exv10w1



 





Exhibit 10.1




HORIZON OFFSHORE, INC.

2005 STOCK INCENTIVE PLAN




(as amended and restated as of May 23, 2007)




     1. Purpose. The purpose of the 2005 Stock Incentive Plan (this “Plan”) of Horizon Offshore,
Inc. (“Horizon”) is to increase stockholder value and to advance the interests of Horizon and its
subsidiaries (collectively, the “Company”) by furnishing a variety of equity incentives (the
“Incentives”) designed to attract, retain and motivate officers, employees, directors, consultants
and advisors and to strengthen the mutuality of interests between such persons and Horizon’s
stockholders. Incentives may consist of options to purchase shares of Horizon’s common stock (the
“Common Stock”), stock appreciation rights, shares of restricted stock, restricted stock units or
other stock-based awards, the value of which is based upon the value of the Common Stock, all on
terms determined under this Plan. As used in this Plan, the term “subsidiary” means any
corporation, limited liability company or other entity of which Horizon owns (directly or
indirectly) within the meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended
(the “Code”), 50% or more of the total combined voting power of all classes of stock, membership
interests or other equity interests issued thereby.



     2. Administration.




     2.1 Composition. This Plan shall be administered by the compensation committee of the
Board of Directors of Horizon, or by a subcommittee of the compensation committee. The
committee or subcommittee that administers this Plan shall hereinafter be referred to as the
“Committee.” The Committee shall consist of not fewer than two members of the Board of
Directors, each of whom shall (a) qualify as a “non-employee director” under Rule 16b-3
under the Securities Exchange Act of 1934 (the “1934 Act”), or any successor rule, and (b)
qualify as an “outside director” under Section 162(m) of the Code and the regulations
thereunder (collectively, “Section 162(m)”).




     2.2 Authority. The Committee shall have authority to award Incentives under this Plan,
to interpret this Plan, to establish any rules or regulations relating to this Plan that it
determines to be appropriate, to enter into agreements with or provide notices to
participants as to the terms of the Incentives (the “Incentive Agreements”) and to make any
other determination that it believes necessary or advisable for the proper administration of
this Plan. Its decisions concerning matters relating to this Plan shall be final,
conclusive and binding on the Company and participants. The Committee may delegate its
authority hereunder to the extent provided in Section 3.



     3. Eligible Participants. Employees and officers of the Company (including officers who also
serve as directors of the Company) and consultants and advisors to the Company shall become
eligible to receive Incentives under this Plan when designated by the Committee. Employees may be
designated individually or by groups or categories, as the Committee deems appropriate. With
respect to participants not subject to Section 16 of the 1934 Act or Section 162(m), (i) the
Committee may delegate to the chief executive officer of Horizon its authority to designate
participants, to determine the type, size and terms of the Incentives to



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be received by these participants, to determine any performance objectives for these
participants and to approve or authorize the form of Incentive Agreement governing such Incentives
and (ii) following any grants of Incentives pursuant to such delegated authority, the chief
executive officer of Horizon or any officer designated by him may exercise any powers of the
Committee under this Plan to accelerate vesting or exercise periods, to terminate restricted
periods, to waive compliance with specified provisions or to otherwise make determinations
contemplated hereunder with respect to such Incentives; provided, however, that in no event may (A)
the chief executive officer grant stock options at an exercise price less than the Fair Market
Value of a share of Common Stock on the later of the date of grant or the date the participant
commences employment with the Company, unless otherwise determined by the Committee (subject to the
limitations in Section 5.1), (B) any person other than the Committee make any of the determinations
set forth in Section 4.5, 11.11 or Section 11.12, or (C) any person take any action that the
Committee lacks the authority to take hereunder. Directors who are not also employees of the
Company (“Outside Directors”) may participate in the Plan only as specifically provided in Section
12 hereof.




     4. Shares Subject to this Plan. The shares of Common Stock with respect to which Incentives
may be granted under this Plan shall be subject to the following:




     4.1 Type of Common Stock. The shares of Common Stock with respect to which Incentives
may be granted under this Plan may be currently authorized but unissued shares or shares
currently held or subsequently acquired by the Company as treasury shares, including shares
purchased in the open market or in private transactions.




     4.2 Maximum Number of Shares. Subject to the other provisions of this Section 4, the
maximum number of shares of Common Stock that may be delivered to participants and their
beneficiaries under this Plan shall be 2,800,000 shares of Common Stock.




     4.3 Share Counting. To the extent any shares of Common Stock covered by an Incentive
are not delivered to a participant or beneficiary because the Incentive is forfeited or
canceled, or the shares of Common Stock are not delivered because the Incentive is paid or
settled in cash, such shares shall not be deemed to have been delivered for purposes of
determining the maximum number of shares of Common Stock available for delivery under
Section 4.2 or 4.4(c). In the event that shares of Common Stock are issued as Incentives
and thereafter are forfeited or reacquired by the Company pursuant to rights reserved upon
issuance thereof, such forfeited and reacquired Shares may again be issued under this Plan.
All shares to which a stock appreciation right relates (not only the net shares) shall be
counted against the shares issuable through the Plan, except as otherwise provided above.




     4.4 Limitations on Number of Shares. Subject to Section 4.5, the following additional
limitations are imposed under this Plan:




     (a) The maximum number of shares of Common Stock that may be issued upon
exercise of stock options intended to qualify as incentive stock options under
Section 422 of the Code shall be 200,000 shares.



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     (b) The maximum number of shares of Common Stock that may be covered by
Incentives granted under this Plan to any one individual during any one
calendar-year period shall be 300,000.




     (c) If, after shares have been earned under an Incentive, the delivery is
deferred, any additional shares attributable to dividends paid during the deferral
period shall be disregarded for purposes of the limitations of this Section 4.




     4.5 Adjustment.




     (a) In the event of any recapitalization, reclassification, stock dividend,
stock split, combination of shares or other change in the Common Stock, all
limitations on numbers of shares of Common Stock provided in this Plan and the
number of shares of Common Stock subject to outstanding Incentives shall be
equitably adjusted in proportion to the change in outstanding shares of Common
Stock. In addition, in the event of any such change in the Common Stock, the
Committee shall make any other adjustment that it determines to be equitable,
including adjustments to the exercise price of any option or the base price of any
stock appreciation right and any per share performance objectives of any Incentive
in order to provide participants with the same relative rights before and after such
adjustment.




     (b) If the Company merges, consolidates, sells all of its assets or dissolves
and such transaction is not a Change of Control, as defined in Section 11.12 (each
of the foregoing a “Fundamental Change”), then thereafter upon any exercise or
payout of an Incentive theretofore granted the participant shall be entitled to
receive (i) in lieu of shares of Common Stock previously issuable thereunder, the
number and class of shares of stock and securities to which the participant would
have been entitled pursuant to the terms of the Fundamental Change if, immediately
prior to such Fundamental Change, the participant had been the holder of record of
the number of shares of Common Stock subject to such Incentive or (ii) in lieu of
payments based upon Common Stock previously payable thereunder, payments based on
any formula that the Committee determines to be equitable in order to provide
participants with substantially equivalent rights before and after the Fundamental
Change. In the event any such Fundamental Change causes a change in the outstanding
Common Stock, the aggregate number of shares available under the Plan may be
appropriately adjusted by the Committee in its sole discretion, whose determination
shall be conclusive.



     5. Stock Options. The Committee may grant incentive stock options (as such term is defined in
Section 422 of the Code) or non-qualified stock options. Any option that is designated as a
non-qualified stock option shall not be treated as an incentive stock option. Each stock option
granted by the Committee under this Plan shall be subject to the following terms and conditions:



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     5.1 Price. The exercise price per share shall be determined by the Committee, subject
to adjustment under Section 4.5; provided that in no event shall the exercise price be less
than the Fair Market Value (as defined below) of a share of Common Stock on the date of
grant, except in the case of a stock option granted in assumption of or in substitution for
an outstanding award of a company acquired by the Company or with which the Company
combines.




     5.2 Number. The number of shares of Common Stock subject to the option shall be
determined by the Committee, subject to the limitations and adjustments provided in Section
4.




     5.3 Duration and Time for Exercise. Subject to earlier termination as provided in
Sections 11.4 and 11.12, the term of each stock option shall be determined by the Committee,
but may not exceed ten years. Each stock option shall become exercisable at such time or
times during its term as shall be determined by the Committee. The Committee may accelerate
the exercisability of any stock option at any time.




     5.4 Conditions to Exercise. The Committee may, in its discretion, provide that a stock
option cannot be exercised unless one or more performance goals are achieved, including any
of those specified in Section 10.




     5.5 Manner of Exercise.




     (a) A stock option may be exercised, in whole or in part, by giving written
notice to the Company, specifying the number of shares of Common Stock to be
purchased. The exercise notice shall be accompanied by tender of the full purchase
price for such shares, which may be paid or satisfied by (i) cash; (ii) check; (iii)
delivery of shares of Common Stock, which shares shall be valued for this purpose at
the Fair Market Value on the business day immediately preceding the date such option
is exercised and, unless otherwise determined by the Committee, shall have been held
by the optionee for at least six months; (iv) delivery of irrevocable written
instructions to a broker approved by the Company (with a copy to the Company) to
immediately sell a portion of the shares issuable under the option and to deliver
promptly to the Company the amount of sale proceeds (or loan proceeds if the broker
lends funds to the participant for delivery to the Company) to pay the exercise
price; (v) in such other manner as may be authorized from time to time by the
Committee; or (vi) any combination of the preceding, equal in value to the full
amount of the exercise price; provided that all such payments shall be made or
denominated in United States dollars.




     (b) Notice under the preceding paragraph may be delivered by telecopy,
electronic mail or any similar form of transmission, provided that the exercise
price of such shares is received by the Company via wire transfer or other means on
or before the day such transmission is received by the Company. The notice shall
specify the manner in which the certificates for such shares are to be delivered.



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     (c) An option to purchase shares of Common Stock in accordance with this Plan
shall be deemed to have been exercised immediately prior to the close of business on
the first business date on which the Company has received both (i) written notice of
such exercise and (ii) payment in full of the exercise price for
the number of shares for which options are being exercised.




     (d) In the case of delivery of an uncertified check, no shares shall be issued
until the check has been paid in full.




     (e) Prior to the issuance of shares of Common Stock upon the exercise of a
stock option, a participant shall have no rights as a stockholder.




     5.6 Repricing. Except for adjustments pursuant to Section 4.5 or actions taken by the
Committee pursuant to Section 11.12(c), unless approved by the stockholders of the Company,
(a) the exercise price for any outstanding option granted under this Plan may not be
decreased after the date of grant and (b) an outstanding option that has been granted under
this Plan may not, as of any date that such option has an exercise price that is greater
than the then current Fair Market Value of a share of Common Stock, be surrendered to the
Company as consideration for anything of value, including the grant of a new option with a
lower exercise price, another Incentive, a cash payment or Common Stock.




     5.7 Incentive Stock Options. Notwithstanding anything in this Plan to the contrary,
the following additional provisions shall apply to the grant of stock options that are
intended to qualify as incentive stock options.




     (a) Any incentive stock option authorized under this Plan shall contain such
other provisions as the Committee shall deem advisable, but shall in all events be
consistent with and contain or be deemed to contain all provisions required in order
to qualify the options as incentive stock options;




     (b) All incentive stock options must be granted within ten years from the date
on which this Plan was adopted by the Board of Directors;




     (c) No incentive stock option shall be granted to any participant who, at the
time such option is granted, would own (within the meaning of Section 422 of the
Code) stock possessing more than 10% of the total combined voting power of all
classes of stock of the corporation that employs such participant or its parent or
subsidiary corporation; and




     (d) The aggregate Fair Market Value (determined with respect to each incentive
stock option as of the time such incentive stock option is granted) of the Common
Stock with respect to which incentive stock options are exercisable for the first
time by a participant during any calendar year (under this Plan or any other plan of
the Company) shall not exceed $100,000. To the extent that such limitation is
exceeded, such options shall not be treated, for federal income tax purposes, as
incentive stock options.



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     6. Restricted Stock.




     6.1 Grant of Restricted Stock. An award of restricted stock may be subject to the
attainment of specified performance goals or targets, restrictions on transfer,
forfeitability provisions and such other terms and conditions as the Committee may
determine, subject to the provisions of this Plan. To the extent restricted stock is
intended to qualify as “performance-based compensation” under Section 162(m), it must be
granted subject to the attainment of performance goals as described in Section 10 and meet
the additional requirements by imposed by Section 162(m).




     6.2 Restricted Period. At the time an award of restricted stock is made, the Committee
shall establish a period of time during which the transfer of the shares of restricted stock
shall be restricted (the “Restricted Period”). Each award of restricted stock may have a
different Restricted Period. A Restricted Period of at least three years is required for
each award of restricted stock, except that if vesting of the shares is subject to the
attainment of specified performance goals, the Restricted Period may be one year or more.
Incremental periodic vesting of portions of the award during the Restricted Period is
permitted. Unless otherwise provided in the Incentive Agreement, the Committee may in its
discretion declare the Restricted Period terminated upon a participant’s death, disability,
retirement or other termination by the Company and permit the sale or transfer of the
restricted stock. The expiration of the Restricted Period shall also occur as provided
under Section 11.12 upon a Change of Control.




     6.3 Escrow. The participant receiving restricted stock shall enter into an Incentive
Agreement with the Company setting forth the conditions of the grant. Certificates
representing shares of restricted stock shall be registered in the name of the participant
and deposited with the Company, together with a stock power endorsed in blank by the
participant. Each such certificate shall bear a legend in substantially the following form:




The transferability of this certificate and the shares of Common Stock
represented by it is subject to the terms and conditions (including
conditions of forfeiture) contained in the Horizon Offshore, Inc. 2005
Incentive Stock Plan (the “Plan”) and an agreement entered into between the
registered owner and Horizon Offshore, Inc. thereunder. Copies of this Plan
and the agreement are on file and available for inspection at the principal
office of the Company.




     6.4 Dividends on Restricted Stock. Any and all cash and stock dividends paid with
respect to the shares of restricted stock shall be subject to any restrictions on transfer,
forfeitability provisions or reinvestment requirements as the Committee may, in its
discretion, prescribe in the Incentive Agreement.




     6.5 Forfeiture. In the event of the forfeiture of any shares of restricted stock under
the terms provided in the Incentive Agreement (including any additional shares of restricted
stock that may result from the reinvestment of cash and stock dividends, if so provided in
the Incentive Agreement), such forfeited shares shall be surrendered and the



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certificates cancelled. The participants shall have the same rights and privileges,
and be subject to the same forfeiture provisions, with respect to any additional shares
received pursuant to Section 4.5 due to a recapitalization, stock split or other change in
capitalization described therein.




     6.6 Expiration of Restricted Period. Upon the expiration or termination of the
Restricted Period and the satisfaction of any other conditions prescribed by the applicable
Incentive Agreement or at such earlier time as provided for in Section 6.2, the restrictions
applicable to the restricted stock shall lapse and a stock
certificate for the number of shares of restricted stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions and legends other than those required by law, to
the participant or the participant’s estate, as the case may be.




     6.7 Rights as a Stockholder. Subject to the restrictions imposed under the terms and
conditions of this Plan and subject to any other restrictions that may be imposed in the
Incentive Agreement, each participant receiving restricted stock shall have all the rights
of a stockholder with respect to shares of Common Stock during any
period in which such shares are subject to forfeiture and restrictions on transfer, including the right to vote
such shares.



     7. Restricted Stock Units.




     7.1 Grant of Restricted Stock Units. A restricted stock unit, or RSU, represents the
right to receive from the Company on the scheduled vesting date or other specified payment
date for such RSU, one share of Common Stock. An award of restricted stock units may be
subject to the attainment of specified performance goals or targets, forfeitability
provisions and such other terms and conditions as the Committee may determine, subject to
the provisions of this Plan. To the extent an award of restricted stock units is intended
to qualify as “performance-based compensation” under Section 162(m), it must be granted
subject to the attainment of performance goals as described in Section 10 and meet the
additional requirements imposed by Section 162(m).




     7.2 Vesting Period. At the time an award of restricted stock units is made, the
Committee shall establish a period of time during which the restricted stock units shall
vest (the “Vesting Period”). Each award of restricted stock units may have a different
Vesting Period. Except as provided in Section 4.4(c), a Vesting Period of at least three
years is required, except that if vesting of the RSUs is subject to the attainment of
specified performance goals, the Vesting Period may be one year or more. Incremental
periodic vesting of portions of the award during the Vesting Period is permitted. The
acceleration of the expiration of the Vesting Period shall occur as provided under Section
11.12(b) upon a Change of Control of the Company and may also occur as provided under
Section 11.4 in the event of termination of employment under the circumstances provided in
the Incentive Agreement.




     7.3 Dividend Equivalent Accounts. Subject to the terms and conditions of this Plan and
the applicable Incentive Agreement, as well as any procedures established by the Committee,
prior to the expiration of the applicable Vesting Period of an RSU



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granted to a participant hereunder, the Company shall establish an account for the
participant and deposit into that account any securities, cash or other property comprising
any dividend or property distribution with respect to the shares of Common Stock underlying
the RSU. The participant shall have no rights to the amounts or other property in such
account until the applicable RSU vests.




     7.4 Rights as a Stockholder. Each participant receiving restricted stock units shall
have no rights as a stockholder with respect to such restricted stock units until such time
as shares of Common Stock are issued to the participant.



     8. Stock-Settled Stock Appreciation Rights.




     8.1 Grant of Stock-Settled Stock Appreciation Rights. A stock-settled stock
appreciation right, or SAR, is a right to receive, without payment to the Company, a number
of shares of Common Stock, the number of which is determined pursuant to the formula set
forth in Section 8.5. Each SAR granted by the Committee under the Plan shall be subject to
the terms and conditions provided in this Section 8:




     8.2 Number. Each SAR granted to any participant shall relate to such number of shares
of Common Stock as shall be determined by the Committee, subject to adjustment as provided
in Section 4.5.




     8.3 Duration. The term of each SAR shall be determined by the Committee, but shall not
exceed a maximum term of 10 years. The Committee may in its discretion accelerate the
exercisability of any SAR at any time in its discretion.




     8.4 Exercise. A SAR may be exercised, in whole or in part, by giving written notice to
the Company, specifying the number of SARs which the holder wishes to exercise. The date
that the Company receives such written notice shall be referred to herein as the “Exercise
Date.” The Company shall, within 30 days of an Exercise Date, deliver to the exercising
holder certificates for the shares of Common Stock to which the holder is entitled pursuant
to Section 8.5




     8.5 Payment. The number of shares of Common Stock which shall be issuable upon the
exercise of a SAR shall be determined by dividing:




     (a) the number of shares of Common Stock as to which the SAR is exercised,
multiplied by the amount of the appreciation in each such share (for this purpose,
the “appreciation” shall be the amount by which the Fair Market Value of the Common
Stock subject to the SAR on the business day preceding the Exercise Date exceeds the
“Base Price,” which is an amount, not less than the Fair Market Value of a share of
Common Stock on the date of grant, which shall be determined by the Committee at the
time of grant, subject to adjustment under Section 4.5); by




     (b) the Fair Market Value of a share of Common Stock on the Exercise Date.



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     8.6 No Fractional Shares. No fractional shares of Common Stock shall be issued upon
the exercise of a SAR. In lieu thereof, the holder of a SAR shall be entitled to purchase
the portion necessary to make a whole share at its Fair Market Value on the Exercise Date.




     8.7 Repricing. Except for adjustments pursuant to Section 4.5 or actions permitted to
be taken by the Committee pursuant to Section 11.12(c), unless approved by the stockholders
of the Company, (a) the Base Price for any outstanding SAR granted under this Plan may not
be decreased after the date of grant and (b) an outstanding SAR that has been granted under
this Plan may not, as of any date that such SAR has a per share Base Price that is greater
than the then current Fair Market Value of a share of Common Stock, be surrendered to the
Company as consideration for anything of value, including the grant of a new SAR with a
lower Base Price, another Incentive, a cash payment or Common Stock.



     9. Other Stock-Based Awards.




     9.1 Grant of Other Stock-Based Awards. Subject to the limitations described in Section
9.2, the Committee may grant to eligible participants “Other Stock-Based Awards,” which
shall consist of awards, other than options, restricted stock, restricted stock units or
SARs provided for in Sections 5 through 8, the value of which is based in whole or in part
on the value of shares of Common Stock. Other Stock-Based Awards may be awards of shares of
Common Stock or may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on or related to, shares of, or appreciation in the value of, Common
Stock (including securities convertible or exchangeable into or exercisable for shares of
Common Stock), as deemed by the Committee consistent with the purposes of this Plan. The
Committee shall determine the terms and conditions of any Other Stock-Based Award (including
which rights of a stockholder, if any, the recipient shall have with respect to Common Stock
associated with any such award) and may provide that such award is payable in whole or in
part in cash. An Other Stock-Based Award may be subject to the attainment of such specified
performance goals or targets as the Committee may determine, subject to the provisions of
this Plan. To the extent that an Other Stock-Based Award is intended to qualify as
“performance-based compensation” under Section 162(m), it must be granted subject to the
attainment of performance goals as described in Section 10 and meet the additional
requirements imposed by Section 162(m).




     9.2 Vesting Terms. Except as otherwise provided in Section 4.4(c), other Stock-Based
Awards granted under this Section 9 shall be subject to a vesting period of at least three
years, except that if vesting of the award is subject to the attainment of specified
performance goals, a minimum vesting period of one year is allowed. Incremental periodic
vesting of portions of the award over the required vesting period is permitted.



     10. Section 162(m) Awards. To the extent that shares of restricted stock, restricted stock
units or Other Stock-Based Awards granted under the Plan are intended to qualify as
“performance-based compensation” under Section 162(m), the vesting, grant or payment of such



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awards shall be conditioned on the achievement of one or more performance goals and must
satisfy the other requirements of Section 162(m). The performance goals pursuant to which such
awards shall vest, be granted or be paid out shall be any or a combination of the following
performance measures applied to the Company or one or more of its divisions, subsidiaries or lines
of business: return on equity, cash flow, assets or investment; stockholder return; changes in
revenues, operating income, cash flow, cash provided by operating activities, earnings before
interest, taxes and/or depreciation, earnings or earnings per share; customer growth; customer
satisfaction or an economic value added measure. The performance goals may be subject to such
adjustments as are specified in advance by the Committee, including adjustments made pursuant to
written guidelines that are approved or confirmed in advance by the Committee. For any performance
period, the performance objectives may be measured on an absolute basis or relative to a group of
peer companies selected by the Committee, relative to internal goals or industry benchmarks, or
relative to levels attained in prior years.




     11. General.




     11.1 Duration. No Incentives may be granted under the Plan later than ten years after
the date of its approval by the Company’s stockholders; provided, however, that Incentives
granted prior to such date shall remain in effect until (a) all such Incentives granted
under this Plan have either been satisfied by the issuance of shares of Common Stock or the
payment of cash or been terminated under the terms of this Plan or the applicable Incentive
Agreement and (b) all restrictions imposed on shares of Common Stock in connection with
their issuance under this Plan have lapsed.




     11.2 Transferability of Incentives.




     (a) No Incentive granted
hereunder may be transferred, pledged, assigned or otherwise encumbered by the
holder thereof except:



     (i) by will;




     (ii) by the laws of descent and distribution; or




     (iii) pursuant to a domestic relations order, as defined in the Code;
or




     (iv) in the case of stock options only, if permitted by the Committee
and so provided in the Incentive Agreement, (A) to Immediate Family Members
(as defined below), (B) to a partnership in which the participant and/or
Immediate Family Members, or entities in which the participant and/or
Immediate Family Members are the sole owners, members or beneficiaries, as
appropriate, are the sole partners, (C) to a limited liability company in
which the participant and/or Immediate Family Members, or entities in which
the participant and/or Immediate Family Members are the sole owners, members
or beneficiaries, as appropriate, are the sole members, or (D) to a trust
for the sole benefit of the participant and/or Immediate Family Members.
“Immediate Family Members” means the spouse and natural or adopted children
or



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grandchildren of the participant and their respective spouses. To the
extent that an incentive stock option is permitted to be transferred during
the lifetime of the participant, it shall be treated thereafter as a
non-qualified stock option.




     (b) No such transfer of any Incentive under Section 11.2(a) shall be effective
to bind the Company unless the Company shall have been furnished with written notice
thereof and a copy of such evidence as the Committee may deem necessary to establish
the validity of the transfer and the acceptance by the transferee or transferees of
the terms and conditions of this Plan and the applicable Incentive Agreement.




     (c) Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an Incentive, or levy of attachment or similar process upon the
Incentive not specifically permitted herein, shall be null and void and without
effect.




     11.3 Dividend Equivalents. In the sole and complete discretion of the Committee, an
Incentive may provide the holder thereof with dividends or dividend equivalents, payable in
cash, shares, other securities or other property on a current or deferred basis.




     11.4 Effect of Termination of Employment or Death. In the event that a participant
ceases to be an employee of the Company for any reason, including death, disability, early
retirement or normal retirement, any outstanding Incentives then held by such participant
may be exercised, may vest or may expire at such times or in such manner as is set forth in
the Incentive Agreement. In its discretion, the Committee may resolve any questions under
this Plan or any Incentive Agreement as to whether and when there has been a termination of
employment and the cause or nature of such termination.




     11.5 Additional Conditions. Anything in this Plan to the contrary notwithstanding:




     (a) the Company may, if it shall determine it necessary or desirable for any
reason, at the time of award of any Incentive or the issuance of any shares of
Common Stock pursuant to any Incentive, require the recipient of the Incentive, as a
condition to the receipt thereof or to the receipt of shares of Common Stock issued
pursuant thereto, to deliver to the Company a written representation of present
intention to acquire the Incentive or the shares of Common Stock issued pursuant
thereto for his own account for investment and not for distribution; and




     (b) if at any time the Company further determines, in its sole discretion, that
the listing, registration or qualification (or any updating of any such document) of
any Incentive or the shares of Common Stock issuable pursuant thereto is necessary
on any securities exchange or under any federal or state securities or blue sky law,
or that the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in



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connection with the award of any Incentive, the issuance of shares of Common
Stock pursuant thereto, or the removal of any restrictions imposed on such shares,
such Incentive shall not be awarded or such shares of Common Stock shall not be
issued or such restrictions shall not be removed, as the case may be, in whole or in
part, unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the Company.




     11.6 Incentive Agreements. An Incentive under this Plan shall be subject to such terms
and conditions, not inconsistent with this Plan, as the Committee may, in its sole
discretion, prescribe and set forth in the Incentive Agreement. Such terms and conditions
may provide for the forfeiture of an Incentive or the gain associated with an Incentive
under certain circumstances to be set forth in the Incentive Agreement, including if the
participant competes with the Company or engages in other activities that are harmful to the
Company. In connection with all grants of Incentives under this Plan, the Committee shall
authorize and approve a form of Incentive Agreement governing the terms and conditions of
such Incentive that apply to all similarly-situated award recipients, and cause the Company
to prepare an individual agreement with or notice to each award recipient that reflects the
actual number of shares of Common Stock to which the Incentive of such recipient relates. A
copy of such document shall be provided to each such award recipient, and the Committee may,
but need not, require that such award recipient duly execute and deliver to the Company a
copy of such document as a condition precedent to the effectiveness of the grant of the
Incentive. Such document is referred to in this Plan as an “Incentive Agreement” regardless
of whether a participant’s signature is required.




     11.7 Withholding.




     (a) The Company shall have the right to withhold from any payments or stock
issuances under this Plan, or to collect as a condition of payment, any taxes
required by law to be withheld.




     (b) If so provided in the applicable Incentive Agreement, a participant will
have the right to satisfy his or her withholding tax obligation in whole or in part
by electing (an “Election”) to deliver currently owned shares of Common Stock or to
have the Company withhold from the shares the participant otherwise would receive
shares of Common Stock having a value equal to the minimum amount required to be
withheld, with the value of the shares to be delivered or withheld being based on
the Fair Market Value of the Common Stock on the date that the amount of tax to be
withheld is determined (the “Tax Date”). Each Election must be made prior to the
Tax Date. Notwithstanding anything to the contrary in this Plan or any Incentive
Agreement, the Committee may disapprove of any Election or suspend or terminate the
right to make Elections.




     11.8 No Continued Employment. No participant under this Plan shall have any right,
because of his or her participation, to continue in the employ of the Company for any period
of time or to any right to continue his or her present or any other rate of compensation.



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     11.9 Deferral Permitted. Payment of cash or distribution of any shares of Common
Stock to which a participant is entitled under any Incentive shall be made as provided in
the Incentive Agreement. Payment may be deferred at the option of the participant if
provided in the Incentive Agreement.




     11.10 Amendment or Discontinuance of this Plan. The Board may amend or discontinue
this Plan at any time; provided, however, that no such amendment may:




     (a) without the approval of the stockholders, (i) increase, subject to
adjustments permitted herein, the maximum number of shares of Common Stock that may
be issued through this Plan, (ii) materially increase the benefits accruing to
participants under this Plan, (iii) materially expand the classes of persons
eligible to participate in this Plan, (iv) materially expand the types of awards
available for grant under the Plan, (v) amend Section 11.1 to permit grants of
Incentives hereunder later than ten years after the date this Plan is approved by
the Company’s stockholders, (vi) materially change the method of determining the
Base price of options or the Base Price of SARs, or (vii) amend Section 5.6 or 8.7
to permit repricing of options or SARs, respectively, or




     (b) materially impair, without the consent of the recipient, an Incentive
previously granted, except (i) as otherwise provided in Section 11.16 and (ii) that
the Company retains all rights to take action under Section 11.12 and to include in
Incentive Agreements provisions authorizing the Committee in its discretion to
cancel unvested or unexercisable Incentives.




     11.11 Definition of Fair Market Value. Whenever the “Fair Market Value” of Common
Stock or some other specified security must be determined for purposes of this Plan, it
shall be determined as follows: (i) if the Common Stock or other security is listed on an
established stock exchange or any automated quotation system that provides sale quotations,
the closing sale price for a share thereof on such exchange or quotation system on the
applicable date or, if shares are not traded on such day, on the next preceding trading
date, (ii) if the Common Stock or other security is not listed on any exchange or quotation
system, but bid and asked prices are quoted and published, the mean between the quoted bid
and asked prices on the applicable date or, if bid and asked prices are not available on
such day, on the next preceding day on which such prices were available; and (iii) if the
Common Stock or other security is not regularly quoted, the fair market value of a share
thereof on the applicable date as established by the Committee in good faith.




     11.12 Change of Control.




     (a) Unless otherwise provided in the Incentive Agreement, a Change of Control
shall mean:




     (i) the acquisition by any person of beneficial ownership of 50% or
more of the outstanding shares of the Common Stock or 50% or more of the
combined voting power of Horizon’s then outstanding



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securities entitled to vote generally in the election of directors;
provided, however, that for purposes of this subsection (i), the following
transactions and acquisitions shall not constitute a Change of Control:




     (A) any acquisition (other than a Business Combination (as
defined below) which constitutes a Change of Control under Section
11.12(a)(ii) hereof) of Common Stock directly from the Company,




     (B) any acquisition of Common Stock by the Company,




     (C) any acquisition of Common Stock by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or




     (D) any acquisition of Common Stock by any Person who as of the
date this Plan is approved by the Company’s stockholders holds any of
the Company’s Series B Mandatorily Convertible Preferred Stock or
their respective affiliates,




     (E) any acquisition of Common Stock by any corporation pursuant
to a Business Combination that does not constitute a Change of
Control under Section 11.12(a)(ii) hereof; or




     (ii) consummation of a reorganization, share exchange, merger or
consolidation (including any such transaction involving any direct or
indirect subsidiary of Horizon) or sale or other disposition of all or
substantially all of the assets of the Company (a “Business Combination”);
provided, however, that in no such case shall any such transaction
constitute a Change of Control if immediately following such Business
Combination, the individuals and entities who were the beneficial owners of
Horizon’s outstanding Common Stock and Horizon’s voting securities entitled
to vote generally in the election of directors immediately prior to such
Business Combination have direct or indirect beneficial ownership,
respectively, of more than 50% of the then outstanding shares of common
stock, and more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the surviving or successor corporation, or, if applicable, the
ultimate parent company thereof; or




     (iii) approval by the stockholders of Horizon of a complete liquidation
or dissolution of Horizon.




For purposes of this Section 11.12, the term “person” shall mean a natural person or
entity, and shall also mean the group or syndicate created when two or more persons
act as a syndicate or other group (including a partnership or limited partnership)
for the purpose of acquiring, holding, or disposing of a security,



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except that “person” shall not include an underwriter temporarily holding a security
pursuant to an offering of the security.




     (b) Upon a Change of Control of the type described in clause (a)(i) of this
Section 11.12 or upon the approval by the Board of Directors of Horizon of any
Change of Control of the type described in clause (a)(ii) or (a)(iii) of this
Section 11.12, all outstanding Incentives granted pursuant to this Plan shall
automatically become fully vested and exercisable, all restrictions or limitations
on any Incentives shall automatically lapse and, unless otherwise provided in the
Incentive Agreement, all performance criteria and other conditions relating to the
payment of Incentives shall be deemed to be achieved at the target level without the
necessity of action by any person.




     (c) No later than 30 days after a Change of Control of the type described in
subsection (a)(i) of this Section 11.12 and no later than 30 days after the approval
by the Board of a Change of Control of the type described in subsections (a)(ii) or
(a)(iii) of this Section 11.12, the Committee, acting in its sole discretion without
the consent or approval of any participant (and notwithstanding any removal or
attempted removal of some or all of the members thereof as directors or Committee
members), may act to effect one or more of the alternatives listed below, which may
vary among individual participants and which may vary among Incentives held by any
individual participant; provided, however, that no such action may be taken if it
would result in the imposition of a penalty on the participant under Section 409A of
the Code as a result thereof:




     (i) require that all outstanding options, SARs or Other Stock-Based
Awards be exercised on or before a specified date (before or after such
Change of Control) fixed by the Committee, after which specified date all
unexercised options, SARs and Other Stock-Based Awards and all rights of
participants thereunder shall terminate,




     (ii) make such equitable adjustments to Incentives then outstanding as
the Committee deems appropriate to reflect such Change of Control and
provide participants with substantially equivalent rights before and after
such Change of Control (provided, however, that the Committee may determine
in its sole discretion that no adjustment is necessary),




     (iii) provide for mandatory conversion or exchange of some or all of
the outstanding options, SARs, restricted stock units or Other Stock-Based
Awards held by some or all participants as of a date, before or after such
Change of Control, specified by the Committee, in which event such
Incentives shall be deemed automatically cancelled and the Company shall
pay, or cause to be paid, to each such participant an amount of cash per
share equal to the excess, if any, of the Change of Control Value of the
shares subject to such option, SAR, restricted stock unit or Other
Stock-Based Award, as defined and calculated below, over the per share
exercise



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price or base price of such Incentive or, in lieu of such cash payment,
the issuance of Common Stock or securities of an acquiring entity having a
Fair Market Value equal to such excess, or




     (iv) provide that thereafter, upon any exercise or payment of an
Incentive that entitles the holder to receive Common Stock, the holder shall
be entitled to purchase or receive under such Incentive, in lieu of the
number of shares of Common Stock then covered by such Incentive, the number
and class of shares of stock or other securities or property (including
cash) to which the holder would have been entitled pursuant to the terms of
the agreement providing for the reorganization, share exchange, merger,
consolidation or asset sale, if, immediately prior to such Change of
Control, the holder had been the record owner of the number of shares of
Common Stock then covered by such Incentive.




     (d) For the purposes of conversions or exchanges under paragraph (iii) of
Section 11.12(c), the “Change of Control Value” shall equal the amount determined by
whichever of the following items is applicable:




     (i) the per share price to be paid to holders of Common Stock in any
such merger, consolidation or other reorganization,




     (ii) the price per share offered to holders of Common Stock in any
tender offer or exchange offer whereby a Change of Control takes place, or




     (iii) in all other events, the fair market value of a share of Common
Stock, as determined by the Committee as of the time determined by the
Committee to be immediately prior to the effective time of the conversion or
exchange.




     (e) In the event that the consideration offered to stockholders of Horizon in
any transaction described in this Section 11.12 consists of anything other than
cash, the Committee shall determine the fair cash equivalent of the portion of the
consideration offered that is other than cash.




     11.13 Repurchase. Upon approval of the Committee, the Company may repurchase all or a
portion of a previously granted Incentive from a participant by mutual agreement by payment
to the participant of cash or Common Stock or a combination thereof with a value equal to
the value of the Incentive determined in good faith by the Committee; provided, however,
that in no event will this section be construed to grant the Committee the power to take any
action in violation of Section 5.6 or 8.7.




     11.14 Liability.




     (a) Neither Horizon, its affiliates or any of their respective directors or
officers shall be liable to any participant relating to the participant’s failure to
(i) realize any anticipated benefit under an Incentive due to the failure to satisfy
any



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applicable conditions to vesting, payment or settlement, including the failure
to attain performance goals or to satisfy the conditions specified in Section 11.5
or (ii) realize any anticipated tax benefit or consequence due to changes in
applicable law, the particular circumstances of the participant, or any other
reason.




     (b) No member of the Committee (or officer of the Company exercising delegated
authority of the Committee under Section 3 thereof) will be liable for any action or
determination made in good faith with respect to this Plan or any Incentive.




     11.15 Interpretation.




     (a) Unless the context otherwise requires, (i) all references to Sections are
to Sections of this Plan, (ii) the term “including” means including without
limitation, (iii) all references to any particular Incentive Agreement shall be
deemed to include any amendments thereto or restatements thereof, and (iv) all
references to any particular statute shall be deemed to include any amendment,
restatement or re-enactment thereof or any statute or regulation substituted
therefore.




     (b) The titles and subtitles used in this Plan or any Incentive Agreement are
used for convenience only and are not to be considered in construing or interpreting
this Plan or the Incentive Agreement.




     (c) All pronouns contained in this Plan or any Incentive Agreement, and any
variations thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as the identities of the parties may require.




     (d) Whenever any provision of this Plan authorizes the Committee to take action
or make determinations with respect to outstanding Incentives that have been granted
or awarded by the chief executive officer of Horizon under Section 3(i) hereof, each
such reference to “Committee” shall be deemed to include a reference to any officer
of the Company that has delegated administrative authority under Section 3(ii) of
this Plan (subject to the limitations of such section).




     11.16 Compliance with Section 409A. It is the intent of the Company that this Plan
comply with the requirements of Section 409A of the Code with respect to any Incentives that
constitute non-qualified deferred compensation under Section 409A and the Company intends to
operate the Plan in compliance with Section 409A and the Department of Treasury’s guidance
or regulations promulgated thereunder. If the Committee grants any Incentives or takes any
other action that would, either immediately or upon vesting or payment of the Incentive,
inadvertently result in the imposition of a penalty on a participant under Section 409A of
the Code, then the Company, in its discretion, may, to the maximum extent permitted by law,
unilaterally rescind ab initio, sever, amend or otherwise modify the grant or action (or any
provision of the Incentive) in such manner necessary for the penalty to be inapplicable or
reduced.



17









 





     12. Stock Options for Outside Directors




     12.1 Grant of Options. Outside Directors shall receive the following:




     (a) Each Outside Director shall be automatically granted non-qualified stock
options to purchase 10,000 shares of Common Stock on the 21st calendar
day after mailing an information statement in accordance with Rule 14c-2(b) under
the 1934 Act; and




     (b) On the day following each annual meeting of stockholders of Horizon
occurring after December 31, 2005, each Outside Director shall be automatically
granted non-qualified stock options to purchase up to 10,000 shares of Common Stock,
the exact number of which shall be set by the Board of Directors.




     12.2 Exercisability of Stock Options. Subject to the Committee’s right to accelerate
the exercisability of any stock option and subject to the Committee’s rights under Section
11.12, the stock options granted to Outside Directors under this Section 12 shall be
exercisable one year after the date of grant and shall expire ten years following the date
of grant.




     12.3 Exercise Price. The exercise price of the stock options granted to Outside
Directors shall be equal to the Fair Market Value, as defined in the Plan, of a share of
Common Stock on the date of grant. The exercise price may be paid as provided in Section
5.5 hereof.




     12.4 Exercise After Termination of Board Service. In the event an Outside Director
ceases to serve on the Board, the stock options granted hereunder must be exercised, to the
extent otherwise exercisable at the time of termination of Board service, within one year
from termination of Board service; provided, however, that in the event of termination of
Board service as a result of retirement (at age 65 or later or after having completed five
or more years of service on the Board), the stock options may be exercised within five years
from the date of termination of Board service. Notwithstanding the foregoing, no stock
options may be exercised later than ten years after the date of grant.



* * * * * * * * * *





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