Exhibit 10.1


 


RUSH ENTERPRISES, INC.

EXECUTIVE TRANSITION PLAN


 


1.                                       Purpose.  The purpose
of the Executive Transition Plan (the “Plan”) is to provide certain protections
to covered executives in the event their employment is involuntarily
terminated, including in connection with a Change in Control of the Company. It
is intended that having the protections provided by the Plan will alleviate
personal concerns that Participants might otherwise have about uncertainties
that may arise in the face of certain business exigencies and opportunities the
Company may have from time to time and, in turn, provide greater assurance to
the Company and its shareholders that the covered executives will be able to
maintain their undivided focus on and attention to the business and interests
of the Company and the enhancement of shareholder value.


 


2.                                       Certain Definitions.


 


(a)                                  “Affiliate” means any entity at least 50%  of the voting, capital or profit interests
of which are owned directly or indirectly by the Company.


 


(b)                                 “Annual Cash Bonus” means the amount
payable to a Participant under the terms of any bonus program sponsored by the
Company in which the Participant is eligible to participate.


 


(c)                                  “Base Salary” means with respect to a
Participant, an amount equal to the Participant’s rate of basic pay for the
period in question, excluding amounts for overtime, bonuses, or allowances, as
determined by the Committee in its sole discretion.


 


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


 


(e)                                  “Cause” means a Participant’s (i) conviction
or plea of guilty or nolo contendre to a felony or other crime involving moral
turpitude; (ii) commission of fraud or a material act or omission
involving dishonesty with respect to the Company, as reasonably determined by
the Board; (iii) willful failure or refusal to carry out the material
responsibilities of his or her employment, as reasonably determined by the
Board; or (iv) gross negligence, willful misconduct, or engaging in a
pattern of behavior which has had or is reasonably likely to have a significant
adverse effect on the Company, as reasonably determined by the Board.


 


(f)                                    “Change in Control” means the occurrence
of any of the following:


 


(i)                                     any “person” (as such term is used in Section 13(d) and
14(d) of the Exchange Act, other than (1) the Company, (2) any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, (3) any entity owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their ownership
of stock of the Company, (4) W. Marvin Rush, W.M. “Rusty” Rush and their
immediate family members (i.e., brothers and sisters (whether by whole or half
blood), spouse, ancestors, and lineal descendants); or (5) any person who
becomes a “beneficial owner” (as defined below) in connection with a 


 





















 


transaction described in clause (1) of subparagraph (iii) below)
is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person any securities
acquired directly from the Company) representing 40% or more of the combined
voting power of the Company’s then outstanding voting securities;


 


(ii)           Incumbent Directors cease for any reason
to constitute a majority of the directors then serving;


 


(iii)          there is consummated a merger or
consolidation of the Company or any direct or indirect subsidiary of the
Company with any other entity, other than (1) a merger or consolidation
which results in the directors of the Company immediately prior to such merger
or consolidation continuing to constitute at least a majority of the board of
directors of the Company, the surviving entity or any parent thereof or (2) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person is or becomes the beneficial owner,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities acquired directly
from the Company) representing 40% or more of the combined voting power of the
Company’s then outstanding voting securities;


 


(iv)                              the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets, other than a sale or disposition by
the Company of all or a majority of the Company’s assets, income or revenue to
an entity, at least 50% of the combined voting power of the voting securities
of which are owned by shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such sale or
disposition; or


 


(v)                                 any other transaction or event occurs
that is resolved by the Company’s Board to be a “Change in Control” for
purposes of this Agreement.


 


(g)                                 “Code” means the Internal Revenue Code of
1986, as amended.


 


(h)                                 “Committee” means the Compensation
Committee of the Board.


 


(i)                                     “Company” means Rush Enterprises Inc., a
Texas corporation, its Affiliates and any successor or assignee thereof.


 


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(j)                                     “Disability” means the inability of a
Participant to perform the material duties of his or her employment by reason
of a medically determinable physical or mental impairment that can be expected
to result in death or that has lasted or is expected to last for a continuous
period of at least 12 months, as determined by a duly licensed physician
selected by the Committee.


 


(k)                                  “Good Reason” means (i) prior to or
following a Change in Control, a material adverse change in a Participant’s
status or position, including, without limitation, any material adverse change
resulting from a diminution in the Participant’s position, duties,
responsibilities or authority or the assignment to the Participant of duties or
responsibilities that are materially inconsistent with his or her status or
position; (ii) prior to or following a Change in Control, a reduction in
the Participant’s annual base salary or a failure to pay same absent similar
reductions in the base salary of similarly situated employees for legitimate
business purposes; (iii) following a Change in Control, a reduction in the
Participant’s target incentive award opportunities; (iv) following a
Change in Control, the relocation of the Participant’s principal place of
employment by more than 50 miles from the current location; (v) in
connection with a Change in Control, the successor or acquiring company fails
or refuses to assume the obligations of the Company under this Plan; or (vi) with
respect to a Level 1 or Level 2 Participant, following a Change in Control a
Level 1 or Level 2 Participant disagrees with the philosophy or policies of the
successor or acquiring Company.  Before terminating employment for Good
Reason, a Participant must specify in writing to the Company the nature of the
act or omission that the Participant deems to constitute Good Reason and
provide the Company 30 days after receipt of such notice to review and, if
required, correct the situation (and thus prevent the Participant’s termination
for Good Reason).


 


(l)                                     “Incumbent Director” means any one of the
following:


 


(i)                                     any member of the Board on March 31,
2008; or


 


(ii)                                  any individual appointed or elected to
the Board after March 31, 2008, if and only if both:


 


(A)                              such individual’s initial assumption of
office is not in connection with an actual or threatened election contest,
including but not limited to a consent solicitation relating to the election of
directors of the Company, and


 


(B)                                the appointment or election by the Board
or the nomination for election by the Company’s shareholders of such individual
was approved or recommended by a vote of at least two-thirds of the Incumbent
Directors in office at the time of such approval or recommendation.


 


(m)                               “Involuntary Termination” means the
termination of a Participant’s employment with the Company (i) by the
Company for any reason other than Cause, death, or Disability, or (ii) by
the Participant for Good Reason.


 


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(n)                                 “Level 1 Participant” means the employees
of the Company selected by the Committee to participate in the Plan as a Level
1 Participant as listed in Exhibit A, as Exhibit A may be amended
from time to time by the Committee.


 


(o)                                 “Level 2 Participant” means the employees
of the Company selected by the Committee to participate in the Plan as a Level
2 Participant as listed in Exhibit A, as Exhibit A may be amended
from time to time by the Committee.


 


(p)                                 “Level 3 Participant” means the employees
of the Company selected by the Committee to participate in the Plan as a Level
3 Participant as listed as listed in Exhibit A, as Exhibit A may be amended
from time to time by the Committee.


 


(q)                                 “Level 4 Participant” means the employees
of the Company selected by the Committee to participate in the Plan as a Level
4 Participant as listed in Exhibit A, as Exhibit A may be amended
from time to time by the Committee.


 


(r)                                    “Participant” means any employee of the
Company selected by the Committee to participate in the Plan.


 


3.                                       Administration.


 


(a)                                  The Committee. 
The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee, acting in its sole and absolute
discretion, shall have full power and authority to interpret, construe and
apply the provisions of the Plan and to take such actions as it deems necessary
or appropriate in order to carry out the provisions of the Plan. The decision
of the Committee as to any question or issue arising under or in connection
with the Plan or an individual’s participation in the Plan shall be final and
conclusive on all persons. The Committee may delegate to other persons such
duties and functions as it deems appropriate in connection with the
administration of the Plan.


 


(b)                                 Indemnification. 
The Company shall indemnify and hold harmless each member of the
Committee and any employee or director of the Company to whom any duty or function
relating to the administration of the Plan is delegated from and against any
loss, cost, liability (including any sum paid in settlement of a claim with the
approval of the Board), damage and expense (including legal and other expenses
incident thereto) arising out of or incurred in connection with the Plan,
unless and except to the extent attributable to such person’s fraud or willful
misconduct.


 


4.                                       Participation.


 


(a)                                  The Committee shall, in its sole and
absolute discretion, from time to time designate the employees of the Company
eligible to participate in the Plan and whether such individual shall be a
Level 1, Level 2, Level 3, or Level 4 Participant.


 


(b)                                 Each Participant shall be provided,
together with a copy of the Plan, a participation certificate, in such form as
the Committee may from time to time prescribe, specifying that the individual
is a Participant and whether the individual is a Level 1, Level 2 level 3, or
Level 4 Participant.


 


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(c)                                  An employee’s status as a Participant
shall terminate at such time as may be determined by the Committee, in its sole
discretion, provided that such Participant shall be given written notice of
such termination of his or her status as a Participant by the Committee at
least 60 days prior to the effective date of such termination of participation,
and provided further that no employee who is a Participant immediately prior to
a Change in Control shall have his status as a Participant terminated at any
time within the two year period following such Change in Control without the
Participant’s prior written consent.


 


5.                                       Involuntary Termination of Participant’s
Employment - General.
Subject to Section 10 (imposing additional conditions with respect to
receipt of payments and benefits under the Plan, including the elimination of
duplicate payments and benefits due to other agreements that may be applicable,
restoration of payments due to a terminated Participant’s violation of
restrictive covenants and the execution and delivery of a release) and except
as otherwise provided in Section 6 (relating to an Involuntary Termination
in conjunction with a Change in Control), if a Participant experiences an
Involuntary Termination, the Participant shall be entitled to receive the
payments and benefits set forth in the following Sections 5(a) – (f).


 


(a)                                  A single lump sum cash payment equal to
the sum of any unpaid base salary earned by the terminated Participant through
the effective date of his or her Involuntary Termination, if any.


 


(b)                                 Payment of any business expenses that
were incurred prior to the effective date of the Participant’s Involuntary
Termination, but which were not reimbursed and are otherwise eligible for
reimbursement as the effective date of the Participant’s Involuntary
Termination, if any.


 


(c)                                  Any payments or benefits that are payable
to the terminated Participant or any covered spouse, dependent or beneficiary
of the terminated Participant, under and in accordance with the provisions of
any employee benefit plan, program or arrangement of the Company (other than
this Plan).


 


(d)                                 A cash payment as follows:


 


(i)                                   if the Participant is a Level 1
Participant equal to four (4) times the Participant’s current Base Salary.


 


(ii)                                if the Participant is a Level 2 Participant
or a Level 3 Participant equal to one (1) times the Participant’s current
Base Salary plus one-half (1/2) times the Annual Cash Bonus, if any, the
Participant received for the calendar year prior to the calendar year in which
the Participant is Involuntarily Terminated.


 


(iii)                             if the Participant is a Level 4 Participant equal to
one-half (1/2) times the Participant’s current Base Salary plus one-half (1/2)
times the Annual Cash Bonus, if any, the Participant received for the calendar
year prior to the calendar year in which the Participant is Involuntarily
Terminated.


 


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Any such cash payment
provided for in this Section 5(d) to a Level 1 Participant shall be
paid in a single lump sum in cash as soon as administratively practicable after
the Participant is Involuntarily Terminated, but in all cases, no later than 21⁄2
months following the fiscal year in which the Level 1 Participant is
Involuntarily Terminated.  Any such cash
payment provided for in this Section 5(d) to a Level 2 or Level 3
Participant shall be paid in equal monthly installments over a one-year period
beginning with the first month following the month in which the Participant was
Involuntarily Terminated; provided, however, to the extent a Level 2
Participant is a “specified employee” as set forth in Section 409A of the
Code, then no more than two times’ the compensation limit under Section 401(a)(17)
of the Code ($460,000 for 2008) may be paid to such specified employee in the
first six months following the month in which he is Involuntarily
Terminated.  Any such cash payment
provided for in this Section 5(d) to a Level 4 Participant shall be
paid in equal monthly installments over a six-month period beginning with the
first month following the month in which the Participant was Involuntarily
Terminated.  Payments provided for under
this Sections 5(a), (b) and (c) will be paid in accordance with
normal payroll practices.


 


(e)                                  If applicable, the Participant will
continue to participate at the Company’s expense in any group term life
insurance program sponsored by the Company in which the Participant was
eligible to participate immediately prior to his Involuntary Termination as if
the Participant’s employment had continued at the Participant’s highest annual
rate of Base Salary in effect at any time during the 12 months preceding the
effective date of the Participant’s Involuntary Termination.  The Participant’s participation in the group
term life insurance program will continue until the earlier (i) (A) 48
months following the effective date of the Participant’s Involuntary
Termination if the Participant is a Level 1 Participant, (B) 12 months
following the effective date of the Participant’s Involuntary Termination if
the Participant is a Level 2 or Level 3 Participant, or (C) 6 months
following the effective date of the Participant’s Involuntary Termination if
the Participant is a Level 4 Participant, (ii) the date that the
Participant is eligible for coverage under a group term life insurance plan
sponsored by the Participant’s successor employer, or (iii) the
Participant’s death.


 


(f)                                    If the Participant and/or any spouse or
dependent participates in a group health plan sponsored by the Company (other
than pursuant to continuation coverage under the Consolidated Omnibus
Reconciliation Act of 1985 (“COBRA”)) as of the effective date of the
Participant’s Involuntary Termination, then, the Participant and/or any spouse
and/or dependents may elect to continue participating in the group health plan
sponsored by the Company at the same benefit levels as are available for
similarly situated active employees at the Company’s expense until the earlier
of (i) (A) 48 months following the effective date of the Participant’s
Involuntary Termination if the Participant is a Level 1 Participant, (B) 12
months following the effective date of the Participant’s Involuntary
Termination if the Participant is a Level 2 or Level 3 Participant, or (C) 6
months following the effective date of the Participant’s Involuntary
Termination if the Participant is a Level 4 Participant, or, if such coverage
is not permitted by the group health plan sponsored by the Company or under
applicable law, the Company will provide COBRA continuation coverage to such
terminated Participant and/or any spouse or dependents, at the Company’s sole
expense, if and to the extent any of such persons elects and is entitled to
receive COBRA continuation coverage, (ii) the date that the Participant is
eligible for coverage under a group health plan sponsored by the Participant’s
successor employer, or (iii) the Participant’s death.  This continuation coverage shall be in
addition to and not in lieu of COBRA 


 


6

















 


to the extent continuation coverage is permitted by
the group health plan sponsored by the Company and applicable law.  Any reimbursement to Participants under this Section 5(f) must
be made not later than the calendar year following the year in which the
expense is incurred.  Following the benefits
continuation period provided herein, the Participant, and/or any spouse and/or
other qualified beneficiary, as defined under Section 4980B of the Code,
shall be eligible to commence continued medical coverage in accordance with and
for the applicable period required by COBRA. 
If the continuation coverage described above ends as a result of the
Participant’s death, the Participant’s spouse and/or dependents who would
otherwise be considered qualified beneficiaries, as defined under Section 4980B
of the Code, shall be eligible to commence continued medical coverage in
accordance with and for the applicable period required by COBRA.


 


6.                                       Involuntary Termination of a Participant’s
Employment in Conjunction with a Change in Control. Subject to Section 10 (imposing
additional conditions with respect to receipt of payments and benefits under
the Plan, including the elimination of duplicate payments and benefits due to
other agreements that may be applicable, restoration of payments due to a
terminated Participant’s violation of restrictive covenants and the execution
and delivery of a release), if a Participant experiences an Involuntary
Termination during the period beginning six months prior to the date of a
Change in Control or, if earlier, the date a definitive agreement is signed
with respect to the Change in Control,  and ending
on the second anniversary of the Change in Control, then the Participant shall
be entitled to receive the payments and benefits set forth in the following
Sections 6(a) – (g).


 


(a)                                  A single lump sum cash payment equal to
the sum of any unpaid base salary earned by the terminated Participant through
the effective date of his or her Involuntary Termination, if any.


 


(b)                                 Payment of any business expenses that
were incurred prior to the effective date of the Participant’s Involuntary
Termination, but which were not reimbursed and are otherwise eligible for
reimbursement as the effective date of the Participant’s Involuntary
Termination, if any.


 


(c)                                  Any payments or benefits that are payable
to the terminated Participant or any covered spouse, dependent or beneficiary
of the terminated Participant, under and in accordance with the provisions of
any employee benefit plan, program or arrangement of the Company (other than
this Plan).


 


(d)                                 A Cash payment as follows:


 


(i)                                     If the Participant is a Level 1
Participant, the Participant shall receive a payment equal to four (4) times
the Participant’s current Base Salary.


 


(ii)                                  If the Participant is a Level 2
Participant or a Level 3 Participant, the Participant shall receive a payment
equal to two (2) times the Participant’s current Base Salary plus two (2) times
the highest Annual Cash Bonus, if any, the Participant received in any of the 


 


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previous five (5) calendar year prior to the calendar year in
which the Participant is Involuntarily Terminated.


 


(iii)          if the Participant is a Level 4
Participant, the Participant shall receive a payment a payment equal to
one-half (1/2) times the Participant’s current Base Salary plus one-half (1/2)
times the highest Annual Cash Bonus, if any, the Participant received in any of
the previous five (5) calendar year prior to the calendar year in which
the Participant is Involuntarily Terminated.


 


Any such cash payment
provided for in this Section 6(d) shall be paid in a single lump sum
in cash as soon as administratively practicable, but no later than 21⁄2 months
following the year in which the Participant is Involuntarily Terminated.  Payments provided for under this Sections
6(a), (b) and (c) will be paid in accordance with normal payroll
practices.  If a Participant is entitled
to receive payments and benefits under this Section 6 due to an
Involuntary Termination prior to but in conjunction with a Change in Control and
if, with respect to such Involuntary Termination, the Participant receives
payments or benefits under Section 5, then, in order to avoid duplication,
the payments and benefits to which the Participant is entitled under this Section 6
will be reduced by the payments and benefits which the Participant has received
under Section 5.


 


(e)                                  If applicable, the Participant will
continue to participate at the Company’s expense in any group term life
insurance program sponsored by the Company in which the Participant was
eligible to participate immediately prior to the Change in Control or the
Participant’s Involuntary Termination as if the Participant’s employment had
continued at the Participant’s highest annual rate of Base Salary in effect at
any time during the 12 months preceding the effective date of the Change in
Control or Participant’s Involuntary Termination.  The Participant’s participation in the group
term life insurance program will continue until the earlier (i) (A) 48
months following the effective date of the Participant’s Involuntary
Termination if the Participant is a Level 1 Participant, (B) 24 months
following the effective date of the Participant’s Involuntary Termination if
the Participant is a Level 2 or Level 3 Participant, or (C) 6 months following
the effective date of the Participant’s Involuntary Termination if the
Participant is a Level 4 Participant, (ii) the date that the Participant
is eligible for coverage under a group term life insurance plan sponsored by
the Participant’s successor employer, or (iii) the Participant’s death.


 


(f)                                    If the Participant and/or any spouse or
dependent participates in a group health plan sponsored by the Company (other
than pursuant to continuation coverage under the Consolidated Omnibus
Reconciliation Act of 1985 (“COBRA”)) as of the effective date of the Change in
Control or Participant’s Involuntary Termination, then, the Participant and/or
any spouse and/or dependents may elect to continue participating in the group
health plan sponsored by the Company at the same benefit levels as are
available for similarly situated active employees at the Company’s expense
until the earlier of (i) (A) 48 months following the effective date
of the Participant’s Involuntary Termination if the Participant is a Level 1
Participant, (B) 24 months following the effective date of the Participant’s
Involuntary Termination if the Participant is a Level 2 or Level 3 Participant,
or (C) 6 months following the effective date of the Participant’s
Involuntary Termination if the Participant is a Level 4 


 


8

















 


Participant, or, if such coverage is not permitted by
the group health plan sponsored by the Company or under applicable law, the
Company will provide COBRA continuation coverage to such terminated Participant
and/or any spouse and/or dependent, at the Company’s sole expense, if and to
the extent any of such persons elects and is entitled to receive COBRA
continuation coverage, (ii) the date that the Participant is eligible for
coverage under a group health plan sponsored by the Participant’s successor
employer, or (iii) the Participant’s death.  This continuation coverage shall be in
addition to and not in lieu of COBRA to the extent continuation coverage is
permitted by the group health plan sponsored by the Company and applicable
law.  Any reimbursement to Participants
under this Section 6(f) must be made not later than the calendar year
following the year in which the expense is incurred.  Following the benefits continuation period provided
herein, the Participant and/or any spouse and/or other qualified beneficiary,
as defined under Section 4980B of the Code, shall be eligible to commence
continued medical coverage in accordance with and for the applicable period
required by COBRA.  If the continuation
coverage described above ends as a result of the Participant’s death, the
Participant’s spouse and dependents who would otherwise be considered qualified
beneficiaries, as defined under Section 4980B of the Code, shall be
eligible to commence continued medical coverage in accordance with and for the
applicable period required by COBRA.


 


(g)                                 If the Participant participates in any
equity-based compensation plan or program sponsored by the Company, and if the
Participant has any outstanding awards under such Plan as of the effective date
of the Participant’s Involuntary Termination, then, to the extent any such
outstanding award is not fully vested as of the effective date of the
Participant’s Involuntary Termination following a Change in Control, the
Participant shall fully vest in all such awards as of the effective date of
such Involuntary Termination.


 


7.                                       Attorney’s Fees. 
If, following a Change in Control, the Company fails to comply with any
of its obligations under the Plan or the Company takes any action to declare
the Plan void or unenforceable or institutes any litigation or other legal
action designed to deny, diminish or to recover from any Participant (or spouse
or beneficiary, as the case may be) the payments and benefits intended to be
provided, then such Participant (or beneficiary, as the case may be) shall be
entitled to retain counsel of his or her choice at the expense of the Company
to represent such Participant (or beneficiary, as the case may be) in
connection with the good faith initiation or defense of any litigation or other
legal action, whether by or against the Company or any director, officer,
shareholder or other person affiliated with the Company or any successor
thereto in any jurisdiction.


 


8.                                       Termination Due to Death or Disability. 
In the event that a Participant experiences a separation from service as
a result of the Participant’s death or Disability, the Participant shall not be
entitled to any benefits under this Plan.


 


9.                                       Excise Tax Payments. 
If a Participant is entitled to receive payments and benefits under the
Plan and if, when combined with the payments and benefits the Participant is
entitled to receive under any other plan, program or arrangement, the
Participant would be subject to excise tax under Section 4999 of the Code,
then the Company shall make “gross-up” payments to the Participant in the
amount(s), at the time(s) and upon the terms and conditions set forth in Exhibit C
annexed to the Plan and incorporated herein by reference.


 


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10.                                 Additional Conditions of Severance
Payments.


 


(a)                                  Effect of Other Agreements. 
Notwithstanding the provisions hereof, if a Participant is entitled to
receive a payment or benefit under the Plan as a result of an Involuntary
Termination and the Participant is also entitled to receive a payment or
benefit under similar circumstances from the Company under another plan or
agreement, then the Company may reduce the amount of the corresponding payment
or adjust the corresponding benefit to which the Participant (or the
Participant’s beneficiary, as the case may be) is entitled under the Plan if
and to the extent reasonably necessary in order to avoid an unintended
duplication of any such payment or benefit.


 


(b)                                 Restoration. 
Any severance payments and benefits due, made or provided pursuant to
the Plan shall be subject to continuing compliance with the restrictive
covenants described in Exhibit B annexed to and made a part of the Plan,
and repayment pursuant to this Section 10(b). As a condition of coverage
under the Plan, each Participant is subject to the restrictions described in Exhibit B.
If a Participant violates or is in breach of any restrictions set forth in Exhibit B
(the determination of which shall be made by the Committee in its sole
discretion), then the Participant shall (i) not be entitled to any further
severance payments and benefits under the Plan, (ii) immediately return to
the Company any severance payments and the value of any severance benefits
previously received hereunder, and (iii) have no further rights or
entitlements under the Plan.  This Section 10(b) shall
not in any manner supersede or limit any other right the Company may have to
enforce or seek legal or equitable relief based on the Plan or Exhibit B.


 


(c)                                  Release of Claims. 
Notwithstanding anything herein to the contrary, the Committee may
condition severance payments or benefits which, but for the Plan, would not
otherwise be payable, on the execution and delivery of a general release in favor
of the Company, its Affiliates, and its officers, directors and employees, in
such form as the Committee may specify. Any payment or benefit that is so
conditioned may be deferred until the expiration of the seven day revocation
period prescribed by the Age Discrimination in Employment Act of 1967, as
amended, or any similar revocation period in effect on the effective date of
the termination of the Participant’s employment.


 


11.                                 No Duty to Mitigate/Set Off. 
Except as otherwise provided in the Plan or in an employment or other
agreement, a Participant entitled to receive any payment or benefits hereunder
shall not be required to seek other employment or to attempt in any way to
reduce any amounts payable to him or her pursuant to the Plan and the payments
and benefits payable hereunder shall not be reduced by any compensation earned
by the Participant as a result of employment or consultancy with another
person.


 


12.                                 Amendment and Termination. 
The Committee may amend the Plan at any time and from time to time and
the Committee may terminate the Plan at any time after December 31, 2008,
provided, however, that any such action that would have an adverse effect on
the amount, timing or value of the payments or benefits a Participant is or
otherwise may become entitled to receive under the Plan shall not be effective
with respect to the Participant (a) if his or her employment terminates
before or within six months after the date such action is taken, and/or (b) prior
to the second anniversary of a Change in Control if such action is taken (1) on
the day of or 


 


10

















 


subsequent to the Change in Control, (2) prior to
the Change in Control, but at the request of a third party participating
directly or indirectly in the Change in Control, or (3) otherwise in
connection with or in anticipation of the Change in Control.


 


13.                                 Successors and Beneficiaries.


 


(a)                                  Successors and Assigns of Company. 
The Company shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, of all or
substantially all the business or assets of the Company, expressly and
unconditionally to assume and agree to perform or cause to be performed the
Company’s obligations under the Plan in the same manner and to the same extent
that the Company would be required to perform if no such succession or
assignment had taken place. In any such event, the term “Company,” as used in
the Plan shall mean the Company, as defined above and any such successor or
assignee.


 


(b)                                 Beneficiary of Deceased Participant. 
For the purposes hereof, a deceased Participant’s beneficiary will be
the person or persons designated as such in a written Plan beneficiary
designation filed with the Committee or its designee, which may be revoked or
revised in the same manner at any time prior to the Participant’s death. In the
absence of a properly filed written Plan beneficiary designation or if no
designated beneficiary survives a Participant, the deceased Participant’s
estate will be deemed to be the Participant’s beneficiary hereunder.


 


14.                                 Miscellaneous.


 


(a)                                  Compliance with ERISA.


 


(i)                                   This Plan is intended to constitute an
unfunded “employee welfare benefit plan” maintained for the purpose of
providing severance benefits to a select group of management or highly
compensated employees, and the Plan shall be administered in a manner
consistent with such intent.  The Plan is
intended to be excepted from the definitions of “employee pension benefit plan”
and “pension plan” set forth under Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”).


 


(ii)                                If you believe you are entitled to
payments and benefits under the Plan, then contact the Committee in writing. If
a claim for benefits under the Plan is denied in full or in part, you, or your
authorized representative, may appeal the decision to the Committee, or its
designee.  To appeal a decision, you, or
your authorized representative, must submit a written document through the U.S.
Postal Service or other courier service appealing the denial of the claim
within 60 days after your termination of employment or you will no longer be
eligible to receive benefits under the Plan. 
You, or your authorized representative, may also include information or
other documentation in support of your claim. 
The Committee, or 


 


11

















 


its designee, will have 90 days from the date it receives your appeal
in which to reach a decision regarding your claim for benefits.  This 90 day period may be extended to 180
days, if required.  If the Committee, or
its designee, requires an extension of time to consider your claim, you will be
notified prior to the end of the initial 90 day period of (1) the need for
such an extension, and (2) when the Committee, or its designee,
anticipates reaching a decision regarding your claim.  Once the Committee, or its designee reaches a
decision on your claim, it will provide you with written notice of that decision.  This notice will include the reasons for the
denial and the specific provision(s) on which the denial is based, a
description of any additional information needed to resubmit the claim, and an
explanation of the claims review procedure. 
In connection with your appeal, you, or your authorized representative,
can review all plan documents and you, or your authorized representative, may
have a qualified person represent you, or your authorized representative,
during the appeal process.  Any documents
or records that support your position must be submitted with your appeal
letter.


 


(b)                                 Unfunded Obligations. 
All severance payments and benefits under the Plan shall constitute an
unfunded obligation of the Company. 
Severance payments shall be made, as due, from the general funds of the
Company.  The Plan shall constitute
solely an unsecured promise by the Company to provide such benefits to you to
the extent provided herein.  For
avoidance of doubt, any health benefits to which you may be entitled under the
Plan shall be provided under other applicable employee benefit plans of the
Company.


 


(c)                                  Nonassignability. 
With the exception of a Participant’s beneficiary designation, no
Participant or beneficiary may pledge, transfer or assign in any way his or her
right to receive payments under the Plan, and any attempted pledge, transfer or
assignment shall be void and of no force or effect.


 


(d)                                 Not a Contract of Employment. 
The terms and conditions of the Plan shall not be deemed to constitute a
contract of employment between any Participant and the Company. Nothing in the
Plan shall be deemed to give any employee the right to be retained in the
employ or other service of the Company or to interfere with the right of the
Company to terminate a Participant’s employment at any time.


 


(e)                                  Governing Law. 
The Plan and all rights thereunder shall be governed and construed in
accordance with ERISA and, to the extent not preempted by Federal law, with the
laws of the State of Texas


 


(f)                                    Withholding. 
The Company may withhold from any and all amounts payable under the Plan
such federal, state and local taxes as may be required to be withheld pursuant
to any applicable law or regulation.


 


12

















 


(g)                                 Obligation to the Company. 
If a Participant (or beneficiary) becomes entitled to a distribution of
benefits under the Plan and if at such time the Participant has outstanding any
debt, obligation or other liability representing an amount owed to the Company,
then the Company may offset such amounts owing it against the amount of
benefits distributable under the terms of the Plan and only when such benefits
are actually distributable pursuant to the terms of the Plan.


 


13
















 


EXHIBIT
B


 


CONFIDENTIALITY
AND

POST-EMPLOYMENT RESTRICTIVE COVENANTS


 


This Exhibit B contains the
confidentiality and post-employment restrictive covenants referenced in the
Plan to which this Exhibit B is annexed. This Exhibit B is a part of
and will be interpreted in accordance with and otherwise subject to the
provisions of the Plan. The payments and benefits provided to a participating
employee (a “Participant”) under the Plan are expressly conditioned upon
continuing compliance with the covenants set forth herein and the provisions
hereof.


 


1.             Access to Secret and
Confidential Information.  The
Company has furnished and shall furnish to the Participant Secret and
Confidential Information.  “Secret and
Confidential Information” includes, without limitation, the Company’s technical
and business information, whether patentable or not, which is of a
confidential, trade secret or proprietary character, and which is either
developed by the Participant alone, with others or by others; lists of
customers; identity of customers; identity of prospective customers; contract
terms; bidding information and strategies; pricing methods or information;
computer software; computer software methods and documentation; hardware; the
Company’s methods of operation; the procedures, forms and techniques used in
servicing accounts; and other information or documents that the Company
requires to be maintained in confidence for the Company’s continued business
success.


 


2.             Non-Disclosure of Secret and
Confidential Information.  In
consideration of being admitted to the Plan and as a condition of receiving and
retaining payments or benefits thereunder, the Participant shall not during the
period of Participant’s employment with the Company or at any time thereafter,
disclose to anyone, including, without limitation, any person, firm,
corporation, or other entity,  or
publish, or use for any purpose, any Secret and Confidential Information,
except as properly required in the ordinary course of the Company’s business or
as directed and authorized by the Company.


 


3.             Duty to Return Company Documents
and Property.  Upon the termination
of Participant’s employment with the Company, for any reason whatsoever,
Participant shall immediately return and deliver to the Company any and all
papers, books, records, documents, memoranda and manuals, e-mail, electronic or
magnetic recordings or data, including all copies thereof, belonging to the
Company or relating to its business, in Participant’s possession, whether
prepared by Participant or others. If at any time after the termination of
employment, Participant determines that he or she has any Secret and
Confidential Information in his or her possession or control, Participant shall
immediately return to the Company all such Secret and Confidential Information
in Participant’s possession or control, including all copies and portions
thereof.


 


1

















 


4.             Disclosure.  While he or she is employed with the Company,
Participant shall promptly disclose to the Company all ideas, inventions,
computer programs, and discoveries, whether or not patentable or copyrightable,
which Participant may conceive or make, alone or with others, during
Participant’s employment, whether or not during working hours, and which directly
or indirectly:


 


(a)           relate to matters within the scope,
field, duties or responsibility of Participant’s employment with the Company;


 


(b)           are based on the Participant’s
knowledge of the actual or anticipated business or interest of the Company; or


 


(c)           are aided by the use of time,
materials, facilities or information of the Company.


 


Participant assigns to the Company, without
further compensation, all rights, titles and interest in all such ideas,
inventions, computer programs and discoveries in all countries of the world.
Participant recognizes that all ideas, inventions, computer programs and
discoveries of the type described above, conceived or made by Participant alone
or with others within one year after termination of employment (voluntary or
otherwise), are likely to have been conceived in significant part either while
employed by the Company or as a direct result of knowledge Participant had of
proprietary information. Accordingly, Participant agrees that such ideas,
inventions or discoveries shall be presumed to have been conceived during
Participant’s employment with the Company, unless and until the contrary is
clearly established by the Participant.


 


5.             Inventions.  Any and all writings, computer software,
inventions, improvements, processes, procedures and/or techniques that
Participant may make, conceive, discover, or develop, either solely or jointly
with any other person or persons, at any time during the term of his or her
employment, whether at the request or upon the suggestion of the Company or
otherwise, which relate to or are useful in connection with any business now or
hereafter carried on or contemplated by the Company, including developments or
expansions of its present fields of operations, shall be the sole and exclusive
property of the Company. Participant shall take all actions necessary so that
the Company can prepare and present applications for copyright or Letters
Patent therefor, and can secure such copyright or Letters Patent wherever
possible, as well as reissue renewals, and extensions thereof, and can obtain
the record title to such copyright or patents. Participant shall not be
entitled to any additional or special compensation or reimbursement regarding
any such writings, computer software, inventions, improvements, processes,
procedures and techniques. Participant acknowledges that the Company from time
to time may have agreements with other persons or entities which impose
obligations or restrictions on the Company regarding inventions made during the
course of work thereunder or regarding the confidential nature of such work.
Participant shall be bound by all such obligations and restrictions and take
all action necessary to discharge the obligations of the Company.


 


2

















 


6.             Non-Solicitation and
Non-Competition Restrictions.  To
protect Secret and Confidential Information, and in the event of Participant’s
termination of employment for any reason whatsoever, whether by Participant or
the Company, the Participant will be subject to the following restrictive
covenants as a further condition of his or her participation in the Plan and
entitlement to receive and retain any payments or benefits under the Plan.


 


(a)           Non-Competition.  For so long as the Participant is employed by
the Company and during the Deemed Severance Period applicable to such
Participant, the Participant shall not, without the prior written consent of
the Company:


 


(1)           personally
engage in Competitive Activities (as defined below); or


 


(2)           work
for, own, manage, operate, control, or participate in the ownership,
management, operation, or control of, or provide consulting or advisory
services to, any person, partnership, firm, corporation, institution or other
entity engaged in Competitive Activities, or any company or person affiliated
with such person or entity engaged in Competitive Activities; provided that the
Participant’s purchase or holding, for investment purposes, of securities of a
publicly traded company shall not constitute “ownership” or “participation in
the ownership” for purposes of this paragraph so long as such equity interest
in any such company is less than a controlling interest.


 


(b)           Competitive Activities.  For purposes hereof, “Competitive Activities”
means activities relating to products or services of the same or similar type
as the products or services (1) which are sold (or, pursuant to an
existing business plan, will be sold) to paying customers of the Company, and (2) for
which the Participant has responsibility to plan, develop, manage, market,
oversee or perform, or had any such responsibility within the Participant’s
most recent 24 months of employment with the Company.  Notwithstanding the previous sentence, an
activity shall not be treated as a Competitive Activity if the geographic
marketing area of the relevant products or services does not overlap with the
geographic marketing area for the applicable products and services of the
Company.


 


(c)           Interference With Business
Relations.  For so long as the
Participant is employed by the Company and during the Deemed Severance Period
applicable to such Participant, the Participant shall not, without the prior
written consent of the Company:


 


(1)           recruit,
induce or solicit any employee or officer, directly or indirectly, of the Company
for employment or for retention as a consultant or service provider;


 


(2)           hire
or participate (with another person or entity) in the process of hiring (other
than for the Company) any person who is then an employee or officer of the
Company, or provide names or other information about any employees of the
Company or an 


 


3

















 


Affiliate to any person or entity, directly or
indirectly, under circumstances that could lead to the use of any such
information for purposes of recruiting, soliciting or hiring;


 


(3)           interfere,
directly or indirectly, with the relationship of the Company or an Affiliate
with any of its employees, agents, or representatives;


 


(4)           solicit
or induce, or in any manner attempt to solicit or induce, directly or
indirectly, any client, customer, or prospect of the Company (1) to cease
being, or not to become, a customer of the Company, or (2) to divert any
business of such customer or prospect from the Company; or


 


(5)           otherwise
interfere with, disrupt, or attempt to interfere with or disrupt, the
relationship, contractual or otherwise, between the Company and any of its
customers, clients, prospects, suppliers, consultants, employees, agents, or
representatives.


 


(d)           Deemed Severance Period.  For purposes hereof, “Deemed Severance Period”
means:


 


(1)           forty-eight
(48) months, with respect to any Participant who is initially entitled to
receive four (4) times the Participant’s current Base Salary pursuant to Section 5(d) or
Section 6(d) of the Plan following such Participant’s separation from
employment with Company;


 


(2)           twenty-four
(24) months, with respect to any Participant who is entitled to receive two (2) times
the Participant’s current Base Salary pursuant to Section 6(d) of the
Plan following such Participant’s separation from employment with Company;


 


(3)           twelve
(12) months, with respect to any Participant who is entitled to receive one (1) times
the Participant’s current Base Salary pursuant to Section 5(d) of the
Plan following such Participant’s separation from employment with Company; and


 


(4)           six
(6) months, with respect to any Participant who is entitled to receive
one-half (1/2) times the Participant’s current Base Salary pursuant to Section 5(d) or
Section 6(d) of the Plan following such Participant’s separation from
employment with Company.


 


7.             Reformation.  If a court concludes that any time period or
the geographic area specified in Section 6 above are unenforceable, then
the time period will be reduced by the number of months, or the geographic area
will be reduced by the elimination of the overbroad 


 


4

















 


portion, or both, so that the restrictions may be enforced in the
geographic area and for the time to the fullest extent permitted by law.


 


8.             Tolling.  If Participant violates any of the
restrictions contained in Section 6, the restrictive period will be
suspended and will not run in favor of Participant from the time of the
commencement of any violation until the time when the Participant cures the
violation to the Company’s satisfaction.


 


9.             Remedies.  It is intended that, in view of the nature of
the Company’s business, the restrictions contained in this Exhibit B shall
be considered reasonable and necessary to protect the Company’s legitimate
business interests and that any violation of these restrictions would result in
irreparable injury to the Company. In the event of a breach or a threatened
breach by Participant of any restrictive covenant contained herein, the Company
shall be entitled to a temporary restraining order and injunctive relief
restraining Participant from the commission of any breach, and to recover the
Company’s attorneys’ fees, costs and expenses related to the breach or
threatened breach. Nothing contained herein shall be construed as prohibiting
the Company from pursuing any other remedies available to it for any breach or
threatened breach, including, without limitation, the restoration and other
remedies specified in the Plan and/or the recovery of money damages, attorneys’
fees, and costs. These covenants and restrictions shall each be construed as
independent of any other provisions in the Plan, and the existence of any claim
or cause of action by Participant against the Company, whether predicated on
the Plan or otherwise, shall not constitute a defense to the enforcement by the
Company of such covenants and restrictions.


 


10.           Severability.  Should a court determine that any section,
paragraph or sentence, or any portion of a section, paragraph or sentence of
this Exhibit B is invalid, unenforceable, or void, this determination
shall not have the effect of invalidating or validating the remainder of the
section, paragraph, sentence or any other provision of this Exhibit B.
Further, it is intended that the court should construe the Plan and this Exhibit B
by limiting and reducing it only to the extent necessary to be enforceable
under then applicable law.


 


11.           Future Employment.  If a Participant seeks or is offered
employment by any other company, firm, or person during the Deemed Severance
Period applicable to such Participant, the Participant shall provide a copy of
this Exhibit B to the prospective employer before accepting employment
with that prospective employer.


 


12.           Applicable Law.  This Exhibit B and all rights hereunder
shall be governed and in accordance with ERISA, and to the extent not preempted
by federal law, with the laws of the State of Texas.


 


5

















 


EXHIBIT C


 


EXCISE TAX GROSS UP


 


1.             Gross-Up Payment.  If any payment or benefit received or to be
received by a Participant from the Company pursuant to the terms of the Plan to
which this Exhibit A is attached (the “Plan”) or otherwise (the “Payments”)
would be subject to the excise tax (the “Excise Tax”) imposed by Section 4999
of the Internal Revenue Code (the “Code”) as determined in accordance with this
Exhibit A, the Company shall pay the Participant, at the time(s) specified
below, an additional amount (the “Gross-Up Payment”) such that the net amount
the Participant retains, after deduction of the Excise Tax on the Payments and
any federal, state, and local income tax and the Excise Tax upon the Gross-Up
Payment, and any interest, penalties, or additions to tax payable by a
Participant with respect thereto, shall be equal to the total present value
(using the applicable federal rate (as defined in Section 1274(d) of
the Code) in such calculation) of the Payments at the time such Payments are to
be made.


 


2.             Calculations.  For purposes of determining whether any of
the Payments shall be subject to the Excise Tax and the amount of such excise
tax:


 


(a)           the total amount of the Payments
shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of
the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the excise tax, except to the extent
that, in the written opinion of independent counsel or an independent national
accounting or other qualified professional firm selected by the Company (“Independent
Adviser”), a Payment (in whole or in part) does not constitute a “parachute
payment” within the meaning of Section 280G(b)(2) of the Code, or
such “excess parachute payments” (in whole or in part) are not subject to the
Excise Tax;


 


(b)           the amount of the Payments that shall
be subject to the Excise Tax shall be equal to the lesser of (1) the total
amount of the Payments or (2) the amount of “excess parachute payments “
within the meaning of Section 280G(b)(1) of the Code (after applying
clause (a), above); and


 


(c)           the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the Independent Adviser
in accordance with the principles of Section 280G(d)(3) and (4) of
the Code.


 


3.             Tax Rates.  For purposes of determining the amount of the
Gross-Up Payment, a Participant shall be deemed to pay federal income taxes at
the highest marginal rates of federal income taxation applicable to individuals
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes, if any, at the highest marginal rates of taxation
applicable to individuals as are in effect in the state and locality of his or
her residence in the calendar year in which the Gross-Up Payment is to be made,
net of the maximum reduction in federal income taxes that can be obtained from
deduction of such state and local taxes, taking into account any limitations
applicable to individuals subject to federal income tax at the highest marginal
rates.


 


1

















 


4.             Time of Gross-Up Payments.  The Gross-Up Payments provided for in this Exhibit A
shall be made upon the earlier of (a) the payment to a Participant of any
Payment or (b) the imposition upon a Participant, or any payment by him or
her, of any Excise Tax.


 


5.             Adjustments to Gross-Up Payments.  If it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding or the
written opinion of the Independent Adviser that the Excise Tax is less than the
amount previously taken into account hereunder, the Participant shall repay the
Company, within 30 days of her receipt of notice of such final determination or
opinion, the portion of the Gross-Up Payment attributable to such reduction
(plus the portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state, and local income tax imposed on the Gross-Up Payment being
repaid by the Participant if such repayment results in a reduction in Excise
Tax or a federal, state, and local income tax deduction) plus any interest
received by the Participant on the amount of such repayment, provided that if
any such amount has been paid by a Participant as an Excise Tax or other tax,
he or she shall cooperate with the Company in seeking a refund of any tax
overpayments, and shall not be required to make repayments to the Company until
the overpaid taxes and interest thereon are refunded to him or her.


 


6.             Additional Gross-Up Payment.  If it is established pursuant to a final determination
of a court or an Internal Revenue Service proceeding or the written opinion of
the Independent Adviser that the Excise Tax exceeds the amount taken into
account hereunder (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess within 30
days of the Company’s receipt of notice of such final determination or opinion.


 


7.             Change in Law or Interpretation.  In the event of any change in or further
interpretation of Section 280G or 4999 of the Code and the regulations
promulgated thereunder,  a Participant
shall be entitled, by written notice to the Company, to request a written
opinion of the Independent Adviser regarding the application of such change or
further interpretation to any of the foregoing, and the Company shall use its
best efforts to cause such opinion to be rendered as promptly as practicable.


 


8.             Fees and Expenses.  All fees and expenses of the Independent
Adviser incurred in connection with this Exhibit A shall be borne by the
Company.


 


9.             Survival.  The Company’s obligation to make a Gross-Up
Payment with respect to Payments made or accrued before the termination of the
Plan shall survive the termination of the Plan unless (a) the affected
Participant’s employment is terminated for Cause, (b) the Participant
fails to execute a release in accordance with the requirements of the Plan, or (c) the
Participant fails to comply with the restrictive covenants contained in Exhibit B
of the Plan, in which event the Company’s obligation under this Exhibit A
shall terminate immediately.


 


10.           Defined Terms.  Unless otherwise clearly required by the
context, for purposes of this Exhibit A, any capitalized term that is
defined in the Plan and is not defined in this Exhibit A shall have the
meaning ascribed to such term in the Plan.


 


2