Exhibit 10.1

 

SRC ENERGY INC. 2015 EQUITY INCENTIVE PLAN

 

1.                                      PURPOSE OF PLAN

 

The purpose of this 2015 Equity Incentive Plan (this “Plan”) of SRC Energy Inc.,
a Colorado corporation (the “Corporation”), is to promote the success of the
Corporation and to increase stockholder value by providing an additional means
to attract, motivate, retain and reward selected employees, directors, and other
eligible persons through the grant of equity awards and certain cash
compensation.

 

2.                                      ELIGIBILITY

 

The Administrator (as such term is defined in Section 3.1) may grant awards
under this Plan only to those persons that the Administrator determines to be
Eligible Persons. An “Eligible Person” is any person who is either: (a) an
officer (whether or not a director) or employee of the Corporation or one of its
Subsidiaries; (b) a director of the Corporation or one of its Subsidiaries; or
(c) an individual consultant who renders bona fide services (other than services
in connection with the offering or sale of securities of the Corporation or one
of its Subsidiaries in a capital-raising transaction or as a market maker or
promoter of securities of the Corporation or one of its Subsidiaries) to the
Corporation or one of its Subsidiaries and who is selected to participate in
this Plan by the Administrator;  provided, however,  that a person who is
otherwise an Eligible Person under clause (c) above may participate in this Plan
only if such participation would not adversely affect either the Corporation’s
eligibility to use Form S-8 to register under the Securities Act of 1933, as
amended (the “Securities Act”), the offering and sale of shares issuable under
this Plan by the Corporation, or the Corporation’s compliance with any other
applicable laws. An Eligible Person who has been granted an award (a
“participant”) may, if otherwise eligible, be granted additional awards if the
Administrator shall so determine. As used herein, “Subsidiary” means any
corporation or other entity controlled by the Corporation directly or indirectly
through one or more intermediaries; and “Board” means the Board of Directors of
the Corporation.

 

3.                                      PLAN ADMINISTRATION

 

3.1                          The Administrator. This Plan shall be administered
by and all awards under this Plan shall be authorized by the Administrator. The
“Administrator” means the Board or one or more committees appointed by the Board
or another committee (within its delegated authority) to administer all or
certain aspects of this Plan. Any such committee shall be comprised solely of
one or more directors or such other number of directors as may be required under
applicable law. A committee may delegate some or all of its authority to another
committee so constituted. The Board or a committee comprised solely of directors
may also delegate, to the extent permitted by applicable law, to one or more
officers of the Corporation, its powers under this Plan (a) to determine the
Eligible Persons who will receive grants of awards under this Plan, and (b) to
determine the number of shares subject to, and the other terms and conditions
of, such awards. The Board may delegate different levels of authority to
different committees with administrative and grant authority under this Plan.
Unless otherwise provided in the bylaws of the Corporation or the applicable
charter of any Administrator: (a) a majority of the members of the acting
Administrator shall constitute a quorum, and (b) the affirmative vote of a
majority of the members present

 

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assuming the presence of a quorum or the unanimous written consent of the
members of the Administrator shall constitute due authorization of an action by
the acting Administrator.

 

With respect to awards intended to satisfy the requirements for
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986, as amended (the “Code”), this Plan shall be administered by a committee
consisting solely of two or more outside directors (as this requirement is
applied under Section 162(m) of the Code);  provided, however,  that the failure
to satisfy such requirement shall not affect the validity of the action of any
committee otherwise duly authorized and acting in the matter. Award grants, and
transactions in or involving awards, intended to be exempt under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), must
be duly and timely authorized by the Board or a committee consisting solely of
two or more non-employee directors (as this requirement is applied under
Rule 16b-3 promulgated under the Exchange Act). To the extent required by any
applicable stock exchange, this Plan shall be administered by a committee
composed entirely of independent directors (as defined by the rules of the
applicable stock exchange). Awards granted to non-employee directors shall not
be subject to the discretion of any officer or employee of the Corporation and
shall be administered exclusively by a committee consisting solely of
independent directors.

 

3.2                          Powers of the Administrator. Subject to the express
provisions of this Plan, the Administrator is authorized and empowered to do all
things necessary or desirable in connection with the authorization of awards and
the administration of this Plan (in the case of a committee or delegation to one
or more officers, within the authority delegated to that committee or
person(s)), including, without limitation, the authority to:

 

(a)    determine eligibility and, from among those persons determined to be
eligible, the particular Eligible Persons who will receive awards under this
Plan;

 

(b)    grant awards to Eligible Persons, determine the price at which securities
will be offered or awarded and the number of securities to be offered or awarded
to any of such persons, determine the other specific terms and conditions of
such awards consistent with the express limits of this Plan, establish the
installments (if any) in which such awards shall become exercisable or shall
vest (which may include, without limitation, performance and/or time-based
schedules), or determine that no delayed exercisability or vesting is required,
establish any applicable performance targets, and establish the events of
termination or reversion of such awards;

 

(c)    approve the forms of award agreements (which need not be identical either
as to type of award or among participants);

 

(d)    construe and interpret this Plan and any agreements defining the rights
and obligations of the Corporation, its Subsidiaries, and participants under
this Plan, further define the terms used in this Plan, and prescribe, amend and
rescind rules and regulations relating to the administration of this Plan or the
awards granted under this Plan;

 

(e)    cancel, modify, or waive the Corporation’s rights with respect to, or
modify, discontinue, suspend, or terminate any or all outstanding awards,
subject to any required

 

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consent under Section 8.6.5;

 

(f)    accelerate or extend the vesting or exercisability or extend the term of
any or all such outstanding awards (in the case of options or stock appreciation
rights, within the maximum ten-year term of such awards) in such circumstances
as the Administrator may deem appropriate (including, without limitation, in
connection with a termination of employment or services or other events of a
personal nature) subject to any required consent under Section 8.6.5;

 

(g)    adjust the number of shares of Common Stock subject to any award, adjust
the price of any or all outstanding awards or otherwise change previously
imposed terms and conditions, in such circumstances as the Administrator may
deem appropriate, in each case subject to compliance with applicable stock
exchange requirements, Sections 4 and 8.6 and the applicable requirements of
Section 162(m) of the Code and treasury regulations thereunder with respect to
awards that are intended to satisfy the requirements for performance-based
compensation under Section 162(m) of the Code, and provided that in no case
(except due to an adjustment contemplated by Section 7) shall the terms of any
outstanding awards be amended (by amendment, cancellation and regrant, or other
means) to reduce the per share exercise or base price of any outstanding stock
option or stock appreciation right or other award granted under this Plan, or be
exchanged for cash, other awards or stock option or stock appreciation rights
with an exercise price that is less than the per share exercise price of the
original stock option or stock appreciation rights, without stockholder
approval, and further provided that any adjustment or change in terms made
pursuant to this Section 3.2(g) shall be made in a manner that, in the good
faith determination of the Administrator will not likely result in the
imposition of additional taxes or interest under Section 409A of the Code;

 

(h)    determine the date of grant of an award, which may be a designated date
after but not before the date of the Administrator’s action (unless otherwise
designated by the Administrator, the date of grant of an award shall be the date
upon which the Administrator took the action granting an award);

 

(i)    determine whether, and the extent to which, adjustments are required
pursuant to Section 7 hereof and authorize the termination, conversion,
substitution, acceleration or succession of awards upon the occurrence of an
event of the type described in Section 7;

 

(j)    acquire or settle (subject to Sections 7 and 8.6) rights under awards in
cash, stock of equivalent value, or other consideration; and

 

(k)    determine the Fair Market Value (as defined in Section 5.6) of the Common
Stock or awards under this Plan from time to time and/or the manner in which
such value will be determined.

 

3.3                          Binding Determinations.  Any action taken by, or
inaction of, the Corporation, any Subsidiary, or the Administrator relating or
pursuant to this Plan and within its authority hereunder or under applicable law
shall be within the absolute discretion of that entity or body and shall be

 

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conclusive and binding upon all persons. Neither the Board, the Administrator,
nor any Board committee, nor any member thereof or person acting at the
direction thereof, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with this Plan
(or any award made under this Plan), and all such persons shall be entitled to
indemnification and reimbursement by the Corporation in respect of any claim,
loss, damage or expense (including, without limitation, legal fees) arising or
resulting therefrom to the fullest extent permitted by law, the Corporation’s
certificate of incorporation and bylaws, as the same may be amended from time to
time, or under any directors and officers liability insurance coverage or
written indemnification agreement with the Corporation that may be in effect
from time to time.

 

3.4                          Reliance on Experts.  In making any determination
or in taking or not taking any action under this Plan, the Administrator may
obtain and may rely upon the advice of experts, including professional advisors
to the Corporation. The Administrator shall not be liable for any such action or
determination taken or made or omitted in good faith based upon such advice.

 

3.5                          Delegation of Non-Discretionary Functions.  In
addition to the ability to delegate certain grant authority to officers of the
Corporation as set forth in Section 3.1, the Administrator may also delegate
ministerial, non-discretionary functions to individuals who are officers or
employees of the Corporation or any of its Subsidiaries or to third parties.

 

4.                                      SHARES OF COMMON STOCK SUBJECT TO THE
PLAN; SHARE LIMIT

 

4.1                          Shares Available.  Subject to the provisions of
Section 7.1, the capital stock available for issuance under this Plan shall be
shares of the Corporation’s authorized but unissued Common Stock. For purposes
of this Plan, “Common Stock” shall mean the common stock of the Corporation, par
value $0.001 per share, and such other securities or property as may become the
subject of awards under this Plan pursuant to an adjustment made under
Section 7.1.

 

4.2                          Share Limit.  The maximum number of shares of
Common Stock that may be delivered pursuant to awards granted to Eligible
Persons under this Plan (the “Share Limit”) may not exceed 10,500,000 shares of
Common Stock.

 

The foregoing Share Limit is subject to adjustment as contemplated by
Section 7.1 and Section 8.10.

 

4.3                          Awards Settled in Cash, Reissue of Awards and
Shares.  The Administrator may adopt reasonable counting procedures to ensure
appropriate counting and to avoid double counting (as, for example, in the case
of tandem or substitute awards) as it may deem necessary or desirable in its
sole discretion. Shares shall be counted against those reserved to the extent
such shares have been delivered and are no longer subject to a substantial risk
of forfeiture. Accordingly, to the extent that an award under the Plan, in whole
or in part, is canceled, expired, forfeited, settled in cash, or otherwise
terminated without delivery of shares to the participant, the shares retained by
or returned to the Corporation will not be deemed to have been delivered under
the Plan and will be deemed to remain or to become available under this Plan.
Notwithstanding the foregoing, shares that are withheld from such an award or
separately surrendered by the participant in payment of the exercise price or
taxes relating to such an award, and the total number of shares subject to the
exercised portion of an SAR (regardless of the actual lesser of number shares
delivered to the

 

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Participant), shall be deemed to have been issued hereunder and shall reduce the
number of shares remaining available for issuance under the Plan. The foregoing
adjustments to the Share Limit of this Plan are subject to any applicable
limitations under Section 162(m) of the Code with respect to awards intended as
performance-based compensation thereunder.

 

4.4                          Reservation of Shares; No Fractional Shares.  The
Corporation shall at all times reserve a number of shares of Common Stock
sufficient to cover the Corporation’s obligations and contingent obligations to
deliver shares with respect to awards then outstanding under this Plan
(exclusive of any dividend equivalent obligations to the extent the Corporation
has the right to settle such rights in cash). No fractional shares shall be
delivered under this Plan. The Administrator may pay cash in lieu of any
fractional shares in settlements of awards under this Plan.

 

5.                                      AWARDS

 

5.1                          Type and Form of Awards.  The Administrator shall
determine the type or types of award(s) to be made to each selected Eligible
Person. Awards may be granted singly, in combination or in tandem. Awards also
may be made in combination or in tandem with, in replacement of, as alternatives
to, or as the payment form for grants or rights under any other employee or
compensation plan of the Corporation or one of its Subsidiaries. The types of
awards that may be granted under this Plan are:

 

5.1.1           Stock Options.  A stock option is the grant of a right to
purchase a specified number of shares of Common Stock during a specified period
as determined by the Administrator. An option may be intended as an incentive
stock option within the meaning of Section 422 of the Code (an “ISO”) or a
nonqualified stock option (an option not intended to be an ISO). The award
agreement for an option will indicate if the option is intended as an ISO;
otherwise it will be deemed to be a nonqualified stock option. The maximum term
of each option (ISO or nonqualified) shall be ten (10) years. The per share
exercise price for each option shall be not less than 100% of the Fair Market
Value of a share of Common Stock on the date of grant of the option. When an
option is exercised, the exercise price for the shares to be purchased shall be
paid in full in cash or such other method permitted by the Administrator
consistent with Section 5.5. Options may only be granted to Eligible Persons for
whom the Corporation would be deemed to be an “eligible issuer of service
recipient stock,” as defined in Treasury Regulation 1.409A-1(b)(5)(iii)(E).

 

5.1.2           Additional Rules Applicable to ISOs.  To the extent that the
aggregate Fair Market Value (determined at the time of grant of the applicable
option) of stock with respect to which ISOs first become exercisable by a
participant in any calendar year exceeds $100,000, taking into account both
Common Stock subject to ISOs under this Plan and stock subject to ISOs under all
other plans of the Corporation or one of its Subsidiaries (or any parent or
predecessor corporation to the extent required by and within the meaning of
Section 422 of the Code and the regulations promulgated thereunder), such
options shall be treated as nonqualified stock options. In reducing the number
of options treated as ISOs to meet the $100,000 limit, the most recently granted
options shall be

 

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reduced first. To the extent a reduction of simultaneously granted options is
necessary to meet the $100,000 limit, the Administrator may, in the manner and
to the extent permitted by law, designate which shares of Common Stock are to be
treated as shares acquired pursuant to the exercise of an ISO. ISOs may only be
granted to employees of the Corporation or one of its subsidiaries (for this
purpose, the term “subsidiary” is used as defined in Section 424(f) of the Code,
which generally requires an unbroken chain of ownership of at least 50% of the
total combined voting power of all classes of stock of each subsidiary in the
chain beginning with the Corporation and ending with the subsidiary in
question). There shall be imposed in any award agreement relating to ISOs such
other terms and conditions as from time to time are required in order that the
option be an “incentive stock option” as that term is defined in Section 422 of
the Code. No ISO may be granted to any person who, at the time the option is
granted, owns (or is deemed to own under Section 424(d) of the Code) shares of
outstanding Common Stock possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation, unless the exercise price of
such option is at least 110% of the Fair Market Value of the stock subject to
the option and such option by its terms is not exercisable after the expiration
of five years from the date such option is granted.

 

5.1.3           Stock Appreciation Rights.  A stock appreciation right or “SAR”
is a right to receive a payment, in cash and/or Common Stock, equal to the
number of shares of Common Stock being exercised multiplied by the excess of
(i) the Fair Market Value of a share of Common Stock on the date the SAR is
exercised, over (ii) the Fair Market Value of a share of Common Stock on the
date the SAR was granted as specified in the applicable award agreement (the
“base price”). The maximum term of a SAR shall be ten (10) years. SARs may only
be granted to Eligible Persons for whom the Corporation would be deemed to be an
“eligible issuer of service recipient stock,” as defined in Treasury
Regulation 1.409A-1(b)(5)(iii)(E).

 

5.1.4           Restricted Stock.

 

(a)    Restrictions. Restricted stock is Common Stock subject to such
restrictions on transferability, risk of forfeiture and other restrictions, if
any, as the Administrator may impose, which restrictions may lapse separately or
in combination at such times, under such circumstances (including based on
achievement of performance goals and/or future service requirements), in such
installments or otherwise, as the Administrator may determine at the date of
grant or thereafter. Except to the extent restricted under the terms of this
Plan and the applicable award agreement relating to the restricted stock, a
participant granted restricted stock shall have all of the rights of a
stockholder of the Corporation, including the right to vote the restricted stock
and the right to receive dividends thereon (subject to the vesting requirements
in Section 5.1.4(c), below, as well as any mandatory reinvestment or other
requirement imposed by the Administrator).

 

(b)    Certificates for Shares. Shares of restricted stock granted under this
Plan may be evidenced in such manner as the Administrator shall determine. If
certificates representing restricted stock are registered in the name of the
participant, the

 

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Administrator may require that such certificates bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such
restricted stock, that the Corporation retain physical possession of the
certificates, and that the participant deliver a stock power to the Corporation,
endorsed in blank, relating to the restricted stock. The Administrator may
require that shares of restricted stock are held in escrow until all
restrictions lapse.

 

(c)    Dividends and Splits. As a condition to the grant of an award of
restricted stock, subject to applicable law, the Administrator may require or
permit a participant to elect that any cash dividends paid on a share of
restricted stock be automatically reinvested in additional shares of restricted
stock or applied to the purchase of additional awards under this Plan or held in
escrow by the Corporation unless and until the related shares of restricted
stock become vested.  Any and all dividends or distributions (whether paid in
cash or reinvested in additional shares or restricted stock or other plan
awards) made on shares of restricted stock shall be subject to the same
forfeiture and other restrictions as the shares of restricted stock to which
they relate.  Stock distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the restricted stock
with respect to which such stock or other property has been distributed.

 

5.1.5    Restricted Stock Units.

 

(a)    Grant of Restricted Stock Units.  A restricted stock unit, or “RSU”,
represents the right to receive from the Corporation on the respective scheduled
vesting or payment date for such RSU, one share of Common Stock or, if specified
in the applicable award agreement, the Fair Market Value of one share of Common
Stock paid in cash. The vesting or payment of an award of RSUs may be subject to
the attainment of specified performance goals or targets, forfeitability
provisions and such other terms and conditions as the Administrator may
determine, subject to the provisions of this Plan.

 

(b)    Dividend Equivalent Accounts. If (and only if) required by the applicable
award agreement, prior to the expiration of the applicable vesting period of an
RSU, the Administrator shall pay dividend equivalent rights with respect to
RSUs, in which case the Corporation shall establish an account for the
participant and reflect in that account any securities, cash or other property
comprising any dividend or property distribution with respect to the shares of
Common Stock underlying each RSU. Each amount or other property credited to any
such account shall be subject to the same vesting conditions as the RSU to which
it relates. The participant shall have the right to be paid the amounts or other
property credited to such account upon vesting of the RSU.

 

(c)    Rights as a Stockholder.  Subject to the restrictions imposed under the
terms and conditions of this Plan and the applicable award agreement, each
participant receiving RSUs shall have no rights as a stockholder of the
Corporation with respect to such RSUs until such time as shares of Common Stock
are issued to the participant. In the event an RSU is settled in cash, the
participant receiving RSUs shall never receive stockholder rights with respect
to such award. No shares of Common Stock shall be issued

 

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at the time a RSU is granted, and the Corporation will not be required to set
aside a fund for the payment of any such award. Except as otherwise provided in
the applicable award agreement, shares of Common Stock issuable under an RSU, if
any, shall be treated as issued on the first date that the RSU is no longer
subject to a substantial risk of forfeiture as determined for purposes of
Section 409A of the Code, and the holder shall be the owner of such shares of
Common Stock on such date. An award agreement may provide that the issuance of
shares of Common Stock (or the settlement of an RSU in cash) under an RSU may be
deferred beyond the first date that the RSU is no longer subject to a
substantial risk of forfeiture, provided that such deferral is structured in a
manner that is intended to comply with the requirements of Section 409A of the
Code.

 

5.1.6    Cash Awards. The Administrator may, from time to time, subject to the
provisions of the Plan and such other terms and conditions as it may determine,
grant cash bonuses (including without limitation, discretionary awards, awards
based on objective or subjective performance criteria, awards subject to other
vesting criteria or awards granted consistent with Section 5.2 below).  Cash
awards shall be awarded in such amount and at such times during the term of the
Plan as the Administrator shall determine.

 

5.1.7           Other Awards.  The other types of awards that may be granted
under this Plan include: (a) stock bonuses, performance stock, performance
units, dividend equivalents, or similar rights to purchase or acquire shares,
whether at a fixed or variable price or ratio related to the Common Stock
(subject to the requirements of Section 5.1.1 and in compliance with applicable
laws), upon the passage of time, the occurrence of one or more events, or the
satisfaction of performance criteria or other conditions, or any combination
thereof; or (b) any similar securities with a value derived from the value of or
related to the Common Stock and/or returns thereon.

 

5.2                          Section 162(m) Performance-Based Awards.  Without
limiting the generality of the foregoing, prior to the effective date of the
changes to Code Section 162(m) implemented by the bill commonly known as the
“Tax Cuts and Jobs Act of 2017,” any of the types of awards listed in
Sections 5.1.4 through 5.1.7 above may be, and options and SARs granted with an
exercise or base price not less than the Fair Market Value of a share of Common
Stock at the date of grant (“Qualifying Options” and “Qualifying SARs,”
respectively) typically will be, granted as awards intended to satisfy the
requirements for “performance-based compensation” within the meaning of
Section 162(m) of the Code (“Performance-Based Awards”). The grant, vesting,
exercisability or payment of Performance-Based Awards may depend (or, in the
case of Qualifying Options or Qualifying SARs, may also depend) on the degree of
achievement of one or more performance goals relative to a pre-established
targeted level or levels using the Business Criteria provided for below for the
Corporation on a consolidated basis or for one or more of the Corporation’s
Subsidiaries, segments, divisions or business units, or any combination of the
foregoing. Such criteria may be evaluated on an absolute basis or relative to
prior periods, industry peers, or stock market indices. Any Qualifying Option or
Qualifying SAR shall be subject to the requirements of Section 5.2.1 and 5.2.3
in order for such award to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code. Any other Performance-Based
Award shall be subject to all of the following provisions of this Section 5.2.

 

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5.2.1           Class; Administrator.  The eligible class of persons for
Performance-Based Awards under this Section 5.2 shall be officers and employees
of the Corporation or one of its Subsidiaries. The Administrator approving
Performance-Based Awards or making any certification required pursuant to
Section 5.2.4 must be constituted as provided in Section 3.1 for awards that are
intended as performance-based compensation under Section 162(m) of the Code.

 

5.2.2           Performance Goals.  The specific performance goals for
Performance-Based Awards (other than Qualifying Options and Qualifying SARs)
shall be based on such business criteria as selected by the Administrator in its
sole discretion (“Business Criteria”) from the following: (1) total shareholder
return; (2) net revenues (3) return on total stockholders’ equity; (4) earnings
per share of Company Stock; (5) net income (before or after taxes); (6) return
on assets; (7) return on investment; (8) return on capital; (9) economic value
added; (10) operating budget or margin; (11) contribution margin; (12) earnings
(adjusted or non-adjusted) from continuing operations; levels of expense, cost
or liability; (13) earnings (adjusted or non-adjusted) before all or any
interest, taxes, depreciation, amortization and/or exploration expense (“EBIT”,
“EBITA”, “EBITDA” or “EBITDAX”); (14) debt reduction; (15) market share; (16)
reserve growth; (17) reserve replacement; (18) production growth; (19)
finding/development costs; (20) lease operating expense; (21) captured
prospects; (22) prospecting licenses signed; (23) operated prospects matured to
drill ready; (24) drilling programs commenced; (25) drillable prospects,
capabilities and critical path items established; (26) third-party capital
sourcing; (27) captured net risked resource potential; (28) acquisition cost
efficiency; (29) stock price; (30) acquisitions of oil and gas interests; (31)
increases in proved, probable or possible reserves; (32) finding and development
costs; (33) overhead costs; (34) general and administration expense; (35) any
combination of, or a specified increase or decrease of one or more of the
foregoing over a specified period; (36) such other criteria as the stockholders
of the Company may approve; and (37) any combination of the foregoing. To
qualify awards as performance-based under Section 162(m) of the Code, the
applicable Business Criterion (or Business Criteria, as the case may be) and
specific performance goal or goals (“targets”) must be established and approved
by the Administrator during the first 90 days of the performance period (and, in
the case of performance periods of less than one year, in no event after 25% or
more of the performance period has elapsed) and while performance relating to
such target(s) remains substantially uncertain within the meaning of
Section 162(m) of the Code. Performance targets shall be adjusted to mitigate
the unbudgeted impact of material, unusual or nonrecurring gains and losses,
accounting changes or other extraordinary events not foreseen at the time the
targets were set unless the Administrator provides otherwise at the time of
establishing the targets; provided that the Administrator shall make all
adjustment with the intent that they not adversely affect the qualification of
any compensation payable under such performance targets as “performance-based
compensation” under Section 162(m) of Code. The applicable performance
measurement period may not be less than 3 months nor more than 10 years.

 

5.2.3           Form of Payment. Grants or awards intended to qualify under this
Section 5.2 may be paid in cash or shares of Common Stock or any combination
thereof.

 

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5.2.4           Certification of Payment.  Before any Performance-Based Award
under this Section 5.2 (other than Qualifying Options and Qualifying SARs) is
paid and to the extent required to qualify the award as performance-based
compensation within the meaning of Section 162(m) of the Code, the Administrator
must certify in writing that the performance target(s) and any other material
terms of the Performance-Based Award were in fact timely satisfied.

 

5.2.5           Reservation of Discretion.  The Administrator will have the
discretion to determine the restrictions or other limitations of the individual
awards granted under this Section 5.2 including the authority to reduce awards,
payouts or vesting or to pay no awards, in its sole discretion, if the
Administrator preserves such authority at the time of grant by language to this
effect in its authorizing resolutions or otherwise.

 

5.2.6           Expiration of Grant Authority.  As required pursuant to
Section 162(m) of the Code and the regulations promulgated thereunder, the
Administrator’s authority to grant new awards that are intended to qualify as
performance-based compensation within the meaning of Section 162(m) of the Code
(other than Qualifying Options and Qualifying SARs) shall terminate upon the
first meeting of the Corporation’s stockholders that occurs in the fifth year
following the year in which the Corporation’s stockholders first approve this
Plan (the “162(m) Term”).

 

5.2.7    Compensation Limitations.  The maximum aggregate number of shares of
Common Stock that may be issued to any Eligible Person during the term of this
Plan pursuant to Qualifying Options and Qualifying SARs may not exceed 4,500,000
shares of Common Stock. The maximum aggregate number of shares of Common Stock
that may be issued to any Eligible Person pursuant to Performance-Based Awards
granted during any single fiscal year during the 162(m) Term (other than cash
awards granted pursuant to Section 5.1.6 and Qualifying Options or Qualifying
SARs) may not exceed 750,000 shares of Common Stock. The maximum amount that may
be paid to any Eligible Person pursuant to Performance-Based Awards granted
pursuant to Sections 5.1.6 (cash awards) during any single fiscal year during
the 162(m) Term may not exceed $3,000,000.

 

5.3                          Award Agreements.  Each award (other than cash
awards described in Section 5.1.6) shall be evidenced by a written or electronic
award agreement in the form approved by the Administrator and, if required by
the Administrator, executed or accepted by the recipient of the award. The
Administrator may authorize any officer of the Corporation (other than the
particular award recipient) to execute any or all award agreements on behalf of
the Corporation (electronically or otherwise). The award agreement shall set
forth the material terms and conditions of the award as established by the
Administrator consistent with the express limitations of this Plan.

 

5.4                          Deferrals and Settlements.  Payment of awards may
be in the form of cash, Common Stock, other awards or combinations thereof as
the Administrator shall determine, and with such restrictions as it may impose.
The Administrator may also require or permit participants to elect to defer the
issuance of shares of Common Stock or the settlement of awards in cash under
such rules and procedures as it may establish under this Plan. The Administrator
may also provide

 

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that deferred settlements include the payment or crediting of interest or other
earnings on the deferral amounts, or the payment or crediting of dividend
equivalents where the deferred amounts are denominated in shares. All mandatory
or elective deferrals of the issuance of shares of Common Stock or the
settlement of cash awards shall be structured in a manner that is intended to
comply with the requirements of Section 409A of the Code.

 

5.5                          Consideration for Common Stock or Awards.  The
purchase price for any award granted under this Plan or the Common Stock to be
delivered pursuant to an award, as applicable, may be paid by means of any
lawful consideration as determined by the Administrator and subject to
compliance with applicable laws, including, without limitation, one or a
combination of the following methods:

 

·                  services rendered by the recipient of such award;

 

·                  cash, check payable to the order of the Corporation, or
electronic funds transfer;

 

·                  notice and third-party payment in such manner as may be
authorized by the Administrator;

 

·                  the delivery of previously owned shares of Common Stock that
are fully vested and unencumbered;

 

·                  by a reduction in the number of shares otherwise deliverable
pursuant to the award; or

 

·                  subject to such procedures as the Administrator may adopt,
pursuant to a “cashless exercise” with a third party who provides financing for
the purposes of (or who otherwise facilitates) the purchase or exercise of
awards.

 

In the event that the Administrator allows a participant to exercise an award by
delivering shares of Common Stock previously owned by such participant and
unless otherwise expressly provided by the Administrator, any shares delivered
which were initially acquired by the participant from the Corporation (upon
exercise of a stock option or otherwise) must have been owned by the participant
at least six months as of the date of delivery (or such other period as may be
required by the Administrator in order to avoid adverse accounting treatment).
Shares of Common Stock used to satisfy the exercise price of an option shall be
valued at their Fair Market Value on the date of exercise. The Corporation will
not be obligated to deliver any shares unless and until it receives full payment
of the exercise or purchase price therefor and any related withholding
obligations under Section 8.5 and any other conditions to exercise or purchase,
as established from time to time by the Administrator, have been satisfied.
Unless otherwise expressly provided in the applicable award agreement, the
Administrator may at any time eliminate or limit a participant’s ability to pay
the purchase or exercise price of any award by any method other than cash
payment to the Corporation.

 

5.6                          Definition of Fair Market Value.  For purposes of
this Plan “Fair Market Value” of a share of Common Stock, as of a date of
determination, shall mean (i) the closing sales price per share of Common Stock
on the U.S. national securities exchange or over-the-counter market

 

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on which such stock is principally traded on the date of determination or
(ii) if the shares of Common Stock are not then listed on any national
securities exchange or traded in an over-the-counter market or the value of such
shares is not otherwise determinable, such value as reasonably determined by the
Administrator in good faith and, to the extent necessary, in accordance with the
requirements of Section 409A of the Code.

 

5.7                          Transfer Restrictions.

 

5.7.1           Limitations on Exercise and Transfer.  Unless otherwise
expressly provided in (or pursuant to) this Section 5.7, by applicable law and
by the award agreement, as the same may be amended, (a) all awards are
non-transferable and shall not be subject in any manner to sale, transfer,
anticipation, alienation, assignment, pledge, encumbrance or charge; (b) awards
shall be exercised only by the participant; and (c) amounts payable or shares
issuable pursuant to any award shall be delivered only to (or for the account
of) the participant.

 

5.7.2           Exceptions.  The Administrator may permit awards to be exercised
by and paid to, or otherwise transferred to, other persons or entities pursuant
to such conditions and procedures, including limitations on subsequent
transfers, as the Administrator may, in its sole discretion, establish in
writing (provided that any such transfers of ISOs shall be limited to the extent
permitted under the federal tax laws governing ISOs). Any permitted transfer
shall be subject to compliance with applicable federal and state securities
laws.

 

5.7.3           Further Exceptions to Limits on Transfer.  The exercise and
transfer restrictions in Section 5.7.1 shall not apply to:

 

(a)    transfers to the Corporation,

 

(b)    the designation of a beneficiary to receive benefits in the event of the
participant’s death or, if the participant has died, transfers to or exercise by
the participant’s beneficiary, or, in the absence of a validly designated
beneficiary, transfers by will or the laws of descent and distribution,

 

(c)    subject to any applicable limitations on ISOs, transfers to a family
member (or former family member) pursuant to a domestic relations order if
approved or ratified by the Administrator,

 

(d)    subject to any applicable limitations on ISOs, if the participant has
suffered a disability, permitted transfers or exercises on behalf of the
participant by his or her legal representative, or

 

(e)    the authorization by the Administrator of “cashless exercise” procedures
with third parties who provide financing for the purpose of (or who otherwise
facilitate) the exercise of awards consistent with applicable laws and the
express authorization of the Administrator.

 

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5.8                          International Awards.  One or more awards may be
granted to Eligible Persons who provide services to the Corporation or one of
its Subsidiaries outside of the United States. Any awards granted to such
persons may, if deemed necessary or advisable by the Administrator, be granted
pursuant to the terms and conditions of any applicable sub-plans, if any,
appended to this Plan and approved by the Administrator.

 

6.                                      EFFECT OF TERMINATION OF SERVICE ON
AWARDS

 

6.1                          Termination of Employment.

 

6.1.1    Administrator Determination.  The Administrator shall establish the
effect of a termination of employment or service on the rights and benefits
under each award under this Plan and in so doing may make distinctions based
upon, inter alia, the cause of termination and type of award. If the participant
is not an employee of the Corporation or one of its Subsidiaries and provides
other services to the Corporation or one of its Subsidiaries, the Administrator
shall be the sole judge for purposes of this Plan (unless a contract or the
award agreement otherwise provides) of whether the participant continues to
render services to the Corporation or one of its Subsidiaries and the date, if
any, upon which such services shall be deemed to have terminated.

 

6.1.2    Stock Options and SARs.  For awards of stock options or SARs, unless
the award agreement provides otherwise, the exercise period of such options or
SARs shall expire: (1) three months after the last day that the participant is
employed by or provides services to the Corporation or a Subsidiary (provided
however, that in the event of the participant’s death during this period, those
persons entitled to exercise the option or SAR pursuant to the laws of descent
and distribution shall have one year following the date of death within which to
exercise such option or SAR); (2) in the case of a participant whose termination
of employment is due to death or disability (as defined in the applicable award
agreement), 12 months after the last day that the participant is employed by or
provides services to the Corporation or a Subsidiary; and (3) immediately upon a
participant’s termination for “cause.” The Administrator will, in its absolute
discretion, determine the effect of all matters and questions relating to a
termination of employment, including, but not by way of limitation, the question
of whether a leave of absence constitutes a termination of employment and
whether a participant’s termination is for “cause.”

 

The term “cause” shall have the meaning assigned to such term in any individual
employment or severance agreement or award agreement with the participant or, if
no such agreement exists or if such agreement does not define “cause,” cause
shall mean (i) participant’s act(s) of gross negligence or willful misconduct in
the course of participant’s employment by the Corporation or any of its
Subsidiaries that is or could reasonably be expected to be materially injurious
to the Corporation or any of its Subsidiaries, (ii) willful failure or refusal
by participant to perform in any material respect his or her duties or
responsibilities, (iii) misappropriation by participant of any assets of the
Corporation or any of its Subsidiaries, (iv) embezzlement or fraud committed by
participant, or at his or her direction, and (v) participant’s conviction of, or
pleading “guilty” or “ no contest” to a felony under state or federal law.

 

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6.1.3    Restricted Stock and RSUs.  For awards of restricted stock, unless the
award agreement provides otherwise, shares of restricted stock that are subject
to restrictions at the time that a participant whose employment or service is
terminated shall be forfeited and reacquired by the Corporation;  provided
however,  the Administrator may provide, by rule or regulation or in any award
agreement, or may determine in any individual case, that restrictions or
forfeiture conditions relating to shares of restricted stock shall be waived in
whole or in part in the event of a termination of employment or service, and the
Administrator may in other cases waive in whole or in part the forfeiture of
shares of restricted stock. Similar rules shall apply in respect of RSUs.

 

6.2                          Events Not Deemed Terminations of Service.  Unless
the express policy of the Corporation or one of its Subsidiaries, or the
Administrator, otherwise provides, the employment relationship shall not be
considered terminated in the case of (a) sick leave, (b) military leave, or
(c) any other leave of absence authorized by the Corporation or one of its
Subsidiaries, or the Administrator; provided that unless reemployment upon the
expiration of such leave is guaranteed by contract or law, such leave is for a
period of not more than 3 months. In the case of any employee of the Corporation
or one of its Subsidiaries on an approved leave of absence, continued vesting of
the award while on leave from the employ of the Corporation or one of its
Subsidiaries may be suspended until the employee returns to service, unless the
Administrator otherwise provides or applicable law otherwise requires. In no
event shall an award be exercised after the expiration of the term set forth in
the award agreement.

 

6.3                          Effect of Change of Subsidiary Status.  For
purposes of this Plan and any award, if an entity ceases to be a Subsidiary of
the Corporation, a termination of employment or service shall be deemed to have
occurred with respect to each Eligible Person in respect of such Subsidiary who
does not continue as an Eligible Person in respect of the Corporation or another
Subsidiary that continues as such after giving effect to the transaction or
other event giving rise to the change in status.

 

7.                                      ADJUSTMENTS; ACCELERATION

 

7.1    Adjustments. Upon or in contemplation of (a) any reclassification,
recapitalization, stock split (including a stock split in the form of a stock
dividend) or reverse stock split (“stock split”), (b) any merger, arrangement,
combination, consolidation, or other reorganization, (c) any spin-off, split-up,
or similar extraordinary dividend distribution in respect of the Common Stock
(whether in the form of securities or property), or (d) any exchange of Common
Stock or other securities of the Corporation, or any similar, unusual or
extraordinary corporate transaction in respect of the Common Stock, the
Administrator shall in such manner, to such extent and at such time as it deems
appropriate and equitable in the circumstances (but subject to compliance with
applicable laws and stock exchange requirements) proportionately adjust any or
all of (1) the number and type of shares of Common Stock (or other securities)
that thereafter may be made the

 

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subject of awards (including the Share Limit), (2) the number, amount and type
of shares of Common Stock (or other securities or property) subject to any or
all outstanding awards, (3) the grant, purchase, or exercise price (which term
includes the base price of any SAR or similar right) of any or all outstanding
awards, (4) the securities, cash or other property deliverable upon exercise or
payment of any outstanding awards, (5) the compensation limitations under
Section162(m) of the Code set forth in Section 5.2.7 and (subject to
Section 8.8.3(a)) the performance standards applicable to any outstanding awards
(provided that no adjustment shall be allowed to the extent inconsistent with
the requirements under Section 162(m) of the Code), and (6) the non-employee
director compensation limitations set forth in Section 9, below. Any adjustment
made pursuant to this Section 7.1 shall be made in a manner that, in the good
faith determination of the Administrator, will not likely result in the
imposition of additional taxes or interest under Section 409A of the Code. With
respect to any award of an ISO, the Administrator may make such an adjustment
that causes the option to cease to qualify as an ISO without the consent of the
affected participant.

 

7.2    Change in Control. The Administrator, in its sole and absolute
discretion, may choose (in an award agreement or otherwise) to provide for full
or partial accelerated vesting of any award upon a Change in Control, or upon
any other event or other circumstance related to the Change in Control, such as
an involuntary termination of employment occurring after such Change in Control,
as the Administrator may determine. Notwithstanding the foregoing, in the event
the Administrator does  not  make appropriate provision for the substitution,
assumption, exchange or other continuation of the award pursuant to the Change
in Control, then each then-outstanding option and SAR shall automatically become
fully vested, all shares of restricted stock and restricted stock units then
outstanding shall automatically fully vest free of restrictions, and each other
award granted under this Plan that is then outstanding shall automatically
become vested in full (assuming all performance targets have been achieved at
100% of target) and payable to the holder of such award.

 

For purposes of this Plan, “Change in Control” shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall have
occurred:

 

(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”)) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of more than 50% or more of the combined voting power of the then-outstanding
voting securities of the Corporation entitled to vote generally in the election
of directors (the “Outstanding Company Voting Securities”); provided, however,
that, for purposes of this definition, the following acquisitions shall not
constitute a Change in Control; (A) any acquisition directly from the
Corporation, (B) any acquisition by the Corporation, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any affiliate of the Corporation or a successor, or (D) any
acquisition by any entity pursuant to a transaction that complies with Sections
(c)(1), (2) and (3) below;

 

(b) Individuals who, as of the effective date of the Plan, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the effective date of the Plan whose

 

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election, or nomination for election by the Corporation’s stockholders, was
approved by a vote of at least two-thirds of the directors then comprising the
Incumbent Board (including for these purposes, the new members whose election or
nomination was so approved, without counting the member and his predecessor
twice) shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board;

 

(c) Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Corporation or any
of its Subsidiaries, a sale or other disposition of all or substantially all of
the assets of the Corporation, or the acquisition of assets or stock of another
entity by the Corporation or any of its Subsidiaries (each, a “Business
Combination”), in each case unless, following such Business Combination, (1) all
or substantially all of the individuals and entities that were the beneficial
owners of the Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of
the combined voting power of the then-outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an
entity that, as a result of such transaction, owns the Corporation or all or
substantially all of the Corporation’s assets directly or through one or more
subsidiaries (a “Parent”)) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the Outstanding
Company Voting Securities, as the case may be, (2) no Person (excluding any
entity resulting from such Business Combination or a Parent or any employee
benefit plan (or related trust) of the Corporation or such entity resulting from
such Business Combination or Parent) beneficially owns, directly or indirectly,
more than 50% of, respectively, the combined voting power of the
then-outstanding voting securities of the entity resulting from such Business
Combination, except to the extent that the ownership in excess of more than 50%
existed prior to the Business Combination, and (3) at least a majority of the
members of the board of directors or trustees of the entity resulting from such
Business Combination or a Parent were members of the Incumbent Board at the time
of the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or

 

(d) Approval by the stockholders of the Corporation of a complete liquidation or
dissolution of the Corporation other than in the context of a transaction that
does not constitute a Change in Control Event under clause (c) above.

 

No compensation that has been deferred for purposes of Section 409A of the Code
shall be payable as a result of a Change in Control unless the Change in Control
qualifies as a change in ownership or effective control of the Corporation
within the meaning of Section 409A of the Code.

 

7.3    Early Termination of Awards. Any award that has been accelerated as
required or permitted by Section 7.2 upon a Change in Control (or would have
been so accelerated but for Section 7.4 or 7.5) shall terminate upon such event,
subject to any provision that has been expressly made by the Administrator,
through a plan of reorganization or otherwise, for the survival,

 

16

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substitution, assumption, exchange or other continuation of such award and
provided that, in the case of options and SARs that will not survive, be
substituted, assumed, exchanged, or otherwise continued in the transaction, the
holder of such award shall be given reasonable advance notice of the impending
termination and a reasonable opportunity to exercise his or her outstanding
options and SARs in accordance with their terms before the termination of such
awards (except that in no case shall more than ten days’ notice of accelerated
vesting and the impending termination be required and any acceleration may be
made contingent upon the actual occurrence of the event).

 

The Administrator may make provision for payment in cash or property (or both)
in respect of awards terminated pursuant to this Section as a result of the
Change in Control and may adopt such valuation methodologies for outstanding
awards as it deems reasonable and, in the case of options, SARs or similar
rights, and without limiting other methodologies, may base such settlement
solely upon the excess if any of the per share amount payable upon or in respect
of such event over the exercise or base price of the award.

 

7.4    Other Acceleration Rules. Any acceleration of awards pursuant to this
Section 7 shall comply with applicable legal and stock exchange requirements
and, if necessary to accomplish the purposes of the acceleration or if the
circumstances require, may be deemed by the Administrator to occur a limited
period of time not greater than 30 days before the event. Without limiting the
generality of the foregoing, the Administrator may deem an acceleration to occur
immediately prior to the applicable event and/or reinstate the original terms of
an award if an event giving rise to the acceleration does not occur.
Notwithstanding any other provision of the Plan to the contrary, the
Administrator may override the provisions of Section 7.2, 7.3, and/or 7.5 by
express provision in the award agreement or otherwise. The portion of any ISO
accelerated pursuant to Section 7.2 or any other action permitted hereunder
shall remain exercisable as an ISO only to the extent the applicable $100,000
limitation on ISOs is not exceeded. To the extent exceeded, the accelerated
portion of the option shall be exercisable as a nonqualified stock option under
the Code.

 

7.5    Possible Rescission of Acceleration. If the vesting of an award has been
accelerated expressly in anticipation of an event and the Administrator later
determines that the event will not occur, the Administrator may rescind the
effect of the acceleration as to any then outstanding and unexercised or
otherwise unvested awards; provided, that , in the case of any compensation that
has been deferred for purposes of Section 409A of the Code, the Administrator
determines that such rescission will not likely result in the imposition of
additional tax or interest under Section 409A of the Code.

 

8.                                      OTHER PROVISIONS

 

8.1    Compliance with Laws.  This Plan, the granting and vesting of awards
under this Plan, the offer, issuance and delivery of shares of Common Stock, the
payment of money under this Plan or under awards are subject to compliance with
all applicable federal and state laws, rules and regulations and to such
approvals by any applicable stock exchange listing, regulatory or governmental
authority as may, in the opinion of counsel for the Corporation, be necessary or
advisable in connection therewith. The person acquiring any securities under
this Plan will, if requested by the Corporation or one of its Subsidiaries,
provide such assurances and

 

17

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representations to the Corporation or one of its Subsidiaries as the
Administrator may deem necessary or desirable to assure compliance with all
applicable legal and accounting requirements.

 

8.2    Future Awards/Other Rights.  No person shall have any claim or rights to
be granted an award (or additional awards, as the case may be) under this Plan,
subject to any express contractual rights (set forth in a document other than
this Plan) to the contrary.

 

8.3    No Employment/Service Contract.  Nothing contained in this Plan (or in
any other documents under this Plan or in any award) shall confer upon any
Eligible Person or other participant any right to continue in the employ or
other service of the Corporation or one of its Subsidiaries, constitute any
contract or agreement of employment or other service or affect an employee’s
status as an employee at will, nor shall interfere in any way with the right of
the Corporation or one of its Subsidiaries to change a person’s compensation or
other benefits, or to terminate his or her employment or other service, with or
without cause. Nothing in this Section 8.3, however, is intended to adversely
affect any express independent right of such person under a separate employment
or service contract other than an award agreement.

 

8.4    Plan Not Funded.  Awards payable under this Plan shall be payable in
shares or from the general assets of the Corporation, and no special or separate
reserve, fund or deposit shall be made to assure payment of such awards. No
participant, beneficiary or other person shall have any right, title or interest
in any fund or in any specific asset (including shares of Common Stock, except
as expressly otherwise provided) of the Corporation or one of its Subsidiaries
by reason of any award hereunder. Neither the provisions of this Plan (or of any
related documents), nor the creation or adoption of this Plan, nor any action
taken pursuant to the provisions of this Plan shall create, or be construed to
create, a trust of any kind or a fiduciary relationship between the Corporation
or one of its Subsidiaries and any participant, beneficiary or other person. To
the extent that a participant, beneficiary or other person acquires a right to
receive payment pursuant to any award hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Corporation.

 

8.5    Tax Withholding.  Upon any exercise, vesting, or payment of any award,
the Corporation or one of its Subsidiaries shall have the right at its option
to:

 

(a)    require the participant (or the participant’s personal representative or
beneficiary, as the case may be) to pay or provide for payment of at least the
minimum amount of any taxes which the Corporation or one of its Subsidiaries may
be required to withhold with respect to such award event or payment; or

 

(b)    deduct from any amount otherwise payable in cash to the participant (or
the participant’s personal representative or beneficiary, as the case may be)
the minimum amount of any taxes which the Corporation or one of its Subsidiaries
may be required to withhold with respect to such cash payment.

 

In any case where a tax is required to be withheld in connection with the
delivery of shares of Common Stock under this Plan, the Administrator may in its
sole discretion (subject to Section 8.1) grant (either at the time of the award
or thereafter) to the participant the right to elect, pursuant to such rules and
subject to such conditions as the Administrator may establish, to have

 

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the Corporation reduce the number of shares to be delivered by (or otherwise
reacquire) the appropriate number of shares, valued in a consistent manner at
their Fair Market Value or at the sales price in accordance with authorized
procedures for cashless exercises, necessary to satisfy the applicable
withholding obligation on exercise, vesting or payment, not in excess of the
maximum statutory rates in the Participant’s applicable jurisdictions.

 

8.6    Effective Date, Termination and Suspension, Amendments.

 

8.6.1    Effective Date and Termination.  This Plan was originally approved by
the Board and became effective upon approval by the stockholders at the
Company’s Annual Meeting on December 15, 2015 (the “Effective Date”).  This
Plan, as amended and restated, will become effective upon approval by the
stockholders at the Company’s 2018 Annual Meeting.  Unless earlier terminated by
the Board, this Plan shall terminate at the close of business ten years after
the date on which it was originally approved by the Board in 2015. After the
termination of this Plan either upon such stated expiration date or its earlier
termination by the Board, no additional awards may be granted under this Plan,
but previously granted awards (and the authority of the Administrator with
respect thereto, including the authority to amend such awards) shall remain
outstanding in accordance with their applicable terms and conditions and the
terms and conditions of this Plan.

 

8.6.2    Board Authorization.  The Board may, at any time, terminate or, from
time to time, amend, modify or suspend this Plan, in whole or in part. No awards
may be granted during any period that the Board suspends this Plan.

 

8.6.3    Stockholder Approval.  To the extent then required by applicable law or
any applicable stock exchange or required under Sections 162, 422 or 424 of the
Code to preserve the intended tax consequences of this Plan, or deemed necessary
or advisable by the Board, this Plan and any amendment to this Plan shall be
subject to approval by the stockholders of the Corporation.

 

8.6.4    Amendments to Awards.  Without limiting any other express authority of
the Administrator under (but subject to) the express limits of this Plan, the
Administrator by agreement or resolution may waive conditions of or limitations
on awards to participants that the Administrator in the prior exercise of its
discretion has imposed, without the consent of a participant, and (subject to
the requirements of Sections 3.2 and 8.6.5) may make other changes to the terms
and conditions of awards. Any amendment or other action that would constitute a
repricing of an award is subject to the limitations set forth in Section 3.2(g).

 

8.6.5    Limitations on Amendments to Plan and Awards.  No amendment, suspension
or termination of this Plan or change of or affecting any outstanding award
shall, without written consent of the participant, affect in any manner
materially adverse to the participant any rights or benefits of the participant
or obligations of the Corporation under any award granted under this Plan.
Changes, settlements and other actions contemplated by Section 7 shall not be
deemed to constitute changes or amendments for

 

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purposes of this Section 8.6.

 

8.7    Privileges of Stock Ownership.  Except as otherwise expressly authorized
by the Administrator or this Plan, a participant shall not be entitled to any
privilege of stock ownership as to any shares of Common Stock not actually
delivered to and held of record by the participant. Except as expressly provided
herein, no adjustment will be made for dividends or other rights as a
stockholder of the Corporation for which a record date is prior to such date of
delivery.

 

8.8    Governing Law; Construction; Severability.

 

8.8.1    Choice of Law.  This Plan, the awards, all documents evidencing awards
and all other related documents shall be governed by, and construed in
accordance with the laws of the State in which the Corporation is incorporated.

 

8.8.2    Severability.  If a court of competent jurisdiction holds any provision
of this Plan invalid and unenforceable, the remaining provisions of this Plan
shall continue in effect.

 

8.8.3    Plan Construction.

 

(a)  Rule 16b-3.  It is the intent of the Corporation that the awards and
transactions permitted by awards be interpreted in a manner that, in the case of
participants who are or may be subject to Section 16 of the Exchange Act,
qualify, to the maximum extent compatible with the express terms of the award,
for exemption from matching liability under Rule 16b-3 promulgated under the
Exchange Act. Notwithstanding the foregoing, the Corporation shall have no
liability to any participant for Section 16 consequences of awards or events
under awards if an award or event does not so qualify.

 

(b)  Section 162(m).  Awards under Sections 5.1.4 through 5.1.7 issued prior to
November 2, 2017 to persons described in Section 5.2 that are either granted or
become vested, exercisable or payable based on attainment of one or more
performance goals related to the Business Criteria, as well as Qualifying
Options and Qualifying SARs granted to persons described in Section 5.2, that
are approved by a committee composed solely of two or more outside directors (as
this requirement is applied under Section 162(m) of the Code) shall be deemed to
be intended as performance-based compensation within the meaning of
Section 162(m) of the Code unless such committee provides otherwise at the time
of grant of the award. It is the further intent of the Corporation that (to the
extent the Corporation or one of its Subsidiaries or awards under this Plan may
be or become subject to limitations on deductibility under Section 162(m) of the
Code) any such awards and any other Performance-Based Awards under Section 5.2
that are granted to or held by a person subject to Section 162(m) of the Code
will qualify as performance-based compensation or otherwise be exempt from
deductibility limitations under Section 162(m) of the Code, including pursuant
to the transition rules set forth in the bill commonly known as the “Tax Cuts
and Jobs Act of 2017.”

 

(c)  Compliance with Section 409A of the Code.  The Board intends that, except
as may be otherwise determined by the Administrator, any awards under the Plan
will be

 

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either exempt from or satisfy the requirements of Section 409A of the Code and
related regulations and Treasury pronouncements (“Section 409A”) to avoid the
imposition of any taxes, including additional income or penalty taxes,
thereunder. If the Administrator determines that an award, award agreement,
acceleration, adjustment to the terms of an award, payment, distribution,
deferral election, transaction or any other action or arrangement contemplated
by the provisions of the Plan would, if undertaken, cause a participant’s award
to become subject to Section 409A, unless the Administrator expressly determines
otherwise, such award, award agreement, payment, acceleration, adjustment,
distribution, deferral election, transaction or other action or arrangement
shall not be undertaken and the related provisions of the Plan and/or award
agreement will be deemed modified or, if necessary, rescinded in order to comply
with the requirements of Section 409A to the extent determined by the
Administrator without the consent of or notice to the participant.
Notwithstanding the foregoing, neither the Corporation nor the Administrator
shall have any obligation to take any action to prevent the assessment of any
excise tax or penalty on any participant under Section 409A and neither the
Corporation nor the Administrator will have any liability to any participant for
such tax or penalty.

 

(d)    No Guarantee of Favorable Tax Treatment.  Although the Corporation
intends that awards under the Plan will be exempt from, or will comply with, the
requirements of Section 409A of the Code, the Corporation does not warrant that
any award under the Plan will qualify for favorable tax treatment under
Section 409A of the Code or any other provision of federal, state, local or
foreign law. The Corporation shall not be liable to any participant for any tax,
interest or penalties the participant might owe as a result of the grant,
holding, vesting, exercise or payment of any award under the Plan.

 

8.9    Captions.  Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of this Plan or any provision thereof.

 

8.10    Stock-Based Awards in Substitution for Stock Options or Awards Granted
by Other Corporation.  Awards may be granted to Eligible Persons in substitution
for or in connection with an assumption of employee stock options, SARs,
restricted stock or other stock-based awards granted by other entities to
persons who are or who will become Eligible Persons in respect of the
Corporation or one of its Subsidiaries, in connection with a distribution,
arrangement, business combination, merger or other reorganization by or with the
granting entity or an affiliated entity, or the acquisition by the Corporation
or one of its Subsidiaries, directly or indirectly, of all or a substantial part
of the stock or assets of the employing entity. The awards so granted need not
comply with other specific terms of this Plan, provided the awards reflect only
adjustments giving effect to the assumption or substitution consistent with the
conversion applicable to the Common Stock in the transaction and any change in
the issuer of the security. Any shares that are delivered and any awards that
are granted by, or become obligations of, the Corporation, as a result of the
assumption by the Corporation of, or in substitution for, outstanding awards
previously granted by an acquired company (or previously granted by a
predecessor employer (or direct or indirect parent thereof) in the case of
persons that become employed by the Corporation or one of its Subsidiaries in
connection with a business or asset acquisition or similar

 

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transaction) shall not be counted against the Share Limit or other limits on the
number of shares available for issuance under this Plan, except as may otherwise
be provided by the Administrator at the time of such assumption or substitution
or as may be required to comply with the requirements of any applicable stock
exchange.

 

8.11    Non-Exclusivity of Plan.  Nothing in this Plan shall limit or be deemed
to limit the authority of the Board or the Administrator to grant awards or
authorize any other compensation, with or without reference to the Common Stock,
under any other plan or authority.

 

8.12    No Corporate Action Restriction.  The existence of this Plan, the award
agreements and the awards granted hereunder shall not limit, affect or restrict
in any way the right or power of the Board or the stockholders of the
Corporation to make or authorize: (a) any adjustment, recapitalization,
reorganization or other change in the capital structure or business of the
Corporation or any Subsidiary, (b) any merger, arrangement, business
combination, amalgamation, consolidation or change in the ownership of the
Corporation or any Subsidiary, (c) any issue of bonds, debentures, capital,
preferred or prior preference stock ahead of or affecting the capital stock (or
the rights thereof) of the Corporation or any Subsidiary, (d) any dissolution or
liquidation of the Corporation or any Subsidiary, (e) any sale or transfer of
all or any part of the assets or business of the Corporation or any Subsidiary,
or (f) any other corporate act or proceeding by the Corporation or any
Subsidiary. No participant, beneficiary or any other person shall have any claim
under any award or award agreement against any member of the Board or the
Administrator, or the Corporation or any employees, officers or agents of the
Corporation or any Subsidiary, as a result of any such action.

 

8.13    Other Corporation Benefit and Compensation Programs.  Payments and other
benefits received by a participant under an award made pursuant to this Plan
shall not be deemed a part of a participant’s compensation for purposes of the
determination of benefits under any other employee welfare or benefit plans or
arrangements, if any, provided by the Corporation or any Subsidiary, except
where the Administrator expressly otherwise provides or authorizes in writing or
except as otherwise specifically set forth in the terms and conditions of such
other employee welfare or benefit plan or arrangement. Awards under this Plan
may be made in addition to, in combination with, as alternatives to or in
payment of grants, awards or commitments under any other plans or arrangements
of the Corporation or its Subsidiaries.

 

8.14    Non-Competition, Code of Ethics and Clawback Policy. By accepting awards
and as a condition to the exercise of awards and the enjoyment of any benefits
of the Plan, including participation therein, each participant agrees to be
bound by and subject to non-competition, confidentiality and invention ownership
agreements acceptable to the Administrator and the Corporation’s code of ethics
policy and other policies applicable to such participant as is in effect from
time to time. Awards shall be subject to any clawback policy adopted by the
Corporation from time to time.

 

9.                                      DIRECTOR COMPENSATION PROVISIONS

 

9.1    Plan Exclusive Vehicle for Non-Employee Director Cash and Equity
Compensation.  All cash and equity compensation paid or provided to the
Corporation’s non-

 

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employee directors shall be awarded under the terms and conditions of this Plan.

 

9.2    Non-Employee Director Compensation.  Non-employee directors may be
awarded any of the types of awards described in Section 5 above for which they
are eligible under the terms and conditions of Section 5, above.

 

9.2.1    Cash Awards. Cash awards (as described in Section 5.1.6) may take any
form determined by the Administrator in its sole and absolute discretion,
including, but not limited to, retainers, committee fees, chairperson fees, per
meeting fees, and special fees for committee service. In no event shall Cash
awards paid to any non-employee director exceed $400,000 in any fiscal year.

 

9.2.2    Equity Awards. Equity Awards (described in Sections 5.1.1, 5.1.3, 5.14.
5.1.5, and 5.1.7) may take any form determined by the Administrator in its sole
and absolute discretion, provided, however, that in no event shall awards
granted to a non-employee director in any fiscal year cover more than 50,000
shares of Common Stock (with the number of shares covered by awards determined
based on the maximum number of shares potentially issuable pursuant to such
awards).

 

As adopted by the Board of Directors of SRC Energy Inc. on January 29, 2018.

 

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