Exhibit 4.1


 


GAINSCO, INC.


 


2005 LONG-TERM
INCENTIVE


 


COMPENSATION PLAN



 





















 


TABLE OF CONTENTS


 


	
  ARTICLE I

  	
   

  
	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Name

  	
   

  
	
  1.2

  	
  Purpose

  	
   

  
	
  1.3

  	
  Definitions

  	
   

  
	
  1.4

  	
  Plan Administration

  	
   

  
	
  1.5

  	
  Shares Available for Incentive Awards

  	
   

  
	
  1.6

  	
  Share Pool Adjustments for Awards and Payouts

  	
   

  
	
  1.7

  	
  Common Stock Available

  	
   

  
	
  1.8

  	
  Eligibility

  	
   

  
	
  1.9

  	
  Awards to Outside Directors

  	
   

  
	
  1.10

  	
  Types of Incentive Awards

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  RESTRICTED
  STOCK

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Award of Restricted Stock

  	
   

  
	
  2.2

  	
  Restrictions

  	
   

  
	
  2.3

  	
  Delivery of Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  RESTRICTED
  STOCK UNITS

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Grants of Restricted Stock Units

  	
   

  
	
  3.2

  	
  Vesting

  	
   

  
	
  3.3

  	
  Adjustment with Respect to Restricted Stock Units

  	
   

  
	
  3.4

  	
  Settlement of Restricted Stock Units

  	
   

  
	
  3.5

  	
  Deferral of Settlement of Restricted Stock Unit

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  PERFORMANCE
  GOALS

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Performance Criteria

  	
   

  
	
  4.2

  	
  Role of Committee

  	
   

  
	
  4.3

  	
  Additional Requirements

  	
   

  
	
  4.4

  	
  Right of Recapture

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  PROVISIONS
  RELATING TO PLAN PARTICIPATION

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Incentive Agreement

  	
   

  
	
  5.2

  	
  No Right to Employment

  	
   

  
	
  5.3

  	
  Securities Requirements

  	
   

  
	
  5.4

  	
  Transferability

  	
   

  
	
  5.5

  	
  Rights as a Shareholder

  	
   

  



 


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  5.6

  	
  Change in Stock and Adjustments

  	
   

  
	
  5.7

  	
  Termination, Death or Disability

  	
   

  
	
  5.8

  	
  Change in Control of the Company

  	
   

  
	
  5.9

  	
  Exchange of Incentive Awards

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  GENERAL

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Effective Date

  	
   

  
	
  6.2

  	
  Funding and Liability of Company

  	
   

  
	
  6.3

  	
  Withholding Taxes

  	
   

  
	
  6.4

  	
  No Guarantee of Tax Consequences

  	
   

  
	
  6.5

  	
  Designation of Beneficiary by Grantee

  	
   

  
	
  6.6

  	
  Deferrals

  	
   

  
	
  6.7

  	
  Amendment and Termination

  	
   

  
	
  6.8

  	
  Requirements of Law

  	
   

  
	
  6.9

  	
  Rule 16b-3 Securities Law Compliance For Insiders

  	
   

  
	
  6.10

  	
  Compliance with Code §162(m)

  	
   

  
	
  6.11

  	
  Notices

  	
   

  
	
  6.12

  	
  Pre-Clearance Agreement with Brokers

  	
   

  
	
  6.13

  	
  Successors to Company

  	
   

  
	
  6.14

  	
  Miscellaneous Provisions

  	
   

  
	
  6.15

  	
  Severability

  	
   

  
	
  6.16

  	
  Usage; Interpretation

  	
   

  
	
  6.17

  	
  Governing Law

  	
   

  



 


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GAINSCO, INC.


 


2005 LONG-TERM
INCENTIVE COMPENSATION PLAN


 


ARTICLE I

GENERAL PROVISIONS


 


1.1           Name.  This Plan shall be known as the “GAINSCO, INC.
2005 Long-Term Incentive Compensation Plan.”


 


1.2           Purpose.  The purpose of the Plan is to foster and
promote the long-term financial success of the Company and to increase shareholder
value by: (a) encouraging the commitment of Grantees, (b) motivating
superior performance of Grantees by means of long-term performance related
incentives, (c) encouraging and providing Grantees with a program for
obtaining ownership interests in the Company which link and align their
personal interests to those of the Company’s shareholders, (d) attracting
and retaining Grantees by providing competitive compensation opportunities, and
(e) enabling Grantees to share in the long-term growth and success of the
Company.


 


The Plan is not intended to be a plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”). The Plan shall
be interpreted, construed and administered consistent with its status as a plan
that is not subject to ERISA.


 


The Plan is intended to comply with the requirements of Code
§409A(a)(2), (3) and (4) and any regulatory or other guidance issued
under such subsections to avoid the consequences of plan failures as set forth
in Code §409A(a)(1).  Any terms of the
Plan or any Incentive Agreement that conflict with such guidance shall be null
and void as of the Effective Date.  To
the extent necessary or advisable, the Committee may amend the Plan to delete
any conflicting provisions and to add such other provisions as are required to
fully comply with the applicable provisions of §409A and any other legislative
or regulatory requirements applicable to the Plan.


 


The Plan will remain in effect, subject to the right of the Board to
amend or terminate the Plan at any time pursuant to Section 6.7, until all
Shares subject to the Plan have been acquired according to its provisions.


 


1.3           Definitions.  The following terms shall have the meanings
set forth below:


 


“Authorized Officer”
means the Chairman of the Board, the President or any other senior officer of
the Company to whom either of them or the Committee delegates the authority to
execute any Incentive Agreement for and on behalf of the Company.  No officer or director shall be an Authorized
Officer with respect to any Incentive Agreement for himself.


 


“Beneficial Owner”
has the meaning set forth in Rule 13d-3 under the Exchange Act.


 


“Board” means the Board
of Directors of the Company.


 


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“Cause” means, in
the case of a Grantee who is an Employee, the termination of the Grantee’s
Employment by any GAINSCO Company by reason of (i) the failure by the Grantee
to perform the Grantee’s assigned duties with any GAINSCO Company (other than
any such failure resulting from the Grantee’s incapacity due to physical or
mental illness); (ii) the Grantee’s malfeasance, gross negligence or
recklessness in the performance of the Grantee’s duties or responsibilities; (iii) the
engaging by the Grantee in any position or conduct, whether or not a conflict
of interest, which is either intentionally, or demonstrably and materially,
injurious to any GAINSCO Company, monetarily or otherwise; (iv) the
failure by the Grantee to obey written directions of the Chairman of the Board
or the President of the Company; (v) the Grantee’s conviction of a felony
or a crime involving moral turpitude; (vi) the Grantee ceases to be
eligible to hold the Grantee’s position with any GAINSCO Company as a result of
any statute or rule, regulation or interpretation of or by any regulatory
agency or other governmental or public authority; (vii) the Grantee’s
fraud upon any GAINSCO Company; (viii) any breach by the Grantee of any
code of conduct adopted by a GAINSCO Company and applicable to Grantee; or (ix) any
misappropriation by Grantee of any property of a GAINSCO Company or a customer
of a GAINSCO Company.


 


A “Change in Control of the
Company” shall be deemed to have occurred if, after the date of the
Award,


 


(a)           any Person (other than an Approved Person (as defined below))
becomes the Beneficial Owner, directly or indirectly, of a majority or more of
the then outstanding Common Stock; or


 


(b)           the Company ceases to be engaged,
directly or through one or more Subsidiaries or Affiliates, in the Insurance
Business;


 


provided, however, that in no event
shall any increase in a Person’s Beneficial Ownership of Common Stock as a
result of the acquisition of securities of the Company by the Company or any of
its Subsidiaries be deemed a Change in Control of the Company.


 


As used in this Plan, (w) “Approved
Person” means any of (1) an employee benefit plan of the
Company (or a trustee or other fiduciary holding securities for such a
plan)  (collectively, an “Employee Plan”), or (2) a
corporation owned, directly or indirectly, by the shareholders of the Company
in substantially the same proportions as their ownership of stock of the
Company, or (3) a Person not less than a majority of whose voting
securities are Beneficially Owned by the Company or any of its Subsidiaries
after giving effect to the transaction, or (4) any of Goff Moore Strategic
Partners, L.P., a Texas limited partnership, John C. Goff, Robert W. Stallings,
James R. Reis, First Western Capital, LLC, an Arizona limited liability
company, or any employee, partner, Affiliate or Associate of any of the
foregoing Persons, or any group (within the meaning of Rule 13d-5 under
the Exchange Act) of which any of them is a member; (x) “Affiliate” means, with respect to
any Person, any other Person that directly, or indirectly, through one or more
intermediaries controls, is controlled by or is under common control with such
specified Person (for this purpose the term “control” (including the terms “controlling”, “controlled
by” and “under common
control with”) shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person whether through the ownership of voting securities, by contract, or
otherwise); (y) “Associate”
means,


 


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with respect
to any Person, (i) any corporation or entity (other than the Company or a
Subsidiary of the Company) of which such Person is an officer or partner or is,
directly or indirectly, the beneficial owner of ten percent or more of the Voting
Stock, (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, and (iii) any relative or spouse of such
Person, or any relative of such spouse, who has the same home as such Person or
who is a director or officer of the Company or any of its Subsidiaries; and (z)
“Insurance Business” means any one or more of (i) the soliciting,
writing, underwriting, arranging, issuing, ceding, assuming, renewing or
servicing (as an insurer, agent, broker or otherwise) of policies, contracts or
treaties of insurance, coinsurance or reinsurance or related products or (ii) the
administering, adjusting or servicing of claims on policies, contracts or
treaties of insurance, coinsurance or reinsurance or related products.


 


“Code” means the Internal Revenue Code of 1986, as amended, and
the regulations and other authority promulgated thereunder by the appropriate Governmental
Authority.  References herein to any
provision of the Code shall refer to any successor provision thereto.


 


“Committee” means
the Compensation Committee of the Board so long as the Compensation Committee
consists of not less than two directors who fulfill both the “nonemployee
director” requirements of Rule 16b-3 under the Exchange Act and the “outside
director” requirements of Code §162(m); provided that in the event the
Compensation Committee is not so composed, “Committee” shall mean a
subcommittee of the Compensation Committee or another committee or subcommittee
designated by the Board which satisfies both of such requirements.


 


“Common Stock” means
the common stock, par value $0.10 per share, of the Company, and any class of
common stock into which such common shares may hereafter be converted,
reclassified or recapitalized.


 


“Company” means GAINSCO,
INC., a Texas corporation, and any successor in interest thereto.


 


A “Corporate Event” shall be deemed to have occurred if, after
the date of the Award, (A) the Company merges or consolidates with any
other corporation or other entity, or another corporation or other entity
acquires Common Stock pursuant to a Share
Exchange, in each case other than a merger, consolidation or Share
Exchange which does not result in the outstanding Shares being converted into
or exchanged for different securities, cash or other property, or any
combination thereof; or (B) a dissolution of the Company.


 


“Covered Employee” means
a named executive officer who is one of the group of covered employees, as
defined in Code §162(m) and Treasury Regulation §1.162-27(c) (or its
successor).


 


“Deferral Election” means an election to delay settlement with
respect to a Restricted Stock Unit Award pursuant to Section 3.5(a) below.


 


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“Deferred Restricted Stock Unit” mean one or more Restricted
Stock Units as to which a Grantee has elected to defer the date of settlement pursuant
to the provisions of Section 3.5(a) below.


 


“Disability” means a
condition of a Grantee as a result of which the Grantee is (i) unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, or (ii) by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an
accident and health plan provided by a GAINSCO Company.


 


“Distribution” means
any dividend, distribution of subscription rights or other distribution by the
Company in respect of any of its Common Stock.


 


“Distribution Right”
means any right to receive Distributions.


 


“Effective Date” means the date on which the Board approves the
Plan.


 


“Employee” means any
full-time, salaried employee of any of the GAINSCO Companies within the meaning
of Code §3401(c) who, in the opinion of the Committee, is in a position to
contribute to the growth, development or financial success of the GAINSCO Companies,
including officers who are members of the Board.


 


“Employment” means that
the individual is employed as an Employee, or by any corporation issuing or
assuming an Incentive Award in any transaction described in Code §424(a), or by
a parent corporation or a subsidiary corporation of such corporation issuing or
assuming such Incentive Award, as the parent-subsidiary relationship shall be
determined at the time of the corporate action described in Code §424(a).  In this regard, the transfer of a Grantee from
Employment by a GAINSCO Company to another GAINSCO Company shall not be deemed
to be a termination of Employment of the Grantee.  Moreover, the Employment of a Grantee shall
not be deemed to have been terminated because of an approved leave of absence
from active Employment on account of temporary illness, authorized vacation or
granted for reasons of professional advancement, education, or health, or
during any period required to be treated as a leave of absence by virtue of any
applicable statute, Company personnel policy or written agreement.  All determinations regarding Employment, and
the termination of Employment hereunder, shall be made by the Committee.


 


“Exchange Act” means
the Securities Exchange Act of 1934, as amended.


 


“Fair Market Value”
means (i) the average of the high and low reported sales prices of a Share
on the date as of which Fair Market Value is to be determined, or if no such
sales were made on such date, the closing sales price on the immediately
preceding business day of a Share, in each case as reported on the principal
market on which the Common Stock is traded, including the National Association
of Securities Dealers’ OTC Bulletin Board System, National Association of
Securities Dealers Automated Quotation System (“NASDAQ”), the American


 


4





















 


Stock Exchange
(“ASE”), or other national securities exchange or stock market on which
Shares are then listed or admitted to trading, or (ii) if the Common Stock
is not so traded, the average of the closing bid and asked prices for a Share
as quoted by the National Quotation Bureau’s “Pink Sheets” on such date, or if
no such quotes appeared in the “Pink Sheets” for such date, the “Pink Sheets”
on the immediately preceding business day.


 


“GAAP” means
generally accepted accounting principles for financial reporting in the U.S.,
consistently applied.


 


“GAINSCO Company”
means any of the Company or any of its direct or indirect Subsidiaries.


 


“Governmental Authority”
means any U.S. federal, state, local, foreign, supernational or supranational
court or tribunal, governmental, regulatory or administrative agency,
department, bureau, authority, commission or arbitral panel.


 


“Grantee” means any
Employee or Outside Director who is granted an Incentive Award under the Plan.


 


“Incentive Award” or “Award”
means a grant of an award under the Plan to a Grantee, including any Restricted
Stock Award or Restricted Stock Unit Award.


 


“Incentive Agreement”
means the written agreement entered into between the Company and the Grantee
setting forth the terms and conditions pursuant to which an Incentive Award is
granted under the Plan, as such agreement is further defined in Section 5.1.


 


“Insider” means an
individual who is, on the relevant date, an officer, director or Beneficial
Owner of ten percent or more of any class of the Company’s equity securities
that is registered pursuant to §12 of the Exchange Act, all as defined under §16
of the Exchange Act.


 


“Outside Director” means
a member of the Board who is not at the time of grant of an Incentive Award an Employee.


 


“Parent” means any
corporation (whether now or hereafter existing) which constitutes a “parent” of
the Company, as defined in Code §424(e).


 


“Performance-Based Exception”
means the performance-based exception from the tax deductibility limitations of
Code §162(m), as prescribed in Code §162(m)(4)(C) and Treasury Regulation §1.162-27(e) (or
its successor).


 


“Performance-Based Restricted Stock”
means shares of Restricted Stock awarded to a Grantee pursuant to Article II
that are subject to a risk of forfeiture if the applicable Performance Goals are
not met within the Performance Period.


 


“Performance Criteria”
has the meaning set forth in Section 4.1.


 


“Performance Goal”
means the objective formula or method established by the Committee in
accordance with Article IV based on Performance Criteria specified by the


 


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Committee for
the applicable Performance Period for determining a Grantee’s right to and the
payment value of any Restricted Stock Award or Restricted Stock Unit Award that
is intended to qualify for the Performance-Based Exception.


 


“Performance Period”
means a period of time determined by the Committee over which the applicable
Performance Goals are measured for the purpose of determining a Grantee’s right
to and the payment value of any Restricted Stock Award or Restricted Stock Unit
Award that is intended to qualify for the Performance-Based Exception.


 


“Person” means any
individual, corporation, partnership, limited liability company, association,
trust or other entity or organization, including any Governmental Authority.


 


“Plan” means the GAINSCO,
INC. 2005 Long-Term Incentive Compensation Plan, as set forth herein and as it
may be amended from time to time.


 


“Restricted Stock” means
Shares issued or transferred to a Grantee pursuant to Article II.


 


“Restricted Stock Award”
means an authorization by the Committee to issue or transfer Restricted Stock
to a Grantee pursuant to Article II.


 


“Restricted Stock Unit” means a contractual right granted to a
Grantee pursuant to Article III to receive, as determined by the Committee
and set forth in the Incentive Agreement, a share of Common Stock on a
specified date, subject to the terms and conditions set forth in the Plan and
in the applicable Incentive Agreement.


 


“Restricted Stock Unit Award”
means an authorization by the Committee to grant Restricted Stock Units to a
Grantee pursuant to Article III.


 


“Restriction Period”
means the period of time determined by the Committee and set forth in the
Incentive Agreement during which the transfer of Restricted Stock by the
Grantee is restricted.


 


“SEC” means the U.S.
Securities and Exchange Commission.


 


“settlement” means
the satisfaction of the Company’s obligation associated with a Grantee’s Award
by payment to the Grantee of the Award amount by the delivery of Shares as
specified in the applicable Incentive Agreement or as otherwise provided in
this Plan or the applicable Incentive Agreement.


 


“Share” means a share
of the Common Stock.


 


“Share Exchange”
means the exchange of equity securities pursuant to a plan of exchange (within
the meaning of TBCA Article 5.02).


 


“Share Pool” means the
number of Shares authorized for issuance under Section 1.5, as adjusted
for awards and payouts under Section 1.6 and as adjusted for changes in
corporate capitalization under Section 5.6.


 


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“Shareholder Approval”
means the approval of the matter submitted for shareholder vote by the holders
of not less than a majority of the outstanding shares of Voting Stock present
in person or by proxy at a meeting of shareholders and voting for or against,
or expressly abstaining from voting on, the matter.


 


“Subsidiary” means any
corporation (whether now or hereafter existing) which constitutes a “subsidiary”
of the Company, as defined in Code §424(f) of the Code, and any limited
liability company, partnership, or other entity in which the Company controls
fifty percent or more of the voting power or equity interests.


 


“TBCA” means the
Texas Business Corporation Act, as amended, or any successor law (including the
Texas Business Organizations Code) that replaces the Texas Business Corporation
Act.


 


“U.S.” means the
United States of America.


 


“vest” means, with
respect to an Award, that the Grantee’s right to the Award is not subject to a
substantial risk of forfeiture as a result of either the satisfaction or lapse
of any condition or restriction applicable to the Award.


 


“Voting Stock”  means the outstanding shares of capital stock
or other securities of a Person entitled to vote generally in an election of
directors or the equivalent of the Person, including in the case of the Company
the Common Stock and the Series A Convertible Preferred Stock, par value
$100.00 per share, and any class of stock into which such shares may hereafter
be converted, reclassified or recapitalized.


 


1.4           Plan
Administration.


 


(a)           Authority of the
Committee.  Except as may be limited
by law and subject to the provisions herein, the Committee shall have full
power to (i) select Grantees who may participate in the Plan; (ii) determine
the sizes, duration and types of Incentive Awards; (iii) determine the
terms and conditions of Incentive Awards and Incentive Agreements; (iv) determine
whether any Shares or units subject to Incentive Awards will be subject to any
restrictions on transfer; (v) construe and interpret the Plan and any
Incentive Agreement or other agreement entered into under the Plan; and (vi) establish,
amend, or waive rules for the Plan’s administration; provided that
the Board shall exercise all of the powers of the Committee in respect of any
Award made to any member of the Committee. 
Further, the Committee may make all other determinations which may be necessary
or advisable for the administration of the Plan.


 


(b)           Decisions Binding.  All determinations and decisions of the
Committee shall be made in its sole and absolute discretion pursuant to the
terms and provisions of the Plan, and shall be final, conclusive and binding on
all persons including the Company, its shareholders, Employees, Grantees, and
their estates and beneficiaries.  The
Committee’s decisions with respect to any Incentive Award need not be uniform
and may be made selectively among Incentive Awards and Grantees, whether or not
such Incentive Awards are similar or such Grantees are similarly situated.


 


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(c)           Modification of
Outstanding Incentive Awards. 
Subject to the Shareholder Approval requirements of Section 6.7 and
the applicable requirements of the Performance-Based Exception, the Committee
may provide for the extension of an Incentive Award, accelerate the vesting of
an Incentive Award, eliminate or make less restrictive any restrictions
contained in an Incentive Award, waive any restriction or other provisions of
an Incentive Award, or otherwise amend or modify an Incentive Award in any
manner that is either (i) not adverse to the Grantee to whom such
Incentive Award was granted or (ii) consented to by such Grantee.


 


(d)           Expenses of
Committee.  The Committee may employ
legal counsel, including independent legal counsel and counsel regularly
employed by the Company, and other consultants and agents as the Committee may
deem appropriate for the administration of the Plan.  The Committee may rely upon any opinion or
computation received from any such counsel, consultant or agent.  All expenses incurred by the Committee in
interpreting and administering the Plan, including meeting expenses and
professional fees, shall be paid by the Company.


 


(e)           Surrender of
Previous Incentive Awards.  The
Committee may grant Incentive Awards to Grantees on the condition that such
Grantees surrender to the Committee for cancellation such other Incentive Awards
as the Committee directs or awards granted under other plans of the Company.  Incentive Awards granted on the condition
precedent of surrender of outstanding Incentive Awards shall not count against
the limits set forth in Section 1.5 until such time as such previous
Incentive Awards are surrendered and cancelled.


 


1.5           Shares
Available for Incentive Awards.


 


(a)           Subject to
adjustment under Section 5.6, there shall be available for Incentive
Awards that are granted wholly or partly in Restricted Stock or Restricted
Stock Units an aggregate of 8,080,000 Shares.


 


(b)           The number of Shares
that are the subject of Incentive Awards under this Plan which are cancelled, forfeited
or terminated, or lapse or expire, shall again immediately become available for
Incentive Awards hereunder.  The
Committee may from time to time adopt and observe procedures concerning the
counting of Shares against the Plan maximum.


 


(c)           Subject to
adjustment as provided in Section 5.6, in any fiscal year of the Company
during any part of which the Plan is in effect, no Grantee may be granted
Restricted Stock Awards and Restricted Stock Unit Awards with respect to more
than 2,000,000 Shares.  This limitation shall
be construed and administered so as to comply with the Performance-Based Exception.


 


1.6           Share
Pool Adjustments for Awards and Payouts. 
The number of Shares authorized for issuance under the Share Pool shall
be (a) reduced on a one Share for one Share basis by the grant of an
Incentive Award, and (b) increased on a one Share for one Share basis by
the cancellation, termination, expiration, forfeiture, or lapse for any reason
of an Incentive Award.


 


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1.7           Common
Stock Available.  The Common Stock
available for issuance or transfer under the Plan shall be made available from authorized
but unissued Shares or treasury stock of the Company.  No fractional Shares shall be issued under the
Plan; payment for fractional Shares shall be made in cash.


 


1.8           Eligibility.


 


(a)           Employees and Outside
Directors shall be eligible to receive Incentive Awards under the Plan.


 


(b)           A Grantee who has
been granted an Incentive Award may, if otherwise eligible, be granted
additional Incentive Awards at any time.


 


1.9           Awards
to Outside Directors.  Any Awards granted
to Outside Directors shall be granted to all Outside Directors on a
non-discretionary basis based on a formula approved from time to time by the Board.


 


1.10         Types
of Incentive Awards.  The types of
Incentive Awards under the Plan are Restricted Stock as described in Article II
and Restricted Stock Units as described in Article III.


 


ARTICLE II

RESTRICTED STOCK


 


2.1           Award
of Restricted Stock.


 


(a)           Grant.  Shares of Restricted Stock, which may be
Performance-Based Restricted Stock as designated by the Committee, may be
awarded by the Committee with such restrictions during the Restriction Period
as the Committee shall designate.  Any
such restrictions may differ with respect to a particular Grantee. Restricted
Stock shall be awarded for no additional consideration or such additional
consideration as the Committee may determine, which consideration may be less
than, equal to or more than the Fair Market Value of the shares of Restricted
Stock on the grant date.  The terms and
conditions of each grant of Restricted Stock shall be evidenced by an Incentive
Agreement and, during the Restriction Period, such Shares of Restricted Stock shall
remain subject to a “substantial risk of forfeiture” within the meaning given
to such term under Code §83.  Any Restricted
Stock Award may, at the time of grant, be designated by the Committee as
Performance-Based Restricted Stock that is intended to qualify for the
Performance-Based Exception without regard to whether the Grantee is a Covered
Employee.


 


(b)           Immediate Transfer
Without Immediate Delivery of Restricted Stock.  Unless otherwise specified in the Grantee’s
Incentive Agreement, each Restricted Stock Award shall constitute an immediate
transfer of the record and beneficial ownership of the Shares of Restricted Stock
to the Grantee, entitling such Grantee to all voting and other ownership rights
in such Shares.


 


If and as specified in the applicable Incentive Agreement, a Restricted
Stock Award may limit the Grantee’s Distribution Rights during the Restriction
Period in which the shares of Restricted Stock are subject to a “substantial
risk of forfeiture” and restrictions on transfer.  In


 


9





















 


the applicable
Incentive Agreement, the Committee may apply any restrictions to the Distribution
Rights that the Committee deems appropriate.  Without limiting the generality of the
preceding sentence, if the grant or vesting of Shares of Performance-Based
Restricted Stock granted to a Covered Employee, is designed to comply with the
requirements of the Performance-Based Exception, the Committee may apply any
restrictions to Distribution Rights with respect to such Shares of Restricted
Stock, such that the Distribution Rights or the Shares of Restricted Stock
maintain eligibility for the Performance-Based Exception.  In the event that any Distribution Right
constitutes a derivative security or an equity security pursuant to the rules under
§16 of the Exchange Act, if applicable, such Distribution Right shall be
subject to a Restriction Period equal to the remaining Restriction Period of
the Shares of Restricted Stock with respect to which the distribution is made.


 


Shares awarded pursuant to a grant of Restricted Stock or
Performance-Based Restricted Stock may be issued in the name of the Grantee and
held, together with a stock power endorsed in blank, by the Committee (or a
person designated by the Committee) or in trust or in escrow pursuant to an
agreement satisfactory to the Committee, until such time as the Restriction
Period has expired.  All such terms and
conditions shall be set forth in the Grantee’s Incentive Agreement.  The Committee (or its delegate) shall issue to
the Grantee a receipt evidencing the certificates held by it which are
registered in the name of the Grantee.


 


2.2           Restrictions.


 


(a)           Forfeiture of
Restricted Stock.  Restricted Stock
awarded to a Grantee may be subject to the following restrictions until the
expiration of the Restriction Period: (i) any restriction that constitutes
a “substantial risk of forfeiture” (as defined in Code §83), or a restriction
on transferability; (ii) unless otherwise specified by the Committee in
the Incentive Agreement, the Restricted Stock that is subject to restrictions
which are not satisfied shall be forfeited and all rights of the Grantee to
such Shares shall terminate; and (iii) any other restrictions that the
Committee determines in advance are appropriate, including rights of repurchase
or first refusal in the Company or provisions subjecting the Restricted Stock
to a continuing substantial risk of forfeiture in the hands of any transferee.  Any such restrictions shall be set forth in
the Grantee’s Incentive Agreement.


 


(b)           Issuance of
Certificates.  Reasonably promptly
after the date of grant with respect to Shares of Restricted Stock, the Committee
shall cause to be issued a stock certificate, registered in the name of the
Grantee to whom such Shares of Restricted Stock were granted, evidencing such
Shares; provided,  however, that the Committee shall not cause to
be issued such a stock certificate unless it has received a stock power duly
endorsed in blank by the Grantee with respect to such Shares.  Each such stock certificate shall bear the
following legend or any other legend approved by the Committee:


 


THE SALE,
ASSIGNMENT, PLEDGE, ENCUMBRANCE OR OTHER DISPOSITION (EACH A “TRANSFER”)
AND VOTING OF ANY OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE RESTRICTIONS, TERMS AND CONDITIONS (INCLUDING FORFEITURE AND
RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE GAINSCO, INC. 2005 LONG-TERM
INCENTIVE COMPENSATION


 


10





















 


PLAN AND AN
INCENTIVE AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER OF SUCH SHARES
AND GAINSCO, INC.  A COPY OF THE PLAN AND
INCENTIVE AGREEMENT ARE ON FILE IN THE MAIN CORPORATE OFFICE OF GAINSCO, INC.


 


(c)           Removal of
Restrictions.  The Committee shall
have the authority to remove any or all of the restrictions on the Restricted
Stock if it determines that, by reason of a change in applicable law or another
change in circumstance arising after the grant date of the Restricted Stock,
such action is necessary or appropriate.


 


2.3           Delivery
of Shares.  Subject to withholding
taxes under Section 6.3 and to the terms of the Incentive Agreement, a
stock certificate evidencing the Shares of Restricted Stock with respect to
which the restrictions in the applicable Incentive Agreement have been
satisfied shall be delivered to the Grantee or other appropriate recipient free
of restrictions; provided,  however, that any certificates shall
bear such legends as the Committee may determine to be necessary or advisable
in order to comply with applicable federal or state securities laws.


 


ARTICLE III

RESTRICTED STOCK UNITS


 


3.1           Grants
of Restricted Stock Units.


 


(a)           Grant.  The Committee may grant Restricted Stock Units
on the terms and conditions set forth in the Plan, and on such other terms and
conditions as are not inconsistent with the purposes and provisions of the
Plan, as the Committee may from time to time determine, including the
satisfaction of any applicable Performance Goals.  Each Restricted Stock Unit awarded to a Grantee
shall correspond to one share of Common Stock. 
Each Incentive Agreement covering a Grant of Restricted Stock Units
shall specify (i) the number of Restricted Stock Units granted; (ii) the
date of grant; (iii) the vesting requirements applicable to such Restricted
Stock Units, including any applicable Performance Goals or other conditions
that the Committee determines must be satisfied in order to remove any
restrictions with respect to such Award; and (iv) any other terms that the
Committee deems appropriate.


 


(b)           Rights.  A Grantee shall have no voting or other
ownership rights, including Distribution Rights, with respect to any Restricted
Stock Unit Award until the date of issuance of Shares in settlement of the
Award; provided that notwithstanding the foregoing and except as
otherwise provided in the applicable Incentive Agreement, in the event that the
Company shall declare a Distribution (other than a Distribution of subscription
or other rights) the record date for which occurs during the period after the
vesting date but before the settlement date of the Award, a Grantee’s vested
Deferred Restricted Stock Unit Award shall be increased (unless an adjustment
for such event has been made under Section 5.6 or otherwise under the Plan
or the applicable Incentive Agreement) by a number of Units equal to the number
of Shares that is equal (i) in the case of a Distribution payable in Shares,
to the number of Shares paid with respect to Shares then represented by the
Award


 


11





















 


(including amounts previously credited under
this Section 3.1(b)); and (ii) in the case of a Distribution payable
in cash or property, the number of Shares determined by dividing (x) the amount
of the cash or the fair market value of the property in the Distribution with
respect to the number of Shares then represented by the Award (including
amounts previously credited under this Section 3.1(b)) by (y) the Fair
Market Value of a Share on that date, and the resulting number of Shares shall
be rounded to the nearest whole number of Shares.  Adjustments to a Grantee’s Restricted Stock
Unit Award pursuant to this Section 3.1(b) shall be subject to the
same terms, conditions and restrictions and shall be settled in the same manner
and at the same time (or as soon thereafter as practicable) as the Shares
originally subject to the Award.


 


3.2           Vesting.  The
Committee shall establish the vesting requirements applicable to Restricted
Stock Units granted hereunder, which vesting requirements shall specify any periods
of time within which such Award may be subject to forfeiture and any applicable
Performance Goals or other conditions that the Committee shall determine and
specify in the Incentive Agreement.


 


3.3           Adjustment
with Respect to Restricted Stock Units.  Except as provided in Section 4.3(c) with
respect to an Award intended to qualify for the Performance-Based Exception, the
Committee may at any time accelerate the date on which any restrictions
applicable to Restricted Stock Units shall lapse.


 


3.4           Settlement
of Restricted Stock Units.  Except as provided in Section 3.5
below with respect to Deferral Elections, on the date on which the restrictions
applicable to Restricted Stock Units lapse, or at such other times as the
Committee shall determine, all restrictions contained in the Incentive Agreement
covering such Restricted Stock Units and in the Plan shall lapse as to such Restricted
Stock Units and the Restricted Stock Units will be settled in Common Stock.  One or more stock certificates for the
appropriate number of Shares, free of the restrictions set forth in the Plan
and applicable Incentive Agreement, shall be delivered to the Grantee or such Shares
shall be credited to a brokerage account if the Grantee so directs; provided,
however, that any certificates shall bear such legends as the Committee may
determine to be necessary or advisable in order to comply with applicable
federal or state securities laws.


 


3.5           Deferral
of Settlement of Restricted Stock Unit.


 


(a)           Election.  With the consent of the Committee, any
Grantee may elect to defer the time of settlement with respect to all or any
portion of a Restricted Stock Unit Award. 
In no event, however, may a Grantee elect to defer the time of
settlement of any Restricted Stock Unit Award that he has already received or
would otherwise have an unrestricted right to receive currently except as
permitted by applicable legal requirements.  Any Deferral Election shall be made at such
time and in such manner as may be specified by the Committee in accordance with
applicable legal requirements and may not be changed at any time thereafter.  A Grantee’s Deferral Election shall specify
the time and manner of settlement of all deferred amounts, which election shall
be subject to the requirements of subsection (b) of this Section 3.5.


 


(b)           Settlement.  A Grantee’s Deferred Restricted Stock Unit shall
be settled at such time or times as the Grantee may elect in accordance with subsection (a) above.  In no event may Grantor elect that settlement
be made earlier than one or more of the following:  (i) the date of the Grantee’s separation
from service with the Company; (ii) the date of the Grantee’s Disability; (iii) the
date of the Grantee’s death; (iv) a specified time (or pursuant to a fixed
schedule) specified by the Grantee at the date of the Deferral Election; (v) an
unforeseeable emergency (as


 


12





















 


determined by the Committee) or (vi) a
Change in Control of the Company.  If a
Grantee does not elect a time of settlement, it shall be presumed that the Grantee
elected that settlement be made as of the earliest to occur of the date of the Grantee’s
separation from service with the Company, the date of the Grantee’s Disability or
death.  If the Grantee does not elect otherwise,
it shall be presumed that the Grantee elected for settlement to be made at one
time rather than in installments.


 


(c)           Code § 409A
Provisions.  Notwithstanding the
foregoing provisions of this Section 3.5(b):


 


(i)            if the Change in Control of the
Company fails to satisfy the requirements of a change in ownership or effective
control under guidance issued by the Secretary of the Treasury under Code § 409A
so that an immediate payment may not be made without violating the provisions
of Code § 409A, any payment or issuance to which Grantee is entitled on a
Change in Control of the Company will be deferred to the earliest date such
payment may be made without violating such provision; and


 


(ii)           in the case of any 409A Specified
Employee as defined below, the date on which any payment is otherwise required
to be made under the Agreement will be deferred to a date that is six months
after the date of Grantee’s separation from service with the Company (or, if
earlier, the date of Grantee’s death) to the extent necessary to comply with
the provisions of Code § 409A and the guidance issued by the Secretary of
the Treasury under Code § 409A.  The
term “409A Specified Employee” is defined in Code § 409A(a)(2)(B)(i) and,
in general, means any Employee of the Company at the time that any Shares are publicly
traded on an established securities market or otherwise who at any time during
the calendar year is:


 


(I)           an officer of the
Company having an annual compensation greater than $130,000 (as such amount may
be adjusted at the same time and in the same manner as under Code § 415(d)),
provided, however, that no more than 50 Employees (or, if lesser,
the greater of 3 or 10 percent of the Employees) shall be treated as officers;


 


(II)         a 5-percent owner of
the Company, or


 


(III)        a 1-percent owner of
the Company having an annual compensation from the Company of more than
$150,000.


 


ARTICLE IV

PERFORMANCE GOALS


 


4.1           Performance
Criteria.  As determined by the
Committee at the time of grant, Restricted Stock Awards and Restricted Stock
Unit Awards made under the Plan may be granted to any Employee or Outside
Director in accordance with the requirements of the Performance-Based Exception
based on one or more of the following business criteria (the “Performance Criteria”):


 


(a)           Premiums written in
operating region;


 


13





















 


(b)           Premiums written –
consolidated;


 


(c)           Earnings before or
after taxes of operating region;


 


(d)           Earnings before or
after taxes – consolidated;


 


(e)           Operating ratio, or
components thereof (including loss ratio) in operating region;


 


(f)            Operating ratio, or
components thereof (including loss ratio) – consolidated;


 


(g)           Performance of the Company’s
investment portfolio;


 


(h)           Achievement of
strategic development initiatives; or


 


(i)            Return on equity.


 


Performance Goals may be stated or measured (i) in
absolute terms, relative to comparison companies or indices, or relative to the
capitalization of the Company or the number of shares outstanding from time to
time; (ii) in accordance with formulae adopted by the Committee; or (iii) with
respect to the Company, any entity which is an Affiliate of the Company, or any
Subsidiary, unit or division of the Company.


 


4.2           Role
of Committee.  The Committee may
establish one or more Performance Goals for each Incentive Award.  In establishing the Performance Goals for each
applicable Incentive Award, the Committee may provide that the effect of
specified extraordinary or unusual events will be included or excluded
(including all items of gain, loss or expense determined to be extraordinary or
unusual in nature or infrequent in occurrence or related to the disposal of a
segment of business or related to a change in accounting principles, all as
determined in accordance with standards by Opinion No. 30 of the
Accounting Principles Board (“APB Opinion 30”) or other authoritative
financial accounting standards).  The
Performance Goals specified in any Incentive Agreement need not be applicable
to all Incentive Awards, and may be particular to an individual Grantee’s
function or position with the Company.


 


4.3           Additional
Requirements.  Any Incentive Award
that is intended to qualify for the Performance-Based Exception shall also be
subject to the following:


 


(a)           No later than the
earlier of (i) 90 days following the commencement of each Performance Period
and (ii) the day on which 25% of the Performance Period has elapsed (or
such other time as may be required or permitted by the Performance-Based
Exception), the Committee shall, in writing, specify (1) the Performance Goals
applicable to the Performance Period for the Incentive Award; and (2) the portion
of the Incentive Award that will vest upon attainment of the Performance Goals.  The Performance Goals shall satisfy the
requirements of the Performance-Based Exception, including the requirement that
the achievement of the Performance Goals be substantially uncertain at the time
they are established and that the Performance Goals be established in such a
way that a third party with knowledge of the relevant facts could determine
whether and to what extent the Performance Goals have been met.


 


14





















 


(b)           Following the
completion of each Performance Period, the Committee shall certify in the
minutes of the Committee whether the applicable Performance Goals have been
achieved and the portion of the Incentive Award, if any, for each Grantee that
became vested in the Performance Period.


 


(c)           In determining the portion
of the Incentive Award, if any, for each Grantee that actually vests in the
applicable Performance Period, the Committee shall have the right to reduce
(but not increase) the vested percentage that would otherwise be earned at a
given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate
performance for the Performance Period.


 


4.4           Right
of Recapture.  If at any time after
the date on which an Award has become vested or Shares are issued pursuant to
the attainment of a Performance Goal, the Committee determines that the earlier
determination as to the achievement of the Performance Goal was based on false
or misleading data and that in fact the Performance Goal had not been achieved
or had been achieved to a lesser extent than originally determined, then any
Award or portion of an Award that became vested based on such incorrect determination
shall be deemed to be not vested and the Grantee shall be obligated to return
to the Company, and the Committee may attempt to recover from the Grantee, any
transfer of Shares made to the Grantee with respect to such Award or portion of
an Award.


 


ARTICLE V

PROVISIONS RELATING TO PLAN PARTICIPATION


 


5.1           Incentive
Agreement.  Each Grantee to whom an
Incentive Award is granted shall be required to enter into an Incentive
Agreement with the Company, in such a form as is provided by the Committee.  The Incentive Agreement shall contain specific
terms as determined by the Committee with respect to the Grantee’s particular
Incentive Award.  Such terms need not be
uniform among all Grantees or any similarly situated Grantees.  The Incentive Agreement may include vesting,
forfeiture and other provisions particular to the particular Grantee’s
Incentive Award, as well as, for example, provisions to the effect that the
Grantee (a) shall not disclose any confidential information acquired
during Employment with the Company, (b) shall abide by all the terms and
conditions of the Plan and such other terms and conditions as may be imposed by
the Committee, (c) shall not interfere with the employment or other
service of any employee, (d) shall not compete with the Company or become
involved in a conflict of interest with the interests of the Company, (e) shall
forfeit any non-vested portion of an Incentive Award if the Grantee’s
Employment is terminated for any reason or, in the case of an Outside Director,
the Grantee ceases to be a member of the Board, (f) shall not be permitted
to make an election under Code §83(b) when applicable, and (g) shall
be subject to any other agreement between the Grantee and the Company regarding
Shares that may be acquired under an Incentive Award including a shareholders’
agreement, buy-sell agreement, or other agreement restricting the transferability
of Shares by Grantee.  An Incentive
Agreement shall include such terms and conditions as are determined by the
Committee to be appropriate with respect to any individual Grantee.  The Incentive Agreement shall be signed by the
Grantee to whom the Incentive Award is made and by an Authorized Officer.


 


15





















 


5.2           No
Right to Employment.  Nothing in the
Plan or any Incentive Agreement shall (i) confer upon any Grantee any
Employment rights (including any right to continued Employment) for any period,
(ii) entitle any Grantee to any remuneration or benefit not set forth in
the Plan or the applicable Incentive Agreement, or (iii) in interfere with,
or limit in any way, the right of any GAINSCO Company to terminate the Employment
of any Grantee who is an Employee at any time without regard to the existence
of the Plan or any Incentive Agreement.


 


5.3           Securities
Requirements.  The Company shall be
under no obligation to effect the registration pursuant to the Securities Act
of 1933 of any Shares to be issued hereunder or to effect similar compliance
under any state laws.  Notwithstanding
anything herein to the contrary, the Company shall not be obligated to cause to
be issued or delivered any certificates evidencing Shares pursuant to the Plan
unless and until the Company is advised by its counsel that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authorities, and the requirements of any securities
exchange on which Shares are traded.  The
Committee may require, as a condition of the issuance and delivery of
certificates evidencing Shares pursuant to the terms hereof, that the recipient
of such Shares make such covenants, agreements and representations, and that
such certificates bear such legends, as the Committee deems necessary or
desirable.


 


The Committee may defer the effectiveness of any action in respect of
any Incentive Award in order to allow the issuance of Shares to be made
pursuant to registration or an exemption from registration or other methods for
compliance available under federal or state securities laws.


 


If the Shares issuable or deliverable pursuant to an Incentive Award
are not registered under the Securities Act of 1933, the Company may imprint on
the certificate for such Shares such legend that the Company considers
necessary or advisable to comply with the Securities Act of 1933 and applicable
state securities laws.


 


5.4           Transferability.  Incentive Awards granted under the Plan shall
not be transferable or assignable other than: (a) by will or the laws of
descent and distribution or (b) pursuant to a qualified domestic relations
order (as defined under Code §414(p)).


 


The designation by a Grantee of a beneficiary of an Incentive Award
shall not constitute a transfer of the Incentive Award.  No transfer by will or by the laws of descent
and distribution shall be effective to bind the Company unless the Committee
has been furnished with a copy of the deceased Grantee’s enforceable will or
such other evidence as the Committee deems necessary to establish the validity
of the transfer.  Any attempted transfer
in violation of this Section 5.4 shall be void and ineffective.


 


5.5           Rights
as a Shareholder.


 


(a)           No Shareholder
Rights.  Except as otherwise provided
in Section 2.1(b) for grants of Restricted Stock or in Section 3.1(b) for
grants of Restricted Stock Units, a Grantee of an Incentive Award shall have no
voting rights, Distribution Rights or other rights as a shareholder with
respect to any Shares until the issuance of a stock certificate or other record
of ownership for such Shares.


 


16





















 


(b)           Representation of
Ownership.  In the case of settlement
of an Incentive Award to a person or estate acquiring the right to such
Incentive Award by reason of the death or Disability of a Grantee, the
Committee may require reasonable evidence as to the ownership of such Incentive
Award or the authority of such person. The Committee may also require such
consents and releases of taxing authorities as it deems advisable.


 


5.6           Change
in Stock and Adjustments.


 


(a)           Changes in Law or
Circumstances.  Subject to Section 5.8
(which only applies in the event of a Change in Control of the Company), in the
event of any change in applicable law or any change in circumstances which
results in or would result in any dilution of the rights granted under the
Plan, or which otherwise warrants an equitable adjustment because it interferes
with the intended operation of the Plan, then, if the Committee should so
determine that such change equitably requires an adjustment in the number or
kind of shares of stock or other securities or property theretofore subject, or
which may become subject, to issuance or transfer under the Plan or in the
terms and conditions of outstanding Incentive Awards, such adjustment shall be
made in accordance with such determination.  Such adjustments may include changes with
respect to (i) the aggregate number of Shares that may be issued under the
Plan and (ii) the number of Shares subject to Incentive Awards.  The Committee shall cause notice to be given
to each applicable Grantee of such adjustment which shall be effective and
binding even if notice is not given.


 


(b)           Exercise of
Corporate Powers.  The existence of
the Plan or outstanding Incentive Awards hereunder shall not affect in any way
the right or power of the Company or its shareholders to make or authorize any
or all adjustments, recapitalization, reorganization or other changes in the
Company’s capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stocks ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise.


 


(c)           Recapitalization
of the Company.  Subject to Section 5.8
(which only applies in the event of a Change in Control of the Company), if
while there are Incentive Awards outstanding, the Company shall effect any
subdivision or consolidation of Shares, dividend payable in Shares, or any stock
split or reverse stock split of the Shares, then the number of Shares available
under the Plan and the number of Incentive Awards shall (i) in the event
of an increase in the number of Shares outstanding, be proportionately
increased and (ii) in the event of a reduction in the number of Shares
outstanding, be proportionately reduced.  The Committee shall take such action and
whatever other action it deems appropriate so that the value of each
outstanding Incentive Award to the Grantee shall not be affected by a corporate
action described in this Section 5.6(c).


 


(d)           Issue of Common
Stock by the Company.  Except as
hereinabove expressly provided in this Section 5.6 and subject to Section 5.8
(which only applies in the event of a Change in Control of the Company), the
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor,


 


17





















 


or upon any conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number of Shares covered by previously granted Incentive
Awards; provided, however, in such event but, subject to any restrictions on
Distribution Rights in the Incentive Agreement, outstanding Shares of
Restricted Stock shall be treated the same as outstanding unrestricted Shares.


 


(e)           Assumption Under
the Plan of Stock Based Incentive Awards. 
Notwithstanding any other provision of the Plan, the Committee may
authorize the assumption and continuation under the Plan of stock-based
incentive awards that were granted under a stock incentive plan or agreement
that is or was maintained by a corporation or other entity that was merged
into, consolidated with, or whose stock or assets were acquired by, the Company
as the surviving corporation.  Any such
action shall be upon such terms and conditions as the Committee may deem
appropriate, including provisions to preserve the holder’s rights under the
previously granted stock-based incentive award.  Any such assumption and continuation of any
such previously granted and unexercised incentive award shall be treated as an
outstanding Incentive Award under the Plan and shall thus count against the
number of Shares reserved for issuance pursuant to Section 1.5.  In addition, any Shares issued by the Company
through the assumption or substitution of outstanding grants from an acquired
company shall reduce the Shares available for grants under Section 1.5.


 


(f)            Assumption of
Incentive Awards by a Successor. 
Subject to the accelerated lapse of restrictions and other provisions of
Section 5.8 that apply in the event of a Change in Control of the Company,
in the event of a Corporate Event, (i) each Grantee shall be entitled to
receive, in lieu of the number of Shares subject to Incentive Awards, such
shares of capital stock or other securities or property as may be deliverable with
respect to or in exchange for the number of Shares which Grantee would have
received had the Grantee’s Incentive Award been settled immediately prior to
such Corporate Event, together with any adjustments; and (ii) the
Committee may take whatever other action it deems appropriate to preserve the
rights of Grantees holding outstanding Incentive Awards in the event of a Corporate
Event.


 


Notwithstanding the previous paragraph of this Section 5.6(f), but
subject to the accelerated lapse of restrictions and other provisions of Section 5.8
that apply in the event of a Change in Control of the Company, in the event of
a Corporate Event, the Committee shall have the right and power to: (i) cancel,
effective immediately prior to the occurrence of the Corporate Event, each
outstanding Incentive Award and, in full consideration of such cancellation,
pay to the Grantee an amount in cash equal to the value, as determined by the
Committee, of the property (including cash) received by the holders of Common
Stock as a result of such Corporate Event; provided,  however,
this clause (i) shall be inapplicable to an Incentive Award granted within
six months before the occurrence of the Corporate Event if the Grantee is an
Insider and such disposition is not exempt under Rule 16b-3 (or other rules preventing
liability of the Insider under §16(b) of the Exchange Act) and, in that
event, the provisions hereof shall be applicable to such Incentive Award after
the expiration of six months from the date of grant; or (ii) provide for
the exchange or substitution of each Incentive Award outstanding immediately
prior to such Corporate Event (whether or not then exercisable) for another
award with respect to the Common Stock or other property for which such
Incentive Award is exchangeable and, incident thereto, make an equitable
adjustment as determined by the Committee in the number of Shares or


 


18





















 


amount of
property (including cash) subject to the Incentive Award; or (iii) provide
for assumption of the Plan and such outstanding Incentive Awards by the
surviving entity or its parent.


 


The Committee shall have the authority to take whatever action it deems
to be necessary or appropriate to effectuate the provisions of this Section 5.6(f).


 


5.7           Termination,
Death or Disability.


 


(a)           Events Occurring
Within Last Three Months of a Year. 
Unless otherwise expressly provided in the Grantee’s Incentive
Agreement, if the Grantee’s Employment is terminated within the last three
months of any calendar year during a performance or service vesting period by
the Company without Cause or due to the Grantee’s death or Disability or for
any reason in the case of a Grantee who is an Outside Director, then any
non-vested portion of any Incentive Award that otherwise would have vested in
that year shall be prorated based on the number of days that the Grantee was
employed or served as an Outside Director during that year and such prorata portion
shall vest and be settled as soon as administratively feasible.  The remaining non-vested portion of any
outstanding Incentive Award shall terminate and no further vesting shall occur.


 


(b)           Other Events.  Unless otherwise expressly provided in the
Grantee’s Incentive Agreement, if the Grantee’s Employment is terminated at any
time or for any reason other than as specified in Section 5.7(a) above,
then any non-vested portion of the Grantee’s outstanding Incentive Award shall
immediately terminate and no further vesting shall occur.


 


(c)           Continuation.  Subject to the conditions and limitations of
the Plan and applicable law and regulation, in the event that a Grantee ceases
to be an Employee or an Outside Director, the Committee and Grantee may
mutually agree with respect to any Incentive Award then held by the Grantee (i) for
an acceleration or other adjustment in any vesting requirements applicable to
the Incentive Award; or (ii) for any other change in the terms and
conditions of the Incentive Award.  In
the event of any such change to an outstanding Incentive Award, a written
amendment to the Grantee’s Incentive Agreement shall be required.


 


5.8           Change
in Control of the Company.  Notwithstanding
any contrary provision in the Plan, in the event of a Change in Control of the
Company, the following actions shall automatically occur as of the day
immediately preceding the date of the Change in Control of the Company unless expressly
provided otherwise in the individual Grantee’s Incentive Agreement:


 


(a)           all of the unlapsed restrictions and
conditions with respect the Incentive Award then outstanding shall be deemed to
lapse, and the Restriction Period with respect thereto shall be deemed to have
expired, and thus each such Incentive Award shall become fully vested; and


 


(b)           with respect to Restricted Stock Units,
settlement shall be made to each Grantee within seven days following the date
of the Change in Control of the Company.


 


Notwithstanding the occurrence of any of the foregoing events set out
in this Section 5.8 which would otherwise result in a Change in Control of
the Company, the Committee may


 


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determine that
an event otherwise constituting or reasonably leading to a Change in Control of
the Company shall not be deemed a Change in Control of the Company hereunder.  Such determination shall be effective (i) if
made by the Committee prior to the occurrence of an event that otherwise would
be, or reasonably lead to, a Change in Control of the Company, or (ii) after
such event, if made by a majority of the directors in office immediately prior
to such event.


 


5.9           Exchange
of Incentive Awards.  The Committee
may permit any Grantee to surrender outstanding Incentive Awards in order to
exercise or realize his rights under other Incentive Awards or in exchange for
the grant of new Incentive Awards, or require holders of Incentive Awards to
surrender outstanding Incentive Awards (or comparable rights under other plans
or arrangements) as a condition precedent to the grant of new Incentive Awards.


 


ARTICLE VI

GENERAL


 


6.1           Effective
Date.  This Plan is adopted by the
Board effective as of the Effective Date, subject to Shareholder Approval.  Incentive Awards may be granted under the Plan
at any time prior to receipt of such Shareholder Approval; provided, however,
if the requisite Shareholder Approval is not obtained, then any Incentive
Awards granted hereunder shall automatically become null and void and of no
force or effect.


 


6.2           Funding
and Liability of Company.  No
provision of the Plan shall require the Company, for the purpose of satisfying
any obligations under the Plan, to purchase assets or place any assets in a
trust or other entity to which contributions are made, or otherwise to
segregate any assets.  In addition, the
Company shall not be required to maintain separate bank accounts, books,
records or other evidence of the existence of a segregated or separately
maintained or administered fund for purposes of the Plan.  Although bookkeeping accounts may be
established with respect to Grantees who are entitled to Shares or rights
thereto under the Plan, any such accounts shall be used merely as a bookkeeping
convenience.  The Company shall not be required
to segregate any assets that may at any time be represented by Shares or rights
thereto.  The Plan shall not be construed
as providing for such segregation, nor shall the Company or the Committee be
deemed to be a trustee of any Shares or rights thereto.  Any liability or obligation of the Company to
any Grantee with respect to an Incentive Award shall be based solely upon any
contractual obligations that may be created by this Plan and any Incentive
Agreement, and no such liability or obligation of the Company shall be deemed
to be secured by any pledge or other encumbrance on any property of the
Company.  Neither the Company nor the
Committee shall be required to give any security or bond for the performance of
any obligation that may be created by the Plan.


 


6.3           Withholding
Taxes.


 


(a)           Tax Withholding.  The Company shall have the power and the
right to deduct or withhold, or require a Grantee to remit to the Company, an
amount sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of the Plan or an Incentive Award hereunder.  Upon the lapse of restrictions on Restricted
Stock, the Committee may elect to satisfy the tax withholding requirement, in
whole or in part, by having the Company withhold Shares having a


 


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Fair Market Value on the date the tax is to
be determined equal to the minimum withholding taxes which could be imposed on
the transaction as determined by the Committee.


 


(b)           Share Withholding.  With respect to tax withholding required upon
the lapse of restrictions on Restricted Stock, or upon any other taxable event
arising as a result of any Incentive Awards, Grantees may elect, subject to the
approval of the Committee, to satisfy the withholding requirement, in whole or
in part, by having the Company withhold Shares having a Fair Market Value on
the date the tax is to be determined equal to the minimum withholding taxes which
could be imposed on the transaction as determined by the Committee.  All such elections shall be made in writing,
signed by the Grantee, and shall be subject to any restrictions or limitations
that the Committee deems appropriate.


 


(c)           Loans.  To the extent permitted by the Sarbanes-Oxley
Act of 2002 or other applicable law, the Committee may provide for loans, on
either a short term or demand basis, from the Company to a Grantee who is an
Employee to permit the payment of taxes required by law.


 


6.4           No
Guarantee of Tax Consequences.  Neither
the Company nor the Committee makes any commitment or guarantee that any
federal, state or local tax treatment will apply or be available to any person
participating or eligible to participate hereunder.


 


6.5           Designation
of Beneficiary by Grantee.  Each
Grantee may, from time to time, name any beneficiary or beneficiaries (who may
be named contingently or successively) to whom any benefit under the Plan is to
be paid in case of the Grantee’s death before the Grantee receives any or all
of such benefit.  Each such designation
shall revoke all prior designations by the same Grantee, shall be in a form
prescribed by the Committee, and will be effective only when filed by the
Grantee in writing with the Committee during the Grantee’s lifetime.  In the absence of any such designation,
benefits remaining unpaid at the Grantee’s death shall be paid to the Grantee’s
estate.


 


6.6           Deferrals.  Except as provided in Section 3.5, the
Committee shall not permit a Grantee to defer such Grantee’s receipt of Shares
that would otherwise be due to such Grantee by virtue of the lapse or waiver of
requirements with respect to Restricted Stock or Restricted Stock Units.


 


6.7           Amendment
and Termination.


 


(a)           Amendment.  The Board shall have the power and authority
to amend the Plan at any time; provided, however, the Board shall
not, without Shareholder Approval within the time period required by applicable
law:


 


(i)            except as provided in Section 5.6,
increase the maximum number of Shares which may be issued under the Plan
pursuant to Section 1.5;


 


(ii)           amend the requirements as to the
class of Employees or Outside Directors eligible to receive Incentive Awards under
the Plan;


 


(iii)          extend the term of the Plan; or,


 


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(iv)          (I) increase the maximum limits on
Incentive Awards to Covered Employees as set for compliance with the
Performance-Based Exception or (II) decrease the authority granted to the
Committee under the Plan in contravention of Rule 16b-3 under the Exchange
Act.


 


(b)           Termination.  The Plan shall terminate on December 31,
2010; provided, however, the Board may, at any earlier date,
terminate the Plan.


 


(c)           Effect of
Amendment or Termination on Outstanding Awards.  Subject to Sections 4.3 and 4.4, no amendment
or termination of the Plan shall adversely affect in any material way any
outstanding Incentive Award previously granted to a Grantee under the Plan
without the written consent of such Grantee or other designated holder of such Incentive
Award.


 


(d)           Shareholder
Approval.  In addition, to the extent
that the Committee determines that (i) the listing or qualification
requirements of any national securities exchange or quotation or transaction
reporting system on which the Common Stock is then listed or quoted, if
applicable, or (ii) the Code (or regulations promulgated thereunder),
require Shareholder Approval in order to maintain compliance with such listing requirements
or to maintain any favorable tax advantages or qualifications, then the Plan
shall not be amended in such respect without Shareholder Approval.


 


6.8           Requirements
of Law.  The granting of Incentive
Awards and the issuance of Shares under the Plan shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any Governmental
Authority or national securities exchanges as may be required. Certificates
evidencing Shares delivered under this Plan (to the extent that such shares are
so evidenced) may be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules and
regulations of the SEC, any securities exchange or quotation or transaction
reporting system upon which the Common Stock is then listed or to which it is
admitted for quotation, and any applicable federal or state securities law, if
applicable. The Committee may cause a legend or legends to be placed upon such
certificates (if any) to make appropriate reference to such restrictions.


 


6.9           Rule 16b-3
Securities Law Compliance For Insiders. 
Transactions under the Plan with respect to Insiders are intended to
comply with all applicable conditions of Rule 16b-3 under the Exchange
Act.  Any ambiguities or inconsistencies
in the construction of an Incentive Award or the Plan shall be interpreted to
give effect to such intention, and to the extent any provision of the Plan or
action by the Committee fails to so comply, it shall be deemed null and void to
the extent permitted by law and deemed advisable by the Committee.


 


6.10         Compliance
with Code §162(m).  Unless otherwise
determined by the Committee with respect to any particular Incentive Award, it
is intended that the Plan shall comply fully with the applicable requirements
so that any Incentive Awards subject to Code §162(m) that are granted to
Covered Employees shall qualify for the Performance-Based Exception.  If any provision of the Plan or an Incentive
Agreement would disqualify the Plan or would not otherwise permit the Plan or
Incentive Award to comply with the Performance-Based Exception as so intended,
such provision shall be construed or deemed to be amended to conform to the
requirements of the Performance-Based Exception to the extent permitted by
applicable law and


 


22





















 


deemed advisable by the Committee; provided,
however, no such construction or amendment shall have an adverse effect
on the prior grant of an Incentive Award or the economic value to a Grantee of
any outstanding Incentive Award.


 


6.11         Notices.


 


(a)           Notice From
Insiders to Secretary of Change in Beneficial Ownership.  Within two business days after the date of a
change in beneficial ownership of the Common Stock issued or delivered pursuant
to this Plan, an Insider should report to the Secretary of the Company any such
change to the beneficial ownership of Common Stock that is required to be
reported with respect to such Insider under Rule 16a-3 promulgated
pursuant to the Exchange Act.  Whenever
reasonably feasible, Insiders will provide the Committee with advance notification
of such change in beneficial ownership.


 


(b)           Notice to
Insiders and Securities and Exchange Commission.  The Company shall provide notice to any
Insider, as well as to the SEC, of any “blackout period,” as defined in §306(a)(4) of
the Sarbanes-Oxley Act of 2002, in any case in which Insider is subject to the
requirements of §304 of said Act in connection with such “blackout period.”


 


6.12         Pre-Clearance
Agreement with Brokers.  Notwithstanding
anything in the Plan to the contrary, no Shares issued pursuant to this Plan
will be delivered to a broker or dealer that receives such Shares for the
account of an Insider unless and until the broker or dealer enters into a
written agreement with the Company whereby such broker or dealer agrees to
report immediately to the Secretary of the Company (or other designated person)
a change in the beneficial ownership of such Shares.


 


6.13         Successors
to Company.  All obligations of the
Company under the Plan with respect to Incentive 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, Share Exchange, or otherwise, of all or substantially all of the
business or assets of the Company.


 


6.14         Miscellaneous
Provisions.


 


(a)           No Employee, Outside
Director or other Person shall have any claim or right to be granted an
Incentive Award under the Plan.


 


(b)           The expenses of the
Plan shall be borne by the Company.


 


(c)           By accepting any
Incentive Award, each Grantee and each person claiming by or through him shall
be deemed to have indicated his acceptance of the Plan.


 


6.15         Severability.  In the event that any provision of this Plan
shall be held illegal, invalid or unenforceable for any reason, such provision
shall be fully severable, but shall not affect the remaining provisions of the
Plan, and the Plan shall be construed and enforced as if the illegal, invalid,
or unenforceable provision was not included herein.


 


6.16         Usage;
Interpretation.  In this Plan, unless
a clear contrary intention appears:


 


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(a)           the singular number
includes the plural number and vice versa;


 


(b)           reference to any
Person includes such Person’s successors and assigns but, if applicable, only
if such successors and assigns are not prohibited by this Plan, and reference
to a Person in a particular capacity excludes such Person in any other capacity
or individually;


 


(c)           reference to any
gender includes each other gender;


 


(d)           reference to any
agreement, document, instrument or plan means such agreement, document, instrument
or plan as amended or modified and in effect from time to time in accordance
with the terms thereof;


 


(e)           reference to any
legal requirement means such legal requirement as amended, modified, codified,
replaced or reenacted, in whole or in part, and in effect from time to time,
including rules and regulations promulgated thereunder and reference to
any section or other provision of any legal requirement means that provision
of such legal requirement from time to time in effect and constituting the
substantive amendment, modification, codification, replacement or reenactment
of such section or other provision;


 


(f)            “hereunder”, “hereof”,
“hereto” and words of similar import shall be deemed references to this Plan as
a whole and not to any particular Article, Section or other provision
thereof;


 


(g)           “including” (and
with correlative meaning “include”) means including without limiting the
generality of any description preceding such term;


 


(h)           “or” is used in the
inclusive sense of “and/or”;


 


(i)            with respect to the
determination of any period of time, “from” means “from and including” and “to”
means “to but excluding”;


 


(j)            references to
documents, instruments or agreements shall be deemed to refer as well to all
addenda, exhibits, schedules or amendments thereto; and


 


(k)           unless otherwise
specified herein, all accounting terms used therein shall be interpreted, and
all accounting determinations thereunder shall be made, in accordance with
GAAP.


 


6.17         Governing
Law.  The Plan shall be interpreted,
construed and constructed in accordance with the laws of the State of Texas
without regard to its conflicts of law provisions, except as may be superseded
by applicable laws of the U.S.  Any
dispute arising out of or relating to the Plan or any Incentive Agreement may
be brought in a court of competent jurisdiction located in Dallas, Texas.  Each Employee or Outside Director accepting
an Incentive Award shall irrevocably submit to the exclusive jurisdiction of
such courts in any such dispute and waive any objection he or she may have to
venue or to convenience of forum, agree that all claims in respect of the
dispute shall be heard and determined only in any such court, and agree not to
bring any dispute arising out of or related to the Plan or any Incentive
Agreement in any other court.


 


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