Document:

Owens Corning Deferred Compensation Plan, effective as of January 1, 2007

  

 Exhibit 10.5 
 OWENS CORNING 
 DEFERRED COMPENSATION PLAN 
 (Effective January 1, 2007) 
 SECTION
1 
 General 
 1.1.
Purpose. The Owens Corning Deferred Compensation Plan (the “Plan”) has been established by Owens Corning (the “Company”) to provide non-employee directors and certain management employees with an opportunity to save in a
tax effective manner and thereby aiding in competitively attracting and retaining such non-employee directors and management employees of exceptional ability. 
 1.2. Effective Date. The “Effective Date” of the Plan is January 1, 2007. 
 1.3.
Operation and Administration. The authority to control and manage the operation and administration of the Plan shall be vested in the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the
“Board”). In controlling and managing the operation and administration of the Plan, the Committee shall have the rights, powers and duties, and may delegate such powers and duties, as set forth in Section 7. Capitalized terms in the
Plan shall be defined as set forth in the Plan. 
 1.4. Plan Year. The term “Plan Year” means the calendar year. 

1.5. Applicable Law. The Plan shall be construed and administered in accordance with the laws of the State of Ohio to the extent that such laws
are not preempted by the laws of the United States of America. 
 1.6. Number. Where the context admits, words in the singular shall
include the plural and the plural shall include the singular. 
 1.7. Notices. Any notice or document required to be filed with the
Plan Administrator (as defined in subsection 7.1) or the Committee under the Plan will be properly filed if delivered or mailed to the Plan Administrator, in care of the Company, at its principal executive offices. The Plan Administrator may, by
advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan may be waived by the person entitled to notice. 
 1.8. Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed with the Plan Administrator at such times, in such form, and subject to such restrictions and limitations as the Plan
Administrator shall require. 
 1.9. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document
or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. 
 1.10. Adjustments. In the event of any increase or decrease in the number of issued shares of common stock of the Company resulting from a subdivision or consolidation of shares or other capital adjustment, or the payment of a stock
dividend or other increase or decrease in shares, effected without receipt of consideration by the Company, or other change in corporate or capital structure, the number of shares in Participants’ Accounts shall be appropriately adjusted by the
Committee; provided, however, that any fractional shares resulting from any such adjustment shall be eliminated. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 

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 SECTION 2 
 Participation 
 2.1. Participant. Subject to the terms of the Plan, a director of the Company
who is not an employee of the Company or any of its subsidiaries (a “Non-Employee Director”) and such management level employees as shall be selected by the Committee (Management Employees) shall be eligible to make deferrals under the
Plan. 
 2.2. Deferral Election. A Non-Employee Director or Management Employee shall become a “Participant” in the Plan by
electing to defer payment of all or a portion of their Eligible Compensation pursuant to the terms of a “Deferral Election”. A Non-Employee Director’s Deferral Election with respect to Eligible Compensation for services to be
performed in a Plan Year shall be filed before the end of the preceding Plan Year; provided, however, that the initial Deferral Election of a new Non-Employee Director may be filed within 30 days after the date on which such individual first became
a Non-Employee Director, and shall be applicable only to Eligible Compensation for services to be performed by the Non-Employee Director after the Deferral Election is filed. To the extent that Management Employees are only eligible to defer
compensation which is performance-based incentive compensation, deferral elections by Management Employees must be filed at least six months prior to the end of the incentive performance period for such compensation. Notwithstanding the foregoing
sentence, with respect to amounts of such incentive compensation payable to Management Employees based on their 2006 service, the Plan shall allow Management Employees to make “new payment elections” on or before December 31, 2006,
under this Plan with respect to both the time and form of payment of such amounts. This new payment election applies only to such amounts to the extent that they would not otherwise be payable in 2006 and such election must not cause an amount to be
paid in 2006. 
 2.3. Eligible Compensation. For purposes of the Plan, “Eligible Compensation” for a Plan Year means:

 (a) for a Non-Employee Director, the Non-Employee Director’s cash compensation including the cash portion of the annual retainer, the
chair retainer and the meeting fees for services performed in such Plan Year; and 
 (b) for a Management Employee, up to 100% of the
Management Employee’s cash incentive compensation for the Plan Year including such payments payable under the Owens Corning Corporate Incentive Plan and the Owens Corning Long-Term Incentive Plan. 
 SECTION 3 
 Plan Accounting

 3.1. Deferred Compensation Accounts. An Account shall be maintained on behalf of each Participant reflecting each class year in
which the Participant makes a deferral election, which shall be credited with the amount which would have been paid to the Participant as Eligible Compensation if it had not been deferred during such class year. Such crediting shall occur as of the
date on which the Eligible Compensation would have been paid to the Participant if it had not been deferred. A Participant shall at all times be 100% vested in any amounts credited to his Account for each such class year. 
 3.2. Adjustment of Accounts. The Accounts of Participants shall be adjusted from time to time in accordance with procedures established by the
Committee to reflect the increase or decrease in value from the investment funds to which the Participant’s Account balance is allocated. Such account may include one or more investment fund options. Investment funds may include a fund indexed
to the value of Owens Corning common stock and any such other investment options that the Committee specifies from time to time. Available investment funds and options shall be those made available under the Plan as determined and specified from
time to time by the Committee. To the extent and in the manner permitted by the Committee, the Participant may elect 

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to have different portions of his Account balance adjusted for any period on the basis of different investment elections made in each class year.
Notwithstanding the election by Participants of certain investments as described herein and the adjustment of their Accounts based on such investment decisions in accordance with uniform rules established by the Committee, the Plan does not require,
and no trust or other instrument maintained in connection with the Plan shall require, that any assets or amounts which are set aside in trust or otherwise for the purpose of paying Plan benefits shall actually be invested in the investment
alternatives selected by Participants. Such investment options may, at the discretion of the Committee be representative or hypothetical for purposes of the Plan. If no investment election has been made by the participant, Accounts shall be credited
to a default investment fund as established from time to time by the Committee. 
 3.3. Statement of Accounts. As soon as practicable
after the end of each Plan Year, and at such other times as determined by the Committee, the Company shall provide each Participant with a statement of the transactions in the Participant’s Accounts during that year and the Participant’s
Account balance as of the end of the year. 
 SECTION 4 
 Distributions 
 4.1. General. Subject to this Section 4 and Section 5 (relating to
change in control), the balance of a Participant’s Account shall be distributed upon the Participant’s “separation from service” (as defined under Code section 409A) with the Company if they are an employee or as a member of the
Board of Directors if they are a Director, or upon the commencement date as elected by the Participant in the Participant’s Distribution Election. All such distributions shall commence and be made in compliance with Code section 409A and
applicable regulations thereunder. Distribution shall be made in either a single lump sum or in annual installments over 5 or 10 years, as elected by the Participant in the Participant’s Distribution Election. If no election is made with
respect to the deferred amount the default form of distribution shall be a single lump sum payment. 
 Notwithstanding the foregoing,
distributions may not be made to a key employee upon a separation from service before the date which is six months after the date of the key employee’s separation from service (or, if earlier, the date of death of the key employee). Any
payments that would otherwise be made during this period of delay shall be accumulated and paid on the first day of the seventh month following the Participant’s separation from service (or, if earlier, the first day of the month after the
Participant’s death). 
 4.2. Distribution Election. A Participant’s Deferral Election shall specify the number of payments
in which the Participant’s Account shall be distributed and shall specify the commencement date for distribution of the deferred amounts. (“Distribution Election”) A Participant’s distribution election may independently specify
either or both of the following: (i) a specific distribution commencement date, and /or (ii) distribution commencing upon separation from service. Where a Participant has selected both a specific distribution date and distribution upon
separation from service, the distribution shall commence upon the first such date to occur. A Participant’s Distribution Election may only be changed, subject to the following: 
  

	 	(a)	Any such change in a Participant’s Distribution Election will not take effect until at least 12 months after the change is made; 

  

	 	(b)	Payments under the changed Distribution Election may not begin until at least 5 years after the date when payments would otherwise have begun; and 

  

	 	(c)	Any such change in a Participant’s Distribution Election must be made at least 12 months before the date distribution was scheduled to commence; and 

 

	 	(d)	There shall be no more than two changes allowed to the distribution election applicable to any given class year. 

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 Participants shall be permitted to elect to change their Distribution Election as set forth above to
delay the deferral date as specified in their Distribution Election. To be effective, an election to further delay the deferral date must otherwise meet the requirements of this section 4.2(a)-(d). 
 4.3. Medium of Payment. All distributions from Participants’ Accounts shall be distributed by the Company in cash only. 
 4.4. Beneficiary. Subject to the terms of the Plan, any benefits payable to a Participant under the Plan that have not been paid at the time of
the Participant’s death shall be paid at the time and in the form determined in accordance with the foregoing provisions of the Plan, to the beneficiary designated by the Participant in writing filed with the Plan Administrator in such form and
at such time as the Plan Administrator shall require. A beneficiary designation form will be effective only when the signed form is filed with the Plan Administrator while the Participant is alive and will cancel all beneficiary designation forms
filed earlier. If a deceased Participant failed to designate a beneficiary, or if the designated beneficiary of a deceased Participant dies before the Participant or before complete payment of the Participant’s benefits, the amounts shall be
paid to the legal representative or representatives of the estate of the last to die of the Participant and the Participant’s designated beneficiary. 
 4.5. Distributions to Disabled Persons. Notwithstanding the provisions of this Section 4, if, in the Plan Administrator’s opinion, a Participant or beneficiary is under a legal disability or is in any
way incapacitated so as to be unable to manage such individual’s financial affairs, the Plan Administrator may direct that payment be made to a relative or friend of such individual for such individual’s benefit until claim is made by a
conservator or other person legally charged with the care of such individual’s person or estate, and such payment shall be in lieu of any such payment to such Participant or beneficiary. Thereafter, any benefits under the Plan to which such
Participant or beneficiary is entitled shall be paid to such conservator or other person legally charged with the care of such individual’s person or estate. 
 4.6. Benefits May Not be Assigned. Neither the Participant nor any other person shall have any voluntary or involuntary right to commute, sell, assign, pledge, anticipate, mortgage or otherwise encumber,
transfer, hypothecate or convey in advance of actual receipt of the amounts, if any, payable hereunder, or any part hereof, which are expressly declared to be unassignable and non-transferable. No part of the amounts payable shall be, prior to
actual payment, subject to seizure or sequestration for payment of any debts, judgements, alimony or separate maintenance owed by the Participant or any other person, or be transferred by operation of law in the event of the Participant’s or
any other person’s bankruptcy or insolvency. 
 4.7. Effect of Taxation. If a portion of the Participant’s Account balance
is includible in income under Code section 409A, such portion shall be distributed immediately to the Participant. 
 4.8. Permitted
Delays. Notwithstanding the foregoing, any payment to a Participant under the Plan shall be delayed upon the Committee’s reasonable anticipation of one or more of the following events: 
  

	 	(a)	The Company’s deduction with respect to such payment otherwise would be limited or eliminated by application of Code section 162(m); 

  

	 	(b)	The making of the payment would violate Federal securities laws or other applicable law; 

 provided, that any payment subject to this Section 4.8 shall be paid in accordance with Code section 409A. 

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 SECTION 5 
 Change in Control 
 5.1. To the extent not prohibited by the Secretary of the Treasury under Code
section 409A, each Participant’s then effective Deferral Election and Distribution Election shall be automatically revoked as of the date on which a “change in control” (as defined under Code section 409A and as defined in 5.2 below)
occurs and the Participant shall receive a lump sum distribution of the Participant’s Account balance upon the payment date following the change in control. Such distribution shall be made to the Participant regardless of any elections
providing for later distribution that may otherwise be applicable under the Plan. The “payment date” upon a change in control will be within 30 days following the change in control. 
 5.2. A “change in control” shall mean: 
 (a) the acquisition by any individual, entity or group (a “Person”), including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act, of more than 50% of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Common Stock”) or (ii) the combined voting power of
the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); excluding, however, the following: (A) any acquisition directly from the Company (excluding
any acquisition resulting from the exercise of an exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged was acquired directly from the Company), (B) any acquisition by the Company,
(C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (3) of this Section 6.8(b); provided further, that for purposes of clause (B), if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of more than 50% of the Outstanding Common Stock or more than 50% of the Outstanding Voting Securities by reason of an acquisition by the
Company, and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Common Stock or any additional Outstanding Voting Securities and such beneficial ownership is publicly
announced, such additional beneficial ownership shall constitute a Change in Control; 
 (b) individuals who, as of the
beginning of any consecutive 2-year period constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided that any individual who subsequently becomes a director of
the Company and whose election, or nomination for election by the Company’s stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and
provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by any other Person with
respect to the election or removal of directors, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board; 
 (c) the consummation of a reorganization, merger or consolidation of the Company or sale or other disposition of all or substantially all
of the assets of the Company (a “Corporate Transaction”); excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the
Outstanding Common Stock and the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 50% of, respectively, the outstanding shares of common stock, and the combined
voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors, as the 

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case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company’s assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Common Stock and the Outstanding Voting Securities, as the case may be, (ii) no Person (other than: the Company; any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by
the Company; the corporation resulting from such Corporate Transaction; and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, more than 50% of the Outstanding Common Stock or the
Outstanding Voting Securities, as the case may be) will beneficially own, directly or indirectly, more than 50% of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board
of directors of the corporation resulting from such Corporate Transaction; or 
 (d) the consummation of a plan of complete
liquidation or dissolution of the Company. 
 (e) Notwithstanding the foregoing, a Change in Control under the Plan shall not
be deemed to have occurred as a result of the implementation of the Sixth Amended Joint Plan of Reorganization for Owens Corning and Its Affiliated Debtors and Debtors-In-Possession (As Modified), which was confirmed by the United States Bankruptcy
Court for the District of Delaware on September 26, 2006, or any restructuring of the Company associated with the implementation of the Plan of Reorganization. 
 SECTION 6 
 Source of Benefit Payments 
 Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Company
whatsoever, including, without limitation, any specific funds, assets, or other property which the Company, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the
amounts, if any, payable under the Plan, unsecured by any assets of the Company. Nothing contained in the Plan shall constitute a guarantee by the company that the assets of the Company shall be sufficient to pay any benefits to any person.

 SECTION 7 
 Committee

 7.1. Powers of Committee. Responsibility for the day-to-day administration of the Plan shall be vested in the Plan
Administrator, which shall be the Committee. The authority to control and manage all other aspects of the operation and administration of the Plan shall also be vested in the Committee. The Committee is authorized to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the
administration of the Plan. Except as otherwise specifically provided by the Plan, any determinations to be made by the Committee under the Plan shall be decided by the Committee in its sole discretion. Any interpretation of the Plan by the
Committee and any decision made by it under the Plan is final and binding on all persons. 
 7.2. Delegation by Committee. The
Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time. 

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 7.3. Information to be Furnished to Committee. The Company shall furnish the Committee with such
data and information as may be required for it to discharge its duties. The records of the Company as to a Participant’s membership on the Board shall be conclusive on all persons unless determined to be incorrect. Participants and other
persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the Plan. 
 7.4. Liability and Indemnification of Committee. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan
unless attributable to such individual’s own fraud or willful misconduct; nor shall the Company be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director or employee of the Company.
The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Company against any and all liabilities, losses, costs and expenses (including legal fees and
expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized
delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable
insurance. 
 SECTION 8 
 Claims for Benefits. 
 8.1. Filing a Claim. A Participant or his authorized representative may file a claim for
benefits under the Plan. Any claim must be in writing and submitted to the Committee at such address as may be specified from time to time. Claimants will be notified in writing of approved claims, which will be processed as claimed. A claim is
considered approved only if its approval is communicated in writing to a claimant. 
 8.2. Denial of Claim. In the case of the denial
of a claim respecting benefits paid or payable with respect to a Participant, a written notice will be furnished to the claimant within 90 days of the date on which the claim is received by the Committee. If special circumstances (such as for a
hearing) require a longer period, the claimant will be notified in writing, prior to the expiration of the 90-day period, of the reasons for an extension of time; provided, however, that no extensions will be permitted beyond 90 days after the
expiration of the initial 90-day period. 
 8.3. Reasons for Denial. A denial or partial denial of a claim will be dated and signed by
the Committee and will clearly set forth: 
  

	 	(a)	the specific reason or reasons for the denial; 

  

	 	(b)	specific reference to pertinent Plan provisions on which the denial is based; 

  

	 	(c)	a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

  

	 	(d)	an explanation of the procedure for review of the denied or partially denied claim set forth below, including the claimant’s right to bring a civil action under ERISA section
502(a) following an adverse benefit determination on review. 

 8.4. Review of Denial. Upon denial of a claim, in whole
or in part, a claimant or his duly authorized representative will have the right to submit a written request to the Committee for a full and fair review of the denied claim by filing a written notice of appeal with the Committee within 60 days of
the receipt by the claimant of written notice of the denial of the claim. A claimant or the claimant’s authorized representative will have, 

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upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for
benefits and may submit issues and comments in writing. The review will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination. 
 If the claimant fails to file a request for review within 60 days of the
denial notification, the claim will be deemed abandoned and the claimant precluded from reasserting it. If the claimant does file a request for review, his request must include a description of the issues and evidence he deems relevant. Failure to
raise issues or present evidence on review will preclude those issues or evidence from being presented in any subsequent proceeding or judicial review of the claim. 
 8.5. Decision Upon Review. The Committee will provide a prompt written decision on review. If the claim is denied on review, the decision shall set forth: 
  

	 	(a)	the specific reason or reasons for the adverse determination; 

  

	 	(b)	specific reference to pertinent Plan provisions on which the adverse determination is based; 

  

	 	(c)	a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to
the claimant’s claim for benefits; and 

  

	 	(d)	a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain the information about such procedures, as well as a statement of
the claimant’s right to bring an action under ERISA section 502(a). 

 A decision will be rendered no more than 60 days
after the Committee’s receipt of the request for review, except that such period may be extended for an additional 60 days if the Committee determines that special circumstances (such as for a hearing) require such extension. If an extension of
time is required, written notice of the extension will be furnished to the claimant before the end of the initial 60-day period. 
 8.6.
Finality of Determinations; Exhaustion of Remedies. To the extent permitted by law, decisions reached under the claims procedures set forth in this Section shall be final and binding on all parties. No legal action for benefits under the Plan
shall be brought unless and until the claimant has exhausted his remedies under this Section. In any such legal action, the claimant may only present evidence and theories which the claimant presented during the claims procedure. Any claims which
the claimant does not in good faith pursue through the review stage of the procedure shall be treated as having been irrevocably waived. Judicial review of a claimant’s denied claim shall be limited to a determination of whether the denial was
an abuse of discretion based on the evidence and theories the claimant presented during the claims procedure. 
 8.7. Limitations
Period. Any suit or legal action initiated by a claimant under the Plan must be brought by the claimant no later than one year following a final decision on the claim for benefits by the Committee. The one-year limitation on suits for benefits
will apply in any forum where a claimant initiates such suit or legal action. 
 SECTION 9 
 Amendment and Termination 
 The
Committee may, at any time, amend or terminate the Plan (including the rules for administration of the Plan), subject to the following: 
  

	 	(a)	Subject to the following provisions of this Section 9, no amendment or termination may materially adversely affect the rights of any Participant or beneficiary under the Plan.

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	 	(b)	The Committee may revoke the right to continue to defer Eligible Compensation under the Plan. Notwithstanding, no such revocation shall apply mid-year to the Eligible Compensation
of any Participant in the year such revocation is adopted. To the extent that the revocation is adopted by the Committee after the beginning of a plan year, the revocation shall apply commencing for the following plan year. 

 

	 	(c)	Upon termination of the Plan, no further deferrals of Eligible Compensation shall be permitted; however, earnings, gains and losses shall continue to be credited to Accounts in
accordance with Section 3 until the Account balances are fully distributed. 

  

	 	(d)	The Plan may not be amended to delay the date on which benefits are otherwise payable under the Plan without the consent of each affected Participant and subject to restrictions on
such delays under Code section 409A as set forth in paragraph 4.2 above. 

  

	 	(e)	Upon termination of the Plan, distribution of balances in Accounts shall be made to Participants and beneficiaries in the manner and at the time described in Section 4, unless
the Committee determines in its sole discretion that all such amounts shall be distributed upon termination in accordance with the requirements under Code section 409A. 

  

	 	(f)	Notwithstanding any other provision of the Plan to the contrary, neither the Committee nor the Board may delegate its rights and responsibilities under this Section 9;
provided, however, that, the Board of Directors may, from time to time, substitute itself, or another committee of the Board, for the Committee under this Section 9.2007 Long-Term Incentive Plan

Table of Contents

  
 EXHIBIT 10.1 
 El Paso Electric Company 
 2007 Long-Term Incentive Plan

  
 Effective May 2, 2007 

Table of Contents

 
Contents 
  

			
		
	 
Article 1. Establishment, Purpose, and Duration
	  	1
		
	 
Article 2. Definitions
	  	1
		
	 
Article 3. Administration
	  	8
		
	 
Article 4. Shares Subject to This Plan and Maximum Awards
	  	9
		
	 
Article 5. Eligibility and Participation
	  	11
		
	 
Article 6. Stock Options
	  	11
		
	 
Article 7. Stock Appreciation Rights
	  	14
		
	 
Article 8. Restricted Stock and Restricted Stock Units
	  	15
		
	 
Article 9. Performance Units/Performance Shares
	  	17
		
	 
Article 10. Cash-Based Awards and Other Stock-Based Awards
	  	18
		
	 
Article 11. Transferability of Awards
	  	19
		
	 
Article 12. Performance Measures
	  	19
		
	 
Article 13. Non-employee Director Awards
	  	21
		
	 
Article 14. Dividend Equivalents
	  	22
		
	 
Article 15. Beneficiary Designation
	  	22
		
	 
Article 16. Rights of Participants
	  	22
		
	 
Article 17. Change in Control
	  	23
		
	 
Article 18. Amendment, Modification, Suspension, and Termination
	  	24
		
	 
Article 19. Withholding
	  	25
		
	 
Article 20. Successors
	  	25
		
	 
Article 21. General Provisions
	  	25

Table of Contents

 El Paso Electric Company 2007 Long-Term Incentive Plan 
  
 
Article 1. Establishment, Purpose, and Duration 
  
 1.1    Establishment.    El Paso Electric Company, a Texas corporation (hereinafter referred to as the “Company”), establishes an incentive compensation plan to be known as the El
Paso Electric Company 2007 Long-Term Incentive Plan (hereinafter referred to as the “Plan”), as set forth in this document. 
  
 This Plan permits the grant of Non-qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units, Cash-Based Awards, and Other Stock-Based Awards. 
  
 This Plan shall become effective upon shareholder approval (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof. 
  
 1.2    Purpose of this Plan.    The purpose of this Plan is to provide a means whereby
Employees and Directors of the Company develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby
advancing the interests of the Company and its shareholders. A further purpose of this Plan is to provide a means through which the Company may attract able individuals to become Employees or serve as Directors of the Company and to provide a
means whereby those individuals can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company. 
  
 1.3    Duration of this Plan.    Unless sooner terminated as provided herein, this Plan shall terminate ten
(10) years from the Effective Date. After this Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plan’s terms and
conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten (10) years after the earlier of: (a) adoption of this Plan by the Board, or (b) the Effective Date. 
  
 
Article 2. Definitions 
  
 Whenever used in
this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized: 
  

	 	2.1	“Affiliate” shall mean any corporation or other entity (including, but not limited to, a partnership or a limited liability company) that is affiliated with the Company
through stock or equity ownership or otherwise, and is designated as an Affiliate for purposes of this Plan by the Committee. For purposes of granting stock options or stock appreciation rights, an entity may not be considered an Affiliate if it
results in noncompliance with Code Section 409A. 

  

 A-1 

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	 	2.2	“Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3. 

  

	 	2.3	“Award” means, individually or collectively, a grant under this Plan of Non-qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, or Other Stock-Based Awards, in each case subject to the terms of this Plan. 

  

	 	2.4	“Award Agreement” or “Agreement” means either: (i) a written agreement entered into by the Company and a Participant setting forth the terms and
provisions applicable to an Award granted under this Plan, or (ii) a written statement issued by the Company to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof. The Committee may
provide for the use of electronic, Internet, or other nonpaper Award Agreements, and the use of electronic, Internet, or other nonpaper means for the acceptance thereof and actions thereunder by a Participant. 

  

	 	2.5	“Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act. 

  

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

  

	 	2.7	“Cash-Based Award” means an Award, denominated in cash, granted to a Participant as described in Article 10. 

  

	 	2.8	“Change in Control” means any of the following events: 

  

	 	(a)	The acquisition by any individual, entity, or group (a “Person”), including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of
beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of thirty percent (30%) or more of either: (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common
Stock”), or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); excluding, however, the
following: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of an exercise, conversion, or exchange privilege unless the security being so exercised, converted, or exchanged was acquired
directly from the Company); (B) any acquisition by the Company; (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (D) any
acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii), and (iii) of subsection (c) of this Section 2.8. 

  

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	 	(b)	Individuals who, as of the Effective Date, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided
that any individual who becomes a director of the Company subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by the vote of at least a majority of the directors then
comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent
Board; 

  

	 	(c)	Consummation of a shareholder-approved reorganization, merger, or consolidation of the Company or sale or other disposition of all or substantially all of the assets of the Company (a
“Corporate Transaction”); excluding, however, a Corporate Transaction pursuant to which: (i) all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Company Stock and the
Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the outstanding shares of common stock, and the combined
voting power of the outstanding securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company’s assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be; (ii) no Person (other than: the Company; any employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company; the corporation resulting from such Corporate Transaction; and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, thirty percent (30%) or
more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) will beneficially own, directly or indirectly, thirty percent (30%) or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors; and (iii) individuals who were members of
the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or 

  

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	 	(d)	Approval by the shareholders of the Company of a plan of complete liquidation or dissolution of the Company. 

  

	 	 	Notwithstanding the foregoing, in no event shall a “Change in Control” be deemed to have occurred as a result of the formation of a Holding Company. For the purposes hereof,
“Holding Company” shall mean an entity that becomes a holding company for the Company or its businesses as a part of any reorganization, merger, consolidation, or other transaction, provided that the outstanding shares of common stock of
such entity and the combined voting power of such entity entitled to vote generally in the election of directors is, immediately after such reorganization, merger, consolidation, or other transaction, beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Voting Securities immediately prior to such reorganization, merger, consolidation, or other transaction in
substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation, or other transaction, of such Outstanding Company Voting Securities. 

  

	 	2.9	“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include
references to any applicable regulations thereunder and any successor or similar provision. 

  

	 	2.10	“Committee” means the Compensation Committee of the Board or a subcommittee thereof, or any other committee designated by the Board to administer this Plan. The members of
the Committee shall be appointed from time to time by and shall serve at the discretion of the Board. If the Committee does not exist or cannot function for any reason, the Board may take any action under the Plan that would otherwise be the
responsibility of the Committee. 

  

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	 	2.11	“Company” means El Paso Electric Company, a Texas corporation, and any successor thereto as provided in Article 20 herein. 

  

	 	2.12	“Covered Employee” means any key Employee who is or may become a “Covered Employee,” as defined in Code Section 162(m), and who is designated by the Committee
as a “Covered Employee” under this Plan for such applicable Performance Period. 

  

	 	2.13	“Director” means any individual who is a member of the Board of Directors of the Company. 

  

	 	2.14	“Disability” means the inability of the holder of an award to perform substantially such holder’s duties and responsibilities for a continuous period of at least six
months, as determined solely by the Committee. 

  

	 	2.15	“Effective Date” has the meaning set forth in Section 1.1. 

  

	 	2.16	“Employee” means any individual designated as an employee of the Company, its Affiliates, and/or its Subsidiaries on the payroll records thereof. 

  

	 	2.17	“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. 

  

	 	2.18	“Fair Market Value” or “FMV” means a price that is based on the opening, closing, actual, high, low, or average selling prices of a Share reported on the New
York Stock Exchange or other established stock exchange (or exchanges) on the applicable date, the preceding trading day, the next succeeding trading day, or an average of trading days, as determined by the Committee in its discretion. Unless the
Committee determines otherwise, Fair Market Value shall be deemed to be equal to the closing price of a Share on the most recent date on which Shares were publicly traded. In the event Shares are not publicly traded at the time a determination of
their value is required to be made hereunder, the determination of their Fair Market Value shall be made by the Committee in such manner as it deems appropriate, provided that in the case of stock options and stock appreciation rights, such
determination shall be made in compliance with Code Section 409A. Such definition(s) of FMV shall be specified in each Award Agreement and may differ depending on whether FMV is in reference to the grant, exercise, vesting, settlement, or
payout of an Award. 

  

	 	2.19	“Full-Value Award” means an Award other than in the form of an ISO, NQSO, or SAR, and which is settled by the issuance of Shares. 

  

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	 	2.20	“Grant Price” means the price established at the time of grant of an SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR.

  

	 	2.21	“Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6 to an Employee and that is designated as an Incentive Stock
Option and that is intended to meet the requirements of Code Section 422, or any successor provision. 

  

	 	2.22	“Insider” shall mean an individual who is, on the relevant date, an officer or Director of the Company, or a more than ten percent (10%) Beneficial Owner of any
class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act. 

  

	 	2.23	“Non-employee Director” means a Director who is not an Employee. 

  

	 	2.24	“Non-employee Director Award” means any NQSO, SAR, or Full-Value Award granted, whether singly, in combination, or in tandem, to a Participant who is a Non-employee Director
pursuant to such applicable terms, conditions, and limitations as the Board or Committee may establish in accordance with this Plan. 

  

	 	2.25	“Non-qualified Stock Option” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422, or that otherwise does
not meet such requirements. 

  

	 	2.26	“Option” means an Incentive Stock Option or a Non-qualified Stock Option, as described in Article 6. 

  

	 	2.27	“Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option. 

  

	 	2.28	“Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 10.

  

	 	2.29	“Participant” means any eligible individual as set forth in Article 5 to whom an Award is granted. 

  

	 	2.30	“Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain performance-based
compensation paid to Covered Employees. Notwithstanding the foregoing, nothing in this Plan shall be construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Code Section 162(m) does not
constitute performance-based compensation for other purposes, including Code Section 409A. 

  

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	 	2.31	“Performance Measures” means measures as described in Article 12 on which the performance goals are based and which are approved by the Company’s shareholders pursuant
to this Plan in order to qualify Awards as Performance-Based Compensation. 

  

	 	2.32	“Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an
Award. 

  

	 	2.33	“Performance Share” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is
determined as a function of the extent to which corresponding performance criteria have been achieved. 

  

	 	2.34	“Performance Unit” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in units, the value of which at the time it is payable is
determined as a function of the extent to which corresponding performance criteria have been achieved. 

  

	 	2.35	“Period of Restriction” means the period when Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture (based on the passage of time, the
achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8. 

  

	 	2.36	“Plan” means the El Paso Electric Company 2007 Long-Term Incentive Plan. 

  

	 	2.37	“Plan Year” means the calendar year. 

  

	 	2.38	“Prior Plans” means the El Paso Electric Company 1999 Long-Term Incentive Plan and the El Paso Electric Company 1996 Long-Term Incentive Plan. 

  

	 	2.39	“Restricted Stock” means an Award granted to a Participant pursuant to Article 8. 

  

	 	2.40	“Restricted Stock Unit” means an Award granted to a Participant pursuant to Article 8, except no Shares are actually awarded to the Participant on the date of grant.

  

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	 	2.41	“Share” means a share of common stock of the Company, no par value per share. 

  

	 	2.42	“Stock Appreciation Right” or “SAR” means an Award, designated as an SAR, pursuant to the terms of Article 7 herein. 

  

	 	2.43	“Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more
than fifty percent (50%) by reason of stock ownership or otherwise. 

  
 
Article 3. Administration 
  
 3.1    General.    The Committee shall be responsible for administering this Plan, subject to this Article 3 and the other provisions of this Plan. The Committee may employ attorneys,
consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All
actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested individuals. 
  
 3.2    Authority of the Committee.    The Committee shall have full and exclusive
discretionary power to interpret the terms and the intent of this Plan and any Award Agreement or other agreement or document ancillary to or in connection with this Plan, to determine eligibility for Awards and to adopt such rules, regulations,
forms, instruments, and guidelines for administering this Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the
terms and conditions set forth in Award Agreements, determining whether, to what extent, and under what circumstances Awards may be settled or exercised and the method or methods by which Awards may be settled, exercised, cancelled, forfeited, or
suspended, granting Awards as an alternative to or as the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, construing any ambiguous provision of the Plan or any Award Agreement, and, subject
to Article 18, adopting modifications and amendments to this Plan or any Award Agreement, including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company, its Affiliates,
and/or its Subsidiaries operate. 
  
 3.3    Delegation.    The Committee may delegate to one or more of its members or to one or more officers of the Company and/or its Subsidiaries and Affiliates, or to one or more agents or
advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any
responsibility the Committee or such individuals may have under this Plan. 
  

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Article 4. Shares Subject to This Plan and Maximum Awards 
  
 4.1    Number of Shares Available for Awards.  
  

	 	(a)	Subject to adjustment as provided in Section 4.4, the maximum number of Shares available for grant to Participants under this Plan on or after the Effective Date shall be one million
(1,000,000) Shares (the “Share Authorization”), which shall consist of: any Shares subject to the outstanding awards as of the Effective Date under the Prior Plans that on or after the Effective Date cease for any reason to be subject to
such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable Shares). 

  

	 	(b)	No more than one million (1,000,000) Shares of the Share Authorization may be issued pursuant to Full-Value Awards. 

  

	 	(c)	The maximum number of Shares of the Share Authorization that may be issued pursuant to ISOs under this Plan shall be one million (1,000,000) Shares. 

  
 4.2    Share Usage.    Shares covered by
an Award shall be counted as used as of the date of grant. Any Shares related to Awards under this Plan or under Prior Plans which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in
cash in lieu of Shares, or are exchanged with the Committee’s permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under this Plan. Moreover, if the Option Price of any Option granted
under this Plan or the tax withholding requirements with respect to any Award granted under this Plan are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), such tendered Shares shall again be available for
grant under this Plan. Furthermore, if an SAR is exercised and settled in Shares, the difference between the total Shares exercised and the net Shares delivered shall again be available for grant under this Plan, with the result being that only the
number of Shares issued upon exercise of an SAR are counted against the Shares available. The Shares available for issuance under this Plan may be authorized and unissued Shares or treasury Shares. 
  
 4.3    Annual Award Limits.    Unless
and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Performance-Based Compensation, the following limits (each an “Annual Award Limit” and, collectively, “Annual Award
Limits”) shall apply to grants of such Awards under this Plan: 
  

	 	(a)	Options: The maximum aggregate number of Shares subject to Options granted in any one Plan Year to any one Participant shall be three hundred thousand (300,000).

  

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	 	(b)	SARs: The maximum number of Shares subject to Stock Appreciation Rights granted in any one Plan Year to any one Participant shall be three hundred thousand (300,000).

  

	 	(c)	Restricted Stock or Restricted Stock Units: The maximum aggregate grant with respect to Awards of Restricted Stock or Restricted Stock Units in any one Plan Year to any one Participant
shall be one hundred fifty thousand (150,000) Shares. 

  

	 	(d)	Performance Units or Performance Shares: The maximum aggregate Award of Performance Units or Performance Shares that a Participant may receive in any one Plan Year shall be one hundred
fifty thousand (150,000) Shares, or equal to the value of one hundred fifty thousand (150,000) Shares determined as of the date of vesting or payout, as applicable. 

  

	 	(e)	Cash-Based Awards and Other Stock-Based Awards: The maximum aggregate amount awarded or credited with respect to Cash-Based or Other Stock-Based Awards to any one Participant in any
one Plan Year may not exceed the value of three million dollars ($3,000,000) or one hundred fifty thousand (150,000). Shares determined as of the date of vesting or payout, as applicable. 

  
 4.4    Adjustments in Authorized
Shares.    In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization,
recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend
in-kind, or other like change in capital structure, the Committee, in order to prevent dilution or enlargement of Participants’ rights under this Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued
under this Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to
outstanding Awards. 
  
 The Committee shall also make appropriate
adjustments in the terms of any Awards under this Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance
Periods. Notwithstanding anything herein to the contrary, following a Change in Control the Committee may not take any such action as described in this Section 4.4 if such action would result in a violation of the requirements of Code
Section 409A. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan. 
  

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 Subject to the provisions of Article 18 and notwithstanding anything else herein to the contrary, without affecting
the number of Shares reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such
terms and conditions as it may deem appropriate, subject to compliance with the rules under Code Sections 409A, 422, and 424, as and where applicable. 
  
 
Article 5. Eligibility and Participation 
  
 5.1    Eligibility.    Individuals eligible to participate in this Plan include all Employees and Directors. 
  
 5.2    Actual Participation.    Subject to the provisions of this Plan, the Committee
may, from time to time, select from all individuals eligible to participate, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of any and all terms permissible by law, and the amount of each
Award. 
  
 
Article 6. Stock Options 
  
 6.1    Grant of Options.    Subject to the terms and provisions of this Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to
time as shall be determined by the Committee, in its sole discretion, provided that ISOs may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted under Code Sections 422 and 424). However, an
Employee who is employed by an Affiliate and/or Subsidiary may only be granted Options to the extent the Affiliate and/or Subsidiary is part of: (i) the Company’s controlled group of corporations, or (ii) a trade or business under
common control, as of the date of grant as determined within the meaning of Code Section 414(b) or 414(c), and substituting for this purpose ownership of at least fifty percent (50%) of the Affiliate and/or Subsidiary to determine the
members of the controlled group of corporations and the entities under common control. 
  
 6.2    Award Agreement.    Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares
to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan. The Award Agreement also shall
specify whether the Option is intended to be an ISO or an NQSO. 
  

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 6.3    Option Price.    The Option Price for each grant of an Option
under this Plan shall be determined by the Committee in its sole discretion and shall be specified in the Award Agreement; provided, however, the Option Price must be at least equal to one hundred percent (100%) of the FMV of the Shares as
determined on the date of grant. 
  
 6.4    Term of Options.    Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall
be exercisable later than the tenth (10th) anniversary date of its grant. 
  
 6.5    Exercise of Options.    Options
granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each
Participant. 
  
 6.6    Payment.    Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or
accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.

  
 A condition of the issuance of the Shares as to which an Option shall be
exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously
acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price (provided that except as otherwise determined by the Committee, the Shares that are tendered must have been held by the Participant for at least
six (6) months (or such other period, if any, as the Committee may permit) prior to their tender to satisfy the Option Price if acquired under this Plan or any other compensation plan maintained by the Company or have been purchased on the open
market); (c) by a cashless (broker-assisted) exercise; (d) by a combination of (a), (b), and/or (c); or (e) any other method approved or accepted by the Committee in its sole discretion. 
  
 Subject to any governing rules or regulations, as soon as practicable after receipt of
written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant’s request, Share certificates in
an appropriate amount based upon the number of Shares purchased under the Option(s). 
  
 Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in U.S. dollars. 
  

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 6.7    Restrictions on Share Transferability.    The Committee may
impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, minimum holding period requirements or restrictions under applicable federal
securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares. 
  
 6.8    Termination of
Employment.    Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or provision of
services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not
be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination. Unless otherwise specified in the Award Agreement, if the employment with or service to the Company of the Participant
terminates, each Option held by such Participant shall be exercisable, to the extent that such Option is exercisable on the effective date of such Participant’s termination of employment or service, until and including the earliest to occur of
(i) the date which is three (3) months (or such other period as set forth in the Award Agreement) after the effective date of such holder’s termination of employment or service and (ii) the expiration date of the term of such
Option; provided that, unless otherwise specified in the Award Agreement, if the Participant’s employment with or service to the Company terminates by reason of death or Disability, each Option held by such Participant shall be exercisable, to
the extent that such Option is exercisable on the effective date of such Participant’s termination of employment or service, until and including the earliest to occur of (i) the date which is six (6) months (or such other period as
set forth in the Award Agreement) after the effective date of such holder’s termination of employment or service and (ii) the expiration date of the term of such Option. 
  
 6.9    Notification of Disqualifying Disposition.    If any Participant shall make any
disposition of Shares issued pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten
(10) days thereof. 
  
 6.10    No Other Feature
of Deferral.    No Option granted pursuant to this Plan shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the later of the exercise or disposition of the
Option, or the time the stock acquired pursuant to the exercise of the Option first becomes substantially vested. 
  

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Article 7. Stock Appreciation Rights 
  
 7.1    Grant of SARs.    Subject to the terms and conditions of this Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee.
However, an Employee who is employed by an Affiliate and/or Subsidiary may only be granted SARs to the extent the Affiliate and/or Subsidiary is: (i) part of the Company’s controlled group of corporations, or (ii) a trade or business
under common control, as of the date of grant as determined within the meaning of Code Section 414(b) or 414(c) and substituting for this purpose ownership of at least fifty percent (50%) of the Affiliate and/or Subsidiary to
determine the members of the controlled group of corporations and the entities under common control. 
  
 Subject to the terms and conditions of this Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and,
consistent with the provisions of this Plan, in determining the terms and conditions pertaining to such SARs. 
  
 The Grant Price for each grant of an SAR shall be determined by the Committee and shall be specified in the Award Agreement; provided, however, the Grant Price on
the date of grant must be at least equal to one hundred percent (100%) of the FMV of the Shares as determined on the date of grant. 
  
 7.2    SAR Agreement.    Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price,
the term of the SAR, and such other provisions as the Committee shall determine. 
  
 7.3    Term of SAR.    The term of an SAR granted under this
Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary date of its grant. Notwithstanding the foregoing, for SARs granted to Participants outside the United States, the Committee has the authority to grant
SARs that have a term greater than ten (10) years. 
  
 7.4    Exercise of SARs.    SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes. 
  
 7.5    Settlement of SARs.    Upon the
exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: 
  

	 	(a)	The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price; by 

  

	 	(b)	The number of Shares with respect to which the SAR is exercised. 

  
 At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other manner approved by the
Committee in its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR. 
  

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 7.6    Termination of Employment.    Each Award Agreement shall set
forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be.
Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to this Plan, and may reflect distinctions based
on the reasons for termination. Unless otherwise specified in the Award Agreement, if the employment with or service to the Company of the Participant terminates, each SAR held by such Participant shall be exercisable, to the extent that such SAR is
exercisable, on the effective date of such Participant’s termination of employment or service, until and including the earliest to occur of (i) the date which is three (3) months (or such other period as set forth in the Award
Agreement) after the effective date of such holder’s termination of employment or service and (ii) the expiration date of the term of such SAR; provided that, unless otherwise specified in the Award Agreement, if the Participant’s
employment with or service to the Company terminates by reason of death or Disability, each SAR held by such Participant shall be exercisable, to the extent that such SAR is exercisable on the effective date of such Participant’s termination of
employment or service, until and including the earliest to occur of (i) the date which is six (6) months (or such other period as set forth in the Award Agreement) after the effective date of such holder’s termination of employment or
service and (ii) the expiration date of the term of such SAR. 
  
 7.7    Other Restrictions.    The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of an SAR granted pursuant to this Plan as it may deem
advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of an SAR for a specified period of time. 
  
 7.8    No Other Feature of
Deferral.    No SAR granted pursuant to this Plan shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise of the SAR. 
  
 
Article 8. Restricted Stock and Restricted Stock Units 
  
 8.1    Grant of Restricted Stock or Restricted Stock Units.    Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Shares
of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded to the Participant on the date
of grant. 
  
 8.2    Restricted Stock or Restricted
Stock Unit Agreement.    Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the
number of Restricted Stock Units granted, and such other provisions as the Committee shall determine. 
  

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 8.3    Other Restrictions.    The Committee shall impose such other
conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to this Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each
Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions and/or
restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such
Restricted Stock or Restricted Stock Units. 
  
 To the extent deemed
appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or
lapse. 
  
 Except as otherwise provided in this Article 8 or in the
applicable Award Agreement, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including
satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine. 
  
 8.4    Certificate Legend.    In
addition to any legends placed on certificates pursuant to Section 8.3, each certificate representing Shares of Restricted Stock granted pursuant to this Plan may bear a legend such as the following or as otherwise determined by the Committee
in its sole discretion: 
  
 The sale or transfer of Shares of stock
represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the El Paso Electric Company 2007 Long-Term Incentive Plan, and in the associated Award
Agreement. A copy of this Plan and such Award Agreement may be obtained from El Paso Electric Company. 
  
 8.5    Voting Rights.    Unless otherwise determined by the Committee and set forth in a Participant’s Award
Agreement, or to the extent permitted or required by law, Participants holding Shares of Restricted Stock granted hereunder shall be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A
Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. 
  

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 8.6    Termination of Employment.    Each Award Agreement shall set
forth the extent to which the Participant shall have the right to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or
its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock
or Restricted Stock Units issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination. 
  
 8.7    Section 83(b) Election.    The Committee may provide in an Award Agreement that the Award of Restricted
Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Code Section 83(b). If a Participant makes an election pursuant to Code Section 83(b) concerning a Restricted Stock
Award, the Participant shall be required to file promptly a copy of such election with the Company. 
  
 
Article 9. Performance Units/Performance Shares 
  
 9.1    Grant of Performance Units/Performance Shares.    Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Performance Units and/or
Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine. 
  
 9.2    Value of Performance Units/Performance Shares.    Each Performance Unit shall have an initial value that
is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its discretion which, depending on
the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Participant. 
  
 9.3    Earning of Performance Units/Performance Shares.    Subject to the terms of this Plan, after the
applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout on the value and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to
be determined as a function of the extent to which the corresponding performance goals have been achieved. 
  
 9.4    Form and Timing of Payment of Performance Units/Performance Shares.    Payment of earned Performance
Units/Performance Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Units/Performance Shares in
the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period.
Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the
Award. 
  

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 9.5    Termination of Employment.    Each Award Agreement shall set
forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its
Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Units or
Performance Shares issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination. 
  
 
Article 10. Cash-Based Awards and Other Stock-Based Awards 
  
 10.1    Grant of Cash-Based Awards.    Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to
Participants in such amounts and upon such terms as the Committee may determine. 
  
 10.2    Other Stock-Based Awards.    The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the
grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of
amounts based on the value of Shares, and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States. 
  
 10.3    Value of Cash-Based and Other Stock-Based
Awards.    Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by
the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out
to the Participant will depend on the extent to which the performance goals are met. 
  

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 10.4    Payment of Cash-Based Awards and Other Stock-Based
Awards.    Payment, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines. 
  
 10.5    Termination of
Employment.    The Committee shall determine the extent to which the Participant shall have the right to receive Cash-Based Awards or Other Stock-Based Awards following termination of the Participant’s employment with or
provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in an agreement entered into with each Participant,
need not be uniform among all Awards of Cash-Based Awards or Other Stock-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination. 
  
 
Article 11. Transferability of Awards 
  
 11.1    Transferability.    Except as provided in Section 11.2 below, during a Participant’s lifetime, his or her Awards shall be exercisable only by the Participant. Awards shall not
be transferable other than by will or the laws of descent and distribution; no Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind; and any purported transfer in violation hereof shall be null and void. The
Committee may establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable or Shares deliverable in the event of, or following, the Participant’s death, may be provided. 

 
 11.2    Committee Action.    The
Committee may, in its discretion, determine that notwithstanding Sections 11.1 and 11.3, any or all Awards (other than ISOs) shall be transferable to and exercisable by such transferees, and subject to such terms and conditions, as the Committee may
deem appropriate; provided, however, no Award may be transferred for value (as defined in the General Instructions to Form S-8). 
  
 11.3    Domestic Relations Orders.    Without limiting the generality of Section 11.1, no domestic relations
order purporting to authorize a transfer of an Award shall be recognized as valid. 
  
 
Article 12. Performance Measures 
  
 12.1    Performance Measures.    The performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be
limited to the following Performance Measures: 
  

	 	(a)	Net earnings or net income (before or after taxes); 

  

	 	(b)	Earnings per share; 

  

	 	(c)	Net sales or revenue growth; 

  

	 	(d)	Net operating profit; 

  

	 	(e)	Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue); 

  

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	 	(f)	Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment); 

  

	 	(g)	Earnings before or after taxes, interest, depreciation, and/or amortization; 

  

	 	(h)	Gross or operating margins; 

  

	 	(i)	Productivity ratios; 

  

	 	(j)	Share price (including, but not limited to, growth measures and total shareholder return); 

  

	 	(k)	Expense targets; 

  

	 	(l)	Margins; 

  

	 	(m)	Operating efficiency; 

  

	 	(n)	Market share; 

  

	 	(o)	Customer satisfaction; 

  

	 	(p)	Working capital targets; and 

  

	 	(q)	Economic value added or EVA® (net operating profit after tax minus the sum of capital multiplied by the cost of capital). 

  
 Any Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company,
Subsidiary, and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the
Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (j) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award
based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 12. 
  
 12.2    Evaluation of Performance.    The Committee may provide in any such Award that any evaluation of performance
may include or exclude any of the following events that occur during a Performance Period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other
laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion
and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses. To the extent
such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility. 
  
 12.3    Adjustment of Performance-Based Compensation.    Awards that are intended to
qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis, or any combination as the Committee determines. 

 

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 12.4    Committee Discretion.    In the event that applicable tax
and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining
shareholder approval provided the exercise of such discretion does not violate Code Section 409A. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based
Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 12.1. 
  
 
Article 13. Non-employee Director Awards 
  
 13.1    Eligibility.    Each Non-employee Director shall receive a Restricted Stock Award in accordance with this Article 13. 
  
 13.2    Restricted Stock Awards.    Unless the Board determines otherwise, on the date
of each annual meeting of shareholders of the Company, the following Restricted Stock Awards shall be made to each person who is a Non-employee Director immediately after such meeting of shareholders: 
  

	 	(a)	Each Non-employee Director, other than the Chairman of the Board and the Vice Chairman of the Board, shall receive a Restricted Stock Award of three thousand five hundred
(3,500) Shares; 

  

	 	(b)	The Vice Chairman of the Board shall receive a Restricted Stock Award equal to the sum of (i) three thousand five hundred (3,500) Shares and (ii) an amount of Shares equal
to one hundred thousand dollars ($100,000) divided by the closing price of the stock on the date of grant; and 

  

	 	(c)	The Chairman of the Board shall receive a Restricted Stock Award of sixteen thousand (16,000) Shares less the number of Shares awarded the Vice Chairman pursuant to
Section 13.2(b)(ii). 

  
 If a person first becomes a
Non-employee Director (other than through a termination of employment) on a date other than an annual meeting of shareholders of the Company, the above amounts shall be prorated based on the portion of the year for which services are provided.

  
 13.3    Period of Restriction for
Awards.    Unless the Board determines otherwise, and unless the Restricted Stock Awards vest earlier pursuant to Article 17 herein, Restricted Stock Awards shall become one hundred percent (100%) vested on the date of
the first anniversary of the date of grant, provided that the Non-employee Director continues service on the Board through such first anniversary. 
  

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 13.4    Changes to Non-employee Director Awards.    The Board shall
have full discretion, without subsequent shareholder approval, to change grant practices for Non-employee Directors, including but not limited to the persons eligible to receive Awards, the size of the Awards, the form of the Awards, and the terms
and conditions of such Awards. 
  
 
Article 14. Dividend Equivalents 
  
 Any
Participant selected by the Committee may be granted dividend equivalents based on the dividends declared on Shares that are subject to any Award, to be credited as of dividend payment dates during the period between the date the Award is granted
and the date the Award is exercised, vests, or expires, as determined by the Committee. Such dividend equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined
by the Committee; provided, however, that no dividend equivalents may be granted on any Award of stock Options or SARs. 
  
 
Article 15. Beneficiary Designation 
  
 Each
Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in case of his death before he receives any or all of such
benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the
Participant’s lifetime. In the absence of any such beneficiary designation, benefits remaining unpaid or rights remaining unexercised at the Participant’s death shall be paid to or exercised by the Participant’s executor,
administrator, or legal representative. 
  
 
Article 16. Rights of Participants 
  
 16.1    Employment.    Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries to terminate any
Participant’s employment or service on the Board or to the Company at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his employment or service as a Director for any specified period of
time. 
  
 Neither an Award nor any benefits arising under this Plan shall
constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject to Articles 3 and 18, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion
of the Committee without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries. 
  

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 16.2    Participation.    No individual shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. 
  
 16.3    Rights as a Shareholder.    Except as otherwise provided herein, a Participant shall have none of the rights
of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares. 
  
 
Article 17. Change in Control 
  
 Notwithstanding any other provision of this Plan to the contrary, the provisions of this Article 17 shall apply in the event of a Change in Control, unless otherwise determined by the Committee in connection with the grant of an Award
as reflected in the applicable Award Agreement. 
  

	 	(a)	All outstanding Options and Stock Appreciation Rights shall become immediately vested and exercisable; 

  

	 	(b)	All Restricted Stock and Restricted Stock Units shall become immediately vested and payable; and 

  

	 	(c)	The Performance Period applicable to Performance Shares and Performance Units shall end upon the occurrence of a Change in Control in the manner and on the date determined by the Committee in
its sole discretion. The performance goals associated with such awards shall be measured based on performance achieved through the end of such shortened Performance Period and such awards shall become vested and payable on a prorated basis to
reflect the shortened Performance Period, with the remaining portion of the awards terminating. 

  
 The Committee may, in its sole discretion, determine that any or all outstanding Awards granted under the Plan, whether or not exercisable, will be canceled and
terminated and that in connection with such cancellation and termination the holder of such Award may receive for each Share of common stock subject to such Awards a cash payment (or the delivery of shares of stock, other securities or a combination
of cash, stock and securities equivalent to such cash payment) equal to the difference, if any, between the consideration received by shareholders of the Company in respect of a Share of common stock in connection with such transaction and the
purchase price per share, if any, under the Award multiplied by the number of Shares of common stock subject to such Award; provided that if such product is zero or less or to the extent that the Award is not then exercisable, the Awards may be
canceled and terminated without payment therefore. 
  

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Article 18. Amendment, Modification, Suspension, and Termination 
  
 18.1    Amendment, Modification, Suspension, and Termination.    Subject to Section 18.3, the Committee may, at
any time and from time to time, alter, amend, modify, suspend, or terminate this Plan and any Award Agreement in whole or in part; provided, however, that without the prior approval of the Company’s shareholders and except as provided
in Section 4.4, Options or SARs issued under this Plan will not be repriced, replaced (with any other Awards), or regranted through cancellation or by lowering the Option Price of a previously granted Option or the Grant Price of a previously
granted SAR nor will any outstanding underwater Options or SARs under the Plan be purchased for cash, and no amendment of this Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange
rule. 
  
 18.2    Adjustment of Awards Upon the
Occurrence of Certain Unusual or Nonrecurring Events.    The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Committee as to the foregoing adjustments, if any,
shall be conclusive and binding on Participants under this Plan. 
  
 18.3    Awards Previously Granted.    Notwithstanding any other provision of this Plan to the contrary (other than Section 18.4), no termination, amendment, suspension, or modification of
this Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under this Plan without the written consent of the Participant holding such Award. 
  
 18.4    Amendment to Conform to
Law.    Notwithstanding any other provision of this Plan to the contrary, the Board of Directors may amend the Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the
purpose of conforming the Plan or an Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A), and to the administrative regulations and rulings promulgated
thereunder. 
  

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Article 19. Withholding 
  
 19.1    Tax Withholding.    The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy
federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan. 
  
 19.2    Share Withholding.    With respect to withholding required upon the exercise of
Options or SARs, upon the lapse of restrictions on Restricted Stock and Restricted Stock Units, or upon the achievement of performance goals related to Performance Shares or any other taxable event arising as a result of an Award granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the
minimum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made in writing, and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole
discretion, deems appropriate. 
  
 
Article 20. Successors 
  
 All obligations
of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of
all or substantially all of the business and/or assets of the Company. 
  
 
Article 21. General Provisions 
  
 21.1    Forfeiture Events.    The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of
employment for cause, termination of the Participant’s provision of services to the Company, Affiliate, and/or Subsidiary, violation of material Company, Affiliate, and/or Subsidiary policies, breach of noncompetition, confidentiality, or other
restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company, its Affiliates, and/or its Subsidiaries. 
  
 21.2    Legend.    The certificates for
Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares. 
  
 21.3    Gender and Number.    Except where otherwise indicated by the context, any masculine term used herein also
shall include the feminine, the plural shall include the singular, and the singular shall include the plural. 
  

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 21.4    Severability.    In the event any provision of this Plan
shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 

 
 21.5    Requirements of Law.    The
granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 
  
 21.6    Delivery of Title.    The
Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan prior to: 
  

	 	(a)	Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and 

  

	 	(b)	Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary
or advisable. 

  
 21.7    Inability to
Obtain Authority.    The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of
any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 
  
 21.8    Investment Representations.    The Committee may require any individual
receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares. 
  
 21.9    Employees Based Outside of the United
States.    Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees or Directors,
the Committee, in its sole discretion, shall have the power and authority to: 
  

	 	(a)	Determine which Affiliates and Subsidiaries shall be covered by this Plan. 

  

	 	(b)	Determine which Employees and/or Directors outside the United States are eligible to participate in this Plan. 

  

	 	(c)	Modify the terms and conditions of any Award granted to Employees and/or Directors outside the United States to comply with applicable foreign laws. 

  

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	 	(d)	Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and
procedures established under this Section 21.9 by the Committee shall be attached to this Plan document as appendices. 

  

	 	(e)	Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.

  
 Notwithstanding the above, the Committee may not take any
actions hereunder, and no Awards shall be granted, that would violate applicable law. 
  
 21.10    Uncertificated Shares.    To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected
on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange. 
  
 21.11    Unfunded Plan.    Participants shall have no right, title, or interest whatsoever in or to any investments
that the Company, and/or its Subsidiaries, and/or its Affiliates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a
trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any individual acquires a right to receive payments from the Company, its
Subsidiaries, and/or its Affiliates under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. All payments to be made hereunder shall be paid
from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth
in this Plan. 
  
 21.12    No Fractional
Shares.    No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or
whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated. 
  
 21.13    Retirement and Welfare Plans.    Neither Awards made under this Plan nor Shares or cash paid pursuant to
such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s or Affiliate’s retirement plans (both qualified and non-qualified) or
welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit. 
  

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Table of Contents

 21.14    Deferred Compensation.    It is intended that any Award
made under this Plan that results in the deferral of compensation (as defined under Code Section 409A) complies with the requirements of Code Section 409A. 
  
 21.15    Nonexclusivity of this Plan.    The adoption of this Plan shall not be
construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant. 
  
 21.16    No Constraint on Corporate Action.    Nothing in this Plan shall be construed
to: (i) limit, impair, or otherwise affect the Company’s or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (ii) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or
appropriate. 
  
 21.17    Governing
Law.    The Plan and each Award Agreement shall be governed by the laws of the state of Texas, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan
to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Texas, to resolve
any and all issues that may arise out of or relate to this Plan or any related Award Agreement. 
  
 21.18    Indemnification.    Subject to requirements of Texas law, each individual who is or shall have been a member
of the Board, or a Committee appointed by the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under this Plan and against and from any and all amounts paid by him or her
in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle and defend it on his/her own behalf, unless such loss, cost, liability, or expense is a result of his/her own willful misconduct or except as expressly provided by statute.

  
 The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such individuals may be entitled under the Company’s Articles of Incorporation, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

  

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