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EXCEL - IDEA: XBRL DOCUMENT - ION GEOPHYSICAL CORP | Financial_Report.xls |
EX-32.1 - EX-32.1 - ION GEOPHYSICAL CORP | h83286exv32w1.htm |
EX-31.2 - EX-31.2 - ION GEOPHYSICAL CORP | h83286exv31w2.htm |
EX-31.1 - EX-31.1 - ION GEOPHYSICAL CORP | h83286exv31w1.htm |
EX-32.2 - EX-32.2 - ION GEOPHYSICAL CORP | h83286exv32w2.htm |
10-Q - FORM 10-Q - ION GEOPHYSICAL CORP | h83286e10vq.htm |
Exhibit 10.1
SIXTH AMENDED AND RESTATED
2004 LONG-TERM INCENTIVE PLAN
2004 LONG-TERM INCENTIVE PLAN
SECTION 1
GENERAL PROVISIONS RELATING
TO PLAN GOVERNANCE, COVERAGE AND BENEFITS
GENERAL PROVISIONS RELATING
TO PLAN GOVERNANCE, COVERAGE AND BENEFITS
1.1 Purpose
The purpose of the Plan is to foster and promote the long-term financial success of ION
Geophysical Corporation (the Company) and its Subsidiaries and to increase stockholder value by:
(a) encouraging the commitment of Directors and selected key Employees and Consultants, (b)
motivating superior performance of Directors and key Employees and Consultants by means of
long-term performance related incentives, (c) encouraging and providing Directors and selected key
Employees and Consultants with a program for obtaining ownership interests in the Company that link
and align their personal interests to those of the Companys stockholders, (d) attracting and
retaining Directors and selected key Employees and Consultants by providing competitive incentive
compensation opportunities, and (e) enabling Directors and selected key Employees and Consultants
to share in the long-term growth and success of the Company. For administrative purposes, and
subject to Section 8.13, this Plan incorporates the ION Geophysical Corporation Amended and
Restated 1996 Non-Employee Director Stock Option Plan (the Director Plan).
The Plan provides for payment of various forms of incentive compensation. Except as provided
in Section 8.14, it is not intended to be a plan that is subject to the Employee Retirement
Income Security Act of 1974, as amended (ERISA), and, as such, the Plan will be interpreted,
construed and administered consistent with its status as a plan that is not subject to ERISA.
This sixth amendment and restatement of the Plan will become effective as of May 27, 2011
(with the Plan having an original effective date of May 3, 2004 (the Effective Date)). The Plan
will commence on the Effective Date, and will remain in effect, subject to the right of the Board
to amend or terminate the Plan at any time pursuant to Section 8.6, until all Shares
subject to the Plan have been purchased or acquired according to its provisions. However, in no
event may any Incentive Award be granted under the Plan after ten (10) years from the Effective
Date.
1.2 Definitions
The following terms shall have the meanings set forth below:
(a) Appreciation. The difference between the Fair Market Value of a share of Common
Stock on the date of exercise of a Tandem SAR and the option exercise price per share of the
Nonstatutory Stock Option to which the Tandem SAR relates.
(b) Authorized Officer. The Chairman of the Board, the CEO or any other senior
officer of the Company to whom either of them delegate the authority to execute any Incentive
Agreement for and on behalf of the Company. No officer or director shall be an Authorized Officer
with respect to any Incentive Agreement for himself.
(c) Board. The Board of Directors of the Company.
(d) Cause. Except as otherwise provided by the Committee or as otherwise provided
in a Grantees employment agreement, when used in connection with the termination of a Grantees
Employment or service, shall mean the termination of the Grantees Employment or Grantees
services as a Director or Consultant by the Company or any Subsidiary by reason of (i) the
conviction of the Grantee by a court of competent jurisdiction as to which no further appeal can
be taken of a crime involving moral turpitude or a felony; (ii) the proven commission by the
Grantee of a material act of fraud upon the Company or any Subsidiary, or any customer or
supplier thereof; (iii) the willful and proven misappropriation of any funds or property of the
Company or any Subsidiary, or any customer or supplier thereof; (iv) the willful, continued and
unreasonable failure by the Grantee to perform the material duties assigned to him which is not
cured to the reasonable satisfaction of the Company within 30 days after written notice of such
failure is provided to Grantee by the Board or by a designated officer of the Company or a
Subsidiary; (v) the knowing engagement by the Grantee in any direct and material conflict of
interest with the Company or any Subsidiary without compliance with the Companys or Subsidiarys
conflict of interest policy, if any, then in effect; or (vi) the knowing engagement by the
Grantee, without the written approval of the Board, in any material activity which competes with
the business of the Company or any Subsidiary or which would result in a material injury to the
business, reputation or goodwill of the Company or any Subsidiary; or (vii) the material breach
by a Consultant of such Grantees contract with the Company.
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(e) CEO. The Chief Executive Officer of the Company.
(f) Change in Control. Any of the events described in and subject to Section
7.7.
(g) Code. The Internal Revenue Code of 1986, as amended, and the regulations and
other authority promulgated thereunder by the appropriate governmental authority. References
herein to any provision of the Code shall refer to any successor provision thereto.
(h) Committee. A committee appointed by the Board consisting of at least two
directors, who fulfill the outside directors requirements of Section 162(m) of the Code, to
administer the Plan. The Committee may be the Compensation Committee of the Board, or any
subcommittee of the Compensation Committee. The Board shall have the power to fill vacancies on
the Committee arising by resignation, death, removal or otherwise. The Board, in its sole
discretion, may bifurcate the powers and duties of the Committee among one or more separate
committees, or retain all powers and duties of the Committee in a single Committee. The members
of the Committee shall serve at the discretion of the Board.
(i) Common Stock. The common stock of the Company, $.01 per value per share, and
any class of common stock into which such common shares may hereafter be converted, reclassified,
re-capitalized, or exchanged.
(j) Company. ION Geophysical Corporation, a corporation organized under the laws of
the State of Delaware, and any successor-in-interest thereto.
(k) Consultant. An independent agent, consultant, attorney, an individual who has
agreed to become an Employee within the next six months, or any other individual who is not a
Director or employee of the Company (or any Parent or Subsidiary) and who, in the opinion of the
Committee, is in a position to contribute to the growth or financial success of the Company (or
any Parent or Subsidiary), (ii), is a natural person and (iii) provides bona fide services to the
Company (or any Parent or Subsidiary), which services are not in connection with the offer or
sale of securities in a capital raising transaction, and do not directly or indirectly promote or
maintain a market for the Companys securities.
(l) Covered Employee. A named executive officer who is one of the group of covered
employees, as defined in Section 162(m) of the Code and Treasury Regulation § 1.162-27(c) (or its
successor), during any such period that the Company is a Publicly Held Corporation.
(m) Deferred Stock. Shares of Common Stock to be issued or transferred to a Grantee
under an Other Stock-Based Award granted pursuant to Section 5 at the end of a specified
deferral period, as set forth in the Incentive Agreement pertaining thereto.
(n) Director. Any individual who is a member of the Board.
(o) Director Plan. The Amended and Restated 1996 Non-Employee Director Stock Option
Plan.
(p) Disability. As determined by the Committee in its discretion exercised in good
faith, a physical or mental condition of the Employee that would entitle him to disability income
payments under the Companys long term disability insurance policy or plan for employees, as then
effective, if any; or in the event that the Grantee is not covered, for whatever reason, under
the Companys long-term disability insurance policy or plan, Disability means a permanent and
total disability as defined in Section 22(e)(3) of the Code. A determination of Disability may be
made by a physician selected or approved by the Committee and, in this respect, the Grantee shall
submit to any reasonable examination by such physician upon request.
(q) Employee. Any employee of the Company (or any Parent or Subsidiary) within the
meaning of Section 3401(c) of the Code who, in the opinion of the Committee, is in a position to
contribute to the growth, development or financial success of the Company (or any Parent or
Subsidiary), including, without limitation, officers who are members of the Board.
(r) Employment. Employment by the Company (or any Parent or Subsidiary), or by any
corporation issuing or assuming an Incentive Award in any transaction described in Section 424(a)
of the Code, or by a parent corporation or a subsidiary corporation of such corporation issuing
or assuming such Incentive Award, as the parent-subsidiary relationship shall be determined at
the time of the corporate action described in Section 424(a) of the Code. In this regard, neither
the transfer of a Grantee from Employment by the Company to Employment by any Parent or
Subsidiary, nor the transfer of a Grantee from Employment by any Parent or Subsidiary to
Employment by the Company, shall be deemed to be a termination of Employment of the Grantee.
Moreover, the
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Employment of a Grantee shall not be deemed to have been terminated because of an approved
leave of absence from active Employment on account of temporary illness, authorized vacation or
granted for reasons of professional advancement, education, health, government service or
military leave, or during any period required to be treated as a leave of absence by virtue of
any applicable statute, Company personnel policy or agreement. Whether an authorized leave of
absence shall constitute termination of Employment hereunder shall be determined by the Committee
in its discretion. Unless otherwise provided in the Incentive Agreement, the term Employment
for purposes of the Plan is also defined to include compensatory or advisory services performed
by a Consultant for the Company (or any Parent or Subsidiary).
(s) Exchange Act. The Securities Exchange Act of 1934, as amended.
(t) Fair Market Value. While the Company is a Publicly Held Corporation, the Fair
Market Value of one share of Common Stock on the date in question is deemed to be the closing
sales price on the immediately preceding business day of a share of Common Stock as reported on
the New York Stock Exchange or other principal securities exchange on which Shares are then
listed or admitted to trading, or as quoted on any national interdealer quotation system, if such
shares are not so listed.
(u) Grantee. Any Employee, Director or Consultant who is granted an Incentive Award
under the Plan.
(v) Immediate Family. With respect to a Grantee, the Grantees child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships.
(w) Incentive Award. A grant of an award under the Plan to a Grantee, including any
Nonstatutory Stock Option, Incentive Stock Option, Stock Appreciation Right, Performance Share,
Restricted Stock, Restricted Stock Unit or Other Stock-Based Award, as well as any Supplemental
Payment.
(x) Incentive Agreement. The written agreement entered into between the Company and
the Grantee setting forth the terms and conditions pursuant to which an Incentive Award is
granted under the Plan, as such agreement is further defined in Section 7.1 (a).
(y) Incentive Stock Option or ISO. A Stock Option granted by the Committee to an
Employee under Section 2 that is designated by the Committee as an Incentive Stock Option
and intended to qualify as an Incentive Stock Option under Section 422 of the Code.
(z) Independent SAR. A Stock Appreciation Right described in Section 2.5.
(aa) Insider. While the Company is a Publicly Held Corporation, an individual who
is, on the relevant date, an officer, director or ten percent (10%) beneficial owner of any class
of the Companys equity securities that is registered pursuant to Section 12 of the Exchange Act,
all as defined under Section 16 of the Exchange Act.
(bb) Non-Employee Director. A Director who is not an Employee.
(cc) Non-Employee Director Award. Any Nonstatutory Stock Option, SAR, Performance
Shares, Restricted Stock, Restricted Stock Unit or Other Stock-Based Award granted, whether
singly, in combination, or in tandem, to a Grantee 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.
(dd) Nonstatutory Stock Option. A Stock Option granted by the Committee to a
Grantee under Section 2 that is not designated by the Committee as an Incentive Stock
Option or to which Section 421 of the Code does not apply.
(ee) Option Price. The exercise price at which a Share may be purchased by the
Grantee of a Stock Option.
(ff) Other Stock-Based Award. An award granted by the Committee to a Grantee under
Section 2 that is not a Nonstatutory Stock Option, SAR, Performance Share, Restricted
Stock or Restricted Stock Unit and is valued in whole or in part by reference to, or is otherwise
based upon, Common Stock.
(gg) Parent. Any corporation (whether now or hereafter existing) that constitutes a
Parent of the Company, as defined in Section 424(e) of the Code.
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(hh) Performance-Based Exception. The performance-based exception from the tax
deductibility limitations of Section 162(m) of the Code, as prescribed in Section 162(m) of the
Code and Treasury Regulation § 1.162-27(e) (or its successor), which is applicable during such
period that the Company is a Publicly Held Corporation.
(ii) Performance Period. A period of time determined by the Committee over which
performance is measured for the purpose of determining a Grantees right to and the payment value
of any Performance Share or Other Stock-Based Award.
(jj) Performance Share. An Incentive Award representing a contingent right to
receive Shares of Common Stock at the end of a Performance Period.
(kk) Period of Restriction. A 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 Section 4.
(ll) Plan. 2004 Long-Term Incentive Plan, as set forth herein and as it may be
amended from time to time.
(mm) Publicly Held Corporation. A corporation issuing any class of common equity
securities required to be registered under Section 12 of the Exchange Act.
(nn) Restricted Stock. An Award granted to a Grantee pursuant to Section 4.
(oo) Restricted Stock Unit. An Award granted to a Grantee pursuant to Section
4, except no Shares are actually awarded to the Grantee on the date of grant.
(pp) Retirement. The voluntary termination of Employment from the Company or any
Parent or Subsidiary constituting retirement for age on any date after the Employee attains the
normal retirement age of 65 years, or such other age as may be designated by the Committee in the
Employees Incentive Agreement.
(qq) intentionally deleted.
(rr) Share. A share of Common Stock of the Company.
(ss) Share Pool. The number of Shares authorized for issuance under Section
1.4 as adjusted for awards and payouts under Section 1.5 and as adjusted for changes
in corporate capitalization under Section 7.5.
(tt) Spread. The difference between the exercise price per Share specified in any
SAR grant and the Fair Market Value of a Share on the date of exercise of the SAR.
(uu) Stock Appreciation Right or SAR. A Tandem SAR described in Section 2.4
or an Independent SAR described in Section 2.5.
(vv) Stock Option or Option. Pursuant to Section 2 or Section 6,
(i) an Incentive Stock Option granted to an Employee, or (ii) a Nonstatutory Stock Option granted
to an Employee, Director or Consultant, whereunder such option the Grantee has the right to
purchase Shares of Common Stock. In accordance with Section 422 of the Code, only an Employee of
the Company, Parent or Subsidiary may be granted an Incentive Stock Option.
(ww) Subsidiary. Any corporation (whether now or hereafter existing) which
constitutes a subsidiary of the Company, as defined in Section 424(f) of the Code.
(xx) Supplemental Payment. Any amount, as described in Sections 2.6, and/or
4.3, that is dedicated to payment of income taxes which are payable by the Grantee
resulting from an Incentive Award.
(yy) Tandem SAR. A Stock Appreciation Right that is granted in connection with a
related Stock Option pursuant to Section 2.4, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Stock Option (and when a Share is
purchased under the Stock Option, the Tandem SAR with respect thereto, shall similarly be
canceled).
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1.3 Plan Administration
(a) Authority of the Committee. Except as may be limited by law and subject to the
provisions herein, the Committee shall have full power to (i) select Grantees who shall participate
in the Plan; (ii) determine the sizes, duration and types of Incentive Awards; (iii) determine the
terms and conditions of Incentive Awards and Incentive Agreements; (iv) determine whether any
Shares subject to Incentive Awards will be subject to any restrictions on transfer; (v) construe
and interpret the Plan and any Incentive Agreement or other agreement entered into under the Plan;
and (vi) establish, amend, or waive rules for the Plans administration. Further, the Committee
shall make all other determinations which may be necessary or advisable for the administration of
the Plan. Notwithstanding the preceding, without the prior approval of the Companys shareholders,
any Stock Option previously granted under the Plan shall not be repriced, replaced, or regranted
through cancellation, or by lowering the exercise price of a previously granted option, except as
provided in Section 7.5.
(b) Meetings. The Committee shall designate a chairman from among its members who
shall preside at all of its meetings, and shall designate a secretary, without regard to whether
that person is a member of the Committee, who shall keep the minutes of the proceedings and all
records, documents, and data pertaining to its administration of the Plan. Meetings shall be held
at such times and places as shall be determined by the Committee and the Committee may hold
telephonic meetings.
(c) Decisions Binding. All determinations and decisions made by the Committee shall
be made in its discretion pursuant to the provisions of the Plan, and shall be final, conclusive
and binding on all persons including the Company, Employees, Directors, Grantees, and their estates
and beneficiaries. The Committees decisions and determinations with respect to any Incentive Award
need not be uniform and may be made selectively among Incentive Awards and Grantees, whether or not
such Incentive Awards are similar or such Grantees are similarly situated.
(d) Modification of Outstanding Incentive Awards. Subject to the stockholder approval
requirements of Section 8.6 if applicable, the Committee may, in its discretion, provide
for the extension of the exercisability of an Incentive Award, accelerate the vesting or
exercisability of an Incentive Award, eliminate or make less restrictive any restrictions contained
in an Incentive Award, waive any restriction or other provisions of an Incentive Award, or
otherwise amend or modify an Incentive Award in any manner that is either (i) not adverse to the
Grantee to whom such Incentive Award was granted or (ii) consented to by such Grantee; provided,
however, no Stock Option issued under the Plan will be repriced, replaced or regranted through
cancellation, or by lowering the Option Price of a previously granted Stock Option. and the period
during which a Stock Option may be exercised shall not be extended such that the compensation
payable under the Stock Option would be subject to the excise tax applicable under Section 409A of
the Code. With respect to an Incentive Award that is an incentive stock option (as described in
Section 422 of the Code), no adjustment to such option shall be made to the extent constituting a
modification within the meaning of Section 424(h)(3) of the Code unless otherwise agreed to by
the Grantee in writing. Except as provided in this Plan in connection with a Change of Control or
a Corporate Event, the language of this Section 1.3(d) prohibits all forms of repricing,
including cash buyouts and Incentive Award exchanges, without stockholder approval.
(e) Delegation of Authority. The Committee may delegate to designated officers or
other employees of the Company any of its duties and authority under the Plan pursuant to such
conditions or limitations as the Committee may establish from time to time; provided, however, the
Committee may not delegate to any person the authority to (i) grant Incentive Awards, or (ii) take
any action which would contravene the requirements of Rule 16b-3 under the Exchange Act or the
Performance-Based Exception under Section 162(m) of the Code.
(f) Expenses of Committee. The Committee may employ legal counsel, including, without
limitation, independent legal counsel and counsel regularly employed by the Company, and other
agents, as the Committee may deem appropriate for the administration of the Plan. The Committee may
rely upon any opinion or computation received from any such counsel or agent. All expenses incurred
by the Committee in interpreting and administering the Plan, including, without limitation, meeting
expenses and professional fees, shall be paid by the Company.
(g) Indemnification. Each person who is or was a member of the Committee, or of the
Board, shall be indemnified by the Company against and from any damage, loss, liability, cost and
expense that may be imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by
reason of any action taken or failure to act under the Plan, except for any such act or omission
constituting willful misconduct or gross negligence. Such person shall be indemnified by the
Company for all amounts paid by him in settlement thereof, with the Companys approval, or paid by
him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided
he shall give the
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Company an opportunity, at its own expense, to handle and defend the same before he undertakes
to handle and defend it on his own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be entitled under the
Companys Articles or Certificate of Incorporation or Bylaws, by contract, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them harmless.
(h) Awards in Foreign Countries. The Board shall have the authority to adopt
modifications, procedures, sub-plans, and other similar plan documents as may be necessary or
desirable to comply with provisions of the laws of foreign countries in which the Company or its
subsidiaries may operate to assure the viability of the benefits of Incentive Awards made to
individuals employed or providing services in such countries and to meet the objectives of the
Plan.
1.4 Shares of Common Stock Available for Incentive Awards
Subject to this Section 1.4 and subject to adjustment under Section 7.5, there
shall be available for Incentive Awards that are granted wholly or partly in Common Stock
(including rights or Options that may be exercised or settled in Common Stock) 15,200,000 Shares of
Common Stock.
The number of Shares of Common Stock that are the subject of Incentive Awards under this Plan,
that are forfeited or terminated, expire unexercised, are settled in cash in lieu of Common Stock
or in a manner such that all or some of the Shares covered by an Incentive Award are not issued to
a Grantee or are exchanged for Incentive Awards that do not involve Common Stock, shall again
immediately become available for Incentive Awards hereunder; provided, however, the aggregate
number of Shares which may be issued upon exercise of ISOs shall in no event exceed 15,200,000
Shares (subject to adjustment pursuant to Section 7.5).
Any Shares of Common Stock reserved for issuance under the Director Plan in excess of the
number of Shares as to which Incentive Awards have been awarded thereunder shall no longer be
available for grant under the Director Plan after the Effective Date but shall instead be available
for grant under the terms and conditions of this Plan. Any Shares as to which Awards granted or
issued under the Director Plan that may lapse, expire, terminate, or be cancelled, are settled in
cash in lieu of common stock, are tendered (either by actual delivery or attestation) to pay the
Option Price, or satisfy any tax withholding requirements shall be deemed available for issuance or
reissuance under the preceding paragraph of this Section of the Plan.
Subject to adjustment under Section 7.5 and the limit set forth above, the following
additional limits are imposed under the Plan:
(a) The maximum number of Shares that may be covered by Incentive Awards granted to any one
individual pursuant to Section 2 (relating to Options and SARs) shall be 15,200,000 Shares during
any one calendar-year period. To the extent required by Section 162(m) of the Code, Shares
subject to the foregoing limit with respect to which the related Incentive Award described in
Section 2 is forfeited, expires, or is canceled shall not again be available for grant under this
limit.
(b) For Performance Shares that are intended to qualify for the Performance-Based Exception,
no more than 15,200,000 Shares may be delivered to any one Grantee for Performance Periods
beginning in any one calendar year, regardless of whether the applicable Performance Period
during which the Performance Shares are earned ends in the same year in which it begins or in a
later calendar year; provided that Performance Shares described in this paragraph (b) that are
intended to qualify for the Performance-Based Exception shall be subject to the following: (i) If
the Performance Shares are denominated in Shares but are settled in an equivalent amount of cash,
the foregoing limit shall be applied as though the Incentive Award was settled in Shares; and
(ii) If delivery of Shares or cash is deferred until after Performance Shares have been earned,
any adjustment in the amount delivered to reflect actual or deemed investment experience after
the date the shares are earned shall be disregarded.
(c) For Supplemental Payments that are intended to qualify for the Performance-Based
Exception, no more than $2,000,000 may be paid to any one Grantee for Performance Periods
beginning in any one calendar year, regardless of whether the applicable Performance Period
during which the Supplemental Payment is earned ends in the same year in which it begins or in a
later calendar year; provided that Supplemental Payments described in this paragraph (c) that are
intended to qualify for the Performance-Based Exception shall be subject to the following: (i) If
a Supplemental Payment is denominated in cash but an equivalent amount of Shares is delivered in
lieu of delivery of cash, the foregoing limit shall be applied as though the Supplemental Payment
was settled in cash; and (ii) if delivery of Shares or cash is deferred until after the
Supplemental Payment has been earned, any adjustment in the amount delivered to reflect actual or
deemed investment experience after the date the Supplemental Payment is earned shall be
disregarded.
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1.5 Share Pool Adjustments for Awards and Payouts
The following Incentive Awards and payouts shall reduce, on a one Share for one Share basis,
the number of Shares authorized for issuance under the Share Pool:
(a) Stock Option;
(b) SAR (except a Tandem SAR);
(c) A payout of a Performance Share in Shares;
(d) Restricted Stock or a payout of Restricted Stock Units in Shares; and
(e) A payout of an Other Stock-Based Award in Shares.
The following transactions shall restore, on a one Share for one Share basis, the number of
Shares authorized for issuance under the Share Pool:
(A) A payout of an SAR or Other Stock-Based Award in the form of cash;
(B) A cancellation, termination, expiration, forfeiture, or lapse for any reason (with the
exception of the termination of a Tandem SAR upon exercise of the related Stock Option, or the
termination of a related Stock Option upon exercise of the corresponding Tandem SAR) of any
Shares subject to an Incentive Award; and
(C) Payment of an Option Price with previously acquired Shares or by withholding Shares
which otherwise would be acquired on exercise (i.e., the Share Pool shall be increased by the
number of Shares turned in or withheld as payment of the Option Price plus any Shares withheld to
pay withholding taxes).
1.6 Common Stock Available
The Common Stock available for issuance or transfer under the Plan shall be made available
from Shares now or hereafter (a) held in the treasury of the Company, (b) are authorized but
unissued, or (c) to be purchased or acquired by the Company. No fractional Shares shall be issued
under the Plan; any payment for fractional Shares shall be made in cash.
1.7 Participation
(a) Eligibility. The Committee shall from time to time designate those key Employees,
Directors or Consultants, if any, to be granted Incentive Awards under the Plan, the type and
number of Incentive Awards granted, and any other terms or conditions relating to the Incentive
Awards as it may deem appropriate to the extent consistent with the provisions of the Plan. A
Grantee who has been granted an Incentive Award may, if otherwise eligible, be granted additional
Incentive Awards at any time.
(b) Incentive Stock Option Eligibility. No Consultant or Non-Employee Director shall
be eligible for the grant of any Incentive Stock Option. In addition, no Employee shall be eligible
for the grant of any Incentive Stock Option who owns or would own immediately before the grant of
such Incentive Stock Option, directly or indirectly, stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company, or any Parent or
Subsidiary. This restriction does not apply if, at the time such Incentive Stock Option is granted,
the Incentive Stock Option exercise price is at least one hundred and ten percent (110%) of the
Fair Market Value on the date of grant and the Incentive Stock Option by its terms is not
exercisable after the expiration of five (5) years from the date of grant. For the purpose of the
immediately preceding sentence, the attribution rules of Section 424(d) of the Code shall apply for
the purpose of determining an Employees percentage ownership in the Company or any Parent or
Subsidiary. This paragraph shall be construed consistent with the requirements of Section 422 of
the Code.
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1.8 Types of Incentive Awards
The types of Incentive Awards under the Plan are Stock Options, Stock Appreciation Rights and
Supplemental Payments as described in Section 2, Performance Shares and Supplemental
Payments as described in Section 3, Restricted Stock, Restricted Stock Units and
Supplemental Payments as described in Section 4, and Other Stock-Based Awards and
Supplemental Payments as described in Section 5, and any combination of the foregoing.
SECTION 2
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 Grant of Stock Options
The Committee is authorized to grant (a) Nonstatutory Stock Options to Employees, Directors or
Consultants and (b) Incentive Stock Options to Employees only, in accordance with the terms and
conditions of the Plan, and with such additional terms and conditions, not inconsistent with the
Plan, as the Committee shall determine in its discretion. Successive grants may be made to the same
Grantee whether or not any Stock Option previously granted to such person remains unexercised.
2.2 Stock Option Terms
(a) Written Agreement. Each grant of a Stock Option shall be evidenced by a written
Incentive Agreement. Among its other provisions, each Incentive Agreement shall set forth, subject
to Section 422 of the Code, the extent to which the Grantee shall have the right to exercise the
Stock Option following termination of the Grantees Employment. Such provisions shall be determined
in the discretion of the Committee, shall be included in the Grantees Incentive Agreement, and
need not be uniform among all Stock Options issued pursuant to the Plan. In addition, Incentive
Agreement shall state whether the Stock Option is intended to meet the requirements of Section 422
of the Code.
(b) Number of Shares. Each Stock Option shall specify the number of Shares of Common
Stock to which it pertains.
(c) Exercise Price. The exercise price per Share of Common Stock under each Stock
Option shall be determined by the Committee; provided, however, that in the case of a Stock Option,
such exercise price shall not be less than 100% of the Fair Market Value per Share on the date the
Stock Option is granted (110% in the case of an Incentive Stock Option for 10% or greater
shareholders pursuant to Section 1.7(b)). Each Stock Option shall specify the method of
exercise, which shall be consistent with the requirements of Section 2.3(a).
(d) Term. In the Incentive Agreement, the Committee shall fix the term of each Stock
Option, which shall be not more than ten (10) years from the date of grant (five years for ISO
grants to 10% or greater shareholders pursuant to Section 1.7(b)). In the event no term is
fixed, such term shall be ten (10) years from the date of grant.
(e) Exercise. The Committee shall determine the time or times at which a Stock Option
may be exercised in whole or in part. Each Stock Option may specify the required period of
continuous Employment and/or the performance objectives to be achieved before the Stock Option or
portion thereof will become exercisable. Each Stock Option, the exercise of which, or the timing of
the exercise of which, is dependent, in whole or in part, on the achievement of designated
performance objectives, may specify a minimum level of achievement in respect of the specified
performance objectives below which no Stock Options will be exercisable and a method for
determining the number of Stock Options that will be exercisable if performance is at or above such
minimum but short of full achievement of the performance objectives. All such terms and conditions
shall be set forth in the Incentive Agreement.
(f) $100,000 Annual Limit on Incentive Stock Options. Notwithstanding any contrary
provision in the Plan, to the extent that the aggregate Fair Market Value (determined as of the
time the Incentive Stock Option is granted) of the Shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any Grantee during any single
calendar year (under the Plan and any other stock option plans of the Company and its Subsidiaries
or Parent) exceeds the sum of $100,000, such Incentive Stock Option shall be treated as a
Nonstatutory Stock Option to the extent in excess of the $100,000 limit, and not an Incentive Stock
Option, but all other terms and provisions of such Stock Option shall remain unchanged. This
paragraph shall be applied by taking Incentive Stock Options into account in the order in which
they were granted and shall be construed in accordance with Section 422(d) of the Code. In the
absence of such regulations or other authority, or if such regulations or other authority require
or permit a designation of the Options which shall cease to constitute Incentive Stock Options,
then such Incentive Stock Options, only to the extent of such excess, shall automatically be deemed
to be Nonstatutory Stock Options but all other terms and conditions of such Incentive Stock
Options, and the corresponding Incentive Agreement, shall remain unchanged.
8
2.3 Stock Option Exercises
(a) Method of Exercise and Payment. Stock Options shall be exercised by the delivery
of a signed written notice of exercise to the Company as of a date set by the Company in advance of
the effective date of the proposed exercise. The notice shall set forth the number of Shares with
respect to which the Option is to be exercised.
The Option Price upon exercise of any Stock Option shall be payable to the Company in full
either: (i) in cash or its equivalent, or (ii) by tendering previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the Option Price, or (iii) by
withholding Shares which otherwise would be acquired on exercise having an aggregate Fair Market
Value at the time of exercise equal to the total Option Price, or (iv) by any combination of (i),
(ii), and (iii) above. Any payment in Shares shall be effected by surrender of such Shares to the
Company in good form for transfer and shall be valued at their Fair Market Value on the date when
the Stock Option is exercised. The Company shall not withhold shares, and the Grantee shall not
surrender, or attest to the ownership of, Shares in payment of the Option Price if such action
would cause the Company to recognize compensation expense (or additional compensation expense) with
respect to the Stock Option for financial reporting purposes.
While the Company is a Publicly Held Corporation, the Committee may also allow the Option
Price to be paid with such other consideration as shall constitute lawful consideration for the
issuance of Shares (including, without limitation, effecting a cashless exercise with a broker or
dealer), subject to applicable securities law restrictions and tax withholdings, or by any other
means which the Committee determines to be consistent with the Plans purpose and applicable law.
As soon as practicable after receipt of a written notification of exercise and full payment,
the Company shall deliver, or cause to be delivered, to or on behalf of the Grantee, in the name of
the Grantee or other appropriate recipient, Share certificates for the number of Shares purchased
under the Stock Option. Such delivery shall be effected for all purposes when the Company or a
stock transfer agent of the Company shall have deposited such certificates in the United States
mail, addressed to Grantee or other appropriate recipient.
Subject to Section 7.2 during the lifetime of a Grantee, each Option granted to him
shall be exercisable only by the Grantee (or his legal guardian or personal representative in the
event of his Disability) or by a broker or dealer acting on his behalf pursuant to a cashless
exercise under the foregoing provisions of this Section 2.3(a).
(b) Restrictions on Share Transferability. The Committee may impose such restrictions
on any Shares acquired pursuant to the exercise of a Stock Option as it may deem advisable,
including, without limitation, restrictions under (i) any stockholders agreement, buy/sell
agreement, right of first refusal, non-competition, and any other agreement between the Company and
any of its securities holders or employees, (ii) any applicable federal securities laws, (iii) the
requirements of any stock exchange or market upon which such Shares are then listed and/or quoted,
or (iv) any blue sky or state securities law applicable to such Shares. Any certificate issued to
evidence Shares issued upon the exercise of an Incentive Award may bear such legends and statements
as the Committee shall deem advisable to assure compliance with federal and state laws and
regulations.
Any Grantee or other person exercising an Incentive Award may be required by the Committee to
give a written representation that the Incentive Award and the Shares subject to the Incentive
Award will be acquired for investment and not with a view to public distribution; provided,
however, that the Committee, in its sole discretion, may release any person receiving an Incentive
Award from any such representations either prior to or subsequent to the exercise of the Incentive
Award.
(c) Notification of Disqualifying Disposition of Shares from Incentive Stock Options.
Notwithstanding any other provision of the Plan, a Grantee who disposes of Shares of Common Stock
acquired upon the exercise of an Incentive Stock Option by a sale or exchange either (i) within two
(2) years after the date of the grant of the Incentive Stock Option under which the Shares were
acquired or (ii) within one (1) year after the transfer of such Shares to him pursuant to exercise,
shall promptly notify the Company of such disposition, the amount realized and his adjusted basis
in such Shares.
(d) Proceeds of Option Exercise. The proceeds received by the Company from the sale
of Shares pursuant to Stock Options exercised under the Plan shall be used for general corporate
purposes.
(e) Information Required in Connection with Exercise of Incentive Stock Option. The
Company shall provide the Grantee with a written statement required by Section 6039 of the Code no
later than January 31 of the year following the calendar year during which the Grantee exercises an
Option that is intended to be an Incentive Stock Option.
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2.4 Stock Appreciation Rights in Tandem with Nonstatutory Stock Options
(a) Grant. The Committee may, at the time of grant of a Nonstatutory Stock Option, or
at any time thereafter during the term of the Nonstatutory Stock Option, grant Stock Appreciation
Rights with respect to all or any portion of the Shares of Common Stock covered by such
Nonstatutory Stock Option. A Stock Appreciation Right in tandem with a Nonstatutory Stock Option is
referred to herein as a Tandem SAR.
(b) General Provisions. The terms and conditions of each Tandem SAR shall be
evidenced by an Incentive Agreement. The Option Price per Share of a Tandem SAR shall be fixed in
the Incentive Agreement and shall not be less than one hundred percent (100%) of the Fair Market
Value of a Share on the grant date of the Nonstatutory Stock Option to which it relates.
(c) Exercise. A Tandem SAR may be exercised at any time the Nonstatutory Stock Option
to which it relates is then exercisable, but only to the extent such Nonstatutory Stock Option is
exercisable, and shall otherwise be subject to the conditions applicable to such Nonstatutory Stock
Option. When a Tandem SAR is exercised, the Nonstatutory Stock Option to which it relates shall
terminate to the extent of the number of Shares with respect to which the Tandem SAR is exercised.
Similarly, when a Nonstatutory Stock Option is exercised, the Tandem SARs relating to the Shares
covered by such Nonstatutory Stock Option exercise shall terminate.
(d) Settlement. Upon exercise of a Tandem SAR, the holder shall receive, for each
Share specified in the Tandem SAR grant, an amount equal to the Appreciation. The Appreciation
shall be payable in cash, Common Stock, or a combination of both, as specified in the Incentive
Agreement. The Appreciation shall be paid within 30 calendar days of the exercise of the Tandem
SAR. If the Appreciation is to be paid in Common Stock or cash only, the resulting shares or cash
shall be determined dividing (1) by (2), where (1) is the number of Shares as to which the Tandem
SAR is exercised multiplied by the Appreciation in such shares and (2) is the Fair Market Value of
a Share on the exercise date. If a portion of the Appreciation is to be paid in Shares, the Share
amount shall be determined by calculating the amount of cash payable pursuant to the preceding
sentence then by dividing (1) as defined herein, minus the amount of cash payable, by (2) as
defined herein.
2.5 Stock Appreciation Rights Independent of Nonstatutory Stock Options
(a) Grant. The Committee may grant Stock Appreciation Rights independent of
Nonstatutory Stock Options (Independent SARs).
(b) General Provisions. The terms and conditions of each Independent SAR shall be
evidenced by an Incentive Agreement. The exercise price per share of Common Stock shall be not less
than one hundred percent (100%) of the Fair Market Value of a Share of Common Stock on the date of
grant of the Independent SAR. The term of an Independent SAR shall be determined by the Committee.
(c) Exercise. Independent SARs shall be exercisable at such time and subject to such
terms and conditions as the Committee shall specify in the Incentive Agreement for the Independent
SAR grant.
(d) Settlement. Upon exercise of an Independent SAR, the holder shall receive, for
each Share specified in the Independent SAR grant, an amount equal to the Spread. The Spread shall
be payable in cash, Common Stock, or a combination of both, as specified in the Incentive
Agreement. The Spread shall be paid within 30 calendar days of the exercise of the Independent SAR.
If the Spread is to be paid in Common Stock or cash only, the resulting shares or cash shall be
determined by dividing (1) by (2), where (1) is the number of Shares as to which the Independent
SAR is exercised multiplied by the Spread in such Shares and (2) is the Fair Market Value of a
Share on the exercise date. If a portion of the Spread is to be paid in Shares, the Share amount
shall be determined by calculating the amount of cash payable pursuant to the preceding sentence
then by dividing (1) as defined herein, minus the amount of cash payable, by (2) as defined herein.
2.6 Supplemental Payment on Exercise of Nonstatutory Stock Options or Stock Appreciation
Rights
The Committee, either at the time of grant or as of the time of exercise of any Nonstatutory
Stock Option or Stock Appreciation Right, may provide in the Incentive Agreement for a Supplemental
Payment by the Company to the Grantee with respect to the exercise of any Nonstatutory Stock Option
or Stock Appreciation Right. The Supplemental Payment shall be in the amount specified by the
Committee, which amount shall not exceed the amount necessary to pay the federal and state income
tax payable with respect to both the exercise of the Nonstatutory Stock Option and/or Stock
Appreciation Right and the receipt of the Supplemental Payment, assuming the holder is taxed at
either the maximum effective income tax rate applicable thereto or at a lower tax rate as deemed
appropriate by the Committee. The Committee shall have the discretion to grant Supplemental
Payments that are payable solely in cash or Supplemental Payments that are payable in cash, Common
Stock, or a combination of both, as determined by the Committee at the time of payment.
10
SECTION 3
PERFORMANCE SHARES
PERFORMANCE SHARES
3.1 Performance Based Awards
(a) Grant. The Committee is authorized to grant Performance Shares to selected
Grantees who are Employees or Consultants. Each grant of Performance Shares shall be evidenced by
an Incentive Agreement in such amounts and upon such terms as shall be determined by the Committee.
The Committee may make grants of Performance Shares in such a manner that more than one Performance
Period is in progress concurrently. For each Performance Period, the Committee shall establish the
number of Performance Shares and their contingent values which may vary depending on the degree to
which performance criteria established by the Committee are met.
(b) Performance Criteria.
(i) The grant of Performance Shares shall be subject to such conditions, restrictions and
contingencies, as determined by the Committee.
(ii) The Committee may designate a grant of Performance Shares to any Grantee as intended to
qualify for the Performance-Based Exception. To the extent required by Code section 162(m), any
grant of Performance Shares so designated shall be conditioned on the achievement of one or more
performance goals, subject to the following:
(A) The performance goals shall be based upon criteria in one or more of the following
categories: performance of the Company as a whole, performance of a segment of the Companys
business, and individual performance. Performance criteria for the Company shall relate to the
achievement of predetermined financial objectives for the Company and its Subsidiaries on a
consolidated basis. Performance criteria for a segment of the Companys business shall relate to
the achievement of financial and operating objectives of the segment for which the Grantee is
accountable.
(B) Performance criteria shall include pre-tax or after-tax profit levels, including:
earnings per share, earnings before interest and taxes, earnings before interest, taxes,
depreciation and amortization, net operating profits after tax, and net income; total shareholder
return; return on assets, equity, capital or investment; cash flow and cash flow return on
investment; economic value added and economic profit; growth in earnings per share; levels of
operating expense and maintenance expense; or measures of customer satisfaction and customer
service, as determined from time to time including the relative improvement therein.
(C) Individual performance criteria shall relate to a Grantees overall performance, taking
into account, among other measures of performance, the attainment of individual goals and
objectives. The performance goals may differ among Grantees.
(c) Modification. If the Committee determines, in its discretion exercised in good
faith, that the established performance measures or objectives are no longer suitable to the
Companys objectives because of a change in the Companys business, operations, corporate
structure, capital structure, or other conditions the Committee deems to be appropriate, the
Committee may modify the performance measures and objectives to the extent it considers to be
necessary. However, if any Performance Shares are designated as intended to qualify for the
Performance-Based Exception, no such modification shall be made to the extent the modification
would otherwise cause the Performance Shares to not qualify for the Performance-Based Exception.
(d) Payment. The basis for payment of Performance Shares for a given Performance
Period shall be the achievement of those performance objectives determined by the Committee at the
beginning of the Performance Period as specified in the Grantees Incentive Agreement. If minimum
performance is not achieved for a Performance Period, no payment shall be made and all contingent
rights shall cease. If minimum performance is achieved or exceeded, the number of Performance
Shares may be based on the degree to which actual performance exceeded the pre-established minimum
performance standards. The amount of payment shall be determined by multiplying the number of
Performance Shares granted at the beginning of the Performance Period times the final Performance
Share value. Payments shall be made in cash or Common Stock in the discretion of the Committee as
specified in the Incentive Agreement.
(e) Special Rule for Covered Employees. No later than the ninetieth (90th) day
following the beginning of a Performance Period (or twenty-five percent (25%) of the Performance
Period) the Committee shall establish performance goals as described in Section 3.1(b)
applicable to Performance Shares awarded to Covered Employees in such a manner as shall permit
payments with respect thereto to
11
qualify for the Performance-Based Exception, if applicable. If a Performance Share granted to
a Covered Employee is intended to comply with the Performance-Based Exception, the Committee in
establishing performance goals shall comply with Treasury Regulation § 1.162-27(e)(2) (or its
successor). As soon as practicable following the Companys determination of the Companys financial
results for any Performance Period, the Committee shall certify in writing: (i) whether the Company
achieved its minimum performance for the objectives for the Performance Period, (ii) the extent to
which the Company achieved its performance objectives for the Performance Period, (iii) any other
terms that are material to the grant of Performance Shares, and (iv) the calculation of the
payments, if any, to be paid to each Grantee for the Performance Period.
SECTION 4
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
4.1 Grant of Restricted Stock or Restricted Stock Units
Subject to the terms and provisions of the Plan, the Committee, at any time and from time to
time, may grant Restricted Stock and/or Restricted Stock Units to Grantees 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 Grantee on the date of grant.
4.2 Restricted Stock Award or Restricted Stock Unit Award Terms
(a) Written Agreement. The terms and conditions of each grant of Restricted Stock
Award and/or Restricted Stock Unit Award shall be evidenced by an Incentive 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.
(b) Transferability. Except as provided in this Plan or an Incentive Agreement,
Restricted Stock and/or Restricted Stock Units granted herein may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Incentive Agreement (and in the case
of Restricted Stock Units until the date of delivery or other payment), or upon earlier
satisfaction of any other conditions, as specified by the Committee, in its sole discretion, and
set forth in the Incentive Agreement or otherwise at any time by the Committee. All rights with
respect to the Restricted Stock and/or Restricted Stock Units granted to a Grantee under the Plan
shall be available during his lifetime only to such Grantee, except as otherwise provided in an
Incentive Agreement or at any time by the Committee.
(c) Other Restrictions. The Committee shall impose such other conditions and/or
restrictions on any Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it
may deem advisable including, without limitation, a requirement that Grantees 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 Companys 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 Section 4, shares of Restricted Stock covered by
each Restricted Stock Award shall become freely transferable by the Grantee after all conditions
and restrictions applicable to such shares have been satisfied or lapse (including satisfaction of
any applicable tax withholding obligations) at the close of the Period of Restriction (but no later
than 2 1/2 months following the end of the year that contains the close of the Period of
Restriction), or as soon as practicable thereafter. 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.
(d) Certificate Legend. In addition to any legends placed on certificates pursuant to
Section 7.1(c), each certificate representing Restricted Stock granted pursuant to the 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 SIXTH amended and restated 2004 long-term incentive
plan, and in the associated incentive agreement. a copy of the plan and such
incentive agreement may be obtained from Ion Geophysical Corporation.
12
(e) Voting Rights. Unless otherwise determined by the Committee or as otherwise set
forth in a Grantees Incentive Agreement, to the extent permitted or required by law, as determined
by the Committee, Grantees holding shares of Restricted Stock granted hereunder may be granted the
right to exercise full voting rights with respect to those shares during the Period of Restriction.
A Grantee shall have no voting rights with respect to any Restricted Stock Units granted hereunder.
(f) Termination of Employment. Each Incentive Agreement shall set forth the extent to
which the Grantee shall have the right to retain Restricted Stock and/or Restricted Stock Units
following termination of the Grantees 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 Incentive Agreement entered into with
each Grantee, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units
issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
(g) Section 83(b) Election. The Committee may provide in an Incentive Agreement that
the Award of Restricted Stock is conditioned upon the Grantee making or refraining from making an
election with respect to the Award under Section 83(b) of the Code. If a Grantee makes an election
pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Grantee shall be
required to file promptly a copy of such election with the Company.
4.3 Supplemental Payment on Vesting of Restricted Stock and Restricted Stock Units
The Committee, either at the time of grant or at the time of vesting of Restricted Stock or
Restricted Stock Units, may provide for a Supplemental Payment by the Company to the Grantee in an
amount specified by the Committee, which amount shall not exceed the amount necessary to pay the
federal and state income tax payable with respect to both the vesting of such Restricted Stock or
Restricted Stock Units and receipt of the Supplemental Payment, assuming the Grantee is taxed at
either the maximum effective income tax rate applicable thereto or at a lower tax rate as seemed
appropriate by the Committee. The Committee shall also have the discretion to grant Supplemental
Payments that are payable in Common Stock.
SECTION 5
OTHER STOCK-BASED AWARDS
OTHER STOCK-BASED AWARDS
5.1 Grant of Other Stock-Based Awards
Other Stock-Based Awards may be awarded by the Committee to selected Grantees that are
denominated or payable in, valued in whole or in part by reference to, or otherwise related to,
Shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan
and the goals of the Company. Other types of Stock-Based Awards include, without limitation,
Deferred Stock, purchase rights, Shares of Common Stock awarded which are not subject to any
restrictions or conditions, convertible or exchangeable debentures, other rights convertible into
Shares, Incentive Awards valued by reference to the value of securities of or the performance of a
specified Subsidiary, division or department, and settlement in cancellation of rights of any
person with a vested interest in any other plan, fund, program or arrangement that is or was
sponsored, maintained or participated in by the Company or any Parent or Subsidiary. As is the case
with other Incentive Awards, Other Stock-Based Awards may be awarded either alone or in addition to
or in tandem with any other Incentive Awards.
5.2 Other Stock-Based Award Terms
(a) Written Agreement. The terms and conditions of each grant of an Other Stock-Based
Award shall be evidenced by an Incentive Agreement.
(b) Purchase Price. Except to the extent that an Other Stock-Based Award is granted
in substitution for an outstanding Incentive Award or is delivered upon exercise of a Stock Option,
the amount of consideration required to be received by the Company shall be either (i) no
consideration other than services actually rendered (in the case of authorized and unissued shares)
or to be rendered, or (ii) in the case of an Other Stock-Based Award in the nature of a purchase
right, consideration (other than services rendered or to be rendered) at least equal to 50% of the
Fair Market Value of the Shares covered by such grant on the date of grant (or such percentage
higher than 50% that is required by any applicable tax or securities law).
(c) Performance Criteria and Other Terms. In its discretion, the Committee may
specify such criteria, periods or goals for vesting in Other Stock-Based Awards and payment thereof
to the Grantee as it shall determine; and the extent to which such criteria, periods or goals have
been met shall be determined by the Committee. All terms and conditions of Other Stock-Based Awards
shall be
13
determined by the Committee and set forth in the Incentive Agreement. The Committee may also
provide for a Supplemental Payment similar to such payment as described in Section 4.3.
(d) Payment. Other Stock-Based Awards may be paid in Shares of Common Stock or other
consideration related to such Shares, in a single payment or in installments on such dates as
determined by the Committee, all as specified in the Incentive Agreement.
(e) Dividends. The Grantee of an Other Stock-Based Award may be entitled to receive,
currently or on a deferred basis, dividends or dividend equivalents with respect to the number of
Shares covered by the Other Stock-Based Award, as determined by the Committee and set forth in the
Incentive Agreement. The Committee may also provide in the Incentive Agreement that such amounts
(if any) shall be deemed to have been reinvested in additional Shares of Common Stock.
SECTION 6
PROVISIONS RELATING TO NON-EMPLOYEE DIRECTOR AWARDS
PROVISIONS RELATING TO NON-EMPLOYEE DIRECTOR AWARDS
6.1 Generally
All Awards to Non-Employee Directors shall be determined by the Board or Committee.
6.2 Vesting Period
Unless the Committee shall otherwise prescribe or as otherwise specified in an applicable
Incentive Agreement, each Incentive Award granted to a Non-Employee Director shall vest as follows:
(a) each Incentive Award granted to a Non-Employee Director under the Plan during his
initial year of service as a Non-Employee Director, if any, shall vest in 33.33% consecutive
annual installments on the first, second and third anniversary dates of the date of grant of each
such Incentive Award;
(b) each Incentive Award granted to a Non-Employee Director under the Plan during his second
full year of service as a Non-Employee Director, if any, shall vest in 50% consecutive annual
installments on the first and second anniversary dates of the Date of Grant of each such
Incentive Award;
(c) each Incentive Award granted to a Non-Employee Director under the Plan during his third
full year of service as a Non-Employee Director, if any, shall fully vest on the first
anniversary date of the date of grant of each such Incentive Award; and
(d) each Incentive Award granted to a Non-Employee Director following the completion of his
third full year of service as a Non-Employee Director, if any, shall be fully vested on the date
of grant.
SECTION 7
PROVISIONS RELATING TO PLAN PARTICIPATION
PROVISIONS RELATING TO PLAN PARTICIPATION
7.1 Plan Conditions
(a) Incentive Agreement. Each Grantee to whom an Incentive Award is granted shall be
required to enter into an Incentive Agreement with the Company, in such a form as is provided by
the Committee. The Incentive Agreement shall contain specific terms as determined by the Committee,
in its discretion, with respect to the Grantees particular Incentive Award. Such terms need not be
uniform among all Grantees or any similarly-situated Grantees. The Incentive Agreement may include,
without limitation, vesting, forfeiture and other provisions particular to the particular Grantees
Incentive Award, as well as, for example, provisions to the effect that the Grantee (i) shall not
disclose any confidential information acquired during Employment with the Company, (ii) shall abide
by all the terms and conditions of the Plan and such other terms and conditions as may be imposed
by the Committee, (iii) shall not interfere with the employment or other service of any employee,
(iv) shall not compete with the Company or become involved in a conflict of interest with the
interests of the Company, (v) shall forfeit an Incentive Award as determined by the Committee
(including if terminated for Cause), (vi) shall not be permitted to make an election under Section
83(b) of the Code when applicable, and (vii) shall be subject to any other agreement between the
Grantee and the Company regarding Shares that may be acquired under an Incentive Award including,
without limitation, a stockholders agreement or other agreement restricting the transferability of
Shares by Grantee. An Incentive Agreement shall include such terms and conditions as are determined
by the Committee, in its discretion, to
14
be appropriate with respect to any individual Grantee. The Incentive Agreement shall be signed
by the Grantee to whom the Incentive Award is made and by an Authorized Officer.
(b) No Right to Employment. Nothing in the Plan or any instrument executed pursuant
to the Plan shall create any Employment rights or right to serve on the Board (including without
limitation, rights to continued Employment or to continue to provide services as a Director or
Consultant) by any Grantee or affect the right of the Company to terminate the Employment or
services of any Grantee at any time without regard to the existence of the Plan.
(c) Securities Requirements. The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of 1933 of any Shares of Common Stock to be issued
hereunder or to effect similar compliance under any state laws. Notwithstanding anything herein to
the contrary, the Company shall not be obligated to cause to be issued or delivered any
certificates evidencing Shares pursuant to the Plan unless and until the Company is advised by its
counsel that the issuance and delivery of such certificates is in compliance with all applicable
laws, regulations of governmental authorities, and the requirements of any securities exchange or
national quotation system on which Shares are traded or quoted. The Committee may require, as a
condition of the issuance and delivery of certificates evidencing Shares of Common Stock pursuant
to the terms hereof, that the recipient of such Shares make such covenants, agreements and
representations, and that such certificates bear such legends, as the Committee, in its discretion,
deems necessary or desirable.
If the Shares issuable on exercise of an Incentive Award are not registered under the
Securities Act of 1933, the Company may imprint on the certificate for such Shares the following
legend or any other legend which counsel for the Company considers necessary or advisable to comply
with the Securities Act of 1933:
The shares of stock represented by this certificate have not been registered
under the securities act of 1933 or under the securities laws of any state and may
not be sold or transferred except upon such registration or upon receipt by the
corporation of an opinion of counsel satisfactory to the corporation, in form and
substance satisfactory to the corporation, that registration is not required for such
sale or transfer.
7.2 Transferability
Incentive Awards granted under the Plan shall not be transferable or assignable, pledged, or
otherwise encumbered other than by will or the laws of descent and distribution. However, only with
respect to Incentive Awards that are not Incentive Stock Options, the Committee may, in its
discretion, authorize all or a portion of the Nonstatutory Stock Options to be granted on terms
which permit transfer by the Grantee to (i) the members of the Grantees Immediate Family, (ii) a
trust or trusts for the exclusive benefit of Immediate Family members, (iii) a partnership in which
Immediate Family members are the only partners, (iv) any other entity owned solely by Immediate
Family members, or (v) pursuant to a domestic relations order that would qualify under Code Section
414(p); provided that (A) the Incentive Agreement pursuant to which such Nonstatutory Stock Options
are granted must expressly provide for transferability in a manner consistent with this Section
7.2, (B) the actual transfer must be approved in advance by the Committee, and (C) subsequent
transfers of transferred Nonstatutory Stock Options shall be prohibited except in accordance with
the first sentence of this section. Following any permitted transfer, the Nonstatutory Stock Option
shall continue to be subject to the same terms and conditions as were applicable immediately prior
to transfer, provided that the term Grantee (subject to the immediately succeeding paragraph)
shall be deemed to refer to the transferee. The events of termination of employment, as set out in
Section 7.6 and in the Incentive Agreement, shall continue to be applied with respect to
the original Grantee, and the Incentive Award shall be exercisable by the transferee only to the
extent, and for the periods, specified in the Incentive Agreement.
Except as may otherwise be permitted under the Code, in the event of a permitted transfer of a
Nonstatutory Stock Option hereunder, the original Grantee shall remain subject to withholding taxes
upon exercise. In addition, the Company and the Committee shall have no obligation to provide any
notices to any Grantee or transferee thereof, including, for example, notice of the expiration of
an Incentive Award following the original Grantees termination of employment.
The designation by a Grantee of a beneficiary of an Incentive Award shall not constitute a
transfer of the Incentive Award. No transfer by will or by the laws of descent and distribution
shall be effective to bind the Company unless the Committee has been furnished with a copy of the
deceased Grantees enforceable will or such other evidence as the Committee deems necessary to
establish the validity of the transfer. Any attempted transfer in violation of this Section
7.2 shall be void and ineffective. The Committee in its discretion shall make all
determinations under this Section 7.2.
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7.3 Rights as a Stockholder
(a) No Stockholder Rights. Except as otherwise set forth in Section 4, a
Grantee of an Incentive Award (or a permitted transferee of such Grantee) shall have no rights as a
stockholder with respect to any Shares of Common Stock until the issuance of a stock certificate
for such Shares.
(b) Representation of Ownership. In the case of the exercise of an Incentive Award by
a person or estate acquiring the right to exercise such Incentive Award by reason of the death or
Disability of a Grantee, the Committee may require reasonable evidence as to the ownership of such
Incentive Award or the authority of such person and may require such consents and releases of
taxing authorities as the Committee may deem advisable.
7.4 Listing and Registration of Shares of Common Stock
The exercise of any Incentive Award granted hereunder shall only be effective at such time as
counsel to the Company shall have determined that the issuance and delivery of Shares of Common
Stock pursuant to such exercise is in compliance with all applicable laws, regulations of
governmental authorities and the requirements of any securities exchange or quotation system on
which Shares of Common Stock are traded or quoted. The Committee may, in its discretion, elect to
suspend the right to exercise any Incentive Award during any Company-imposed employee blackout
stock trading period that is necessary or desirable to comply with requirements of such laws,
regulations or requirements. The Committee may also, in its discretion, elect to extend the period
for exercise of any Incentive Award to reflect any such blackout period. The Committee may, in
its discretion, defer the effectiveness of any exercise of an Incentive Award in order to allow the
issuance of Shares of Common Stock to be made pursuant to registration or an exemption from
registration or other methods for compliance available under federal or state securities laws. The
Committee shall inform the Grantee in writing of its decision to defer the effectiveness of the
exercise of an Incentive Award.
7.5 Change in Stock and Adjustments
(a) Changes in Law. Subject to Section 7.7 (which only applies in the event
of a Change of Control), in the event of any change in applicable law which warrants equitable
adjustment because it interferes with the intended operation of the Plan, then, if the Committee
should determine, in its absolute discretion, that such change equitably requires an adjustment in
the number or kind of shares of stock or other securities or property theretofore subject, or which
may become subject, to issuance or transfer under the Plan or in the terms and conditions of
outstanding Incentive Awards, such adjustment shall be made in accordance with such determination.
Such adjustments may include changes with respect to (i) the aggregate number of Shares that may be
issued under the Plan, (ii) the number of Shares subject to Incentive Awards, and (iii) the price
per Share for outstanding Incentive Awards. Any adjustment under this paragraph of an outstanding
Incentive Stock Option shall be made only to the extent not constituting a modification within
the meaning of Section 424(h)(3) of the Code unless otherwise agreed to by the Grantee in writing.
The Committee shall give notice to each applicable Grantee of such adjustment, which shall be
effective and binding.
(b) Exercise of Corporate Powers. The existence of the Plan or outstanding Incentive
Awards hereunder shall not affect in any way the right or power of the Company or its stockholders
to make or authorize any or all adjustments, re-capitalizations, reorganizations or other changes
in the Companys capital structure or its business or any merger or consolidation of the Company,
or any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise.
(c) Recapitalization of the Company. Subject to Section 7.7 (which only
applies in the event of a Change in Control), in the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or
other property), re-capitalization, stock split, reverse stock split, rights offering,
reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision,
repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event affects the Common Stock such that an adjustment is determined by
the Committee to be appropriate to prevent the dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee shall, in such manner as
it deems equitable, adjust any or all of (i) the number of shares and type of Common Stock (or the
securities or property) which thereafter may be made the subject of Incentive Awards, (ii) the
number of shares and type of Common Stock (or other securities or property) subject to outstanding
Incentive Awards, (iii) the number of shares and type of Common Stock (or other securities or
property) subject to the annual per-individual limitation under Section 1.4(a) of the Plan,
(iv) the Option Price of each outstanding Incentive Award, and (v) the number of or Option Price of
Shares of Common Stock then subject to outstanding SARs previously granted and unexercised under
the Plan to the end that the same proportion of the Companys issued and outstanding shares of
Common Stock in each instance shall remain subject to exercise at the same aggregate Option Price;
provided however, that the
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number of Shares of Common Stock (or other securities or property) subject to any Incentive
Award shall always be a whole number. In lieu of the foregoing, if deemed appropriate, the
Committee may make provision for a cash payment to the holder of an outstanding Incentive Award.
Notwithstanding the foregoing, no such adjustment or cash payment shall be made or authorized to
the extent that such adjustment or cash payment would cause the Plan or any Stock Option to violate
Section 422 of the Code. Such adjustments shall be made in accordance with the rules of any
securities exchange, stock market, or stock quotation system to which the Company is subject.
Upon the occurrence of any such adjustment or cash payment, the Company shall provide notice
to each affected Grantee of its computation of such adjustment or cash payment, which shall be
conclusive and shall be binding upon each such Grantee.
(d) Issue of Common Stock by the Company. Except as herein above expressly provided
in this Section 7.5 and subject to Section 7.7 in the event of a Change in Control,
the issue by the Company of shares of stock of any class, or securities convertible into shares of
stock of any class, for cash or property, or for labor or services, either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, or upon any conversion of shares or
obligations of the Company convertible into such shares or other securities, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of, or Fair Market Value
of, any Incentive Awards then outstanding under previously granted Incentive Awards.
(e) Assumption of Incentive Awards by a Successor. Unless otherwise determined by the
Committee in its discretion pursuant to the next paragraph, but subject to the accelerated vesting
and other provisions of Section 7.7 that apply in the event of a Change in Control, in the
event of a Corporate Event (defined below), each Grantee shall be entitled to receive, in lieu of
the number of Shares subject to Incentive Awards, such shares of capital stock (or other securities
or property) as may be issuable or payable with respect to or in exchange for the number of Shares
which Grantee would have received had he exercised the Incentive Award immediately prior to such
Corporate Event, together with any adjustments (including, without limitation, adjustments to the
Option Price and the number of Shares issuable on exercise of outstanding Stock Options). A
Corporate Event means any of the following: (i) a dissolution or liquidation of the Company, (ii)
a sale of all or substantially all of the Companys assets, or (iii) a merger, consolidation or
combination involving the Company (other than a merger, consolidation or combination (A) in which
the Company is the continuing or surviving corporation and (B) which does not result in the
outstanding Shares being converted into or exchanged for different securities, cash or other
property, or any combination thereof). The Committee shall take whatever other action it deems
appropriate to preserve the rights of Grantees holding outstanding Incentive Awards.
Subject to the accelerated vesting and other provisions of Section 7.7 that apply in
the event of a Change in Control, in the event of a Corporate Event, the Committee in its
discretion shall have the right and power to:
(i) cancel, effective immediately prior to the occurrence of the Corporate Event, each
outstanding Incentive Award (whether or not then exercisable) and, in full consideration of such
cancellation, pay to the Grantee an amount in cash equal to the excess of (A) the value, as
determined by the Committee, of the property (including cash) received by the holders of Common
Stock as a result of such Corporate Event over (B) the exercise price of such Incentive Award, if
any; or
(ii) provide for the exchange or substitution of each Incentive Award outstanding
immediately prior to such Corporate Event (whether or not then exercisable) for another award
with respect to the Common Stock or other property for which such Incentive Award is exchangeable
and, incident thereto, make an equitable adjustment as determined by the Committee, in its
discretion, in the exercise price of the Incentive Award, if any, or in the number of Shares or
amount of property (including cash) subject to the Incentive Award; or
(iii) provide for the assumption of the Plan and such outstanding Incentive Awards by the
surviving entity or its parent.
The Committee, in its discretion, shall have the authority to take whatever action it deems to
be necessary or appropriate to effectuate the provisions of this Subsection (e).
(f) intentionally deleted.
7.6 Termination of Employment, Death, Disability and Retirement
(a) Termination of Relationship. Unless otherwise expressly provided in the Grantees
Incentive Agreement, if the Grantees Employment or services as a Director or Consultant is
terminated for any reason other than due to his death, Disability, Retirement, or for Cause, any
non-vested portion of any Stock Option or other applicable Incentive Award at the time of such
termination shall
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automatically expire and terminate and no further vesting shall occur after the termination
date. In such event, except as otherwise expressly provided in his Incentive Agreement, the Grantee
shall be entitled to exercise his rights only with respect to the portion of the Incentive Award
that was vested as of his termination of Employment or service date. In such event, except as
otherwise expressly provided in his Incentive Agreement, the Grantee shall be entitled to exercise
his vested Stock Options for a period that shall end on the earlier of (i) the expiration date set
forth in the Incentive Agreement or (ii) one hundred eighty (180) days after the date of his
termination, except with respect to Incentive Stock Options, in which case such period shall be
three (3) months.
(b) Termination for Cause. Unless otherwise expressly provided in the Grantees
Incentive Agreement, in the event of the termination of a Grantees Employment, or service as a
Consultant or Director, for Cause, all vested and non-vested Stock Options and other Incentive
Awards (other than vested Restricted Stock or vested Restricted Stock Units) granted to such
Grantee shall immediately expire, and shall not be exercisable to any extent, as of 12:01 a.m.,
Houston, Texas time, on the date of such termination of Employment or service for cause.
(c) Retirement. Unless otherwise expressly provided in the Grantees Incentive
Agreement, upon the termination of Employment due to the Retirement of any Employee who is a
Grantee:
(i) all of his Stock Options and Stock Appreciation Rights then outstanding shall become
100% vested and immediately and fully exercisable until the earlier of (A) the expiration date
set forth in the Incentive Agreement for such Incentive Award; or (B) the expiration of (1)
twelve months after the date of his termination of Employment due to his Retirement in the case
of any Incentive Award other than an Incentive Stock Option or (2) three months after his
termination date in the case of an Incentive Stock Option;
(ii) any Period of Restriction with respect to any of his Restricted Stock or Restricted
Stock Units shall be deemed to have expired and all restrictions imposed on Restricted Stock or
Restricted Stock Units shall lapse, and each such Incentive Award shall thereupon become free of
all restrictions and fully vested; and
(iii) all of the restrictions and conditions of any of his Other Stock-Based Awards then
outstanding shall be deemed satisfied, and the Period of Restriction with respect thereto shall
be deemed to have expired, and each such Incentive Award shall thereupon become free of all
restrictions and fully vested.
(d) Disability or Death. Unless otherwise expressly provided in the Grantees
Incentive Agreement, upon the termination of Employment or service as a Director due to the
Disability or death of any Employee or Non-Employee Director who is a Grantee:
(i) all of his Stock Options and Stock Appreciation Rights then outstanding shall become
100% vested and immediately and fully exercisable until the earlier of (A) the expiration date
set forth in the Incentive Agreement for such Incentive Award; or (B) the expiration of (1)
twelve months after the date of his termination of Employment due to his Disability or death in
the case of any Incentive Award other than an Incentive Stock Option or (2) three months after
his termination date in the case of an Incentive Stock Option;
(ii) any Period of Restriction with respect to any of his Restricted Stock or Restricted
Stock Unit shall be deemed to have expired and all restrictions imposed on Restricted Stock or
Restricted Stock Units shall lapse, and each such Incentive Award shall thereupon become free of
all restrictions and fully vested; and
(iii) all of the restrictions and conditions of any of his Other Stock-Based Awards then
outstanding shall be deemed satisfied, and the Period of Restriction with respect thereto shall
be deemed to have expired, and each such Incentive Award shall thereupon become free of all
restrictions and fully vested.
In the case of any vested Incentive Stock Option held by an Employee following termination of
Employment, notwithstanding the definition of Disability in Section 1.2, whether the
Employee has incurred a Disability for purposes of determining the length of the Option exercise
period following termination of Employment under this Subsection (d) shall be determined by
reference to Section 22(e)(3) of the Code to the extent required by Section 422(c)(6) of the Code.
The Committee shall determine whether a Disability for purposes of this Subsection (d) has
occurred.
(e) Continuation. Subject to the conditions and limitations of the Plan and
applicable law and regulation in the event that a Grantee ceases to be an Employee or Consultant,
as applicable, for whatever reason, the Committee and Grantee may mutually agree with respect to
any outstanding Option or other Incentive Award then held by the Grantee (i) for an acceleration or
other adjustment in any
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vesting schedule applicable to the Incentive Award, (ii) for a continuation of the exercise
period following termination for a longer period than is otherwise provided under such Incentive
Award, or (iii) to any other change in the terms and conditions of the Incentive Award. In the
event of any such change to an outstanding Incentive Award, a written amendment to the Grantees
Incentive Agreement shall be required.
7.7 Change in Control
In the event of a Change in Control (as defined below), the following actions shall
automatically occur as of the day immediately preceding the Change in Control date unless expressly
provided otherwise in the Grantees Incentive Agreement:
(a) all of the Stock Options and Stock Appreciation Rights then outstanding shall become
100% vested and immediately and fully exercisable;
(b) any Period of Restriction with respect to any Restricted Stock or Restricted Stock Unit
shall be deemed to have expired and all restrictions imposed on Restricted Stock or Restricted
Stock Units shall lapse, and thus each such Incentive Award shall become free of all restrictions
and fully vested;
(c) all of the restrictions and conditions of any Other Stock-Based Awards then outstanding
shall be deemed satisfied, and the Period of Restriction with respect thereto shall be deemed to
have expired, and thus each such Incentive Award shall become free of all restrictions and fully
vested; and
(d) all of the Performance Shares, Restricted Stock, Restricted Stock Units and any Other
Stock-Based Awards shall become fully vested, deemed earned in full, and promptly paid within
thirty (30) days to the affected Grantees without regard to payment schedules and notwithstanding
that the applicable performance cycle, retention cycle or other restrictions and conditions have
not been completed or satisfied.
Notwithstanding any other provision of this Plan, unless otherwise expressly provided in the
Grantees Incentive Agreement, the provisions of this Section 7.7 may not be terminated,
amended, or modified to adversely affect any Incentive Award theretofore granted under the Plan
without the prior written consent of the Grantee with respect to his outstanding Incentive Awards,
subject, however, to the last paragraph of this Section 7.7.
For all purposes of this Plan, a Change in Control of the Company means the occurrence of
any one or more of the following events:
(a) The acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act (a Person)) of beneficial ownership(within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of forty percent (40%) or more of either (i)
the then outstanding shares of common stock of the Company (the Outstanding Company Stock) or
(ii) the combined voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the Outstanding Company Voting Securities);
provided, however, that the following acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Company or any Subsidiary, (ii) any acquisition by the Company
or any Subsidiary or by any employee benefit plan (or related trust) sponsored or maintained by
the Company or any Subsidiary, or (iii) any acquisition by any corporation pursuant to a
reorganization, merger, consolidation or similar business combination involving the Company (a
Merger), if, following such Merger, the conditions described in clauses (i) and (ii) of
Section 7.7(c) (below) are satisfied;
(b) Individuals who, as of the Effective Date, constitute the Board of Directors of the
Company (the Incumbent Board) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to the Effective
Date whose election, or nomination for election by the Companys shareholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (a solicitation by any person or group of persons for
the purpose of opposing a solicitation of proxies or consents by the Board with respect to the
election or removal of Directors at any annual or special meeting of stockholders) or other
actual or threatened solicitation of proxies or consents by or on behalf of a Person other than
the Board;
(c) Consummation of a Merger, unless immediately following such Merger, (i) substantially
all of the holders of the Outstanding Company Voting Securities immediately prior to Merger
beneficially own, directly or indirectly, more than 50% of the common stock of the corporation
resulting from such Merger (or its parent corporation) in substantially the same proportions as
their ownership of Outstanding Company Voting Securities immediately prior to such Merger and
(ii) at least a majority of the members
19
of the board of directors of the corporation resulting from such Merger (or its parent
corporation) were members of the Incumbent Board at the time of the execution of the initial
agreement providing for such Merger; or
(d) The sale or other disposition of all or substantially all of the assets of the Company.
7.8 Exchange of Incentive Awards
The Committee may, in its discretion, permit any Grantee to surrender outstanding Incentive
Awards in order to exercise or realize his rights under other Incentive Awards or in exchange for
the grant of new Incentive Awards, or require holders of Incentive Awards to surrender outstanding
Incentive Awards (or comparable rights under other plans or arrangements) as a condition precedent
to the grant of new Incentive Awards.
SECTION 8
GENERAL
GENERAL
8.1 Effective Date and Grant Period
The amendment and restatement of this Plan is adopted by the Board effective as of February
14, 2008. No Incentive Award that is an Incentive Stock Option shall be granted under the Plan
after ten (10) years from the Effective Date. Unless sooner terminated by action of the Board, this
Plan will terminate at 5:00 p.m. Houston, Texas time, on May 3, 2014. Incentive Awards under this
Plan may not be granted after that date, but any Incentive Award duly granted before that date will
continue to be effective in accordance with its terms and conditions.
8.2 Funding and Liability of Company
No provision of the Plan shall require the Company, for the purpose of satisfying any
obligations under the Plan, to purchase assets or place any assets in a trust or other entity to
which contributions are made, or otherwise to segregate any assets. In addition, the Company shall
not be required to maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for purposes of the Plan.
Although bookkeeping accounts may be established with respect to Grantees who are entitled to cash,
Common Stock or rights thereto under the Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Company shall not be required to segregate any assets that may at any
time be represented by cash, Common Stock or rights thereto. The Plan shall not be construed as
providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a
trustee of any cash, Common Stock or rights thereto. Any liability or obligation of the Company to
any Grantee with respect to an Incentive Award shall be based solely upon any contractual
obligations that may be created by this Plan and any Incentive Agreement, and no such liability or
obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any
property of the Company. Neither the Company, the Board nor the Committee shall be required to give
any security or bond for the performance of any obligation that may be created by the Plan.
8.3 Withholding Taxes
(a) Tax Withholding. The Company shall have the power and the right to deduct or
withhold, or require a Grantee to remit to the Company, an amount sufficient to satisfy federal,
state, and local taxes, domestic or foreign, required by law or regulation to be withheld with
respect to any taxable event arising as a result of the Plan or an Incentive Award hereunder.
(b) Share Withholding. With respect to tax withholding required upon the exercise of
Stock Options or SARs, or upon any other taxable event arising as a result of any Incentive Awards,
Grantees may elect, subject to the approval of the Committee in its discretion, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair
Market Value on the date the tax is to be determined equal to the minimum withholding tax which
could be imposed on the transaction. All such elections shall be made in writing, signed by the
Grantee, and shall be subject to any restrictions or limitations that the Committee, in its
discretion, deems appropriate.
8.4 No Guarantee of Tax Consequences
Neither the Company nor the Committee makes any commitment or guarantee that any federal,
state or local tax treatment will apply or be available to any person participating or eligible to
participate hereunder.
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8.5 Designation of Beneficiary by Grantee
Each Grantee may, from time to time, name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid in case of his death
before he receives any or all of such benefit. Each such designation shall revoke all prior
designations by the same Grantee, shall be in a form prescribed by the Committee, and will be
effective only when filed by the Grantee in writing with the Committee during the Grantees
lifetime. In the absence of any such designation, benefits remaining unpaid at the Grantees death
shall be paid to the Grantees estate.
8.6 Amendment and Termination
The Board shall have the power and authority to terminate or amend the Plan at any time. No
termination, amendment, or modification of the Plan shall adversely affect in any material way any
outstanding Incentive Award previously granted to a Grantee under the Plan, without the written
consent of such Grantee or other designated holder of such Incentive Award.
In addition, to the extent that the Committee determines that (a) the listing or qualification
requirements of any national securities exchange or quotation system on which the Companys Common
Stock is then listed or quoted, if applicable, or (b) the Code (or regulations promulgated
thereunder), require stockholder approval in order to maintain compliance with such listing or
quotation system requirements or to maintain any favorable tax advantages or qualifications, then
the Plan shall not be amended in such respect without approval of the Companys stockholders.
8.7 Governmental Entities and Securities Exchanges
The granting of Incentive Awards and the issuance of Shares under the Plan shall be subject to
all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required. Certificates evidencing shares of Common Stock
delivered under this Plan (to the extent that such shares are so evidenced) may be subject to such
stop transfer orders and other restrictions as the Committee may deem advisable under the rules and
regulations of the Securities and Exchange Commission, any securities exchange or transaction
reporting system upon which the Common Stock is then listed or to which it is admitted for
quotation, and any applicable federal or state securities law, if applicable. The Committee may
cause a legend or legends to be placed upon such certificates (if any) to make appropriate
reference to such restrictions.
8.8 Successors to Company
All obligations of the Company under the Plan with respect to Incentive Awards granted
hereunder shall be binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
8.9 Miscellaneous Provisions
(a) No Employee or Consultant, or other person shall have any claim or right to be granted an
Incentive Award under the Plan. Neither the Plan, nor any action taken hereunder, shall be
construed as giving any Employee, Director or Consultant, any right to be retained in the
Employment or other service of the Company or any Parent or Subsidiary.
(b) By accepting any Incentive Award, each Grantee and each person claiming by or through him
shall be deemed to have indicated his acceptance of the Plan.
(c) Performance-based awards granted under the Plan to a Grantee who is subject to the
Companys Compensation Recoupment Policy, as may be amended from time to time, may be reduced or
subject to recoupment pursuant to the terms and conditions of such policy.
8.10 Severability
In the event that any provision of this Plan shall be held illegal, invalid or unenforceable
for any reason, such provision shall be fully severable, but shall not affect the remaining
provisions of the Plan, and the Plan shall be construed and enforced as if the illegal, invalid, or
unenforceable provision was not included herein.
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8.11 Gender, Tense and Headings
Whenever the context so requires, words of the masculine gender used herein shall include the
feminine and neuter, and words used in the singular shall include the plural. Section headings as
used herein are inserted solely for convenience and reference and constitute no part of the
interpretation or construction of the Plan.
8.12 Governing Law
The Plan shall be interpreted, construed and constructed in accordance with the laws of the
State of Texas without regard to its conflicts of law provisions, except as may be superseded by
applicable laws of the United States or applicable provisions of the Delaware General Corporation
Law.
8.13 Successor to Director Plan
This Plan shall serve as the successor to the Director Plan. All outstanding Awards under the
Director Plan shall continue to be governed solely by the terms and conditions of the instrument
evidencing such grant or issuance. Notwithstanding any provision in this Plan to the contrary, no
provision of this Plan is intended to modify, extend or renew any option granted under the Director
Plan. Any provision in this Plan that is contrary to a provision in the Director Plan that would
create a modification, extension or renewal of such option is hereby incorporated into this Plan.
All terms, conditions and limitations, if any, that are set forth in any previously granted option
agreement shall remain in full force and effect under the terms of the Plan pursuant to which it
was issued.
8.14 Deferred Compensation
This Plan and any Incentive Agreement issued under the Plan is intended to meet the
requirements of Section 409A of the Code and shall be administered in a manner that is intended to
meet those requirements and shall be construed and interpreted in accordance with such intent. To
the extent that an Incentive Award or payment, or the settlement or deferral thereof, is subject to
Section 409A of the Code, except as the Board otherwise determines in writing, the Incentive Award
shall be granted, paid, settled or deferred in a manner that will meet the requirements of Section
409A of the Code, including regulations or other guidance issued with respect thereto, such that
the grant, payment, settlement or deferral shall not be subject to the excise tax applicable under
Section 409A of the Code. Any provision of this Plan or any Incentive Agreement that would cause an
Incentive Award or the payment, settlement or deferral thereof to fail to satisfy Section 409A of
the Code shall be amended (in a manner that as closely as practicable achieves the original intent
of this Plan or the Incentive Agreement, as applicable) to comply with Section 409A of the Code on
a timely basis, which may be made on a retroactive basis, in accordance with regulations and other
guidance issued under Section 409A of the Code. In the event the Plan allows for a deferral of
compensation, the Plan is intended to qualify for certain exemptions under Title I of ERISA
provided for plans that are unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly-compensated employees.
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