<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1996
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________________
EL PASO ELECTRIC COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 74-0607870
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
123 W. MILLS
EL PASO, TEXAS 79901
(915) 543-5711
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
_________________________
EL PASO ELECTRIC COMPANY 1996 LONG-TERM INCENTIVE PLAN
------------------------------------------------------
(FULL TITLE OF THE PLAN)
TERRY BASSHAM, ESQ.
GENERAL COUNSEL
EL PASO ELECTRIC COMPANY
123 W. MILLS
EL PASO, TEXAS 79901
(915) 543-5711
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
_________________________
WITH A COPY TO:
DANIEL G. KELLY, JR.
SIDLEY & AUSTIN
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 3,500,000 $7.00 $20,357,100 $6,168.82
(without par value)
================================================================================================================
</TABLE>
(1) Issuable upon exercise of options, exercise of stock appreciation rights,
or achievement of performance measures in connection with performance
shares granted pursuant to the El Paso Electric Company 1996 Long-Term
Incentive Plan (the "Plan") or upon award of bonus stock or restricted
stock pursuant to the Plan.
(2) The proposed maximum per share and aggregate offering price, calculated
solely for the purpose of calculating the registration fee pursuant to Rule
457(c) and (h)(1) under the Securities Act of 1933, is based on (a) the
number of shares of restricted stock approved for issuance under the Plan
multiplied by the closing price on the date such awards were approved
($5.00 with respect to 55,000 shares, $5.3215 with respect to 100,000
shares, and $5.63 with respect to 25,000 shares), (b) the exercise price of
options that have been approved under the Plan multiplied by the number of
shares of Common Stock underlying such options ($5.32 for 800,000 shares,
$5.56 for 800,000 shares, and $7.00 for 300,000 shares) and (c) the
remaining number of shares of Common Stock as to which awards may be
granted under the Plan (1,420,000) multiplied by $6.06, the average of
the high and low per share price of the Common Stock reported by the
American Stock Exchange on December 12, 1996.
_________________________
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
ITEM 1. Plan Information.*
ITEM 2. Registrant Information and Employee Plan Annual Information.*
*The Information called for in Part I of Form S-8 is currently included in
a prospectus, dated December 16, 1996, which is to be distributed to
participants in the El Paso Electric Company 1996 Long-Term Incentive Plan.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents, which have previously been filed by the
Company with the Commission under the Exchange Act are incorporated by reference
in this Prospectus:
1. Annual Report on Form 10-K for the year ended December 31, 1995;
2. Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1996;
3. Current Reports on Form 8-K dated January 9, 1996 and February 12,
1996;
4. The description of the Common Stock of the Company, no par value,
set forth in Form 8-A for Registration of Certain Classes of Securities Pursuant
to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, effective as
of February 15, 1996, including any amendment or report filed for the purpose of
updating such description.
In addition, all documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment to this Registration Statement that indicates that all
securities offered hereby have been sold or which deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and made a part hereof from their respective dates of
filing (such documents, and the documents enumerated above, being hereinafter
referred to as "Incorporated Documents").
Any statement contained in an Incorporated Document shall be deemed to
be modified or superseded for purposes of this Registration Statement to the
extent that a statement contained herein or in any other subsequently filed
document Incorporated Document modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The financial statements of the Company at December 31, 1994 and 1995,
and for each of the three years in the three-year period ended December 31,
1995, appearing in the
-2-
<PAGE>
Company's Annual Report on Form 10-K have been incorporated herein in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants included therein, and upon the authority of said firm as experts in
accounting and auditing.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1 of the Texas Business Corporation Act provides for the
indemnification of officers and directors of the Company against liability in
proceedings in which the individual is wholly successful and permits the
authorization of indemnification in other proceedings. The Company's Restated
Articles of Incorporation and Bylaws provide for indemnification of officers and
directors of the Company to the fullest extent permitted by law. The Company has
entered into indemnity agreements with each officer and director pursuant to
which the Company is required to indemnify such officers and directors to the
fullest extent permitted by law. Article 1302-7.06 of the Texas Miscellaneous
Corporation Law Act authorizes a Texas corporation to include a provision in its
articles of incorporation to provide that "a director of the corporation shall
not be liable, or shall be liable only to the extent provided in the articles of
incorporation, to the corporation or its shareholders... for monetary damages
for an act or omission in the director's capacity as a director," with certain
exceptions. The Company's Amended and Restated Articles of Incorporation include
a provision eliminating the liability of a director for monetary damages to the
Company to the fullest extent permitted by Article 1302-7.06.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The following exhibits are filed with this Registration Statement:
Exhibit
Number Description
4.1 El Paso Electric Company 1996 Long-Term Incentive Plan
5 Opinion of Clark, Thomas & Winters, a Professional
Corporation regarding legality of the Common Stock
15 Letter re unaudited Interim Financial Information
23.1 Consent of Clark, Thomas & Winters, P.C. (Incorporated by
reference to Exhibit 5 hereof)
23.2 Consent of KPMG Peat Marwick LLP.
-3-
<PAGE>
ITEM 9. UNDERTAKINGS.
The Company hereby undertakes:
(a) (1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
- -------- -------
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purposes of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for the purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act that is incorporated by reference in
the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
-4-
<PAGE>
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling period of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling period in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of El Paso, State of Texas, on the 16th day of
December, 1996.
EL PASO ELECTRIC COMPANY
By: /s/ James S. Haines, Jr.
------------------------------------
James S. Haines, Jr.
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James S. Haines, Jr. Chief Executive Office, December 16, 1996
- ---------------------------- President and Director -----------------
James S. Haines, Jr. (Principal Executive Officer)
/s/ Gary R. Hedrick Vice President, Treasurer December 16, 1996
- ---------------------------- and Chief Financial Officer -----------------
Gary R. Hedrick (Principal Financial and
Accounting Officer)
/s/ George W. Edwards, Jr. Chairman of the Board and December 16, 1996
- ---------------------------- Director -----------------
George W. Edwards, Jr.
/s/ Wilson K. Cadman Director December 16, 1996
- ---------------------------- -----------------
Wilson K. Cadman
/s/ James A. Cardwell Director December 16, 1996
- ---------------------------- -----------------
James A. Cardwell
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
- --------- ----- ----
/s/ Ramiro Guzman Director December 16, 1996
- ---------------------------- -----------------
Ramiro Guzman
/s/ James W. Harris Director December 16, 1996
- ---------------------------- -----------------
James W. Harris
____________________________ Director ________________
Kenneth R. Heitz
/s/ Edward C. Houghton, IV Director December 16, 1996
- ---------------------------- -----------------
Edward C. Houghton, IV
/s/ Michael K. Parks Director
- ---------------------------- December 16, 1996
Michael K. Parks -----------------
/s/ Eric B. Siegel Director
- ---------------------------- December 16, 1996
Eric B. Siegel -----------------
/s/ Stephen Wertheimer Director
- ---------------------------- December 16, 1996
Stephen Wertheimer -----------------
________________________ Director _________________
Charles A. Yamarone
</TABLE>
-7-
<PAGE>
Exhibit 4.1
-----------
EL PASO ELECTRIC COMPANY
1996 LONG-TERM INCENTIVE PLAN
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1996 Long-Term Incentive Plan (the "Plan")
-------- ----
of El Paso Electric Company (the "Company") and any subsidiaries of the Company
-------
that may exist from time to time (individually a "Subsidiary" and collectively
----------
the Subsidiaries") are (i) to align the interests of the Company's stockholders
------------
and the recipients of awards under this Plan by increasing the proprietary
interest of such recipients in the Company's growth and success, (ii) to advance
the interests of the Company by attracting and retaining officers and other key
employees and well-qualified persons who are not officers or employees of the
Company ("non-employee directors") for service as directors of the Company and
----------------------
(iii) to motivate such employees and non-employee directors to act in the long-
term best interests of the Company's stockholders. For purposes of this Plan,
references to employment by the Company shall also mean employment by a
Subsidiary.
1.2 CERTAIN DEFINITIONS.
-------------------
"AGREEMENT" shall mean the written agreement evidencing an award hereunder
---------
between the Company and the recipient of such award.
"BOARD" shall mean the Board of Directors of the Company.
-----
"BONUS STOCK" shall mean shares of Common Stock which are not subject to a
-----------
Restriction Period or Performance Measures.
"BONUS STOCK AWARD" shall mean an award of Bonus Stock under this Plan.
-----------------
"CAUSE" shall mean any act of dishonesty, commission of a felony,
-----
significant activities harmful to the reputation of the Company, refusal to
perform or substantial disregard of duties properly assigned or significant
violation of any statutory or common law duty of loyalty to the Company.
"CHANGE IN CONTROL" shall have the meaning set forth in Section 6.8(b).
-----------------
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
----
"COMMITTEE" shall mean the Committee designated by the Board, consisting of
---------
two or more members of the Board, each of whom shall be (i) a Non-Employee
Director or "disinterested
<PAGE>
person" within the meaning of Rule 16b-3 under the Exchange Act and (ii) an
"outside director" within the meaning of Section 162(m) of the Code.
"COMMON STOCK" shall mean the common stock, no par value, of the Company.
------------
"COMPANY" has the meaning specified in Section 1.1.
-------
"DIRECTORS RESTRICTED STOCK" shall have the meaning set forth in Section
--------------------------
5.1.
"DISABILITY" shall mean the inability of the holder of an award to perform
----------
substantially such holder's employment duties and responsibilities for a
continuous period of at least six months, as determined solely in the judgment
of the Committee, unless a different definition of "Disability" shall be set
forth in a particular holder's Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
------------
"FAIR MARKET VALUE" shall mean the closing transaction price of Common
-----------------
Stock as reported in the American Stock Exchange Composite Transactions on the
date as of which such value is being determined, or, if the Common Stock is not
listed on the American Stock Exchange, the closing transaction price of a share
of Common Stock on the principal national stock exchange on which the Common
Stock is traded on the date as of which such value is being determined, or, if
there shall be no reported transactions for such date, on the next preceding
date for which a transaction was reported; provided, however, that if Fair
Market Value for any date cannot be so determined, Fair Market Value shall be
determined by the Committee by whatever means or method as the Committee, in the
good faith exercise of its discretion, shall at such time deem appropriate.
"FREE-STANDING SAR" shall mean an SAR which is not issued in tandem with,
-----------------
or by reference to, an option, which entitles the holder thereof to receive,
upon exercise, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of such SARs which are exercised.
"INCENTIVE STOCK OPTION" shall mean an option to purchase shares of Common
----------------------
Stock that meets the requirements of Section 422 of the Code, or any successor
provision, which is intended by the Committee to constitute an Incentive Stock
Option.
-2-
<PAGE>
"INCUMBENT BOARD" shall have the meaning set forth in Section 6.8(b)(2)
---------------
hereof.
"LEGAL REPRESENTATIVE" shall mean a guardian, legal representative or other
--------------------
person acting in a similar capacity with respect to a holder of an option or
SAR.
"MATURE SHARES" shall mean shares of Common Stock for which the holder
-------------
thereof has good title, free and clear of all liens and encumbrances and which
such holder either (i) has held for at least six months or (ii) has purchased on
the open market.
"NON-EMPLOYEE DIRECTOR" shall mean any director of the Company who is not
---------------------
an officer or employee of the Company or any Subsidiary and who satisfies the
other criteria to be a "Non-Employee Director" within the meaning of such term
as set forth in Rule 16b-3(b)(3) under the Exchange Act.
"NON-STATUTORY STOCK OPTION" shall mean a stock option which is not an
--------------------------
Incentive Stock Option.
"PERFORMANCE MEASURES" shall mean the criteria and objectives, established
--------------------
by the Committee, which shall be satisfied or met (i) as a condition to the
exercisability of all or a portion of an option or SAR or (ii) during the
applicable Restriction Period or Performance Period as a condition to the
holder's receipt, in the case of a Restricted Stock Award, of the shares of
Common Stock subject to such award, or, in the case of a Performance Share
Award, of payment with respect to such award. Such criteria and objectives may
include, but are not limited to, the attainment by a share of Common Stock of a
specified Fair Market Value for a specified period of time, earnings per share,
return on equity, earnings of the Company, revenues, market share, cash flow or
cost reduction goals, customer satisfaction goals or any combination of the
foregoing and any other criteria and objectives established by the Board or the
Committee.
"PERFORMANCE PERIOD" shall mean a period designated by the Committee during
------------------
which the Performance Measures shall be measured.
"PERFORMANCE SHARE" shall mean a right, contingent upon the attainment of
-----------------
specified Performance Measures within a specified Performance Period, to receive
one share of Common Stock, which may be Restricted Stock, or in lieu thereof,
the Fair Market Value of such Performance Share in cash.
"PERFORMANCE SHARE AWARD" shall mean an award of Performance Shares under
-----------------------
this Plan.
"PERMANENT AND TOTAL DISABILITY" shall have the meaning set forth in
------------------------------
Section 22(e)(3) of the Code or any successor thereto.
-3-
<PAGE>
"PERMITTED TRANSFEREE" shall mean with respect to a holder of an option (i)
--------------------
the spouse, (ii) any lineal descendants or (iii) a trust or similar arrangement
of which such spouse, a lineal descendant, or one or more of such persons are
the only current beneficiaries, provided that such spouse or descendant (or the
Legal Representative of such spouse or descendant) or such trust or similar
arrangement, as the case may be, has entered into a written agreement with the
Company authorizing the Company to withhold shares of Common Stock which would
otherwise be delivered to such person upon an exercise of a Non-Statutory Stock
Option to pay any federal, state, local or other taxes which may be required to
be withheld or paid in connection with such exercise in the event that the
holder of the option does not provide for an arrangement satisfactory to the
Company to assure that such taxes will be paid.
"RESTRICTED STOCK" shall mean shares of Common Stock which are subject to a
----------------
Restriction Period and shall include Directors Restricted Stock.
"RESTRICTED STOCK AWARD" shall mean an award of Restricted Stock under this
----------------------
Plan.
"RESTRICTION PERIOD" shall mean any period designated by the Board or the
------------------
Committee during which the Common Stock subject to a Restricted Stock Award may
not be sold, transferred, assigned, pledged, hypothecated or otherwise
encumbered or disposed of, except as provided in this Plan or the Agreement
relating to such award.
"SAR" shall mean a stock appreciation right which may be a Free-Standing
---
SAR or a Tandem SAR.
"STOCK AWARD" shall mean a Restricted Stock Award or a Bonus Stock Award.
-----------
"TANDEM SAR" shall mean an SAR which is granted in tandem with, or by
----------
reference to, an option (including a Non-Statutory Stock Option granted prior to
the date of grant of the SAR), which entitles the holder thereof to receive,
upon exercise of such SAR and surrender for cancellation of all or a portion of
such option, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of shares of Common Stock subject to
such option, or portion thereof, which is surrendered.
"TAX DATE" shall have the meaning set forth in Section 6.5.
--------
"TEN PERCENT HOLDER" shall have the meaning set forth in Section 2.1(a).
------------------
-4-
<PAGE>
1.3 ADMINISTRATION. This Plan shall be administered by the Committee in
--------------
accordance with the terms of the Plan. Any one or a combination of the
following awards may be made under this Plan to eligible officers, other key
employees and Non-Employee Directors of the Company and its Subsidiaries: (i)
options to purchase shares of Common Stock in the form of Incentive Stock
Options or Non-Statutory Stock Options, (ii) SARs in the form of Tandem SARs or
Free-Standing SARs, (iii) Stock Awards in the form of Restricted Stock or Bonus
Stock and (iv) Performance Shares. The Board or the Committee shall, subject to
the terms of this Plan, select eligible officers, other key employees and non-
employee directors for participation in this Plan and determine the form, amount
and timing of each award to such persons and, if applicable, the number of
shares of Common Stock, the number of SARs and the number of shares of
Restricted Stock and Bonus Stock and Performance Shares subject to such an
award, the exercise price or base price associated with the award, the time and
conditions of exercise or settlement of the award and all other terms and
conditions of the award, including, without limitation, the form of the
Agreement evidencing the award. The Committee shall, subject to the terms of
this Plan, interpret this Plan and the application thereof, establish rules and
regulations it deems necessary or desirable for the administration of this Plan
and may impose, incidental to the grant of an award, conditions with respect to
the award, such as limiting competitive employment or other activities. All
such interpretations, rules, regulations and conditions shall be conclusive and
binding on all parties.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.
The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer and President or other executive officer of the
Company as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority with regard to (A) the
selection for participation in the Plan of (i) the Chief Executive Officer of
the Company (or any employee who is acting in such capacity), one of the four
highest compensated officers of the Company (other than the Chief Executive
Officer), or any other person deemed to be a "covered employee" within the
meaning of Section 162(m) of the Code or who, in the Committee's judgment, is
likely to be a covered employee at any time during the period an award hereunder
to such employee would be outstanding or (ii) an officer or other person subject
to Section 16 of the Exchange Act, or (B) decisions concerning the timing,
pricing or amount of an award to such an employee, officer or other person who
is, or who in the Committee's judgment is likely to be, a covered employee.
-5-
<PAGE>
No member of the Board of Directors or Committee, and neither the Chief
Executive Officer and President nor any other executive officer to whom the
Committee delegates any of its power and authority hereunder, shall be liable
for any act, omission, interpretation, construction or determination made in
good faith in connection with this Plan, and each member of the Board and the
Committee and the Chief Executive Officer and President and each such other
executive officer who is designated by the Committee to exercise any power or
authority hereunder shall be entitled to indemnification and reimbursement by
the Company in respect of any claim, loss, damage or expense (including
attorneys' fees) arising therefrom to the full extent permitted by law, except
as otherwise may be provided in the Company's Amended and Restated Articles of
Incorporation and/or Bylaws, and under any directors' and officers' liability
insurance that may be in effect from time to time.
1.4 ELIGIBILITY. Participants in this Plan shall consist of such officers or
-----------
other key employees or Non-Employee Directors of the Company and its
Subsidiaries as the Committee in its sole discretion may select from time to
time. The Committee's selection of a person to participate in this Plan at any
time shall not require the Committee to select such person to participate in
this Plan at any other time. Non-Employee Directors appointed pursuant to the
Reorganization (as defined below) shall be eligible to participate in this Plan
in accordance with Article V.
1.5 SHARES AVAILABLE. Subject to adjustment as provided in Section 6.7, Three
----------------
Million Five Hundred Thousand (3,500,000) shares of Common Stock shall be
available under this Plan. Such shares of Common Stock shall be reduced by the
sum of (i) the aggregate number of shares of Common Stock that are issued upon
the grant of a Stock Award and (ii) the aggregate number of shares of Common
Stock which become subject to outstanding options, outstanding Free-Standing
SARs and outstanding Performance Shares. To the extent that shares of Common
Stock subject to an outstanding option (other than in connection with the
exercise of a Tandem SAR), Free-Standing SAR, Restricted Stock, Bonus Stock or
Performance Share award are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such award or by reason of the
delivery or withholding of shares of Common Stock to pay all or a portion of the
exercise price of an award, if any, or to satisfy all or a portion of the tax
withholding obligations relating to an award, then such shares of Common Stock
shall again be available under this Plan.
Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
-6-
<PAGE>
To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which awards may be granted during any calendar year to the Chief
Executive Officer and President shall be 900,000 and to any other person shall
be 200,000, subject to adjustment as provided in Section 6.7.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 STOCK OPTIONS. The Committee may, in its discretion, grant options to
-------------
purchase shares of Common Stock to such eligible persons as may be selected by
the Committee. Each option, or portion thereof, that is not an Incentive Stock
Option, shall be a Non-Statutory Stock Option. Each Incentive Stock Option
shall be granted within ten years of the effective date of this Plan. To the
extent that the aggregate Fair Market Value (determined as of the date of grant)
of shares of Common Stock with respect to which options designated as Incentive
Stock Options are exercisable for the first time by a participant during any
calendar year (under this Plan or any other plan of the Company, or any parent
or Subsidiary) exceeds the amount (currently $100,000) established by the Code,
such options shall constitute Non-Statutory Stock Options.
Options shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
-----------------------------------
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock purchasable
upon exercise of any Non-Statutory Stock Option and Incentive Stock Option shall
not be less than 100% of the Fair Market Value of a share of Common Stock on the
date of grant of such option; provided further, that if an Incentive Stock
Option shall be granted to any person who, at the time such option is granted,
owns capital stock possessing more than ten percent of the total combined voting
power of all classes of capital stock of the Company (or of any parent or
Subsidiary) (a "Ten Percent Holder"), the purchase price per share of Common
------------------
Stock shall be the price (currently 110% of Fair Market Value) required by the
Code in order to constitute an Incentive Stock Option.
(b) Option Period and Exercisability. The period during which an option
--------------------------------
may be exercised shall be determined by the Committee; provided, however, that
no Incentive Stock Option shall be exercised later than ten years after its date
of grant; provided further, that if an Incentive Stock Option shall be granted
to a Ten Percent Holder, such option shall not be exercised later than five
years after its date of grant. The
-7-
<PAGE>
Committee may, in its discretion, establish Performance Measures which must be
satisfied or met during a Performance Period as a condition either to the grant
of an option or to the exercisability of all or a portion of an option. The
Committee shall determine whether an option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any time.
An exercisable option, or portion thereof, may be exercised only with respect to
whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving written
------------------
notice to the Company specifying the number of whole shares of Common Stock to
be purchased and accompanied by payment therefor in full (unless another
arrangement for such payment which is satisfactory to the Company has been made)
either (A) in cash, (B) by delivery of Mature Shares having a Fair Market Value,
determined as of the date of exercise, equal to the aggregate purchase price
payable by reason of such exercise, (C) by authorizing the Company to withhold
whole shares of Common Stock which would otherwise be delivered upon exercise of
the option having a Fair Market Value, determined as of the date of exercise,
equal to the aggregate purchase price payable by reason of such exercise, (D) in
cash by a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise or (E) a combination of (A), (B) and
(C), in each case to the extent determined by the Committee at the time the
option is granted and as set forth in the Agreement relating to the option, (ii)
if applicable, by surrendering to the Company any Tandem SARs which are
cancelled by reason of the exercise of the option and (iii) by executing such
documents as the Company may reasonably request. The Committee shall have sole
discretion to disapprove of an election pursuant to any of clauses (B)-(E) and
in the case of an optionee who is subject to Section 16 of the Exchange Act, the
Company may require that the method of making such payment be in compliance with
Section 16 and the rules and regulations thereunder. If payment of the purchase
price is to be made pursuant to clause (B) or (C) (or a combination thereof) of
the first sentence of this Section, any fraction of a share of Common Stock
which would be required to pay such purchase price shall be disregarded and the
remaining amount due shall be paid in cash by the optionee. No certificate
representing Common Stock shall be delivered until the full purchase price
therefor has been paid.
(d) Additional Options. The Committee shall have the authority to include
------------------
in any Agreement relating to an option a provision entitling the optionee to an
additional option in the event such optionee exercises the option represented by
such option agreement, in whole or in part, by delivering previously owned whole
shares of Common Stock in payment of the purchase price in accordance with this
Plan and such Agreement. Any such additional option shall be for a number of
shares of Common Stock equal to the number of delivered shares, shall have a
purchase price determined by the Committee in accordance with this Plan,
-8-
<PAGE>
and shall be exercisable on the terms and subject to the conditions set forth in
the Agreement relating to such additional option.
(e) Dividend Equivalents. The Agreement relating to any Non-Statutory
--------------------
Stock Option may provide for the grant of "dividend equivalents" with respect to
each Non-Statutory Stock Option. Each dividend equivalent shall entitle the
optionee to receive a cash payment equal to the product of (i) the dividends
declared with respect to a share of Common Stock, and (ii) the number of shares
of Common Stock subject to such option.
2.2 STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant
-------------------------
SARs to such eligible persons as may be selected by the Committee. The
Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a
Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:
(a) Number of SARs and Base Price. The number of SARs subject to an award
-----------------------------
shall be determined by the Committee. Any Tandem SAR related to an Incentive
Stock Option shall be granted at the same time that such Incentive Stock Option
is granted. The base price of a Tandem SAR shall be the purchase price per share
of Common Stock of the related option. The base price of a Free-Standing SAR
shall be determined by the Committee; provided, however, that such base price
shall not be less than 100% of the Fair Market Value of a share of Common Stock
on the date of grant of such SAR.
(b) Exercise Period and Exercisability. The Agreement relating to an
----------------------------------
award of SARs shall specify whether such award may be settled in shares of
Common Stock (including shares of Restricted Stock) or cash or a combination
thereof. The period for the exercise of an SAR shall be determined by the
Committee; provided, however, that no Tandem SAR shall be exercised later than
the expiration, cancellation, forfeiture or other termination of the related
option. The Committee may, in its discretion, establish Performance Measures
which shall be satisfied or met during a Performance Period as a condition to
the exercisability of an SAR. The Committee shall determine whether an SAR may
be exercised in cumulative or non-cumulative installments and in part or in full
at any time. An exercisable SAR, or portion thereof, may be exercised, in the
case of a Tandem SAR, only with respect to whole shares of Common Stock and, in
the case of a Free-Standing SAR, only with respect to a whole number of SARs.
If an SAR is settled in shares of Restricted Stock, a certificate or
certificates representing such Restricted Stock shall be issued in accordance
with Section
-9-
<PAGE>
3.2(c) and the holder of such Restricted Stock shall have such rights of a
stockholder of the Company as determined pursuant to Section 3.2(d). Prior to
the exercise of an SAR, the holder of such SAR shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject to
such SAR.
(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving
------------------
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
cancelled by reason of the exercise of the Tandem SAR and (iii) by executing
such documents as the Company may reasonably request. A Free-Standing SAR may
be exercised (i) by giving written notice to the Company specifying the whole
number of SARs which are being exercised and (ii) by executing such documents as
the Company may reasonably request.
2.3 Termination of Employment. (a) Disability. Unless otherwise specified
------------------------- ----------
in the Agreement relating to an option or SAR, as the case may be, and subject
to paragraph (f) below and Section 6.8, if the employment with the Company of
the holder of an option or SAR terminates by reason of Disability, each option
and SAR held by such holder shall be exercisable only to the extent that such
option or SAR, as the case may be, is exercisable on the effective date of such
holder's termination of employment and may thereafter be exercised by such
holder (or such holder's Legal Representative) until and including the earliest
to occur of (i) the date which is 120 days after the effective date of such
holder's termination of employment and (ii) the expiration date of the term of
such option or SAR.
(b) Retirement. Unless otherwise specified in the Agreement relating to
----------
an option or SAR, as the case may be, and subject to paragraph (f) below and
Section 6.8, if the employment with the Company of the holder of an option or
SAR terminates by reason of retirement, each option and SAR held by such holder
shall be exercisable only to the extent that such option or SAR, as the case may
be, is exercisable on the effective date of such holder's termination of
employment and may thereafter be exercised by such holder (or such holder's
Legal Representative) until and including the earliest to occur of (i) the date
which is 120 days after the effective date of such holder's termination of
employment and (ii) the expiration date of the term of such option or SAR.
(c) Death. Unless otherwise specified in the Agreement relating to an
-----
option or SAR, as the case may be, and subject to paragraph (f) below and
Section 6.8, if the employment with the Company of the holder of an option or
SAR terminates by reason of death, each option and SAR held by such holder shall
be exercisable only to the extent that such option or SAR, as the case may be,
is exercisable on the date of such holder's death, and after such date may be
exercised by the beneficiary or beneficiaries duly designated by the holder or,
if none, the
-10-
<PAGE>
executor or administrator of the holder's estate or, if none, the person to whom
the holder's rights under such option or SAR shall pass by will or by the
applicable laws of descent or distribution until and including the earliest to
occur of (i) the date which is 120 days after the date of death and (ii) the
expiration date of the term of such option or SAR.
(d) Other Termination. Unless specified in the Agreement relating to an
-----------------
option or SAR, as the case may be, and subject to paragraph (f) below and
Section 6.8, if the employment with the Company of the holder of an option or
SAR terminates for any reason other than Disability, retirement or death, each
option and SAR held by such holder shall be exercisable only to the extent that
such option or SAR is exercisable on the effective date of such holder's
termination of employment and may thereafter be exercised by such holder (or
such holder's Legal Representative) until and including the earliest to occur of
(i) the date which is 120 days after the effective date of such holder's
termination of employment and (ii) the expiration date of the term of such
option or SAR.
(e) Death Following Termination of Employment. Unless otherwise specified
-----------------------------------------
in the Agreement relating to an option or SAR, as the case may be, and subject
to paragraph (f) below and Section 6.8, if the holder of an option or SAR dies
during the 90-day period following (A) termination of employment by reason of
Disability, (B) termination of employment by reason of retirement or (C)
termination of employment for any reason other than Disability or retirement
(or, in each case, such other period specified in the Agreement relating to such
option or SAR), each option and SAR held by such holder shall be exercisable
only to the extent that such option or SAR, as the case may be, is exercisable
on the date of such holder's death and may thereafter be exercised by the
beneficiary or beneficiaries duly designated by the holder or, if none, the
executor or administrator of the holder's estate or, if none, the person to whom
the holder's rights under such option or SAR shall pass by will or by applicable
laws of descent and distribution, until and including the earliest to occur of
(i) the date which is 90 days after the date of death and (ii) the expiration
date of the term of such option or SAR.
(f) Termination of Employment - Incentive Stock Options. Unless otherwise
---------------------------------------------------
specified in the Agreement relating to the option and subject to Section 6.8, if
the employment with the Company of a holder of an Incentive Stock Option
terminates by reason of Permanent and Total Disability (as defined in Section
22(e)(3) of the Code), each Incentive Stock Option held by such optionee shall
be exercisable only to the extent that such option is exercisable on the
effective date of such optionee's termination of employment by reason of
Permanent and Total Disability, and may thereafter be exercised by such optionee
(or such optionee's Legal Representative) until and including the
-11-
<PAGE>
earliest to occur of (i) the date which is 90 days (or such other period as set
forth in the Agreement relating to such option) after the effective date of such
optionee's termination of employment by reason of Permanent and Total Disability
and (ii) the expiration date of the term of such option.
Unless otherwise specified in the Agreement relating to the option and
subject to Section 6.8, if the employment with the Company of a holder of an
Incentive Stock Option terminates by reason of death, each Incentive Stock
Option held by such optionee shall be exercisable only to the extent that such
option is exercisable on the date of such optionee's death and may thereafter be
exercised by the beneficiary or beneficiaries duly designated by the optionee
or, if none, the executor or administrator of the optionee's estate or, if none,
the person to whom the optionee's rights under such option shall pass by will or
by the applicable laws of descent and distribution until and including the
earliest to occur of (i) the date which is 90 days (or such other period as set
forth in the Agreement relating to such option) after the date of death and (ii)
the expiration date of the term of such option.
If the employment with the Company of a holder of an Incentive Stock
Option terminates for any reason other than Permanent and Total Disability or
death, each Incentive Stock option held by such optionee shall be exercisable
only to the extent such option is exercisable on the effective date of such
optionee's termination of employment, and may thereafter be exercised by such
holder (or such holder's Legal Representative) until and including the earliest
to occur of (i) the date which is 90 days after the effective date of such
optionee's termination of employment and (ii) the expiration date of the term of
such option.
If the holder of an Incentive Stock Option dies during the exercise
period following termination of employment by reason of Permanent and Total
Disability, or if the holder of an Incentive Stock Option dies during the 90-day
period following termination of employment for any reason other than Permanent
and Total Disability or death, each Incentive Stock Option held by such optionee
shall be exercisable only to the extent such option is exercisable on the date
of the optionee's death and may thereafter be exercised by the beneficiary or
beneficiaries duly designated by the optionee or, if none, the executor or
administrator of the optionee's estate or, if none, the person to whom the
optionee's rights under such option shall pass by will or by the applicable laws
of descent and distribution until and including the earliest to occur of (i) the
date which is 90 days (or such shorter period as set forth in the Agreement
relating to such option) after the date of death and (ii) the expiration date of
the term of such option.
-12-
<PAGE>
III. STOCK AWARDS
3.1 STOCK AWARDS. The Committee may, in its discretion, grant Stock Awards to
------------
such eligible persons as may be selected by the Committee. The Agreement
relating to a Stock Award shall specify whether the Stock Award is a Restricted
Stock Award or Bonus Stock Award.
3.2 TERMS OF STOCK AWARDS. Stock Awards shall be subject to the following
---------------------
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common
--------------------------------
Stock subject to a Restricted Stock Award or Bonus Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a Restricted
Stock Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted
----------------------
Stock Award may provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) upon the satisfaction of
specified Performance Measures during the specified Restriction Period or (ii)
upon the completion of a continuous period of employment with the Company by the
holder of such award during the specified Restriction Period, and for the
forfeiture of the shares of Common Stock subject to such award (x) if specified
Performance Measures are not satisfied or met during the specified Restriction
Period or (y) if the holder of such award does not remain continuously in the
employment of the Company during the specified Restriction Period.
Bonus Stock Awards shall not be subject to any Performance Measures or
Restriction Periods.
(c) Share Certificates. During the Restriction Period, a certificate or
------------------
certificates representing a Restricted Stock Award shall be registered in the
holder's name and may bear a legend, in addition to any legend which may be
required pursuant to Section 6.6, indicating that the ownership of the shares of
Common Stock represented by such certificate is subject to the restrictions,
terms and conditions of this Plan and the Agreement relating to the Restricted
Stock Award. All such certificates shall be deposited with the Company, together
with stock powers or other instruments of assignment (including a power of
attorney), each endorsed in blank with a guarantee of signature if deemed
necessary or appropriate, which would permit transfer to the Company of all or a
portion of the shares of Common Stock subject to the Restricted Stock Award in
the event such award is forfeited in whole or in part. Upon termination of any
applicable Restriction Period (and the satisfaction or attainment
-13-
<PAGE>
of applicable Performance Measures), or upon the grant of a Bonus Stock Award,
in each case subject to the Company's right to require payment of any taxes in
accordance with Section 6.5, a certificate or certificates evidencing ownership
of the requisite number of shares of Common Stock shall be delivered to the
holder of such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise set
----------------------------------------------
forth in the Agreement relating to a Restricted Stock Award, and subject to the
terms and conditions of a Restricted Stock Award, the holder of such award shall
have all rights as a stockholder of the Company, including, but not limited to,
voting rights, the right to receive dividends and the right to participate in
any capital adjustment applicable to all holders of Common Stock; provided,
however, that a distribution with respect to shares of Common Stock, other than
a regular cash dividend, shall be deposited with the Company and shall be
subject to the same restrictions as the shares of Common Stock with respect to
which such distribution was made. The Agreement relating to a Restricted Stock
Award may provide that regular cash dividends made with respect to Common Stock
in a Restricted Stock Award prior to the termination of the Restriction Period
shall be deposited with the Company and such cash dividends shall be used to
purchase additional shares of Common Stock, which shall be subject to the same
restrictions, vesting period, Performance Measures and other provisions as the
shares of Common Stock with respect to which such cash dividend was made.
3.3 TERMINATION OF EMPLOYMENT. Subject to Section 6.8, all of the
-------------------------
terms relating to the satisfaction of Performance Measures and the termination
of the Restriction Period relating to a Restricted Stock Award, or any
cancellation or forfeiture of such Restricted Stock Award upon a termination of
employment with the Company of the holder of such Restricted Stock Award,
whether by reason of Disability, retirement, death or other termination, shall
be set forth in the Agreement relating to such Restricted Stock Award.
IV. PERFORMANCE SHARE AWARDS
4.1 PERFORMANCE SHARE AWARDS. The Committee may, in its discretion, grant
------------------------
Performance Share Awards to such eligible persons as may be selected by the
Committee.
4.2 TERMS OF PERFORMANCE SHARE AWARDS. Performance Share Awards shall be
---------------------------------
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable.
(a) Number of Performance Shares and Performance Measures. The number of
-----------------------------------------------------
Performance Shares subject to any award and the
-14-
<PAGE>
Performance Measures and Performance Period applicable to such award shall be
determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance Share
----------------------
Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award if specified Performance Measures are satisfied or met during the
specified Performance Period, and for the forfeiture of such award if specified
Performance Measures are not satisfied or met during the specified Performance
Period.
(c) Settlement of Vested Performance Share Awards. The Agreement
---------------------------------------------
relating to a Performance Share Award (i) shall specify whether such award may
be settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder thereof
shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on any deferred
dividend equivalents, with respect to the number of shares of Common Stock
subject to such award. If a Performance Share Award is settled in shares of
Restricted Stock, a certificate or certificates representing such Restricted
Stock shall be issued in accordance with Section 3.2(c) and the holder of such
Restricted Stock shall have such rights of a stockholder of the Company as
determined pursuant to Section 3.2(d). Prior to the settlement of a Performance
Share Award in shares of Common Stock, including Restricted Stock, the holder of
such award shall have no rights as a stockholder of the Company with respect to
the shares of Common Stock subject to such award.
4.3 TERMINATION OF EMPLOYMENT. Subject to Section 6.8, all of the
-------------------------
terms relating to the satisfaction of Performance Measures and the termination
of the Performance Period relating to a Performance Share Award, or any
cancellation or forfeiture of such Performance Share Award upon a termination of
employment with the Company of the holder of such Performance Share Award,
whether by reason of Disability, retirement, death or other termination, shall
be set forth in the Agreement relating to such Performance Share Award.
V. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
5.1 ELIGIBILITY. In accordance with the compensation approved by the
-----------
United States Bankruptcy Court for the Western District of Texas, Austin
Division, in the order confirming the Company's Fourth Amended Plan of
Reorganization (the "Reorganization"), each individual who was serving as a Non-
Employee Director as of February 13, 1996 shall receive Restricted Stock having
the terms described in Section 5.3 ("Directors Restricted Stock").
--------------------------
-15-
<PAGE>
5.2 GRANTS OF DIRECTORS RESTRICTED STOCK. An initial award of 5,000
------------------------------------
shares of Directors Restricted Stock shall be issued (the "Initial Directors
Restricted Stock") to each eligible Non-Employee Director. A second grant of
Directors Restricted Stock shall be made to each eligible Non-Employee Director
on the first to occur of February 12, 1997 and a Change in Control (the
"Additional Grant Date"). The second award for each eligible Non-Employee
Director shall be the number of shares of Common Stock equal to the product of
(a) 1,000 and (b) the amount (expressed to the nearest two decimal places) by
which the average of the Fair Market Value of the Common Stock for the five
trading days preceding the Additional Grant Date exceeds $5.00 per share. If the
average of the Fair Market Value of the Common Stock for the five trading days
preceding the Additional Grant Date is less than $5.00, no second award of
Directors Restricted Stock shall be made.
5.3 DIRECTORS RESTRICTED STOCK. Subject to earlier vesting in
--------------------------
accordance with Section 6.8, the Initial Directors Restricted Stock shall be
subject to a Restriction Period that ends as to 20% of the shares subject to
such stock grant on February 12, 1997 and as to an additional 20% on each
anniversary thereof through and including February 12, 2001. The second award
of Directors Restricted Stock, if any, shall be subject to a Restriction Period
that ends as to 20% of the shares granted on each of the first through the fifth
anniversaries of the date of such award; provided in each case, however, that
upon the Disability or death of a Non-Employee Director prior to the end of an
applicable Restriction Period, such Director's Restricted Stock shall thereupon
fully vest and cease to be subject to any restrictions on transfer.
The provisions of Sections 3.2(c) and (d) shall apply to Directors
Restricted Stock. A holder of Directors Restricted Stock shall have all rights
as a stockholder of the Company, including, but not limited to, voting rights,
the right to receive dividends and the right to participate in any capital
adjustment applicable to all holders of Common Stock; provided, however, that a
distribution with respect to shares of Common Stock, other than a regular cash
dividend, shall be deposited with the Company and shall be subject to the same
restrictions as the shares of Common Stock with respect to which such
distribution was made.
VI. GENERAL
6.1 EFFECTIVE DATE AND TERM OF PLAN. (a) This Plan shall be submitted to the
-------------------------------
stockholders of the Company for approval at a special meeting called for such
purpose and, if approved by the affirmative vote of a majority of the shares of
Common Stock present in person or represented by proxy at such meeting of
stockholders, shall become effective as of April 30, 1996. This
-16-
<PAGE>
Plan shall terminate ten years after its effective date unless terminated
earlier by the Board. Termination of this Plan shall not affect the terms or
conditions of any award granted prior to termination.
Awards hereunder may be made at any time prior to the termination of this
Plan, provided that no award may be made later than ten years after the
effective date of this Plan. In the event that this Plan is not approved by the
stockholders of the Company, this Plan and any awards hereunder shall be void
and of no force or effect.
(b) Notwithstanding any provision herein giving authority to the Committee
with respect to the selection of persons eligible to receive awards hereunder,
or with respect to the amount or terms of any such award, the following grants
made by the Board shall be deemed to be fully effective under, and shall be
governed by and subject to, the Plan:
1. Grant, effective April 30, 1996, to Mr. James S. Haines, Jr., of
100,000 Restricted Shares and an aggregate of 800,000 Incentive Stock Options
and Non-Statutory Stock Options, as specified in that certain Employment
Agreement dated as of April 30, 1996 between the Company and Mr. Haines (the
"Employment Agreement");
2. Grant, effective May 1, 1996, to Mr. George Edwards, of 25,000
Restricted Shares, in consideration of his election as Chairman of the Board
effective May 1, 1996 to and including April 30, 1997.
3. Grant, effective June 11, 1996, to Mr. David H. Wiggs, Jr., of
500,000 Non-Statutory Stock Options, as specified in that certain Consulting
Agreement, dated as of May 1, 1996 between the Company and Mr. Wiggs (the
"Consulting Agreement"); and
4. Grants, effective June 11, 1996, to certain executive officers of
the Company of an aggregate of 600,000 Incentive Stock Options and Non-Statutory
Stock Options, as specified in a resolution of the Board adopted on June 11,
1996.
(c) Notwithstanding any provision herein giving authority to the Committee
or the Board with respect to the selection of persons eligible to receive awards
hereunder, or with respect to the amount or terms of any award, the grants
referred to in Sections 5.1 through 5.3 above are made pursuant to the
Reorganization as formula awards pursuant to Rule 16b-3 under the Exchange Act,
and are otherwise fully effective under, and governed by, the Plan.
(d) Each of the grants referred to in Sections 6.1(b) and (c) above shall
be evidenced by an Agreement approved by the
-17-
<PAGE>
Committee that is consistent with the terms of the Employment Agreement and the
Consulting Agreement for Messrs. Haines and Wiggs, respectively, and of this
Plan and the Reorganization.
6.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
----------
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Rule 16b-3 under the Exchange Act and Section
162(m)(4)(c) of the Code; provided, however, that, except as provided in Section
6.7, no amendment shall be made without stockholder approval if such amendment
would (a) increase the maximum number of shares of Common Stock available for
issuance under this Plan (subject to Section 6.7), (b) reduce the minimum
purchase price in the case of an option or the base price in the case of an SAR,
(c) effect any change inconsistent with Section 422 of the Code or (d) extend
the term of this Plan. No amendment may impair the rights of a holder of an
outstanding award without the consent of such holder.
6.3 AGREEMENT. Each award under this Plan shall be evidenced by an Agreement
---------
setting forth the terms and conditions applicable to such award. No award shall
be valid until an Agreement is executed by the Company and the recipient of such
award and, upon execution by each party and delivery of the Agreement to the
Company, such award shall be effective as of the effective date set forth in the
Agreement.
6.4 NON-TRANSFERABILITY OF STOCK OPTIONS, SARS, RESTRICTED STOCK AND
----------------------------------------------------------------
PERFORMANCE SHARES. No Incentive Stock Option shall be transferable other than
- ------------------
by will or the laws of descent and distribution or pursuant to a beneficiary
designation effective on the holder's death. No Non-Statutory Option, SAR,
Restricted Stock or Performance Share shall be transferable other than (a) by
will or the laws of descent and distribution, (b) pursuant to beneficiary
designation effective on the holder's death or (c) to the extent permitted under
(i) securities laws relating to the registration of securities subject to
employee benefit plans, (ii) Rule 16b-3 under the Exchange Act and (iii) as set
forth in the Agreement relating to such award, by gift to Permitted Transferee.
Each option, SAR, Restricted Stock or Performance Share may be exercised or
settled during the participant's lifetime only by the holder or the holder's
Legal Representative. Except as permitted by the second preceding sentence, no
option, SAR, Restricted Stock or Performance Share may be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of any option, SAR, Restricted Stock or
Performance Share, such award and all rights thereunder shall immediately become
null and void.
-18-
<PAGE>
6.5 TAX WITHHOLDING. The Company shall have the right to require, prior to the
---------------
issuance or delivery of any shares of Common Stock or the payment of any cash
pursuant to an award made hereunder, payment by the holder of such award of any
federal, state, local or other taxes which may be required to be withheld or
paid in connection with such award. An Agreement may provide that (i) the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of
the date the obligation to withhold or pay taxes arises in connection with an
award (the "Tax Date"), or withhold an amount of cash which would otherwise be
--------
payable to a holder, in the amount necessary to satisfy any such obligation or
(ii) the holder may satisfy any such obligation by any of the following means:
(A) a cash payment to the Company, (B) delivery to the Company of Mature Shares
having an aggregate Fair Market Value, determined as of the Tax Date, equal to
the amount necessary to satisfy any such obligation, (C) authorizing the Company
to withhold whole shares of Common Stock which would otherwise be delivered
having an aggregate Fair Market Value, determined as of the Tax Date, or
withhold an amount of cash which would otherwise be payable to a holder, equal
to the amount necessary to satisfy any such obligation, (D) in the case of the
exercise of an option, a cash payment by a broker-dealer acceptable to the
Company to whom the optionee has submitted an irrevocable notice of exercise or
(E) any combination of (A), (B) and (C), in each case to the extent set forth in
the Agreement relating to the award; provided, however, that the Committee shall
have sole discretion to disapprove of an election pursuant to any of clauses
(B)-(E) and that in the case of a holder who is subject to Section 16 of the
Exchange Act, the Company may require that the method of satisfying such an
obligation be in compliance with Section 16 and the rules and regulations
thereunder. An Agreement may provide for shares of Common Stock to be delivered
or withheld having an aggregate Fair Market Value in excess of the minimum
amount required to be withheld. Any fraction of a share of Common Stock which
would be required to satisfy such an obligation shall be disregarded and the
remaining amount due shall be paid in cash by the holder.
6.6 RESTRICTIONS ON SHARES. Each award made hereunder shall be subject to the
----------------------
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any award made hereunder bear a
-19-
<PAGE>
legend indicating that the sale, transfer or other disposition thereof by the
holder is prohibited except in compliance with the thereunder.
6.7 ADJUSTMENT. In the event of any stock split, stock dividend,
----------
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option and the
purchase price per security, the terms of each outstanding SAR, the number and
class of securities subject to each outstanding Stock Award, and the terms of
each outstanding Performance Share shall be appropriately adjusted by the
Committee, such adjustments to be made in the case of outstanding options and
SARs without an increase in the aggregate purchase price or base price. The
decision of the Committee regarding any such adjustment shall be final, binding
and conclusive. If any such adjustment would result in a fractional security
being (i) available under this Plan, such fractional security shall be
disregarded, or (ii) subject to an award under this Plan, the Company shall pay
the holder of such award, in connection with the first vesting, exercise or
settlement of such award, in whole or in part, occurring after such adjustment,
an amount in cash determined by multiplying (i) the fraction of such security
(rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair
Market Value on the vesting, exercise or settlement date over (B) the exercise
or base price, if any, of such award.
6.8 CHANGE IN CONTROL.
-----------------
(a) Notwithstanding any provision in this Plan or any Agreement, in the
event of a Change in Control, (i) all outstanding options and SARs shall
immediately become exercisable in full, (ii) the Restriction Period applicable
to any outstanding Restricted Stock Award shall lapse, (iii) the Performance
Period applicable to any outstanding Performance Share Award shall lapse, (iv)
the Performance Measures applicable to any outstanding Restricted Stock Award
(if any) and to any outstanding Performance Share Award shall be deemed to be
satisfied at the maximum level.
(b) "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act, of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 30% or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding Company
-------------------
Common Stock") or (ii) the combined voting power of the then
- ------------
-20-
<PAGE>
outstanding securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities"); excluding, however,
-------------------------------------
the following: (A) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or exchange
privilege unless the security being so exercised, converted or exchanged was
acquired directly from the Company), (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, (D) any
acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (3) of this Section 6.8(b) or (E) any
acquisition by a fund advised by Fidelity Management & Research Company or an
account managed by Fidelity Management Trust Company, or their affiliates
(collectively "Fidelity"), unless such acquisition results in Fidelity
beneficially owning 50% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities;
(2) individuals who, as of May 1, 1996, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least a
---------------
majority of such Board; provided that any individual who becomes a director of
the Company subsequent to May 1, 1996 whose election, or nomination for election
by the Company's stockholders, was approved by the vote of at least a majority
of the directors then comprising the Incumbent Board shall be deemed a member of
the Incumbent Board; and provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or threatened
election contest, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board shall not be deemed a member of the Incumbent Board;
(3) approval by the stockholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Corporate Transaction"); excluding, however, a
---------------------
Corporate Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than 60% of, respectively, the outstanding shares of common
stock, and the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
indirectly) in substantially the same proportions relative to each other as
-21-
<PAGE>
their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities,
as the case may be, (ii) no Person (other than: the Company; any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; the corporation resulting from such
Corporate Transaction; and any Person which beneficially owned, immediately
prior to such Corporate Transaction, directly or indirectly, 30% or more of the
Outstanding Company Common Stock or the Outstanding Company Voting Securities,
as the case may be) will beneficially own, directly or indirectly, 30% or more
of, respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of the
outstanding securities of such corporation entitled to vote generally in the
election of directors and (iii) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction; or
(4) approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.
6.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right to
---------------------------------------
participate in this Plan. Neither this Plan nor any award made hereunder shall
confer upon any person any right to continued employment by the Company, any
Subsidiary or any affiliate of the Company or affect in any manner the right of
the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
6.10 RIGHTS AS STOCKHOLDER. No person shall have any right as a stockholder of
---------------------
the Company with respect to any shares of Common Stock or other equity security
of the Company which is subject to an award hereunder unless and until such
person becomes a stockholder of record with respect to such shares of Common
Stock or equity security.
6.11 GOVERNING LAW. This Plan, each award hereunder and the related Agreement,
-------------
and all determinations made and actions taken pursuant thereto, to the extent
not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Texas and construed in accordance therewith
without giving effect to principles of conflicts of laws.
6.12 SEVERABILITY. If a provision of the Plan shall be held illegal or
------------
invalid, the illegality or invalidity shall not affect the remaining parts of
the Plan and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included in the Plan.
-22-
<PAGE>
Exhibit 5
December 16, 1996
El Paso Electric Company
Board of Directors
303 N. Oregon Street
El Paso, Texas 79901
Re: 3,500,000 Shares of Common Stock, no par value, of El Paso
Electric Company
Gentlemen:
We refer to the Registration Statement on Form S-8 filed with the
Securities and Exchange Commission on December 16, 1996 (the "Registration
Statement") by El Paso Electric Company (the "Company") under the Securities Act
of 1933 (the "Act") relating to the registration of 3,500,000 shares of Common
Stock (the "New Shares"), no par value, of the Company.
We are familiar with the proceedings to date with respect to the
proposed issuance of the New Shares pursuant to the Company's 1996 Long-Term
Incentive Plan (the "1996 Plan") pursuant to the Registration Statement and have
examined such records, documents and questions of law, and satisfied ourselves
as to such matters of fact, as we have considered relevant and necessary as a
basis for this opinion.
Based on the foregoing, we are of the opinion that:
The New Shares issued pursuant to the Plan will be validly issued,
fully paid and nonassessable when (i) the Company's Board of Directors or a duly
authorized committee of the Board shall have duly adopted final resolutions
authorizing the award of such New Shares in accordance with the terms of the
1996 Plan, and (ii) certificates representing the New Shares shall have been
duly executed, countersigned and registered in the books of the Company and duly
delivered to the participants in the 1996 Plan in accordance with the terms of
the 1996 Plan and, with respect to Stock Appreciation Rights and Stock Options
(as such terms are defined in the 1996 Plan), upon receipt of the consideration
therefor upon the exercise of such rights and options.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
<PAGE>
Very truly yours,
/s/ Clark, Thomas & Winters,
a Professinal Corporation
<PAGE>
EXHIBIT 15
El Paso Electric Company
El Paso, Texas
Ladies and Gentlemen:
Re: Registration Statement No. 33-XXXXX on Form S-8
With respect to the subject registration statement, we acknowledge our awareness
of the use therein of our reports dated May 13, 1996, August 12, 1996, and
November 1, 1996 related to our reviews of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
Very truly yours,
KPMG Peat Marwick LLP
El Paso, Texas
December 16, 1996
<PAGE>
EXHIBIT 23.2
The Board of Directors
El Paso Electric Company:
We consent to the use of our audit report dated March 18, 1996 on the balance
sheets of El Paso Electric Company (a debtor-in-possession as of January 8,
1992) as of December 31, 1995 and 1994, and the related statements of
operations, accumulated deficit, and cash flows for each of the years in the
three-year period ended December 31, 1995 incorporated herein by reference and
to the reference to our firm under the heading "Interests of Named Experts and
Counsel" in the registration statement.
KPMG Peat Marwick LLP
El Paso, Texas
December 16, 1996
