exv10w4







	 	 	 	 	 



Exhibit 10.4




HOLLY CORPORATION




LONG-TERM INCENTIVE COMPENSATION PLAN

As Amended and Restated as of May 24, 2007




(Formerly designated the Holly Corporation 2000 Stock Option Plan)





     1. Purpose. The purpose of the Holly Corporation Long-Term Incentive Compensation Plan as
amended and restated as of May 24, 2007 (formerly designated the Holly Corporation 2000 Stock
Option Plan) (the “Plan”) is to advance the interests of Holly Corporation (the “Company”) by
strengthening the ability of the Company and its subsidiaries to attract, retain and motivate able
people of high caliber as employees, directors and consultants through arrangements that relate the
compensation for such persons to the long-term performance of the Company. Accordingly, the Plan
provides for granting Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock
Awards, Bonus Stock Awards, Stock Appreciation Rights, Phantom Stock Awards, Performance Awards or
any combination of the foregoing, as the Committee shall determine.



     2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth
below, in addition to such terms defined in Section 1 hereof:



          (a) “Amendment Effective Date” means December 12, 2002. The Plan prior to amendment was
effective January 1, 2001.




          (b) “Award” means any Option, Restricted Stock Award, Bonus Stock Award, Stock Appreciation
Right, Phantom Stock Award, or Performance Award, together with any other right or interest granted
to a Participant under the Plan.




          (c) “Beneficiary” means one or more persons, trusts or other entities that have been
designated by a Participant in his or her most recent written beneficiary designation filed with
the Committee to receive the benefits specified under the Plan upon such Participant’s death or to
which Awards or other rights are transferred if and to the extent permitted under Section 10(d)
hereof. If, upon a Participant’s death, there is no designated Beneficiary or surviving designated
Beneficiary, then the term Beneficiary means the persons, trusts or other entities entitled by will
or the laws of descent and distribution to receive such benefits.




          (d) “Board” means the Company’s board of directors.




          (e) “Bonus Stock Award” means Shares granted to a Participant under Section 6(c) hereof.




          (f) “Code” means the Internal Revenue Code of 1986, as amended from time to time, including
regulations thereunder and successor provisions and regulations thereto.




          (g) “Committee” means a committee of two or more directors designated by the Board to administer the
Plan; provided, however, that, unless otherwise determined by the Board, the Committee shall
consist solely of two or more directors, each of whom shall be (i) a “nonemployee director” within
the meaning of Rule 16b-3 under the Exchange Act, and (ii) an




 









 







“outside director” as defined under Section 162(m) of the Code, unless administration of the
Plan by “outside directors” is not then required in order to qualify for tax deductibility under
Section 162(m) of the Code.




          (h) “Covered Employee” means an Eligible Person who is a Covered Employee as specified in
Section 8(b)(vi) of the Plan.




          (i) “Disability” means, as determined by the Board in the sole discretion exercised in good
faith of the Board, a physical or mental impairment of sufficient severity that either the
Participant is unable to continue performing the duties he performed before such impairment or the
Participant’s condition entitles him to disability benefits under any insurance or employee benefit
plan of the Company or its Subsidiaries and that impairment or condition is cited by the Company as
the reason for termination of the Participant’s employment or participation as a member of the
Board.




          (j) “Eligible Person” means any current or proposed officer, director, or key employee or
consultant whose services are deemed to be of potential benefit to the Company or any of its
Subsidiaries. An employee on leave of absence may be considered as still in the employ of the
Company or a Subsidiary for purposes of eligibility for participation in the Plan.




          (k) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time,
including rules thereunder and successor provisions and rules relating thereto.




          (l) “Fair Market Value” means the fair market value as determined by the Committee. Unless
otherwise determined by the Committee, the Fair Market Value of a Share shall be the closing price
of a Share, on the date on which the determination of Fair Market Value is being made or if no
Shares were traded on such date then the last trading date prior thereto, as quoted on the
composite transactions table for the American Stock Exchange or, if the Shares are not then subject
to trading on the American Stock Exchange, then as quoted in a comparable manner on any other
national stock exchange or, if not so quoted, then as reported for the over-the-counter market on
which the largest volume of trading of Shares has occurred in the 30 trading days prior to the date
for which a determination is made.




          (m) “Incentive Stock Option” means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code or any successor provision thereto.




          (n) “Non-Qualified Stock Option” means any Option that does not constitute an Incentive Stock
Option.




          (o) “Option” means a right granted to a Participant under Section 6(a) hereof to purchase
Shares or other Awards at a specified price during specified time periods.




          (p) “Participant” means a person who has been granted an Award under the Plan which remains
outstanding, including a person who is no longer an Eligible Person.




          (q) “Performance Award” means a right granted to a Participant under Section 8 hereof to
receive cash and/or other consideration other than Shares based on performance
conditions, as provided in Section 8, measured over a period of not less than six months nor
more than ten years.




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          (r) “Phantom Stock Award” means a right granted to a Participant under Section 7(b) hereof.




          (s) “Qualified Member” means a member of the Committee who is a “Non-Employee Director” within
the meaning of Rule 16b-3(b)(3) and an “outside director” within the meaning of regulation 1.162-27
under Section 162(m) of the Code.




          (t) “Restricted Stock Award” means Shares granted to a Participant under Section 6(b) hereof
that are subject to certain restrictions and to a risk of forfeiture.




          (u) “Rule 16b-3” means Rule 16b-3, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act, as from time to time in effect and applicable to the Plan and
Participants.




          (v) “Securities Act” means the Securities Act of 1933 and the rules and regulations
promulgated thereunder, or any successor law, as it may be amended from time to time.




          (w) “Shares” means shares of the Company’s common stock, par value $.01 per share, and such
other securities as may be substituted (or resubstituted) for shares of the Company’s common stock,
par value $.01 per share, pursuant to Section 10 hereof.




          (x) “Stock Appreciation Right” means a right granted to a Participant under Section 7(a)
hereof.




          (y) “Subsidiary” means with respect to the Company, any corporation or other entity of which
at least 50% of the voting power of the voting equity securities or equity interest is owned,
directly or indirectly, by the Company or any other entity determined by the Committee to
constitute a Subsidiary due to its relationship to the Company.




     3. Administration.



          (a) Authority of the Committee. The Plan shall be administered by the Committee
except to the extent the Board elects to administer all or part of the Plan or except to the extent
the Board appoints a separate committee other than the Committee to administer all or part of the
Plan, in which case references herein to the “Committee” shall be deemed to include references to
the “Board” and/or such additional committee, as applicable. To the extent a portion of the Plan is
administered by the Committee, and another portion of the Plan is administered by the Board and/or
a separate committee, references herein to “Committee” shall be deemed to be references to the
“Board” or such additional committee, as applicable, but only to the extent the Board or additional
committee administers a portion of the Plan and only with respect to those portions of the Plan
that the Board has elected to administer or over which the separate committee has been delegated
authority. Subject to the express provisions of the Plan and Rule 16b-3, the Committee shall have
the authority, in its sole and absolute discretion, to (i) adopt, amend, and rescind administrative
and interpretive rules and regulations relating to the



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Plan; (ii) determine the Eligible Persons to whom, and the time or times at which, Awards
shall be granted; (iii) determine the amount of cash and the number of Options, Restricted Stock
Awards, Bonus Stock Awards, Stock Appreciation Rights, Phantom Stock Awards, or Performance Awards,
or any combination thereof, that shall be the subject of each Award; (iv) determine the terms and
provisions of each Award agreement (which need not be identical), including provisions defining or
otherwise relating to (A) the term and the period or periods and extent of exercisability of
Options, (B) the extent to which the transferability of Shares and Awards is restricted, (C) the
effect of termination of employment of a Participant on the Award, and (D) the effect of approved
leaves of absence (consistent with any applicable regulations of the Internal Revenue Service); (v)
accelerate the time of exercisability of any Option that has been granted; (vi) construe the
respective Award agreements and the Plan; (vii) make determinations of the Fair Market Value of the
Shares pursuant to the Plan; (viii) delegate its duties under the Plan to such agents as it may
appoint from time to time, provided that the Committee may not delegate its duties with respect to
making Awards to, or otherwise with respect to Awards granted to, Eligible Persons who are subject
to Section 16(b) of the Exchange Act or Section 162(m) of the Code; (ix) subject to ratification by
the Board, terminate, modify, or amend the Plan; and (x) make all other determinations, perform all
other acts, and exercise all other powers and authority necessary or advisable for administering
the Plan, including the delegation of those ministerial acts and responsibilities as the Committee
deems appropriate. Subject to Rule 16b-3 and Section 162(m) of the Code, the Committee may correct
any defect, supply any omission, or reconcile any inconsistency in the Plan, in any Award, or in
any Award agreement in the manner and to the extent it deems necessary or desirable to carry the
Plan into effect, and the Committee shall be the sole and final judge of that necessity or
desirability. The determinations of the Committee on the matters referred to in this Section 3(a)
shall be final and conclusive.




          (b) Manner of Exercise of Committee Authority. At any time that a member of the
Committee is not a Qualified Member, any action of the Committee relating to an Award granted or to
be granted to a Participant who is then subject to Section 16 of the Exchange Act in respect of the
Company, or relating to an Award intended by the Committee to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code and regulations thereunder, may be
taken either (i) by a subcommittee, designated by the Committee, composed solely of two or more
Qualified Members, or (ii) by the Committee but with each such member who is not a Qualified Member
abstaining or recusing himself or herself from such action; provided, however, that, upon such
abstention or recusal, the Committee remains composed solely of two or more Qualified Members. Such
action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of
such non-Qualified Member(s), shall be the action of the Committee for purposes of the Plan. Any
action of the Committee shall be final, conclusive and binding on all persons, including the
Company, its Subsidiaries, stockholders, Participants, Beneficiaries, and transferees under Section
10(d) hereof or other persons claiming rights from or through a Participant. The express grant of
any specific power to the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The Committee may delegate to
officers or managers of the Company or any Subsidiary, or committees thereof, the authority,
subject to such terms as the Committee shall determine, to perform such functions, including
administrative functions, as the Committee may determine, to the extent that such delegation will
not result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants
subject to



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Section 16 of the Exchange Act in respect of the Company and will not cause Awards intended to
qualify as “performance-based compensation” under Section 162(m) of the Code to fail to so qualify.
The Committee may appoint agents to assist it in administering the Plan.




          (c) Limitation of Liability. The Committee and each member thereof shall be entitled
to, in good faith, rely or act upon any report or other information furnished to him or her by any
officer or employee of the Company or a Subsidiary, the Company’s legal counsel, independent
auditors, consultants or any other agents assisting in the administration of the Plan. Members of
the Committee and any officer or employee of the Company or a Subsidiary acting at the direction or
on behalf of the Committee shall not be personally liable for any action or determination taken or
made in good faith with respect to the Plan, and shall, to the fullest extent permitted by law, be
indemnified and held harmless by the Company with respect to any such action or determination.




     4. Shares Subject to Plan.



          (a) Overall Number of Shares Available for Delivery. Subject to adjustment in a
manner consistent with any adjustment made pursuant to Section 10 of the Plan, the total number of
Shares that may be delivered in connection with Awards under the Plan shall not exceed 1,500,000,
including all Shares delivered with respect to Options granted under the Plan prior to the
Amendment Effective Date.




          (b) Application of Limitation to Grants of Awards. No Award may be granted if (i) the
number of Shares to be delivered in connection with such Award exceeds (ii) the number of Shares
remaining available under the Plan minus the number of Shares issuable in settlement of or relating
to then-outstanding Awards. The Committee may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute
awards) and make adjustments if the number of Shares actually delivered differs from the number of
Shares previously counted in connection with an Award.




          (c) Availability of Shares Not Delivered under Awards. Shares subject to an Award
under the Plan that expires or is canceled, forfeited, settled in cash or otherwise terminated
without a delivery of Shares to the Participant, including (i) the number of Shares withheld in
payment of any exercise price of an Award or taxes relating to Awards, and (ii) the number of
Shares surrendered in payment of any exercise price of an Award or taxes relating to any Award,
will again be available for Awards under the Plan, except that if any such Shares could not again
be available for Awards to a particular Participant under any applicable law or regulation, such
Shares shall be available exclusively for Awards to Participants who are not subject to such
limitation.




          (d) Shares Offered. The Shares to be delivered under the Plan shall be made available
from (i) authorized but unissued Shares, or (ii) previously issued Shares reacquired by the
Company.




     5. Eligibility; Per Person Award Limitations. Awards may be granted under the Plan only to
Eligible Persons. In each fiscal year or 12-month period, as applicable, during any part of which
the Plan is in effect, an Eligible Person may not be granted (a) Awards, provided



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for in Sections 6 and 7 of the Plan, relating to more than 150,000 Shares, subject to
adjustment in a manner consistent with any adjustment made pursuant to Section 10 of the Plan, or
(b) Awards, provided for in Section 8 of the Plan, with a value at the time of payment which
exceeds the Fair Market Value of 150,000 Shares as of the date of the grant of the Award.



     6. Options, Restricted Stock and Bonus Stock.



          (a) Options. The Committee is authorized to grant Options to Participants on the
following terms and conditions:





          (i) Exercise Price. The exercise price or prices for Shares under each Option
shall be determined by the Committee at the time the Option is granted, and may be less
than, equal to or greater than, the Fair Market Value of the Shares at the time of the
granting of the Option, provided that the exercise price per Share for any Option that is
intended to be performance-based compensation under Section 162(m)(4)(C) of the Code or an
Incentive Stock Option under Section 422 of the Code shall not be less than the Fair Market
Value of a Share as of the effective date of grant of the Option; provided, however, that in
the case of an individual who owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or its parent or any
Subsidiary, the exercise price per Share of any Incentive Stock Option under Section 422 of
the Code shall not be less than 110% of the Fair Market Value of a Share as of the effective
date of grant of the Incentive Stock Option.




          (ii) Time and Method of Exercise. The Committee shall determine the time or
times at which or the circumstances under which an Option may be exercised in whole or in
part (including based on achievement of performance goals and/or future service
requirements), the methods by which such exercise price may be paid or deemed to be paid,
the form of such payment, including, without limitation, cash, Shares, other Awards or
awards granted under other plans of the Company or any Subsidiary, or other property
(including notes, to the extent permitted under applicable law, or other contractual
obligations of Participants to make payment on a deferred basis), and the methods by or
forms in which Shares will be delivered or deemed to be delivered to Participants,
including, but not limited to, the delivery of Restricted Stock Awards subject to Section
6(b) hereof. In the case of an exercise whereby the exercise price is paid with Shares, the
value of such Shares for purposes of calculating the exercise price paid shall be the Fair
Market Value. Notwithstanding anything to the contrary herein, unless otherwise provided in
any agreement evidencing an Option, in the event of the death of a Participant while in the
employ of the Company or one of its Subsidiaries, an Option theretofore granted to the
Participant shall be exercisable within the year succeeding such death (even if the Option
would otherwise expire prior to one year from the date of death) but only to the extent that
the optionee was entitled to exercise the Option as of the date of death.




          (iii) Incentive Stock Options. The terms of any Incentive Stock Option granted
under the Plan shall comply in all respects with the provisions of Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to
Incentive Stock Options (including any Stock Appreciation Right in tandem



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therewith) shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to disqualify either the Plan or any
Incentive Stock Option under Section 422 of the Code, unless the Participant has first
requested the change that will result in such disqualification. Incentive Stock Options
shall not be granted more than ten years after the earlier of the adoption of the Plan or
the approval of the Plan by the Company’s stockholders. Notwithstanding the foregoing, the
Fair Market Value of Shares subject to an Incentive Stock Option and the aggregate Fair
Market Value of shares of stock of any parent or Subsidiary corporation (within the meaning
of Sections 424(e) and (f) of the Code) subject to any other incentive stock option (within
the meaning of Section 422 of the Code) of the Company or a parent or Subsidiary corporation
(within the meaning of Sections 424(e) and (f) of the Code) that first becomes purchasable
by a Participant in any calendar year may not (with respect to that Participant) exceed
$100,000, or such other amount as may be prescribed under Section 422 of the Code or
applicable regulations or rulings from time to time. As used in the previous sentence, Fair
Market Value shall be determined as of the date the Incentive Stock Options are granted.
Failure to comply with this provision shall not impair the enforceability or exercisability
of any Option, but shall cause the excess amount of Shares to be reclassified in accordance
with the Code. No Incentive Stock Option may be granted after December 13, 2010.



          (b) Restricted Stock Awards. The Committee is authorized to grant Restricted Stock
Awards to Participants on the following terms and conditions:





          (i) Grant and Restrictions. Restricted Stock Awards shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions, if any, as the
Committee may impose, which restrictions may lapse separately or in combination at such
times, under such circumstances (including based on achievement of performance goals and/or
future service requirements), in such installments or otherwise, as the Committee may
determine at the date of grant or thereafter. Except to the extent restricted under the
terms of the Plan and any Award agreement relating to the Restricted Stock Award, a
Participant granted a Restricted Stock Award shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock Award and the right to receive dividends
thereon (subject to any mandatory reinvestment or other requirement imposed by the
Committee). During the restricted period applicable to the Restricted Stock Award, the
Restricted Stock Award may not be sold, transferred, pledged, hypothecated, margined or
otherwise encumbered by the Participant.




          (ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable restriction period, Restricted Stock Awards
that are at that time subject to restrictions shall be forfeited and reacquired by the
Company; provided that the Committee may provide, by rule or regulation or in any Award
agreement, or may determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock Awards shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the Committee may in other cases
waive in whole or in part the forfeiture of Restricted Stock Awards.



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          (iii) Certificates for Shares. Restricted Stock Awards granted under the Plan
may be evidenced in such manner as the Committee shall determine. If certificates for Shares
relating to Restricted Stock Awards are registered in the name of the Participant, the
Committee may require that such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted Stock Awards, that the
Company retain physical possession of the certificates, and that the Participant deliver a
stock power to the Company, endorsed in blank, relating to such Shares.




          (iv) Dividends and Splits. As a condition to the grant of a Restricted Stock
Award, the Committee may require or permit a Participant to elect that any cash dividends
paid on a Share related to the Restricted Stock Award be automatically reinvested in
additional Shares related to the Restricted Stock Award or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined by the Committee, Shares
distributed in connection with a stock split or stock dividend, and other property
distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the
same extent as the Restricted Stock Award with respect to which such Shares or other
property has been distributed.



          (c) Bonus Stock Awards. The Committee is authorized to grant Awards of Shares as
bonuses, provided that, in the case of Participants subject to Section 16 of the Exchange Act, the
amount of such grants remains within the discretion of the Committee to the extent necessary to
ensure that such Awards are exempt from liability under Section 16(b) of the Exchange Act. Bonus
Stock Awards shall be subject to such other terms as shall be determined by the Committee.




          (d) Performance Goals. To the extent the Committee determines that any Award granted
pursuant to this Section 6 shall constitute performance-based compensation for purposes of Section
162(m) of the Code, the grant or settlement of the Award shall, in the Committee’s discretion, be
subject to the achievement of performance goals determined and applied in a manner consistent with
Section 8(b).




     7. Stock Appreciation Rights and Phantom Stock.



          (a) Stock Appreciation Rights. The Committee is authorized to grant Stock
Appreciation Rights to Participants on the following terms and conditions:





          (i) Right to Payment. A Stock Appreciation Right shall confer on the
Participant to whom it is granted a right to receive, upon exercise thereof, the excess of
(A) the Fair Market Value of one Share on the date of exercise over (B) the grant price of
the Stock Appreciation Right as determined by the Committee.




          (ii) Rights Related to Options. A Stock Appreciation Right granted in
connection with an Option shall entitle a Participant, upon exercise thereof, to surrender
that Option or any portion thereof, to the extent unexercised, and to receive payment of an
amount computed pursuant to Subsection 7(a)(i) hereof. That Option shall then cease to be
exercisable to the extent surrendered. A Stock Appreciation Right granted in



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connection with an Option shall be exercisable only at such time or times and only to
the extent that the related Option is exercisable and shall not be transferable except to
the extent that the related Option is transferable.




          (iii) Right Without Option. A Stock Appreciation Right granted independent of
an Option shall be exercisable as determined by the Committee and set forth in the Award
agreement governing the Stock Appreciation Right.




          (iv) Terms. The Committee shall determine at the date of grant the time or
times at which and the circumstances under which a Stock Appreciation Right may be exercised
in whole or in part (including based on achievement of performance goals and/or future
service requirements), the method of exercise, whether or not a Stock Appreciation Right
shall be in tandem or in combination with any other Award, and any other terms and
conditions of any Stock Appreciation Right.



          (b) Phantom Stock Awards. The Committee is authorized to grant Phantom Stock Awards
to Participants, which are rights to receive cash at the end of a specified deferral period,
subject to the following terms and conditions:





          (i) Award and Restrictions. Satisfaction of a Phantom Stock Award shall occur
upon expiration of the deferral period specified for such Phantom Stock Award by the
Committee (or, if permitted by the Committee, as elected by the Participant). In addition,
Phantom Stock Awards shall be subject to such restrictions (which may include a risk of
forfeiture), if any, as the Committee may impose, which restrictions may lapse at the
expiration of the deferral period or at earlier specified times (including based on
achievement of performance goals and/or future service requirements), separately or in
combination, in installments or otherwise, as the Committee may determine.




          (ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable deferral period or portion thereof to which
forfeiture conditions apply (as provided in any Award agreement evidencing the Phantom Stock
Awards), all Phantom Stock Awards that are at that time subject to deferral (other than a
deferral at the election of the Participant) shall be forfeited; provided that the Committee
may provide, by rule or regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to Phantom Stock Awards
shall be waived in whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part the forfeiture of
Phantom Stock Awards.



          (c) Performance Goals. To the extent the Committee determines that any Award granted
pursuant to this Section 7 shall constitute performance-based compensation for purposes of Section
162(m) of the Code, the grant or settlement of the Award shall, in the Committee’s discretion, be
subject to the achievement of performance goals determined and applied in a manner consistent with
Section 8(b).




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     8. Performance Awards.



          (a) Performance Awards. The Committee may grant Performance Awards based on
performance criteria measured over a period of not less than six months and not more than ten
years. The Committee may use such business criteria and other measures of performance as it may
deem appropriate in establishing any performance conditions, and may exercise its discretion to
increase the amounts payable under any Award subject to performance conditions except as limited
under Section 8(b) in the case of a Performance Award granted to a Covered Employee.




          (b) Performance Goals. The grant and/or settlement of a Performance Award shall be
contingent upon terms set forth in this Section 8(b).





          (i) General. The performance goals for Performance Awards shall consist of one
or more business criteria and a targeted level or levels of performance with respect to each
of such criteria, as specified by the Committee. In the case of any Award granted to a
Covered Employee, performance goals shall be designed to be objective and shall otherwise
meet the requirements of Section 162(m) of the Code and regulations thereunder (including
Treasury Regulation §1.162-27 and successor regulations thereto), including the requirement
that the level or levels of performance targeted by the Committee are such that the
achievement of performance goals is “substantially uncertain” at the time of grant. The
Committee may determine that such Performance Awards shall be granted and/or settled upon
achievement of any one performance goal or that two or more of the performance goals must be
achieved as a condition to the grant and/or settlement of such Performance Awards.
Performance goals may differ among Performance Awards granted to any one Participant or for
Performance Awards granted to different Participants.




          (ii) Business Criteria. One or more of the following business criteria for the
Company, on a consolidated basis, and/or for specified Subsidiaries, divisions or business
or geographical units of the Company (except with respect to the total stockholder return
and earnings per share criteria), shall be used by the Committee in establishing performance
goals for Performance Awards granted to a Covered Employee: (A) earnings per share; (B)
increase in revenues; (C) increase in cash flow; (D) increase in cash flow return; (E)
return on net assets; (F) return on assets; (G) return on investment; (H) return on capital;
(I) return on equity; (J) economic value added; (K) gross margin; (L) net income; (M) pretax
earnings; (N) pretax earnings before interest, depreciation and amortization; (O) pretax
operating earnings after interest expense and before incentives, service fees, and
extraordinary or special items; (P) operating income; (Q) total stockholder return; (R) debt
reduction; (S) net profit margin; and (T) any of the above goals determined on an absolute
or relative basis or as compared to the performance of a published or special index deemed
applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock
Index or a group of comparable companies.



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          (iii) Performance Period; Timing for Establishing Performance Goals.
Achievement of performance goals in respect of Performance Awards shall be measured
over a performance period of not less than one year and not more than ten years, as
specified by the Committee. Performance goals in the case of any Award granted to a Covered
Employee shall be established not later than 90 days after the beginning of any performance
period applicable to such Performance Awards, or at such other date as may be required or
permitted for “performance-based compensation” under Section 162(m) of the Code.




          (iv) Settlement of Performance Awards; Other Terms. After the end of each
performance period, the Committee shall determine the amount, if any, of Performance Awards
payable to each Participant based upon achievement of business criteria over a performance
period. The Committee may not exercise discretion to increase any such amount payable in
respect of a Performance Award designed to comply with Section 162(m) of the Code. The
Committee shall specify the circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the Participant prior to the end of a
performance period or settlement of Performance Awards.




          (v) Written Determinations. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award, and the achievement
of performance goals relating to Performance Awards shall be made in writing in the case of
any Award granted to a Covered Employee. The Committee may not delegate any responsibility
relating to such Performance Awards.




          (vi) Status of Performance Awards under Section 162(m) of the Code. It is the
intent of the Company that Performance Awards granted to persons who are designated by the
Committee as likely to be Covered Employees within the meaning of Section 162(m) of the Code
and regulations thereunder (including Treasury Regulation §1.162-27 and successor
regulations thereto) shall, if so designated by the Committee, constitute “performance-based
compensation” within the meaning of Section 162(m) of the Code and regulations thereunder.
Accordingly, the terms of this Section 8(b) shall be interpreted in a manner consistent with
Section 162(m) of the Code and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given Participant will be a
Covered Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the Committee, at the
time of grant of a Performance Award, who is likely to be a Covered Employee with respect to
that fiscal year. If any provision of the Plan as in effect on the date of adoption or any
agreements relating to Performance Awards that are designated as intended to comply with
Section 162(m) of the Code does not comply or is inconsistent with the requirements of
Section 162(m) of the Code or regulations thereunder, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.



     9. Certain Provisions Applicable to All Awards.



          (a) General. Awards may be granted on the terms and conditions set forth in Sections
6, 7 and 8 hereof and this Section 9. In addition, the Committee may impose on any Award or the
exercise thereof, such additional terms and conditions, not inconsistent with the



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provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture
of Awards in the event of termination of employment by the Participant and terms permitting a
Participant to make elections relating to his or her Award. The Committee shall retain full power
and discretion to accelerate or waive, at any time, any term or condition of an Award that is not
mandatory under the Plan; provided, however, that the Committee shall not have any discretion to
accelerate or waive any term or condition of an Award that is intended to qualify as
“performance-based compensation” for purposes of Section 162(m) of the Code if such discretion
would cause the Award not to so qualify. Except in cases in which the Committee is authorized to
require other forms of consideration under the Plan, or to the extent other forms of consideration
must be paid to satisfy the requirements of the Delaware General Corporation Law, no consideration
other than services may be required for the grant of any Award.




          (b) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem
with, or in substitution or exchange for, any other Award or any award granted under another plan
of the Company, any Subsidiary, or any business entity to be acquired by the Company or a
Subsidiary, or any other right of a Participant to receive payment from the Company or any
Subsidiary. Such additional, tandem and substitute or exchange Awards may be granted at any time.
If an Award is granted in substitution or exchange for another Award, the Committee shall require
the surrender of such other Award in consideration for the grant of the new Award. In addition,
Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under
other plans of the Company or any Subsidiary.




          (c) Term of Awards. The term of each Award shall be for such period as may be
determined by the Committee; provided that in no event shall the term of any Option or Stock
Appreciation Right exceed a period of ten years (or such shorter term as may be required in respect
of an Incentive Stock Option under Section 422 of the Code).




          (d) Form and Timing of Payment under Awards; Deferrals. Subject to the terms of the
Plan and any applicable Award agreement, payments to be made by the Company or a Subsidiary upon
the exercise of an Option or other Award or settlement of an Award may be made in a single payment
or transfer, in installments, or on a deferred basis. The settlement of any Award may, subject to
any limitations set forth in the Award agreement, be accelerated and cash paid in lieu of Shares in
connection with such settlement, in the discretion of the Committee or upon occurrence of one or
more specified events. In the discretion of the Committee, Awards granted pursuant to Sections 7 or
8 of the Plan may be payable in Shares to the extent permitted by the terms of the applicable Award
agreement. Installment or deferred payments may be required by the Committee (subject to Section
10(f) of the Plan, including the consent provisions thereof in the case of any deferral of an
outstanding Award not provided for in the original Award agreement) or permitted at the election of
the Participant on terms and conditions established by the Committee. Payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on installment or
deferred payments or the grant or crediting of amounts in respect of installment or deferred
payments denominated in Shares. Any deferral shall only be allowed as is provided in a separate
deferred compensation plan adopted by the Company. The Plan shall not constitute an “employee
benefit plan” for purposes of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended.




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          (e) Exemptions from Section 16(b) Liability. It is the intent of the Company that the
grant of any Awards to or other transaction by a Participant who is subject to Section 16 of the
Exchange Act shall be exempt from Section 16(b) of the Exchange Act pursuant to an applicable
exemption (except for transactions acknowledged by the Participant in writing to be non-exempt).
Accordingly, if any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 as then applicable to any such transaction, such provision shall be
construed or deemed amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 so that such Participant shall avoid liability under Section 16(b) of the Exchange Act.




     10. General Provisions.



          (a) Company’s Right to Terminate or Modify Awards in Certain Circumstances. Except to
the extent that an Award agreement provides otherwise with specific reference to this Section
10(a), in the event of (i) an acquisition of substantially all of the assets of the Company or of a
greater than 80% stock interest in the Company by an entity in which the Company does not have a
50% or greater interest prior to such acquisition, or (ii) a merger, consolidation, or
recapitalization involving a fundamental change in the capital structure of the Company, the
Company shall have the right to terminate any Award upon the payment of an amount equal to the then
value of the Award, without regard to vesting or forfeiture provisions of the Award, as determined
by the Committee, taking into account to the extent determined by the Committee to be appropriate
the Fair Market Value of Shares at the time of termination and the performance of the Company up to
the time of termination. Upon tender of payment by the Company to a holder of the amount determined
by the Committee pursuant to this provision, the Award held by such holder shall automatically
terminate. Alternatively, in such circumstances, the Company, in the discretion of the Board, may
make arrangements for the acquiring or surviving corporation to assume any or all outstanding
Awards and substitute on equitable terms Awards relating to the stock or performance of such
acquiring or surviving corporation. The determinations of the Board and/or the Committee pursuant
to this Section 10(a) shall be final, binding and conclusive.




          (b) No Limitation on Other Company Transactions. The existence of the Plan and the
Awards granted hereunder shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization
or other change in the Company’s capital structure or its business, any merger or consolidation of
the Company, any issue of debt or equity securities affecting Shares or the rights thereof, the
dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all
or any part of its assets or business or any other corporate act or proceeding.




          (c) Dilution or Other Adjustments. In the event that there is any change in the
Shares through merger, consolidation, reorganization or recapitalization or in the event of any
stock split or dividend to holders of Shares payable in Shares or the issuance to such holders of
rights to subscribe to Shares, or in the event of any change in the capital structure of the
Company, the Board shall, subject to any requirements of applicable law, regulations and rules,
make such adjustments with respect to any provision or provisions of the Plan, including but not
limited to the limitations on Awards that may be granted under the Plan as set forth in Sections 4
and 5, and with respect to Awards theretofore granted under the Plan as the Board deems



13









 






appropriate to prevent dilution or enlargement of Award rights. The determinations of the
Board pursuant to this Section 10(b) shall be final, binding and conclusive. Except as hereinbefore
expressly provided, the issuance by the Company of shares of stock of any class or securities
convertible into shares of stock of any class, for cash, property, labor or services, upon direct
sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares
or obligations of the Company convertible into such shares or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of Shares relating to Awards theretofore granted or the exercise price
per Share in the case of Options.




          (d) Transferability.





          (i) Permitted Transferees. The Committee may, in its discretion, permit a
Participant to transfer all or any portion of an Award or authorize all or a portion of an
Award to be granted to an Eligible Person on terms which permit transfer by such
Participant; provided that, in either case a transferee may only be a child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, in each case with respect to the Participant, a trust in
which these persons have more than fifty percent of the beneficial interest, a foundation in
which these persons (or the Participant) control the management of assets, and any other
entity in which these persons (or the Participant) own more than fifty percent of the voting
interests (collectively, “Permitted Transferees”); provided further that, (A) there may be
no consideration for any such transfer and (B) subsequent transfers of Awards transferred as
provided above shall be prohibited except subsequent transfers back to the original holder
of the Award and transfers to other Permitted Transferees of the original holder. Agreements
evidencing Awards with respect to which such transferability is authorized at the time of
grant must be approved by the Committee, and must expressly provide for transferability in a
manner consistent with this Subsection 10(d)(i).




          (ii) Qualified Domestic Relations Orders. An Award may be transferred, to a
Permitted Transferee, pursuant to a domestic relations order entered or approved by a court
of competent jurisdiction upon delivery to the Company of written notice of such transfer
and a certified copy of such order.




          (iii) Other Transfers. Except as expressly permitted by Subsections 10(d)(i)
and 10(d)(ii) above, Awards shall not be transferable other than by will or the laws of
descent and distribution. Notwithstanding anything to the contrary in this Section 10, an
Incentive Stock Option shall not be transferable other than by will or the laws of descent
and distribution.




          (iv) Effect of Transfer. Following the transfer of any Award as contemplated
by Subsections 10(d)(i), 10(d)(ii) and 10(d)(iii) above, (A) such Award shall continue to be
subject to the same terms and conditions as were applicable immediately prior to transfer,
provided that the term “Participant” shall be deemed to refer to the Permitted Transferee,
the recipient under a qualified domestic relations order,



14









 







the estate or heirs of a deceased Participant, or other transferee, as applicable, to
the extent appropriate to enable the Permitted Transferee to exercise the transferred Award
in accordance with the terms of the Plan and applicable law and (B) the provisions of the
Award relating to exercisability thereof shall continue to be applied with respect to the
original Participant and, following the occurrence of any such events described therein, the
Awards shall be exercisable by the Permitted Transferee, the recipient under a qualified
domestic relations order, the estate or heirs of a deceased Participant, or other
transferee, as applicable, only to the extent and for the periods that would have been
applicable in the absence of the transfer.




          (v) Procedures and Restrictions. Any Participant desiring to transfer an Award
as permitted under Subsections 10(d)(i), 10(d)(ii) or 10(d)(iii) above shall make
application therefor in the manner and time specified by the Committee and shall comply with
such other requirements as the Committee may require to assure compliance with all
applicable securities laws. The Committee shall not give permission for such a transfer if
(A) it would give rise to short-swing liability under Section 16(b) of the Exchange Act or
(B) it may not be made in compliance with all applicable federal, state and foreign
securities laws.




          (vi) Registration. To the extent the issuance to any Permitted Transferee of
any Shares issuable pursuant to Awards transferred as permitted in this Section 10(d) is not
registered pursuant to the effective registration statement of the Company generally
covering the Shares to be issued pursuant to the Plan to initial holders of Awards, the
Company shall not have any obligation to register the issuance of any such Shares to any
such transferee.



          (e) Taxes. The Company and any Subsidiary are authorized to withhold from any Award
granted, or any payment relating to an Award under the Plan, including from a distribution of
Shares, amounts of withholding and other taxes due or potentially payable in connection with any
transaction involving an Award, and to take such other action as the Committee may deem advisable
to enable the Company and Participants to satisfy obligations for the payment of withholding taxes
and other tax obligations relating to any Award. This authority shall include authority to withhold
or receive Shares or other property and to make cash payments in respect thereof in satisfaction of
a Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the
Committee.




          (f) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue
or terminate the Plan or the Committee’s authority to grant Awards under the Plan without the
consent of stockholders or Participants, except that any amendment or alteration to the Plan,
including any increase in any Share limitation, shall be subject to the approval of the Company’s
stockholders not later than the annual meeting next following such Board action if such stockholder
approval is required by any federal or state law or regulation or the rules of any stock exchange
or automated quotation system on which the Shares may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other such changes in this Plan to stockholders
for approval; provided that, without the consent of an affected Participant, no such Board action
may materially and adversely affect the rights of such Participant under any previously granted and
outstanding Award. The Committee may waive any conditions or



15









 






rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted
and any Award agreement relating thereto, except as otherwise provided in the Plan; provided that,
without the consent of an affected Participant, no such Committee action may materially and
adversely affect the rights of such Participant under such Award.




          (g) Limitation on Rights Conferred under Plan. Neither the Plan nor any action taken
hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue
as an Eligible Person or Participant or in the employ or service of the Company or a Subsidiary,
(ii) interfering in any way with the right of the Company or a Subsidiary to terminate any Eligible
Person’s or Participant’s employment or service at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated uniformly with other
Participants and employees, or (iv) conferring on a Participant any of the rights of a stockholder
of the Company unless and until the Participant is duly issued or transferred Shares in accordance
with the terms of an Award.




          (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its
submission to the stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board or a committee thereof to adopt such other incentive
arrangements as it may deem desirable, including incentive arrangements and awards which do not
qualify under Section 162(m) of the Code. Nothing contained in the Plan shall be construed to
prevent the Company or any Subsidiary from taking any corporate action which is deemed by the
Company or such Subsidiary to be appropriate or in its best interest, whether or not such action
would have an adverse effect on the Plan or any Award made under the Plan. No employee, beneficiary
or other person shall have any claim against the Company or any Subsidiary as a result of any such
action.




          (i) Payments in the Event of Forfeitures; Fractional Shares; Share Allotments. Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to
which a Participant paid cash or other consideration to the Company in exchange for such Award, the
Participant shall be repaid the amount of such cash or other consideration. Unless otherwise
determined by the Committee, no fractional Shares, or Shares in lots of less than 100 Shares, shall
be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether
cash, other Awards or other property shall be issued or paid in lieu of such fractional Shares, or
lots of less than 100 Shares, and whether fractional Shares or any rights thereto shall be
forfeited or otherwise eliminated.




          (j) Severability. If any provision of the Plan is held to be illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such
provision shall be fully severable and the Plan shall be construed and enforced as if the illegal
or invalid provision had never been included herein. If any of the terms or provisions of the Plan
or any Award agreement conflict with the requirements of Rule 16b-3 (as those terms or provisions
are applied to Eligible Persons who are subject to Section 16(b) of the Exchange Act) or Section
422 of the Code (with respect to Incentive Stock Options), then those conflicting terms or
provisions shall be deemed inoperative to the extent they so conflict with the requirements of Rule
16b-3 (unless the Board or the Committee, as appropriate, has expressly determined that the Plan or
such Award should not comply with Rule 16b-3) or Section 422 of the Code. With respect to Incentive
Stock Options, if the Plan does not contain any provision required to be



16









 






included herein under Section 422 of the Code, that provision shall be deemed to be
incorporated herein with the same force and effect as if that provision had been set out at length
herein; provided, further, that, to the extent any Option that is intended to qualify as an
Incentive Stock Option cannot so qualify, such Option (to that extent) shall be deemed a
Non-Qualified Stock Option for all purposes of the Plan.




          (k) Governing Law. All questions arising with respect to the provisions of the Plan
and Awards shall be determined by application of the laws of the State of Texas, without giving
effect to any conflict of law provisions thereof, except to the extent Texas law is preempted by
federal law or where the law of the state of incorporation of the Company shall be mandatorily
applied. The obligation of the Company to sell and deliver Shares hereunder is subject to
applicable federal and state laws and to the approval of any governmental authority required in
connection with the authorization, issuance, sale, or delivery of such Shares.




          (l) Conditions to Delivery of Shares. Nothing herein or in any Award granted
hereunder or any Award agreement shall require the Company to issue any Shares with respect to any
Award if that issuance would, in the opinion of counsel for the Company, constitute a violation of
the Securities Act or any similar or superseding statute or statutes, any other applicable statute
or regulation, or the rules of any applicable securities exchange or securities association, as
then in effect. At the time of any exercise of an Option or Stock Appreciation Right, or at the
time of any grant of a Restricted Stock Award, Bonus Stock Award or Phantom Stock Award, the
Company may, as a condition precedent to the exercise of such Option or Stock Appreciation Right,
vesting of any Restricted Stock Award or Phantom Stock Award, or grant of any Bonus Stock Award,
require from the Participant (or in the event of his death, his legal representatives, heirs,
legatees, or distributees) such written representations, if any, concerning the holder’s intentions
with regard to the retention or disposition of the Shares being acquired pursuant to the Award and
such written covenants and agreements, if any, as to the manner of disposal of such Shares as, in
the opinion of counsel to the Company, may be necessary to ensure that any disposition by that
holder (or in the event of the holder’s death, his legal representatives, heirs, legatees, or
distributees) will not involve a violation of the Securities Act or any similar or superseding
statute or statutes, any other applicable state or federal statute or regulation, or any rule of
any applicable securities exchange or securities association, as then in effect.




          (m) Plan Effective Date, Stockholder Approval and Plan Duration. The Plan has been
adopted by the Board originally effective as of January 1, 2001 and as amended and restated
effective as of December 12, 2002 contingent upon the approval of the stockholders of the Company.
If the stockholders of the Company do not approve the Plan as amended and restated, the Plan shall
continue in effect as originally adopted effective January 1, 2001. No Award, other than an
Incentive Stock Option, shall be granted under the Plan after December 31, 2010 and no Incentive
Stock Option shall be granted under the Plan after December 13, 2010.





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