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EL PASO ENERGY CORPORATION
STRATEGIC STOCK PLAN
EFFECTIVE AS OF JUNE 19, 1996
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TABLE OF CONTENTS
SECTION 1 PURPOSES........................................1
SECTION 2 DEFINITIONS 1
2.1 Beneficiary.....................................1
2.2 Board of Directors..............................1
2.3 Cause...........................................1
2.4 Change in Control...............................2
2.5 Code............................................3
2.6 Common Stock....................................3
2.7 Company.........................................3
2.8 Exchange Act....................................3
2.9 Fair Market Value...............................3
2.10 Good Reason.....................................4
2.11 Management Committee............................4
2.12 Option..........................................5
2.13 Option Price....................................5
2.14 Participant.....................................5
2.15 Performance Goals...............................5
2.16 Performance Period..............................5
2.17 Permanent Disability or Permanently Disabled....5
2.18 Plan Administrator..............................6
2.19 Restricted Stock................................6
2.20 Rule 16b-3......................................6
2.21 Section 16 Insider..............................6
2.22 Subsidiary......................................6
2.23 Total Shareholder Return........................6
SECTION 3 ADMINISTRATION..................................7
SECTION 4 ELIGIBILITY.....................................7
SECTION 5 SHARES AVAILABLE FOR THE PLAN...................8
SECTION 6 STOCK OPTIONS...................................8
SECTION 7 STOCK APPRECIATION RIGHTS......................12
SECTION 8 LIMITED STOCK APPRECIATION RIGHTS..............14
SECTION 9 RESTRICTED STOCK...............................15
SECTION 10 REGULATORY APPROVALS AND LISTING...............16
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Strategic Stock Plan
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SECTION 11 EFFECTIVE DATE AND TERM OF PLAN................17
SECTION 12 GENERAL PROVISIONS.............................17
SECTION 13 COMPLIANCE WITH RULE 16b-3.....................19
SECTION 14 AMENDMENT, TERMINATION OR DISCONTINUANCE
OF THE PLAN....................................20
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Strategic Stock Plan
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EL PASO ENERGY CORPORATION
STRATEGIC STOCK PLAN
SECTION 1 PURPOSES
The purposes of the El Paso Energy Corporation Strategic Stock Plan (the
"Plan") are to promote the interests of the Company (as defined below) and its
stockholders by strengthening its ability to attract and retain officers and
key management employees in the employ of the Company and its Subsidiaries (as
defined below) by furnishing suitable recognition of their ability and industry
which contributes materially to the success of the Company in strategic
transactions and to align the interests and efforts of the Company's officers
and key management employees to the long-term interests of the Company's
stockholders. The Plan provides for the grant of stock options, limited stock
appreciation rights, stock appreciation rights and restricted stock in
accordance with the terms and conditions set forth below.
SECTION 2 DEFINITIONS
Unless otherwise required by the context, the following terms when used in
the Plan shall have the meanings set forth in this Section 2:
2.1 BENEFICIARY
The person or persons designated by the Participant pursuant to Section
6.2(f) of this Plan to whom payments are to be paid pursuant to the terms of
the Plan in the event of the Participant's death.
2.2 BOARD OF DIRECTORS
The Board of Directors of the Company.
2.3 CAUSE
The Company may terminate the Participant's employment for Cause. A
termination for Cause is a termination evidenced by a resolution adopted in
good faith by the Management Committee (or by two-thirds (2/3) of the Board of
Directors in the case of a Management Committee member) that the Participant
(i) willfully and continually failed to substantially perform the Participant's
duties with the Company (other than a failure resulting from the Participant's
incapacity due to physical or mental illness) which failure continued for a
period of at least thirty (30) days after a written notice of demand for
substantial performance has been delivered to the Participant specifying the
manner in which the Participant has failed to substantially perform or (ii)
willfully engaged in conduct which is demonstrably and materially injurious to
the Company, monetarily or otherwise; provided, however, that no termination of
the Participant's employment shall be for Cause
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as set forth in clause (ii) above until (A) there shall have been delivered to
the Participant a copy of a written notice setting forth that the Participant
was guilty of the conduct set forth in clause (ii) above and specifying the
particulars thereof in detail and (B) the Participant shall have been provided
an opportunity to be heard by the Board of Directors (with the assistance of
the Participant's counsel if the Participant so desires). No act, nor failure
to act, on the Participant's part shall be considered "willful" unless the
Participant has acted, or failed to act, with an absence of good faith and
without a reasonable belief that the Participant's action or failure to act was
in the best interest of the Company. Notwithstanding anything contained in the
Plan to the contrary, no failure to perform by the Participant after notice of
termination is given by the Participant shall constitute Cause.
2.4 CHANGE IN CONTROL
As used in the Plan, a Change in Control shall be deemed to occur (i) if
any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting power of the
Company's then outstanding securities, (ii) upon the first purchase of the
Common Stock pursuant to a tender or exchange offer (other than a tender or
exchange offer made by the Company), (iii) upon the approval by the Company's
stockholders of a merger or consolidation, a sale or disposition of all or
substantially all of the Company's assets or a plan of liquidation or
dissolution of the Company, or (iv) if, during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors cease for any reason to constitute at least a majority
thereof, unless the election or nomination for the election by the Company's
stockholders of each new director was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who were directors at the beginning
of the period. Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur if the Company either merges or consolidates with or into
another company or sells or disposes of all or substantially all of its assets
to another company, if such merger, consolidation, sale or disposition is in
connection with a corporate restructuring wherein the stockholders of the
Company immediately before such merger, consolidation, sale or disposition own,
directly or indirectly, immediately following such merger, consolidation, sale
or disposition at least eighty percent (80%) of the combined voting power of
all outstanding classes of securities of the company resulting from such merger
or consolidation, or to which the Company sells or disposes of its assets, in
substantially the same proportion as their ownership in the Company immediately
before such merger, consolidation, sale or disposition. The acquisition and
merger of Tenneco Inc. shall not constitute a Change in Control under this
Plan.
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2.5 CODE
The Internal Revenue Code of 1986, as amended and in effect from time to
time, and the temporary or final regulations of the Secretary of the U.S.
Treasury adopted pursuant to the Code.
2.6 COMMON STOCK
The Common Stock of the Company, $3 par value per share, or such other
class of shares or other securities as may be applicable pursuant to the
provisions of Section 5.
2.7 COMPANY
El Paso Energy Corporation or El Paso Natural Gas Company, which ever
entity is publicly held.
2.8 EXCHANGE ACT
The Securities Exchange Act of 1934, as amended.
2.9 FAIR MARKET VALUE
As applied to a specific date, Fair Market Value shall be deemed to be the
mean between the highest and lowest quoted selling prices at which Common Stock
is sold on such date as reported in the NYSE-Composite Transactions by The Wall
Street Journal on such date, or if no Common Stock was traded on such date, on
the next preceding day on which Common Stock was so traded. Notwithstanding
the foregoing, upon the exercise,
(a) during the thirty (30) day period following a Change in Control,
of a limited stock appreciation right or stock appreciation right granted
in connection with an option more than six (6) months prior to a Change
in Control, or
(b) during the seven (7) month period following a Change in Control,
of a limited stock appreciation right or of a stock appreciation right
granted in connection with an option less than six (6) months prior to a
Change in Control,
On or after a Change in Control, Fair Market Value on the date of
exercise shall be deemed to be the greater of (i) the highest price per
share of Common Stock as reported in the NYSE-Composite Transactions by
The Wall Street Journal during the sixty (60) day period ending on the
day preceding the date of exercise of the stock appreciation right or
limited stock appreciation right, as the case may be, and (ii) if the
Change in Control is one described in clause (ii) or (iii) of Section
2.4, the highest price per share paid for Common Stock in connection with
such Change in Control.
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2.10 GOOD REASON
Good Reason shall mean the occurrence of any of the following events or
conditions, after a Change in Control:
(a) a change in the Participant's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Participant's reasonable judgment, represents a substantial reduction of
the status, title, position or responsibilities as in effect immediately
prior thereto; the assignment to the Participant of any duties or
responsibilities which, in the Participant's reasonable judgment, are
inconsistent with such status, title, position or responsibilities; or
any removal of the Participant from or failure to reappoint or reelect
the Participant to any of such positions, except in connection with the
termination of the Participant's employment for Cause, for Permanent
Disability or as a result of his or her death, or by the Participant
other than for Good Reason;
(b) a reduction in the Participant's annual base salary;
(c) the Company's requiring the Participant (without the consent of
the Participant) to be based at any place outside a thirty-five (35) mile
radius of his or her place of employment prior to a Change in Control,
except for reasonably required travel on the Company's business which is
not materially greater than such travel requirements prior to the Change
in Control;
(d) the failure by the Company to (i) continue in effect any
material compensation or benefit plan in which the Participant was
participating at the time of the Change in Control or (ii) provide the
Participant with compensation and benefits at least equal (in terms of
benefit levels and/or reward opportunities) to those provided for under
each employee benefit plan, program and practice as in effect immediately
prior to the Change in Control (or as in effect following the Change in
Control, if greater);
(e) any material breach by the Company of any provision of the Plan;
or
(f) any purported termination of the Participant's employment for
Cause by the Company which does not otherwise comply with the terms of
the Plan.
2.11 MANAGEMENT COMMITTEE
A committee consisting of the Chief Executive Officer and such other
senior officers as the Chief Executive Officer shall designate. The Chief
Executive Officer may
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from time to time remove members from, or add members to, the Management
Committee.
2.12 OPTION
An option which is not intended to meet the requirements of an Incentive
Stock Option as defined in Section 422 of the Code.
2.13 OPTION PRICE
The price per share of Common Stock at which each option is exercisable.
2.14 PARTICIPANT
An eligible employee to whom an option, limited stock appreciation right,
stock appreciation right or Restricted Stock is granted under the Plan as set
forth in Section 4.
2.15 PERFORMANCE GOALS
The Plan Administrator shall establish one or more performance goals
("Performance Goals") for each Performance Period in writing. Each Performance
Goal selected for a particular Performance Period shall be a relative or
absolute measure of any one or more of the following (or such other measures as
the Plan Administrator may determine): Total Shareholder Return, operating
income, pre-tax profit, earnings per share, cash flow, return on capital,
return on equity, return on net assets, net income, debt reduction, safety,
return on investment or revenues. The foregoing terms shall have the same
meaning as used in the Company's financial statements, or if the terms are not
used in the Company's financial statements, they shall have the meaning
generally applied pursuant to general accepted accounting principles, or as
used in the industry, as applicable.
2.16 PERFORMANCE PERIOD
That period of time during which Performance Goals are measured to
determine the vesting or granting of options, limited stock appreciation
rights, stock appreciation rights or Restricted Stock, as the Plan
Administrator may determine.
2.17 PERMANENT DISABILITY OR PERMANENTLY DISABLED
A Participant shall be deemed to have become Permanently Disabled for
purposes of the Plan if the Plan Administrator shall find upon the basis of
medical evidence satisfactory to the Plan Administrator that the Participant is
totally disabled, whether due to physical or mental condition, so as to be
prevented from engaging in further employment by the Company or any of its
Subsidiaries, and that such disability will be permanent and continuous during
the remainder of the Participant's life; provided, that
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with respect to Section 16 Insiders such determination shall be made by the
Board of Directors, or the Compensation Committee thereof, if required.
2.18 PLAN ADMINISTRATOR
The Management Committee (or the Board of Directors or a committee thereof
in the case of Section 16 Insiders, if required), pursuant to Section 3, shall
administer the Plan.
2.19 RESTRICTED STOCK
Common Stock granted under the Plan that is subject to the requirements of
Section 9 and such other restrictions as the Plan Administrator deems
appropriate.
2.20 RULE 16B-3
Rule 16b-3 of the General Rules and Regulations under the Exchange Act.
2.21 SECTION 16 INSIDER
Any person who is selected by the Plan Administrator to receive options,
limited stock appreciation rights, stock appreciation rights and/or Restricted
Stock pursuant to the Plan and who is subject to the requirements of Section 16
of the Exchange Act, and the rules and regulations promulgated thereunder.
2.22 SUBSIDIARY
An entity that is designated by the Plan Administrator as a subsidiary for
purposes of the Plan and that is a corporation (or other form of business
association that is treated as a corporation for tax purposes) of which shares
(or other ownership interests) having more than fifty percent (50%) of the
voting power are owned or controlled, directly or indirectly, by the Company so
as to qualify as a "subsidiary corporation" (within the meaning of Section
424(f) of the Code).
2.23 TOTAL SHAREHOLDER RETURN
The sum of (i) the appreciation or depreciation in the price of a share of
a company's common stock, and (ii) the dividends and other distributions paid
and/or declared during the applicable Performance Period, expressed as a
percentage basis of the Fair Market Value of such share on the first day of the
applicable Performance Period, as calculated in a manner determined by the Plan
Administrator.
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SECTION 3 ADMINISTRATION
3.1 The Plan shall be administered by the Management Committee, unless the
Board of Directors shall otherwise determine the administrator of the Plan.
3.2 Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have full authority to construe and interpret the
Plan, to establish, amend and rescind rules and regulations relating to the
Plan, to select persons eligible to participate in the Plan, to grant options,
limited stock appreciation rights, stock appreciation rights and Restricted
Stock thereunder, to administer the Plan, to make recommendations to the Board
of Directors, to take all such steps and make all such determinations in
connection with the Plan and the options, limited stock appreciation rights,
stock appreciation rights and Restricted Stock granted thereunder as it may
deem necessary or advisable, which determination shall be final and binding
upon all Participants. The Plan Administrator shall cause the Company at its
expense to take any action related to the Plan which may be required or
necessary to comply with the provisions of any federal or state law or any
regulations issued thereunder.
3.3 Each member of the Management Committee acting as Plan Administrator,
while serving as such, shall be considered to be acting in his or her capacity
as an officer of the Company. Members of the Management Committee acting under
the Plan shall be fully protected in relying in good faith upon the advice of
counsel and shall incur no liability except for gross negligence or willful
misconduct in the performance of their duties.
SECTION 4 ELIGIBILITY
To be eligible for selection by the Plan Administrator to participate in
the Plan, an individual must be an officer or key management employee of the
Company, or of any Subsidiary, as of the date on which the Plan Administrator
grants to such individual an option, limited Stock appreciation right, stock
appreciation right or Restricted Stock or a person who, in the judgment of the
Plan Administrator, holds a position of responsibility and is able to
contribute substantially to the Company's continued success. Notwithstanding
the foregoing, the Plan Administrator may make a grant under this Plan to
individuals who are not officers or key management employees, provided that the
effectiveness of such grant shall be conditioned upon such individual becoming
an officer or key management employee of the Company or any Subsidiary.
Members of the Board of Directors of the Company who are full-time salaried
officers shall be eligible to participate. Members of the Board of Directors
who are not employees are not eligible to participate in this Plan.
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SECTION 5 SHARES AVAILABLE FOR THE PLAN
5.1 Subject to Section 5.2, the maximum number of shares that may be
issued for which options, limited stock appreciation rights, stock appreciation
rights and Restricted Stock may at any time be granted under the Plan is one
million (1,000,000) shares of Common Stock, from shares held in the Company's
treasury or out of the authorized but unissued shares of the Company, or partly
out of each, as shall be determined by the Plan Administrator.
5.2 In the event of a recapitalization, stock split, stock dividend,
exchange of shares, merger, reorganization, change in corporate structure or
shares of the Company or similar event, the Board of Directors, upon the
recommendation of the Plan Administrator, may make appropriate adjustments in
the number of shares authorized for the Plan and, with respect to outstanding
options, limited stock appreciation rights, stock appreciation rights, and
Restricted Stock, the Plan Administrator may make appropriate adjustments in
the number of shares and the Option Price.
SECTION 6 STOCK OPTIONS
6.1 Options may be granted to eligible employees in such number, and at
such times during the term of the Plan as the Plan Administrator shall
determine, the Plan Administrator taking into account the duties of the
respective employees, their present and potential contributions to the success
of the Company, and such other factors as the Plan Administrator shall deem
relevant in accomplishing the purposes of the Plan. The granting of an option
shall take place when the Plan Administrator by resolution, written consent or
other appropriate action determines to grant such an option to a particular
Participant at a particular price. Each option shall be evidenced by a written
instrument delivered by or on behalf of the Company containing provisions not
inconsistent with the Plan.
6.2 All options granted under the Plan shall be subject to the following
terms and conditions:
(a) Option Price
The Option Price shall be the Fair Market Value of the Common Stock
on the date the option is granted, unless otherwise determined by the
Plan Administrator.
(b) Duration of Options
Options shall be exercisable at such time and under such conditions
as set forth in the option grant, but in no event shall any option be
exercisable later than the tenth anniversary of the date of its grant.
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(c) Exercise of Options
Subject to Section 6.2(j), a Participant may not exercise an option
until the Participant has completed one (1) year of continuous employment
with the Company or any of its Subsidiaries from and including the date
on which the option is granted, or such shorter or longer period as the
Plan Administrator may determine in a particular case. This requirement
is waived in the event of death or Permanent Disability of a Participant
before such period of continuous employment is completed and may be
waived or modified in the agreement evidencing the option or by written
notice to the Participant from the Plan Administrator. Thereafter,
shares of Common Stock covered by an option may be purchased at one time
or in such installments over the balance of the option period as may be
provided in the option grant. Any shares not purchased on the applicable
installment date may be purchased thereafter at any time prior to the
final expiration of the option. To the extent that the right to purchase
shares has accrued thereunder, options may be exercised from time to time
by written notice to the Company setting forth the number of shares with
respect to which the option is being exercised.
(d) Payment
The purchase price of shares purchased under options shall be paid
in full to the Company upon the exercise of the option by delivery of
consideration equal to the product of the Option Price and the number of
shares purchased (the "Purchase Price"). Such consideration may be
either (i) in cash or (ii) at the discretion of the Plan Administrator,
in Common Stock already owned by the Participant for at least six (6)
months, or any combination of cash and Common Stock. The Fair Market
Value of such Common Stock as delivered shall be valued as of the day
prior to delivery. The Plan Administrator can determine at the time the
option is granted that additional forms of payment will be permitted. To
the extent permitted by the Plan Administrator and applicable laws and
regulations (including, but not limited to, federal tax and securities
laws, regulations and state corporate law), an option may also be
exercised by delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds to pay the Purchase Price. A
Participant shall have none of the rights of a stockholder until the
shares of Common Stock are issued to the Participant.
If specifically authorized in the option grant, a Participant may
elect to pay all or a portion of the Purchase Price by having shares of
Common Stock with a Fair Market Value equal to all or a portion of the
Purchase Price be withheld from the shares issuable to the Participant
upon the exercise of the option. The Fair Market Value of such Common
Stock as is withheld shall be determined as of the same day as the
exercise of the option. In the event an option grant to a Section 16
Insider provides that the Purchase Price may be paid in whole or in part
by
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having shares with a Fair Market Value equal to all or a portion of the
Purchase Price withheld from the shares issuable to the Participant upon
the exercise of the option, the following restrictions shall apply. To
the extent required for compliance with Rule 16b-3, the withholding of
shares issuable upon the exercise of an option to pay the Purchase Price
by a Section 16 Insider must be approved by the Plan Administrator and
must be made (x) pursuant to an irrevocable election made six (6) months
in advance of the transaction, (y) during the period beginning on the
third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the
Company and ending on the twelfth business day following such date, or
(z) otherwise in accordance with Rule 16b-3 and interpretations
thereunder.
(e) Restrictions
The Plan Administrator shall determine and reflect in the option
grant, with respect to each option, the nature and extent of the
restrictions, if any, to be imposed on the shares of Common Stock which
may be purchased thereunder, including, but not limited to, restrictions
on the transferability of such shares acquired through the exercise of
such options for such periods as the Plan Administrator may determine
and, further, that in the event a Participant's employment by the
Company, or a Subsidiary, terminates during the period in which such
shares are nontransferable, the Participant shall be required to sell
such shares back to the Company at such prices as the Plan Administrator
may specify in the option.
(f ) Nontransferability of Options
During a Participant's lifetime, an option may be exercisable only
by the Participant. Options granted under the Plan and the rights and
privileges conferred thereby shall not be subject to execution,
attachment or similar process and may not be transferred, assigned,
pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by
applicable law and Rule 16b-3, the Plan Administrator may permit a
recipient of an option to designate in writing during the Participant's
lifetime a Beneficiary to receive and exercise the Participant's options
in the event of such Participant's death (as provided in Section 6.2(i)).
If any Participant attempts to transfer, assign, pledge, hypothecate or
otherwise dispose of any option under the Plan or of any right or
privilege conferred thereby, contrary to the provisions of the Plan, or
suffers the sale or levy or any attachment or similar process upon the
rights and privileges conferred hereby, all affected options held by such
Participant shall be immediately forfeited.
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(g) Purchase for Investment
The Plan Administrator shall have the right to require that each
Participant or other person who shall exercise an option under the Plan,
and each person into whose name shares of Common Stock shall be issued
pursuant to the exercise of an option, represent and agree that any and
all shares of Common Stock purchased pursuant to such option are being
purchased for investment only and not with a view to the distribution or
resale thereof and that such shares will not be sold except in accordance
with such restrictions or limitations as may be set forth in the option.
This Section 6.2(g) shall be inoperative during any period of time when
the Company has obtained all necessary or advisable approvals from
governmental agencies and has completed all necessary or advisable
registrations or other qualifications of shares of Common Stock as to
which options may from time to time be granted.
(h) Termination of Employment
Upon the termination of a Participant's employment for any reason
other than death or Permanent Disability, the Participant's option shall
be exercisable only to the extent that it was then exercisable and,
unless the term of the options expires sooner, such options shall expire
according to the following schedule; provided, that the Plan
Administrator may at any time determine in a particular case that
specific limitations and restrictions under the Plan shall not apply:
(i) Retirement
The option shall expire, unless exercised, thirty-six (36)
months after the Participant's retirement from the Company or any
Subsidiary.
(ii) Disability
The option shall expire, unless exercised, thirty-six (36)
months after the Participant's Permanent Disability.
(iii) Termination
Subject to subparagraph (iv) below, the option shall expire,
unless exercised, thirty-six (36) months after a Participant
resigns or is terminated as an employee of the Company or any of
its Subsidiaries, unless the Plan Administrator shall have
determined in a specific case that the option should expire sooner
or should terminate when the Participant's employment status
ceases.
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(iv) Termination Following a Change in Control
The option shall expire, unless exercised, thirty-six (36)
months after a Participant's termination of employment (other than
a termination by the Company for Cause or a voluntary termination
by the Participant other than for Good Reason) following a Change
in Control, provided that said termination of employment occurs
within two (2) years following a Change in Control.
(v) All Other Terminations
Notwithstanding subparagraphs (iii) and (iv) above, the
option shall expire upon termination of employment for Cause.
(i) Death of Participant
Upon the death of a Participant, whether during the Participant's
period of employment or during the thirty-six (36) month period referred
to in Sections 6.2(h)(i), (ii) and (iii), the option shall expire, unless
the original term of the option expires sooner, twelve (12) months after
the date of the Participant's death, unless the option is exercised
within such twelve (12) month period by the Participant's Beneficiary,
legal representatives, estate or the person or persons to whom the
deceased's option rights shall have passed by will or the laws of descent
and distribution; provided, that the Plan Administrator shall determine
in a particular case that specific limitations and restrictions under the
Plan shall not apply. Notwithstanding any other Plan provisions
pertaining to the times at which options may be exercised, no option
shall continue to be exercisable, pursuant to Section 6.2(h) or this
Section 6.2(i), at a time that would violate the maximum duration of
Section 6.2(b).
(j) Change in Control
Notwithstanding other Plan provisions pertaining to the times at
which options may be exercised, all outstanding options, to the extent
not then currently exercisable, shall become exercisable in full upon the
occurrence of a Change in Control. In addition, no option shall continue
to be exercisable at a time that would violate the maximum duration of
Section 6.2(b).
SECTION 7 STOCK APPRECIATION RIGHTS
7.1 The Plan Administrator may grant stock appreciation rights to
Participants in connection with any option granted under the Plan, either at
the time of the grant of such option or at any time thereafter during the term
of the option. Such stock appreciation rights shall cover the same shares
covered by the options (or such lesser
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number of shares of Common Stock as the Plan Administrator may determine) and
shall, except as provided in Section 7.3, be subject to the same terms and
conditions as the related options and such further terms and conditions not
inconsistent with the Plan as shall from time to time be determined by the Plan
Administrator.
7.2 Each stock appreciation right shall entitle the holder of the related
option to surrender to the Company unexercised the related option, or any
portion thereof, and to receive from the Company in exchange therefor an amount
equal to the excess of the Fair Market Value of one share of Common Stock on
the date the right is exercised over the Option Price per share times the
number of shares covered by the option, or portion thereof, which is
surrendered. Payment shall be made in shares of Common Stock valued at Fair
Market Value as of the date the right is exercised, or in cash, or partly in
shares and partly in cash, at the discretion of the Plan Administrator;
provided, however, that payment shall be made solely in cash with respect to a
stock appreciation right which is exercised within seven (7) months following a
Change in Control. Notwithstanding the foregoing and to the extent required by
Rule 16b-3, a payment, in whole or in part, of cash upon exercise of a stock
appreciation right by a Section 16 Insider may be made only if the Plan
Administrator approves such election to receive cash and the right is exercised
during the period beginning on the third business day following the date of
release for publication of the quarterly or annual summary statements of sales
and earnings of the Company and ending on the twelfth business day following
such date. Stock appreciation rights may be exercised from time to time upon
actual receipt by the Company of written notice stating the number of shares of
Common Stock with respect to which the stock appreciation right is being
exercised. The value of any fractional shares shall be paid in cash.
7.3 Stock appreciation rights are subject to the following restrictions:
(a) Each stock appreciation right shall be exercisable at such time
or times as the option to which it relates shall be exercisable, or at
such other times as the Plan Administrator may determine; provided,
however, that such right shall not be exercisable until the Participant
shall have completed a six (6) month period of continuous employment with
the Company or any of its Subsidiaries immediately following the date on
which the stock appreciation right is granted. In the event of death or
Permanent Disability of a Participant during employment but before the
Participant has completed such period of continuous employment, such
stock appreciation right shall be exercisable; but only within the period
specified in the related option. In the event of a Change in Control,
the requirement that a Participant shall have completed a six (6) month
period of continuous employment is waived with respect to a Participant
who is employed by the Company at the time of the Change in Control but
who, within the six (6) month period, voluntarily terminates employment
for Good Reason or is terminated by the Company other than for Cause.
Notwithstanding the foregoing, a stock appreciation right may not be
exercised for cash by a Section 16 Insider under any circumstances until
the expiration of the six (6) month period required under Rule 16b-3.
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(b) Except in the event of a Change in Control, the Plan
Administrator in its sole discretion may approve or deny in whole or in
part a request to exercise a stock appreciation right. Denial or
approval of such request shall not require a subsequent request to be
similarly treated by the Plan Administrator.
(c) The right of a Participant to exercise a stock appreciation
right shall be canceled if and to the extent the related option is
exercised. To the extent that a stock appreciation right is exercised,
the related option shall be deemed to have been surrendered unexercised
and canceled.
(d) A holder of stock appreciation rights shall have none of the
rights of a stockholder until shares of Common Stock, if any, are issued
to such holder pursuant to such holder's exercise of such rights.
(e) The acquisition of Common Stock pursuant to the exercise of a
stock appreciation right shall be subject to the same restrictions as
would apply to the acquisition of Common Stock acquired upon acquisition
of the related option, as set forth in Section 6.2.
SECTION 8 LIMITED STOCK APPRECIATION RIGHTS
8.1 The Plan Administrator may grant limited stock appreciation rights to
Participants in connection with any options granted under the Plan, either at
the time of the grant of such option or at any time thereafter during the term
of the option. Such limited stock appreciation rights shall cover the same
shares covered by the options (or such lesser number of shares of Common Stock
as the Plan Administrator may determine) and shall, except as provided in
Section 8.3, be subject to the same terms and conditions as the related options
and such further terms and conditions not inconsistent with the Plan as shall
from time to time be determined by the Plan Administrator.
8.2 Each limited stock appreciation right shall entitle the holder of the
related option to surrender to the Company the unexercised portion of the
related option and to receive from the Company in exchange therefor an amount
in cash equal to the excess of the Fair Market Value of one (1) share of Common
Stock on the date the right is exercised over the Option Price per share times
the number of shares covered by the option, or portion thereof, which is
surrendered.
8.3 Limited stock appreciation rights are subject to the following
restrictions:
(a) Each limited stock appreciation right shall be exercisable in
full for a period of seven (7) months following the date of a Change in
Control regardless of whether the holder is employed by the Company or
any of its Subsidiaries on the date the right is exercised; provided,
however, that limited stock appreciation rights may not be exercised
under any circumstances until the expiration of the six
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(6) month period required under Rule 16b-3. Limited stock appreciation
rights shall be exercisable only to the same extent and subject to the
same conditions as the options related thereto are exercisable, as
provided in Section 6.2(j).
(b) The right of a Participant to exercise a limited stock
appreciation right shall be canceled if and to the extent the related
option is exercised. To the extent that a limited stock appreciation
right is exercised, the related option shall be deemed to have been
surrendered unexercised and canceled.
SECTION 9 RESTRICTED STOCK
9.1 Restricted Stock may be granted to Participants in such number and at
such times during the term of the Plan as the Plan Administrator shall
determine, the Plan Administrator taking into account the duties of the
respective Participants, their present and potential contributions to the
success of the Company, and such other factors as the Plan Administrator shall
deem relevant in accomplishing the purposes of the Plan. The granting of
Restricted Stock shall take place when the Plan Administrator by resolution,
written consent or other appropriate action determines to grant such Restricted
Stock to a particular Participant. Each grant shall be evidenced by a written
instrument delivered by or on behalf of the Company containing provisions not
inconsistent with the Plan. The Participant receiving a grant of Restricted
Stock shall be recorded as a stockholder of the Company. Each Participant who
receives a grant of Restricted Stock shall have all the rights of a stockholder
with respect to such shares (except as provided in the restrictions on
transferability), including the right to vote the shares and receive dividends
and other distributions; provided, however, that no Participant awarded
Restricted Stock shall have any right as a stockholder with respect to any
shares subject to the Participant's Restricted Stock grant prior to the date of
issuance to the Participant of a certificate or certificates for such shares,
or before the effective date of any book entry form, as applicable.
9.2 A grant of Restricted Stock shall entitle a Participant to receive, on
the date or dates designated by the Plan Administrator, upon payment to the
Company of the par value of the Common Stock in a manner determined by the Plan
Administrator, the number of shares of Common Stock selected by the Plan
Administrator. The Plan Administrator may require, under such terms and
conditions as it deems appropriate or desirable, that the certificates for
Restricted Stock delivered under the Plan may be held in custody by a bank or
other institution, or that the Company may itself hold such shares in custody
until the Restriction Period (as defined in Section 9.3) expires or until
restrictions thereon otherwise lapse, and may require, as a condition of any
issuance of Restricted Stock that the Participant shall have delivered a stock
power endorsed in blank relating to the shares of Restricted Stock.
9.3 During a period of years following the date of grant, as determined by
the Plan Administrator, which shall in no event be less than one (1) year
and/or until the required Performance Goals are achieved, if applicable (the
"Restriction Period"), the
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Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated
or otherwise encumbered or disposed of by the recipient, except in the event of
death or Permanent Disability, the transfer to the Company as provided under
the Plan or the Plan Administrator's waiver or modification of such
restrictions in the agreement evidencing the grant of Restricted Stock, or by
resolution of the Plan Administrator adopted at any time.
9.4 Except as provided in Section 9.5 or 9.6, or as determined by the Plan
Administrator, if a Participant terminates employment with the Company for any
reason before the expiration of the Restriction Period, all shares of
Restricted Stock still subject to restriction shall be forfeited by the
Participant to the Company. In addition, in the event of any attempt by the
Participant to sell, exchange, transfer, pledge or otherwise dispose of shares
of Restricted Stock in violation of the terms of the Plan, such shares shall be
forfeited to the Company.
9.5 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock shall lapse, upon the
Participant's death or Permanent Disability or any termination of employment
determined by the Plan Administrator to end the Restriction Period.
9.6 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock shall terminate immediately upon
a Change in Control.
9.7 When the restrictions imposed by Section 9.3 expire or otherwise lapse
with respect to one or more shares of Restricted Stock, the Company shall
deliver to the Participant (or the Participant's legal representative,
Beneficiary or heir) one (1) share of Common Stock for each share of Restricted
Stock. At that time, the agreement referred to in Section 9.1, as it relates
to such shares, shall be terminated.
9.8 Subject to Section 9.2, a Participant entitled to receive Restricted
Stock under the Plan shall be issued a certificate for such shares. Such
certificate shall be registered in the name of the Participant, and shall bear
an appropriate legend reciting the terms, conditions and restrictions, if any,
applicable to such shares and shall be subject to appropriate stop-transfer
orders.
SECTION 10 REGULATORY APPROVALS AND LISTING
10.1 The Company shall not be required to issue any certificate for shares
of Common Stock upon the exercise of an option or a stock appreciation right
granted under the Plan, with respect to a grant of Restricted Stock:
(a) obtaining any approval or ruling from the Securities and
Exchange Commission, the Internal Revenue Service or any other
governmental agency
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which the Company, in its sole discretion, shall determine to be
necessary or advisable;
(b) listing of such shares on any stock exchange on which the Common
Stock may then be listed; or
(c) completing any registration or other qualification of such
shares under any federal or state laws, rulings or regulations of any
governmental body which the Company, in its sole discretion, shall
determine to be necessary or advisable.
All certificates for shares of Common Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions as the Plan
Administrator may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which Common Stock is then listed and any applicable federal or State
securities laws, and the Plan Administrator may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions. The foregoing provisions of this paragraph shall not be
effective if and to the extent that the shares of Common Stock delivered under
the Plan are covered by an effective and current registration statement under
the Securities Act of 1933, as amended, or if and so long as the Plan
Administrator determines that application of such provisions as no longer
required or desirable. In making such determination, the Plan Administrator
may rely upon an opinion of counsel for the Company.
SECTION 11 EFFECTIVE DATE AND TERM OF PLAN
The Plan shall be effective as of June 19, 1996 provided that the Plan is
adopted by the Board. Subject to the foregoing condition, options, limited
stock appreciation rights, stock appreciation rights and Restricted Stock may
be granted pursuant to the Plan from time to time within the period commencing
upon adoption of the Plan by the Board of Directors and ending ten (10) years
after the of such adoption. Options, limited stock appreciation rights, stock
appreciation rights and Restricted Stock theretofore granted may extend beyond
that date and the terms and conditions of the Plan shall continue to apply
thereto and to shares of Common Stock acquired thereunder. To the extent
required for compliance with Rule 16b-3, shares of Common Stock underlying
options, limited stock appreciation rights, stock appreciation rights,
Restricted Stock and Common Stock granted to Section 16 Insiders may not be
sold until a date at least six (6) months after the date of such grant.
SECTION 12 GENERAL PROVISIONS
12.1 Nothing contained in the Plan, or in any option, limited stock
appreciation right, stock appreciation right or Restricted Stock granted
pursuant to the Plan, shall
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confer upon any employee any right with respect to continuance of employment by
the Company or a Subsidiary, nor interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of such employee at any
time with or without assigning any reason therefor.
12.2 Grants, vesting or payment of stock options, limited stock
appreciation rights, stock appreciation rights or Restricted Stock shall not be
considered as part of a Participant's salary or used for the calculation of any
other pay, allowance, pension or other benefit unless otherwise permitted by
other benefit plans provided by the Company or its Subsidiaries, or required by
law or by contractual obligations of the Company or its Subsidiaries.
12.3 The right of a Participant or Beneficiary to the payment of any
compensation under the Plan may not be assigned, transferred, pledged or
encumbered, nor shall such right or other interests be subject to attachment,
garnishment, execution or other legal process.
12.4 Leaves of absence for such periods and purposes conforming to the
personnel policy of the Company, or of its Subsidiaries, as applicable, shall
not be deemed terminations or interruptions of employment, unless a Participant
commences a leave of absence from which he or she is not expected to return to
active employment with the Company or its Subsidiaries.
12.5 In the event a Participant is transferred from the Company to a
Subsidiary, or vice versa, or is promoted or given different responsibilities,
the stock options, limited stock appreciation rights, stock appreciation rights
and Restricted Stock granted to the Participant prior to such date shall not be
affected. Notwithstanding the foregoing or any other provision in this Plan,
in the event a Participant becomes an officer or director of the Company
subject to Section 16(b) of the Exchange Act, the Plan Administrator may take
any and all action necessary to prevent any violation of Section 16(b),
including, but not limited to, accelerating the vesting of options, rights or
Restricted Stock, canceling any unvested options, rights or Restricted Stock
and/or requiring the Participant to exercise any and all vested options or
rights at such times as the Plan Administrator may determine.
12.6 The Plan shall be construed and governed in accordance with the laws
of the State of Texas, except that it shall be construed and governed in
accordance with applicable federal law in the event that such federal law
preempts state law.
12.7 Appropriate provision shall be made for all taxes required to be
withheld in connection with the exercise, grant or other taxable event with
respect to options, limited stock appreciation rights, stock appreciation
rights and Restricted Stock under the applicable laws or regulations of any
governmental authority, whether federal, state or local and whether domestic or
foreign. Unless otherwise provided in the grant, a Participant is permitted to
deliver shares of Common Stock (including shares acquired pursuant to the
exercise of an option or stock appreciation right other than the option or
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stock appreciation right currently being exercised, to the extent permitted by
applicable regulations) for payment of withholding taxes on the exercise of an
option, stock appreciation right, or limited stock appreciation right, upon the
grant or vesting of Restricted Stock. At the election of the Plan
Administrator or, subject to approval of the Plan Administrator at its sole
discretion, at the election of a Participant, shares of Common Stock may be
withheld from the shares issuable to the Participant upon the exercise of an
option or stock appreciation right or upon the vesting of the Restricted Stock
to satisfy tax withholding obligations. The Fair Market Value of Common Stock
as delivered pursuant to this Section 12.7 shall be valued as of the day prior
to delivery, and shall be calculated in accordance with Section 2.9. The
withholding of shares of Common Stock to pay tax obligations in connection with
the exercise of an option or stock appreciation right or the vesting of
Restricted Stock by a Section 16 Insider must be approved by the Plan
Administrator and must occur (i) pursuant to an irrevocable election made six
(6) months in advance of the transaction, (ii) during the period beginning on
the third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the Company and
ending on the twelfth business day following such date, or (iii) otherwise in
accordance with the provisions of Rule 16b-3 and interpretations thereunder.
In the event Section 16 of the Exchange Act and rules thereunder, including
Rule 16b-3, is amended or interpreted to permit shares of Common Stock to be
withheld to pay tax obligations outside the periods described in clause (i) or
(ii) of the preceding sentence, or without Plan Administrator approval, the
Plan Administrator may determine that such provisions shall no longer apply to
Section 16 Insiders.
Any Participant that makes a Section 83(b) election under the Code shall,
within ten (10) days of making such election, notify the Company in writing of
such election and shall provide the Company with a copy of such election form
filed with the Internal Revenue Service.
Tax advice should be obtained by the Participant prior to the
Participant's (i) entering into any transaction under or with respect to the
Plan, (ii) designating or choosing the times of distributions under the Plan,
or (iii) disposing of any shares of Common Stock issued under the Plan.
SECTION 13 COMPLIANCE WITH RULE 16B-3
The Company's intention is that, so long as any of the Company's equity
securities are registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, with respect to awards granted to or held by Section 16 Insiders, the Plan
shall comply in all respects with Rule 16b-3, or with any other exemption
available pursuant to Section 16 of the Exchange Act or rules thereunder, and,
if any Plan provision is later found not to be in compliance with Rule 16b-3,
that provision shall be deemed modified as necessary to meet the requirements
of Rule 16b-3.
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Notwithstanding anything in the Plan to the contrary, the Board of
Directors, in its absolute discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
Participants who are Section 16 Insiders without so restricting, limiting or
conditioning the Plan with respect to other Participants.
SECTION 14 AMENDMENT, TERMINATION OR DISCONTINUANCE
OF THE PLAN
14.1 Subject to the Board of Directors and Section 14.2, the Plan
Administrator may from time to time make such amendments to the Plan as it may
deem proper and in the best interest of the Company, including, but not limited
to, any amendment necessary to ensure that the Company may obtain any
regulatory approval referred to in Section 10; provided, however, that no
change in any option, limited stock appreciation right, stock appreciation
right or Restricted Stock theretofore granted may be made without the consent
of the Participant which would impair the right of the Participant to acquire
or retain Common Stock or cash that the Participant may have acquired as a
result of the Plan.
14.2 The Board of Directors may at any time suspend the operation of or
terminate the Plan with respect to any shares of Common Stock or rights which
are not at that time subject to option, limited stock appreciation right, stock
appreciation right or grant of Restricted Stock.
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