Exhibit 10.1

The EXCO Resources, Inc.

 

AMENDED AND RESTATED

2005 LONG-TERM INCENTIVE PLAN

 

The EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan (the
“Plan”) was originally adopted by the Board of Directors and the stockholders of
EXCO Holdings II, Inc., a Delaware corporation (“Holdings II”), on September 15,
2005. As a result of the merger of Holdings II with and into EXCO Holdings Inc.,
a Delaware corporation (“Holdings”), the Plan was assumed by Holdings, effective
as of September 30, 2005, and ratified by Holdings’ Board of Directors,
effective as of October 5, 2005, and Holdings’ stockholders, effective as of
October 3, 2005. As a result of the merger of Holdings with and into EXCO
Resources, Inc., a Texas corporation (the “Company”), the Plan was assumed by
the Company, effective as of February 14, 2006, in accordance with the terms of
that certain Agreement and Plan of Merger, dated February 9, 2006, which
agreement, including the merger and the Company’s assumption of the Plan
contemplated thereby, were approved, effective as of February 4, 2006, by
(i) the Boards of Directors of the Company and Holdings, (ii) the sole
shareholder of the Company, and (iii) the stockholders of Holdings. The Plan was
amended pursuant to an amendment approved by (i) the Board of Directors of the
Company on June 29, 2007 and (ii) the shareholders of the Company on August 30,
2007. The Plan was amended and restated by the Board of Directors of the Company
on November 14, 2007. The Awards previously granted under this Plan have been
converted into awards in EXCO Resources, Inc. common stock pursuant to the
requirements of Treasury Regulation section 1.424-1. The Plan shall be known as
the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan from
and after November 14, 2007.

 

ARTICLE 1

PURPOSE

 

The purpose of the Plan is to attract and retain the services of key employees,
consultants and Outside Directors of the Company and its Subsidiaries and to
provide such persons with a proprietary interest in the Company through the
granting of incentive stock options, nonqualified stock options, stock
appreciation rights, restricted stock, restricted stock units, performance
awards, dividend equivalent rights, and other awards, whether granted singly, or
in combination, or in tandem, that will

 

(a)           increase the interest of such persons in the Company’s welfare;

 

(b)           furnish an incentive to such persons to continue their services
for the Company; and

 

(c)           provide a means through which the Company may attract able persons
as employees, Consultants and Outside Directors.

 

With respect to Reporting Participants, the Plan and all transactions under the
Plan are intended to comply with all applicable conditions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934 (the “1934 Act”). To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void ab initio, to the extent permitted by law and
deemed advisable by the Committee. No Incentive Stock Options shall be issued to
Consultants, independent contractors or Outside Directors of the Company.

 

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ARTICLE 2

DEFINITIONS

 

For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:

 

2.1          “Award” means the grant of any Incentive Stock Option, Nonqualified
Stock Option, Restricted Stock, SAR, Restricted Stock Units, Performance Award,
Dividend Equivalent Right or Other Award, whether granted singly or in
combination or in tandem (each individually referred to herein as an
“Incentive”).

 

2.2          “Award Agreement” means a written agreement between a Participant
and the Company which sets out the terms of the grant of an Award.

 

2.3          “Award Period” means the period set forth in the Award Agreement
during which one or more Incentives granted under an Award may be exercised.

 

2.4          “Board” means the board of directors of the Company.

 

2.5          “Callable” means Common Stock issued to a Participant which is
subject to the Company’s right to call and repurchase such Common Stock upon
Termination of Employment pursuant to the terms of the Award Agreement under
which the Participant purchased the Common Stock.

 

2.6          “Change in Control” means any of the following, except as otherwise
provided herein:  (i) any consolidation, merger or share exchange of the Company
in which the Company is not the continuing or surviving corporation or pursuant
to which shares of the Company’s Common Stock would be converted into cash,
securities or other property, other than a consolidation, merger or share
exchange of the Company in which the holders of the Company’s Common Stock
immediately prior to such transaction have the same proportionate ownership of
Common Stock of the surviving corporation immediately after such transaction or
the merger of the Company into one of its subsidiaries; (ii) any sale, lease,
exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of all or
substantially all of the assets of the Company; (iii) the stockholders of the
Company approve any plan or proposal for the liquidation or dissolution of the
Company; (iv) the cessation of control (by virtue of their not constituting a
majority of directors) of the Board by the individuals (the “Continuing
Directors”) who (x) at February 14, 2006 were directors or (y) become directors
after February 14, 2006 and whose election or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of the
directors then in office who were directors at February 14, 2006 or whose
election or nomination for election was previously so approved; (v) the
acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the
1934 Act) of an aggregate of 50% or more of the voting power of the Company’s
outstanding voting securities by any person or group (as such term is used in
Rule 13d-5 under the 1934 Act) who beneficially owned less than 50% of the
voting power of the Company’s outstanding voting securities on February 14,
2006; provided, however, that notwithstanding the foregoing, an acquisition
shall not constitute a Change in Control hereunder if the acquirer is (x) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company and acting in such capacity, (y) a Subsidiary of the Company or a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of voting securities of
the Company or (z) any other person whose acquisition of shares of voting
securities is approved in advance by a majority of the Continuing Directors,
(aa) a purchase(s) of the shares are sold pursuant to effective registration
under applicable federal and state securities laws; or (vi) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case
involving the Company to a case under Chapter 7.

 

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Notwithstanding the foregoing provisions of this Section 2.6, in the event an
Award issued under the Plan is subject to Section 409A of the Code, then, to the
extent necessary to comply with the requirements of Section 409A of the Code, in
lieu of the foregoing definition, the definition of “Change in Control” for
purposes of such Award shall be the definition provided for under Section 409A
of the Code and the regulations or other guidance issued thereunder.

 

2.7          “Code” means the Internal Revenue Code of 1986, as amended.

 

2.8          “Committee” means the Compensation Committee of the Board.

 

2.9          “Common Stock” means the common stock, par value $0.001 per share,
which the Company is currently authorized to issue or may in the future be
authorized to issue, or any securities into which or for which the common stock
of the Company may be converted or exchanged, as the case may be, pursuant to
the terms of this Plan.

 

2.10        “Company” means EXCO Resources, Inc., a Texas corporation, and any
successor entity.

 

2.11        “Consultant” means any person performing advisor or consulting
services to the Company or a Subsidiary, with or without compensation, who is
not an Employee, provided that bona fide services must be rendered by such
person and such services shall not be rendered in connection with the offer or
sale of securities in a capital raising transaction. A Consultant is not
eligible to receive Incentive Stock Options.

 

2.12        “Corporation” means any entity that (i) is defined as a corporation
under Section 7701 of the Code and (ii) is the Company or is in an unbroken
chain of corporations (other than the Company) beginning with the Company, if
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing a majority of the total combined voting power of all
classes of stock in one of the other corporations in the chain. For purposes of
clause (ii) hereof, an entity shall be treated as a “corporation” if it
satisfies the definition of a corporation under Section 7701 of the Code.

 

2.13        “Date of Grant” means the effective date on which an Award is made
to a Participant as set forth in the applicable Award Agreement; provided,
however, that solely for purposes of Section 16 of the 1934 Act and the
rules and regulations promulgated thereunder, the Date of Grant of an Award
shall be the date of stockholder approval of the Plan if such date is later than
the effective date of such Award as set forth in the Award Agreement.

 

2.14        “Dividend Equivalent Right” means the right of the holder thereof to
receive credits as set forth in Section 6.9 hereof based on the cash dividends
that would have been paid on the shares of Common Stock specified in the Award
if such shares were held by the Participant to whom the Award is made.

 

2.15        “Employee” means common law employee (as defined in accordance with
the Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company or any Subsidiary of the Company.

 

2.16        “Executive Officer” means an officer of the Company or a Subsidiary
subject to Section 16 of the 1934 Act or a “covered employee” as defined in
Section 162(m)(3) of the Code.

 

2.17        “Exempt Shares” means shares of Common Stock designated as “Exempt
Shares” pursuant to Section 5.1(b).

 

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2.18        “Fair Market Value” means, as of a particular date, (a) if the
shares of Common Stock are listed on a national securities exchange, the closing
sales price per share of Common Stock on the consolidated transaction reporting
system for the principal securities exchange for the Common Stock on that date,
or, if there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (b) if the shares of Common
Stock are not so listed but are quoted on the Nasdaq National Market System, the
closing sales price per share of Common Stock on the Nasdaq National Market
System on that date, or, if there shall have been no such sale so reported on
that date, on the last preceding date on which such a sale was so reported,
(c) if the Common Stock is not so listed or quoted, the mean between the closing
bid and asked price on that date, or, if there are no quotations available for
such date, on the last preceding date on which such quotations shall be
available, as reported by Nasdaq, or, if not reported by Nasdaq, by the National
Quotation Bureau, Inc., or (d) if none of the above is applicable, such amount
as may be determined by the Committee (acting on the advice of an Independent
Third Party, should the Committee elect in its sole discretion to utilize an
Independent Third Party for this purpose), in good faith, to be the fair market
value per share of Common Stock and in accordance with the requirements, as
applicable, of Section 422 of the Code  and Section 409A of the Code and the
regulations and other guidance issued thereunder.

 

2.19        “Full Value Award” means any Award with a net benefit to the
Participant, without regard to any restrictions such as those described in
Section 6.4(b), equal to the aggregate Fair Market Value of the total shares of
Common Stock subject to the Award. Full Value Awards include Restricted Stock
and Restricted Stock Units, but do not include Stock Options and SARs.

 

2.20        “Incentive” is defined in Section 2.1 hereof.

 

2.21        “Incentive Stock Option”  or “ISO” means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.

 

2.22        “Independent Third Party” means an individual or entity independent
of the Company having experience in providing investment banking or similar
appraisal or valuation services and with expertise generally in the valuation of
securities or other property for purposes of this Plan. The Committee
may utilize one or more Independent Third Parties.

 

2.23        “Nonqualified Stock Option” means a nonqualified stock option,
granted pursuant to this Plan, which is not an Incentive Stock Option.

 

2.24        “Option Price” means the price which must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.

 

2.25        “Other Award” means an Award issued pursuant to Section 6.10 hereof.

 

2.26        “Outside Director” means a director of the Company who is not an
Employee or Consultant.

 

2.27        “Participant” means an Employee, Consultant or Outside Director of
the Company or a Subsidiary to whom an Award is granted under this Plan.

 

2.28        “Plan” means this EXCO Resources, Inc. Amended and Restated 2005
Long-Term Incentive Plan, as amended from time to time.

 

2.29        “Performance Award” means an Award hereunder of cash, shares of
Common Stock, units or rights based upon, payable in, or otherwise related to,
Common Stock pursuant to Section 6.8 hereof.

 

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2.30        “Performance Goal” means any of the goals set forth in Section 6.11
hereof.

 

2.31        “Reporting Participant” means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.

 

2.32        “Restricted Stock” means shares of Common Stock issued or
transferred to a Participant pursuant to Section 6.4 of this Plan which are
subject to restrictions or limitations set forth in this Plan and in the related
Award Agreement.

 

2.33        “Restricted Stock Units” means units awarded to Participants
pursuant to Section 6.7 hereof, which are convertible into Common Stock at such
time as such units are no longer subject to restrictions as established by the
Committee.

 

2.34        “Retirement” means any Termination of Service solely due to
retirement upon or after attainment of age sixty-five (65), or permitted early
retirement as determined by the Committee.

 

2.35        “SAR” or “stock appreciation right” means the right to receive an
amount, in cash and/or Common Stock, equal to the excess of the Fair Market
Value of a specified number of shares of Common Stock as of the date the SAR is
exercised (or, as provided in the Award Agreement, converted) over the SAR Price
for such shares.

 

2.36        “SAR Price” means the exercise price or conversion price of each
share of Common Stock covered by a SAR, determined on the Date of Grant of the
SAR.

 

2.37        “Stock Option” means a Nonqualified Stock Option or an Incentive
Stock Option.

 

2.38        “Subsidiary” means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item
(i) above or any limited partnership listed in item (ii) above. “Subsidiaries”
means more than one of any such corporations, limited partnerships, partnerships
or limited liability companies.

 

2.39        “Tenure Award” means an Award hereunder of cash, shares of Common
Stock, units or rights based upon, payable in, or otherwise related to, Common
Stock that vests over time based upon the Participant’s continued employment
with or service to the Company.

 

2.40        “Termination of Service” occurs when a Participant who is (i) an
Employee of the Company or any Subsidiary ceases to serve as an Employee of the
Company and its Subsidiaries, for any reason; (ii) an Outside Director of the
Company or a Subsidiary ceases to serve as a director of the Company and its
Subsidiaries for any reason; or (iii) a Consultant of the Company or a
Subsidiary ceases to serve as a Consultant of the Company and its Subsidiaries
for any reason. Except as may be necessary or desirable to comply with
applicable federal or state law, a “Termination of Service” shall not be deemed
to have occurred when a Participant who is an Employee becomes an Outside
Director or Consultant or vice versa. If, however, a Participant who is an
Employee and who has an Incentive Stock Option ceases to be an Employee but does

 

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not suffer a Termination of Service, and if that Participant does not exercise
the Incentive Stock Option within the time required under Section 422 of the
Code upon ceasing to be an Employee, the Incentive Stock Option shall thereafter
become a Nonqualified Stock Option. Notwithstanding the foregoing provisions of
this Section 2.40, in the event an Award issued under the Plan is subject to
Section 409A of the Code, then, to the extent necessary to comply with the
requirements of Section 409A of the Code, in lieu of the foregoing definition,
the definition of “Termination of Service” for purposes of such Award shall be
the definition of “separation from service” provided for under Section 409A of
the Code and the regulations or other guidance issued thereunder.

 

2.41        “Total and Permanent Disability” means a Participant is qualified
for long-term disability benefits under the Company’s or Subsidiary’s disability
plan or insurance policy; or, if no such plan or policy is then in existence or
if the Participant is not eligible to participate in such plan or policy, that
the Participant, because of a physical or mental condition resulting from bodily
injury, disease, or mental disorder, is unable to perform his or her duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Committee, based upon medical reports or other evidence
satisfactory to the Committee; provided that, with respect to any Incentive
Stock Option, Total and Permanent Disability shall have the meaning given it
under the rules governing Incentive Stock Options under the Code.
Notwithstanding the foregoing provisions of this Section 2.41, in the event an
Award issued under the Plan is subject to Section 409A of the Code, then, to the
extent necessary to comply with the requirements of Section 409A of the Code, in
lieu of the foregoing definition, the definition of “Total and Permanent
Disability” for purposes of such Award shall be the definition of “disability”
provided for under Section 409A of the Code and the regulations or other
guidance issued thereunder.

 

ARTICLE 3

ADMINISTRATION

 

3.1          General Administration; Compensation Committee. Subject to the
terms of this Article 3, the Plan shall be administered by the Compensation
Committee of the Board (the “Committee”). The Committee shall consist of not
fewer than two persons.

 

If at any time the Committee shall include members who are not “outside
directors” under Section 162(m) of the Code and/or “non-employee directors” as
defined in Rule 16b-3 promulgated under the 1934 Act, then to the extent
necessary to satisfy the requirements of Section 162(m) of the Code and/or
Rule 16b-3 promulgated under the 1934 Act, any function relating to a Reporting
Participant or a covered employee (as defined in Section 162(m) of the Code)
may be performed solely by a subcommittee of the Committee consisting of two or
more members, which shall be solely comprised of Committee members who are
“outside directors” under Section 162(m) of the Code and/or “non-employee
directors” as defined in Rule 16b-3 promulgated under the 1934 Act.

 

Notwithstanding anything contained herein to the contrary, discretionary Awards
granted to Outside Directors shall be administered by the Compensation Committee
of the Board (or a subcommittee thereof), which shall be comprised solely of
independent directors under rules promulgated by the New York Stock Exchange.

 

3.2          Designation of Participants and Awards.

 

(a)           The Committee shall determine and designate from time to time the
eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement, where applicable, the Award Period, the Date of Grant,
and such other terms, provisions, limitations, and performance requirements, as
are approved by the Committee, but not inconsistent with the Plan. The

 

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Committee shall determine whether an Award shall include one type of Incentive
or two or more Incentives granted in combination or two or more Incentives
granted in tandem (that is, a joint grant where exercise of one Incentive
results in cancellation of all or a portion of the other Incentive). Although
the members of the Committee shall be eligible to receive Awards, all decisions
with respect to any Award, and the terms and conditions thereof, to be granted
under the Plan to any member of the Committee shall be made solely and
exclusively by the other members of the Committee, or if such member is the only
member of the Committee, by the Board.

 

(b)           Notwithstanding Section 3.2(a), the Board may, in its discretion
and by a resolution adopted by the Board, authorize one or more officers of the
Company (an “Authorized Officer”) to (i) designate one or more Employees as
eligible persons to whom Awards will be granted under the Plan and
(ii) determine the number of shares of Common Stock that will be subject to such
Awards; provided, however, that the resolution of the Board granting such
authority shall (x) specify the total number of shares of Common Stock that
may be made subject to the Awards, (y) set forth the price or prices (or a
formula by which such price or prices may be determined) to be paid for the
purchase of the Common Stock subject to such Awards, and (z) not authorize an
officer to designate himself as a recipient of any Award.

 

3.3          Authority of the Committee. The Committee, in its discretion, shall
(i) interpret the Plan, (ii) prescribe, amend, and rescind any rules and
regulations necessary or appropriate for the administration of the Plan, (iii) 
establish performance goals for an Award and certify the extent of their
achievement, and (iv) make such other determinations or certifications and take
such other action as it deems necessary or advisable in the administration of
the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.

 

The Committee may delegate to officers of the Company, pursuant to a written
delegation, the authority to perform specified functions under the Plan. Any
actions taken by any officers of the Company pursuant to such written delegation
of authority shall be deemed to have been taken by the Committee.
Notwithstanding the foregoing, to the extent necessary to satisfy the
requirements of Section 162(m) of the Code and/or Rule 16b-3 promulgated under
the 1934 Act, any function relating to a Reporting Participant or a covered
employee (as defined in Section 162(m) of the Code) shall be performed solely by
the Committee or  a subcommittee thereof consisting of two or more members of
the Committee.

 

With respect to restrictions in the Plan that are based on the requirements of
Rule 16b-3 promulgated under the 1934 Act, Section 422 of the Code,
Section 162(m) of the Code, the rules of any exchange or inter-dealer quotation
system upon which the Company’s securities are listed or quoted, or any other
applicable law, rule or restriction (collectively, “applicable law”), to the
extent that any such restrictions are no longer required by applicable law, the
Committee shall have the sole discretion and authority to grant Awards that are
not subject to such mandated restrictions and/or to waive any such mandated
restrictions with respect to outstanding Awards.

 

3.4          Prohibition on Acceleration of Benefits. Any Award which
constitutes deferred compensation under Section 409A of the Code shall not have
the time or schedule of any payment thereunder accelerated, except as permitted
under the guidance issued under Section 409A of the Code.

 

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ARTICLE 4

ELIGIBILITY

 

Any Employee (including an Employee who is also a director or an officer),
Consultant or Outside Director of the Company or any Subsidiary whose judgment,
initiative, and efforts contributed or may be expected to contribute to the
successful performance of the Company or any Subsidiary is eligible to
participate in the Plan; provided that only Employees of a corporation shall be
eligible to receive Incentive Stock Options. The Committee, upon its own action,
may grant, but shall not be required to grant, an Award to any Employee,
Consultant or Outside Director of the Company or any Subsidiary. Awards may be
granted by the Committee at any time and from time to time to new Participants,
or to some or all of the then existing Participants, and may include or exclude
previous Participants, as the Committee shall determine. Except as required by
this Plan, Awards granted at different times need not contain similar
provisions. The Committee’s determinations under the Plan (including without
limitation determinations of which Employees, Consultants or Outside Directors,
if any, are to receive Awards, the form, amount and timing of such Awards, the
terms and provisions of such Awards and the agreements evidencing same) need not
be uniform and may be made by it selectively among Participants who receive, or
are eligible to receive, Awards under the Plan.

 

ARTICLE 5

SHARES SUBJECT TO PLAN

 

5.1          Number Available for Awards.

 

(a)           In General. Subject to adjustment as provided in Articles 11 and
12, the maximum number of shares of Common Stock that may be delivered pursuant
to Awards granted under the Plan is twenty million (20,000,000) shares, of
which  up to twenty million (20,000,000) shares may delivered pursuant to
Incentive Stock Options. Shares to be issued may be made available from
authorized but unissued Common Stock, Common Stock held by the Company in its
treasury, or Common Stock purchased by the Company on the open market or
otherwise. During the term of this Plan, the Company will at all times reserve
and keep available the number of shares of Common Stock that shall be sufficient
to satisfy the requirements of this Plan.

 

(b)           Exempt Shares. No more than ten percent (10%) of the shares of
Common Stock that may be delivered pursuant to Awards under
Section 5.1(a) may be shares designated as “Exempt Shares.”

 

5.2          Reuse of Shares. To the extent that any Award under this Plan shall
be forfeited, shall expire or be canceled, in whole or in part, then the number
of shares of Common Stock covered by the Award or stock option so forfeited,
expired or canceled may again be awarded pursuant to the provisions of this
Plan. In the event that previously acquired shares of Common Stock are delivered
to the Company in full or partial payment of the exercise price for the exercise
of a Stock Option granted under this Plan, the number of shares of Common Stock
available for future Awards under this Plan shall be reduced only by the net
number of shares of Common Stock issued upon the exercise of the Stock Option.
Awards that may be satisfied either by the issuance of shares of Common Stock or
by cash or other consideration shall be counted against the maximum number of
shares of Common Stock that may be issued under this Plan only during the period
that the Award is outstanding or to the extent the Award is ultimately satisfied
by the issuance of shares of Common Stock. Awards will not reduce the number of
shares of Common Stock that may be issued pursuant to this Plan if the
settlement of the Award will not require the issuance of shares of Common Stock,
as, for example, a SAR that can be satisfied only by the payment of cash.
Notwithstanding any provisions of the Plan to the contrary, only shares
forfeited back to the Company, shares canceled on account of termination,
expiration or lapse of an

 

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Award, shares surrendered in payment of the exercise price of an option or
shares withheld for payment of applicable employment taxes and/or withholding
obligations resulting from the exercise of an option shall again be available
for grant of Incentive Stock Options under the Plan, but shall not increase the
maximum  number of shares described in Section 5.1 above as the maximum number
of shares of Common Stock that may be delivered pursuant to Incentive Stock
Options.

 

ARTICLE 6

GRANT OF AWARDS

 

6.1          In General.

 

(a)           The grant of an Award shall be authorized by the Committee and
shall be evidenced by an Award Agreement setting forth the Incentive or
Incentives being granted, the total number of shares of Common Stock subject to
the Incentive(s), the Option Price (if applicable), the Award Period, the Date
of Grant, and such other terms, provisions, limitations, and performance
objectives, as are approved by the Committee, but (i) not inconsistent with the
Plan and (ii) to the extent an Award issued under the Plan is subject to
Section 409A of the Code, in compliance with the applicable requirements of
Section 409A of the Code and the regulations or other guidance issued
thereunder. The Company shall execute an Award Agreement with a Participant
after the Committee approves the issuance of an Award. Any Award granted
pursuant to this Plan must be granted within ten (10) years of the date of
adoption of this Plan. The Plan shall be submitted to the Company’s stockholders
for approval; however, the Committee may grant Awards under the Plan prior to
the time of stockholder approval. Any such Award granted prior to such
stockholder approval shall be made subject to such stockholder approval. The
grant of an Award to a Participant shall not be deemed either to entitle the
Participant to, or to disqualify the Participant from, receipt of any other
Award under the Plan.

 

(b)           If the Committee establishes a purchase price for an Award, the
Participant must accept such Award within a period of thirty (30) days (or such
shorter period as the Committee may specify) after the Date of Grant by
executing the applicable Award Agreement and paying such purchase price.

 

(c)           Any Award under this Plan that is settled in whole or in part in
cash on a deferred basis may provide for interest equivalents to be credited
with respect to such cash payment. Interest equivalents may be compounded and
shall be paid upon such terms and conditions as may be specified by the Award.
If the Award does not specify interest equivalents, then no interest equivalents
shall be credited.

 

6.2          Option Price. The Option Price for any share of Common Stock which
may be purchased under a Nonqualified Stock Option for any share of Common Stock
may be equal to or greater than the Fair Market Value of the share on the Date
of Grant. The Option Price shall never be less than the Fair Market Value of the
share on the Date of Grant. The Option Price for any share of Common Stock which
may be purchased under an Incentive Stock Option must be at least equal to the
Fair Market Value of the share on the Date of Grant; if an Incentive Stock
Option is granted to an Employee who owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than ten percent (10%) of
the combined voting power of all classes of stock of the Company (or any parent
or Subsidiary), the Option Price shall be at least 110% of the Fair Market Value
of the Common Stock on the Date of Grant.

 

6.3          Maximum ISO Grants. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant)

 

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of the Common Stock with respect to which Incentive Stock Options (under this
and any other plan of the Company and its Subsidiaries) are exercisable for the
first time by such Employee during any calendar year to exceed $100,000. To the
extent any Stock Option granted under this Plan which is designated as an
Incentive Stock Option exceeds this limit or otherwise fails to qualify as an
Incentive Stock Option, such Stock Option (or any such portion thereof) shall be
a Nonqualified Stock Option. In such case, the Committee shall designate which
stock will be treated as Incentive Stock Option stock by causing the issuance of
a separate stock certificate and identifying such stock as Incentive Stock
Option stock on the Company’s stock transfer records.

 

6.4          Restricted Stock. If Restricted Stock is granted to or received by
a Participant under an Award (including a Stock Option), the Committee shall set
forth in the related Award Agreement: (i) the number of shares of Common Stock
awarded, (ii) the price, if any, to be paid by the Participant for such
Restricted Stock and the method of payment of the price, (iii) the time or times
within which such Award may be subject to forfeiture, in whole or in part, or
the schedule which determines when the Participant earns a vested interest in
the shares of Common Stock (subject to the Restricted Stock Award),
(iv) specified Performance Goals of the Company, a Subsidiary, any division
thereof or any group of Employees of the Company, or other criteria, which the
Committee determines must be met in order to remove any restrictions (including
vesting) on such Award, and (v) all other terms, limitations, restrictions, and
conditions of the Restricted Stock, which shall be consistent with this Plan
and, to the extent Restricted Stock granted under the Plan is subject to
Section 409A of the Code, in compliance with the applicable requirements of
Section 409A of the Code and the regulations or other guidance issued
thereunder. The provisions of Restricted Stock need not be the same with respect
to each Participant.

 

(a)           Legend on Shares. Each Participant who is awarded or receives
Restricted Stock shall be issued a stock certificate or certificates in respect
of such shares of Common Stock. Such certificate(s) shall be registered in the
name of the Participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock,
substantially as provided in Section 15.9 of the Plan.

 

(b)           Restrictions and Conditions. Shares of Restricted Stock shall be
subject to the following restrictions and conditions:

 

(i)            Subject to the other provisions of this Plan and the terms of the
particular Award Agreements, during such period as may be determined by the
Committee commencing on the Date of Grant or the date of exercise of an Award
(the “Restriction Period”), the Participant shall not be permitted to sell,
transfer, pledge or assign shares of Restricted Stock. Except for these
limitations and subject to Section 7.2 below, the Committee may in its sole
discretion, remove any or all of the restrictions on such Restricted Stock
whenever it may determine that, by reason of changes in applicable laws or other
changes in circumstances arising after the date of the Award, such action is
appropriate.

 

(ii)           Except as provided in sub-paragraph (i) above or in the
applicable Award Agreement, the Participant shall have, with respect to his or
her Restricted Stock, all of the rights of a stockholder of the Company,
including the right to vote the shares, and the right to receive any dividends
thereon. Certificates for shares of Common Stock free of restriction under this
Plan shall be delivered to the Participant promptly after, and only after, the
Restriction Period shall expire without forfeiture in respect of such shares of
Common Stock or after any other restrictions imposed on such shares of Common
Stock by the applicable Award Agreement or other agreement have expired.
Certificates for the shares of Common Stock forfeited under the provisions of
the Plan and the applicable Award Agreement shall be

 

10

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promptly returned to the Company by the forfeiting Participant. Each Award
Agreement shall require that (x) each Participant, by his or her acceptance of
Restricted Stock, shall irrevocably grant to the Company a power of attorney to
transfer any shares so forfeited to the Company and agrees to execute any
documents requested by the Company in connection with such forfeiture and
transfer, and (y) such provisions regarding returns and transfers of stock
certificates with respect to forfeited shares of Common Stock shall be
specifically performable by the Company in a court of equity or law.

 

(iii)          The Restriction Period of Restricted Stock shall commence on the
Date of Grant or the date of exercise of an Award, as specified in the Award
Agreement, and, subject to Article 12 of the Plan, unless otherwise established
by the Committee in the Award Agreement setting forth the terms of the
Restricted Stock, shall expire upon satisfaction of the conditions set forth in
the Award Agreement; such conditions may provide for vesting based on such
Performance Goals, as may be determined by the Committee in its sole discretion.

 

(iv)          Except as otherwise provided in the particular Award Agreement,
upon Termination of Service for any reason during the Restriction Period, the
nonvested shares of Restricted Stock shall be forfeited by the Participant. In
the event a Participant has paid any consideration to the Company for such
forfeited Restricted Stock, the Committee shall specify in the Award Agreement
that either (i) the Company shall be obligated to, or (ii) the Company may, in
its sole discretion, elect to, pay to the Participant, as soon as practicable
after the event causing forfeiture, in cash, an amount equal to the lesser of
the total consideration paid by the Participant for such forfeited shares or the
Fair Market Value of such forfeited shares as of the date of Termination of
Service, as the Committee, in its sole discretion shall select. Upon any
forfeiture, all rights of a Participant with respect to the forfeited shares of
the Restricted Stock shall cease and terminate, without any further obligation
on the part of the Company.

 

6.5          SARs. The Committee may grant SARs to any Participant, either as a
separate Award or in connection with a Stock Option. SARs shall be subject to
such terms and conditions as the Committee shall impose, provided that such
terms and conditions are (i)  not inconsistent with the Plan and (ii) to the
extent a SAR issued under the Plan is subject to Section 409A of the Code, in
compliance with the applicable requirements of Section 409A of the Code and the
regulations or other guidance issued thereunder. The grant of the SAR
may provide that the holder may be paid for the value of the SAR either in cash
or in shares of Common Stock, or a combination thereof. In the event of the
exercise of a SAR payable in shares of Common Stock, the holder of the SAR shall
receive that number of whole shares of Common Stock having an aggregate Fair
Market Value on the date of exercise equal to the value obtained by multiplying
(i) the difference between the Fair Market Value of a share of Common Stock on
the date of exercise over the  SAR Price as set forth in such SAR (or other
value specified in the agreement granting the SAR), by (ii) the number of shares
of Common Stock as to which the SAR is exercised, with a cash settlement to be
made for any fractional shares of Common Stock. The Committee, in its sole
discretion, may place a ceiling on the amount payable upon exercise of a SAR,
but any such limitation shall be specified at the time that the SAR is granted.

 

6.6          SAR Price. The SAR Price for any share of Common Stock subject to a
SAR may be equal to or greater than the Fair Market Value of the share on the
Date of Grant.

 

6.7          Restricted Stock Units. Restricted Stock Units may be awarded or
sold to any Participant under such terms and conditions as shall be established
by the Committee, provided, however, that such terms and conditions are (i) not
inconsistent with the Plan and (ii) to the extent a Restricted Stock Unit issued
under the Plan is subject to Section 409A of the Code, in compliance with the
applicable requirements of Section 409A of the Code and the regulations or other
guidance issued thereunder). Restricted Stock Units shall be

 

11

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subject to such restrictions as the Committee determines, including, without
limitation, (a) a prohibition against sale, assignment, transfer, pledge,
hypothecation or other encumbrance for a specified period; or (b) a requirement
that the holder forfeit (or in the case of shares of Common Stock or units sold
to the Participant, resell to the Company at cost) such shares or units in the
event of Termination of Service during the period of restriction.

 

6.8          Performance Awards.

 

(a)           The Committee may grant Performance Awards to one or more
Participants. The terms and conditions of such Performance Awards shall be
specified at the time of the grant and may include provisions establishing the
performance period (subject to Section 6.8(d)), the Performance Goals to be
achieved during a performance period, and the maximum or minimum settlement
values, provided that such terms and conditions are (i) not inconsistent with
the Plan and (ii) to the extent a Performance Award issued under the Plan is
subject to Section 409A of the Code, in compliance with the applicable
requirements of Section 409A of the Code and the regulations or other guidance
issued thereunder. If the Performance Award is to be in shares of Common Stock,
the Performance Awards may provide for the issuance of the shares of Common
Stock at the time of the grant of the Performance Award or at the time of  the
certification by the Committee that the Performance Goals for the performance
period have been met; provided, however, if shares of Common Stock are issued at
the time of the grant of the Performance Award and if, at the end of the
performance period, the Performance Goals are not certified by the Committee to
have been fully satisfied, then, notwithstanding any other provisions of this
Plan to the contrary, the Common Stock shall be forfeited in accordance with the
terms of the grant to the extent the Committee determines that the Performance
Goals were not met. The forfeiture of shares of Common Stock issued at the time
of the grant of the Performance Award due to failure to achieve the established
Performance Goals shall be separate from and in addition to any other
restrictions provided for in this Plan that may be applicable to such shares of
Common Stock. Each Performance Award granted to one or more Participants shall
have its own terms and conditions.

 

If it is determined to be necessary in order to satisfy Section 162(m) of the
Code, at the time of the grant of a Performance Award (other than a Stock
Option) and to the extent permitted under Section 162(m) of the Code and the
regulations issued thereunder, the Committee shall provide for the manner in
which the Performance Goals shall be reduced to take into account the negative
effect on the achievement of specified levels of the Performance Goals which
may result from enumerated corporate transactions, extraordinary events,
accounting changes and other similar occurrences which were unanticipated at the
time the Performance Goal was initially established. In no event, however,
may the Committee increase the amount earned under a Performance Award, unless
the reduction in the Performance Goals would reduce or eliminate the amount to
be earned under the Performance Award and the Committee determines not to make
such reduction or elimination.

 

With respect to a Performance Award that is not intended to satisfy the
requirements of Code Section 162(m), if the Committee determines, in its sole
discretion, that the established performance measures or objectives are no
longer suitable because of a change in the Company’s business, operations,
corporate structure, or for other reasons that the Committee deemed
satisfactory, the Committee may modify the performance measures or objectives
and/or the performance period. However, the Committee may not, in any event,
increase the number of shares of Common Stock earned by any Executive officer
upon satisfaction of any Performance Goal.

 

(b)           Performance Awards may be valued by reference to the Fair Market
Value of a share of Common Stock or according to any formula or method deemed
appropriate by the Committee, in its

 

12

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sole discretion, including, but not limited to, achievement of Performance Goals
or other specific financial, production, sales or cost performance objectives
that the Committee believes to be relevant to the Company’s business and/or
remaining in the employ of the Company for a specified period of time.
Performance Awards may be paid in cash, shares of Common Stock, or other
consideration, or any combination thereof. If payable in shares of Common Stock,
the consideration for the issuance of such shares may be the achievement of the
performance objective established at the time of the grant of the Performance
Award. Performance Awards may be payable in a single payment or in installments
and may be payable at a specified date or dates or upon attaining the
performance objective. The extent to which any applicable performance objective
has been achieved shall be conclusively determined by the Committee.

 

6.9          Dividend Equivalent Rights. The Committee may grant a Dividend
Equivalent Right to any Participant, either as a component of another Award or
as a separate Award. The terms and conditions of the Dividend Equivalent Right
shall be specified by the grant. Dividend equivalents credited to the holder of
a Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional shares of Common Stock (which may thereafter accrue
additional dividend equivalents). Any such reinvestment shall be at the Fair
Market Value at the time thereof. Dividend Equivalent Rights may be settled in
cash or shares of Common Stock, or a combination thereof, in a single payment or
in installments. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement, or payment of, or lapse of restrictions on, such other
Award, and that such Dividend Equivalent Right granted as a component of another
Award may also contain terms and conditions different from such other Award.

 

6.10        Other Awards. The Committee may grant to any Participant other forms
of Awards,  based upon, payable in, or otherwise related to, in whole or in
part, shares of Common Stock, if the Committee determines that such other
form of Award is consistent with the purpose and restrictions of this Plan. The
terms and conditions of such other form of Award shall be specified by the
grant. Such Other Awards may be granted for no cash consideration, for such
minimum consideration as may be required by applicable law, or for such other
consideration as may be specified by the grant.

 

6.11        Performance Goals. Awards of Restricted Stock, Restricted Stock
Units, Performance Award and Other Awards (whether relating to cash or shares of
Common Stock) under the Plan may be made subject to the attainment of
Performance Goals relating to one or more business criteria which, where
applicable, shall be within the meaning of Section 162(m) of the Code and
consist of one or more or any combination of the following criteria: cash flow;
cost; revenues;  sales; ratio of debt to debt plus equity; net borrowing, credit
quality or debt ratings; profit before tax; economic profit; earnings before
interest and taxes; earnings before interest, taxes, depreciation and
amortization; gross margin; earnings per share (whether on a pre-tax, after-tax,
operational or other basis); operating earnings; capital expenditures; expenses
or expense levels; economic value added; ratio of operating earnings to capital
spending or any other operating ratios; free cash flow; net profit; net sales;
net asset value per share; the accomplishment of mergers, acquisitions,
dispositions, public offerings or similar extraordinary business transactions;
sales growth; price of the Company’s Common Stock; return on assets, equity or
stockholders’ equity; market share; inventory levels, inventory turn or
shrinkage; or total return to stockholders (“Performance Criteria”). Any
Performance Criteria may be used to measure the performance of the Company as a
whole or any business unit of the Company and may be measured relative to a peer
group or index. Any Performance Criteria may include or exclude
(i) extraordinary, unusual and/or non-recurring items of gain or loss,
(ii) gains or losses on the disposition of a business, (iii) changes in tax or
accounting regulations or laws, or (iv) the effect of a merger or acquisition,
as identified in the Company’s quarterly and annual earnings releases. In all
other respects, Performance Criteria shall be calculated in accordance with the
Company’s financial statements, under generally accepted accounting principles,
or under a methodology established by the Committee prior to the

 

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issuance of an Award which is consistently applied and identified in the audited
financial statements, including footnotes, or the Compensation Discussion and
Analysis section of the Company’s annual report. However, the Committee may not
in any event increase the amount of compensation payable to an individual upon
the attainment of a Performance Goal.

 

6.12        Tandem Awards. The Committee may grant two or more Incentives in one
Award in the form of a “tandem Award,” so that the right of the Participant to
exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and a SAR are issued in a
tandem Award, and the Participant exercises the SAR with respect to 100 shares
of Common Stock, the right of the Participant to exercise the related Stock
Option shall be canceled to the extent of 100 shares of Common Stock.

 

6.13        Maximum Individual Grants. No participant may receive during any
calendar year of the Company, Awards covering an aggregate of more than two
million (2,000,000) shares of Company Stock.

 

ARTICLE 7

AWARD PERIOD; VESTING; TERMINATION OF SERVICE

 

7.1          Award Period. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be exercised
in whole or in part for any period or periods of time or beyond any date
specified in the Award Agreement. Except as provided in the Award Agreement, an
Incentive may be exercised in whole or in part at any time during its term. The
Award Period for an Incentive shall be reduced or terminated upon Termination of
Service. No Incentive granted under the Plan may be exercised at any time after
the end of its Award Period. No portion of any Incentive may be exercised after
the expiration of ten (10) years from its Date of Grant. However, if an Employee
owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than ten percent (10%) of the combined voting
power of all classes of stock of the Company (or any parent or Subsidiary) and
an Incentive Stock Option is granted to such Employee, the term of such
Incentive Stock Option (to the extent required by the Code at the time of grant)
shall be no more than five (5) years from the Date of Grant.

 

7.2          Vesting.

 

(a)           General. Except as otherwise provided by Section 7.2(b), the
Committee, in its sole discretion, may determine that an Incentive will be
immediately vested in whole or in part, or that all or any portion may not be
vested until a date, or dates, subsequent to its Date of Grant, or until the
occurrence of one or more specified events, subject in any case to the terms of
the Plan. If the Committee imposes conditions upon vesting, then, except as
otherwise provided by Section 7.2(b), subsequent to the Date of Grant, the
Committee may, in its sole discretion, accelerate the date on which all or any
portion of the Incentive may be vested; provided, however, that shares of Common
Stock underlying all or any portion of a Nonqualified Stock Option or Incentive
Stock Option for which the Committee accelerates the vesting date other than in
the event of the Participant’s death, Total and Permanent Disability or
Retirement, or the occurrence of a Change in Control shall be Exempt Shares.

 

(b)           Full Value Award Vesting. Except as otherwise provided herein, the
Committee must grant all Full Value Awards in accordance with the following
provisions:

 

(i)      All Full Value Awards granted by the Committee that constitute
Performance Awards must vest no earlier than one (1) year after the Date of
Grant.

 

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(ii)     All Full Value Awards granted by the Committee that constitute Tenure
Awards must vest no earlier than over the three (3) year period commencing on
the Date of Grant on a pro rata basis.

 

(iii)    The Committee may not accelerate the date on which all or any portion
of a Full Value Award may be vested or waive the Restriction Period on a Full
Value Award except upon the Participant’s death, Total and Permanent Disability
or Retirement or the occurrence of a Change in Control.

 

Notwithstanding the foregoing, the Committee may, in its sole discretion, grant
Full Value Awards with more favorable vesting provisions than set forth in this
Section 7.2(b) or accelerate the vesting or waive the Restriction Period for
Full Value Awards at any time, provided that the shares of Common Stock subject
to such Awards shall be Exempt Shares.

 

ARTICLE 8

EXERCISE OF INCENTIVE

 

8.1          In General. A vested Incentive may be exercised during its Award
Period, subject to limitations and restrictions set forth in the Award Agreement
and in Article 7. A vested Incentive may be exercised at such times and in such
amounts as provided in this Plan and the applicable Award Agreement, subject to
the terms, conditions and restrictions of the Plan.

 

8.2          Securities Law and Exchange Restrictions. In no event may an
Incentive be exercised or shares of Common Stock be issued pursuant to an Award
if a necessary listing or quotation of the shares of Common Stock on a stock
exchange or inter-dealer quotation system or any registration under state or
federal securities laws required under the circumstances has not been
accomplished.

 

8.3          Exercise of Stock Option.

 

(a)           In General. If a Stock Option is exercisable prior to the time it
is vested, the Common Stock obtained on the exercise of the Stock Option shall
be Restricted Stock which is subject to the applicable provisions of the Plan
and the Award Agreement. If the Committee imposes conditions upon exercise, then
subsequent to the Date of Grant, the Committee may, in its sole discretion,
accelerate the date on which all or any portion of the Stock Option may be
exercised. No Stock Option may be exercised  for a fractional share of Common
Stock. The granting of a Stock Option shall impose no obligation upon the
Participant to exercise that Stock Option.

 

(b)           Notice and Payment. Subject to such administrative regulations as
the Committee may from time to time adopt, a Stock Option may be exercised by
the delivery of written notice to the Company (or such person or persons
designated in the Award Agreement) setting forth the number of shares of Common
Stock with respect to which the Stock Option is to be exercised and the date of
exercise thereof (the “Exercise Date”) which shall be at least three (3) days
after giving such notice unless an earlier time shall have been mutually agreed
upon. On the Exercise Date, the Participant shall deliver to the Company
consideration with a value equal to the total Option Price of the shares to be
purchased, payable as provided in the Award Agreement, which may provide for
payment in any one or more of the following ways:  (a) cash or check, bank
draft, or money order payable to the order of the Company, (b) Common Stock
(including Restricted Stock) owned by the Participant on the Exercise Date,
valued at its Fair Market Value on the Exercise Date, and which the Participant
has not

 

15

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acquired from the Company within six (6) months prior to the Exercise Date,
(c) by delivery (including by FAX) to the Company or its designated agent of an
executed irrevocable option exercise form together with irrevocable instructions
from the Participant to a broker or dealer, reasonably acceptable to the
Company, to sell certain of the shares of Common Stock purchased upon exercise
of the Stock Option or to pledge such shares as collateral for a loan and
promptly deliver to the Company the amount of sale or loan proceeds necessary to
pay such purchase price, and/or (d) in any other form of valid consideration
that is acceptable to the Committee in its sole discretion. In the event that
shares of Restricted Stock are tendered as consideration for the exercise of a
Stock Option, a number of shares of Common Stock issued upon the exercise of the
Stock Option equal to the number of shares of Restricted Stock used as
consideration therefor shall be subject to the same restrictions and provisions
as the Restricted Stock so tendered.

 

(c)           Issuance of Certificate. Except as otherwise provided in
Section 6.4 hereof (with respect to shares of Restricted Stock) or in the
applicable Award Agreement, upon payment of all amounts due from the
Participant, the Company shall cause certificates for the Common Stock then
being purchased to be delivered as directed by the Participant (or the person
exercising the Participant’s Stock Option in the event of his death) at its
principal business office promptly after the Exercise Date; provided that if the
Participant has exercised an Incentive Stock Option, the Company may at its
option retain physical possession of the certificate evidencing the shares
acquired upon exercise until the expiration of the holding periods described in
Section 422(a)(1) of the Code. The obligation of the Company to deliver shares
of Common Stock shall, however, be subject to the condition that, if at any time
the Committee shall determine in its discretion that the listing, registration,
or qualification of the Stock Option or the Common Stock upon any securities
exchange or inter-dealer quotation system or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary as a
condition of, or in connection with, the Stock Option or the issuance or
purchase of shares of Common Stock thereunder, the Stock Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any conditions
not reasonably acceptable to the Committee.

 

(d)           Failure to Pay. Except as may otherwise be provided in an Award
Agreement, if the Participant fails to pay for any of the Common Stock specified
in such notice or fails to accept delivery thereof, that portion of the
Participant’s Stock Option and right to purchase such Common Stock may be
forfeited by the Participant, in the Company’s sole discretion.

 

8.4          SARs. Subject to the conditions of this Section 8.4 and such
administrative regulations as the Committee may from time to time adopt, a SAR
may be exercised by the delivery (including by FAX) of written notice to the
Committee setting forth the number of shares of Common Stock with respect to
which the SAR is to be exercised and the date of exercise thereof (the “Exercise
Date”) which shall be at least three (3) days after giving such notice unless an
earlier time shall have been mutually agreed upon. Subject to the terms of the
Award Agreement and only if permissible under Section 409A of the Code and the
regulations or other guidance issued thereunder (or, if not so permissible, at
such time as permitted by Section 409A of the Code and the regulations or other
guidance issued thereunder), the Participant shall receive from the Company in
exchange therefor in the discretion of the Committee, and subject to the terms
of the Award Agreement:

 

(i)            cash in an amount equal to the excess (if any) of the Fair Market
Value (as of the date of the exercise, or if provided in the Award Agreement,
conversion, of the SAR) per share of Common Stock over the SAR Price per share
specified in such SAR, multiplied by the total number of shares of Common Stock
of the SAR being surrendered;

 

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(ii)           that number of shares of Common Stock having an aggregate Fair
Market Value (as of the date of the exercise, or if provided in the Award
Agreement, conversion, of the SAR) equal to the amount of cash otherwise payable
to the Participant, with a cash settlement to be made for any fractional share
interests; or

 

(iii)          the Company may settle such obligation in part with shares of
Common Stock and in part with cash.

 

The distribution of any cash or Common Stock pursuant to the foregoing sentence
shall be made at such time as set forth in the Award Agreement.

 

8.5          Disqualifying Disposition of Incentive Stock Option. If shares of
Common Stock acquired upon exercise of an Incentive Stock Option are disposed of
by a Participant prior to the expiration of either two (2) years from the Date
of Grant of such Stock Option or one (1) year from the transfer of shares of
Common Stock to the Participant pursuant to the exercise of such Stock Option,
or in any other disqualifying disposition within the meaning of Section 422 of
the Code, such Participant shall notify the Company in writing of the date and
terms of such disposition. A disqualifying disposition by a Participant shall
not affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.

 

ARTICLE 9

AMENDMENT OR DISCONTINUANCE

 

Subject to the limitations set forth in this Article 9, the Board may at any
time and from time to time, without the consent of the Participants, alter,
amend, revise, suspend, or discontinue the Plan in whole or in part; provided,
however, that no amendment for which stockholder approval is required either
(i) by any securities exchange or inter-dealer quotation system on which the
Common Stock is listed or traded or (ii) in order for the Plan and Incentives
awarded under the Plan to continue to comply with Sections 162(m), 421, and 422
of the Code, including any successors to such Sections, or other applicable law,
shall be effective unless such amendment shall be approved by the requisite vote
of the stockholders. Notwithstanding the foregoing, no amendment to the Plan
that increases the benefits accrued to Participants, increases the maximum
number of shares of Common Stock which may be issued under the Plan,  reprices
any Stock Options or modifies the requirements for participation in the Plan
shall be effective unless such amendment shall be approved by the stockholders
of the Company entitled to vote thereon in the manner set forth in the Company’s
articles of incorporation and bylaws. Any amendments made pursuant to this
Article 9 shall, to the extent deemed necessary or advisable by the Committee,
be applicable to any outstanding Incentives theretofore granted under the Plan,
notwithstanding any contrary provisions contained in any Award Agreement. In the
event of any such amendment to the Plan, the holder of any Incentive outstanding
under the Plan shall, upon request of the Committee and as a condition to the
exercisability thereof, execute a conforming amendment in the form prescribed by
the Committee to any Award Agreement relating thereto. Notwithstanding anything
contained in this Plan to the contrary, unless required by law, no action
contemplated or permitted by this Article 9 shall adversely affect any rights of
Participants or obligations of the Company to Participants with respect to any
Incentive theretofore granted under the Plan without the consent of the affected
Participant.

 

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ARTICLE 10

TERM

 

The Plan shall be effective from the date that this Plan is approved by the
Board. Unless sooner terminated by action of the Board, the Plan will terminate
on September 15, 2015, but Incentives granted before that date will continue to
be effective in accordance with their terms and conditions.

 

ARTICLE 11

CAPITAL ADJUSTMENTS

 

In the event that any dividend or other distribution (whether in the form of
cash, Common Stock, other securities, or other property), recapitalization,
stock split, reverse stock split, rights offering, reorganization, merger,
consolidation, split-up, spin-off, split-off, combination, subdivision,
repurchase, or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event
affects the fair value of an Award, then the Committee shall adjust any or all
of the following so that the fair value of the Award immediately after the
transaction or event is equal to the fair value of the Award immediately prior
to the transaction or event (i) the number of shares and type of Common Stock
(or the securities or property) which thereafter may be made the subject of
Awards, (ii) the number of shares and type of Common Stock (or other securities
or property) subject to outstanding Awards, (iii) the number of shares and type
of Common Stock (or other securities or property) specified as the annual
per-participant limitation under Section 5.1 of the Plan, (iv) the Option Price
of each outstanding Award, (v) the amount, if any, the Company pays for
forfeited shares of Common Stock in accordance with Section 6.4, and (vi) the
number of or SAR Price of shares of Common Stock then subject to outstanding
SARs previously granted and unexercised under the Plan to the end that the same
proportion of the Company’s issued and outstanding shares of Common Stock in
each instance shall remain subject to exercise at the same aggregate SAR Price;
provided however, that the number of shares of Common Stock (or other securities
or property) subject to any Award shall always be a whole number.
Notwithstanding the foregoing, no such adjustment shall be made or authorized to
the extent that such adjustment would cause the Plan or any Stock Option to
violate Section 422 of the Code or Section 409A of the Code. Such adjustments
shall be made in accordance with the rules of any securities exchange, stock
market, or stock quotation system to which the Company is subject.

 

Upon the occurrence of any such adjustment, the Company shall provide notice to
each affected Participant of its computation of such adjustment which shall be
conclusive and shall be binding upon each such Participant.

 

ARTICLE 12

RECAPITALIZATION, MERGER AND CONSOLIDATION

 

12.1        No Effect on Company’s Authority. The existence of this Plan and
Incentives granted hereunder shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company’s capital
structure and its business, or any Change in Control, or any merger or
consolidation of the Company, or any issuance of bonds, debentures, preferred or
preference stocks ranking prior to or otherwise affecting the Common Stock or
the rights thereof (or any rights, options, or warrants to purchase same), or
the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

 

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12.2        Conversion of Incentives Where Company Survives. Subject to any
required action by the stockholders, and except as otherwise provided by
Section 12.4 hereof or as may be required to comply with Section 409A of the
Code and the regulations or other guidance issued thereunder, if the Company
shall be the surviving or resulting corporation in any merger, consolidation or
share exchange, any Incentive granted hereunder shall pertain to and apply to
the securities or rights (including cash, property, or assets) to which a holder
of the number of shares of Common Stock subject to the Incentive would have been
entitled.

 

12.3        Exchange or Cancellation of Incentives Where Company Does Not
Survive. Except as otherwise provided by Section 12.4 hereof or as may be
required to comply with Section 409A of the Code and the regulations or other
guidance issued thereunder, in the event of any merger, consolidation or share
exchange pursuant to which the Company is not the surviving or resulting
corporation or where stockholders of the Company prior to such transaction do
not control a majority of the voting shares of the surviving corporation, there
shall be substituted for each share of Common Stock subject to the unexercised
portions of outstanding Incentives, that number of shares of each class of stock
or other securities or that amount of cash, property, or assets of the
surviving, resulting or consolidated company which were distributed or
distributable to the stockholders of the Company in respect to each share of
Common Stock held by them, such outstanding Incentives to be thereafter
exercisable for such stock, securities, cash, or property in accordance with
their terms.

 

12.4        Cancellation of Incentives. Notwithstanding the provisions of
Sections 12.2 and 12.3 hereof,  and except as may be required to comply with
Section 409A of the Code and the regulations or other guidance issued
thereunder, all Incentives granted hereunder may be canceled by the Company, in
its sole discretion, as of the effective date of any Change in Control, merger,
consolidation or share exchange, or of any proposed sale of all or substantially
all of the assets of the Company, or of any dissolution or liquidation of the
Company, by either:

 

(a)           giving notice to each holder thereof or his personal
representative of its intention to cancel those Incentives for which the
issuance of shares of Common Stock involved payment by the Participant for such
shares, and permitting the purchase during the thirty (30) day period next
preceding such effective date of any or all of the shares of Common Stock
subject to such outstanding Incentives, including in the Board’s discretion some
or all of the shares as to which such Incentives would not otherwise be vested
and exercisable; or

 

(b)           in the case of Incentives that are either (i) settled only in
shares of Common Stock, or (ii) at the election of the Participant, settled in
shares of Common Stock, paying the holder thereof an amount equal to a
reasonable estimate of the difference between the net amount per share payable
in such transaction or as a result of such transaction, and the price per share
of such Incentive to be paid by the Participant (hereinafter the “Spread”),
multiplied by the number of shares subject to the Incentive. In cases where the
shares constitute, or would after exercise, constitute Restricted Stock, the
Company, in its discretion may include some or all of those shares in the
calculation of the amount payable hereunder. In estimating the Spread,
appropriate adjustments to give effect to the existence of the Incentives shall
be made, such as deeming the Incentives to have been exercised, with the Company
receiving the exercise price payable thereunder, and treating the shares
receivable upon exercise of the Incentives as being outstanding in determining
the net amount per share. In cases where the proposed transaction consists of
the acquisition of assets of the Company, the net amount per share shall be
calculated on the basis of the net amount receivable with respect to shares of
Common Stock upon a distribution and liquidation by the Company after giving
effect to expenses and charges, including but not limited to taxes, payable by
the Company before such liquidation could be completed.

 

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(c)           An Award that by its terms would be fully vested or exercisable
upon a Change in Control will be considered vested or exercisable for purposes
of Section 12.4(a) hereof.

 

ARTICLE 13

LIQUIDATION OR DISSOLUTION

 

Subject to Section 12.4 hereof, in case the Company shall, at any time while any
Incentive under this Plan shall be in force and remain unexpired, (i) sell all
or substantially all of its property, or (ii) dissolve, liquidate, or wind up
its affairs, then each Participant shall be entitled to receive, in lieu of each
share of Common Stock of the Company which such Participant would have been
entitled to receive under the Incentive, the same kind and amount of any
securities or assets as may be issuable, distributable, or payable upon any such
sale, dissolution, liquidation, or winding up with respect to each share of
Common Stock of the Company. If the Company shall, at any time prior to the
expiration of any Incentive, make any partial distribution of its assets, in the
nature of a partial liquidation, whether payable in cash or in kind (but
excluding the distribution of a cash dividend payable out of earned surplus and
designated as such) and an adjustment is determined by the Committee to be
appropriate to prevent the dilution of the benefits or potential benefits
intended to be made available under the Plan, then the Committee shall, in such
manner as it may deem equitable, make such adjustment in accordance with the
provisions of Article 11 hereof.

 

ARTICLE 14

INCENTIVES IN SUBSTITUTION FOR

INCENTIVES GRANTED BY OTHER ENTITIES

 

Incentives may be granted under the Plan from time to time in substitution for
similar instruments held by employees, consultants or directors of a
corporation, partnership, or limited liability company who become or are about
to become Employees, Consultants or Outside Directors of the Company or any
Subsidiary as a result of a merger or consolidation of the employing corporation
with the Company, the acquisition by the Company of equity of the employing
entity, or any other similar transaction pursuant to which the Company becomes
the successor employer. The terms and conditions of the substitute Incentives so
granted may vary from the terms and conditions set forth in this Plan to such
extent as the Committee at the time of grant may deem appropriate to conform, in
whole or in part, to the provisions of the Incentives in substitution for which
they are granted.

 

ARTICLE 15

MISCELLANEOUS PROVISIONS

 

15.1        Investment Intent. The Company may require that there be presented
to and filed with it by any Participant under the Plan, such evidence as it
may deem necessary to establish that the Incentives granted or the shares of
Common Stock to be purchased or transferred are being acquired for investment
and not with a view to their distribution.

 

15.2        No Right to Continued Employment. Neither the Plan nor any Incentive
granted under the Plan shall confer upon any Participant any right with respect
to continuance of employment by the Company or any Subsidiary.

 

15.3        Indemnification of Board and Committee. No member of the Board or
the Committee, nor any officer or Employee of the Company acting on behalf of
the Board or the Committee, shall be personally

 

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liable for any action, determination, or interpretation taken or made in good
faith with respect to the Plan, and all members of the Board and the Committee,
each officer of the Company, and each Employee of the Company acting on behalf
of the Board or the Committee shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination, or interpretation.

 

15.4        Effect of the Plan. Neither the adoption of this Plan nor any action
of the Board or the Committee shall be deemed to give any person any right to be
granted an Award or any other rights except as may be evidenced by an Award
Agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.

 

15.5        Compliance With Other Laws and Regulations. Notwithstanding anything
contained herein to the contrary, the Company shall not be required to sell or
issue shares of Common Stock under any Incentive if the issuance thereof would
constitute a violation by the Participant or the Company of any provisions of
any law or regulation of any governmental authority or any national securities
exchange or inter-dealer quotation system or other forum in which shares of
Common Stock are quoted or traded (including without limitation Section 16 of
the 1934 Act and Section 162(m) of the Code); and, as a condition of any sale or
issuance of shares of Common Stock under an Incentive, the Committee may require
such agreements or undertakings, if any, as the Committee may deem necessary or
advisable to assure compliance with any such law or regulation. The Plan, the
grant and exercise of Incentives hereunder, and the obligation of the Company to
sell and deliver shares of Common Stock, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required.

 

15.6        Tax Requirements. The Company or, if applicable, any Subsidiary (for
purposes of this Section 15.6, the term “Company” shall be deemed to include any
applicable Subsidiary), shall have the right to deduct from all amounts paid in
cash or other form in connection with the Plan, any Federal, state, local, or
other taxes required by law to be withheld in connection with an Award granted
under this Plan. The Company may, in its sole discretion, also require the
Participant receiving shares of Common Stock issued under the Plan to pay the
Company the amount of any taxes that the Company is required to withhold in
connection with the Participant’s income arising with respect to the Award. Such
payments shall be required to be made when requested by Company and may be
required to be made prior to the delivery of any certificate representing shares
of Common Stock. Such payment may be made (i) by the delivery of cash to the
Company in an amount that equals or exceeds (to avoid the issuance of fractional
shares under (iii) below) the required tax withholding obligations of the
Company; (ii) if the Company, in its sole discretion, so consents in writing,
the actual delivery by the exercising Participant to the Company of shares of
Common Stock that the Participant has not acquired from the Company within six
(6) months prior to the date of exercise, which shares so delivered have an
aggregate Fair Market Value that equals or exceeds (to avoid the issuance of
fractional shares under (iii) below) the required tax withholding payment;
(iii) if the Company, in its sole discretion, so consents in writing, the
Company’s withholding of a number of shares to be delivered upon the exercise of
the Stock Option, which shares so withheld have an aggregate fair market value
that equals (but does not exceed) the required tax withholding payment; or
(iv) any combination of (i), (ii), or (iii). The Company may, in its sole
discretion, withhold any such taxes from any other cash remuneration otherwise
paid by the Company to the Participant. The Committee may in the Award Agreement
impose any additional tax requirements or provisions that the Committee deems
necessary or desirable.

 

15.7        Assignability. Incentive Stock Options may not be transferred,
assigned, pledged, hypothecated or otherwise conveyed or encumbered other than
by will or the laws of descent and distribution and may be exercised during the
lifetime of the Participant only by the Participant or the Participant’s legally
authorized representative, and each Award Agreement in respect of an Incentive
Stock Option shall so provide. The designation by a Participant of a beneficiary
will not constitute a transfer of the Stock Option. The

 

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Committee may waive or modify any limitation contained in the preceding
sentences of this Section 15.7 that is not required for compliance with
Section 422 of the Code.

 

Except as otherwise provided herein, Nonqualified Stock Options  and SARs
may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or
encumbered other than by will or the laws of descent and distribution. The
Committee may, in its discretion, authorize all or a portion of a Nonqualified
Stock Option or SAR to be  granted to a Participant on terms which permit
transfer by such Participant to (i) the spouse (or former spouse), children or
grandchildren of the Participant (“Immediate Family Members”), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members, (iii) a
partnership in which the only partners are (1) such Immediate Family Members
and/or (2) entities which are controlled by Immediate Family Members, (iv) an
entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code
or any successor provision, or (v) a split interest trust or pooled income fund
described in Section 2522(c)(2) of the Code or any successor provision, provided
that (x) there shall be no consideration for any such transfer, (y) the Award
Agreement pursuant to which such Nonqualified Stock Option or SAR is granted
must be approved by the Committee and must expressly provide for transferability
in a manner consistent with this Section, and (z) subsequent transfers of
transferred Nonqualified Stock Options or SARs shall be prohibited except those
by will or the laws of descent and distribution.

 

Following any transfer, any such Nonqualified Stock Option and SAR shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Articles 8, 9, 11,
13 and 15 hereof the term “Participant” shall be deemed to include the
transferee. The events of Termination of Service shall continue to be applied
with respect to the original Participant, following which the Nonqualified Stock
Options and SARs shall be exercisable  by the transferee only to the extent and
for the periods specified in the Award Agreement. The Committee and the Company
shall have no obligation to inform any transferee of a Nonqualified Stock Option
or SAR of any expiration, termination, lapse or acceleration of such Stock
Option or SAR. The Company shall have no obligation to register with any federal
or state securities commission or agency any Common Stock issuable or issued
under a Nonqualified Stock Option or SAR that has been transferred by a
Participant under this Section 15.7.

 

15.8        Use of Proceeds. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.

 

15.9        Legend. Each certificate representing shares of Restricted Stock
issued to a Participant shall bear the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the provisions
hereof (any such certificate not having such legend shall be surrendered upon
demand by the Company and so endorsed):

 

On the face of the certificate:

 

“Transfer of this stock is restricted in accordance with conditions printed on
the reverse of this certificate.”

 

On the reverse:

 

“The shares of stock evidenced by this certificate are subject to and
transferable only in accordance with that certain EXCO Resources, Inc. Amended
and Restated 2005 Long-Term Incentive Plan, a copy of which is on file at the
principal office of the Company in Dallas, Texas. No transfer or pledge of the
shares evidenced hereby may be made except in accordance with and subject to the
provisions of said

 

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Plan. By acceptance of this certificate, any holder, transferee or pledgee
hereof agrees to be bound by all of the provisions of said Plan.”

 

The following legend shall be inserted on a certificate evidencing Common Stock
issued under the Plan if the shares were not issued in a transaction registered
under the applicable federal and state securities laws:

 

“Shares of stock represented by this certificate have been acquired by the
holder for investment and not for resale, transfer or distribution, have been
issued pursuant to exemptions from the registration requirements of applicable
state and federal securities laws, and may not be offered for sale, sold or
transferred other than pursuant to effective registration under such laws, or in
transactions otherwise in compliance with such laws, and upon evidence
satisfactory to the Company of compliance with such laws, as to which the
Company may rely upon an opinion of counsel satisfactory to the Company.”

 

A copy of this Plan shall be kept on file in the office of the Company at 12377
Merit Drive, Suite 1700, Dallas, Texas, United States, or any successor location
of the Company’s principal executive offices.

 

***************

 

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IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of
November 14, 2007, by its Chairman, Chief Executive Officer and Vice Chairman,
President and Secretary pursuant to prior action taken by the Board.

 

 

 

 

EXCO RESOURCES, INC.

 

 

 

 

 

 

 

 

By:

/s/ Douglas H. Miller

 

 

Name: Douglas H. Miller

 

 

Title:   Chairman and Chief Executive Officer

 

 

 

Attest:

 

 

 

 

 

 

 

 

/s/ William L. Boeing

 

 

William L. Boeing

 

 

Vice President, General Counsel and Secretary

 

 

 

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