Exhibit 10.5


 


PARTICLE DRILLING,
INC.


 


2004 STOCK INCENTIVE PLAN


 


I.                                         PURPOSE


 


The
purpose of the PARTICLE DRILLING,
INC. 2004 STOCK INCENTIVE PLAN (the “Plan”) is to provide a means
through which PARTICLE DRILLING,
INC., a Texas corporation (the “Company”), and its Affiliates may
attract able persons to serve as Directors or Consultants or to enter the
employ of the Company and its Affiliates and to provide a means whereby those
individuals upon whom the responsibilities of the successful administration and
management of the Company and its Affiliates rest, and whose present and
potential contributions to the Company and its Affiliates are of importance,
can acquire and maintain stock ownership, thereby strengthening their concern
for the welfare of the Company and its Affiliates.  A further purpose of the Plan is to provide
such individuals with additional incentive and reward opportunities designed to
enhance the profitable growth of the Company and its Affiliates.  Accordingly, the Plan provides for granting
Incentive Stock Options, options that do not constitute Incentive Stock
Options, Restricted Stock Awards, or any combination of the foregoing, as is
best suited to the circumstances of the particular employee, Consultant or
Director as provided herein.


 


II.                                     DEFINITIONS


 


The
following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:


 


(a)                                  “Affiliate”
means any corporation, partnership, limited liability company or partnership,
association, trust or other organization which, directly or indirectly,
controls, is controlled by, or is under common control with, the Company.  For purposes of the preceding sentence, “control”
(including, with correlative meanings, the terms “controlled by” and “under
common control with”), as used with respect to any entity or organization,
shall mean the possession, directly or indirectly, of the power (i) to vote
more than 50% of the securities having ordinary voting power for the election
of directors of the controlled entity or organization, or (ii) to direct or
cause the direction of the management and policies of the controlled entity or
organization, whether through the ownership of voting securities or by contract
or otherwise.


 


(b)                                 “Award”
means, individually or collectively, any Option or Restricted Stock Award.


 


(c)                                  “Board”
means the Board of Directors of the Company.


 


(d)                                 “Code”
means the Internal Revenue Code of 1986, as amended.  Reference in the Plan to any section of
the Code shall be deemed to include any amendments or successor provisions to
such section and any regulations under such section.


 


(e)                                  “Committee”
means a committee of the Board that is selected by the Board as provided in
Paragraph IV(a).


 





















 


(f)                                    “Common
Stock” means the common stock, par value $0.001 per share, of
the Company, or any security into which such common stock may be changed by
reason of any transaction or event of the type described in Paragraph IX.


 


(g)                                 “Company”
means Particle Drilling, Inc., a Texas corporation, and any successor
thereto that adopts the Plan.


 


(h)                                 “Consultant”
means any person who is not an employee or a Director and who is providing
advisory or consulting services to the Company or any Affiliate.


 


(i)                                     “Corporate
Change” shall have the meaning assigned to such term in Paragraph
IX(c) of the Plan.


 


(j)                                     “Director”
means an individual who is a member of the Board.


 


(k)                                  An “employee”
means any person (including a Director) in an employment relationship with the
Company or any Affiliate.


 


(l)                                     “Fair
Market Value” means, as of any specified date, the mean of the
high and low sales prices of the Common Stock (i) reported by the National
Market System of NASDAQ on that date or (ii) if the Common Stock is listed on a
national stock exchange, reported on the stock exchange composite tape on that
date (or such other reporting service approved by the Committee); or, in either
case, if no prices are reported on that date, on the last preceding date on
which such prices of the Common Stock are so reported.  If the Common Stock is traded over the
counter at the time a determination of its fair market value is required to be
made hereunder, its fair market value shall be deemed to be equal to the
average between the reported high and low or closing bid and asked prices of
Common Stock on the most recent date on which Common Stock was publicly
traded.  In the event Common Stock is not
publicly traded at the time a determination of its value is required to be made
hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate. Notwithstanding the
foregoing, the Fair Market Value of a share of Common Stock on the date of an
initial public offering of Common Stock shall be the offering price under such
initial public offering.


 


(m)                               “Incentive Stock Option” means
an incentive stock option within the meaning of section 422 of the Code.


 


(n)                                 “Option”
means an Award granted under Paragraph VII of the Plan and includes both
Incentive Stock Options to purchase Common Stock and Options that do not constitute
Incentive Stock Options to purchase Common Stock.


 


(o)                                 “Option
Agreement” means a written agreement between the Company and a
Participant with respect to an Option.


 


(p)                                 “Participant”
means an employee, Consultant, or Director who has been granted an Award.


 


(q)                                 “Plan”
means the Particle Drilling, Inc. 2004 Stock Incentive Plan, as amended
from time to time.


 


2





















 


(r)                                    “Restricted
Stock Agreement” means a written agreement between the Company
and a Participant with respect to a Restricted Stock Award.


 


(s)                                  “Restricted
Stock Award” means an Award granted under Paragraph VIII of the
Plan.


 


(t)                                    “Stock
Appreciation Right” shall have the meaning assigned to such term
in Paragraph VII(d) of the Plan.


 


III.                                 EFFECTIVE DATE AND DURATION OF THE PLAN


 


The
Plan shall become effective upon the date of its adoption by the Board,
provided the Plan is approved by the stockholders of the Company within 12
months thereafter. Notwithstanding any provision in the Plan, in any Option
Agreement or in any Restricted Stock Agreement, no Option shall be exercisable
and no Restricted Stock Award shall vest prior to such stockholder
approval.  No further Awards may be
granted under the Plan after 10 years from the date the Plan is adopted by the
Board.  The Plan shall remain in effect
until all Options granted under the Plan have been satisfied or expired, and
all Restricted Stock Awards granted under the Plan have vested or been
forfeited.


 


IV.                                ADMINISTRATION


 


(a)                                  Composition of Committee.  The
Plan shall be administered by a committee of, and appointed by, the Board.  In the absence of the Board’s appointment of
a committee to administer the Plan, the Board shall serve as the Committee.


 


(b)                                 Powers. 
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine which employees, Consultants, or
Directors shall receive an Award, the time or times when such Award shall be
made, whether an Incentive Stock Option or nonqualified Option shall be
granted, and the number of shares to be subject to each Option or Restricted
Stock Award.  In making such
determinations, the Committee shall take into account the nature of the
services rendered by the respective employees, Consultants, or Directors, their
present and potential contribution to the Company’s success and such other
factors as the Committee in its discretion shall deem relevant.


 


(c)                                  Additional Powers.  The
Committee shall have such additional powers as are delegated to it by the other
provisions of the Plan.  Subject to the
express provisions of the Plan, this shall include the power to construe the
Plan and the respective agreements executed hereunder, to prescribe rules and
regulations relating to the Plan, and to determine the terms, restrictions and
provisions of the agreement relating to each Award, including such terms,
restrictions and provisions as shall be requisite in the judgment of the
Committee to cause designated Options to qualify as Incentive Stock Options,
and to make all other determinations necessary or advisable for administering
the Plan.  The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any agreement relating to an Award in the manner and to the extent it shall
deem expedient to carry it into effect. 
The determinations of the Committee on the matters referred to in this
Paragraph IV shall be conclusive.


 


3





















 


V.                                    SHARES SUBJECT TO
THE PLAN; GRANT OF AWARDS


 


(a)                                  Shares Subject to the Plan. 
Subject to adjustment in the same manner as provided in Paragraph IX
with respect to shares of Common Stock subject to Options then outstanding, the
aggregate number of shares of Common Stock that may be issued under the Plan
shall not exceed 3,500,000 shares. 
Shares shall be deemed to have been issued under the Plan only (i) to
the extent actually issued and delivered pursuant to an Award or (ii) to the
extent an Award is settled in cash.  To
the extent that an Award lapses or the rights of its holder terminate, any
shares of Common Stock subject to such Award shall again be available for the
grant of an Award under the Plan.


 


(b)                                 Grant of Awards. The Committee may from time to time grant
Awards to one or more employees, Consultants, or Directors determined by it to
be eligible for participation in the Plan in accordance with the terms of the
Plan.


 


(c)                                  Stock Offered. 
Subject to the limitations set forth in Paragraph V(a), the stock to be
offered pursuant to the grant of an Award may be authorized but unissued Common
Stock or Common Stock previously issued and outstanding and reacquired by the
Company.  Any of such shares which remain
unissued and which are not subject to outstanding Awards at the termination of
the Plan shall cease to be subject to the Plan but, until termination of the
Plan, the Company shall at all times make available a sufficient number of
shares to meet the requirements of the Plan.


 


VI.                                ELIGIBILITY


 


Awards
may be granted only to persons who, at the time of grant, are employees,
Consultants, or Directors.  An Award may
be granted on more than one occasion to the same person, and, subject to the
limitations set forth in the Plan, such Award may include an Incentive Stock
Option, an Option that is not an Incentive Stock Option, a Restricted Stock
Award, or any combination thereof.


 


VII.                            STOCK OPTIONS


 


(a)                                  Option Period.  The
term of each Option shall be as specified by the Committee at the date of
grant; provided, however, that each such Option by its terms shall not be
exercisable after the expiration of ten years from the date of grant.


 


(b)                                 Limitations on Exercise of Option.  An
Option shall be exercisable in whole or in such installments and at such times
as determined by the Committee.


 


(c)                                  Special Limitations on Incentive Stock
Options.  An Incentive Stock Option may be granted only
to an individual who is employed by the Company or any parent or subsidiary
corporation (as defined in section 424 of the Code) of the Company at the
time the Option is granted. To the extent that the aggregate fair market value
(determined at the time the respective Incentive Stock Option is granted) of
stock with respect to which Incentive Stock Options are exercisable for the
first time by an individual during any calendar year under all incentive stock
option plans of the Company and its parent and subsidiary corporations exceeds
$100,000, such Incentive Stock Options shall be treated as Options which do not
constitute Incentive Stock Options. The Committee shall determine, in
accordance with applicable


 


4





















 


provisions of the Code, Treasury Regulations and
other administrative pronouncements, which of a Participant’s Incentive Stock
Options will not constitute Incentive Stock Options because of such limitation
and shall notify the Participant of such determination as soon as practicable
after such determination.  No Incentive
Stock Option shall be granted to an individual if, at the time the Option is
granted, such individual owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of its parent
or subsidiary corporation, within the meaning of section 422(b)(6) of the
Code, unless (i) at the time such Option is granted the option price is at
least 110% of the Fair Market Value of the Common Stock subject to the Option
and (ii) such Option by its terms is not exercisable after the expiration of
five years from the date of grant.  An
Incentive Stock Option shall not be transferable otherwise than by will or the
laws of descent and distribution, and shall be exercisable during the
Participant’s lifetime only by such Participant or the Participant’s guardian
or legal representative.


 


(d)                                 Option Agreement.  Each
Option shall be evidenced by an Option Agreement in such form and containing
such provisions not inconsistent with the provisions of the Plan as the
Committee from time to time shall approve, including, without limitation,
provisions to qualify an Incentive Stock Option under section 422 of the
Code.  Each Option Agreement shall
specify the effect of termination of (i) employment, (ii) the consulting or
advisory relationship, or (iii) membership on the Board, as applicable, on the
exercisability of the Option.  An Option
Agreement may provide for the payment of the option price, in whole or in part,
by the delivery of a number of shares of Common Stock (plus cash if necessary)
having a Fair Market Value equal to such option price.  Moreover, an Option Agreement may provide for
a “cashless exercise” of the Option by establishing procedures satisfactory to
the Committee with respect thereto. 
Further, an Option Agreement may provide for the surrender of the right
to purchase shares under the Option in return for a payment in cash or shares
of Common Stock or a combination of cash and shares of Common Stock equal in
value to the excess of the Fair Market Value of the shares with respect to
which the right to purchase is surrendered over the option price therefor (“Stock
Appreciation Rights”), on such terms and conditions as the Committee in its
sole discretion may prescribe.  In the
case of any such Stock Appreciation Right that is granted in connection with an
Incentive Stock Option, such right shall be exercisable only when the Fair
Market Value of the Common Stock exceeds the price specified therefor in the
Option or the portion thereof to be surrendered.  The terms and conditions of the respective
Option Agreements need not be identical. 
Subject to the consent of the Participant, the Committee may, in its
sole discretion, amend an outstanding Option Agreement from time to time in any
manner that is not inconsistent with the provisions of the Plan (including,
without limitation, an amendment that accelerates the time at which the Option,
or a portion thereof, may be exercisable.)


 


(e)                                  Option Price and Payment.  The
price at which a share of Common Stock may be purchased upon exercise of an
Option shall be determined by the Committee but, subject to adjustment as
provided in Paragraph IX, such purchase price shall not be less than the Fair
Market Value of a share of Common Stock on the date such Option is
granted.  The Option or portion thereof
may be exercised by delivery of an irrevocable notice of exercise to the
Company, as specified by the Committee. 
The purchase price of the Option or portion thereof shall be paid in
full in the manner prescribed by the Committee. 
If permitted by applicable law, the Company may assist a Participant who
has received an Option in the payment of such Option’s purchase price by
lending the amount of some or all of such purchase price to such


 


5





















 


Participant on such terms and such rates of interest
and upon such security (or unsecured) as shall have been authorized by or under
authority of the Board.  Separate stock
certificates shall be issued by the Company for those shares acquired pursuant
to the exercise of an Incentive Stock Option and for those shares acquired
pursuant to the exercise of any Option that does not constitute an Incentive
Stock Option.


 


(f)                                    Stockholder Rights and Privileges.  The
Participant shall be entitled to all the privileges and rights of a stockholder
only with respect to such shares of Common Stock as have been purchased under
the Option and for which certificates of stock have been registered in the
Participant’s name.


 


(g)                                 Options and Rights in Substitution for
Options Granted by Other Employers.  Options and Stock Appreciation
Rights may be granted under the Plan from time to time in substitution for
options held by individuals providing services to corporations or other
entities who become employees, Consultants, or Directors as a result of a
merger or consolidation or other business transaction with the Company or any Affiliate.


 


VIII.                        RESTRICTED STOCK
AWARDS


 


(a)                                  Forfeiture Restrictions To Be Established by
the Committee.  Shares of Common Stock that are the subject
of a Restricted Stock Award shall be subject to restrictions on disposition by
the Participant and an obligation of the Participant to forfeit and surrender
the shares to the Company under certain circumstances (the “Forfeiture
Restrictions”).  The Forfeiture
Restrictions shall be determined by the Committee in its sole discretion, and
the Committee may provide that the Forfeiture Restrictions shall lapse upon (i)
the attainment of one or more performance targets established by the Committee,
(ii) the Participant’s continued employment with the Company or an Affiliate or
continued service as a Consultant or Director for a specified period of time,
(iii) the occurrence of any event or the satisfaction of any other condition
specified by the Committee in its sole discretion, or (iv) a combination of any
of the foregoing.  Each Restricted Stock
Award may have different Forfeiture Restrictions, in the discretion of the
Committee.


 


(b)                                 Other Terms and Conditions. 
Common Stock awarded pursuant to a Restricted Stock Award shall be
represented by a stock certificate registered in the name of the
Participant.  Unless provided otherwise
in a Restricted Stock Agreement, the Participant shall have the right to
receive dividends with respect to Common Stock subject to a Restricted Stock
Award, to vote Common Stock subject thereto and to enjoy all other stockholder
rights, except that (i) the Participant shall not be entitled to delivery of
the stock certificate until the Forfeiture Restrictions have expired, (ii) the
Company shall retain custody of the stock until the Forfeiture Restrictions
have expired, (iii) the Participant may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the stock until the Forfeiture Restrictions
have expired, and (iv) a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Agreement shall cause a forfeiture
of the Restricted Stock Award.  At the
time of such Award, the Committee may, in its sole discretion, prescribe
additional terms, conditions or restrictions relating to Restricted Stock
Awards, including, but not limited to, rules pertaining to the termination of
employment or service as a Consultant or Director (by retirement, disability,
death or otherwise) of a Participant prior to expiration of the Forfeitures
Restrictions.  Such additional


 


6





















 


terms, conditions or restrictions shall be set forth
in a Restricted Stock Agreement made in conjunction with the Award.


 


(c)                                  Payment for Restricted Stock.  The
Committee shall determine the amount and form of any payment for Common Stock
received pursuant to a Restricted Stock Award, provided that in the absence of
such a determination, a Participant shall not be required to make any payment
for Common Stock received pursuant to a Restricted Stock Award, except to the
extent otherwise required by law.


 


(d)                                 Committee’s Discretion to Accelerate Vesting
of Restricted Stock Awards.  The Committee may, in its
discretion and as of a date determined by the Committee, fully vest any or all
Common Stock awarded to a Participant pursuant to a Restricted Stock Award and,
upon such vesting, all restrictions applicable to such Restricted Stock Award
shall terminate as of such date.  Any
action by the Committee pursuant to this Subparagraph may vary among individual
Participants and may vary among the Restricted Stock Awards held by any
individual Participant.


 


(e)                                  Restricted Stock Agreements.  At the time any Award is made under this
Paragraph VIII, the Company and the Participant shall enter into a Restricted
Stock Agreement setting forth each of the matters contemplated hereby and such
other matters as the Committee may determine to be appropriate.  The terms and provisions of the respective
Restricted Stock Agreements need not be identical.  Subject to the consent of the Participant,
the Committee may, in its sole discretion, amend an outstanding Restricted
Stock Agreement from time to time in any manner that is not inconsistent with
the provisions of the Plan.


 


IX.                                RECAPITALIZATION
OR REORGANIZATION


 


(a)                                  No Effect on Right or Power.  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 or any Affiliate’s capital structure or its business, any
merger or consolidation of the Company or any Affiliate, any issue of debt or
equity securities ahead of or affecting Common Stock or the rights thereof, the
dissolution or liquidation of the Company or any Affiliate 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.


 


(b)                                 Subdivision or Consolidation of Shares; Stock
Dividends.  The shares with respect to which Options may
be granted are shares of Common Stock as presently constituted, but if, and
whenever, prior to the expiration of an Option theretofore granted, the Company
shall effect a subdivision or consolidation of shares of Common Stock or the
payment of a stock dividend on Common Stock without receipt of consideration by
the Company, the number of shares of Common Stock with respect to which such
Option may thereafter be exercised (i) in the event of an increase in the
number of outstanding shares shall be proportionately increased, and the
purchase price per share shall be proportionately reduced, and (ii) in the
event of a reduction in the number of outstanding shares shall be
proportionately reduced, and the purchase price per share shall be
proportionately increased.  Any fractional
share resulting from such adjustment shall be rounded up to the next whole
share.


 


7





















 


(c)                                  Recapitalizations and Corporate Changes.  If
the Company recapitalizes, reclassifies its capital stock, or otherwise changes
its capital structure (a “recapitalization”), the number and class of shares of
Common Stock covered by an Option theretofore granted shall be adjusted so that
such Option shall thereafter cover the number and class of shares of stock and
securities to which the Participant would have been entitled pursuant to the
terms of the recapitalization if, immediately prior to the recapitalization,
the Participant had been the holder of record of the number of shares of Common
Stock then covered by such Option.  If
(i) the Company shall not be the surviving entity in any merger or
consolidation (or survives only as a subsidiary of an entity), (ii) the Company
sells, leases or exchanges or agrees to sell, lease or exchange all or
substantially all of its assets to any other person or entity, (iii) the
Company is to be dissolved and liquidated, (iv) any person or entity, including
a “group” as contemplated by Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of more than 50% of the outstanding shares
of the Company’s voting stock (based upon voting power), or (v) as a result of
or in connection with a contested election of Directors, the persons who were Directors
of the Company before such election shall cease to constitute a majority of the
Board (each such event is referred to herein as a “Corporate Change”), no later
than (x) 10 days after the approval by the stockholders of the Company of such
merger, consolidation, reorganization, sale, lease or exchange of assets or
dissolution or such election of Directors or (y) 30 days after a Corporate
Change of the type described in clause (iv), the Committee, acting in its sole
discretion without the consent or approval of any Participant, shall effect one
or more of the following alternatives, which alternatives may vary among
individual Participants and which may vary among Options held by any individual
Participant:  (1) accelerate the time at
which Options then outstanding may be exercised so that such Options may be
exercised in full for a limited period of time on or before a specified date
(before or after such Corporate Change) fixed by the Committee, after which
specified date all unexercised Options and all rights of Participants
thereunder shall terminate, (2) require the mandatory surrender to the Company
by selected Participants of some or all of the outstanding Options held by such
Participants (irrespective of whether such Options are then exercisable under
the provisions of the Plan) as of a date, before or after such Corporate
Change, specified by the Committee, in which event the Committee shall
thereupon cancel such Options and cause the Company to pay to each Participant
an amount of cash per share equal to the excess, if any, of the amount
calculated in Subparagraph (d) below (the “Change of Control Value”) of the
shares subject to such Option over the exercise price(s) under such Options for
such shares, or (3) make such adjustments to Options then outstanding as the
Committee deems appropriate to reflect such Corporate Change (provided,
however, that the Committee may determine in its sole discretion that no
adjustment is necessary to Options then outstanding), including, without
limitation, adjusting an Option to provide that the number and class of shares
of Common Stock covered by such Option shall be adjusted so that such Option
shall thereafter cover securities of the surviving or acquiring corporation or
other property (including, without limitation, cash) as determined by the
Committee in its sole discretion.


 


(d)                                 Change of Control Value.  For
the purposes of clause (2) in Subparagraph (c) above, the “Change of Control
Value” shall equal the amount determined in clause (i), (ii) or (iii), whichever
is applicable, as follows: (i) the per share price offered to stockholders of
the Company in any such merger, consolidation, sale of assets or dissolution
transaction, (ii) the per share price offered to stockholders of the Company in
any tender offer or exchange offer whereby a Corporate Change takes place, or
(iii) if such Corporate Change occurs other than pursuant to a tender or
exchange offer, the fair market value per share of the shares into which


 


8





















 


such Options being surrendered are exercisable, as
determined by the Committee as of the date determined by the Committee to be
the date of cancellation and surrender of such Options.  In the event that the consideration offered
to stockholders of the Company in any transaction described in this
Subparagraph (d) or Subparagraph (c) above consists of anything other than
cash, the Committee shall determine the fair cash equivalent of the portion of
the consideration offered which is other than cash.


 


(e)                                  Other Changes in the Common Stock.  In
the event of changes in the outstanding Common Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations,
split-ups, split-offs, spin-offs, exchanges or other relevant changes in
capitalization or distributions to the holders of Common Stock occurring after
the date of the grant of any Award and not otherwise provided for by this
Paragraph IX, such Award and any agreement evidencing such Award shall be
subject to adjustment by the Committee at its discretion as to the number and
price of shares of Common Stock or other consideration subject to such
Award.  In the event of any such change
in the outstanding Common Stock or distribution to the holders of Common Stock,
or upon the occurrence of any other event described in this Paragraph IX, the
aggregate number of shares available under the Plan shall be appropriately
adjusted to the extent, if any, determined by the Committee, whose
determination shall be conclusive.


 


(f)                                    Stockholder Action.  Any
adjustment provided for in the above Subparagraphs shall be subject to any
required stockholder action.


 


(g)                                 No Adjustments unless Otherwise Provided. 
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 of Common Stock subject to Awards theretofore granted or the purchase
price per share, if applicable.


 


X.                                    AMENDMENT AND
TERMINATION OF THE PLAN


 


The
Board in its discretion may terminate the Plan at any time with respect to any
shares of Common Stock for which Awards have not theretofore been granted.  The Board shall have the right to alter or
amend the Plan or any part thereof from time to time; provided that no change
in the Plan may be made that would impair the rights of a Participant with
respect to an Award theretofore granted without the consent of the Participant,
and provided, further, that the Board may not, without approval of the
stockholders of the Company, amend the Plan to (a) increase the maximum
aggregate number of shares that may be issued under the Plan or (b) change the
class of individuals eligible to receive Awards under the Plan.


 


XI.                                MISCELLANEOUS


 


(a)                                  No Right To An Award. 
Neither the adoption of the Plan nor any action of the Board or of the
Committee shall be deemed to give an employee, Consultant, or Director any
right to be granted an Option, a right to a Restricted Stock Award, or any
other rights hereunder


 


9





















 


except as may be evidenced by an Option Agreement or
a Restricted Stock Agreement duly executed on behalf of the Company, and then
only to the extent and on the terms and conditions expressly set forth
therein.  The Plan shall be
unfunded.  The Company shall not be
required to establish any special or separate fund or to make any other
segregation of funds or assets to assure the performance of its obligations
under any Award.


 


(b)                                 No Employment/Membership Rights Conferred. 
Nothing contained in the Plan shall (i) confer upon any employee or
Consultant any right with respect to continuation of employment or of a
consulting or advisory relationship with the Company or any Affiliate or (ii)
interfere in any way with the right of the Company or any Affiliate to
terminate his or her employment or consulting or advisory relationship at any
time.  Nothing contained in the Plan
shall confer upon any Director any right with respect to continuation of
membership on the Board.


 


(c)                                  Other Laws; Withholding.  The
Company shall not be obligated to issue any Common Stock pursuant to any Award
granted under the Plan at any time when the shares covered by such Award have
not been registered under the Securities Act of 1933, as amended, and such
other state and federal laws, rules and regulations as the Company or the
Committee deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of such laws,
rules and regulations available for the issuance and sale of such shares.  No fractional shares of Common Stock shall be
delivered, nor shall any cash in lieu of fractional shares be paid.  The Company shall have the right to deduct in
connection with all Awards any taxes required by law to be withheld and to
require any payments required to enable it to satisfy its withholding
obligations.


 


(d)                                 No Restriction on Corporate Action. 
Nothing contained in the Plan shall be construed to prevent the Company
or any Affiliate from taking any action which is deemed by the Company or such
Affiliate 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 Participant, beneficiary or other person
shall have any claim against the Company or any Affiliate as a result of any
such action.


 


(e)                                  Restrictions on Transfer.  An
Award (other than an Incentive Stock Option, which shall be subject to the
transfer restrictions set forth in Paragraph VII(c)) shall not be transferable
otherwise than (i) by will or the laws of descent and distribution, (ii)
pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder, or (iii) with the consent of the Committee.


 


(f)                                    Governing Law.  The Plan shall be
governed by, and construed in accordance with, the laws of the State of Texas,
without regard to conflicts of law principles thereof.


 


10