior to such cancellation; or (z)
to cancel any such Awards and to deliver to the Participants cash in an amount that the Board
shall determine in its sole discretion is



 









 






equal to the fair market value of such Awards on the date of such event, which in the
case of Options or SARs shall be the excess of the Fair Market Value of Common Stock on such
date over the exercise or strike price of such Award.




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



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



     17. Effect on Prior Plan. From and after the Effective Date of the Plan, no further awards or
grants will be made under the Prior Plan. The Prior Plan will, however, continue in existence and
operation following the Effective Date with respect to awards or grants outstanding under the Prior
Plan. From and after the Effective Date, shares available for issuance under the Prior Plan will be
subject to provisions of Section 4 of this Plan. The Prior Plan is hereby amended as necessary to
effect the provisions of Section 4 of this Plan.



     18. Section 409A Compliance. Notwithstanding anything in this Plan to the contrary, if any
Plan provision or Award under the Plan would result in the imposition of an additional tax under
Section 409A the Code and related regulations and Treasury pronouncements (“Section 409A”), that
Plan provision or Award will be reformed to avoid imposition of the applicable tax and no action
taken to comply with Section 409A shall be deemed to adversely affect the Participant’s rights to
an Award. All elections to defer, distributions, and other aspects of the Plan shall be made in
accordance with and shall comply with Section 409A, as amended, and any regulations and other
guidance thereunder.



     19. Rights as a Stockholder. A Participant will not have any rights as a stockholder with
respect to any share covered by any Award until such Participant has become the stockholder of
record of such share.



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



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



 









 





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



     23. Effectiveness and Term. The Plan shall be effective on the Effective Date and shall
terminate, except with respect to Awards then outstanding, on the earlier of (a) the termination of
the Plan in accordance with Section 12, (b) the date when no more shares are available for issuance
under the Plan or (c) the tenth anniversary of the Effective Date. This Plan has been adopted by
the Board subject to stockholder approval. Notwithstanding any terms herein to the contrary, the
Plan and any benefits granted hereunder will be null and void if stockholder approval is not
obtained at the next annual meeting of stockholders.