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EXHIBIT 10.1
AZURIX CORP.
1999 STOCK PLAN
(AS AMENDED AND RESTATED EFFECTIVE JUNE 13, 2000)
ARTICLE 1
PURPOSES OF THE PLAN
1.1 Purposes. The purposes of the Plan are (a) to enhance the
Company's ability to attract and retain the services of qualified key
employees, officers and directors upon whose judgment, initiative and
efforts the successful conduct and development of the Company's
business largely depends, and (b) to provide additional incentives to
such persons or entities to devote their utmost effort and skill to the
advancement and betterment of the Company, by providing them an
opportunity to participate in the ownership of the Company and thereby
have an interest in the success and increased value of the Company.
ARTICLE 2
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 Administrator. "Administrator" means the Human Resources and
Compensation Committee of the Board.
2.2 Affiliate. "Affiliate" shall mean (i) any entity that directly
or through one or more intermediaries is controlled by the Company,
(ii) any entity in which the Company has a significant equity interest
as determined by the Committee, or (iii) as used in Article 8 and in
the term "Associate", as the term "affiliate" is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended, or any successor
rule or regulation.
2.3 Affiliated Company. "Affiliated Company" means Enron Corp. or
"subsidiary corporation" of the Company or Enron Corp., whether now
existing or hereafter created or acquired, as those terms are defined
in Sections 424(e) and 424(f) of the Code, respectively.
2.4 Associate. "Associate" is used to indicate a relationship with
a specified person and shall mean (i) any corporation, partnership or
other organization to which such specified person is an officer or
partner or is, directly or indirectly, the Beneficial Owner of ten
percent (10%) or more of any class of equity securities, (ii) any trust
or other estate in which such specified person has a substantial
beneficial interest or as to which such specified person serves as
trustee or in a similar fiduciary capacity, (iii) any relative or
spouse of such specified person, or any relative of such spouse, who
has the same home as such specified person or who is a Director or
officer of the Company or any of its parents or Affiliates, and (iv)
any person who is a director or officer of such specified person or any
of its parents or Affiliates (other than the Company or any
wholly-owned subsidiary of the Company).
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2.5 Beneficial Owner. "Beneficial Owner" shall be defined by
reference to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation; provided, however, and
without limitation, any individual, corporation, partnership, group,
association or other person or entity which has the right to acquire
any capital stock of the Company at any time in the future, whether
such right is contingent or absolute, pursuant to any agreement,
arrangement or understanding or upon exercise of conversion rights,
warrants or options, or otherwise, shall be the Beneficial Owner of
such capital stock.
2.6 Board. "Board" means the Board of Directors of the Company.
2.7 Change in Control. "Change in Control" means any of the events
or circumstances described in Article 8.
2.8 Code. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
2.9 Committee. "Committee" means a committee of two or more members
of the Board appointed to administer the Plan, as set forth in Section
7.1 hereof.
2.10 Common Stock. "Common Stock" means the Common Stock of the
Company, subject to adjustment pursuant to Section 4.3 hereof.
2.11 Disability. "Disability" means permanent and total disability
as defined in the long term disability benefit plan covering employees
of the Company, or if a Participant is not covered by such a plan, as
determined by the Administrator. The Administrator's determination of a
Disability or the absence thereof shall be binding on all interested
parties.
2.12 Effective Date. "Effective Date" as to this restatement of the
Plan means June 13, 2000, or if later, the date the Plan is approved by
shareholders of the Company. No grants of Options or Restricted Stock
shall be made under the Plan prior to the Effective Date; provided,
however, that this restatement of the Plan shall not invalidate Options
or Restricted Stock granted on or before May 1, 2000.
2.13 Exercise Price. "Exercise Price" means the purchase price per
share of Common Stock payable upon exercise of an Option.
2.14 Fair Market Value. "Fair Market Value" shall mean, with
respect to any property (including, without limitation, any Common
Stock or other securities), the value of such property determined by
such methods or procedures as shall be established from time to time by
the Committee; provided, that so long as the closing price of Common
Stock as reported in the "NYSE-Composite Transactions" section of the
Midwest edition of The Wall Street Journal is reported, Fair Market
Value with respect to a share of Common Stock on a particular date
shall mean such closing price of such Common Stock as so reported for
such date (or, if no prices are quoted for that date, as so quoted for
the last preceding date for which such prices were so quoted).
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2.15 Incentive Option. "Incentive Option" means any Option
designated and qualified as an "incentive stock option" as defined in
Section 422 of the Code.
2.16 Incentive Option Agreement. "Incentive Option Agreement" means
an Option Agreement with respect to an Incentive Option.
2.17 Nonqualified Option. "Nonqualified Option" means any Option
that is not an Incentive Option. To the extent that any Option
designated as an Incentive Option fails in whole or in part to qualify
as an Incentive Option, including, without limitation, for failure to
meet the limitations applicable to a 10% Shareholder or because it
exceeds the annual limit provided for in Section 5.6 below, it shall to
that extent constitute a Nonqualified Option.
2.18 Nonqualified Option Agreement. "Nonqualified Option Agreement"
means an Option Agreement with respect to a Nonqualified Option.
2.19 Option. "Option" means any option to purchase Common Stock
granted pursuant to the Plan.
2.20 Option Agreement. "Option Agreement" means the written
agreement entered into between the Company and the Optionee with
respect to an Option granted under the Plan.
2.21 Optionee. "Optionee" means a Participant who holds an Option.
2.22 Participant. "Participant" means an individual or entity that
has received a grant of an Option or a grant of Restricted Stock under
the Plan, and where permitted under the Plan, includes such person's
successors and assigns.
2.23 Restricted Stock. "Restricted Stock" means shares of Common
Stock issued pursuant to Article 6 hereof, subject to any restrictions
and conditions as are established pursuant to such Article 6.
2.24 Restricted Stock Agreement. "Restricted Stock Agreement" means
the written agreement entered into between the Company and a
Participant with respect to a grant of Restricted Stock offered under
the Plan.
2.25 10% Shareholder. "10% Shareholder" means a person who, as of a
relevant date, owns or is deemed to own (by reason of the attribution
rules applicable under Section 424(d) of the Code) stock possessing
more than 10% of the total combined voting power of all classes of
stock of the Company or of an Affiliated Company.
2.26 Company. "Company" means Azurix Corp.
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ARTICLE 3
ELIGIBILITY
3.1 General. Any employee of the Company (including employees who
are residents of the United Kingdom) or an Affiliated Company who is
designated by the Committee to receive a grant of an Option and/or a
grant of Restricted Stock under the Plan, and any individual who is a
Director of the Company duly elected by stockholders of the Company who
is not an employee of the Company at the time a grant is made, shall be
eligible to be designated a Participant. However, subject to the
foregoing, only employees of the Company or an Affiliated Company,
within the meaning of section 424(e) or (f) of the Code, shall be
eligible to receive grants of Incentive Stock Options under the Plan.
Grants may be made to the same individual on more than one occasion.
3.2 Grants to Non-employee Directors. Any grant, and the provisions
applicable thereto, made under the Plan to an eligible non-employee
director must be approved by the Board.
ARTICLE 4
PLAN SHARES
4.1 Shares Subject to the Plan. A total of 17,583,284, subject to
adjustment as to number and kind of shares in the same manner as
pursuant to Section 4.3 hereof, of the Company's authorized shares of
Common Stock may be issued under the Plan, of which twenty five percent
(25%) may be granted in the form of Restricted Stock and Options for up
to 7,500,000 shares may be granted in the form of Incentive Options,
subject to adjustment as to the number and kind of shares in the same
manner as pursuant to Section 4.3 hereof.
For purposes of this limitation, in the event that (a) all or any
portion of any Option or Restricted Stock granted or offered under the
Plan can no longer under any circumstances be exercised, or (b) any
shares of Common Stock are reacquired by the Company pursuant to an
Incentive Option Agreement, Nonqualified Option Agreement or Restricted
Stock Agreement, the shares of Common Stock allocable to the
unexercised portion of such Option or such grant of Restricted Stock,
shall again be available for grant or issuance under the Plan.
4.2 Accounting for Grants. For purposes of this Article 4, if a
grant under this Plan is denominated in shares of Common Stock, the
number of shares covered by such grant, or to which such grant relates,
shall be counted on the date of grant against the aggregate number of
shares of Common Stock available for making grants under the Plan;
provided, however, that grants that operate in tandem with (whether
granted simultaneously with or at a different time from) other grants
may be counted or not counted under procedures adopted by the Committee
in order to avoid double counting.
4.3 Adjustments. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash,
shares of Common Stock, other securities or other
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property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of shares of Common Stock or other securities of
the Company, issuance of warrants or other rights to purchase shares of
Common Stock or other securities of the Company (or other similar
corporate transaction or event) affects the shares of Common Stock such
that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the
Committee may, subject to Section 4.4, in such manner as it may deem
equitable, adjust any or all of (a) the number and type of shares of
Common Stock (or other securities or property) which thereafter may be
made the subject of grants made under the Plan, (b) the number and type
of shares of Common Stock (or other securities or property) subject to
outstanding grants made under the Plan, and (c) the purchase or
exercise price with respect to any grant made under the Plan, or, if
deemed appropriate, make provision for a cash payment to the holder of
an outstanding grant made under the Plan; provided, however, that with
respect to grants of Incentive Stock Options, no such adjustment shall
be authorized to the extent that such adjustment would cause the Plan
to violate Section 422(b)(1) of the Code or any successor provision
thereto; and provided further, that the number of shares of Common
Stock subject to any grant made under the Plan denominated in shares of
Common Stock shall always be a whole number.
4.4 If, and whenever, prior to the expiration of a grant
theretofore made, the Company shall effect a subdivision or
consolidation of shares of Common Stock or the payment of a stock
dividend on shares of Common Stock without receipt of consideration by
the Company, the number of shares of Common Stock with respect to which
such grant may thereafter be vested or exercised (a) in the event of an
increase in the number of outstanding shares of Common Stock shall be
proportionately increased, and if the grant is an Option the purchase
price per share shall be proportionately reduced, and (b) in the event
of a reduction in the number of outstanding shares of Common Stock
shall be proportionately reduced, and if the grant is an Option the
purchase price per share shall be proportionately increased.
ARTICLE 5
OPTIONS
5.1 Option Agreement. Each Option granted pursuant to this Plan
shall be evidenced by an Option Agreement which shall specify the
number of shares subject thereto, vesting provisions relating to such
Option, the Exercise Price per share, and whether the Option is an
Incentive Option or Nonqualified Option. As soon as is practical
following the grant of an Option, an Option Agreement shall be duly
executed and delivered by or on behalf of the Company to the Optionee
to whom such Option was granted. Each Option Agreement shall be in such
form and contain such additional terms and conditions, not inconsistent
with the provisions of this Plan, as the Administrator shall, from time
to time, deem desirable. Each Option Agreement may be different from
each other Option Agreement. No individual shall be granted Options
totaling more than 2,000,000 shares of Common Stock in any single
calendar year.
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5.2 Exercise Price. The Exercise Price per share of Common Stock
covered by each Option shall be determined by the Administrator,
subject to the following: (a) the Exercise Price of an Incentive Option
shall not be less than 100% of Fair Market Value on the date the
Incentive Option is granted, (b) the Exercise Price of a Nonqualified
Option shall not be less than 100% of Fair Market Value on the date the
Nonqualified Option is granted, and (c) if the person to whom an Option
is granted is a 10% Shareholder on the date of grant, the Exercise
Price of an Incentive Option shall not be less than 110% of Fair Market
Value on the date the Option is granted.
5.3 Time and Method of Exercise. Subject to the provisions
contained in the Plan and in a Participant's Option Agreement,
unexercised vested shares of Common Stock under an Option may be
exercised in whole or in part from time to time by request to the
Company. Payment of the exercise price and any applicable tax
withholding amounts must be made at the time of exercise, in whole or
in part, by delivery of a cashier's check or shares of Common Stock, or
any combination thereof having a Fair Market Value equal to such
exercise price provided that the Fair Market Value of shares of Common
Stock so delivered shall be equal to the closing price of such shares
as reported in the "NYSE -- Composite Transaction" section of the
Midwest Edition of the Wall Street Journal on the date of actual
receipt by the Company of the notice exercising the Option or, if no
prices are so reported on such day, on the last preceding day on which
such prices of shares of Common Stock are so reported. An Option may be
exercised through a broker financed exercise pursuant to the provisions
of Regulation T of the Federal Reserve Board. If the Company receives
payment of the purchase price for the exercise of the Option through a
broker financed exercise before the end of the third business day
following the broker's execution of the sale of shares of Common Stock
for the financed exercise, the exercise shall be effective at the time
of such sale. Otherwise, the exercise shall be effective when the
Company receives payment of the purchase price.
5.4 Term and Termination of Options. The term and provisions for
termination of each Option shall be as fixed by the Administrator, but
no Option may be exercisable more than ten (10) years after the date it
is granted.
5.5 Vesting and Exercise of Options. Each Option shall vest and
become exercisable in one or more installments at such time or times,
and subject to such conditions for accelerated vesting, including
without limitation the achievement of specified performance goals or
objectives, as may be determined by the Administrator.
5.6 Annual Limit on Incentive Options. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock shall not, with respect to which Incentive Options granted
under this Plan and any other plan of the Company or any Affiliated
Company become exercisable for the first time by an Optionee during any
calendar year, exceed $100,000.
5.7 Nontransferability of Options. No Option shall be assignable or
transferable except pursuant to the provisions of Section 11.1 of this
Plan and no Incentive Option may be transferred by the Optionee other
than by will or the laws of descent and distribution.
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5.8 Rights as Shareholder. An Optionee or permitted transferee of
an Option shall have no rights or privileges as a shareholder with
respect to any shares covered by an Option until such Option has been
duly exercised and certificates representing shares purchased upon such
exercise have been issued to such person.
5.9 Grants to Residents and Citizens of Foreign Countries.
Notwithstanding anything to the contrary in this Article 5, the
Committee may, in its discretion, grant Options to residents and to
citizens of countries other than the United States of America with the
requirement that the exercise thereof be required to be made through a
broker financed exercise as referenced in Section 5.3 above.
ARTICLE 6
RESTRICTED STOCK
6.1 Grants of Restricted Stock. A grant of Restricted Stock
pursuant to a Restricted Stock Agreement entitles the recipient to
acquire shares of Common Stock subject to such terms, restrictions and
conditions as the Administrator may determine at the time of grant.
6.2 Grants of Performance Based Restricted Stock. The Committee is
authorized to make grants of Restricted Stock which qualify as
performance-based compensation under Code Section 162(m), such that a)
the issuance is contingent upon attainment of pre-established
performance criteria; or b) restrictions lapse contingent upon
attainment of pre-established performance criteria. The performance
criteria to be used with such grants shall be recurring after-tax net
income and/or cash flow, at the Company and/or subsidiary level, and
earnings per share and/or total shareholder return, at the Company
level, as determined at the sole discretion of the Committee.
Performance criteria will be established by the Committee prior to the
beginning of each performance period, defined as January 1 of each
year, or such later date as permitted under the Code, or applicable
regulations. Notwithstanding any other provision of the Plan, no
individual shall receive a grant of Restricted Stock under this Section
6.2 totaling more than 100,000 shares of Common Stock in any single
calendar year. Recurring after-tax net income means after-tax net
income subject to adjustment by the Committee in its sole discretion
for what the Committee considers an unordinary or nonrecurring items of
after-tax net income.
6.3 Restricted Stock Agreement. Each Restricted Stock Agreement
shall be in such form, and shall set forth the terms, conditions and
restrictions of the Restricted Stock, not inconsistent with the
provisions of this Plan, as the Administrator shall, from time to time,
deem desirable. Each Restricted Stock Agreement may be different from
each other Restricted Stock Agreement.
6.4 Rights as a Shareholder. Upon becoming vested in Restricted
Stock, a Participant shall have the rights of a shareholder with
respect to the Restricted Stock granted pursuant to the Restricted
Stock Agreement, including voting and dividend rights, subject to the
terms, restrictions and conditions as are set forth herein and in the
Restricted Stock Agreement. Unless the Administrator shall determine
otherwise, certificates evidencing shares of Restricted Stock shall
remain in the possession of the Company until such shares have vested
and are no longer
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subject to any restrictions on transfer in accordance with the terms of
the Restricted Stock Agreement.
6.5 Vesting of Restricted Stock. The Restricted Stock Agreement
shall specify the date or dates, the performance goals or objectives
that must be achieved, if any, and any other conditions on which the
Restricted Stock may vest.
6.6 Dividends. All dividends and distributions, or cash equivalent
thereof (whether cash, stock or otherwise), on unvested Restricted
Stock shall be withheld from the respective Participant and credited by
the Company for the Participant's account. At such time as a
Participant becomes vested in a portion of the grant of Restricted
Stock, all accumulated credits for dividends and distributions, or cash
equivalent thereof attributable to such vested Restricted Stock shall
be released to the Participant. Interest shall not be paid on any
dividends or distributions or cash equivalent thereof, credited by the
Company for the account of a Participant. The Company shall have the
option of paying such credits for accumulated dividends or
distributions or cash equivalent thereof, in shares of Common Stock of
the Company rather than in cash. If payment is made in shares, the
conversion to shares shall be at the Fair Market Value. Dividends and
distributions, or cash equivalent thereof credited on non-vested
Restricted Stock shall be forfeited in the same manner and at the same
time as the respective shares of Restricted Stock to which they are
attributable are forfeited.
6.7 Nonassignability of Rights. No Participant's right to acquire
shares of Restricted Stock shall be assignable or transferable except
pursuant to the provisions of Section 11.1 of this Plan.
ARTICLE 7
ADMINISTRATION OF THE PLAN
7.1 Administrator. Authority to control and manage the operation
and administration of the Plan shall be vested in the Committee
consisting of two (2) or more members of the Board who are
"Non-Employee Directors" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 and are "outside directors" as
referenced in Regulation 1.162-27(e)(3) issued under the Code (the
"Committee" or "Administrator"). Members of the Committee may be
appointed from time to time by, and shall serve at the pleasure of, the
Board.
7.2 Powers of the Administrator. In addition to any other powers or
authority conferred upon the Administrator elsewhere in the Plan or by
law, the Administrator shall have full power and authority: (a) to
determine the persons to whom, and the time or times at which,
Incentive Options or Nonqualified Options and grants of Restricted
Stock shall be granted, the number of shares to be represented by each
Option and grant of Restricted Stock and the consideration, if any, to
be received by the Company upon the exercise thereof; (b) to construe
and interpret provisions of the Plan and other documents and agreements
pertaining to the Plan; (c) to create, amend or rescind rules and
regulations relating to the Plan; (d) to determine the terms,
conditions and restrictions contained in, and the form of, Option
Agreements and Restricted Stock Agreements; (e) to determine the
identity or capacity of any persons who may be entitled to
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exercise a Participant's rights under any Option or Restricted Stock
Agreement granted under the Plan; (f) to correct any defect or supply
any omission or reconcile any inconsistency in the Plan or in any
Option Agreement or Restricted Stock Agreement; (g) to accelerate the
vesting of any Option or grant of Restricted Stock; (h) to extend the
exercise date of any Option and vesting date of any grant of Restricted
Stock; (i) except for changing the Exercise Price of a granted Option,
to amend outstanding Option Agreements and Restricted Stock Agreements
to provide for, among other things, any change or modification which
the Administrator could have provided for upon the grant of an Option
or Restricted Stock or in furtherance of the powers provided for
herein; and (j) to make all other determinations necessary or advisable
for the administration of the Plan, but only to the extent not contrary
to the express provisions of the Plan. Any action, decision,
interpretation or determination made in good faith by the Administrator
in the exercise of its authority conferred upon it under the Plan shall
be final and binding on the Company and all Participants.
7.3 Limitation on Liability. No employee of the Company or member
of the Board or Committee shall be subject to any liability with
respect to duties under the Plan unless the person acts fraudulently or
in bad faith. To the extent permitted by law, the Company shall
indemnify each member of the Board or Committee, and any employee of
the Company with duties under the Plan, who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed
proceeding, whether civil, criminal, administrative or investigative,
by reason of such person's conduct in the performance of duties under
the Plan.
ARTICLE 8
CHANGE IN CONTROL
8.1 Change in Control of Enron Corp. If at any time after the date
the Plan is adopted when Enron Corp. directly or indirectly owns thirty
percent (30%) or more of the capital stock of the Company, a
transaction occurs which is not approved, recommended or supported by a
majority of the board of directors of Enron Corp. in actions taken
prior to, and with respect to, such transaction in which:
(i) Enron Corp. merges or consolidates with any other entity (other
than one of Enron Corp.'s wholly owned subsidiaries) and is not the
surviving entity (or survives only as the subsidiary of another person
or entity),
(ii) Enron Corp. sells all or substantially all of its assets to
any other person or entity,
(iii) Enron Corp. is dissolved,
(iv) any third person or entity (other than the trustee or
committee of any qualified employee benefit plan of Enron Corp.),
together with its Affiliates and Associates, shall be, directly or
indirectly, the Beneficial Owner of at least thirty percent (30%) of
the outstanding capital stock of Enron Corp., or
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(v) the individuals who constitute the members of Enron Corp.'s
board of directors on the date hereof (the "Incumbent Board") cease for
any reason to constitute at least a majority thereof, provided that any
person becoming a director subsequent to the date hereof whose election
or nomination for election by Enron Corp.'s stockholders was approved
by a vote of at least eighty percent (80%) of the directors comprising
the Incumbent Board (either by a specific vote or by approval of the
proxy statement of Enron Corp. in which such person is named as a
nominee for director, without objection to such nomination) shall be,
for purposes of this clause (v), considered as though such person were
a member of the Incumbent Board,
then within (a) ten days of the approval by the stockholders of Enron
Corp. of such merger, consolidation, sale of assets or dissolution as
described in clause (i), (ii) or (iii) of this Section 8.1, or (b)
thirty (30) days of the occurrence of such change of Beneficial
Ownership or Directors as described in clause (iv) or (v) of this
Section 8.1, with respect to outstanding grants of Restricted Stock
made under Article 6, all such grants of Restricted Stock, irrespective
of whether they are then vested, shall be surrendered to the Company by
each grantee thereof and such grants shall thereupon be canceled by the
Company, and the grantee shall receive a cash payment by the Company in
an amount equal to the number of Shares subject to the grant of
Restricted Stock held by such grantee multiplied by the Fair Market
Value of a Share on the date determined by the Administrator (as
constituted prior to any change described in clause (iv) or (v)) to be
the date of cancellation and surrender of such Options if any such
change of Beneficial Ownership or Directors occurs other than pursuant
to a tender or exchange offer, whichever is appropriate, and with
respect to outstanding grants of Options made under Article 5, all such
outstanding Options irrespective of whether they are then exercisable,
shall be surrendered (at such time as may be necessary to comply with
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, if
applicable) to the Company by each grantee thereof and such Options
shall thereupon be cancelled by the Company, and the grantee shall
receive a cash payment by the Company in an amount equal to the number
of Shares subject to the Options held by such grantee multiplied by the
difference between (x) and (y) where (y) equals the purchase price per
Share covered by the Option, and (x) equals the Fair Market Value of a
Share on the date determined by the Administrator (as constituted prior
to any change described in clause (iv) or (v)) to be the date of
cancellation and surrender of such Options if any such change of
Beneficial Ownership or directors occurs other than pursuant to a
tender or exchange offer, whichever is appropriate.
8.2 Change in Control of the Company. If a transaction occurs after
the date the Plan is adopted in which as a result of a transaction that
has not been approved, recommended or supported by a majority of the
board of directors of the Company in actions taken prior to, and with
respect to, such transaction:
(i) the Company merges or consolidates with any other entity (other
than one of the Company's wholly owned subsidiaries) and is not the
surviving entity (or survives only as the subsidiary of another person
or entity), or
(ii) the individuals who constitute the members of Company's Board
on the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that
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any person becoming a Director subsequent to the date of the public
offering whose election or nomination for election by the Company's
stockholders was approved by a vote of at least eighty percent (80%) of
the Directors comprising the Incumbent Board (either by a specific vote
or by approval of the proxy statement of the Company in which such
person is named as a nominee for Director, without objection to such
nomination) shall be, for purposes of this clause (ii), considered as
though such person were a member of the Incumbent Board,
then within (a) ten days of the approval by the stockholders of the
Company of such merger or consolidation as described in clause (i) of
this Section 8.2 or (b) thirty (30) days of the occurrence of such
change of Directors as described in clause (ii) of this Section 8.2,
then with respect to outstanding grants of Restricted Stock made under
Article 6, all such grants of Restricted Stock, irrespective of whether
they are then vested, shall be surrendered to the Company by each
grantee thereof and such grants shall thereupon be canceled by the
Company, and the grantee shall receive a cash payment by the Company in
an amount equal to the number of Shares subject to the grant of
Restricted Stock held by such grantee multiplied by the Fair Market
Value of a Share on the date determined by the Administrator (as
constituted prior to any change described in clause (ii)) to be the
date of cancellation and surrender of such Options, and with respect to
outstanding grants of Options made under Article 5, all such
outstanding Options, irrespective of whether they are then exercisable,
shall be surrendered (at such time as may be necessary to comply with
Rule 16b-3 under the Securities Exchange Act of 1934, as amended) to
the Company by each grantee thereof and such Options shall thereupon be
canceled by the Company, and the grantee shall receive a cash payment
by the Company in an amount equal to the number of Shares subject to
the Options held by such grantee multiplied by the difference between
(x) and (y) where (y) equals the purchase price per Share covered by
the Option, and (x) equals (1) the per share price offered to
stockholders of the Company in any such merger or consolidation, or (2)
the Fair Market Value of a Share on the date determined by the
Administrator (as constituted prior to any change described in clause
(ii)) to be the date of cancellation and surrender of such Options. In
the event that the consideration offered to stockholders of the Company
in any transaction described in this Section 8.2 consists of anything
other than cash, the Administrator (as constituted prior to such
transaction) shall determine the fair cash equivalent of the portion of
the consideration offered which is other than cash.
ARTICLE 9
AMENDMENT AND TERMINATION OF THE PLAN
9.1 Amendments. The Board in its discretion may terminate the Plan
at any time with respect to any shares of Common Stock for which a
grant has not theretofore been made. The Board shall have the right to
alter or amend the Plan or any part thereof from time to time;
provided, that no change in any grant theretofore made may be made
which would impair the rights of the recipient of a grant without the
consent of such recipient; and provided further, that notwithstanding
any other provision of the Plan or any grant agreement, without the
approval of the stockholders of the Company no such amendment or
alteration shall be made that would:
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(i) increase the total number of shares of Common Stock available
for grants under the Plan, except as provided in Article 4 hereof;
(ii) change the minimum exercise price for grant of Options;
(iii) extend the maximum period during which grants may be made
under the Plan; or
(iv) increase the maximum number of shares of Common Stock for
which Options may be granted under Section 5.1 or shares of
performance-based Restricted Stock that may be granted under Section
6.2 to any individual in any calendar year.
The Board may alter or amend the Plan to comply with requirements
under the Code relating to Incentive Options or other types of options
which give Optionees more favorable tax treatment than that applicable
to Options granted under this Plan as of its Effective Date. Upon any
such alteration or amendment, any outstanding Option granted hereunder
may, if the Administrator so determines and if permitted by applicable
law, be subject to the more favorable tax treatment afforded to an
Optionee pursuant to such terms and conditions.
9.2 Plan Termination. Unless the Plan shall theretofore have been
terminated, the Plan shall terminate on February 1, 2009 and no Options
or grants of Restricted Stock may be granted under the Plan thereafter,
but Option Agreements and Restricted Stock Agreements then outstanding
shall continue in effect in accordance with their respective terms and
provisions.
9.3 Employees in Foreign Countries. The Board shall have the
authority to adopt such modifications, procedures, and subplans as may
be necessary or desirable to comply with provisions of the laws of
foreign countries in which the Company or its Affiliated Companies may
operate to assure the viability of the benefits from grants made to
eligible employees employed in such countries and to meet the
objectives of the Plan.
ARTICLE 10
TAX WITHHOLDING
10.1 Withholding. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to
satisfy the minimum applicable Federal, state, and local tax
withholding requirements with respect to any Options exercised or
Restricted Stock issued under the Plan. To the extent permissible under
applicable tax, securities and other laws, the Administrator may, in
its sole discretion and upon such terms and conditions as it may deem
appropriate, permit a Participant to satisfy his or her obligation to
pay any such tax, up to an amount equivalent to settle the minimum
statutory tax withholding rates for federal and state tax purposes
including payroll taxes by (a) directing the Company to apply shares of
Common Stock to which the Participant is entitled as a result of the
exercise of an Option or as a result of the purchase of or lapse of
restrictions on Restricted Stock or (b) delivering to the Company
shares of Common Stock owned by the Participant. The shares of Common
Stock so applied or delivered in satisfaction of the Participant's tax
withholding obligation shall be valued at their
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Fair Market Value as of the date of measurement of the amount of income
subject to withholding.
ARTICLE 11
MISCELLANEOUS
11.1 Benefits Not Alienable. No grant of an Option or Restricted
Stock and no right under any such grant shall be assignable, alienable,
saleable or transferable by a Participant other than:
(a) by will or by the laws of descent and distribution;
(b) pursuant to a "domestic relations order" as defined in Section
414 of the Code or Section 206 of the Employee Retirement Income
Security Act of 1974, as amended;
(c) by transfer by an eligible Participant, subject to such rules
as the Committee may adopt to preserve the purposes of the Plan
(including limiting such transfer to Participants who are directors or
senior executives), to:
(I) a member of his or her Immediate Family,
(II) a trust solely for the benefit of the Participant and
his or her immediate Family, or
(III) a partnership or limited liability company whose only
partners or shareholders are the Participant and his or her
Immediate Family members,
(d) by designation, in a manner established by the Committee, of a
beneficiary or beneficiaries to exercise the rights of the Participant
and to receive any property distributable with respect to any grant
upon the death of the Participant.
Each transferee described in (b) and (c) above is hereafter
referred to as a "Permitted Transferee", provided that the Committee is
notified in writing of the terms and conditions of any transfer
intended to be described in (b) or (c) and the Committee determines
that the transfer complies with the requirements of the Plan and the
applicable grant agreement. Any purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance that does not qualify
under (a), (b), (c) or (d) shall be void and unenforceable against the
Company. "Immediate Family" means, with respect to a particular
Participant, the Participant's spouse, children or grandchildren
(including adopted and stepchildren).
The terms and provisions of Option Agreements and Restricted Stock
Agreements shall be binding upon the beneficiaries, executors and
administrators of the Participant and on the Permitted Transferees of
the Participant (including the beneficiaries, executors and
administrators of the Permitted Transferees), except that Permitted
Transferees shall not reassign any such agreement other than by will or
by the laws of descent and distribution. A grant and underlying
agreement shall be exercised only by the Participant (or his or her
attorney in fact or
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guardian) (including, in the case of a transferred grant and underlying
agreement, by a Permitted Transferee), or, in the case of the
Participant's death, by the Participant's executor or administrator
(including, in the case of a transferred grant and underlying
agreement, by the executor or administrator of the Permitted
Transferee), and all exercises of a grant shall be accompanied by
sufficient payment, as determined by the Company, to meet its
withholding tax obligation on such exercise or by other arrangements
satisfactory to the Committee to provide for such payment. Any
unauthorized attempt at assignment, transfer, pledge or other
disposition of a grant made under the Plan shall be without effect.
11.2 No Enlargement or Employee Rights. This Plan is strictly a
voluntary undertaking on of the Company and shall not be deemed to
constitute a contract between the Company and any Participant to be
consideration for, or an inducement to, or a condition of, the
employment of any Participant. Nothing contained in the Plan shall be
deemed to give the right to any Participant to be retained as an
employee of the Company or any Affiliated Company or to interfere with
the right of the Company or any Affiliated Company to discharge any
Participant at any time.
11.3 Application of Funds. Any proceeds received by the Company
from the sale of Common Stock pursuant to Option Agreements, except as
otherwise provided herein, will be used for general corporate purposes.
ARTICLE 12
APPROVED SHARE OPTION SCHEME FOR UK PARTICIPANTS
12.1 Purpose. The Plan as modified by this Article 12 is intended
to be approved by the Inland Revenue under Schedule 9 to the Act. The
purpose of this Article 12 is to grant UK Inland Revenue Approved Share
Options to UK Participants under the Plan. This Article 12 is to be
read as a continuation of the Plan and modify the Options granted
thereunder only in relation to UK resident Participants who are granted
Options under this Article 12 of the Plan. This Article 12 does not add
to or modify the Plan in respect of any other category of Participant.
Where any conflict arises in the interpretation of the rules of the
Plan and this Article 12 in relation to Approved Options granted under
the Plan as modified by this Article 12, the provisions of this
Article 12 shall prevail.
12.2 Additional Definitions. The following additional capitalized
definitions shall have the respective meanings set forth below:
(a) "Act" shall mean the Income and Corporation Taxes Act 1988.
(b) "Approved Option" shall mean an Option granted under the Plan
as modified by this Article 12 to a UK Participant while the Plan as
modified by this Article 12 is approved by the UK Inland Revenue under
the Act.
(c) "Limit" shall mean L30,000 or such other amount as may from
time to time be specified in paragraph 28 of Schedule 9 to the Act.
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(d) "UK Participant" shall mean an employee or director of the
Company or any participating Affiliate who satisfies the eligibility
criteria in Article 3 of the Plan (as modified by Article 12).
12.3 Modified Definitions. The following definitions in Article 2
of the Plan shall be modified as set forth below in relation to
Approved Options only and shall be so construed throughout the Plan:
(a) "Affiliate" shall mean any company which is both a subsidiary
of the Company (as defined by Section 736 of the Companies Act 1985)
and under the control of the Company (as defined by Section 840 of the
Act) and which is for the time being designated by the Committee as a
participating Affiliate.
(b) "Option" shall mean Non-Qualified Options only and in
the context of the Plan as modified by this Article 12 shall mean
Approved Options.
(c) "Common Stock" shall mean shares of Common Stock of the Company
which satisfy the provisions of paragraph 10 to 14 inclusive of
Schedule 9 to the Act.
12.4 Omitted Definitions. The following definitions in Article 2
shall be treated as having been omitted therefrom in relation to
Approved Options only and the Plan shall accordingly be constructed
throughout as if all references to such definitions had been omitted:
(i) "Incentive Option" and "Incentive Option Agreement".
(ii) "Restricted Stock" and "Restricted Stock Agreement".
12.5 Variation of Share Capital. Articles 4.3 and 4.4 of the Plan
(adjustments) are replaced in relation to Approved Options with the
following provision; "In the event of any variation of the shares of
Common Stock of the Company by way of capitalization or rights issue,
consolidation, subdivision or reduction of capital or otherwise, the
number of shares of Common Stock subject to any Approved Option and the
Exercise Price for each of those shares of Common Stock shall be
adjusted in such manner as the Committee decides to be fair and
reasonable provided that:
(i) the aggregate amount payable on the exercise of an Approved
Option in full is not increased
(ii) the Exercise Price for a share of Common Stock is not reduced
below its par value
(iii) no adjustment shall be made without the prior approval of the
Board of Inland Revenue and
(iv) following the adjustment the shares of Common Stock continue
to satisfy the conditions specified in paragraphs 10 to 14 inclusive of
Schedule 9 to the Act."
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12.6 Eligibility. Article 3 shall be modified in relation to
Approved Options by;
(i) deleting the words "or an Affiliated Company" commencing in
line 1; and
(ii) inserting the following provisions;
(a) Approved Options may only be granted to employees or
directors of the Company or any participating Affiliate;
(b) Directors of the Company or a participating Affiliate
are only eligible to be designated a UK Participant if they are
required to devote substantially the whole of their time to their
duties and in any case not less than 25 hours per week (excluding meal
breaks) to the Company and/or any participating Affiliate;
(c) Approved Options may only be granted to employees or
directors of the Company or any participating Affiliate who are not
ineligible to participate in the Plan by virtue of paragraph 8 of
Schedule 9 to the Act (material interest in a close company); and
(iii) omitting reference to Article 3.2.
12.7 Approved Options.
(a) Option Agreement. Article 5.1 of the Plan shall be
modified in relation to Approved Options by;
(i) deleting the words "..., and the Exercise Price per
share, and whether the Option is an Incentive Option or a Nonqualified
Option" and replacing them with ", and the Exercise Price per share.
The Option Agreement shall specify that the Option is an Approved
Option granted under Article 12 of the Plan." and;
(ii) inserting after the sentence "Each Option Agreement
shall be in such form and contain such additional terms and conditions,
not inconsistent with the provisions of this Plan, as the Administrator
shall, from time to time, deem desirable" the following words:
"PROVIDED that any such additional terms and conditions are first
approved by the Inland Revenue."
(b) Exercise Price. Article 5.2 of the Plan shall be
modified in relation to Approved Options by the addition of the
following provision at 5.2(d);
"and (d) the Exercise Price of an Approved Option shall not be less
than 100% of the Fair Market Value on the date the Approved Option is
granted."
(c) Time and Method of Exercise. Article 5.3 of the Plan
shall be modified in relation to Approved Options by;
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(i) deleting the words commencing "...from time to
time by request to the Company..." through to "...provisions of
Regulation T of the Federal Reserve Board" and replacing them with
"...from time to time. An Approved Option may only be exercised by a UK
Participant giving notice to the Company in writing of the number of
shares of Common Stock in respect of which he wishes to exercise the
Approved Option accompanied by the appropriate payment either in cash
or by the delivery of irrevocable instructions to a broker to deliver
promptly to the Company an amount equal to the relevant exercise
price."; and
(ii) inserting the following provision at the end of
Article 5.3; "No Approved Option may be exercised by a UK Participant
who has become ineligible to participate in the Plan by virtue of
paragraph 8 of Schedule 9 to the Act (material interest in a close
company)."
(d) Vesting and Exercise of Approved Options. Article 5.5 of
the Plan shall be modified in relation to Approved Options by the
deletion of the words "and subject to such conditions for accelerated
vesting".
(e) Limit on Approved Options. Article 5.6 of the Plan shall
be deleted in relation to Approved Options and replaced by the
following provision; "No Approved Options shall be granted to UK
Participants if at the relevant date of grant the aggregate Exercise
Price of all subsisting Approved Options granted under the Plan and any
other plan established by the Company or any associated company as
defined in Section 187 of the Act of the Company and approved by the
Inland Revenue under the provisions of Schedule 9 to the Act (other
than a savings-related share option scheme) would exceed the Limit."
12.8 Additional Provisions in Article 5. Article 5 shall be
modified in relation to Approved Options by the addition of the
following provisions;
(i) Exercise of Approved Options on Termination of
Employment. If a UK Participant's employment with the Company or a
participating Affiliate terminates on account of death, disability,
ill-health, injury, redundancy (within the meaning of the Employment
Rights Act 1996) or early retirement by agreement with his employer or
retirement at or after contractual retirement age, such UK Participant
(or where appropriate, the personal representative of the UK
Participant) may exercise their Approved Option, up to the number of
unexercised vested shares of Common Stock such UK Participant is
entitled to on the date of such termination as set out in the Notice of
Grant of Stock Option, at any time during the period of twelve months
following the date of such termination . If a UK Participant's
employment ceases for any other reason, the Approved Option shall lapse
upon such date of termination, unless the Notice of Grant and/or the
Stock Option Grant Agreement in relation to such Approved Option
specifies otherwise .
(ii) Issue or Transfer of Shares. The appropriate number of
Shares shall be allotted or transferred (as the case may be) within 30
days following the exercise of an Option.
12.9 Article 6 shall not apply to Approved Options.
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12.10 Administration of the Plan. Article 7 of the Plan shall be
modified in relation to Approved Options by;
(i) the deletion of Articles 7.2 (g) of the Plan
(acceleration of vesting), and 7.2 (h) of the Plan (extension of
exercise date); and
(ii) inserting the following provision at the end of Article
7.2 (c) (amendment of rules and regulations relating to the Plan);
"PROVIDED that any creation, amendment or rescission in relation to
Approved Options is subject to Article 12.12 below"; and
(iii) inserting the following provision at the end of
Article 7.2(d) (determination of terms, conditions and restrictions);
"PROVIDED that in relation to Approved Options, any such terms,
conditions and restrictions are first approved by the Inland Revenue"
and;
(iv) inserting the following provision at the end of Article
7.2 (i) (amendment of terms of outstanding Option Agreement); ...powers
provided for herein "PROVIDED that such power conferred by this Article
7.2 (i) may only be exercised in relation to Approved Options pursuant
to and in accordance with Article 12.6 above and/or in relation to the
amendment, relaxation, waiver or substitution of any performance
condition detailed in the Option Agreement, provided that such
amendment, relaxation, waiver or substitution shall not result in that
Approved Option being subject to constraints and/or conditions which
are more difficult to satisfy than those which applied immediately
prior to such amendment, relaxation, waiver or substitution."
12.11 Change in Control. Article 8 of the plan is modified in
relation to Approved Options by;
(i) replacing the paragraph at Article 8.1 commencing " then
within (a) ten days of the approval by the stockholders..." through to
"...other than pursuant to a tender or exchange offer, whichever is
appropriate" with the following provision; "If any of the events listed
in Article 8.1 (i), (ii), (iii), (iv) or (v) should occur, then upon
the date of the approval by the stockholders of Enron Corp of the
events listed at Article 8.1 (i), (ii) or (iii), or upon the date of
the occurrence of an event listed at Article 8.1 (iv) or (v), all
outstanding Approved Options shall immediately lapse."; and
(ii) replacing the paragraph at Article 8.2 commencing "
then within (a) ten days of the approval by the stockholders..."
through to "...the fair cash equivalent of the portion of the
consideration offered which is other than cash" with the following
provision; "If any of the events listed in Article 8.2 (i) or (ii)
should occur, or if there is a change in control of the Company as
defined by Section 840 of the Act, then upon the date of the approval
by the stockholders of the Company of the event listed at Article 8.2
(i) or upon the date of the occurrence of the event listed at Section
8.2 (ii) or upon the date that the change in control of the Company as
defined by Section 840 of the Act becomes effective, all outstanding
Approved Options shall immediately lapse."
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12.12 Amendments to the Plan. Article 9 of the Plan is modified
in relation to Approved Options by the addition of the following
provision: "No amendment to the Plan which relates to an Approved
Option shall be effective unless it is approved by the Inland Revenue."
12.13 Limits on Transfer of Awards. The provisions of Article
11.1(b) and Article 11.1(c) shall not apply to Approved Options.
AZURIX CORP.
By: /s/ REBECCA P. MARK
-----------------------------------------
Name: Rebecca P. Mark
Title: Chairman and Chief Executive Officer
ATTEST:
/s/ NORMA A. TIDROW
---------------------------------------------
Name: Norma A. Tidrow
Title: Secretary
19
