exv10w11



 






Exhibit 10.11




VALERO ENERGY CORPORATION




2003 EMPLOYEE STOCK INCENTIVE PLAN




Amended and Restated as of October 1, 2005





 









 








Table of Contents




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	SECTION 1. Purpose
	 	 	1	 
	 
	 	 	 	 
	SECTION 2. Definitions
	 	 	1	 
	 
	 	 	 	 
	SECTION 3. Administration
	 	 	3	 
	 
	 	 	 	 
	SECTION 4. Shares and Other Property Available For Awards
	 	 	4	 
	 
	 	 	 	 
	SECTION 5. Eligibility
	 	 	6	 
	 
	 	 	 	 
	SECTION 6. Awards
	 	 	6	 
	 
	 	 	 	 
	SECTION 7. Amendment and Termination
	 	 	12	 
	 
	 	 	 	 
	SECTION 8. Change Of Control
	 	 	13	 
	 
	 	 	 	 
	SECTION 9. General Provisions
	 	 	15	 
	 
	 	 	 	 
	SECTION 10. Effective Date of the Plan
	 	 	16	 
	 
	 	 	 	 
	SECTION 11. Term of the Plan
	 	 	16	 






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2003 EMPLOYEE STOCK INCENTIVE PLAN




SECTION 1. Purpose.




          The purpose of this 2003 Employee Stock Incentive Plan (the “Plan”) is to promote the
interests of the Company and its stockholders by (i) attracting and retaining employees of the
Company and its affiliates; (ii) motivating these employees by using performance-related incentives
to achieve longer range performance goals; and (iii) enabling these employees to participate in the
long-term growth and financial success of the Company.



SECTION 2. Definitions.




          As used in the Plan, the following terms shall have the meanings set forth below:




     (a) “Affiliate” shall mean (i) any entity that, directly or through one or more
intermediaries, is controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, as determined by the Committee.




     (b) “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock,
Performance Award, Stock Compensation Award or Other Stock-Based Award.




     (c) “Award Agreement” shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be executed or
acknowledged by a Participant.




     (d) “Board” shall mean the Board of Directors of the Company.




     (e) “Cause” shall mean the (i) conviction of the Participant by a state or
federal court of a felony involving moral turpitude, (ii) conviction of the Participant by a
state or federal court of embezzlement or misappropriation of funds of the Company, (iii)
the Company’s (or applicable Affiliate’s) reasonable determination that the Participant has
committed an act of fraud, embezzlement, theft, or misappropriation of funds in connection
with such Participant’s duties in the course of his or her employment with the Company (or
applicable Affiliate), (iv) the Company’s (or its applicable Affiliate’s) reasonable
determination that the Participant has engaged in gross mismanagement, negligence or
misconduct which causes or could potentially cause material loss, damage or injury to the
Company, any of its Affiliates or their respective employees, or (v) the Company’s (or
applicable Affiliate’s) reasonable determination that (a) the Participant has violated any
policy of the Company (or applicable Affiliate), including but not limited to, policies
regarding sexual harassment, insider trading, confidentiality, substance abuse and/or
conflicts of interest, which violation could result in the termination of the Participant’s
employment, or (b) the Participant has failed to satisfactorily perform the material duties
of Participant’s position with the Company or any of its Affiliates.




     (f) “Change of Control” is defined in Section 8(b) of the Plan.



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     (g) “Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time.




     (h) “Committee” shall mean the Committee appointed to administer the Plan, as
further described in Section 3 of the Plan.




     (i) “Company” shall mean Valero Energy Corporation, a Delaware corporation,
formerly known as “Valero Refining and Marketing Company”.




     (j) “Employee” shall mean any employee of the Company or of any Affiliate other
than officers and directors within the meaning of Rule 16a-1(f) of the Exchange Act.




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




     (l) “Exercisable Award” is defined in Section 6(h)(vii)(A).




     (m) “Exercise Notice” is defined in Section 6(g)(i) of the Plan.




     (n) “Fair Market Value” shall mean the average of the “high” and “low” reported
sales price per Share (as reported in the NYSE — Composite Transactions listing) as of the
relevant measuring date, or if there are no sales on the NYSE on that measuring date, then
as of the next day on which there were sales.




     (o) “Notice Date” is defined in Section 6(g)(i) of the Plan.




     (p) “Option” shall mean an option granted under Section 6(a) of the Plan that
is not intended to be an Incentive Stock Option, within the meaning of Section 422 of the
Code or any successor provision thereto.




     (q) “Other Stock-Based Award” shall mean any right granted under Section 6(f)
of the Plan.




     (r) “Participant” shall mean any Employee granted an Award under the Plan.




     (s) “Performance Award” shall mean any right granted under Section 6(d) of the
Plan.




     (t) “Person” shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political subdivision
thereof or other entity.




     (u) “Preference Share Purchase Right” shall mean one of the rights distributed
pursuant to the Rights Agreement to purchase 1/100 share of the Junior Participating
Preferred Stock, Series I, of Valero.



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     (v) “Reorganization Event” is defined in Section 4(c) of the Plan.




     (w) “Restricted Stock” shall mean any Share, prior to the lapse of restrictions
thereon, granted under Section 6(c) of the Plan.




     (x) “Rights Agreement” shall mean the Rights Agreement, dated as of June 18,
1997, between the Company and Computershare Investor Services, L.L.C., as Rights Agent
(successor Rights Agent to Harris Trust and Savings Bank), as amended.




     (y) “SAR” or “stock appreciation right” is further described in Section
6(b) of the Plan and shall mean the right, subject to the provisions of this Plan, to
receive a payment in cash equal to the difference between the specified exercise price of
the SAR and the Fair Market Value of one Share.




     (z) “SEC” shall mean the Securities and Exchange Commission.




     (aa) “Settlement Date” is defined in Section 6(g)(i) of the Plan.




     (bb) “Share” or “Shares” shall mean the common stock of the Company,
$0.01 par value, and other securities or property that may become the subject of Awards or
become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan.




     (cc) “Stock Compensation” shall mean any right granted under Section 6(e) of
the Plan.




     (dd) “Tax Payment" is defined in Section 6(g)(ii) of the Plan.



SECTION 3. Administration.




          The Plan shall be administered by a committee of the Board appointed by the Board to act for
purposes of administering this Plan. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee by the Plan, the
Committee shall have authority to:




     (a) designate Participants;




     (b) determine the type or types of Awards to be granted to an Employee;




     (c) determine the number of Shares to be covered by, or with respect to which
payments, rights, or other matters are to be calculated in connection with, Awards;




     (d) determine the terms and conditions of any Award and any subsequent
amendments thereto;



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     (e) determine to what extent and under what circumstances Awards may be
settled or exercised in cash, Shares, other securities, other Awards or other property, or
canceled, forfeited, or suspended, and the method or methods by which Awards may be settled,
exercised, canceled, forfeited, or suspended;




     (f) provide for the acceleration of any time period relating to the vesting,
exercise or realization of any Award so that the Award may be exercised or realized in full
on or before a date fixed by the Committee; the Committee may, in its discretion, include
other provisions and limitations in any Award Agreement as the Committee may deem equitable
and in the best interests of the Company;




     (g) interpret and administer the Plan and any instrument or agreement
relating to the Plan, including Award Agreements;




     (h) establish, amend, suspend, or waive any rules or regulations regarding
the Plan, and appoint any agent the Committee shall deem appropriate for the proper
administration of the Plan; and




     (i) make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations, and other decisions
with respect to the Plan or any Award shall be within the sole discretion of the Committee,
may be made at any time, and shall be final, conclusive, and binding upon all Persons,
including the Company, any Affiliate, any Participant, any holder or beneficiary of any
Award, any stockholder of the Company and any Employee.



SECTION 4. Shares and Other Property Available For Awards.




          (a) Shares Available. Subject to adjustment as provided in Section 4(c),
the number of Shares with respect to which Awards may be granted under the Plan shall be 5,000,000.



          (b) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares, Shares
held by the Company in its treasury or Shares purchased by the Company on the open market or
otherwise.



          (c) Adjustments.




     (i) If all or any portion of an Award vests or is exercised subsequent to any
stock dividend, rights distribution, split-up, recapitalization,
combination or exchange of shares, merger, consolidation, acquisition of property or stock, spin-off or separation,
reorganization, liquidation or other similar event (any one of which being hereafter
referred to as a “Reorganization Event”), as a result of which shares or other securities of
any class or rights shall be issued in respect of outstanding Shares, or Shares shall be
changed into the same or a different number of shares of the same or another class or



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classes or other securities, the person exercising or otherwise entitled to such Award
shall receive, except as may be otherwise determined by the Committee:




     (A) for the aggregate price payable upon such exercise of an Option,
or upon vesting of an Award (other than an Option) denominated in Shares (1) the
aggregate number and class of shares, rights or other securities for which a
recognized market exists, and (2) a cash amount equal to the fair market value (as
reasonably determined by the Committee) on such exercise or vesting date of any
other property (other than regular cash dividend payments) and of any shares, rights
or other securities for which no recognized market exists, which, if Shares (as
authorized at the date of the granting of such Award) had been acquired at the date
of granting of the Award for the same aggregate price (on the basis of the price per
share, if any, provided in the Award) and had not been disposed of, such person or
persons would be holding at the time of such exercise or vesting as a result of such
acquisition and any such Reorganization Event, and




     (B) a cash amount upon the exercise of any SARs equal to the
difference between the aggregate grant price of such SARs and the aggregate of (1)
the fair market value on the exercise date of any whole shares, rights or other
securities for which a recognized market exists, and (2) the fair market value (as
reasonably determined by the Committee) on such date of any other property (other
than regular cash dividend payments) which the holder of a number of Shares equal to
the number of such SARs, if such Shares had been purchased at the date of granting
of such SARs and not otherwise disposed of, would be holding at the time of exercise
of such SARs as a result of such purchase and any such Reorganization Event;


provided, however, that no fractional Share, fractional right or other fractional security shall be
issued upon any such exercise or vesting, and the aggregate price paid shall be appropriately
reduced to reflect any fractional Share, fractional right or other fractional security not issued;
and provided further, however, that if the exercise or vesting of any Award subsequent to any
Reorganization Event would, pursuant to clause (A) of this Section 4(c)(i), require the delivery of
shares, rights or other securities that the Company is not then authorized to issue or that in the
sole judgment of the Committee cannot be issued without undue effort or expense, the person
exercising or vesting in such Award shall receive, in lieu of such shares, rights or other
securities, a cash payment equal to the Fair Market Value on the exercise or vesting date, as the
case may be, as reasonably determined by the Committee, of such shares, rights or other securities.
For purposes of applying the provisions of this Plan, the Preference Share Purchase Rights
distributed to stockholders of the Company pursuant to the Rights Agreement shall be deemed not to
have been distributed until the Distribution Date (as defined in the Rights Agreement).




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     (ii) In the event of any change in the number of Shares outstanding resulting
from a Reorganization Event, the aggregate number and class of Shares remaining available to
be awarded under this Plan shall be that number and class which a person, to whom an Award
had been granted for all of the available Shares under this Plan on the date preceding such
change, would be entitled to receive as provided in Section 4(c)(i).




     (iii) Upon the occurrence of any Reorganization Event, the Committee shall be
entitled (but shall not be required) to determine that new Award Agreements shall be entered
into with Participants reflecting such event.



     (d) Share Counting. For purposes of determining at any time the number of
Shares that remain available for grant under this Plan, the number of Shares then authorized
pursuant to Section 4 of the Plan shall be (i) decreased by the “gross” number of Shares issued
pursuant to exercised Awards, (ii) decreased by the “gross” number of Shares issuable pursuant to
outstanding unexercised Awards, and (iii) increased by the number of Shares to which a Participant
shall have forfeited, voluntarily surrendered or otherwise permanently lost his or her right to
exercise or vest in an Award under any provision of this Plan or otherwise. As used herein, the
“gross” number of Shares refers to the maximum number of Shares that may be issued upon the
exercise of an Award. Should the exercise price of an Award under the Plan be paid with Shares or
should Shares otherwise issuable under the Plan be withheld by the Company in satisfaction of the
withholding taxes incurred in connection with the exercise or vesting of an Award, then the number
of Shares available for issuance under the Plan shall be reduced by the net number of Shares issued
to the holder of such option. In the event that property other than Shares is tendered for payment
of the exercise price, the number of Shares available for issuance under the Plan shall be reduced
by the gross number of Shares for which the Award is exercised or which vest under the stock
issuance, and not the net number of Shares issued to the holder of such option.



SECTION 5. Eligibility.




     Any Employee shall be eligible to be designated a Participant by the Committee.



SECTION 6. Awards.



     (a) Options. In determining that an eligible Employee shall be granted an
Option, the Committee shall determine, subject to the provisions of the Plan, the number of Shares
to be covered by each Option, the exercise price therefor and the conditions and limitations
applicable to the exercise of the Option. The exercise price per Share purchasable under an Option
shall be determined by the Committee at the time each Option is granted; provided, that the
exercise price per Share shall not be less than 100% of Fair Market Value on the date of such
grant, and once established, the exercise price under an Option shall not be reduced.



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     (b) Stock Appreciation Rights. Subject to the provisions of the Plan, in
determining that an eligible Employee shall be awarded SARs, the Committee shall determine the
number of Shares to be covered by each SAR Award, the grant price thereof and the conditions and
limitations applicable to the exercise thereof. SAR Awards shall be payable in cash or in stock,
as determined by the Committee, and may be granted in tandem with another Award, in addition to
another Award, or freestanding and unrelated to another Award. SARs granted in tandem with or in
addition to another Award may be granted either at the same time as the other Award or at a later
time.




     (i) Grant Price. The grant price (strike price) of an SAR shall be
determined by the Committee, provided, that the grant price shall not be less than 100% of
Fair Market Value on the date of such grant, and, once established, the grant price shall
not be reduced.




     (ii) Other Terms and Conditions. Subject to the terms of the Plan
and any applicable Award Agreement, the Committee shall determine, at or after the grant of
an SAR, the term, methods of exercise, and any other terms and conditions of any SAR.



     (c) Restricted Stock. Subject to the provisions of the Plan, in determining
that an eligible Employee shall be awarded Restricted Stock, the Committee shall determine the
number of Shares of Restricted Stock to be granted to each Participant, the duration of the
restriction period during which, and the conditions under which, the Restricted Stock may be
forfeited to the Company, and the other terms and conditions of the Awards.




     (i) Dividends. Unless otherwise determined by the Committee, a
Restricted Stock Award shall provide for the payment of dividends during its restriction
period. Dividends paid on Restricted Stock may be paid directly to the Participant, may be
subject to risk of forfeiture, or may be subject to transfer restrictions during any period
established by the Committee, all as determined by the Committee in its discretion.




     (ii) Registration. Any Restricted Stock may be evidenced in any
manner deemed appropriate by the Committee, including book-entry registration or the
issuance of stock certificates. If any stock certificate is issued with respect to
Restricted Stock, the certificate shall be registered in the name of the Participant and may
bear an appropriate legend referring to the terms, conditions, and restrictions applicable
to the Restricted Stock. The Participant shall be entitled to exercise all voting rights
with respect to the Restricted Stock during the restriction period.




     (iii) Forfeiture. Except as otherwise determined by the Committee or
the Chief Executive Officer, subject to Section 6(h)(vii)(D), upon termination of a
Participant’s employment with the Company for any reason, the provisions of Section
6(h)(vii)(B) and (C) shall apply with respect to Restricted Stock granted hereunder.



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     (iv) Issuance of Shares. Unrestricted Shares, evidenced in any
manner as the Committee shall deem appropriate, shall be nonforfeitable and shall be issued
to the Participant promptly after the applicable restrictions have lapsed or otherwise
terminated or been satisfied.



     (d) Performance Awards. The Committee shall have authority to determine the
Employees who may receive a Performance Award, which shall consist of a right, denominated or
payable in cash, Shares, other securities or other property (including Restricted Stock), and that
shall confer on the holder thereof, rights valued at an amount determined by the Committee and
payable to or exercisable by the holder thereof, in whole or in part, upon the achievement of
prescribed performance goals during prescribed performance periods as the Committee shall
establish. Performance Awards shall be based upon achievement of a specified performance goal or
goals established by the Committee. The Committee, in its sole discretion, may provide for a
reduction in the value of a Performance Award during the performance period and prior to
certification that the established performance goal(s) has been met. When earned, Performance
Awards may be paid in a lump sum or in installments following the close of the performance period
or, in accordance with procedures established by the Committee, on a deferred basis.



     (e) Stock Compensation. The Committee shall have authority to pay in Shares
all or any portion of the amounts payable under any compensation program of the Company. The
number and type of Shares to be distributed in lieu of the cash compensation applicable to any
Award, as well as the terms and conditions of any bonus awards, shall be determined by the
Committee.



     (f) Other Stock-Based Awards. The Committee is hereby authorized to grant
to eligible Employees an “Other Stock-Based Award,” which shall consist of a right




     (i) that is not an Award or right described in Section 6(a), (b), (c), (d),
or (e) above, and




     (ii) that is denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including securities convertible
into Shares), as are deemed by the Committee to be consistent with the purposes of the Plan.
Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall
determine the terms and conditions of any Other Stock-Based Award.



     (g) Exercise of Option or SAR Awards.




     (i) Notice. Unless otherwise prescribed by the Committee, Awards may
be exercised only by written notice of exercise (the “Exercise Notice”), in the form
prescribed by the Committee, delivered to the Company to the Financial Benefit Plan
Administration Manager or other Company official administering the Plan, and signed by the
Participant or the representative or transferee thereof. The date on which the Exercise
Notice is delivered to the Company shall be the “Notice Date.” The Exercise



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Notice shall specify a date (the “Settlement Date”), not less than three business days
nor more than ten business days following the Notice Date, upon which the Shares or other
rights shall be issued or transferred to the Participant (or other person entitled to
exercise the Award) and the Award’s exercise price shall be paid to the Company.




     (ii) Payment. Unless otherwise prescribed by the Committee, on the
Settlement Date, the person exercising an Award shall tender to the Company full payment for
the Shares or other rights with respect to which the Award is exercised, together with an
additional amount equal to the amount of any taxes required to be collected or withheld by
the Company in connection with the exercise of the Award (the “Tax Payment”).




     (iii) Tax Payment Election. Subject to the approval of the
Committee, and to any rules and limitations as the Committee may adopt, a person exercising
an Award may make the Tax Payment in whole or in part by electing, at or before the time of
exercise of the Award, either (A) to have the Company withhold from the number of Shares
otherwise deliverable a number of Shares whose value equals the Tax Payment, or (B) to
deliver certificates for other Shares owned by the person exercising the Award, endorsed in
blank with appropriate signature guarantee, having a value equal to the amount otherwise to
be collected or withheld.




     (iv) Payment with Stock. Subject to approval by the Committee, a
person exercising an Award for the receipt of Shares may pay for the Shares by tendering to
the Company other Shares legally and beneficially owned by that person at the time of the
exercise of the Award. The certificate(s) representing any Shares tendered in payment of an
Award’s exercise price must be accompanied by a stock power duly executed with appropriate
signature guarantees. The Committee may, in its sole discretion, refuse any tender of
Shares. If the person elects to rescind his or her Exercise Notice, the person may again
(subject to the other terms of this Plan) deliver an Exercise Notice with respect to the
Award at any time prior to its expiration date.




     (v) Valuation. Any calculation with respect to a Participant’s
income, required tax withholding or other matters required to be made by the Company upon
the exercise of an Award shall be made using the Fair Market Value of the Shares on the
Notice Date, whether or not the Exercise Notice is delivered to the Company before or after
the close of trading on that date, unless otherwise specified by the Committee.
Notwithstanding the foregoing, for Option exercises using the Company’s “same-day-sale for
cash method” or “broker sale for stock method,” a Participant’s taxable gain and related tax
withholding on the exercise will be calculated using the actual market price at which Shares
were sold in the transaction.




     (vi) Rights as Stockholder . Except as provided in Section 6(c) of
this Plan, until the issuance of the stock certificate(s) for Shares purchased hereunder (as
evidenced by the appropriate entry on the books of the Company or any authorized transfer
agent of the Company), no right to vote or receive dividends or any other rights



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as a stockholder of the Company shall exist with respect to such Shares,
notwithstanding the exercise of any Award. No adjustment will be made for a dividend or
other rights for which the record date is prior to the date the stock certificates
evidencing such Shares are issued, except as otherwise provided in this Plan.



     (h) General.




     (i) Grants. Awards may be granted, in the discretion of the
Committee, either alone or in addition to, in tandem with, or in substitution for any other
Award granted under the Plan or any award granted under any other plan of the Company or any
Affiliate. Awards granted in addition to or in tandem with other Awards or awards granted
under any other plan of the Company or any Affiliate may be granted either at the same time
as or at a different time from the grant of other Awards or awards. The Committee shall not
have the authority to reprice an Award once granted, or to cancel and reissue an Award at a
lower price.




     (ii) Forms of Payment by Company. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to be made by the Company or an
Affiliate upon the grant, exercise or payment of an Award may be made in any form as the
Committee shall determine, including cash, Shares, other securities, other Awards or other
property, or any combination thereof, and shall be made in a single payment.




     (iii) Nonassignability. Without prior written approval from the
Committee, no Award granted under this Plan shall be transferable by the Participant, except
upon Participant’s death and then the same shall be transferred to the Participant’s
beneficiary designated under the Valero Energy Corporation Beneficiary Designation Form, or
if there is no such designation, then the same shall be transferred pursuant to the will of
the Participant and if there is no will, then pursuant to the applicable laws of descent and
distribution, and no Participant or other person claiming by, through or under a Participant
shall have any right to sell, assign, transfer, pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate or convey in advance of actual receipt any Award payable
hereunder, or any part thereof, all of which are, and all rights in and to which are, hereby
expressly declared to be nonassignable and nontransferable; any such purported sale,
assignment or conveyance without the Committee’s prior approval shall be void and of no
force or effect. No Award shall, prior to actual payment or delivery, be subject to seizure
or sequestration for the payment of any debts, judgments, alimony or separate maintenance
owed by a Participant, or other person claiming by, through or under a Participant, or be
transferable by operation of law in the event of bankruptcy or insolvency.




     (iv) Term of Awards. The term of each Award shall be for the period
determined by the Committee, provided, that, in no event shall the term of any Award exceed
a period of 10 years.



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     (v) Share Certificates. All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan pursuant to any Award or
the exercise thereof shall be subject to (A) all stop transfer orders and other restrictions
as the Committee may deem advisable under the Plan, (B) the rules, regulations, and other
requirements of the SEC and any stock exchange upon which the Shares or other securities are
then listed and (C) any applicable federal or state laws. The Committee may cause a legend
or legends to be put on any stock certificates to make appropriate reference to applicable
restrictions.




     (vi) Delivery of Shares or Other Securities and Payment of
Consideration. No Shares or other securities shall be delivered pursuant to any Award
until payment in full of any amount required to be paid pursuant to the Plan or the
applicable Award Agreement is received by the Company. Payment may be made in any form or
method prescribed by the Committee, including cash, Shares, other securities, other Awards
or other property, or any combination thereof, provided that the combined value, as
determined by the Committee, of all cash and cash equivalents and the Fair Market Value of
any Shares or other property tendered to the Company as of the date of such tender, is at
least equal to the full amount required to be paid.




     (vii) Termination of Employment.




     (A) Except as otherwise provided in the Plan, or otherwise determined
by the Committee and included in the applicable Award Agreement, an Option, SAR or
Other Stock-Based Award having an exercise provision (each, an “Exercisable Award”)
vests in and may be exercised by a Participant only while the Participant is and has
continually been since the date of the grant of the Exercisable Award an Employee.
If a Participant’s employment with the Company is voluntarily terminated by the
Participant (other than through retirement, death or disability; see subsection (C)
below), then: (i) that portion of any Exercisable Award that has not vested on or
prior to such date of termination shall automatically lapse and be forfeited, and
(ii) all vested but unexercised Exercisable Awards previously granted to that
Participant under the Plan shall automatically lapse and be forfeited at the close
of business on the 30th day following that date of such Participant’s termination,
unless an Exercisable Award expires earlier according to its original terms. If a
Participant’s employment is involuntarily terminated by the Company for Cause: (i)
that portion of any Exercisable Award that has not vested on or prior to such date
of termination shall automatically lapse and be forfeited, and (ii) all vested but
unexercised Exercisable Awards previously granted to that Participant under the Plan
shall automatically lapse and be forfeited at the close of business on the 30th day
following that date of such Participant’s termination, unless an Exercisable Award
expires earlier according to its original terms. If a Participant’s employment is
involuntarily terminated by the Company other than for Cause: (i) that portion of
any Exercisable Award which has not vested on or prior to such date of termination
shall automatically lapse and be forfeited, and (ii) all



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vested but unexercised Exercisable Awards previously granted to that
Participant under the Plan shall automatically lapse and be forfeited at the close
of business on the last business day of the twelfth month following the date of the
Participant’s termination, unless an Exercisable Award sooner expires according to
its original terms.




     (B) Except as otherwise provided in the Plan, or otherwise determined
by the Committee and included in the applicable Award Agreement, if a Participant’s
employment with the Company is voluntarily terminated by the Participant (other than
through retirement, death or disability; see subsection (C) below), or is terminated
by the Company with or without Cause, then any Restricted Stock or Performance Award
previously granted to that Participant under the Plan which remains unvested shall
automatically lapse and be forfeited at the close of business on the date of the
Participant’s termination of employment.




     (C) Except as otherwise provided in the Plan, or otherwise determined
by the Committee and included in the applicable Award Agreement, if a Participant’s
employment is terminated because of retirement, death or disability (with the
determination of disability to be made within the sole discretion of the Committee),
any Award held by the Participant shall remain outstanding and vest or become
exercisable according to the Award’s original terms; provided, however, that any
Restricted Stock held by the Participant which remains unvested as of the date of
retirement, death or disability shall immediately vest and become non-forfeitable as
of such date.




     (D) The Committee or the Chief Executive Officer may prescribe new or
additional terms for the vesting, exercise or realization of any Award; provided,
however, that no such action shall deprive a Participant or beneficiary, without his
or her consent, of the right to any benefit accrued to his or her credit at the time
of such action.




     (viii) Award Agreements. Awards shall be evidenced by Award
Agreements having terms and conditions, not inconsistent with the Plan, as prescribed by the
Committee. Award Agreements need not be uniform.



SECTION 7. Amendment and Termination.




     Except to the extent prohibited by applicable law and unless otherwise expressly provided in
an Award Agreement or in the Plan:



     (a) Amendments to the Plan. The Committee or the Board may amend, suspend
or terminate the Plan without the consent of any stockholder, Participant, other holder or
beneficiary of an Award, or other Person.



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     (b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter any Award theretofore granted; provided that, no change in any
Award shall reduce the benefit accruing to any Participant without the consent of the Participant.



     (c) Unusual or Nonrecurring Events. The Committee is hereby authorized to
make adjustments in the terms, conditions, and criteria of Awards in recognition of unusual or
nonrecurring events (including the events described in Section 4(c) of the Plan) affecting the
Company, any Affiliate, or the financial statements of the Company or any Affiliate, or in
recognition of changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available under the Plan.



SECTION 8. Change Of Control.




     (a) Effect. If a Change of Control shall occur, each Award held by a
Participant pursuant to the Plan shall remain in full force and effect until the earlier of (i) the
expiration date of the Award, or (ii) 90 days following the Participant’s date of termination of
employment with the Company.



     (b) Defined. A Change of Control shall be deemed to occur when:




     (i) the stockholders of the Company approve any agreement or transaction
pursuant to which: (A) the Company will merge or consolidate with any other Person (other
than a wholly owned subsidiary of the Company) and will not be the surviving entity (or in
which the Company survives only as the subsidiary of another entity); (B) the Company will
sell all or substantially all of its assets to any other Person (other than a wholly owned
subsidiary of the Company); or (C) the Company will be liquidated or dissolved; or




     (ii) any “person” or “group” (as these terms are used in Section 13(d) and
14(d) of the Exchange Act) other than the Company, any subsidiary of the Company, any
employee benefit plan of the Company or its subsidiaries, or any entity holding Shares for
or pursuant to the terms of such employee benefit plans, is or becomes an “Acquiring Person”
as defined in the Rights Agreement (or any successor rights agreement) (or, if no Rights
Agreement is then in effect, such person or group acquires or holds such number of shares
as, under the terms and conditions of the most recent such rights agreement to be in force
and effect, would have caused such person or group to be an “Acquiring Person” thereunder);
or




     (iii) any “person” or “group” shall commence a tender offer or exchange offer
for 15% or more of the Shares then outstanding, or for any number or amount of Shares which,
if the tender or exchange offer were to be fully subscribed and all Shares for which the
tender or exchange offer is made were to be purchased or exchanged



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pursuant to the offer, would result in the acquiring person or group directly or
indirectly beneficially owning 50% or more of the Shares then outstanding; or




     (iv) individuals who, as of any date, constitute the Board (the “Incumbent
Board”) thereafter cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director whose election, or nomination for
election by the Company’s stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person or group other than the
Board; or




     (v) the occurrence of the Distribution Date (as defined in the Rights
Agreement); or




     (vi) any other event determined by the Board or the Committee to constitute a
“Change of Control” hereunder.



     (c) Actions of Committee. In addition to the Committee’s authority set
forth in Section 7(c) of the Plan, in order to maintain the Participants’ rights in the event of
any Change of Control, the Committee, as constituted before the Change of Control, is hereby
authorized, and has sole discretion, as to any Award, either at the time the Award is made
hereunder or any time thereafter, to take any one or more of the following actions:




     (i) provide for the acceleration of any time periods relating to the vesting,
exercise or realization of the Award so that the Award may be exercised or realized in full
on or before a date fixed by the Committee;




     (ii) provide for the purchase of any Award, upon the Participant’s request,
for an amount of cash equal to the amount that could have been attained upon the exercise of
the Award or realization of the Participant’s rights in the Award had the Award been
currently exercisable or payable;




     (iii) adjust any outstanding Award as the Committee deems appropriate to
reflect the Change of Control; or




     (iv) cause any outstanding Award to be assumed, or new rights substituted
therefor, by the acquiring or surviving corporation after the Change of Control. The
Committee may in its discretion include other provisions and limitations in any Award
Agreement as it may deem equitable and in the best interests of the Company.



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SECTION 9. General Provisions.




     (a) No Rights to Awards. No Employee, Participant or other Person shall
have any claim to be granted any Award. The Committee is not required to treat uniformly the
Employees, Participants, or holders or beneficiaries of Awards when making grants of Awards under
the Plan. The terms and conditions of Awards are not required to be the same with respect to each
recipient.



     (b) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company or any Affiliate, or to a
committee of such officers or managers, the authority, subject to the terms and limitations the
Committee shall determine, to grant Awards or to cancel, modify or waive rights with respect to, or
to amend, suspend, or terminate Awards.



     (c) Withholding. The Company or any Affiliate is hereby authorized to
withhold from any Award, from any payment due or transfer made under any Award or under the Plan or
from any compensation or other amount owing to a Participant the amount (in cash, Shares, other
securities, other Awards or other property) of any applicable withholding taxes with respect to an
Award, its exercise, the lapse of restrictions thereon, payment or transfer under an Award or under
the Plan, and to take any other action necessary in the opinion of the Company to satisfy all
obligations for the payment of the taxes.



     (d) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in effect any other
compensation arrangements.



     (e) No Right to Employment. The grant of an Award shall not be construed as
creating a contract of employment or giving Participant the right to be retained in the employ of
the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement.



     (f) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance with the laws of
the State of Texas and applicable federal law.



     (g) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction as to any Person or
Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee,
such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee, materially altering
the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction,
Person or Award and the remainder of the Plan and any such Award shall remain in full force and
effect.



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     (h) NYSE Listing and Other Laws and Regulations. Notwithstanding anything
to the contrary contained in this Plan, in any Award, or any Award Agreement or other agreement
entered into under this Plan, the grant or making of any Award shall be conditional and shall be
granted or awarded subject to acceptance of the Shares deliverable pursuant to the Award for
listing on the NYSE. The Committee may refuse to issue or transfer any Shares or other
consideration under an Award if, acting in its sole discretion, it determines that the issuance or
transfer of the Shares or other consideration might violate any applicable law or regulation,
violate any regulation for admission or trading on the NYSE, or entitle the Company to recover any
consideration or proceeds under Section 16 of the Exchange Act, and any payment tendered to the
Company by a Participant, other holder or beneficiary in connection with the exercise of such Award
shall be promptly refunded.



     (i) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or any fiduciary relationship
between the Company or any Affiliate and a Participant or any other Person. To the extent that any
Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award,
such right shall be no greater than the right of any unsecured general creditor of the Company or
any Affiliate.



     (j) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether cash, other
securities, or other property shall be paid or transferred in lieu of any fractional Shares or
whether fractional Shares or any rights thereto shall be canceled, terminated, or otherwise
eliminated.



     (k) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. The headings shall not be deemed in any way
material or relevant to the construction or interpretation of the Plan or any provision thereof.



     (l) Construction. Use of the term “including” in this Plan shall be
construed to mean “including but not limited to.”



SECTION 10. Effective Date of the Plan.




     The Plan shall be effective April 23, 2003, following its approval by the Compensation
Committee of the Board.



SECTION 11. Term of the Plan.




     The Plan shall expire on April 23, 2013. However, unless otherwise expressly provided in the
Plan or in an applicable Award Agreement, any Award made prior to, and outstanding on such date,
shall remain valid in accordance with its terms and conditions, and the authority of the Board or
the Committee to amend, suspend, or terminate any such Award or to waive any conditions or rights
under any such Award in accordance with the Plan, shall extend beyond such date.




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