exv10w8






Exhibit 10.8




Form of


WPX Energy, Inc.




2011 Incentive Plan



Effective as of ___








 









 








Table of Contents




	 	 	 	 	 
	 	 	Page	 
	Article 1. Effective Date, History, Objectives, and Duration
	 	 	1	 
	1.1 Effective Date
	 	 	1	 
	1.2 Objectives of the Plan
	 	 	1	 
	1.3 Duration of the Plan
	 	 	1	 
	 
	 	 	 	 
	Article 2. Definitions
	 	 	2	 
	2.1 Acquired Entity Award
	 	 	2	 
	2.2 Affiliate
	 	 	2	 
	2.3 Annual Meeting of Company Stockholders
	 	 	2	 
	2.4 Award
	 	 	2	 
	2.5 Award Agreement
	 	 	2	 
	2.6 Base Amount
	 	 	2	 
	2.7 Board
	 	 	2	 
	2.8 CEO
	 	 	2	 
	2.9 Code
	 	 	2	 
	2.10 Committee and Management Committee
	 	 	2	 
	2.11 Common Stock
	 	 	2	 
	2.12 Controlled Affiliate
	 	 	2	 
	2.13 Covered Employee
	 	 	2	 
	2.14 Designated 162(m) Group
	 	 	3	 
	2.15 Director Annual Grant
	 	 	3	 
	2.16 Director Fees
	 	 	3	 
	2.17 Disability
	 	 	3	 
	2.18 Dividend Equivalent
	 	 	3	 
	2.19 Eligible Person
	 	 	3	 
	2.20 Exchange Act
	 	 	3	 
	2.21 Equity Election
	 	 	3	 
	2.22 Fair Market Value
	 	 	3	 
	2.23 Grant Date
	 	 	3	 
	2.24 Grantee
	 	 	4	 
	2.25 Incentive Stock Option
	 	 	4	 
	2.26 including or includes
	 	 	4	 
	2.27 Non-Equity Incentive Award
	 	 	4	 
	2.28 Non-Management Director
	 	 	4	 
	2.29 Non-Qualified Stock Option
	 	 	4	 
	2.30 Option
	 	 	4	 
	2.31 Option Price
	 	 	4	 
	2.32 Option Term
	 	 	4	 
	2.33 Other Stock-Based Award
	 	 	4	 
	2.34 Performance-Based Exception
	 	 	4	 
	2.35 Performance Measures
	 	 	4	 
	2.36 Performance Period
	 	 	4	 






 









 






	 	 	 	 	 
	 	 	Page	 
	2.37 Performance Share and Performance Unit
	 	 	4	 
	2.38 Period of Restriction
	 	 	4	 
	2.39 Person
	 	 	4	 
	2.40 Restricted Stock Unit
	 	 	5	 
	2.41 Rule 16b-3
	 	 	5	 
	2.42 SEC
	 	 	5	 
	2.43 Section 16 Non-Management Director
	 	 	5	 
	2.44 Section 16 Person
	 	 	5	 
	2.45 Share
	 	 	5	 
	2.46 Shares of Restricted Stock or Restricted Stock
	 	 	5	 
	2.47 Spin-Off Awards
	 	 	5	 
	2.48 Stock Appreciation Right or SAR
	 	 	5	 
	2.49 Termination of Affiliation
	 	 	5	 
	 
	 	 	 	 
	Article 3. — Administration
	 	 	6	 
	3.1 Committee
	 	 	6	 
	3.2 Powers of Committee
	 	 	7	 
	 
	 	 	 	 
	Article 4. — Shares Subject to the Plan, Maximum Awards, and 162(m) Compliance
	 	 	10	 
	4.1 Number of Shares Available for Grants
	 	 	10	 
	4.2 Adjustments in Authorized Shares and Awards
	 	 	10	 
	4.3 Compliance with Section 162(m) of the Code
	 	 	11	 
	(a) Section 162(m) Compliance
	 	 	11	 
	(b) Annual Individual Limitations
	 	 	11	 
	 
	4.4 Performance-Based Exception Under Section 162(m)
	 	 	11	 
	 
	 	 	 	 
	Article 5. — Eligibility and General Conditions of Awards
	 	 	15	 
	5.1 Eligibility
	 	 	15	 
	5.2 Award Agreement
	 	 	15	 
	5.3 General Terms and Termination of Affiliation
	 	 	15	 
	5.4 Nontransferability of Awards
	 	 	15	 
	5.5 Cancellation and Rescission of Awards
	 	 	16	 
	5.6 Stand-Alone, Tandem and Substitute Awards
	 	 	16	 
	5.7 Compliance with Rule 16b-3
	 	 	17	 
	(a) Reformation to Comply with Exchange Act Rules
	 	 	17	 
	(b) Rule 16b-3 Administration
	 	 	17	 
	 
	5.8 Deferral of Award Payouts
	 	 	17	 
	 
	 	 	 	 
	Article 6. — Stock Options
	 	 	19	 
	6.1 Grant of Options
	 	 	19	 
	6.2 Award Agreement
	 	 	19	 
	6.3 Option Price; No Repricing
	 	 	19	 
	6.4 Grant of Incentive Stock Options
	 	 	19	 
	6.5 Payment
	 	 	20	 






ii









 






	 	 	 	 	 
	 	 	Page	 
	Article 7. — Shares of Restricted Stock
	 	 	22	 
	7.1 Grant of Shares of Restricted Stock
	 	 	22	 
	7.2 Award Agreement
	 	 	22	 
	7.3 Consideration for Shares of Restricted Stock
	 	 	22	 
	7.4 Effect of Forfeiture
	 	 	22	 
	7.5 Escrow; Legends
	 	 	22	 
	7.6 Voting Rights; Dividends and Distributions
	 	 	23	 
	 
	 	 	 	 
	Article 8. — Restricted Stock Units
	 	 	24	 
	8.1 Grant of Restricted Stock Units
	 	 	24	 
	8.2 Delivery and Limitations
	 	 	24	 
	8.3 Forfeiture
	 	 	24	 
	 
	 	 	 	 
	Article 9. — Performance Units and Performance Shares
	 	 	25	 
	9.1 Grant of Performance Units and Performance Shares
	 	 	25	 
	9.2 Value/Performance Goals
	 	 	25	 
	(a) Performance Unit
	 	 	25	 
	(b) Performance Share
	 	 	25	 
	 
	9.3 Earning of Performance Units and Performance Shares
	 	 	25	 
	9.4 Forfeiture
	 	 	26	 
	 
	 	 	 	 
	Article 10. — Stock Appreciation Rights
	 	 	27	 
	10.1 Grant of SARs
	 	 	27	 
	10.2 Award Agreement
	 	 	27	 
	10.3 Payments of SAR Amount
	 	 	27	 
	10.4 Forfeiture
	 	 	27	 
	10.5 No Repricing
	 	 	27	 
	 
	 	 	 	 
	Article 11. — Other Stock-Based Awards
	 	 	28	 
	 
	 	 	 	 
	Article 12. — Non-Equity Incentive Awards
	 	 	29	 
	 
	 	 	 	 
	Article 13. — Change in Control
	 	 	30	 
	13.1 Acceleration of Exercisability and Lapse of Restrictions
	 	 	30	 
	13.2 Definitions
	 	 	30	 
	(a) Cause
	 	 	30	 
	(b) Change Date
	 	 	31	 
	(c) Change in Control
	 	 	31	 
	(d) Good Reason
	 	 	32	 
	(e) Incumbent Directors
	 	 	33	 
	(f) Retirement
	 	 	33	 
	(g) Surviving Enterprise
	 	 	33	 
	(h) Voting Securities
	 	 	33	 
	 
	13.3 Flexibility to Amend
	 	 	33	 
	 
	 	 	 	 
	Article 14. — Non-Management Director Awards
	 	 	34	 
	14.1 Director Annual Grant
	 	 	34	 






iii









 






	 	 	 	 	 
	 	 	Page	 
	(a) Automatic Grant of Director Annual Grant
	 	 	34	 
	(b) Prorated Director Annual Grant
	 	 	34	 
	(c) Non-Management Director Status
	 	 	35	 
	(d) Vesting and Payment
	 	 	35	 
	 
	 	 	 	 
	14.2 Election to Receive Director Fees in Shares or Restricted Stock Units in Lieu of Cash
	 	 	35	 
	(a) Payment of Director Fees in Shares
	 	 	35	 
	(b) Payment of Director Fees in Restricted Stock Units
	 	 	36	 
	 
	 	 	 	 
	14.3 Deferral Elections
	 	 	36	 
	(a) Timing of Deferral Elections
	 	 	36	 
	(b) Content of Deferral Elections
	 	 	36	 
	(c) Deferral Account
	 	 	36	 
	(d) Settlement of Deferral Accounts
	 	 	37	 
	 
	 	 	 	 
	14.4. Insufficient Number of Shares
	 	 	37	 
	14.5 Non-Forfeitability
	 	 	37	 
	 
	 	 	 	 
	Article 15. — Amendment, Modification, and Termination
	 	 	38	 
	15.1 Amendment, Modification, and Termination
	 	 	38	 
	15.2 Awards Previously Granted
	 	 	38	 
	 
	 	 	 	 
	Article 16. — Withholding
	 	 	39	 
	16.1 Mandatory Tax Withholding
	 	 	39	 
	16.2 Notification under Code Section 83(b)
	 	 	39	 
	 
	 	 	 	 
	Article 17. — Additional Provisions
	 	 	40	 
	17.1 Successors
	 	 	40	 
	17.2 Severability
	 	 	40	 
	17.3 Requirements of Law
	 	 	40	 
	17.4 Securities Law Compliance
	 	 	40	 
	17.5 No Rights as a Stockholder
	 	 	41	 
	17.6 Nature of Payments
	 	 	41	 
	17.7 Non-Exclusivity of Plan
	 	 	41	 
	17.8 Governing Law
	 	 	41	 
	17.9 Share Certificates
	 	 	41	 
	17.10 Unfunded Status of Awards; Creation of Trusts
	 	 	42	 
	17.11 Employment
	 	 	42	 
	17.12 Participation
	 	 	42	 
	17.13 Military Service
	 	 	42	 
	17.14 Construction; Gender and Number
	 	 	42	 
	17.15 Headings
	 	 	42	 
	17.16 Obligations
	 	 	42	 
	17.17 No Right to Continue as Director
	 	 	42	 
	17.18 Code Section 409A Compliance
	 	 	42	 











iv









 








WPX ENERGY, INC.

2011 INCENTIVE PLAN



(Effective as of ___________)




Article 1. — Effective Date, History, Objectives, and Duration



1.1 Effective Date. WPX Energy, Inc., a Delaware corporation (the “Company”), established
an incentive compensation plan known as the WPX Energy, Inc. 2011 Incentive Plan (the “Plan”)
effective __________, 2011 (the “Effective Date”) upon approval of the Plan by The Williams
Companies, Inc. as the Company’s sole stockholder.



1.2 Objectives of the Plan. The Plan is intended (a) to allow selected employees and
officers of the Company and its Affiliates to acquire or increase equity ownership in the Company,
thereby strengthening their commitment to the success of the Company and stimulating their efforts
on behalf of the Company, and to assist the Company and its Affiliates in attracting new employees
and officers and retaining existing employees and officers, (b) to provide Non-Equity Incentive
Award (as defined below) opportunities to employees in the Designated 162(m) Group (as defined
below), (c) to optimize the profitability and growth of the Company and its Affiliates through
incentives which are consistent with the Company’s goals, and (d) to attract and retain highly
qualified persons to serve as Non-Management Directors and to promote ownership by such
Non-Management Directors of a greater proprietary interest in the Company, thereby aligning such
Non-Management Directors’ interests more closely with the interests of the Company’s stockholders.



1.3 Duration of the Plan. The Plan shall commence on the Effective Date and shall remain
in effect, subject to the right of the Board of Directors of the Company (the “Board”) to amend or
terminate the Plan at any time pursuant to Article 15 hereof, until all Shares subject to it shall
have been purchased or acquired according to the Plan’s provisions, or, if earlier, __________,
2021, the tenth (10th) anniversary of the Effective Date. Termination of the Plan will not affect
the rights and obligations of the Grantees and the Company arising under Awards theretofore granted
and then in effect.







1









 








Article 2. — Definitions




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


2.1 “Acquired Entity Award” has the meaning set forth in Section 5.6.



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



2.3 “Annual Meeting of Company Stockholders” has the meaning set forth in Section 14.1.



2.4 “Award” means Options (including Non-Qualified Stock Options and Incentive Stock
Options), Shares of Restricted Stock, Restricted Stock Units, Performance Units (which may be paid
in cash), Performance Shares, Stock Appreciation Rights, Other Stock-Based Awards, Non-Equity
Incentive Awards or Director Annual Grants granted under the Plan.



2.5 “Award Agreement” means the written agreement or other instrument as may be approved
from time to time by the Committee or Management Committee (as applicable) by which an Award shall
be evidenced. An Award Agreement may be in the form of either (a) an agreement to be either
executed by both the Grantee and the Company (or an authorized representative of the Company) or
delivered and acknowledged electronically as the Committee shall determine or (b) certificates,
notices or similar instruments as approved by the Committee or Management Committee (as
applicable).



2.6 “Base Amount” means with respect to a Stock Appreciation Right, the amount with
respect to which the appreciation in the value of a Share shall be measured over the period
beginning with the Grant Date and ending on the date of exercise of such Stock Appreciation Right.



2.7 “Board” has the meaning set forth in Section 1.3.



2.8 “CEO” means the Chief Executive Officer of the Company.



2.9 “Code” means the Internal Revenue Code of 1986, as amended from time to time.
References to a particular section of the Code include references to regulations and rulings
thereunder and to successor provisions.



2.10 “Committee” and “Management Committee” have the respective meanings set forth
in Article 3.



2.11 “Common Stock” means the common stock, $1.00 par value, of the Company.



2.12 “Controlled Affiliate” means any Person that directly or indirectly, through one or
more intermediaries, is controlled by the Company.



2.13 “Covered Employee” means a Grantee who, as of the date that the value of an Award is
recognizable as income, is one of the group of “covered employees,” within the meaning of Section
162(m) of the Code, with respect to the Company.







2









 







2.14 “Designated 162(m) Group” means that group of persons whom the Committee believes may
be Covered Employees with respect to a current or future fiscal year of the Company.



2.15 “Director Annual Grant” means an Award made to a Non-Management Director under Section
14.1.



2.16 “Director Fees” has the meaning set forth in Section 14.2.



2.17 “Disability” means, unless otherwise defined in an Award Agreement, or as otherwise
determined under procedures established by the Committee for purposes of the Plan, for purposes of
the exercise of an Incentive Stock Option, a disability within the meaning of Section 22(e)(3) of
the Code, and for all other purposes, disability as defined in the Company’s long-term disability
plan in which the Grantee participates or is eligible to participate, as determined by the
Committee.



2.18 “Dividend Equivalent” means a right to receive or accrue, to the extent provided under
the respective Award Agreement, payments equal to dividends or distributions of property on a
specified number of Shares.



2.19 “Eligible Person” means any employee (including any officer) of the Company or an
Affiliate that is a Controlled Affiliate or a parent (as defined in Rule 405 promulgated under the
Securities Act), except that only employees in the Designated 162(m) Group shall be Eligible
Persons with respect to Non-Equity Incentive Awards.



2.20 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to
time. References to a particular section of the Exchange Act include references to successor
provisions.



2.21 “Equity Election” has the meaning set forth in Section 14.2.



2.22 “Fair Market Value” means (a) with respect to any property other than Shares, the fair
market value of such property determined by such methods or procedures as shall be established from
time to time by the Committee, and (b) with respect to Shares, unless otherwise determined in the
good faith discretion of the Committee, as of any date: (i) the closing price on the date of
determination reported in The Wall Street Journal (or an equivalent alternate or successor) (or, if
no sale of Shares was reported for such date, on the most recent trading day prior to such date on
which a sale of Shares was reported); (ii) if the Shares are not listed on the New York Stock
Exchange, the closing price of the Shares on such other national exchange on which the Shares are
principally traded or as reported by the Nasdaq Global Select or Global Market System, or similar
securities market, or if no such quotations are available, the average of the high bid and low
asked quotations in the over-the-counter market as reported by the Nasdaq Capital Market or similar
securities market; or (iii) in the event that there shall be no public market for the Shares, the
fair market value of the Shares as determined (which determination shall be conclusive) in good
faith by the Committee.



2.23 “Grant Date” means the date on which an Award is granted or, in the case of a grant to
an Eligible Person, such later date as specified in advance by the Committee.







3









 







2.24 “Grantee” means an Eligible Person who has been granted an Award.



2.25 “Incentive Stock Option” means an Option that is intended to meet the requirements of
Section 422 of the Code.



2.26 “including” or “includes” means “including, without limitation,” or “includes,
without limitation,” respectively.



2.27 “Non-Equity Incentive Award” means an Award granted to a person in the Designated
162(m) Group that is not granted, valued by reference to, or payable in Shares.



2.28 “Non-Management Director” means a member of the Board who is not an employee of the
Company or any Affiliate.



2.29 “Non-Qualified Stock Option” means an Option that is not an Incentive Stock Option.



2.30 “Option” means an option granted under Article 6 of the Plan.



2.31 “Option Price” means the price at which a Share may be purchased by a Grantee pursuant
to the exercise of an Option.



2.32 “Option Term” means the period beginning on the Grant Date of an Option and ending on
the date such Option expires, terminates or is cancelled.



2.33 “Other Stock-Based Award” means a right, granted under Article 11 of the Plan, that
relates to or is valued by reference to Shares or other Awards relating to Shares.



2.34 “Performance-Based Exception” means the performance-based exception from the tax
deductibility limitations of Section 162(m) of the Code contained in Section 162(m)(4)(C) of the
Code (including the special provisions for options thereunder).



2.35 “Performance Measures” has the meaning set forth in Section 4.4.



2.36 “Performance Period” means the time period over which performance goals shall be
determined.



2.37 “Performance Share” and “Performance Unit” have the respective meanings set
forth in Article 9.



2.38 “Period of Restriction” means the period during which Shares of Restricted Stock or
Restricted Stock Units are subject to forfeiture if the conditions specified in the Award Agreement
are not satisfied.



2.39 “Person” means any individual, sole proprietorship, partnership, joint venture,
limited liability company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government instrumentality, division, agency,
body or department.







4









 







2.40 “Restricted Stock Unit” means a right, granted in accordance with Article 8 hereof, to
receive a Share or cash payment equal to the value thereof, subject to such Period of Restriction
as the Committee shall determine.



2.41 “Rule 16b-3” means Rule 16b-3 promulgated by the SEC under the Exchange Act, as
amended from time to time, together with any successor rule.



2.42 “SEC” means the United States Securities and Exchange Commission, or any successor
thereto.



2.43 “Section 16 Non-Management Director” means a Non-Management Director who satisfies the
requirements to qualify as a “non-employee director” under Rule 16b-3.



2.44 “Section 16 Person” means a person who is subject to potential liability under Section
16(b) of the Exchange Act with respect to transactions involving equity securities of the Company.



2.45 “Securities Act” means the Securities Act of 1933, as amended from time to time. References
to a particular section of the Securities Act include references to successor provisions.



2.46 “Share” means a share of Common Stock, and such other securities of the Company as may
be substituted or resubstituted for Shares pursuant to Section 4.2 hereof.



2.47 “Shares of Restricted Stock” or “Restricted Stock” means Shares that are
subject to forfeiture if the Grantee does not satisfy the conditions specified in the Award
Agreement applicable to such Shares.



2.48 “Spin-Off Awards” mean Awards granted under this Plan upon the assumption by the
Company of equity-based compensation awards previously granted by The Williams Companies, Inc. in
connection with the spin-off of the Company from The Williams Companies, Inc. (“Spin-Off”). Such
assumed Awards shall be referred to herein as (“Assumed Williams Awards”). Nothing in this Plan
shall require the Company to grant any Assumed Williams Awards under this Plan.



2.49 “Stock Appreciation Right” or “SAR” has the meaning set forth in Section 10.1
hereof.



2.50 “Termination of Affiliation” occurs on the first day on which an individual is for any
reason no longer providing services to the Company or any Affiliate in the capacity of an employee
or officer, or with respect to an individual who is solely an employee or officer of an Affiliate,
the first day on which such entity ceases to be an Affiliate of the Company. Notwithstanding the
foregoing, except as otherwise provided in the Award Agreement with respect to such Award, with
respect to an Award subject to Section 409A of the Code, “Termination of Affiliation” means a
“separation from service” as defined in Section 409A of the Code and regulations and other
administrative guidance promulgated thereunder.







5









 








Article 3. — Administration



3.1 Committee.




     (a) Subject to Articles 14 and 15, and to Section 3.2, the Plan shall be administered by a
committee (the “Committee”). Except to the extent the Board reserves administrative powers to
itself or appoints a different committee to administer the Plan, the Committee shall be (i) the
Board, with respect to all Non-Management Directors, (ii) the Compensation Committee of the Board,
with respect to all executive officers of the Company (which term shall have the same meaning as
the term “officer” as defined in Rule 16a-1(f) promulgated under the Exchange Act and shall in any
event include all of the members of the Company’s Executive Officer Team (“EOT”)) and any other
Eligible Person with respect to whom it elects to act as the Committee, and (iii) except as the
Committee may provide, if the CEO is a member of the Board, a committee consisting of the CEO, with
respect to any Eligible Person other than an executive officer of the Company. In addition, to the
extent the Board considers it desirable to comply with Rule 16b-3 or meet the Performance-Based
Exception, the Committee shall consist of two or more directors of the Company, all of whom qualify
both as “outside directors” within the meaning of Section 162(m) of the Code and as Section 16
Non-Management Directors (the “Independent Committee”). The number of members of the Committee
shall from time to time be increased or decreased, and shall be subject to such conditions, in each
case as the Board deems appropriate to permit transactions in Shares pursuant to the Plan to
satisfy such conditions of Rule 16b-3 and the Performance-Based Exception as then in effect.



     (b) The Board or the Compensation Committee may, by resolution, appoint and delegate to
another committee of one or more officers of the Company (including the CEO) (a “Management
Committee”) any or all of the authority of the Board or the Committee, as applicable, with respect
to Awards to Grantees other than Grantees who are executive officers of the Company, Non-Management
Directors, or are persons in the Designated 162(m) Group for whom the Board or the Compensation
Committee desires to have the Performance-Based Exception apply and/or are Section 16 Persons at
the time any such delegated authority is exercised; provided, however, that the resolution so
authorizing such Management Committee shall specify the total number of Shares that may be subject
to Awards (if any) such Management Committee may award pursuant to such delegated authority, and
any such Award shall be subject to the form(s) of Award Agreement theretofore approved by the
Compensation Committee. Any delegation of authority pursuant to this Section 3.1(b) shall comply
with the requirements of applicable law, including Section 157(c) of the General Corporation Law of
the State of Delaware to the extent applicable.



     (c) Unless the context requires otherwise, any references herein to “Committee” include
references to the Board, the Compensation Committee of the Board, the Management Committee, the
Independent Committee (if distinct from any of the foregoing) or the CEO, as applicable. For
avoidance of doubt, notwithstanding any provision of the Plan to the contrary, any action taken by
the Compensation Committee of the Board shall be treated as a valid action of the Committee, except
as limited by the terms of the Board’s delegation of authority to the Compensation Committee of the
Board or in the event that such action would violate applicable law.



6









 




3.2 Powers of Committee. Subject to and consistent with the provisions of the Plan
(including Article 14 and any limitations in scope of authority established in accordance with
Section 3.1 above), the Committee has full and final authority and sole discretion as follows:




     (a) to determine when, to whom and in what types and amounts Awards should be granted;



     (b) to grant Awards in any number and amount to Eligible Persons, and to determine the terms
and conditions applicable to each Award (including the number of Shares or the amount of cash or
other property to which an Award will relate, any exercise price, grant price, Base Amount or
purchase price, any limitation or restriction, any schedule for or performance conditions relating
to the earning of the Award or the lapse of limitations, forfeiture restrictions, restrictions on
exercisability or transferability, any performance goals including those relating to the Company
and/or an Affiliate and/or any division thereof and/or an individual, and/or vesting based on the
passage of time, based in each case on such considerations as the Committee shall determine);



     (c) to determine the benefit payable under any Performance Unit, Performance Share, Other
Stock-Based Award or Non-Equity Incentive Award and to determine whether any performance or vesting
conditions have been satisfied;



     (d) to determine whether or not specific Awards shall be granted in connection with other
specific Awards, and if so, whether they shall be exercisable cumulatively with, or alternatively
to, such other specific Awards and all other matters to be determined in connection with an Award;



     (e) to determine the Option Term;



     (f) to determine the amount, if any, that a Grantee shall pay for Shares of Restricted Stock,
when Shares of Restricted Stock shall be forfeited and whether such Shares shall be held in escrow;



     (g) to determine whether, to what extent and under what circumstances an Award may be settled
in, or the exercise price of an Award may be paid in, cash, Shares, other Awards or other property,
or an Award may be accelerated, vested, canceled, forfeited or surrendered or any terms of the
Award may be waived, and to accelerate the exercisability of, and to accelerate or waive any or all
of the terms and conditions applicable to, any Award or any group of Awards for any reason and at
any time;



     (h) to determine with respect to Awards whether, to what extent and under what circumstances
cash, Shares, other Awards, other property and other amounts payable with respect to an Award will
be deferred either automatically (whether to limit loss of deductions pursuant to Section 162(m) of
the Code or otherwise), at the election of the Committee or at the election of the Grantee;



     (i) to offer to exchange or buy out any previously granted Award for a payment in cash, Shares
or one or more other Awards, subject to Section 6.3 and Section 10.5;



7









 





     (j) to construe and interpret the Plan and to make all determinations, including factual
determinations, necessary or advisable for the administration of the Plan;



     (k) to make, amend, suspend, waive and rescind rules and regulations relating to the Plan;



     (l) to appoint such agents as the Committee may deem necessary or advisable to administer the
Plan;



     (m) to determine the terms and conditions of all Award Agreements applicable to Eligible
Persons (which need not be identical) and, with the consent of the Grantee, to amend any such Award
Agreement at any time, among other things, to permit transfers of such Awards to the extent
permitted by the Plan; provided that the consent of the Grantee shall not be required for any
amendment (i) which does not materially adversely affect the rights of the Grantee, or (ii) which
is necessary or advisable (as determined by the Committee) to carry out the purpose of the Award as
a result of any new applicable law or change in an existing applicable law, or (iii) to the extent
the Award Agreement specifically permits amendment without consent, or (iv) provided for or
specifically contemplated in the Plan (such as Section 6.4 or Article 13);



     (n) to cancel, with the consent of the Grantee, outstanding Awards and to grant new Awards in
substitution therefor, subject to Section 6.3 and Section 10.5;



     (o) to make such adjustments or modifications to Awards or to adopt such sub-plans for
Grantees working outside the United States as are advisable to fulfill the purposes of the Plan
(including to comply with local law);



     (p) to impose such additional terms and conditions upon the grant, exercise or retention of
Awards as the Committee may, before or concurrently with the grant thereof, deem appropriate,
including, as applicable, limiting the percentage of Awards which may from time to time be
exercised by a Grantee;



     (q) to make adjustments in the terms and conditions of, and the criteria in, Awards in
recognition of unusual or nonrecurring events (including events described in Section 4.2) affecting
the Company or an Affiliate or the financial statements of the Company or an Affiliate, or in
response to changes in applicable laws, regulations or accounting principles; provided that in no
event shall such adjustment increase the value of an Award for a person included in the Designated
162(m) Group for whom the Committee desires to have the Performance-Based Exception apply so as to
cause the Performance-Based Exception to be unavailable;



     (r) to correct any defect or supply any omission or reconcile any inconsistency, and to
construe and interpret the Plan, the rules and regulations, and Award Agreement or any other
instrument entered into or relating to an Award under the Plan; and



     (s) to take any other action with respect to any matters relating to the Plan for which it is
responsible and to make all other decisions and determinations as may be required under the terms
of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan.



8









 





     Any action of the Committee with respect to the Plan shall be final, conclusive and binding on
all persons, including the Company, its Affiliates, any Grantee, any person claiming any rights
under the Plan from or through any Grantee, and stockholders, except to the extent the Committee
may subsequently modify, or take further action not consistent with, its prior action. If not
specified in the Plan, the time at which the Committee must or may make any determination shall be
determined by the Committee, and any such determination may thereafter be modified by the
Committee. 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 Affiliate the authority,
subject to such terms as the Committee shall determine, to perform specified functions under the
Plan (subject to Sections 3.1(b), 4.3, 4.4 and 5.7(b)).



9









 





Article 4. — Shares Subject to the Plan, Maximum Awards, and 162(m) Compliance



4.1 Number of Shares Available for Grants. Subject to adjustment as provided in Section
4.2, the number of Shares hereby reserved for delivery under the Plan shall be ____________ Shares.
The number of Shares available for delivery pursuant to Incentive Stock Options shall be the
number set forth in the first sentence of this Section 4.1.




     If any Shares subject to an Award granted hereunder are forfeited or such Award is settled in
cash or otherwise terminates without the delivery of such Shares, the Shares subject to such Award,
to the extent of any such forfeiture, settlement or termination, shall again be available for grant
under the Plan. Notwithstanding the foregoing, Shares subject to an Award under the Plan may not
again be made available for issuance under the Plan if such Shares are: (a) Shares used to pay the
exercise price of an Option, (b) Shares delivered to or withheld by the Company to pay the
withholding taxes related to an Award, or (c) Shares repurchased by the Company on the open market
with the proceeds of an Award paid to the Company by or on behalf of the Grantee. Shares delivered
pursuant to the Plan may be, in whole or in part, authorized and unissued Shares, or treasury
Shares, including Shares repurchased by the Company for purposes of the Plan.



     Notwithstanding the foregoing, an unlimited number of Shares may be issued under the Plan
pursuant to Acquired Entity Awards granted in assumption of, or in substitution for, an outstanding
award previously granted by an Acquired Entity, so long as the terms of the acquisition of such
awards previously granted by an Acquired Entity do not expressly provide for the issuance of Shares
authorized under this Section 4.1.


4.2 Adjustments in Authorized Shares and Awards. In the event of any dividend or other
distribution (whether in the form of cash, Shares, or other property, but excluding regular,
quarterly cash dividends), recapitalization, forward or reverse stock split, subdivision,
consolidation or reduction of capital, reorganization, merger, consolidation, scheme of
arrangement, split-up, spin-off or combination involving the Company or repurchase or exchange of
Shares or other securities of the Company or other rights to purchase Shares or other securities of
the Company, or other similar corporate transaction or event that affects the Shares, provided that
any such transaction or event referred to heretofore does not involve the receipt of consideration
by the Company, then the Committee shall, in such manner as it deems equitable in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be made available under
the Plan, adjust (a) the number and type of Shares (or other securities or property) with respect
to which Awards may be granted, (b) the number and type of Shares (or other securities or property)
subject to outstanding Awards, (c) the grant or exercise price or Base Amount with respect to any
applicable Award or, if deemed appropriate, make provision for a cash payment to the holder of an
outstanding Award, (d) the number and kind of outstanding Shares of Restricted Stock or relating to
any other outstanding Award in connection with which Shares are issued or otherwise subject, (e)
the number of Shares with respect to which Awards may be granted to a Grantee, as set forth in
Section 4.3, (f) the number and type of Shares (or other securities or property) as to which Awards
may be settled, and (g) the number of Shares subject to outstanding Restricted Stock or Restricted
Stock Units granted under Article 14; provided, in each case, that with respect to Awards of
Incentive Stock Options intended as of their Grant Date to qualify as Incentive Stock Options, no
such adjustment shall be authorized to






10









 







the extent that such adjustment would cause the Plan to violate Section 422(b)(1) of the Code; and
provided further that the number of Shares subject to any Award denominated in Shares shall always
be a whole number. By way of example and not limitation, neither the conversion of any convertible
securities of the Company nor any open market purchase of Shares by the Company shall be treated as
a transaction that “does not involve the receipt of consideration” by the Company.



4.3 Compliance with Section 162(m) of the Code. To the extent the Committee determines
that compliance with the Performance-Based Exception is desirable, the following shall apply:




     (a) Section 162(m) Compliance. All Awards granted to persons included in the
Designated 162(m) Group shall comply with the requirements of the Performance-Based Exception;
provided that to the extent Section 162(m) of the Code requires periodic shareholder approval of
performance measures, such approval shall not be required for the continuation of the Plan or as a
condition to grant any Award hereunder after such approval is required. In addition, in the event
that changes are made to Section 162(m) of the Code to permit flexibility with respect to the Award
or Awards available under the Plan, the Committee may, subject to this Section 4.3, make any
adjustments to such Awards as it deems appropriate.



     (b) Annual Individual Limitations. During any calendar year, no Grantee may be
granted Awards (other than Awards that cannot be satisfied in Shares) with respect to more than
______________ Shares, subject to adjustment as provided in Section 4.2. The maximum potential
value of Awards to be settled in cash or property (other than Shares) that may be granted with
respect to any calendar year (or the Company’s fiscal year, if the Company’s fiscal year is not the
calendar year) to any Grantee included in the Designated 162(m) Group (regardless of when such
Award is settled) shall not exceed _____________. (Thus, Awards to be settled in cash or property
(other than Shares) with a Performance Period (or other period of time explicitly or implicitly
utilized to determine the value to be provided to the Grantee) over more than one calendar year (or
fiscal year) may exceed the one-year grant limit in the prior sentence at the time of payment or
settlement so long as the total maximum potential value does not exceed the one-year limit
multiplied by the number of calendar years (or fiscal years) or portions thereof over which the
value of such Award is determined.)


4.4 Performance-Based Exception Under Section 162(m). Unless and until the Committee
proposes for stockholder vote and stockholders approve a change in the general performance measures
set forth in this Section 4.4, for Awards (other than Options or SARs) designed to qualify for the
Performance-Based Exception, the objective Performance Measure(s) shall be chosen from among the
following:




     (a) Earnings (either in the aggregate or on a per-share basis);



     (b) Net income;



     (c) Operating income;



     (d) Operating profit;



     (e) Cash flow;



11









 





     (f) Stockholder returns (including return on assets, investments, equity, or gross sales)
(including income applicable to common stockholders or other class of stockholders);



     (g) Return measures (including return on assets, equity, sales, or capital expenditures);



     (h) Earnings before or after either, or any combination of, interest, taxes, depreciation or
amortization (EBITDA);



     (i) Gross revenues;



     (j) Share price (including growth measures and total stockholder return or attainment by the
Shares of a specified value for a specified period of time);



     (k) Reductions in expense levels in each case, where applicable, determined either on a
Company-wide basis or in respect of any one or more business units;



     (l) Net economic value;



     (m) Market share;



     (n) Annual net income to common stock;



     (o) Earnings per share;



     (p) Annual cash flow provided by operations;



     (q) Changes in annual revenues;



     (r) Strategic business criteria, consisting of one or more objectives based on meeting
specified revenue, market penetration, geographic business expansion goals, objectively identified
project milestones, production volume levels, cost targets, and goals relating to acquisitions or
divestitures;



     (s) Reserve growth (reserve replacement) or reserves per share;



     (t) Reserve replacement efficiency ratio;



     (u) Productions growth or production per share;



     (v) Drilling results;



     (w) Development costs;



     (x) Economic value added;



     (y) Sales;



     (z) Costs;



12









 





     (aa) Results of customer satisfaction surveys;



     (bb) Aggregate product price and other product price measures;



     (cc) Safety record;



     (dd) Service reliability;



     (ee) Operating and maintenance cost management;



     (ff) Energy production availability performance measures;



     (gg) Debt rating;


and/or




     (hh) Achievement of objective business or operational goals such as market share and/or
business development;


provided that subsections (a) through (g) may be measured on a pre- or post-tax basis; and provided
further that the Committee may, on the Grant Date of an Award intended to comply with the
Performance-Based Exception, and in the case of other grants, at any time, provide that the formula
for such Award may include or exclude items to measure specific objectives, such as losses from
discontinued operations, extraordinary gains or losses, the cumulative effect of accounting
changes, acquisitions or divestitures, foreign exchange impacts and any unusual, nonrecurring gain
or loss. For Awards intended to comply with the Performance-Based Exception, the Committee shall
set the Performance Measures within the time period prescribed by Section 162(m) of the Code. The
levels of performance required with respect to Performance Measures may be expressed in absolute or
relative levels and may be based upon a set increase, set positive result, maintenance of the
status quo, set decrease or set negative result, and may be measured annually, cumulatively over a
period of years or over such other period determined by the Committee. Performance Measures may
differ for Awards to different Grantees. The Committee shall specify the weighting (which may be
the same or different for multiple objectives) to be given to each Performance Measure for purposes
of determining the final amount payable with respect to any such Award. Any one or more of the
Performance Measures may apply to the Grantee, to a department, unit, division or function within
the Company or any one or more Affiliates; or to the Company and/or any one or more Affiliates; and
may apply either alone or relative to the performance of other businesses or individuals (including
industry or general market indices).




     The Committee shall have the discretion to adjust the determinations of the degree of
attainment of the pre-established performance goals; provided that Awards which are designed to
qualify for the Performance-Based Exception may not be adjusted upward (the Committee shall retain
the discretion to adjust such Awards downward) so as to cause the Performance-Based Exception to be
unavailable. The Committee may not delegate any responsibility with respect to Awards intended to
qualify for the Performance-Based Exception. All determinations by the Committee as to the
achievement of the Performance Measure(s) shall be in writing prior to payment of the Award.



13









 





     In the event that applicable laws change to permit Committee discretion to alter the governing
performance measures without obtaining stockholder approval of such changes, and still qualify for
the Performance-Based Exception, the Committee shall have sole discretion to make such changes
without obtaining stockholder approval.



     For purposes of Section 4.3 and this Section 4.4 (and any other provisions of the Plan for
which compliance with Section 162(m) of the Code is intended), references to “Committee” means the
Compensation Committee of the Board or, if a separate body, the Independent Committee.



14









 





Article 5. — Eligibility and General Conditions of Awards



5.1 Eligibility. Awards may be granted to any Eligible Person or Non-Management Director,
whether or not he or she has previously received an Award; provided that only persons included in
the Designated 162(m) Group shall be Eligible Persons with respect to Non-Equity Incentive Awards
made under the Plan and Non-Management Directors may only receive Awards granted under Article 14
of the Plan. A prospective employee of the Company or an Affiliate may be granted an Award so long
as the Grant Date does not occur prior to the date that such Person commences employment or the
performance of services for the Company or an Affiliate.



5.2 Award Agreement. To the extent not set forth in the Plan, the terms and conditions of
each Award shall be set forth in an Award Agreement.



5.3 General Terms and Termination of Affiliation. The Committee may impose on any Award or
the exercise or settlement thereof, at the Grant Date or, subject to the provisions of Section
15.2, thereafter, such additional terms and conditions not inconsistent with the provisions of the
Plan as the Committee shall determine, including terms requiring forfeiture, acceleration or
pro-rata acceleration of Awards in the event of a Termination of Affiliation by the Grantee.
Except as may be required under the Delaware General Corporation Law, Awards may be granted for no
consideration other than prior and future services. Except as otherwise determined by the
Committee pursuant to this Section 5.3, all Awards that have not been exercised and that are
subject to (a) a risk of forfeiture, (b) deferral by the Committee (and not voluntary deferral by
the Grantee), (c) vesting or (d) unexpired Performance Periods at the time of a Termination of
Affiliation, shall be forfeited to the Company.



5.4 Nontransferability of Awards.




     (a) Each Award and each right under any Award shall be exercisable only by the Grantee during
the Grantee’s lifetime, or, if permissible under applicable law, by the Grantee’s guardian or legal
representative or by a transferee receiving such Award pursuant to a domestic relations order
(“DRO”).



     (b) No Award (prior to the time, if applicable, Shares are delivered in respect of such
Award), and no right under any Award, may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Grantee otherwise than by will or by the laws of descent
and distribution (or in the case of Shares of Restricted Stock, to the Company) or pursuant to a
DRO, and any such purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company and any Affiliate; provided that
the designation of a beneficiary shall not constitute an assignment, alienation, pledge,
attachment, sale, transfer or encumbrance.



     (c) Notwithstanding subsections (a) and (b) above, to the extent provided in the Award
Agreement, Director Annual Grants, Restricted Stock Units, Stock Appreciation Rights and Awards
other than Incentive Stock Options and Non-Equity Incentive Awards, may be transferred to one or
more trusts or persons during the lifetime of the Grantee in connection with the Grantee’s estate
planning or wealth transfer planning, and may be exercised by such transferee in accordance with
the terms of such Award. If so determined by the Committee, a



15









 




Grantee may, in the manner established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the Grantee, and to receive any distribution with respect
to any Award upon the death of the Grantee. A transferee, beneficiary, guardian, legal
representative or other person claiming any rights under the Plan from or through any Grantee shall
be subject to and consistent with the provisions of the Plan and any applicable Award Agreement,
except to the extent the Plan and Award Agreement otherwise provide with respect to such persons,
and to any additional restrictions or limitations deemed necessary or appropriate by the Committee.




     (d) Nothing herein shall be construed as requiring the Committee to honor a DRO except as
required under the respective Award Agreement or to the extent required under applicable law.


5.5 Cancellation and Rescission of Awards. Unless the Award Agreement specifies otherwise,
the Committee may cancel, rescind, suspend, withhold, or otherwise limit or restrict any
unexercised Award at any time if the Grantee is not in compliance with all applicable provisions of
the Award Agreement and the Plan or if the Grantee has a Termination of Affiliation.



5.6 Stand-Alone, Tandem and Substitute Awards.




     (a) 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 for, any other Award granted under the
Plan or any other plan of the Company or any Affiliate; provided that if the stand-alone, tandem or
substitute Award is intended to qualify for the Performance-Based Exception, it must separately
satisfy the requirements of the Performance-Based Exception. In connection with the Company’s
acquisition, however effected, of another corporation or entity (the “Acquired Entity”) or the
assets thereof, the Committee may, at its discretion, grant Awards (“Substitute Awards”) associated
with the stock or other equity interest in such Acquired Entity (“Acquired Entity Award”) held by a
Grantee immediately prior to such Acquisition in order to preserve for Grantee the economic value
of all or a portion of such Acquired Entity Award on such terms as the Committee determines
necessary to achieve preservation of economic value. For the avoidance of doubt, to the extent
that the Spin-Off Awards are granted under the Plan, they shall be considered Acquired Entity
Awards for purposes of the Plan. If an Award is granted in substitution for another Award or any
non-Plan award or benefit, the Committee shall require the surrender of such other Award or
non-Plan award or benefit in consideration for the grant of the new Award. Awards granted in
addition to or in tandem with other Awards or non-Plan awards or benefits may be granted either at
the same time as or at a different time from the grant of such other Awards or non-Plan awards or
benefits. The Option Price of any Option or the purchase price of any other Award conferring a
right to purchase Shares:




     (i) If granted in substitution for an outstanding Award or non-Plan award or benefit,
shall be either not less than the Fair Market Value of Shares at the date such substitute
Award is granted or not less than such Fair Market Value at that date reduced to reflect the
Fair Market Value of the Award or award required to be surrendered by the Grantee as a
condition to receipt of a substitute Award; or



16









 






     (ii) If granted in tandem with an already outstanding Award or an award granted under
another plan, shall be either not less than the Fair Market Value of Shares at the date of
grant of the later Award or the Fair Market Value of Shares at the date of grant of the
earlier Award or award granted under such other plan.



     (b) The Committee may, in its discretion and on such terms and conditions as the Committee
considers appropriate in the circumstances, grant Awards under the Plan in substitution for stock
and stock-based Awards held by employees of another corporation who become employees of the Company
or an Affiliate as the result of a merger or consolidation or other combination of the employing
corporation with the Company or an Affiliate or the acquisition by the Company or an Affiliate of
property or stock of the employing corporation.


5.7 Compliance with Rule 16b-3.




     (a) Reformation to Comply with Exchange Act Rules. To the extent the Committee
determines that a grant or other transaction by a Section 16 Person should comply with applicable
provisions of Rule 16b-3 (except for transactions exempted under alternative Exchange Act rules),
the Committee shall take such actions as necessary to make such grant or other transaction so
comply, and if any provision of this Plan or any Award Agreement relating to a given Award does not
comply with the requirements of Rule 16b-3 as then applicable to any such grant or transaction,
such provision will be construed or deemed amended, if the Committee so determines, to the extent
necessary to conform to the then applicable requirements of Rule 16b-3 without the consent of or
notice to the affected Section 16 Person.



     (b) Rule 16b-3 Administration. Any function relating to a Section 16 Person shall be
performed solely by the Committee or the Board if necessary to ensure compliance with applicable
requirements of Rule 16b-3, to the extent the Committee determines that such compliance is desired.
Each member of the Committee or person acting on behalf of the Committee shall be entitled to, in
good faith, rely or act upon any report or other information furnished to him by any officer,
manager or other employee of the Company or any Affiliate, the Company’s independent certified
public accountants or any executive compensation consultant or attorney or other professional
retained by the Company to assist in the administration of the Plan. For purposes of Section
5.7(a) and this Section 5.7(b), references to “Committee” means the Compensation Committee of the
Board or, if a separate body, the Independent Committee.


5.8 Deferral of Award Payouts. The Committee may permit or require a Grantee to defer
receipt of the payment of cash or the delivery of Shares that would otherwise be due by virtue of
the lapse or waiver of restrictions with respect to Shares of Restricted Stock, the satisfaction of
any requirements or goals with respect to Performance Units or Performance Shares, the lapse or
waiver of the Period of Restriction for Restricted Stock Units, or the lapse or waiver of
restrictions with respect to Other Stock-Based Awards. The Committee may also require such a
deferral of receipt in order to avoid non-deductibility of any amounts associated with such Award
or to comply with the requirements of applicable law. If any such deferral is required or
permitted, the Committee shall, in its sole discretion, establish rules and procedures for such
payment deferrals. Except as otherwise provided in an Award Agreement or this Section 5.8, any
payment of any Shares that are subject to such deferral shall be made or delivered to the Grantee
upon the Grantee’s Termination of Affiliation. Notwithstanding anything herein to the






17









 







contrary, in no event will any deferral or payment of a deferred number of Shares or any other
payment with respect to any Award be allowed if the Committee determines, in its sole discretion,
that the deferral would result in the imposition of the additional tax under Section 409A(a)(1)(B)
of the Code.







18









 








Article 6. — Stock Options



6.1 Grant of Options. Subject to and consistent with the provisions of the Plan, Options
may be granted to any Eligible Person in such number, and upon such terms, and at any time and from
time to time as shall be determined by the Committee.



6.2 Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall
specify the Option Price, the Option Term (which shall be for a period of not more than ten (10)
years from its Grant Date), the number of Shares to which the Option pertains, the time or times at
which such Option shall be exercisable, and such other provisions as the Committee shall determine.



6.3 Option Price; No Repricing. The Option Price of an Option under this Plan shall be
determined in the sole discretion of the Committee, and, except with respect to an Option granted
as an Acquired Entity Award, shall be at least equal to 100% of the Fair Market Value of a Share on
the Grant Date. Subject to the adjustment under Section 4.2, neither the Committee nor the Board
shall have the authority or discretion to reduce, directly or indirectly, the Option Price of any
outstanding Option without stockholder approval, including, without limitation, by (a) canceling
previously awarded Options and regranting them with a lower Option Price or (b) exchanging or
buying out any previously granted Option for a payment in cash, Shares or other Award,
notwithstanding any authority otherwise granted the Committee or the Board under the Plan.



6.4 Grant of Incentive Stock Options. At the time of the grant of any Option, the
Committee may in its discretion designate that such Option (or portion thereof) shall be made
subject to additional restrictions to permit it to qualify as an Incentive Stock Option. Any
Option (or portion thereof) designated as an Incentive Stock Option:




     (a) shall be granted only to an employee of the Company or a parent or Subsidiary Corporation
(as defined below);



     (b) shall have an Option Price of not less than 100% of the Fair Market Value of a Share on
the Grant Date, and, if granted to a person who owns capital stock (including stock treated as
owned under Section 424(d) of the Code) possessing more than 10% of the total combined voting power
of all classes of capital stock of the Company or any Subsidiary Corporation (a “10% Owner”), have
an Option Price not less than 110% of the Fair Market Value of a Share on its Grant Date;



     (c) shall be for a period of not more than 10 years (five years if the Grantee is a 10% Owner)
from its Grant Date, and shall be subject to earlier termination as provided herein or in the
applicable Award Agreement;



     (d) shall not have an aggregate Fair Market Value (as of the Grant Date) of the Shares with
respect to which Incentive Stock Options (whether granted under the Plan or any other stock option
plan of the Grantee’s employer or any parent or Subsidiary Corporation (“Other Plans”)) are
exercisable for the first time by such Grantee during any calendar year (“Current Grant”),
determined in accordance with the provisions of Section 422 of the Code, which exceeds $100,000
(the “$100,000 Limit”);



19









 





     (e) shall require the Grantee to notify the Committee of any disposition of any Shares
delivered pursuant to the exercise of the Incentive Stock Option under the circumstances described
in Section 421(b) of the Code (relating to holding periods and certain disqualifying dispositions)
(a “Disqualifying Disposition”), within 10 days of such a Disqualifying Disposition; and



     (f) shall by its terms not be assignable or transferable other than by will or the laws of
descent and distribution and may be exercised, during the Grantee’s lifetime, only by the Grantee;
provided that the Grantee may, to the extent provided in the Plan in any manner specified by the
Committee, designate in writing a beneficiary to exercise his or her Incentive Stock Option after
the Grantee’s death.



     For purposes of this Section 6.4, “Subsidiary Corporation” means a corporation other than the
Company in an unbroken chain of corporations beginning with the Company if, at the time of granting
the Option, each of the corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain. For purposes of this Section 6.4, references to “parent”
shall mean a parent corporation within the meaning of Section 424(e) of the Code. Notwithstanding
the foregoing and Section 3.2, the Committee may, without the consent of the Grantee, at any time
before the exercise of an Option (whether or not an Incentive Stock Option), take any action
necessary to prevent such Option from being treated as an Incentive Stock Option.



     Notwithstanding anything in this Section 6.4 to the contrary, Options designated as Incentive
Stock Options shall not be eligible for treatment under the Code as Incentive Stock Options (and
will be deemed to be Non-Qualified Stock Options) to the extent that either (a) the aggregate Fair
Market Value of the Shares (determined on the Grant Date) with respect to the Current Grant and all
Incentive Stock Options previously granted under the Plan and any Other Plans which are exercisable
for the first time during a calendar year would exceed the $100,000 Limit, or (b) such Options
otherwise remain exercisable but are not exercised within three (3) months of Termination of
Affiliation (or such other period of time provided in Section 422 of the Code).


6.5 Payment. Except as otherwise provided by the Committee in an Award Agreement or
otherwise, Options shall be exercised by the delivery of a written notice of exercise to the
Company or its designee, setting forth the number of Shares with respect to which the Option is to
be exercised, accompanied by full payment for the Shares made by any one or more of the following
means, subject to the approval of the Committee:




     (a) cash, personal check or wire transfer;



     (b) Shares, valued at their Fair Market Value on the date of exercise;



     (c) withholding of Shares otherwise deliverable upon exercise valued at their Fair Market
Value on the date of exercise; or



     (d) subject to applicable law, pursuant to procedures previously approved by the Company, in
cash through the sale of the Shares acquired on exercise of the Option through a



20









 







broker-dealer to whom the Grantee has submitted an irrevocable notice of exercise and
irrevocable instructions to deliver promptly to the Company the amount of sale or loan proceeds
sufficient to pay for such Shares, together with, if requested by the Company, the mandatory amount
of federal, state, local and foreign withholding taxes payable by Grantee by reason of such
exercise.



21









 





Article 7. — Shares of Restricted Stock



7.1 Grant of Shares of Restricted Stock. Subject to and consistent with the provisions of
the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to
any Eligible Person in such amounts as the Committee shall determine.



7.2 Award Agreement. Each grant of Shares of Restricted Stock shall be evidenced by an
Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted
Stock granted, and such other provisions as the Committee shall determine. The Committee may
impose such conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to
the Plan as it may deem advisable, including restrictions based upon the achievement of specific
performance goals, time-based restrictions on vesting following the attainment of the performance
goals, and/or restrictions under applicable securities laws; provided that such conditions and/or
restrictions may lapse, if so determined by the Committee, in the event of the Grantee’s
Termination of Affiliation due to death, Disability, normal or approved early retirement, or
involuntary termination by the Company or an Affiliate without “cause.” Except as otherwise
determined by the Committee, upon Termination of Affiliation during the applicable Period of
Restriction, Shares of Restricted Stock that are at that time subject to forfeiture shall be
forfeited and automatically reacquired by the Company.



7.3 Consideration for Shares of Restricted Stock. The Committee shall determine the
amount, if any, that a Grantee shall pay for Shares of Restricted Stock, subject to the following
sentence. Except with respect to Shares of Restricted Stock that are treasury shares, for which no
payment need be required, the Committee shall require the Grantee to pay at least the par value of
a Share for each Share of Restricted Stock. Such payment shall be made in full in cash and/or
other consideration permissible by applicable law (including prior and/or future services, which
shall be considered a “benefit to the corporation” within the meaning of Section 152 of the
Delaware General Corporation Law) by the Grantee before the delivery of the Shares under terms
determined by the Committee.



7.4 Effect of Forfeiture. If Shares of Restricted Stock are forfeited, and if the Grantee
was required to pay for such Shares with cash or property, the Grantee shall be deemed to have
resold such Shares to the Company at a price equal to the lesser of (a) the amount paid in cash or
property by the Grantee for such Shares, or (b) the Fair Market Value of such Shares at the close
of business on the date of such forfeiture. The Company shall pay to the Grantee the deemed sale
price as soon as is administratively practical. Such Shares shall cease to be outstanding, and
shall no longer confer on the Grantee thereof any rights as a stockholder of the Company, from and
after the date of the event causing the forfeiture, whether or not the Grantee accepts the
Company’s tender of payment for such Shares.



7.5 Escrow; Legends. The Committee may provide that any certificates for any Shares of
Restricted Stock (a) shall be held (together with one or more stock powers executed in blank by the
Grantee) in escrow by the Secretary of the Company until such Shares become nonforfeitable or are
forfeited and/or (b) shall bear an appropriate legend restricting the transfer of such Shares. If
any Shares of Restricted Stock become nonforfeitable, the Company shall cause certificates for such
Shares to be delivered without such legend, except as may be required under applicable law.







22









 







7.6 Voting Rights; Dividends and Distributions. Unless otherwise determined by the
Committee in accordance with applicable law, individuals holding Shares of Restricted Stock granted
hereunder may exercise full voting rights with respect to those shares during the Period of
Restriction. Individuals in whose name Shares of Restricted Stock are granted shall be entitled to
receive all dividends and other distributions paid with respect to those Shares once the Period of
Restriction has ended.








23









 








Article 8. — Restricted Stock Units



8.1 Grant of Restricted Stock Units. Subject to and consistent with the provisions of the
Plan, the Committee, at any time and from time to time, may grant Restricted Stock Units to any
Eligible Person, in such amount and upon such terms as the Committee shall determine.



8.2 Delivery and Limitations. Delivery of Shares will occur upon expiration of the Period
of Restriction specified for the Award of Restricted Stock Units by the Committee. In addition, an
Award of Restricted Stock Units shall be subject to such limitations as the Committee may impose,
which limitations may lapse at the end of the Period of Restriction of such Restricted Stock Units
or at other specified times, separately or in combination, in installments or otherwise, as the
Committee shall determine at the time of grant or thereafter. A Grantee awarded Restricted Stock
Units will have no voting rights and will have no rights to receive dividends or Dividend
Equivalents in respect of Restricted Stock Units.



8.3 Forfeiture. Except as otherwise determined by the Committee, upon Termination of
Affiliation during the applicable Period of Restriction, Restricted Stock Units that are at that
time subject to forfeiture shall be forfeited.







24









 








Article 9. — Performance Units and Performance Shares



9.1 Grant of Performance Units and Performance Shares. Subject to and consistent with the
provisions of the Plan, Performance Units or Performance Shares may be granted to any Eligible
Person in such amounts and upon such terms, and at any time and from time to time, as shall be
determined by the Committee.



9.2 Value/Performance Goals. The Committee shall set performance goals in its discretion
which, depending on the extent to which they are met, will determine the number or value of
Performance Units or Performance Shares that will be paid to the Grantee. With respect to Covered
Employees and to the extent the Committee deems it appropriate to comply with Section 162(m) of the
Code, all performance goals shall be objective Performance Measures as set forth in Section 4.4
satisfying the requirements for the Performance-Based Exception, and shall be set by the Committee
within the time period prescribed by Section 162(m) of the Code and related regulations.




     (a) Performance Unit. Each Performance Unit shall have an initial value that is
established by the Committee at the time of grant.



     (b) Performance Share. Each Performance Share shall have an initial value equal to
the Fair Market Value of a Share at the close of business on the Grant Date.


9.3 Earning of Performance Units and Performance Shares. After the applicable Performance
Period has ended, the holder of Performance Units or Performance Shares shall be entitled to
payment based on the level of achievement of performance goals set by the Committee. If a
Performance Unit or Performance Share Award is intended to comply with the
Performance-Based Exception, the Committee shall certify the level of achievement of the
performance goals in writing before the Award is settled.




     At the discretion of the Committee, the settlement of Performance Units or Performance Shares
may be in cash, Shares of equivalent value, or in some combination thereof, as set forth in the
Award Agreement or otherwise determined by the Committee.



     Except with respect to Awards with respect to which the Committee intends that the
Performance-Based Exception shall apply, if a Grantee is promoted, demoted or transferred to a
different business unit of the Company during a Performance Period, then, to the extent the
Committee determines the performance goals or Performance Period are no longer appropriate, the
Committee may adjust, change, eliminate or cancel the performance goals or the applicable
Performance Period as it deems appropriate in order to make them appropriate and comparable to the
initial performance goals or Performance Period.



     A Grantee shall not be entitled to payment or accrual of Dividend Equivalents with respect to
Shares deliverable in connection with grants of Performance Units or Performance Shares, whether
unearned, earned but not yet delivered to the Grantee or otherwise. In addition, a Grantee shall
be entitled to exercise his or her voting rights with respect to such Shares to the extent such
Shares have been issued to the Grantee.



25









 




9.4 Forfeiture. Except as otherwise determined by the Committee, upon Termination of
Affiliation any unvested and/or unearned Performance Units and Performance Shares shall be
forfeited.







26









 








Article 10. — Stock Appreciation Rights



10.1 Grant of SARs. Subject to and consistent with the provisions of the Plan, stock
appreciation rights (“Stock Appreciation Rights” or “SARs”) may be granted to any Eligible Persons
in such numbers and upon such terms, and at any time and from time to time, as shall be determined
by the Committee. Each SAR shall represent the right of the Grantee to receive upon exercise of
the SAR an amount equal to the amount described in Section 10.3, subject to such terms and
conditions as the Committee shall determine.



10.2 Award Agreement. Each grant of SARs shall be evidenced by an Award Agreement that
shall specify, as the Committee shall determine, the number of Shares as to which the SAR relates,
the Base Amount, the term and such other terms and conditions as the Committee shall determine,
including without limitation vesting and forfeiture, provided that as to each SAR:




     (a) except with respect to a SAR granted as an Acquired Entity Award, the Base Amount shall
never be less than the Fair Market Value of a Share on the Grant Date; and



     (b) the term shall not exceed ten years from the Grant Date.


10.3 Payment of SAR Amount. Upon exercise of a SAR, the Grantee shall be entitled to
receive payment of an amount determined by multiplying (a) the difference between the Base Amount
of the SAR and the Fair Market Value of a Share at the close of business on the date the SAR is
exercised by (b) the number of Shares with respect to which the SAR is exercised. In the
discretion of the Committee, payment of the SAR amount by the Company may be in cash, Shares or a
combination of cash and Shares.



10.4 Forfeiture. Except as otherwise determined by the Committee, upon Termination of
Affiliation any unvested SARs shall be forfeited.



10.5 No Repricing. Subject to the adjustment under Section 4.2, neither the Committee nor
the Board shall have the authority or discretion to reduce, directly or indirectly, the Base Amount
of any outstanding SAR without stockholder approval, including, without limitation, by (a)
canceling previously awarded SARs and regranting them with a lower Base Amount or (b) exchanging or
buying out any previously granted SARs for a payment in cash, Shares or other Award,
notwithstanding any authority otherwise granted the Committee under the Plan.








27









 








Article 11. — Other Stock-Based Awards




     The Committee is authorized, subject to limitations under applicable law, to grant to any
Eligible Persons such other Awards that are denominated or payable in, valued in whole or in part
by reference to, or otherwise based on, or related to, Shares or other securities, as deemed by the
Committee to be consistent with the purposes of the Plan, including Shares awarded which are not
subject to any restrictions or conditions, convertible or exchangeable debt securities or other
rights convertible or exchangeable into Shares, Awards valued by reference to the value of
securities of or the performance of specified Affiliates, and Awards payable in securities of
Affiliates. Subject to and consistent with the provisions of the Plan, the Committee shall
determine the terms and conditions of such Awards. Except as provided by the Committee, Shares or
other securities delivered pursuant to a purchase right granted under this Article 11 shall be
purchased for such consideration, paid for by such methods and in such forms, including cash,
Shares, outstanding Awards or other property or other consideration permitted by applicable law, as
the Committee shall determine.



28









 





Article 12. — Non-Equity Incentive Awards




     The Committee is authorized to grant Non-Equity Incentive Awards alone or in conjunction with
other Awards to individuals who are at the time of the grant of such Non-Equity Incentive Award,
included in the Designated 162(m) Group. All terms, conditions and limitations applicable to any
Non-Equity Incentive Award shall be determined by the Committee, subject to and consistent with the
provisions of the Plan (including the applicable annual individual limitation under Section 4.3(b)
and the use of one or more of the Performance Measures set forth in Section 4.4) and Section 162(m)
of the Code.



29









 





Article 13. — Change in Control



13.1 Acceleration of Exercisability and Lapse of Restrictions. If, upon or within two (2)
years following a Change in Control, a Grantee has a Termination of Affiliation with the Company
and the Company’s Affiliates (excluding any transfer to the Company or its Affiliates) voluntarily
for Good Reason, or involuntarily (other than due to Cause, death, Disability, or Retirement) the
following acceleration provisions shall apply to Awards other than Awards granted under Article 14:




     (a) All outstanding Awards pursuant to which the Grantee may have rights, the exercise of
which is restricted or limited, shall become fully exercisable; unless the right to lapse
restrictions or limitations is waived or deferred by a Grantee prior to such lapse, all
restrictions or limitations (including risks of forfeiture) on outstanding Awards subject to
restrictions or limitations under the Plan shall lapse; and all performance criteria and other
conditions to payment of Awards under which payments of cash, Shares or other property are subject
to conditions shall be deemed to be achieved or fulfilled (at the target level, to the extent
applicable) and shall be waived by the Company; and



     (b) Notwithstanding any other provision of the Plan or any outstanding Award Agreement, Awards
in the form of Non-Qualified Stock Options which are accelerated under this Section 13.1 shall be
exercisable after a Grantee’s Termination of Affiliation for a period equal to the lesser of (i)
the remaining term of each nonqualified option; or (ii) eighteen (18) months.


13.2 Definitions. For purposes of this Article 13, the following terms shall have the
meanings set forth below:




      (a) “Cause” means, from and after the occurrence of a Change in Control,
unless otherwise defined in an Award Agreement or individual employment, change in control, or
other severance agreement, the occurrence of any one or more of the following, as determined in the
good faith and reasonable judgment of the Committee or person to whom the Committee may delegate
its authority under the Plan:




     (i) willful failure by a Grantee to substantially perform his or her duties (as they
existed immediately prior to a Change in Control), other than any such failure resulting
from a Disability; or




     (ii) Grantee’s conviction of or plea of nolo contendere to a crime involving fraud,
dishonesty or any other act constituting a felony involving moral turpitude or causing
material harm, financial or otherwise, to the Company or an Affiliate; or




     (iii) Grantee’s willful or reckless material misconduct in the performance of his
duties which results in an adverse effect on the Company, the Subsidiary or an Affiliate; or




     (iv) Grantee’s willful or reckless violation or disregard of the code of business
conduct or other published policy of the Company or an Affiliate; or




     (v) Grantee’s habitual or gross neglect of duties.



30









 





     (b) “Change Date” means, with respect to an Award, the date on which a Change in
Control first occurs while the Award is outstanding.



     (c) “Change in Control” means, unless otherwise defined in an Award Agreement or
individual Change in Control severance agreement, the occurrence of any one or more of the
following:




     (i) any person (as such term is used in Rule 13d-5 of the SEC under the Exchange Act)
or group (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act),
other than The Williams Companies, Inc. (from the Effective Date until immediately after the
completion of the Spin-Off), a Controlled Affiliate or any employee benefit plan (or any
related trust) sponsored or maintained by the Company or any of its Controlled Affiliates (a
“Related Party”), becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of 20% or more of the common stock of the Company or of Voting Securities representing
20% or more of the combined voting power of all Voting Securities of the Company, except
that no Change in Control shall be deemed to have occurred solely by reason of such
beneficial ownership by a Person with respect to which both more than 75% of the common
stock of such Person and Voting Securities representing more than 75% of the combined voting
power of the Voting Securities of such Person are then owned, directly or indirectly, by the
persons who were the direct or indirect owners of the common stock and Voting Securities of
the Company immediately before such acquisition, in substantially the same proportions as
their ownership, immediately before such acquisition, of the common stock and Voting
Securities of the Company, as the case may be; or




     (ii) the Company’s Incumbent Directors (determined using the date of the Award as the
baseline date) cease for any reason to constitute at least a majority of the directors of
the Company then serving; or




     (iii) consummation of a merger, reorganization, recapitalization, consolidation, or
similar transaction (any of the foregoing, a “Reorganization Transaction”), other than a
Reorganization Transaction that results in the Persons who were the direct or indirect
owners of the outstanding common stock and Voting Securities of the Company immediately
before such Reorganization Transaction becoming, immediately after the consummation of such
Reorganization Transaction, the direct or indirect owners, of both at least 65% of the
then-outstanding equity securities of the Surviving Enterprise and Voting Securities
representing at least 65% of the combined voting power of the then-outstanding Voting
Securities of the Surviving Enterprise, in substantially the same respective proportions as
such Persons’ ownership of the common stock and Voting Securities of the Company immediately
before such Reorganization Transaction; or




     (iv) consummation of a plan or agreement for the sale or other disposition of all or
substantially all of the consolidated assets of the Company or a plan of complete
liquidation of the Company, other than any such transaction that would result in (A) a
Related Party owning or acquiring more than 50% of the assets owned by the Company
immediately prior to the transaction or (B) the Persons who were the direct or indirect
owners of the outstanding common stock and Voting Securities of the Company



31









 







immediately before such transaction becoming, immediately after the consummation of
such transaction, the direct or indirect owners, of more than 50% of the assets owned by the
Company immediately prior to the transaction.


Notwithstanding the occurrence of any of the foregoing events and subject to Section 17.18, a
Change in Control shall not occur with respect to a Grantee if, in advance of such event, the
Grantee agrees in writing that such event shall not constitute a Change in Control.



Notwithstanding anything in this Plan to the contrary, none of (1) the initial public offering of
the Common Stock, (2) the spin-off of the Company from The Williams Companies, Inc., or (3) any
changes to the capital structure of the Company or the ownership of the Voting Securities of the
Company made prior to the time of the consummation of either the initial public offering of the
Common Stock or the distribution of the Company’s securities to the stockholders of The Williams
Companies, Inc. in connection with the spin-off, will be considered a Change in Control for
purposes of this Plan.




     (d) “Good Reason” means, unless otherwise defined in an Award Agreement or individual
employment, change in control or other severance agreement, the occurrence, upon or within two
years following a Change in Control and without a Grantee’s prior written consent, of any one or
more of the following:




     (i) a material adverse reduction in the nature or scope of the Grantee’s duties from
the most significant of those assigned at any time in the 90-day period prior to a Change in
Control; or




     (ii) a significant reduction in the authority and responsibility assigned to the
Grantee; or




     (iii) any failure to pay Grantee’s base salary; or




     (iv) a material reduction of Grantee’s aggregate compensation and/or aggregate benefits
from the amounts and/or levels in effect on the Change Date, unless such reduction is part
of a policy applicable to peer employees of the Employer and of any successor entity; or




     (v) a requirement by the Company or an Affiliate that the Grantee’s principal duties be
performed at a location more than fifty (50) miles from the location where the Grantee was
employed immediately preceding the Change in Control, without the Grantee’s consent (except
for travel reasonably required in the performance of the Grantee’s duties); provided such
new location is farther from Grantee’s residence than the prior location; or




     (vi) the failure of the Surviving Enterprise following a Reorganization Transaction to
assume all Awards previously made under the Plan or to provide equivalent awards of
substantially the same value.


Notwithstanding anything in this Article 13 to the contrary, no act or omission shall constitute
grounds for “Good Reason”:







32









 









     (i) Unless, at least 30 days prior to his termination, Grantee gives a written notice
to the Company or the Affiliate that employs Grantee of his intent to terminate his
employment for Good Reason which describes the alleged act or omission giving rise to Good
Reason;




     (ii) Unless such notice is given within 90 days of Grantee’s first actual knowledge of
such act or omission; and




     (iii) Unless the Company or the Affiliate that employs Grantee fails to cure such act
or omission within the 30 day period after receiving such notice.


Further, no act or omission shall be “Good Reason” if Grantee has consented in writing to such act
or omission.




     (e) “Incumbent Directors” means, determined as of any date by reference to any
baseline date:




     (i) the members of the Board on the date of such determination who have been members of
the Board since such baseline date; and




     (ii) the members of the Board on the date of such determination who were appointed or
elected after such baseline date and whose election, or nomination for election by
stockholders of the Company or the owners of the Surviving Enterprise, as applicable, was
approved by a vote or written consent of two-thirds of the directors comprising the
Company’s Incumbent Directors on the date of such vote or written consent, but excluding
each such member whose initial assumption of office was in connection with (A) an actual or
threatened election contest, including a consent solicitation, relating to the election or
removal of one or more members of the Board or (B) a “tender offer” (as such term is used in
Section 14(d) of the Exchange Act).



     (f) “Retirement” shall have the meaning ascribed to such term in the Company’s
governing tax-qualified retirement plan applicable to the Grantee, or if no such plan is applicable
to the Grantee, in the good faith determination of the Committee.



     (g) “Surviving Enterprise” means the entity resulting from a Reorganization
Transaction or, if securities representing at least 50% of the aggregate voting power of all Voting
Securities of such resulting entity are directly or indirectly owned by another entity, such other
entity.



     (h) “Voting Securities” of an entity means equity securities of such entity that are
entitled to vote generally in the election of the members of the board of directors or other
governing body of such entity.


13.3 Flexibility to Amend. The provisions of this Article 13 and any similar or related
provisions of any Award Agreement may be modified at any time prior to a Change in Control, without
the consent of the Grantee or the Company’s stockholders.







33









 








Article 14. — Non-Management Director Awards



14.1 Director Annual Grant.




     (a) Automatic Grant of Director Annual Grant. Subject to adjustment as provided in
Section 4.2, annually or at such other time or times as the Board may, in its sole discretion,
determine, each Non-Management Director shall be granted an Award payable, as determined by the
Board, in the form of one or a combination of Restricted Stock or Restricted Stock Units
(determined by rounding up to the next higher whole number of Shares any fractional portion of a
Share equal to or in excess of one-half Share, and otherwise rounding down to the next lower whole
number of Shares) having a Fair Market Value at the close of business on the Grant Date of up to
____________ (“Director Annual Grant”). If no Annual Meeting of Company Stockholders is held prior
to June 1 of any calendar year, the Grant Date for the Director Annual Grant shall be May 31.
Notwithstanding the foregoing, the Board may, in its discretion exercised at any time prior to the
date a Director Annual Grant is granted for a year, provide that the Director Annual Grant for such
year shall be granted in installments, so that only a portion (which portion shall be the same for
each Non-Management Director) of the Director Annual Grant shall be granted on the date of the
Annual Meeting of Company Stockholders (or May 31, as applicable) of such year, and the remaining
portion or portions shall be granted at such time or times in such year as the Board may specify at
the time it determines to grant the Director Annual Grant in installments. A person who first
becomes a Non-Management Director after the conclusion of the Annual Meeting of Company
Stockholders and prior to August 1 of any year shall be granted the full Director Annual Grant for
such year as of December 15.



     (b) Prorated Director Annual Grant.




     (i) Subject to adjustment as provided in Section 4.2, a person who first becomes a
Non-Management Director on or after August 1 of any year from and after 2012 and prior to
the first Annual Meeting of Company Stockholders following the date the person becomes a
Non-Management Director shall be granted a prorated Director Annual Grant for such first
year with a Grant Date following the date such person becomes a Non-Management Director
determined as follows:




     (A) The Grant Date shall be December 15 if the person first becomes a
Non-Management Director on or before December 15 of the year.




     (B) The Grant Date shall be the date of the next Annual Meeting of Company
Stockholders if the person first becomes a Non-Management Director on or after
December 16 of the year. If no Annual Meeting of Company Stockholders is held prior
to the next following June 1, the Grant Date shall be May 31 of the year following
the date the person becomes a Non-Management Director.




     (ii) The prorated portion of the Director Annual Grant shall be determined by
multiplying the value of such Director Annual Grant by a fraction, the numerator of which is
the number of full and fractional calendar months elapsing between the date such person
first becomes a Non-Management Director and the date of the first Annual Meeting of Company
Stockholders following the date the person becomes a Non-



34









 







Management Director and the denominator of which is twelve; provided that with respect
to any component of a Director Annual Grant denominated in Shares, including but not limited
to Shares of Restricted Stock or Restricted Stock Units, only whole numbers of Shares shall
be granted, determined by rounding up to the next higher whole number of Shares any
fractional portion of a Share equal to or in excess of one-half Share, and otherwise
rounding down to the next lower whole number of Shares. If no Annual Meeting of Company
Stockholders is scheduled as of a December 15 Grant Date or held as of a May 31 Grant Date,
such prorated Director Annual Grant shall be determined by multiplying each component of
such Director Annual Grant by a fraction, the numerator of which is the number of full and
fractional calendar months elapsing between the date such person first becomes a
Non-Management Director and May 31 of the year following the date such person becomes a
Non-Management Director and the denominator of which is twelve. As to any component
denominated in Shares, including without limitation Shares of Restricted Stock or Restricted
Stock Units, only whole numbers of Shares shall be granted, determined by rounding up to the
next higher whole number of Shares any fractional portion of a Share equal to or in excess
of one-half Share, and otherwise rounding down to the next lower whole number of Shares.




     (iii) In the event the Board has determined that the Director Annual Grant for a year
shall be granted in installments, the Board shall make appropriate provisions for prorating
installments with respect to Non-Management Directors entitled to a prorated Director Annual
Grant, consistent with the preceding provisions of this Section 14.1(b).



     (c) Non-Management Director Status. A person must be a Non-Management Director on the
Grant Date of a Director Annual Grant (or any installment thereof) in order to be granted such
Director Annual Grant (or installment thereof). For a Director Annual Grant granted on the date of
the Annual Meeting of Company Stockholders, other than a prorated Director Annual Grant, the person
must be a Non-Management Director at the conclusion of the Annual Meeting of Company Stockholders.



     (d) Vesting and Payment. Each Director Annual Grant shall vest and be paid out in
Shares as determined by the Committee.


14.2 Election to Receive Director Fees in Shares or Restricted Stock Units in Lieu of Cash.




     (a) Payment of Director Fees in Shares. To the extent permitted by the Committee from
time to time, a Non-Management Director may elect (“Equity Election”) to be paid all or a portion
of cash fees, if any, earned in his or her capacity as a Non-Management Director (including any
retainer fees, fees for service as chairman of a Board committee and any other cash fees paid to
directors (“Director Fees”)), in the form of Shares in lieu of cash. An Equity Election may be
made at any time prior to the date Director Fees would otherwise have been paid in cash, subject to
such restrictions and advance filing requirements as the Company may impose, including, but not
limited to, restrictions designed to comply with the requirements of Section 409A of the Code.
Each Equity Election shall be irrevocable, shall specify the portion of the Director Fees to be
paid in the form of Shares and shall remain in effect with respect to future Director Fees until
the Non-Management Director revokes or changes such Equity Election. Any such revocation or change
shall have prospective application only. Shares delivered



35









 




pursuant to an Equity Election shall be that whole number of Shares (determined by rounding up to
the next higher whole number of Shares any fractional portion of a Share equal to or in excess of
one-half Share, and otherwise rounding down to the next lower whole number of Shares), determined
by dividing the amount of Director Fees to be paid in Shares by the Fair Market Value of a Share at
the close of business on the date such Director Fees would otherwise be paid.




     (b) Payment of Director Fees in Restricted Stock Units. A Non-Management Director who
makes a Deferral Election in accordance with Section 14.3 shall receive all or part (as he or she
elects) of his or her Director Fees in the form of a number of Restricted Stock Units equal to the
quotient of the amount of Director Fees to be paid in the form of Restricted Stock Units divided by
the Fair Market Value of a Share at the close of business on the date such Director Fees would
otherwise be paid in cash.


14.3 Deferral Elections. To the extent permitted by the Committee from time to time, each
member of the Board who is a Non-Management Director may make an election (“Deferral Election”) to
be paid any or all of the following (“Deferrable Amounts”) in the form of Restricted Stock Units in
lieu of cash or Shares, as applicable: (a) Director Annual Grants as provided in Section 14.1; or
(b) Director Fees as provided in 14.2(a).




     (a) Timing of Deferral Elections. An initial Deferral Election must be filed with the
Human Resources Department of the Company no later than December 31 of the year preceding the
calendar year in which the Deferrable Amounts to which the Deferral Election applies would
otherwise be paid or delivered, subject to such restrictions and advance filing requirements as the
Company may impose; provided that any newly elected or appointed Non-Management Director may file a
Deferral Election not later than 30 days after the date such person first becomes a Non-Management
Director. A Deferral Election shall be irrevocable as of the filing deadline and shall only apply
with respect to Deferrable Amounts otherwise payable after the filing of such election. Any such
revocation or change shall have prospective application only and shall in no event apply with
respect to compensation earned in the calendar year in which the revocation or change is made.



     (b) Content of Deferral Elections. A Deferral Election must specify the following:




     (i) (A) The number of shares (including shares subject to Restricted Stock Units
granted under Section 14.1(a) or Section 14.1(b)) subject to the Director Annual Grant to be
deferred and paid in Restricted Stock Units under this Section 14.3 and/or (B) the dollar
amount of Director Fees to be deferred and paid in Restricted Stock Units under this Section
14.3, as applicable; and




     (ii) the date such Restricted Stock Units shall be paid (subject to such Period of
Restriction and other limitations as may be specified by counsel to the Company).



     (c) Deferral Account. The Company shall establish an account (“Deferral Account”) on
its books for each Non-Management Director who makes a Deferral Election. A number of Restricted
Stock Units (determined in the case of a Deferrable Amount otherwise payable in cash by dividing
the amount of cash to be deferred by the Fair Market Value of a Share at the close of business on
the date such cash would otherwise be paid) shall be credited to the Non-



36









 




Management Director’s Deferral Account as of each date a Deferrable Amount subject to a Deferral
Election would otherwise be paid. Deferral Accounts shall be maintained for recordkeeping purposes
only and the Company shall not be obligated to segregate or set aside assets representing
securities or other amounts credited to Deferral Accounts. The obligation to make distributions of
securities or other amounts credited to Deferral Accounts shall be an unfunded unsecured obligation
of the Company.




     (d) Settlement of Deferral Accounts. The Company shall settle a Non-Management
Director’s Deferral Account by delivering to the holder thereof (which may be the Non-Management
Director or his or her beneficiary) a number of Shares equal to the number of Restricted Stock
Units then credited to such Deferral Account (or a specified portion in the event of any partial
settlement); provided that if less than the value of a whole Share remains in the Deferral Account
at the time of any such distribution, the number of Shares distributed shall be rounded up to the
next higher whole number of Shares if the fractional portion of a Share remaining is equal to or in
excess of one-half Share, and otherwise shall be rounded down to the next lower whole number of
Shares. Such settlement shall be made at the time or times specified in the applicable Deferral
Election.


14.4 Insufficient Number of Shares. If at any date insufficient Shares are available under
the Plan for the automatic grant of Director Annual Grants, or the delivery of Shares in lieu of
cash payment of Director Fees, or crediting Restricted Stock Units pursuant to a Deferral Election,
(a) Director Annual Grants under Section 14.1 automatically shall be granted proportionately to
each Non-Management Director eligible for such a grant to the extent Shares are then available
(provided that no Director Annual Grant shall be granted with respect to a fractional number of
Shares), and (b) then, if any Shares remain available, Director Fees elected to be received in
Shares shall be paid in the form of Shares or Restricted Stock Units proportionately among
Non-Management Directors then eligible to participate to the extent Shares are then available and
otherwise in the form of cash.



14.5 Non-Forfeitability. The interest of each Non-Management Director in Director Annual
Grants granted or delivered under the Plan at all times shall be non-forfeitable, except to the
extent the Board provides otherwise.








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Article 15. — Amendment, Modification, and Termination



15.1 Amendment, Modification, and Termination. Subject to Section 15.2, the Board may, at
any time and from time to time, alter, amend, suspend, discontinue or terminate the Plan in whole
or in part without the approval of the Company’s stockholders, except that (a) any amendment or
alteration shall be subject to the approval of the Company’s stockholders if such stockholder
approval is required by any federal or state law or regulation or the rules of any securities
exchange or other form of securities market on which the Shares may then be listed or quoted, (b)
the Board may otherwise, in its discretion, determine to submit other such amendments or
alterations to stockholders for approval and (c) no amendment or alteration of Section 6.3 or
Section 10.5 (except to correct a scrivener’s error) shall be made without the approval of the
Company’s stockholders.



15.2 Awards Previously Granted. Except as otherwise specifically permitted in the Plan or
an Award Agreement, no termination, amendment, or modification of the Plan shall adversely affect
in any material way any Award previously granted under the Plan, without the written consent of the
Grantee of such Award; provided that Article 13 may be removed, amended or modified at any time
prior to a Change in Control without the consent of any Grantee.







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Article 16. — Withholding



16.1 Mandatory Tax Withholding




     (a) Whenever, under the Plan, (i) Shares are to be delivered upon payment of an Award, (ii)
Shares of Restricted Stock become nonforfeitable, (iii) a cash payment is made for any Award, or
(iv) any other payment event occurs with respect to rights and benefits hereunder, the Company or
any Affiliate shall be entitled to require (A) that the Grantee remit an amount in cash, or in the
Company’s discretion, in Shares, valued at their Fair Market Value on the date the withholding
obligation arises, sufficient to satisfy all of the employer’s federal, state, and local tax
withholding requirements related thereto but no more than the minimum amount necessary to satisfy
such amounts (“Required Withholding”), (B) the withholding of such Required Withholding from
compensation otherwise due to the Grantee or from any Shares valued at their Fair Market Value at
the date the withholding obligation arises, or from any other payment due to the Grantee under the
Plan or otherwise or (C) any combination of the foregoing.



     (b) If any Grantee makes an election under Section 83(b) of the Code, the Company or any
Affiliate shall be entitled to require (i) that the Grantee remit an amount in cash, or in the
Company’s discretion, in Shares, valued at their Fair Market Value on the date the withholding
obligation arises, sufficient to satisfy the resulting Required Withholding, (ii) the withholding
of such Required Withholding from compensation otherwise due to the Grantee or from any Shares or
other payment due to the Grantee under the Plan or otherwise or (iii) any combination of the
foregoing.


16.2 Notification under Code Section 83(b). If any Grantee makes the election permitted
under Section 83(b) of the Code to include in such Grantee’s gross income in the year of transfer
the amounts specified in Section 83(b) of the Code, then such Grantee shall notify the Company of
such election within ten (10) days of filing the notice of the election with the Internal Revenue
Service, in addition to any filing and notification required pursuant to regulations issued under
Section 83(b) of the Code. The Committee may, in connection with the grant of an Award or at any
time thereafter, prohibit a Grantee from making the election described above.








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Article 17. — Additional Provisions



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



17.2 Severability. If any part of the Plan is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any other
part of the Plan. Any Section or part of a Section so declared to be unlawful or invalid shall, if
possible, be construed in a manner which will give effect to the terms of such Section or part of a
Section to the fullest extent possible while remaining lawful and valid.



17.3 Requirements of Law. The granting of Awards and the delivery of Shares under the Plan
shall be subject to all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or securities exchanges as may be required. Notwithstanding any provision of
the Plan or any Award, Grantees shall not be entitled to exercise, or receive benefits under, any
Award, and the Company (and any Affiliate) shall not be obligated to deliver any Shares or deliver
benefits to a Grantee, if such exercise or delivery would constitute a violation by the Grantee or
the Company of any applicable law or regulation.



17.4 Securities Law Compliance.




     (a) If the Committee deems it necessary to comply with any applicable securities law, or the
requirements of any securities exchange or other form of securities market upon which Shares may be
listed, the Committee may impose any restriction on Shares acquired pursuant to Awards under the
Plan as it may deem advisable. All certificates for Shares delivered under the Plan pursuant to
any Award or the exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations and other
requirements of the SEC, any securities exchange or other form of securities market upon which
Shares are then listed, any applicable securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such restrictions. If
so requested by the Company, the Grantee shall make a written representation to the Company that he
or she will not sell or offer to sell any Shares unless a registration statement shall be in effect
with respect to such Shares under the Securities Act of 1933, as amended, and any applicable state
or foreign securities law or unless he or she shall have furnished an opinion to the Company, in
form and substance satisfactory to the Company, that such registration is not required.



     (b) If the Committee determines that the exercise, nonforfeitability of, or delivery of
benefits pursuant to, any Award would violate any applicable provision of securities laws or the
listing requirements of any securities exchange or other form of securities market on which are
listed any of the Company’s equity securities, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as applicable, but the Company shall use all reasonable efforts to
cause such exercise, nonforfeitability or delivery to comply with all such provisions at the
earliest practicable date.



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17.5 No Rights as a Stockholder. No Grantee shall have any rights as a stockholder of the
Company with respect to the Shares (other than Shares of Restricted Stock) which may be deliverable
upon exercise or payment of such Award until such Shares have been delivered to him or her. Shares
of Restricted Stock, whether held by a Grantee or in escrow by the Secretary of the Company, shall
confer on the Grantee all rights of a stockholder of the Company, except as otherwise provided in
the Plan or Award Agreement in compliance with applicable law. At the time of a grant of Shares of
Restricted Stock, the Committee may require the payment of cash dividends thereon to be deferred
and, if the Committee so determines, reinvested in additional Shares of Restricted Stock. Stock
dividends and deferred cash dividends issued with respect to Shares of Restricted Stock shall be
subject to the same restrictions and other terms as apply to the Shares of Restricted Stock with
respect to which such dividends are issued. The Committee may in its discretion provide for
payment or crediting of interest on deferred cash dividends.



17.6 Nature of Payments. Unless specified in the Award Agreement or otherwise determined
by the Company, Awards shall be special incentive payments to the Grantee and shall not be taken
into account in computing the amount of salary or compensation of the Grantee for purposes of
determining any pension, retirement, death or other benefit under (a) any pension, retirement,
profit-sharing, bonus, insurance or other employee benefit plan of the Company or any Affiliate,
except as such plan shall otherwise expressly provide, or (b) any agreement between (i) the Company
or any Affiliate and (ii) the Grantee, except as such agreement shall otherwise expressly provide.



17.7 Non-Exclusivity of 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 to adopt such other compensatory arrangements for employees
or Non-Management Directors as it may deem desirable.



17.8 Governing Law. The Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Delaware, other than its laws respecting
choice of law.



17.9 Share Certificates. Any certificates for Shares delivered under the terms of the Plan
shall be subject to such stop-transfer orders and other restrictions as the Committee may deem
advisable under federal or state securities laws, rules and regulations thereunder, and the rules
of any foreign securities laws, rules and regulations thereunder, and the rules of any national
securities exchange or other form of securities market on which Shares are listed or quoted. The
Committee may cause a legend or legends to be placed on any such certificates to make appropriate
reference to such restrictions or any other restrictions or limitations that may be applicable to
Shares. In addition, during any period in which Awards or Shares are subject to restrictions or
limitations under the terms of the Plan or any Award Agreement, or during any period during which
delivery or receipt of an Award or Shares has been deferred by the Committee or a Grantee, the
Committee may require any Grantee to enter into an agreement providing that certificates
representing Shares deliverable or delivered pursuant to an Award shall remain in the physical
custody of the Company or such other person as the Committee may designate.







41









 







17.10 Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made
to a Grantee pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give
any such Grantee any rights that are greater than those of a general creditor of the Company;
provided that the Committee may authorize the creation of trusts or make other arrangements to meet
the Company’s obligations under the Plan to deliver cash, Shares or other property pursuant to any
Award which trusts or other arrangements shall be consistent with the “unfunded” status of the Plan
unless the Committee otherwise determines.



17.11 Employment. Nothing in the Plan or an Award Agreement shall interfere with or limit
in any way the right of the Company or any Affiliate to terminate any Grantee’s employment at any
time, for any reason or no reason, or shall confer upon any Grantee the right to continue in the
employ or as an officer of the Company or any Affiliate.



17.12 Participation. No employee or officer shall have the right to be selected to receive
an Award under this Plan or, having been so selected, to be selected to receive a future Award.



17.13 Military Service. Awards shall be administered in accordance with Section 414(u) of
the Code and the Uniformed Services Employment and Reemployment Rights Act of 1994 to the extent
required by law or as determined by the Committee.



17.14 Construction; Gender and Number. The following rules of construction will apply to
the Plan: (a) the word “or” is disjunctive but not necessarily exclusive, and (b) words in the
singular include the plural, words in the plural include the singular, and words in the neuter
gender include the masculine and feminine genders and words in the masculine or feminine gender
include the other neuter genders.



17.15 Headings. The headings of articles and sections are included solely for convenience
of reference, and if there is any conflict between such headings and the text of this Plan, the
text shall control.



17.16 Obligations. Unless otherwise specified in an Award Agreement, the obligation to
deliver, pay or transfer any amount of money or other property pursuant to Awards under this Plan
shall be the sole obligation of a Grantee’s employer; provided that the obligation to deliver or
transfer any Shares pursuant to Awards under this Plan shall be the sole obligation of the Company.



17.17 No Right to Continue as Director. Nothing in the Plan or any Award Agreement shall
confer upon any Non-Management Director the right to continue to serve as a director of the
Company.



17.18 Code Section 409A Compliance. The Board intends that, except as may be otherwise
determined by the Committee, any Awards under the Plan satisfy the requirements of Section 409A of
the Code and related regulations and Treasury pronouncements (“Section 409A”) to avoid the
imposition of any taxes, including additional income taxes, thereunder. If the Committee determines
that an Award, Award Agreement, payment, distribution, deferral election, transaction or any other
action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a
Grantee to become subject to additional taxes pursuant to






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Section 409A, unless the Committee expressly determines otherwise, such grant of Award, payment,
distribution, deferral election, transaction or other action or arrangement shall not be undertaken
and the related provisions of the Plan and/or Award Agreement will be amended or deemed modified in
as close a manner as possible to give effect to the original terms of the Award, or, only if
necessary because a modification or deemed modification would not be reasonably effective in
avoiding the additional income tax under Section 409A(a)(1)(B) of the Code, rescinded in order to
comply with the requirements of Section 409A to the extent determined by the Committee without the
consent of or notice to the Grantee. Notwithstanding the foregoing, with respect to any Award
intended by the Committee to be exempt from the requirements of Section 409A which is to be paid
out when vested, such payment shall be made as soon as administratively feasible after the Award
becomes vested, but in no event shall such payment be made later than 2-1/2 months after the end of
the calendar year in which the Award became vested unless (a) deferred pursuant to Section 5.8 or
14.3 or (b) otherwise permitted under the exemption provisions of Section 409A.




END OF DOCUMENT





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