Unassociated Document


     

    

      EXHIBIT
        10.1

       

      ENERGY
        XXI SERVICES, LLC

       

      2006
        LONG-TERM INCENTIVE PLAN

       

      [As
        amended for fiscal year 2008]


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      ENERGY
        XXI SERVICES, LLC 

       

      2006
        LONG-TERM INCENTIVE PLAN

       

      Table
        of Contents 

      


      

        
          	
                  ARTICLE
                    I INTRODUCTION 

                	 	 	
                  1

                	 
	
                  1.1
                    Purpose 

                	 	 	
                  1

                	 
	
                  1.2
                    Shares Subject to the Plan 

                	 	 	
                  1

                	 
	
                  1.3
                    Administration of the Plan 

                	 	 	
                  1

                	 
	
                  1.4
                    Amendment and Discontinuance of the Plan 

                	 	 	
                  1

                	 
	
                  1.5
                    Granting of Awards to Participants 

                	 	 	
                  1

                	 
	
                  1.6
                    Term of Plan 

                	 	 	
                  2

                	 
	
                  1.7
                    Leave of Absence 

                	 	 	
                  2

                	 
	
                  1.8
                    Definitions

                	 	 	
                  2

                	 
	 	 	 	 	 
	
                  ARTICLE
                    II NON-QUALIFIED OPTIONS 

                	 	 	
                  5

                	 
	
                  2.1
                    Grants 

                	 	 	
                  5

                	 
	
                  2.2
                    Calculation of Exercise Price 

                	 	 	
                  5

                	 
	
                  2.3
                    Terms and Conditions of Options 

                	 	 	
                  5

                	 
	
                  2.4
                    Amendment 

                	 	 	
                  6

                	 
	
                  2.5
                    Acceleration of Vesting 

                	 	 	
                  7

                	 
	
                  2.6
                    Other Provisions 

                	 	 	
                  7

                	 
	
                  2.7
                    No Option Repricing Without Stockholder Approval 

                	 	 	
                  7

                	 
	 	 	 	 	 
	
                  ARTICLE
                    III INCENTIVE OPTIONS 

                	 	 	
                  7

                	 
	
                  3.1
                    Eligibility 

                	 	 	
                  7

                	 
	
                  3.2
                    Exercise Price 

                	 	 	
                  7

                	 
	
                  3.3
                    Dollar Limitation 

                	 	 	
                  7

                	 
	
                  3.4
                    10% Stockholder 

                	 	 	
                  7

                	 
	
                  3.5
                    Options Not Transferable 

                	 	 	
                  8

                	 
	
                  3.6
                    Compliance with 422 

                	 	 	
                  8

                	 
	
                  3.7
                    Limitations on Exercise 

                	 	 	
                  8

                	 
	 	 	 	 	 
	
                  ARTICLE
                    IV STOCK APPRECIATION RIGHTS AND RESTRICTED STOCK UNIT AWARDS
                    

                	 	 	
                  8

                	 
	
                  4.1
                    Stock Appreciation Rights 

                	 	 	
                  8

                	 
	
                  4.2
                    Restricted Stock Unit Awards 

                	 	 	
                  8

                	 
	 	 	 	 	 
	
                  ARTICLE
                    V RESTRICTED STOCK 

                	 	 	
                  10

                	 
	
                  5.1
                    Eligible Persons 

                	 	 	
                  10

                	 
	
                  5.2
                    Restricted Period and Vesting 

                	 	 	
                  10

                	 
	 	 	 	 	 
	
                  ARTICLE
                    VI PERFORMANCE AWARDS 

                	 	 	
                  10

                	 
	
                  6.1
                    Performance Awards 

                	 	 	
                  10

                	 
	
                  6.2
                    Performance Goals 

                	 	 	
                  11

                	 
	 	 	 	 	 
	
                  ARTICLE
                    VII OTHER STOCK OR PERFORMANCE-BASED AWARDS 

                	 	 	
                  12

                	 
	 	 	 	 	 
	
                  ARTICLE
                    VIII CERTAIN PROVISIONS APPLICABLE TO ALL AWARDS 

                	 	 	
                  12

                	 
	
                  8.1
                    General 

                	 	 	
                  12

                	 
	
                  8.2
                    Stand-Alone, Additional, Tandem and Substitute Awards 

                	 	 	
                  12

                	 
	
                  8.3
                    Term of Awards 

                	 	 	
                  12

                	 


        

         

        
          
            
            

          

          
            i

            
              

            

          

          
            
            

          

        

         

        
          	
                  8.4
                    Form and Timing of Payment under Awards; Deferrals 

                	 	 	
                  13

                	 
	
                  8.5
                    Vested and Unvested Awards 

                	 	 	
                  13

                	 
	
                  8.6
                    Exemptions from Section 16(b) Liability 

                	 	 	
                  13

                	 
	
                  8.7
                    Other Provisions 

                	 	 	
                  13

                	 
	 	 	 	 	 
	
                  ARTICLE
                    IX WITHHOLDING FOR TAXES 

                	 	 	
                  13

                	 
	 	 	 	 	 
	
                  ARTICLE
                    X MISCELLANEOUS 

                	 	 	
                  14

                	 
	
                  10.1
                    No Rights to Awards 

                	 	 	
                  14

                	 
	
                  10.2
                    No Right to Employment 

                	 	 	
                  14

                	 
	
                  10.3
                    Governing Law 

                	 	 	
                  14

                	 
	
                  10.4
                    Severability 

                	 	 	
                  14

                	 
	
                  10.5
                    Other Laws 

                	 	 	
                  14

                	 
	
                  10.6
                    409A Compliance — No Guarantee of Tax Consequences 

                	 	 	
                  14

                	 
	
                  10.7
                    Shareholder Agreements 

                	 	 	
                  15

                	 


        

      

      



      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

      


      ENERGY
        XXI SERVICES, LLC 

       

      2006
        Long-term Incentive Plan 

      As
        Amended for Fiscal Year 2008 

       

      ARTICLE
        I

      INTRODUCTION
        

       

      1.1
        Purpose. The
        Energy XXI Services, LLC 2006 Long-term Incentive Plan (the ‘‘Plan’’)
        is
        intended to promote the interests of Energy XXI Services, LLC, a Delaware
        limited liability corporation, (the ‘‘Employer’’)
        and
        its stockholders (the ‘‘Stockholders’’)
        by
        encouraging Employees, Service Providers and Non-Employee Directors (as each
        is
        defined below) to acquire or increase their equity interests in Energy XXI
        (Bermuda) Limited, a Bermuda entity, and any successor entity (the ‘‘Company’’)
        thereby giving them an added incentive to work toward the continued growth
        and
        success of the Employer and the Company. The Board of Directors of the Company
        (the ‘‘Board’’)
        also
        contemplates that through the Plan, the Company, the Employer and its Affiliates
        will be better able to compete for the services of the individuals needed
        for
        the continued growth and success of the Company. 

       

      1.2
        Shares Subject to the Plan. The
        aggregate number of shares of Common Stock, of the Company (‘‘Common
        Stock’’)
        that
        may be issued under the Plan shall not exceed five million (5,000,000) shares.
        In each calender year, during any part of which the Plan is in effect, a
        Participant may not be granted (a) Awards (other than Awards designated to
        be
        paid only in cash or the settlement of which is not based on a number of
        shares
        of Common Stock) relating to more than 5,000,000 shares of Common Stock,
        subject
        to adjustment in a manner consistent with any adjustment described below,
        and
        (b) Awards designated to be paid only in cash, or the settlement of which
        is not
        based on a number of shares of Common Stock, having a value determined on
        the
        date of grant in excess of $3,000,000. Notwithstanding the above, however,
        in
        the event that at any time after the Effective Date (as defined below) the
        outstanding shares of Common Stock are subdivided, consolidated, split-up,
        spun-off, reclassified, recapitalized, or changed into or exchanged for a
        different number or kind of shares or other securities of the Company by
        reason
        of a merger, consolidation, recapitalization, reclassification, stock split,
        stock dividend, combination of shares or the like, the aggregate number and
        class of securities available under the Plan (or issuable to any one Participant
        pursuant to this Plan in any one calendar year) shall be ratably adjusted
        by the
        Committee (as defined below), whose determination shall be final and binding
        upon the Company and all other interested persons. Shares issued pursuant
        to the
        Plan (i) may be treasury shares, authorized but unissued shares or, if
        applicable, shares acquired in the open market and (ii) shall be fully paid
        and
        nonassessable. 

       

      1.3
        Administration of the Plan. The
        Plan
        shall be administered by the Committee. Subject to the provisions of the
        Plan,
        the Committee shall interpret the Plan and all Awards under the Plan, shall
        make
        such rules as it deems necessary for the proper administration of the Plan,
        shall make all other determinations necessary or advisable for the
        administration of the Plan and shall correct any defect or supply any omission
        or reconcile any inconsistency in the Plan or in any Award under the Plan
        in the
        manner and to the extent that the Committee deems desirable to effectuate
        the
        Plan. Any action taken or determination made by the Committee pursuant to
        this
        and the other paragraphs of the Plan shall be conclusive on all parties.
        The act
        or determination of a majority of the Committee shall be deemed to be the
        act or
        determination of the Committee. 

       

      1.4
        Amendment and Discontinuance of the Plan. The
        Board
        may amend, suspend or terminate the Plan; provided, however, that, without
        the
        consent of the holder of an Award, no amendment, suspension or termination
        of
        the Plan may terminate such Award or adversely affect such person’s rights with
        respect to such Award in any material respect; provided further, however,
        that
        any amendment which would constitute a ‘‘material revision’’ of the Plan (as
        that term is used in the rules of any exchange on which the Common Stock
        is
        traded) shall be subject to Stockholder approval. 

       

      1.5
        Granting of Awards to Participants. The
        Committee shall have the authority to grant, prior to the expiration date
        of the
        Plan, Awards to such Employees, Service Providers and Non-Employee Directors
        as
        may be selected by it on the terms and conditions hereinafter set forth in
        the
        Plan. In selecting the persons to receive Awards, including the type and
        size of
        the Award, the Committee may consider any factors that it may deem relevant.
        Notwithstanding the foregoing, any Awards made to members of the Committee
        or
        any Service Provider to the Committee or the Board, must be approved by the
        full
        Board. 


      
        
          
          

        

        
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      1.6
        Term of Plan. The
        Plan
        has been adopted by the board of directors of the Employer and the Company.
        The
        Plan is effective as of October 6, 2006 (the ‘‘Effective
        Date’’),
        subject to approval by the Stockholders and the shareholders of the Company.
        The
        provisions of the Plan are applicable to all Awards granted on or after the
        Effective Date. If not sooner terminated under the provisions of Section
        1.4
        hereof, the Plan shall terminate upon, and no further Awards shall be made,
        after the tenth (10th)
        anniversary of the Effective Date. 

       

      1.7
        Leave of Absence. If an Employee is on military, sick leave or other
        bona fide leave of absence, such person shall be considered an ‘‘Employee’’ for
        purposes of an outstanding Award during the period of such leave provided
        it
        does not exceed ninety (90) days, or, if longer, so long as the person’s right
        to reemployment is guaranteed either by statute or by contract. If the period
        of
        leave exceeds ninety (90) days, such Employee’s Employment (as defined below)
        shall be deemed to have terminated on the ninety-first (91st) day of
        such leave, unless the person’s right to reemployment is guaranteed by statute
        or contract. 

       

      1.8
        Definitions. As
        used
        in the Plan, the following terms shall have the meanings set forth below:
        

       

      ‘‘1934
        Act’’
means
        the Securities Exchange Act of 1934, as amended, and the rules and regulations
        promulgated thereunder by the Securities and Exchange Commission. 

       

      ‘‘Affıliate’’
means
        (i) any entity in which the Employer directly or indirectly, owns fifty percent
        (50%) or more of the combined voting power, as determined by the Committee,
        (ii)
        any ‘‘parent corporation’’ of the Employer (as defined in Section 424(e) of the
        Code), (iii) any ‘‘subsidiary corporation’’ of any such parent corporation (as
        defined in Section 424(f) of the Code) of the Employer and (iv) any trades
        or
        businesses, whether or not incorporated which are members of a controlled
        group
        or are under common control (as defined in Sections 414(b) or (c) of the
        Code)
        with the Employer, but using the threshold of 50% ownership wherever 80%
        appears; provided, that, for the purpose of issuing Options or Stock
        Appreciation Rights, ‘‘Affiliate’’ means any corporation or other entity in a
        chain of corporations and/or other entities in which the Company has a
‘‘controlling interest’’ within the meaning of Treas. Reg. §
1.414(c)-2(b)(2)(i), but using the threshold of 50 percent ownership wherever
        80
        percent appears. 

       

      ‘‘Awards’’
means,
        collectively, Options, Stock Appreciation Rights, Restricted Stock Unit Awards,
        Restricted Stock, Performance Awards or Other Stock or Performance Based
        Awards.


       

      ‘‘Board’’
has
        the meaning set forth in Section 1.1 hereof. 

       

      ‘‘Cause’’
for
        termination of any Participant who is a party to an agreement of Employment
        with
        or provides services to the Employer or the Company shall mean termination
        for
‘‘Cause’’ as such term is defined in such agreement, the relevant portions of
        which are incorporated herein by reference. If such agreement does not define
        ‘‘Cause’’ or if a Participant is not a party to such an agreement, ‘‘Cause’’
means (i) the commission by a Participant of a criminal or other act that
        causes
        or is likely to cause substantial economic damage to the Company or an Affiliate
        or substantial injury to the business reputation of the Company or an Affiliate;
        (ii) the commission by a Participant of an act of fraud in the performance
        of
        such Participant’s duties on behalf of the Company or an Affiliate; or (iii) the
        failure of a Participant to perform the duties of such Participant to the
        Company or an Affiliate (other than such failure resulting from the
        Participant’s incapacity due to physical or mental illness). 

       

      ‘‘Change
        of Control’’
shall
        be deemed to have occurred upon any of the following events: 

       

      (i)
        any
‘‘person’’ (as defined in Section 3(a)(9) of the 1934 Act, and as modified by
        Section 13(d) and 14(d) thereof) other than (A) the Company or any of its
        subsidiaries, (B) any employee benefit plan of the Company or any of its
        subsidiaries, (C) an Affiliate, (D) a company owned, directly or indirectly,
        by
        stockholders of the Company in substantially the same proportions as their
        ownership of the Company, or (E) an underwriter temporarily holding securities
        pursuant to an offering of such securities (a ‘‘person’’),
        becomes the ‘‘beneficial owner’’ (as defined in Rule 13d-3 of the 1934 Act),
        directly or indirectly, of securities of the Company representing fifty percent
        (50%) or more of the shares of voting stock of the Company then outstanding;
        provided, however, that an initial public offering of Common Stock shall
        not
        constitute a Change of Control; 


      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      


      (ii)
        the
        consummation of any merger, reorganization, business combination or
        consolidation of the Company or one of its subsidiaries with or into any
        other
        company, other than a merger, reorganization, business combination or
        consolidation which would result in the holders of the voting securities
        of the
        Company outstanding immediately prior thereto holding securities which represent
        immediately after such merger, reorganization, business combination or
        consolidation more than fifty percent (50%) of the combined voting power
        of the
        voting securities of the Company or the surviving company or the parent of
        such
        surviving company; 

       

      (iii)
        the
        consummation of a sale or disposition by the Company of the Employer or all
        or
        substantially all of the Company’s assets, other than a sale or disposition
        where the holders of the voting securities of the Company outstanding
        immediately prior thereto hold securities immediately thereafter which represent
        more than fifty percent (50%) of the combined voting power of the voting
        securities of the acquiror, or parent of the acquiror, of such assets, or
        the
        stockholders of the Company approve a plan of complete liquidation or
        dissolution of the Company; or 

       

      (iv)
        individuals who, as of the Effective Date, constitute the Board (the
‘‘Incumbent
        Board’’)
        cease
        for any reason to constitute at least a majority of the Board; provided,
        however, that any individual becoming a Director subsequent to the Effective
        Date whose election to the Board was approved by a vote of at least a majority
        of the Directors then comprising the Incumbent Board shall be considered
        as
        though such individual were a member of the Incumbent Board, but excluding,
        for
        this purpose, any such individual whose initial assumption of office occurs
        as a
        result of an election contest with respect to the election or removal of
        Directors or other solicitation of proxies or consents by or on behalf of
        a
        person other than the Board. 

       

      Solely
        with respect to any Award that is subject to Section 409A of the Code and
        that
        is payable upon a Change of Control, and to the extent that the above definition
        does not comply with Section 409A, such definition shall be modified, to
        the
        extent required to ensure that this definition complies with the requirements
        of
        Section 409A of the Code, as set forth in regulations or other regulatory
        guidance issued under Section 409A of the Code by the appropriate governmental
        authority and the Plan shall be operated in accordance with the above definition
        of Change of Control as modified to the extent necessary to ensure that the
        above definition complies with the definition prescribed in such regulations
        or
        other regulator guidance insofar as the definition relates to any Award that
        is
        subject to Section 409A of the Code and payable upon a Change of Control.
        

       

      ‘‘Code’’
means
        the Internal Revenue Code of 1986, as amended from time to time, and the
        rules
        and regulations thereunder. 

       

      ‘‘Committee’’
means
        the committee appointed by the Board or, if none, the Board; provided however,
        that with respect to any Award granted to a Covered Employee which is intended
        to be ‘‘performance-based compensation’’ as described in Section 162(m)(4)(c) of
        the Code, to the extent such Award is subject to Section 162(m) of the Code,
        the
        Committee shall consist solely of two or more ‘‘outside directors’’ as described
        in Section 162(m)(4)(c)(i) of the Code; and if the Company is subject to
        the
        1934 Act, the Committee shall mean the compensation committee of the Board,
        which shall consist of not less than two (2) independent members of the Board,
        each of whom shall qualify as a ‘‘non-employee director’’ (as that term is
        defined in Rule 16b-3 of the General Rules and Regulations under the 1934
        Act)
        appointed by and serving at the pleasure of the Board to administer this
        Plan
        or, if none, the independent members of the Board. 

       

      ‘‘Common
        Stock’’
has
        the meaning set forth in Section 1.2 hereof. 

       

      ‘‘Company’’
has
        the meaning set forth in Section 1.1 hereof. 


      
        
          
          

        

        
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      ‘‘Covered
        Employee’’
shall
        mean each of the employees/officers of the Company as described in Section
        162(m) of the Code and applicable rules, regulations and guidance issued
        thereunder, as well as any person designated by the Committee, at the time
        of
        grant of an Award, who is likely to be a Covered Employee. 

       

      ‘‘Director’’
means
        a director of the Company. 

       

      ‘‘Disability’’
means
        a Participant is 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 is, by reason of any medically determinable
        physical or mental impairment which can be expected to result in death or
        can be
        expected to last of or 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 covering employees of the Employer. 

       

      ‘‘Effective
        Date’’
has
        the meaning set forth in Section 1.6 hereof. 

       

      ‘‘Employee’’
means
        any employee of the Employer or an Affiliate. 

       

      ‘‘Employer’’
        has
        the
        meaning set forth in Section 1.1 hereof and any other Affiliate which is
        determined by the Board to be an Employer. 

       

      ‘‘Employment’’
        includes any period in which a Participant is an Employee or a paid Service
        Provider to the Employer or an Affiliate. 

       

      ‘‘Fair
        Market Value or FMV Per Share’’
The
        Fair Market Value or FMV Per Share of the Common Stock shall be the closing
        price on any national or foreign securities exchange or over-the-counter
        market,
        if applicable, for the date of the determination, or if no trade of the Common
        Stock shall have been reported for such date, the closing sales price quoted
        on
        such exchange for the most recent trade prior to the determination date.
        If
        shares of the Common Stock are not listed or admitted to trading on any
        exchange, over-the-counter market or any similar organization as of the
        determination date, the FMV Per Share shall be determined by the Committee
        in
        good faith using a fair application of a reasonable valuation methodology
        taking
        into account all available information material to the value of the Company.
        

       

      ‘‘Good
        Reason’’ means
        termination of Employment by an Employee, or termination of service by a
        Service
        Provider if such Employee or Service Provider is a party to an agreement
        for
        Employment with or services to the Employer or the Company, which agreement
        includes a definition of ‘‘Good Reason’’ (or similar term or concept) for
        termination of Employment with or services to the Company, ‘‘Good Reason’’ shall
        have the same definition for purposes of the Plan as is set forth in such
        agreement, the relevant portions of which are incorporated herein by reference.
        If such Employee or Service Provider is not a party to an agreement with
        the
        Employer or the Company that defines the term ‘‘Good Reason,’’ (or similar term
        or concept) such term shall not be applicable to such Employee or Service
        Provider and any provision of the Plan or an Award referencing ‘‘Good Reason’’
shall not be applicable to such Employee or Service Provider. 

       

      ‘‘Incentive
        Option’’
means
        any option which satisfies the requirements of Section 422 of the Code and
        is
        granted pursuant to Article III of the Plan. 

       

      ‘‘Incumbent
        Board’’
has
        the meaning set forth in this Section 1.8 in the definition of ‘‘Change of
        Control.’’ 

       

      ‘‘Non-Employee
        Director’’
means
        persons who are members of the Board but who are neither Employees nor Service
        Providers of the Company or any Affiliate. 

       

      ‘‘Non-Qualified
        Option’’
shall
        mean an option not intended to satisfy the requirements of Section 422 of
        the
        Code and which is granted pursuant to Article II of the Plan. 

       

      ‘‘Option’’
means
        an option to acquire Common Stock granted pursuant to the provisions of the
        Plan, and refers to either an Incentive Option or a Non-Qualified Option,
        or
        both, as applicable. 


      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      


      ‘‘Option
        Expiration Date’’
means
        the date determined by Committee which shall not be more than ten (10) years
        after the date of grant of an Option. 

       

      ‘‘Option
        Grant Date’’
means
        the date on which the Committee grants an Option pursuant to the provisions
        of
        the Plan. 

       

      ‘‘Optionee’’
        means
        a
        Participant who has received or will receive an Option. 

       

      ‘‘Other
        Stock or Performance-Based Award’’
means
        an award granted pursuant to Article VII of the Plan. 

       

      ‘‘Participant’’
means
        any Non-Employee Director, Employee or Service Provider granted an Award
        under
        the Plan. 

       

      ‘‘Performance
        Award’’
means
        an Award granted pursuant to Article VI of the Plan, which, if earned, shall
        be
        payable in shares of Common Stock, cash or any combination thereof as determined
        by the Committee. 

       

      ‘‘Performance
        Period’’
means
        a period of not less than one year and not more than five years during which
        the
        Committee may grant Performance Awards. 

       

      ‘‘Person’’
has
        the meaning set forth in this Section 1.8 in the definition of ‘‘Change of
        Control’’. 

       

      ‘‘Restricted
        Period’’
means
        the period established by the Committee with respect to an Award during which
        the Award either remains subject to forfeiture or is not exercisable by the
        Participant. 

       

      ‘‘Restricted
        Stock’’
means
        any share of Common Stock, prior to the lapse of restrictions thereon, granted
        under Article V of the Plan. 

       

      ‘‘Restricted
        Stock Unit Awards’’
has
        the meaning set forth in Section 4.2 hereof. 

       

      ‘‘Service
        Provider’’
means
        any individual or entity, other than a Director or an Employee, who renders
        consulting or advisory services to the Company or an Affiliate. 

       

      ‘‘Stock
        Appreciation Rights’’
means
        an Award described in Section 4.1(a) that is granted pursuant to Article
        IV of
        the Plan. 

       

      ‘‘Stockholder’’
has
        the meaning set forth in Section 1.1 hereof. 

       

      


      ARTICLE
        II

      NON-QUALIFIED
        OPTIONS 

       

      2.1
        Grants. The
        Committee may grant Options to purchase Common Stock to any Employee, Service
        Provider or Non-Employee Director, provided that such grant does not constitute
        a deferral of compensation within the meaning of section 409A of the Code.
        

       

      2.2
        Calculation of Exercise Price. The
        exercise price to be paid for each share of Common Stock deliverable upon
        exercise of each Option granted under this Article II shall not be less than
        the
        FMV Per Share on the date of grant of such Option. The exercise price for
        each
        Option granted under this Article II shall be subject to adjustment as provided
        in Section 2.3(d) below. 

       

      2.3
        Terms and Conditions of Options. Options
        shall be in such form as the Committee may from time to time approve, shall
        be
        subject to the following terms and conditions and may contain such additional
        terms and conditions, not inconsistent with this Article II, as the Committee
        shall deem desirable: 

       

      (a)
        Option
        Period and Conditions and Limitations on Exercise.
        No
        Option shall be exercisable later than the Option Expiration Date. To the
        extent
        not prohibited by other provisions of the Plan, each Option shall be exercisable
        at such time or times as the Committee in its discretion may determine at
        the
        time such Option is granted. 

       

      (b)
        Manner
        of Exercise.
        In
        order to exercise an Option, the person or persons entitled to exercise it
        shall
        deliver to the Company payment in full for the shares being purchased, together
        with any required withholding taxes. The payment of the exercise price, together
        with any required withholding taxes, for each Option shall be made (i) in
        cash
        or by check payable and acceptable to the Company, (ii)
        with
        the consent of the Committee, by tendering to the Company shares of Common
        Stock
        owned by the person for more than six months having an aggregate Fair Market
        Value as of the date of exercise that is not greater than the full exercise
        price for the shares with respect to which the Option is being exercised
        and by
        paying any remaining amount of the exercise price as provided in (i) above,
        or
        (iii) subject to such instructions as the Committee may specify, at the person’s
        written request the Company may deliver certificates for the shares of Common
        Stock for which the Option is being exercised to a broker for sale on behalf
        of
        the person, provided that the person has irrevocably instructed such broker
        to
        remit directly to the Company on the person’s behalf the full amount of the
        exercise price from the proceeds of such sale. In the event that the person
        elects to make payment as allowed under clause (ii) above, the Committee
        may,
        upon confirming that the Optionee owns the number of additional shares being
        tendered, authorize the issuance of a new certificate for the number of shares
        being acquired pursuant to the exercise of the Option less the number of
        shares
        being tendered upon the exercise and return to the person (or not require
        surrender of) the certificate for the shares being tendered upon the exercise.
        If the Committee so requires, such person or persons shall also deliver a
        written representation that all shares being purchased are being acquired
        for
        investment and not with a view to, or for resale in connection with, any
        distribution of such shares. 

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

         

      

      (c)
        Options
        not Transferable.
        Except
        as provided below, no Non-Qualified Option granted hereunder shall be
        transferable other than by (i) will or by the laws of descent and distribution
        or (ii) pursuant to a domestic relations order and, during the lifetime of
        the
        Participant to whom any such Option is granted, and it shall be exercisable
        only
        by the Participant (or his guardian). Any attempt to transfer, assign, pledge,
        hypothecate or otherwise dispose of, or to subject to execution, attachment
        or
        similar process, any Option granted hereunder, or any right thereunder, contrary
        to the provisions hereof, shall be void and ineffective, shall give no right
        to
        the purported transferee, and shall, at the sole discretion of the Committee,
        result in forfeiture of the Option with respect to the shares involved in
        such
        attempt. With respect to a specific Non-Qualified Option, the Participant
        (or
        his guardian), subject to the consent of the Committee, may transfer, for
        estate
        planning purposes, all or part of such Option to one or more immediate family
        members or related family trusts or partnerships or similar entities.


       

      (d)
        Adjustment
        of Options.
        In the
        event that at any time after the Effective Date the outstanding shares of
        Common
        Stock are subdivided, consolidated, split-up, spun-off, reclassified,
        recapitalized, or changed into or exchanged for a different number or kind
        of
        shares or other securities of the Company by reason of merger, consolidation,
        recapitalization, reclassification, stock split, stock dividend, combination
        of
        shares or the like, the Committee shall make an appropriate and equitable
        adjustment in the number and kind of shares, and the exercise price per share,
        as to which all outstanding Options granted, or portions thereof then
        unexercised, shall be exercisable, to the end that after such event the shares
        subject to the Plan and each Participant’s proportionate interest shall be
        maintained as before the occurrence of such event. Such adjustment in an
        outstanding Option shall be made without change in the total price applicable
        to
        the Option or the unexercised portion of the Option (except for any change
        in
        the aggregate price resulting from rounding of share quantities or prices)
        and
        with any necessary corresponding adjustment in exercise price per share.
        Any
        such adjustment made by the Committee shall be final and binding upon all
        Participants, the Company and all other interested persons. 

       

      (e)
        Listing
        and Registration of Shares.
        Each
        Option shall be subject to the requirement that if at any time the Committee
        determines, in its discretion, that the listing, registration, or qualification
        of the shares subject to such Option under any securities exchange or under
        any
        state or federal law, or the consent or approval of any governmental regulatory
        body, is necessary or desirable as a condition of, or in connection with,
        the
        issue or purchase of shares thereunder, such Option may not be exercised
        in
        whole or in part unless such listing, registration, qualification, consent
        or
        approval shall have been effected or obtained and the same shall have been
        free
        of any conditions not acceptable to the Committee. 

       

      2.4
        Amendment. The
        Committee may, without the consent of the person or persons entitled to exercise
        any outstanding Option, amend, modify or terminate such Option; provided,
        however, such amendment, modification or termination shall not, without such
        person’s consent, reduce or diminish the value of such Option determined as if
        the Option had been exercised, vested, cashed in or otherwise settled on
        the
        date of such amendment or termination or cause such Option to be subject
        to
        adverse tax consequences under section 409A of the Code. The Committee may
        at
        any time or from time to time, in its discretion, in the case of any Option
        which is not then immediately exercisable in full, accelerate the time or
        times
        at which such Option may be exercised to any earlier time or times.



      
        
          
          

        

        
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      2.5
        Acceleration of Vesting. Any
        Option granted hereunder which is not otherwise vested shall vest (unless
        specifically provided to the contrary by the Committee in the document or
        instrument evidencing an Option granted hereunder) upon (i) termination of
        an
        Employee or Service Provider without Cause or termination by an Employee
        or
        Service Provider with Good Reason; (ii) termination, removal or resignation
        of
        an Employee, Service Provider or Non-Employee Director for any reason within
        one
        (1) year from the effective date of the Change of Control; or (iii) death
        or
        Disability of the Participant. 

       

      2.6
        Other Provisions. 

       

      (a)
        The
        person or persons entitled to exercise, or who have exercised, an Option
        shall
        not be entitled to any rights as a Stockholder with respect to any shares
        subject to such Option until he shall have become the holder of record of
        such
        shares. 

       

      (b)
        No
        Option granted hereunder shall be construed as limiting any right which the
        Employer, the Company or any Affiliate may have to terminate at any time,
        with
        or without cause, the Employment of any person to whom such Option has been
        granted. 

       

      (c)
        Notwithstanding any provision of the Plan or the terms of any Option, the
        Company shall not be required to issue any shares hereunder if such issuance
        would, in the judgment of the Committee, constitute a violation of any state,
        local or federal law or of the rules or regulations of any governmental
        regulatory body. 

       

      2.7
        No Option Repricing Without Stockholder Approval. With
        Stockholder approval only, the Committee may grant to holders of outstanding
        Non-Qualified Options, in exchange for the surrender and cancellation of
        such
        Non-Qualified Options, new Non-Qualified Options having exercise prices lower
        than the exercise price provided in the Non-Qualified Options so surrendered
        and
        canceled. 

      


      ARTICLE
        III

      INCENTIVE
        OPTIONS 

       

      The
        terms
        specified below shall be applicable to all Incentive Options. Except as modified
        by the provisions of this Article III, all the provisions of Article II hereof
        shall also be applicable to Incentive Options. Non-Qualified Options shall
        not
        be
        subject to the terms of this Article III. 

       

      3.1
        Eligibility. Incentive
        Options may be granted only to Employees of (i) the Employer or the Company,
        (ii) any ‘‘parent corporation’’ of the Company (as defined in section 424(e) of
        the Code) or (iii) any ‘‘subsidiary corporation’’ of the Company (as defined in
        section 424(f) of the Code). Incentive Options may be granted only if the
        Plan
        is approved by the Stockholders of the Employer within one year prior to
        or
        after the Effective Date. 

       

      3.2
        Exercise Price. The
        exercise price per Share shall not be less than one hundred percent (100%)
        of
        the FMV Per Share on the Option Grant Date (subject to adjustment as provided
        in
        Section 2.3(d)). 

       

      3.3
        Dollar Limitation. The
        aggregate Fair Market Value (determined as of the respective date or dates
        of
        grant) of shares of Common Stock for which one or more options granted to
        any
        Employee under the Plan (or any other option plan of the Employer, the Company
        or an Affiliate) may for the first time become exercisable as Incentive Options
        during any one (1) calendar year shall not exceed the sum of One Hundred
        Thousand Dollars ($100,000). To the extent the Employee holds two (2) or
        more
        such Options which become exercisable for the first time in the same calendar
        year, the foregoing limitation on the exercisability of such Options as
        Incentive Options shall be applied on the basis of the order in which such
        Options are granted. 

       

      3.4
        10% Stockholder. If
        any
        Employee to whom an Incentive Option is granted is a 10% stockholder of the
        Company, the Employer or any Affiliate, then the exercise price per share
        shall
        not be less than one hundred ten percent (110%) of the FMV Per Share on the
        Option Grant Date and the option term shall not exceed five (5) years measured
        from the Option Grant Date. 


      
        
          
          

        

        
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      3.5
        Options Not Transferable. No
        Incentive Option granted hereunder shall be transferable other than by will
        or
        by the laws of descent and distribution and shall be exercisable during the
        Optionee’s lifetime only by such Optionee. 

       

      3.6
        Compliance with 422. All
        Options that are intended to be Incentive Options shall be designated as
        such in
        the Option grant and in all respects shall be issued in compliance with Code
        Section 422. No more than five million (5,000,000) Incentive Options may
        be
        issued under the terms of the Plan. 

       

      3.7
        Limitations on Exercise. No
        Incentive Option shall be exercisable more than three (3) months after the
        Optionee ceases to be an Employee for any reason other than death or disability
        (within the meaning of section 22(e)(3) of the Code), or more than one (1)
        year
        after the Optionee ceases to be an Employee due to death or disability (within
        the meaning of section 22(e)(3) of the Code). 

      


      ARTICLE
        IV

      STOCK
        APPRECIATION RIGHTS AND RESTRICTED STOCK UNIT AWARDS 

       

      4.1
        Stock Appreciation Rights. The
        Committee is authorized to grant Stock Appreciation Rights to Employees,
        Service
        Providers or Non-Employee Directors on the following terms and conditions,
        provided that such grant does not constitute a deferral of compensation within
        the meaning of section 409A of the Code. 

       

      (a)
        Right
        to Payment.
        A Stock
        Appreciation Right shall confer on the Participant to whom it is granted
        a right
        to receive, upon exercise thereof, the excess of (A) the FMV Per Share on
        the
        date of exercise over (B) the FMV Per Share on the date of grant. Such excess
        may be paid in cash or shares of Common Stock as determined by the Committee
        and
        set forth in the Award agreement. 

       

      (b)
        Rights
        Related to Options.
        A Stock
        Appreciation Right granted in connection with an Option shall entitle a
        Participant, upon exercise thereof, to surrender that Option or any portion
        thereof, to the extent unexercised, and to receive payment of an amount computed
        pursuant to Subsection 4.1(a) hereof. That Option shall then cease to be
        exercisable to the extent surrendered. A Stock Appreciation Right granted
        in
        connection with an Option shall be exercisable only at such time or times
        and
        only to the extent that the related Option is exercisable and shall not be
        transferable (other than by will or the laws of descent and distribution)
        except
        to the extent that the related Option is transferable. 

       

      (c)
        Right
        Without Option.
        A Stock
        Appreciation Right granted independent of an Option shall be exercisable
        as
        determined by the Committee and set forth in the Award agreement governing
        such
        Stock Appreciation Right. 

       

      (d)
        Terms.
        The
        Committee shall determine at the date of grant the time or times at which
        and
        the circumstances under which a Stock Appreciation Right may be exercised
        in
        whole or in part (including achievement of certain performance goals and/or
        meeting certain future service requirements), the method of exercise, whether
        or
        not a Stock Appreciation Right shall be in tandem or in combination with
        any
        other Award and any other terms and conditions of any Stock Appreciation
        Right.


       

      (e)
        Adjustment
        of Stock Appreciation Rights.
        In the
        event that at any time after the Effective Date the outstanding shares of
        Common
        Stock are subdivided, consolidated, split-up, spun-off, reclassified,
        recapitalized, or changed into or exchanged for a different number or kind
        of
        shares or other securities of the Company by reason of merger, consolidation,
        recapitalization, reclassification, stock split, stock dividend, combination
        of
        shares or the like, the Committee shall make an appropriate and equitable
        adjustment in the outstanding Stock Appreciation Rights granted, to the end
        that
        after such event the Stock Appreciation Rights subject to the Plan and each
        Participant’s proportionate interest shall be maintained as before the
        occurrence of such event. Any such adjustment made by the Committee shall
        be
        final and binding upon all Participants, the Company and all other interested
        persons. 

       

      4.2
        Restricted Stock Unit Awards. The
        Committee is authorized to grant rights to receive cash or Common Stock equal
        to
        the Fair Market Value of specified number of shares of Common Stock at the
        end
        of a specified deferral period to Participants (‘‘Restricted
        Stock Unit Awards’’),
        subject to the following terms and conditions: 


      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      


      


      (a)
        Award
        and Restrictions.
        Satisfaction of a Restricted Stock Unit Award shall occur upon expiration
        of the
        deferral period specified for such Restricted Stock Unit Award by the Committee.
        In addition, Restricted Stock Unit Awards shall be subject to such restrictions
        (which may include a risk of forfeiture), if any, as the Committee may impose,
        which restrictions may lapse at the expiration of the deferral period or
        at
        earlier specified times (including based on achievement of performance goals
        and/or future service requirements), separately or in combination, installments
        or otherwise, as the Committee may determine. 

       

      (b)
        Forfeiture.
        Except
        as otherwise determined by the Committee or as may be set forth in any Award,
        employment or other agreement pertaining to a Restricted Stock Unit Award,
        upon
        termination of Employment or services during the applicable deferral period
        or
        portion thereof to which forfeiture conditions apply, all Restricted Stock
        Unit
        Awards that are at that time subject to deferral (other than a deferral at
        the
        election of the Participant) shall be forfeited; provided that the Committee
        may
        provide, by rule or regulation or in any Award agreement, or may determine
        in
        any individual case, that restrictions or forfeiture conditions relating
        to
        Restricted Stock Unit Awards shall be waived in whole or in part in the event
        of
        terminations resulting from specified causes, and the Committee may in other
        cases waive in whole or in part the forfeiture of Restricted Stock Unit Awards.
        

       

      (c)
        Adjustment
        of Restricted Stock Unit Awards.
        In the
        event that at any time after the Effective Date the outstanding shares of
        Common
        Stock are subdivided, consolidated, split-up, spun-off, reclassified,
        recapitalized, or changed into or exchanged for a different number or kind
        of
        shares or other securities of the Company by reason of merger, consolidation,
        recapitalization, reclassification, stock split, stock dividend, combination
        of
        shares or the like, the Committee shall make an appropriate and equitable
        adjustment in the outstanding Restricted Stock Unit Awards granted, to the
        end
        that after such event the Restricted Stock Unit Awards subject to the Plan
        and
        each Participant’s proportionate interest shall be maintained as before the
        occurrence of such event. Any such adjustment made by the Committee shall
        be
        final and binding upon all Participants, the Company and all other interested
        persons. 


      
        
          
          

        

        
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      ARTICLE
        V

      RESTRICTED
        STOCK 

       

      5.1
        Eligible Persons. All
        Employees, Service Providers and Non-Employee Directors shall be eligible
        for
        grants of Restricted Stock. 

       

      5.2
        Restricted Period and Vesting. 

       

      (a)
        A
        grant of Restricted Stock is a grant of Common Stock to a Participant which
        is
        subject to such limitations (including, without limitation, limitations that
        qualify as a ‘‘substantial risk of forfeiture’’ within the meaning given to that
        term under Section 83 of the Code) and restrictions on transfer by the
        Participant and repurchase by the Employer or the Company as the Committee,
        in
        its sole discretion, shall determine. Prior to the lapse of such restrictions,
        the Participant shall not be permitted to transfer such shares. The Employer
        or
        the Company shall have the right to repurchase or recover such shares for
        the
        lesser of (A) the amount of cash paid therefore, if any or (B) the FMV of
        the
        shares at the time of repurchase, if (i) the Participant’s Employment from or
        services to the Employer or an Affiliate is terminated by the Employer, such
        Affiliate or the Participant prior to the lapse of such restrictions (unless
        otherwise provided in the related Award agreement) or (ii) the Restricted
        Stock
        is forfeited by the Participant pursuant to the terms of the Award.


       

      (b)
        Notwithstanding the foregoing, unless the Award specifically provides otherwise,
        all Restricted Stock not otherwise vested shall vest upon (i) termination
        of an
        Employee or Service Provider without Cause; (ii) termination by an Employee
        or
        Service Provider with Good Reason; (iii) termination, resignation or removal
        of
        an Employee, Service Provider or Non-Employee Director for any reason within
        one
        (1) year from the effective date of a Change of Control; or (iv) death or
        Disability of the Participant. 

       

      (c)
        Each
        certificate representing Restricted Stock awarded under the Plan shall be
        registered in the name of the Participant and, during the Restricted Period,
        shall be left in deposit with the Company and a stock power endorsed in blank.
        Unless otherwise provided in an Award agreement, the grantee of Restricted
        Stock
        shall have all the rights of a Stockholder with respect to such shares including
        the right to vote and the right to receive dividends or other distributions
        paid
        or made with respect to such shares. Any certificate or certificates
        representing shares of Restricted Stock shall bear a legend similar to the
        following: 

       

      The
        shares represented by this certificate have been issued pursuant to the terms
        of
        the Energy XXI Services, LLC 2006 Long-term Incentive Plan (as amended and
        restated) and Restricted Stock Grant Agreement dated ________, 200___ and
        may
        not be sold, pledged, transferred, assigned or otherwise encumbered in any
        manner except as is set forth in the terms of such Plan or grant. 

       

      (d)
        Adjustment
        of Restricted Stock.
        In the
        event that at any time after the Effective Date the outstanding shares of
        Common
        Stock are subdivided, consolidated, split-up, spun-off, reclassified,
        recapitalized, or changed into or exchanged for a different number or kind
        of
        shares or other securities of the Company by reason of merger, consolidation,
        recapitalization, reclassification, stock split, stock dividend, combination
        of
        shares or the like, the Committee shall make an appropriate and equitable
        adjustment in the outstanding Restricted Stock granted, to the end that after
        such event the shares of Restricted Stock subject to the Plan and each
        Participant’s proportionate interest shall be maintained as before the
        occurrence of such event. Any such adjustment made by the Committee shall
        be
        final and binding upon all Participants, the Company and all other interested
        persons. 

      


      ARTICLE
        VI

      PERFORMANCE
        AWARDS 

       

      6.1
        Performance Awards. To
        the
        extent the Committee determines that any Award granted pursuant to this Plan
        shall be contingent upon performance goals or shall constitute performance-based
        compensation for purposes of Section 162(m) of the Code, the grant or settlement
        of the Award shall, in the Committee’s discretion, be subject to the achievement
        of performance goals determined and applied in a manner consistent with this
        Section 6.1. The Committee may grant Performance Awards based on performance
        criteria measured over a Performance Period. The Committee may use such business
        criteria and other measures of performance as it may deem appropriate in
        establishing any performance conditions, and may exercise its discretion
        to
        increase the amounts payable under any Award subject to performance conditions
        except as limited under Section 6.2 hereof in the case of a Performance Award
        granted to a Covered Employee. 

       


      
        
          
          

        

        
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      6.2
        Performance Goals. The
        grant
        and/or settlement of a Performance Award shall be contingent upon the terms
        set
        forth in this Section 6.2. 

       

      (a)
        General.
        The
        performance goals for Performance Awards shall consist of one or more business
        criteria and a targeted level or levels of performance with respect to each
        such
        criteria, as specified by the Committee. In the case of any Award granted
        to a
        Covered Employee, performance goals shall be designed to be objective and
        shall
        otherwise meet the requirements of Section 162(m) of the Code and regulations
        thereunder (including Treasury Regulations sec. 1.162-27 and successor
        regulations thereto), including the requirement that the level or levels
        of
        performance targeted by the Committee are such that the achievement of
        performance goals is ‘‘substantially uncertain’’ at the time the Award is
        granted. The Committee may determine that such Performance Awards shall be
        granted and/or settled upon achievement of any one performance goal or that
        two
        or more of the performance goals must be achieved as a condition to the grant
        and/or settlement of such Performance Awards. Performance goals may differ
        among
        Performance Awards granted to any one Participant or for Performance Awards
        granted to different Participants. 

       

      (b)
        Business
        Criteria.
        One or
        more of the following business criteria for the Company, an a consolidated
        basis, and/or for specified subsidiaries, divisions or business or geographical
        units of the Company (except with respect to the total stockholder return
        and
        earnings per share criteria), shall be used by the Committee in establishing
        performance goals for Performance Awards granted to a Participant: (i) earnings
        per share; (ii) increase in revenues; (iii) increase in cash fiow; (iv) increase
        in cash fiow return; (v) return on net assets; (vi) return on assets; (vii)
        return on investment; (viii) return on capital; (ix) return on equity; (x)
        economic value added; (xi) gross margin; (xii) net income; (xiii) pretax
        earnings; (xiv) pretax earnings before interest, depreciation and amortization;
        (xv) pretax operating earnings after interest expense and before incentives,
        service fees, and extraordinary or special items; (xvi) operating income;
        (xvii)
        total stockholder return; (xviii) debt reduction; (xix) any other operational
        criteria determined by the Committee; and (xx) any of the above goals determined
        on the absolute or relative basis or as compared to the performance of a
        published or special index deemed applicable by the Committee including,
        but not
        limited to, the Standard & Poor’s 500 Stock Index or a group of comparable
        companies. 

       

      (c)
        Timing
        for Establishing Performance Goals.
        Performance goals in the case of any Award granted to a Participant who is
        a
        Covered Employee shall be established not later than ninety (90) days after
        the
        beginning of any Performance Period applicable to such Performance Awards,
        or at
        such other date as may be required or permitted for ‘‘performance-based
        compensation’’ under Section 162(m) of the Code. 

       

      (d)
        Settlement
        of Performance Awards; Other Terms.
        After
        the end of each Performance Period, the Committee shall determine the amount,
        if
        any, of Performance Awards payable to each Participant based upon achievement
        of
        business criteria over a Performance Period. The Committee may not exercise
        discretion to increase any such amount payable in respect of a Performance
        Award
        to a Covered Employee which is designed to comply with Section 162(m) of
        the
        Code. The Committee shall specify the circumstances in which such Performance
        Awards shall be paid or forfeited in the event of termination of Employment
        by
        the Participant prior to the end of a Performance Period or settlement of
        Performance Awards. 

       

      (e)
        Written
        Determinations.
        All
        determinations by the Committee as to the establishment of performance goals,
        the amount of any Performance Award, and the achievement of performance goals
        relating to Performance Awards shall be made in writing in the case of any
        Award
        granted to a Participant. The Committee may not delegate any responsibility
        relating to Performance Awards discussed in this Section 6.2(e).



      
        
          
          

        

        
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      (f)
        Status
        of Performance Awards under Section 162(m) of the Code.
        It is
        the intent of the Employer and the Company that Performance Awards granted
        to
        persons who are designated by the Committee as likely to be Covered Employees
        within the meaning of Section 162(m) of the Code and regulations thereunder
        (including Treasury Regulations sec. 1.162-27 and successor regulations thereto)
        shall, if so designated by the Committee, constitute ‘‘performance-based
        compensation’’ within the meaning of Section 162(m) of the Code and regulations
        thereunder. Accordingly, the terms of this Section 6.2 shall be interpreted
        in a
        manner consistent with Section 162(m) of the Code and regulations thereunder.
        If
        any provision of the Plan as in effect on the date of adoption or any agreements
        relating to Performance Awards that are designated as intended to comply
        with
        Section 162(m) of the Code does not comply or is inconsistent with the
        requirements of Section 162(m) of the Code or regulations thereunder, such
        provision shall be construed or deemed amended to the extent necessary to
        conform to such requirements. 

      


      ARTICLE
        VII

      OTHER
        STOCK OR PERFORMANCE-BASED AWARDS 

       

      The
        Committee is hereby authorized to grant to Employees, Non-Employee Directors
        and
        Service Providers of the Company or its Affiliates, Other Stock or
        Performance-Based Awards, which shall consist of a right which (i) is not
        an
        Award described in any other Article and (ii) is denominated or payable in,
        valued in whole or in part by reference to, or otherwise based on or related
        to,
        shares of Common Stock (including, without limitation, securities convertible
        into shares of Common Stock) or cash as are deemed by the Committee to be
        consistent with the purposes of the Plan. Subject to the terms of the Plan,
        the
        Committee shall determine the terms and conditions of any such Other Stock
        or
        Performance-Based Award. 

       

      ARTICLE
        VIII

      CERTAIN
        PROVISIONS APPLICABLE TO ALL AWARDS 

       

      8.1
        General. Awards
        may be granted on the terms and conditions set forth herein. In addition,
        the
        Committee may impose on any Award or the exercise thereof, such additional
        terms
        and conditions, not inconsistent with the provisions of the Plan, as the
        Committee shall determine, including terms requiring forfeiture of Awards
        in the
        event of termination of Employment by the Participant and terms permitting
        a
        Participant to make elections relating to his Award. Notwithstanding the
        foregoing, the Committee may amend any Award without the consent of the holder
        if the Committee deems it necessary to avoid adverse tax consequences to
        the
        holder under Code Section 409A. The Committee shall retain full power and
        discretion to accelerate or waive, at any time, any term or condition of
        an
        Award that is not mandatory under this Plan; provided,
        however,
        that
        the Committee shall not have discretion to accelerate or waive any term or
        condition of an Award (i) if such discretion would cause the Award to have
        adverse tax consequences to the Participant under 409A, or (ii) if the Award
        is
        intended to qualify as ‘‘performance-based compensation’’ for purposes of
        Section 162(m) of the Code and such discretion would cause the Award not
        to so
        qualify. 

       

      8.2
        Stand-Alone, Additional, Tandem and Substitute Awards. Awards
        granted under the Plan may, in the discretion of the Committee, be granted
        either alone, in addition to, in tandem with, or in substitution or exchange
        for, any other Award or any award granted under another plan of the Company,
        any
        Affiliate, or any business entity to be acquired by the Company or an Affiliate,
        or any other right of a Participant to receive payment from the Company or
        any
        Affiliate. Such additional, tandem and substitute or exchange Awards may
        be
        granted at any time. If an Award is granted in substitution or exchange for
        another Award, the Committee shall require the surrender of such other Award
        in
        consideration for the grant of the new Award. Notwithstanding anything in
        the
        Plan to the contrary, Options granted in substitution or exchange for an
        option
        in a corporate transaction shall be granted in accordance with the rules
        of
        Treasury Regulations section 1.424-1. In addition, Awards may be granted
        in lieu
        of cash compensation, including, but not limited to, in lieu of cash amounts
        payable under other plans of the Company or any Affiliate. 

       

      8.3
        Term of Awards. The
        term
        or Restricted Period of each Award that is an Option, Stock Appreciation
        Right,
        Restricted Stock Unit Award or Restricted Stock shall be for such period
        as may
        be determined by the Committee; provided that in no event shall the term
        of any
        such Award exceed a period of ten (10) years (or such shorter terms as may
        be
        required in respect of an Incentive Option). 


      
        
          
          

        

        
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      8.4
        Form and Timing of Payment under Awards; Deferrals. Subject
        to the terms of the Plan and any applicable Award agreement, payments to
        be made
        by the Company or an Affiliate upon the exercise of an Option or other Award
        or
        settlement of an Award may be made in a single payment or transfer, in
        installments or on a deferred basis. The settlement of any Award may, subject
        to
        any limitations set forth in the related Award agreement, be accelerated
        and
        cash may be paid in lieu of shares in connection with such settlement, in
        the
        discretion of the Committee or upon occurrence of one or more specified events;
        provided, however, such discretion may not be exercised if the exercise of
        such
        discretion would result in adverse tax consequences to the Participant under
        Section 409A of the Code. In the discretion of the Committee, Awards granted
        pursuant to Article IV or VI hereof may be payable in cash or shares to the
        extent permitted by the terms of the applicable Award agreement. Installment
        or
        deferred payments may be required by the Committee (subject to Section 1.4
        hereof, including the consent provisions thereof in the case of any deferral
        of
        an outstanding Award not provided for in the original Award agreement) or
        permitted at the election of the Participant on terms and conditions established
        by the Committee; provided, however, that no deferral shall be required or
        permitted by the Committee if such deferral would result in adverse tax
        consequences to the Participant under Section 409A of the Code. Payments
        may
        include, without limitation, provisions for the payment or crediting of
        reasonable interest on installment or deferred payments or the grant or
        crediting of amounts in respect of installment or deferred payments denominated
        in shares. Any deferral shall only be allowed as is provided in a separate
        deferred compensation plan adopted by the Company, which plan shall be compliant
        with Section 409A of the Code. The Plan shall not constitute an ‘‘employee
        benefit plan’’ for purposes of Section 3(3) of the Employee Retirement Income
        Security Act of 1974, as amended. 

       

      8.5
        Vested and Unvested Awards. After
        the
        satisfaction of all of the terms and conditions set by the Committee with
        respect to an Award of (i) Restricted Stock, a certificate, without the legend
        set forth in Section 5.2(c) hereof, for the number of shares that are no
        longer
        subject to such restrictions, terms and conditions shall be delivered to
        the
        Employee, (ii) Restricted Stock Unit Award, to the extent not paid in cash,
        a
        certificate for the number of shares equal to the number of shares of Restricted
        Stock Unit Award earned, and (iii) Stock Appreciation Rights or Performance
        Awards, cash and/or a certificate for the number of shares equal in value
        to the
        number of Stock Appreciation Rights or amount of Performance Awards vested
        shall
        be delivered to the person. Upon termination, resignation or removal of a
        Participant under circumstances that do not cause such Participant to become
        fully vested, any remaining unvested Options, shares of Restricted Stock,
        Restricted Stock Unit Award, Stock Appreciation Rights or Performance Awards,
        as
        the case may be, shall either be forfeited back to the Employer or the Company
        or, if appropriate under the terms of the Award, shall continue to be subject
        to
        the restrictions, terms and conditions set by the Committee with respect
        to such
        Award. Notwithstanding any other provisions of the Plan, upon or as soon
        as
        reasonably practicable following the vesting of a Restricted Stock Unit Award,
        Peformance Award or Other Stock or Performance Based Award, the distribution
        of
        such Award shall occur in a single lump sum no later than the fifteenth (15th)
        day of the third (3rd) month following the date on which vesting occurs.
        Should
        the Participant die before receiving all amounts payable hereunder, the balance
        shall be paid to the Participant’s estate by this date. 

       

      8.6
        Exemptions from Section 16(b) Liability. It
        is the
        intent of the Company that the grant of any Awards to or other transaction
        by a
        Participant who is subject to Section 16 of the 1934 Act shall be exempt
        from
        Section 16(b) of the 1934 Act pursuant to an applicable exemption (except
        for
        transactions acknowledged by the Participant in writing to be non-exempt).
        Accordingly, if any provision of this Plan or any Award agreement does not
        comply with the requirements of Rule 16b-3 under the 1934 Act as then applicable
        to any such transaction, such provision shall be construed or deemed amended
        to
        the extent necessary to conform to the applicable requirements of Rule 16b-3
        so
        that such Participant shall avoid liability under Section 16(b). 

       

      8.7
        Other Provisions. No
        grant
        of any Award shall be construed as limiting any right which the Employer,
        the
        Company or any Affiliate may have to terminate at any time, with or without
        cause, the Employment of any person to whom such Award has been granted.
        

      


      ARTICLE
        IX

      WITHHOLDING
        FOR TAXES 

       

      Any
        issuance of Common Stock pursuant to the exercise of an Option or payment
        of any
        other Award under the Plan shall not be made until appropriate arrangements,
        satisfactory to the Employer and the Company, have been made for the payment
        of
        any tax amounts (federal, state, local or other) that may be required to
        be
        withheld or paid by the Employer or the Company with respect thereto. Such
        arrangements may, at the discretion of the Committee, include allowing the
        person to tender to the Employer or the Company shares of Common Stock owned
        by
        the person, or to request the Employer or the Company to withhold shares
        of
        Common Stock being acquired pursuant to the Award, whether through the exercise
        of an Option or as a distribution pursuant to the Award, which have an aggregate
        FMV Per Share as of the date of such withholding that is not greater than
        the
        sum of all tax amounts to be withheld with respect thereto, together with
        payment of any remaining portion of such tax amounts in cash or by check
        payable
        and acceptable to the Employer or the Company. 

       


      
        
          
          

        

        
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      Notwithstanding
        the foregoing, if on the date of an event giving rise to a tax withholding
        obligation on the part of the Employer or the Company the person is an officer
        or individual subject to Rule 16b-3 under the 1934 Act, then, to the extent
        permitted by applicable law, such person may direct that such tax withholding
        be
        effectuated by the Employer or the Company withholding the necessary number
        of
        shares of Common Stock (at the tax rate required by the Code) from such Award
        payment or exercise. 

       

      ARTICLE
        X

      MISCELLANEOUS
        

       

      10.1
        No Rights to Awards. No
        Participant or other person shall have any claim to be granted any Award,
        there
        is no obligation for uniformity of treatment of Participants, or holders
        or
        beneficiaries of Awards and the terms and conditions of Awards need not be
        the
        same with respect to each recipient. 

       

      10.2
        No Right to Employment. The
        grant
        of an Award shall not be construed as giving a Participant the right to be
        retained in the employ of the Employer, the Company or any Affiliate. Further,
        the Employer, the Company or any Affiliate may at any time dismiss a Participant
        from Employment, free from any liability or any claim under the Plan, unless
        otherwise expressly provided in the Plan or in any Award Agreement.


       

      10.3
        Governing Law. The
        validity, construction and effect of the Plan and any rules and regulations
        relating to the Plan shall be determined in accordance with applicable federal
        law and the laws of the State of Texas, without regard to any principles
        of
        confiicts of law. 

       

      10.4
        Severability. If
        any
        provision of the Plan or any Award is or becomes or is deemed to be invalid,
        illegal, or unenforceable in any jurisdiction or as to any Participant or
        Award,
        or would disqualify the Plan or any Award under any law deemed applicable
        by the
        Committee, such provision shall be construed or deemed amended to conform
        to the
        applicable laws, or if it cannot be construed or deemed amended without,
        in the
        determination of the Committee, materially altering the intent of the Plan
        or
        the Award, such provision shall be stricken as to such jurisdiction, Participant
        or Award and the remainder of the Plan and any such Award shall remain in
        full
        force and effect. 

       

      10.5
        Other Laws. The
        Committee may refuse to issue or transfer any shares or other consideration
        under an Award agreement if, acting in its sole discretion, it determines
        that
        the issuance or transfer of such shares or such other consideration might
        violate any applicable law. 

       

      10.6
        409A Compliance — No Guarantee of Tax Consequences. It
        is the
        intention of the Employer and the Company that all Awards granted by the
        Committee be in compliance with Section 409A of the Code in all respects
        and the
        Plan shall be so construed; provided, however that the Participant shall
        be
        solely responsible for and liable for any tax consequences (including but
        not
        limited to any interest or penalties) as a result of participation in the
        Plan.
        Neither the Board, nor the Employer, 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 and assumes no liability whatsoever for the tax consequences to
        the
        Participants. Notwithstanding anything herein to the contrary, if any amounts
        payable hereunder are reasonably determined by the Committee to be
‘‘nonqualified deferred compensation’’ payable to a ‘‘specified employee’’ upon
‘‘separation from service’’ (within the meaning of section 409A of the Code)
        then such amounts that would otherwise be payable upon separation from service
        shall be held and not be paid by the Company upon separation from service,
        but
        shall be paid on the earlier of: (1) the first day that is six months following
        the Participant’s separation from service; or (2) Participant’s date of death.
        Such amounts that would otherwise be payable in installments commencing on
        separation from service shall be accumulated and paid in a lump sum on the
        date
        that is the earlier of (1) or (2) above and shall be paid in installments
        thereafter. 


      
        
          
          

        

        
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      10.7
        Shareholder Agreements. The
        Committee may condition the grant, exercise or payment of any Award upon
        such
        person entering into a stockholders’ agreement in such form as approved from
        time to time by the Board. 


      
        
          
          

        

        
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