Exhibit 10.1

BRONCO DRILLING COMPANY, INC.
2006 STOCK INCENTIVE PLAN
(as amended on December 10, 2010)

1. Purpose; Eligibility.
 
1.1 General Purpose.  The name of this plan is the Bronco Drilling Company, Inc.
2006 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to enable
Bronco Drilling Company, Inc., a Delaware corporation (the “Company”), and any
Affiliate to obtain and retain the services of the types of Employees,
Consultants and Directors who will contribute to the Company’s long range
success and to provide incentives that are linked directly to increases in share
value which will inure to the benefit of all stockholders of the Company.
 
1.2 Eligible Award Recipients.  The persons eligible to receive Awards are the
Employees, Consultants and Directors of the Company and its Affiliates.
 
1.3 Available Awards. The purpose of the Plan is to provide a means by which
eligible recipients of Awards may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of one or more of
the following Awards: (a) Incentive Stock Options, (b) Nonstatutory Stock
Options, (c) Restricted Awards (Restricted Stock and Restricted Stock Units),
(d) Performance Awards and (e) Stock Appreciation Rights.
 
2. Definitions.
 
2.1 “409A Award” means an Award that is considered “nonqualified deferred
compensation” within the meaning of Section 409A of the Code and Section 8 of
this Plan.
 
2.2 “Administrator” means the Board or the Committee appointed by the Board in
accordance with Section 3.5.
 
2.3 “Affiliate” means any parent corporation or subsidiary corporation of the
Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code and any individual,
partnership, corporation, limited liability company, association, joint stock
company, trust, joint venture or unincorporated organization that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with the Company. For this purpose “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of another, whether through ownership
of voting securities, by contract or otherwise.
 
2.4 “Award” means any right granted under the Plan, including an Incentive Stock
Option, a Nonstatutory Stock Option, a Restricted Award (Restricted Stock and
Restricted Stock Units), a Performance Award, a Stock Appreciation Right and a
409A Award.
 
2.5 “Award Agreement” means a written agreement between the Company and a holder
of an Award evidencing the terms and conditions of an individual Award grant.
Each Award Agreement shall be subject to the terms and conditions of the Plan.
 
2.6 “Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular “person” (as that term is used in Section 13(d)(3)
of the Exchange Act), such “person” shall be deemed to have beneficial ownership
of all securities that such “person” has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only after the passage of time. The terms “Beneficially Owns” and
“Beneficially Owned” have a corresponding meaning.
 
2.7 “Board” means the Board of Directors of the Company.
 
2.8 “Cashless Exercise” has the meaning set forth in Section 6.4.
 
2.9 “Cause” means, (a) with respect to any Participant who is a party to an
employment or service agreement or employment policy manual with the Company or
its Affiliates and such agreement or policy manual provides for a definition of
Cause, as defined therein and (b) with respect to all other Participants, (i)
the commission of, or plea of guilty or no contest to, a felony or a crime
involving moral turpitude or the commission of any other act involving willful
malfeasance or material fiduciary breach with respect to the Company or an
Affiliate, (ii) conduct tending to bring the Company into substantial public
disgrace, or disrepute, (iii) gross negligence or willful misconduct with
respect to the Company or an Affiliate or (iv) material violation of state or
federal securities laws. The Administrator, in its absolute discretion, shall
determine the effect of all matters and questions relating to whether a
Participant has been discharged for Cause.
 
2.10 “Change in Control” shall mean:
 
(a) The direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of the
Company to any “person” (as that term is used in Section 13(d)(3) of the
Exchange Act);
 
(b) The Incumbent Directors cease for any reason to constitute at least a
majority of the Board;
 
(c) The adoption of a plan relating to the liquidation or dissolution of the
Company; or
 
(d) The consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any “person” or “group” (as
such terms are used in Section 13(d) of the Exchange Act), becomes the
Beneficial Owner of more than 50% of the voting power of the Company. The
foregoing notwithstanding, a transaction shall not constitute a Change in
Control if (i) its sole purpose is to change the state of the Company’s
incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company’s securities
immediately before such transaction; (ii) it constitutes an initial public
offering or a secondary public offering that results in any security of the
Company being listed (or approved for listing) on any securities exchange or
designated (or approved for designation) as a national market security on an
interdealer quotation system; or (iii) solely because 50% or more of the total
voting power of the Company’s then outstanding securities is acquired by (A) a
trustee or other fiduciary holding securities under one or more employee benefit
Plans of the Company or any Affiliate, or (B) any company which, immediately
prior to such Business Combination, is owned directly or indirectly by the
stockholders of the Company in substantially the same proportion as their
ownership of stock in the Company immediately prior to such acquisition.
 
2.11 “Code” means the Internal Revenue Code of 1986, as amended.
 
2.12 “Committee” means a committee of one or more members of the Board appointed
by the Board to administer the Plan in accordance with Section 3.5.
 
2.13 “Common Stock” means the common stock, $0.01 par value per share of the
Company.
 
2.14 “Company” means Bronco Drilling Company, Inc., a Delaware corporation.
 
2.15 “Consultant” means any person, including an advisor, (a) engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or who provides bona fide services to the Company
or an Affiliate pursuant to a written agreement or (b) who is a member of the
Board of Directors of an Affiliate; provided that, except as otherwise permitted
in Section 5.4(b) hereof, such person is a natural person and such services are
not in connection with the offer or sale of securities in a capital raising
transaction and do not directly or indirectly promote or maintain a market for
the Company’s securities.
 
2.16 “Continuous Service” means that the Participant’s service with the Company
or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant’s Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant’s Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Administrator or its
delegate, in its sole discretion, may determine whether Continuous Service shall
be considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal or family
leave of absence.
 
2.17 “Covered Employee” means the chief executive officer and the four other
highest compensated officers of the Company for whom total compensation is or
would be required to be reported to stockholders under the Exchange Act, as
determined for purposes of Section 162(m) of the Code.
 
 

--------------------------------------------------------------------------------

 
 
2.18 “Date of Grant” means, provided the key terms and conditions of the Award
are communicated to the Participant within a reasonable period of time following
the Administrator’s action, the date on which the Administrator adopts a
resolution, or takes other appropriate action, expressly granting an Award to a
Participant that specifies the key terms and conditions of the Award and from
which the Participant begins to benefit from or be adversely affected by
subsequent changes in the Fair Market Value of the Company Common Stock or, if a
different date is set forth in such resolution or determined by the
Administrator as the Date of Grant, then such date as is set forth in such
resolution. In any situation where the terms of the Award are subject to
negotiation with the Participant, the Date of Grant shall not be earlier than
the date the key terms and conditions of the Award are communicated to the
Participant.
 
2.19 “Detrimental Activity” means: (a) violation of the terms of any agreement
with the Company concerning non-disclosure, confidentiality, intellectual
property, privacy or exclusivity; (b) disclosure of the Company’s confidential
information to anyone outside the Company, without prior written authorization
from the Company, or in conflict with the interests of the Company, whether the
confidential information was acquired or disclosed by the Participant during or
after employment by the Company; (c) failure or refusal to disclose promptly or
assign to the Company all right, title and interest in any invention, work
product or idea, patentable or not, made or conceived by the Participant during
employment by the Company, relating in any manner to the interests of the
Company or, the failure or refusal to do anything reasonably necessary to enable
the Company to secure a patent where appropriate in the United States and in
other countries; (d) activity that is discovered to be grounds for or results in
termination of the Participant’s employment for Cause; (e) any breach of a
restrictive covenant contained in any employment agreement, Award Agreement or
other agreement between the Participant and the Company, during any period for
which a restrictive covenant prohibiting Detrimental Activity, or other similar
conduct or act, is applicable to the Participant during or after employment by
the Company; (f) any attempt directly or indirectly to induce any Employee of
the Company to be employed or perform services or acts in conflict with the
interests of the Company; (g) any attempt, in conflict with the interests of the
Company, directly or indirectly, to solicit the trade or business of any current
or prospective customer, client, supplier or partner of the Company; (h) the
conviction of, or guilty plea entered by, the Participant for any felony or a
crime involving moral turpitude whether or not connected with the Company; or
(i) the commission of any other act involving willful malfeasance or material
fiduciary breach with respect to the Company.
 
2.20 “Director” means a member of the Board.
 
2.21 “Disability” means that the Optionholder is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment; provided, however, for purposes of determining the term of an
Incentive Stock Option pursuant to Section 6.10 hereof, the term Disability
shall have the meaning ascribed to it under Code Section 22(e)(3). The
determination of whether an individual has a Disability shall be determined
under procedures established by the Administrator. Except in situations where
the Administrator is determining Disability for purposes of the term of an
Incentive Stock Option pursuant to Section 6.10 hereof within the meaning of
Code Section 22(e)(3), the Administrator may rely on any determination that a
Participant is disabled for purposes of benefits under any long-term disability
plan maintained by the Company or any Affiliate in which a Participant
participates.
 
2.22 “Effective Date” shall mean April 20, 2006, the date the Board adopted the
Plan.
 
2.23 “Employee” means any person employed by the Company or an Affiliate. Mere
service as a Director or payment of a director’s fee by the Company or an
Affiliate shall not be sufficient to constitute “employment” by the Company or
an Affiliate.
 
2.24 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
2.25 “Fair Market Value” means, as of any date, the value of the Common Stock as
determined below. The Fair Market Value on the date of the Company’s initial
public offering of its Common Stock shall be the initial price to the public on
such date. Thereafter, on any date on which the Company’s shares of Common Stock
are registered under Section 12 of the Exchange Act (a) if the Common Stock is
admitted to quotation on the Nasdaq over the counter market or any interdealer
quotation system and closing prices are reported the Fair Market Value on any
date shall not be less than the closing price reported for the Common Stock on
such market or system for such date or, if closing prices are not reported, the
Fair Market Value on any given date shall not be less than the average of the
highest bid and lowest asked prices of the Common Stock reported for such date
or, if no bid and asked prices were reported for such date, for the last day
preceding such date for which such prices were reported, (b) if the Common Stock
is admitted to trading on a national securities exchange or the Nasdaq National
Market or Nasdaq Small Cap Market, the Fair Market Value on any date shall not
be less than the closing price reported for the Common Stock on such exchange or
system for such date or, if no sales were reported for such date, for the last
date preceding the date on which such a sale was reported, or (c) in the absence
of an established market for the Common Stock, the Fair Market Value determined
in good faith by the Administrator and such determination shall be conclusive
and binding on all persons.
 
2.26 “Form S-8” has the meaning set forth in Section 5.4(b).
 
2.27 “Free Standing Rights” has the meaning set forth in Section 7.3(a).
 
2.28 “Incentive Stock Option” means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
 
2.29 “Incumbent Directors” means individuals who, on the Effective Date,
constitute the Board, provided that any individual becoming a Director
subsequent to the Effective Date whose election or nomination for election to
the Board was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
Director without objection to such nomination) shall be an Incumbent Director.
No individual initially elected or nominated as a Director of the Company as a
result of an actual or threatened election contest with respect to Directors or
as a result of any other actual or threatened solicitation of proxies by or on
behalf of any person other than the Board shall be an Incumbent Director.
 
2.30 “Listing Date” means the first date upon which any security of the Company
is listed (or approved for listing) upon notice of issuance on any securities
exchange or designated (or approved for designation) upon notice of issuance as
a national market security on an interdealer quotation system.
 
2.31 “Market Stand-Off” has the meaning set forth in Section 15.
 
2.32 “Nasdaq” means the Nasdaq Stock Market, Inc., or any successor thereto.
 
2.33 “Non-Employee Director” means a Director who is a “non-employee director”
within the meaning of Rule 16b-3.
 
2.34 “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.
 
2.35 “Officer” means (a) before the Listing Date, any person designated by the
Company as an officer and (b) on and after the Listing Date, a person who is an
officer of the Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder.
 
2.36 “Option” means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
 
2.37 “Option Agreement” means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option
grant.  Each Option Agreement shall be subject to the terms and conditions of
the Plan and need not be identical.
 
2.38 “Optionholder” means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
 
2.39 “Outside Director” means a Director who is an “outside director” within the
meaning of Section 162(m) of the Code and Treasury Regulations § 1.162-27(e)(3).
 
2.40 “Participant” means a person to whom an Award is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Award.
 
2.41 “Performance Award” means Awards granted pursuant to Section 7.2.
 
2.42 Intentionally Deleted.
 
2.43 “Permitted Transferee” means (a) any spouse, parents, siblings (by blood,
marriage or adoption) or lineal descendants (by blood, marriage or adoption) of
a Participant; (b) any trust or other similar entity for the benefit of a
Participant or the Participant’s spouse, parents, siblings or lineal
descendants; provided, however, that any transfer made by a Participant to a
Permitted Transferee may only be made if the Permitted Transferee, prior to the
time of transfer of stock, agrees in writing to be bound by the terms of this
Plan and provides written notice to the Company of such transfer.
 
2.44 “Plan” means this Bronco Drilling Company, Inc. 2006 Stock Incentive Plan.
 
 

--------------------------------------------------------------------------------

 
 
2.45 “Related Rights” has the meaning set forth in Section 7.3(a).
 
2.46 “Restricted Award” means any Award granted pursuant to Section 7.1,
including Restricted Stock and Restricted Stock Units.
 
2.47 “Restricted Period” has the meaning set forth in Section 7.1.
 
2.48 “Restricted Stock” has the meaning set forth in Section 7.1.
 
2.49 “Restricted Stock Unit” means a hypothetical Common Stock unit having a
value equal to the Fair Market Value of an identical number of shares of Common
Stock as determined in Section 7.1.
 
2.50 “Right of Repurchase” means the Company’s option to repurchase unvested
Common Stock acquired under the Plan upon the Participant’s termination of
Continuous Service pursuant to Section 11.7.
 
2.51 “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.
 
2.52 “Rule 701” has the meaning set forth in Section 5.4(a).
 
2.53 “SAR Amount” has the meaning set forth in Section 7.3(i).
 
2.54 “SAR exercise price” has the meaning set forth in Section 7.3(b).
 
2.55 “SEC” means the Securities and Exchange Commission.
 
2.56 “Securities Act” means the Securities Act of 1933, as amended.
 
2.57 “Stock Appreciation Right” means the right pursuant to an award granted
under Section 7.3 to receive an amount equal to the excess, if any, of (A) the
Fair Market Value, as of the date such Stock Appreciation Right or portion
thereof is surrendered, of the shares of stock covered by such right or such
portion thereof, over (B) the aggregate SAR exercise price of such right or such
portion thereof.
 
2.58 “Stock for Stock Exchange” has the meaning set forth in Section 6.4.
 
2.59 “Surviving Entity” means the Company if immediately following any merger,
consolidation or similar transaction, the holders of outstanding voting
securities of the Company immediately prior to the merger or consolidation own
equity securities possessing more than 50% of the voting power of the entity
existing following the merger, consolidation or similar transaction. In all
other cases, the other entity to the transaction and not the Company shall be
the Surviving Entity. In making the determination of ownership by the
stockholders of an entity immediately after the merger, consolidation or similar
transaction, equity securities which the stockholders owned immediately before
the merger, consolidation or similar transaction as stockholders of another
party to the transaction shall be disregarded. Further, outstanding voting
securities of an entity shall be calculated by assuming the conversion of all
equity securities convertible (immediately or at some future time) into shares
entitled to vote.
 
2.60 “Ten Percent Stockholder” means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates.
 
3. Administration.
 
3.1 Administration by Board.  The Plan shall be administered by the Board unless
and until the Board delegates administration to a Committee, as provided in
Section 3.5.
 
3.2 Powers of Administrator.  The Administrator shall have the power and
authority to select and grant to Participants, Awards pursuant to the terms of
the Plan.
 
3.3 Specific Powers.  In particular, the Administrator shall have the authority:
(a) to construe and interpret the Plan and apply its provisions; (b) to
promulgate, amend, and rescind rules and regulations relating to the
administration of the Plan; (c) to authorize any person to execute, on behalf of
the Company, any instrument required to carry out the purposes of the Plan; (d)
to delegate its authority to one or more Officers of the Company with respect to
Awards that do not involve Covered Employees or “insiders” within the meaning of
Section 16 of the Exchange Act, provided such delegation is pursuant to a
resolution that specifies the total number of shares of Common Stock that may be
subject to awards by such Officer and such Officer may not make an Award to
himself or herself; (e) to determine when Awards are to be granted under the
Plan; (f) from time to time to select, subject to the limitations set forth in
this Plan, those Participants to whom Awards shall be granted; (g) to determine
the number of shares of Common Stock to be made subject to each Award; (h) to
determine whether each Option is to be an Incentive Stock Option or a
Nonstatutory Stock Option; (i) to prescribe the terms and conditions of each
Award, including, without limitation, the exercise price and medium of payment,
vesting provisions and Right of Repurchase provisions, and to specify the
provisions of the Award Agreement relating to such grant or sale; (j) to amend
any outstanding Awards, including for the purpose of modifying the time or
manner of vesting, the purchase price or exercise price, or the term of any
outstanding Award; provided, however, that if any such amendment impairs a
Participant’s rights or increases a Participant’s obligations under his or her
Award, such amendment shall also be subject to the Participant’s consent
(provided, however, a cancellation of an Award where the Participant receives a
payment equal in value to the Fair Market Value of the vested Award or, in the
case of vested Options, the difference between the Fair Market Value of the
Common Stock subject to an Option and the exercise price, shall not constitute
an impairment of the Participant’s rights that requires consent); (k) to
determine the duration and purpose of leaves of absences which may be granted to
a Participant without constituting termination of their Continuous Service for
purposes of the Plan, which periods shall be no shorter than the periods
generally applicable to Employees under the Company’s employment policies; (l)
to make decisions with respect to outstanding Awards that may become necessary
upon a Change in Control or an event that triggers anti-dilution adjustments;
and (m) to exercise discretion to make any and all other determinations which it
determines to be necessary or advisable for administration of the Plan.
 
3.4 Decisions Final. All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final and binding on the Company and the
Participants, unless such decisions are determined by a court having
jurisdiction to be arbitrary and capricious.
 
3.5 The Committee.
 
(a) General. The Board may delegate administration of the Plan to a Committee or
Committees of one or more members of the Board, and the term “Committee” shall
apply to any person or persons to whom such authority has been delegated. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board or the Administrator shall thereafter be to the Committee
or subcommittee), subject, however, to such resolutions, not inconsistent with
the provisions of the Plan, as may be adopted from time to time by the Board.
The Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. The members of the Committee shall be appointed by
and serve at the pleasure of the Board. From time to time, the Board may
increase or decrease the size of the Committee, add additional members to,
remove members (with or without cause) from, appoint new members in substitution
therefor, and fill vacancies, however caused, in the Committee. The Committee
shall act pursuant to a vote of the majority of its members or, in the case of a
committee comprised of only two members, the unanimous consent of its members,
whether present or not, or by the written consent of the majority of its members
and minutes shall be kept of all of its meetings and copies thereof shall be
provided to the Board. Subject to the limitations prescribed by the Plan and the
Board, the Committee may establish and follow such rules and regulations for the
conduct of its business as it may determine to be advisable.
 
(b) Committee Composition when Common Stock is Registered. At such time as the
Common Stock is required to be registered under Section 12 of the Exchange Act,
in the discretion of the Board, a Committee may consist solely of two or more
Non-Employee Directors who are also Outside Directors. The Board shall have
discretion to determine whether or not it intends to comply with the exemption
requirements of Rule 16b-3 and/or Section 162(m) of the Code. However, if the
Board intends to satisfy such exemption requirements, with respect to Awards to
any Covered Employee and with respect to any insider subject to Section 16 of
the Exchange Act, the Committee shall be a compensation committee of the Board
that at all times consists solely of two or more Non-Employee Directors who are
also Outside Directors. Within the scope of such authority, the Board or the
Committee may (i) delegate to a committee of one or more members of the Board
who are not Outside Directors the authority to grant Awards to eligible persons
who are either (A) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Award or (B)
not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code or (ii) delegate to a committee of one or more members of the
Board who are not Non-Employee Directors the authority to grant Awards to
eligible persons who are not then subject to Section 16 of the Exchange Act.
Nothing herein shall create an inference that an option is not validly granted
under the Plan in the event Awards are granted under the Plan by a compensation
committee of the Board that does not at all times consist solely of two or more
Non-Employee Directors who are also Outside Directors.
 
 

--------------------------------------------------------------------------------

 
 
3.6 Indemnification. In addition to such other rights of indemnification as they
may have as Directors or members of the Committee, and to the extent allowed by
applicable law, the Administrator shall be indemnified by the Company against
the reasonable expenses, including attorney’s fees, actually incurred in
connection with any action, suit or proceeding or in connection with any appeal
therein, to which the Administrator may be party by reason of any action taken
or failure to act under or in connection with the Plan or any option granted
under the Plan, and against all amounts paid by the Administrator in settlement
thereof (provided, however, that the settlement has been approved by the
Company, which approval shall not be unreasonably withheld) or paid by the
Administrator in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Administrator did not act in good
faith and in a manner which such person reasonably believed to be in the best
interests of the Company, and in the case of a criminal proceeding, had no
reason to believe that the conduct complained of was unlawful; provided,
however, that within 60 days after institution of any such action, suit or
proceeding, such Administrator or Committee member shall, in writing, offer the
Company the opportunity at its own expense to handle and defend such action,
suit or proceeding.
 
4. Shares Subject to the Plan.
 
4.1 Share Reserve.  Subject to the provisions of Section 12.1 relating to
adjustments upon changes in Common Stock, the shares that may be issued pursuant
to Awards shall consist of the Company’s authorized but unissued Common Stock,
and the maximum aggregate amount of such Common Stock which may be issued upon
exercise of all Awards under the Plan shall not exceed 5,000,000, less
1,000,000, the total number of shares underlying options granted to Employees
prior to the adoption of this Plan and outstanding on the Effective Date under
the Bronco Drilling Company, Inc. 2005 Stock Incentive Plan (“Prior Outstanding
Options”). If, prior to the termination of the Plan, a Prior Outstanding Option
shall expire, be forfeited or terminate for any reason without having been
exercised in full, the shares subject to such expired, forfeited or terminated
Prior Outstanding Options shall again be available for purposes of the Plan and
the number of shares of Common Stock which may be issued upon the exercise of
Awards under the Plan shall be increased by the number of shares of Common Stock
underlying such expired, forfeited or terminated Prior Outstanding Options. In
no event, however, will the maximum aggregate amount of Common Stock which may
be issued upon exercise of all Awards under the Plan, including Incentive Stock
Options, exceed 5,000,000 shares of Common Stock (subject to adjustment as
provided in Section 12.1), all of which may be used for Incentive Stock Options
or any other Award. Awards for fractional shares of Common Stock may not be
issued under the terms of the Plan.
 
4.2 Reversion of Shares to the Share Reserve.  If any Award shall for any reason
expire or otherwise terminate, in whole or in part, the shares of Common Stock
not acquired under such Award shall revert to and again become available for
issuance under the Plan. If shares of Common Stock issued under the Plan are
reacquired by the Company pursuant to the terms of any forfeiture provision,
including the Right of Repurchase of unvested Common Stock under Section
11.7(a), such shares shall again be available for purposes of the Plan.
 
4.3 Source of Shares.  The shares of Common Stock subject to the Plan may be
authorized but unissued Common Stock or reacquired Common Stock, bought on the
market, pursuant to any forfeiture provision or otherwise.
 
5. Eligibility.
 
5.1 Eligibility for Specific Awards. Incentive Stock Options may be granted only
to Employees. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants.
 
5.2 Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least 110%
of the Fair Market Value of the Common Stock at the Date of Grant and the Option
is not exercisable after the expiration of five years from the Date of Grant.
 
5.3 Section 162(m) Limitation. Subject to the provisions of Section 12.1
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Awards covering more than 500,000 shares during
any fiscal year. This Section 5.3 shall not apply prior to the Listing Date and,
following the Listing Date, this Section 5.3 shall not apply until (a) the
earliest of: (i) the first material modification of the Plan (including any
increase in the number of shares of Common Stock reserved for issuance under the
Plan in accordance with Section 4.1); (ii) the issuance of all of the shares of
Common Stock reserved for issuance under the Plan; (iii) the expiration of the
Plan; or (iv) the first meeting of stockholders at which Directors are to be
elected that occurs after the close of the third calendar year following the
calendar year in which occurred the first registration of an equity security
under Section 12 of the Exchange Act; or (b) such other date required by Section
162(m) of the Code and the rules and regulations promulgated thereunder.
 
5.4 Consultants.
 
(a) Prior to the Listing Date, a Consultant shall not be eligible for the grant
of an Award if, at the time of grant, either the offer or the sale of the
Company’s securities to such Consultant is not exempt under Rule 701 of the
Securities Act (“Rule 701”) because of the nature of the services that the
Consultant is providing to the Company, or because the Consultant is not a
natural person, or as otherwise provided by Rule 701, unless the Company
determines that such grant need not comply with the requirements of Rule 701 and
will satisfy another exemption under the Securities Act as well as comply with
the securities laws of all other relevant jurisdictions.
 
(b) From and after the Listing Date, a Consultant shall not be eligible for the
grant of an Award if, at the time of grant, a Form S-8 Registration Statement
under the Securities Act (“Form S-8”) is not available to register either the
offer or the sale of the Company’s securities to such Consultant because of the
nature of the services that the Consultant is providing to the Company (i.e.,
capital raising), or because the Consultant is not a natural person, or as
otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.
 
5.5 Directors. Each Director of the Company shall be eligible to receive
discretionary grants of Awards under the Plan.
 
6. Option Provisions.
 
Each Option shall be in such form and shall contain such terms and conditions as
the Administrator shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. Notwithstanding the foregoing, the Company shall have no liability to
any Participant or any other person if an Option designated as an Incentive
Stock Option fails to qualify as such at any time or if an Option is determined
to constitute “nonqualified deferred compensation” within the meaning of Section
409A of the Code and the terms of such Option do not satisfy the additional
conditions applicable to nonqualified deferred compensation under Section 409A
of the Code and Section 8 of the Plan. The provisions of separate Options need
not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:
 
6.1 Term.  Subject to the provisions of Section 5.2 regarding Ten Percent
Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of 10 years from the date it was granted.
 
6.2 Exercise Price of an Incentive Stock Option.  Subject to the provisions of
Section 5.2 regarding Ten Percent Stockholders, the exercise price of each
Incentive Stock Option shall be not less than 100% of the Fair Market Value of
the Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Incentive Stock Option may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
 
6.3 Exercise Price of a Nonstatutory Stock Option.  The exercise price of each
Nonstatutory Stock Option shall be not less than 100% of the Fair Market Value
of the Common Stock subject to the Option on the date the Option is granted;
provided, however, any Nonstatutory Stock Option granted with an exercise price
less than 100% of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted shall satisfy the additional conditions
applicable to nonqualified deferred compensation under Section 409A of the Code,
in accordance with Section 6.15 and Section 8 hereof. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
 
 

--------------------------------------------------------------------------------

 
 
6.4 Consideration.  The exercise price of Common Stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (a) in cash or by certified or bank check at the time the
Option is exercised or (b) in the discretion of the Administrator, upon such
terms as the Administrator shall approve, the exercise price may be paid: (i) by
delivery to the Company of other Common Stock, duly endorsed for transfer to the
Company, with a Fair Market Value on the date of delivery equal to the exercise
price (or portion thereof) due for the number of shares being acquired, or by
means of attestation whereby the Participant identifies for delivery specific
shares of Common Stock that have been held for more than six months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes) that have a Fair Market Value on the date of
attestation equal to the exercise price (or portion thereof) and receives a
number of shares of Common Stock equal to the difference between the number of
shares thereby purchased and the number of identified attestation shares of
Common Stock (a “Stock for Stock Exchange”); (ii) during any period for which
the Common Stock is publicly traded (i.e., the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market, or if the Common Stock is quoted on the
Nasdaq System (but not on the Nasdaq National Market) or any similar system
whereby the Common Stock is regularly quoted by a recognized securities dealer
but closing sale prices are not reported), by a copy of instructions to a broker
directing such broker to sell the Common Stock for which such Option is
exercised, and to remit to the Company the aggregate Exercise Price of such
Options (a “Cashless Exercise”); (iii) in any other form of legal consideration
that may be acceptable to the Administrator, including without limitation with a
full-recourse promissory note; provided, however, if applicable law requires,
the par value (if any) of Common Stock, if newly issued, shall be paid in cash
or cash equivalents. Any Common Stock acquired upon exercise with a promissory
note shall be pledged as security for payment of the principal amount of the
promissory note and interest thereon. The interest rate payable under the terms
of the promissory note shall not be less than the minimum rate (if any) required
to avoid the imputation of additional interest under the Code. Subject to the
foregoing, the Administrator (in its sole discretion) shall specify the term,
interest rate, amortization requirements (if any) and other provisions of such
note. Unless the Administrator determines otherwise, shares of Common Stock
having a Fair Market Value at least equal to the principal amount of any such
loan shall be pledged by the holder to the Company as security for payment of
the unpaid balance of the loan and such pledge shall be evidenced by a pledge
agreement, the terms of which shall be determined by the Administrator, in its
discretion; provided, however, that each loan shall comply with all applicable
laws, regulations and rules of the Board of Governors of the Federal Reserve
System and any other governmental agency having jurisdiction. Unless otherwise
specifically provided in the Option, the purchase price of Common Stock acquired
pursuant to an Option that is paid by delivery (or attestation) to the Company
of other Common Stock acquired, directly or indirectly from the Company, shall
be paid only by shares of the Common Stock of the Company that have been held
for more than six months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes). Notwithstanding
the foregoing, during any period for which the Common Stock is publicly traded
(i.e., the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market,
or if the Common Stock is quoted on the Nasdaq System (but not on the Nasdaq
National Market) or any similar system whereby the Common Stock is regularly
quoted by a recognized securities dealer but closing sale prices are not
reported), an exercise with a promissory note or other transaction by a Director
or executive officer that involves or may involve a direct or indirect extension
of credit or arrangement of an extension of credit by the Company, or an
Affiliate in violation of Section 402(a) of the Sarbanes-Oxley Act (codified as
Section 13(k) of the Exchange Act) shall be prohibited with respect to any Award
under this Plan. Unless otherwise provided in the terms of an Option Agreement,
payment of the exercise price by a Participant who is an officer, director or
other “insider” subject to Section 16(b) of the Exchange Act in the form of a
Stock for Stock Exchange is subject to pre-approval by the Administrator, in its
sole discretion. Any such pre-approval shall be documented in a manner that
complies with the specificity requirements of Rule 16b-3, including the name of
the Participant involved in the transaction, the nature of the transaction, the
number of shares to be acquired or disposed of by the Participant and the
material terms of the Options involved in the transaction.
 
6.5 Transferability of an Incentive Stock Option. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
 
6.6 Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock Option
may, in the sole discretion of the Administrator, be transferable to a Permitted
Transferee upon written approval by the Administrator to the extent provided in
the Option Agreement. A Permitted Transferee includes: (a) a transfer by gift or
domestic relations order to a member of the Optionholder’s immediate family
(child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships), any person sharing the Optionholder’s household (other than a
tenant or employee), a trust in which these persons have more than 50% of the
beneficial interest, a foundation in which these persons (or the Optionholder)
control the management of assets, and any other entity in which these persons
(or the Optionholder) own more than 50% of the voting interests; (b) third
parties designated by the Administrator in connection with a program established
and approved by the Administrator pursuant to which Participants may receive a
cash payment or other consideration in consideration for the transfer of such
Nonstatutory Stock Option; and (c) such other transferees as may be permitted by
the Administrator in its sole discretion. If the Nonstatutory Stock Option does
not provide for transferability, then the Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
 
6.7 Vesting Generally. The Option may, but need not, vest and therefore become
exercisable in periodic installments that may, but need not, be equal. The
Option may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or other criteria)
as the Administrator may deem appropriate. The vesting provisions of individual
Options may vary. No Option may be exercised for a fraction of a share of Common
Stock. The Administrator may, but shall not be required to, provide for an
acceleration of vesting and exercisability in the terms of any Option Agreement
upon the occurrence of a specified event.
 
6.8 Termination of Continuous Service. Unless otherwise provided in an Option
Agreement or in an employment agreement the terms of which have been approved by
the Administrator, in the event an Optionholder’s Continuous Service terminates
(other than upon the Optionholder’s death or Disability or termination by the
Company for Cause), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise such Option as of the date
of termination) but only within such period of time ending on the earlier of (a)
the date three months following the termination of the Optionholder’s Continuous
Service, or (b) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate. Unless otherwise provided in an Option Agreement or in an
employment agreement the terms of which have been approved by the Administrator,
or as otherwise provided in Sections 6.10 and 6.11 of this Plan, outstanding
Options that are not exercisable at the time an Optionholder’s Continuous
Service terminates for any reason other than for Cause (including an
Optionholder’s death or Disability) shall be forfeited and expire at the close
of business on the date of such termination. If the Optionholder’s Continuous
Service terminates for Cause, all outstanding Options shall be forfeited
(whether or not vested) and expire as of the beginning of business on the date
of such termination for Cause.
 
6.9 Extension of Termination Date. An Optionholder’s Option Agreement may also
provide that if the exercise of the Option following the termination of the
Optionholder’s Continuous Service for any reason other than Cause (other than
upon the Optionholder’s death or Disability) would be prohibited at any time
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act or any other state or federal securities
law or the rules of any securities exchange or interdealer quotation system,
then the Option shall terminate on the earlier of (a) the expiration of the term
of the Option in accordance with Section 6.1 or (b) the expiration of a period
after termination of the Participant’s Continuous Service that is three months
after the end of the period during which the exercise of the Option would be in
violation of such registration or other securities law requirements.
 
6.10 Disability of Optionholder. Unless otherwise provided in an Option
Agreement, in the event that an Optionholder’s Continuous Service terminates as
a result of the Optionholder’s Disability, the Optionholder may exercise his or
her Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination), but only within such period of time
ending on the earlier of (a) the date 12 months following such termination or
(b) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionholder does not exercise his or her
Option within the time specified herein, the Option shall terminate.
 
6.11 Death of Optionholder. Unless otherwise provided in an Option Agreement, in
the event an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder’s estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder’s death, but only within the period ending on the
earlier of (a) the date 12 months following the date of death or (b) the
expiration of the term of such Option as set forth in the Option Agreement. If,
after death, the Option is not exercised within the time specified herein, the
Option shall terminate.
 
6.12 Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds $100,000, the Options or portions thereof which exceed
such limit (according to the order in which they were granted) shall be treated
as Nonstatutory Stock Options.
 
6.13 Early Exercise. The Option may, but need not, include a provision whereby
the Optionholder may elect at any time before the Optionholder’s Continuous
Service terminates to exercise the Option as to any part or all of the shares of
Common Stock subject to the Option prior to the full vesting of the Option. In
such case, the shares of Common Stock acquired on exercise shall be subject to
the vesting schedule that otherwise would apply to determine the exercisability
of the Option. Any unvested shares of Common Stock so purchased may be subject
to any other restriction the Administrator determines to be appropriate.
 
6.14 Reload Options. At the discretion of the Administrator, the Option may
include a “reload” feature pursuant to which an Optionholder exercising an
option by the delivery of a number of shares of Common Stock in accordance with
Section 6.4(b)(i) hereof would automatically be granted an additional Option
(with an exercise price equal to the Fair Market Value of the Common Stock on
the date the additional Option is granted and with the same expiration date as
the original Option being exercised, and with such other terms as the
Administrator may provide) to purchase that number of shares of Common Stock
equal to the number delivered in a Stock for Stock Exchange of the original
Option.
 
 

--------------------------------------------------------------------------------

 
 
6.15 Additional Requirements Under Section 409A. Each Option Agreement shall
include a provision whereby, notwithstanding any provision of the Plan or the
Option Agreement to the contrary, the Option shall satisfy the additional
conditions applicable to nonqualified deferred compensation under Section 409A
of the Code, in accordance with Section 8 hereof, in the event any Option under
this Plan is granted with an exercise price less than Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted (regardless
of whether or not such exercise price is intentionally or unintentionally priced
at less than Fair Market Value, or is materially modified at a time when the
Fair Market Value exceeds the exercise price), or is otherwise determined to
constitute “nonqualified deferred compensation” within the meaning of Section
409A of the Code.
 
7. Provisions of Awards Other Than Options.
 
7.1 Restricted Awards. A Restricted Award is an Award of actual shares of Common
Stock (“Restricted Stock”) or hypothetical Common Stock units (“Restricted Stock
Units”) having a value equal to the Fair Market Value of an identical number of
shares of Common Stock, which may, but need not, provide that such Restricted
Award may not be sold, assigned, transferred or otherwise disposed of, pledged
or hypothecated as collateral for a loan or as security for the performance of
any obligation or for any other purpose for such period (the “Restricted
Period”) as the Administrator shall determine. Each Restricted Award shall be in
such form and shall contain such terms, conditions and Restricted Periods as the
Administrator shall deem appropriate, including the treatment of dividends or
dividend equivalents, as the case may be. The Administrator in its discretion
may provide for an acceleration of the end of the Restricted Period in the terms
of any Restricted Award, at any time, including in the event a Change in Control
occurs. The terms and conditions of the Restricted Award may change from time to
time, and the terms and conditions of separate Restricted Awards need not be
identical, but each Restricted Award shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
 
(a) Purchase Price. The purchase price of Restricted Awards, if any, shall be
determined by the Administrator, and may be stated as cash, property or prior
services.
 
(b) Consideration. The consideration for Common Stock acquired pursuant to the
Restricted Award shall be paid either: (i) in cash at the time of purchase; or
(ii) in any other form of legal consideration that may be acceptable to the
Administrator in its discretion including, without limitation, a recourse
promissory note, property or a Stock for Stock Exchange, or prior services that
the Administrator determines have a value at least equal to the Fair Market
Value of such Common Stock.
 
(c) Vesting. Shares of Common Stock acquired under the Restricted Award may, but
need not, be subject to a Restricted Period that specifies a Right of Repurchase
in favor of the Company in accordance with a vesting schedule to be determined
by the Administrator, or forfeiture in the event the consideration was in the
form of services. The Administrator in its discretion may provide for an
acceleration of vesting in the terms of any Restricted Award, at any time,
including in the event a Change in Control occurs.
 
(d) Termination of Participant’s Continuous Service. Unless otherwise provided
in a Restricted Award or in an employment agreement the terms of which have been
approved by the Administrator, in the event a Participant’s Continuous Service
terminates for any reason, the Company may exercise its Right of Repurchase or
otherwise reacquire, or the Participant shall forfeit the unvested portion of a
Restricted Award acquired in consideration of prior or future services, and any
or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the Restricted Award
shall be forfeited and the Participant shall have no rights with respect to the
Award.
 
(e) Transferability. Rights to acquire shares of Common Stock under the
Restricted Award shall be transferable by the Participant only upon such terms
and conditions as are set forth in the Award Agreement, as the Administrator
shall determine in its discretion, so long as Common Stock awarded under the
Restricted Award remains subject to the terms of the Award Agreement.
 
(f) Concurrent Tax Payment. The Administrator, in its sole discretion, may (but
shall not be required to) provide for payment of a concurrent cash award in an
amount equal, in whole or in part, to the estimated after tax amount required to
satisfy applicable federal, state or local tax withholding obligations arising
from the receipt and deemed vesting of restricted stock for which an election
under Section 83(b) of the Code may be required.
 
(g) Lapse of Restrictions. Upon the expiration or termination of the Restricted
Period and the satisfaction of any other conditions prescribed by the
Administrator, the restrictions applicable to the Restricted Award shall lapse
and a stock certificate for the number of shares of Common Stock with respect to
which the restrictions have lapsed shall be delivered, free of any restrictions
except those that may be imposed by law, the terms of the Plan or the terms of a
Restricted Award, to the Participant or the Participant’s beneficiary or estate,
as the case may be, unless such Restricted Award is subject to a deferral
condition that complies with the 409A Award requirements that may be allowed or
required by the Administrator in its sole discretion. The Company shall not be
required to deliver any fractional share of Common Stock but will pay, in lieu
thereof, the Fair Market Value of such fractional share in cash to the
Participant or the Participant’s beneficiary or estate, as the case may be.
Unless otherwise subject to a deferral condition that complies with the 409A
Award requirements, the Common Stock certificate shall be issued and delivered
and the Participant shall be entitled to the beneficial ownership rights of such
Common Stock not later than (i) the date that is 2 1/2 months after the end of
the Participant’s taxable year for which the Restricted Period ends and the
Participant has a legally binding right to such amounts; (ii) the date that is 2
1/2 months after the end of the Company’s taxable year for which the Restricted
Period ends and the Participant has a legally binding right to such amounts,
whichever is later; or (iii) such earlier date as may be necessary to avoid
application of Code Section 409A to such Award.
 
7.2 Performance Awards.
 
(a) Nature of Performance Awards. A Performance Award is an Award entitling the
recipient to acquire shares of Common Stock or hypothetical Common Stock units
having a value equal to the Fair Market Value of an identical number of shares
of Common Stock that will be settled in the form of shares of Common Stock upon
the attainment of specified performance goals. The Administrator may make
Performance Awards independent of or in connection with the granting of any
other Award under the Plan. Performance Awards may be granted under the Plan to
any Participant, including those who qualify for awards under other performance
plans of the Company. The Administrator in its sole discretion shall determine
whether and to whom Performance Awards shall be made, the performance goals
applicable under each Award, the periods during which performance is to be
measured, and all other limitations and conditions applicable to the awarded
shares; provided, however, that the Administrator may rely on the performance
goals and other standards applicable to other performance plans of the Company
in setting the standards for Performance Awards under the Plan. Performance
goals shall be based on a pre-established objective formula or standard that
specifies the manner of determining the number of shares under the Performance
Award that will be granted or will vest if the performance goal is attained.
Performance goals will be determined by the Administrator prior to the time 25%
of the service period has elapsed and may be based on one or more business
criteria that apply to a Participant, a business unit or the Company and its
Affiliates. Such business criteria may include, by way of example and without
limitation, revenue, earnings before interest, taxes, depreciation and
amortization (EBITDA), funds from operations, funds from operations per share,
operating income, pre-tax or after-tax income, cash available for distribution,
cash available for distribution per share, net earnings, earnings per share,
return on equity, return on assets, return on capital, economic value added,
share price performance, improvements in the Company’s attainment of expense
levels, and implementing or completion of critical projects, or improvement in
cash-flow (before or after tax). A performance goal may be measured over a
performance period on a periodic, annual, cumulative or average basis and may be
established on a corporate-wide basis or established with respect to one or more
operating units, divisions, subsidiaries, acquired businesses, minority
investments, partnerships or joint ventures. More than one performance goal may
be incorporated in a performance objective, in which case achievement with
respect to each performance goal may be assessed individually or in combination
with each other. The Administrator may, in connection with the establishment of
performance goals for a performance period, establish a matrix setting forth the
relationship between performance on two or more performance goals and the amount
of the Performance Award payable for that performance period. The level or
levels of performance specified with respect to a performance goal may be
established in absolute terms, as objectives relative to performance in prior
periods, as an objective compared to the performance of one or more comparable
companies or an index covering multiple companies, or otherwise as the
Administrator may determine. Performance goals shall be objective and, if the
Company is publicly traded, shall otherwise meet the requirements of Section
162(m) of the Code. Performance goals may differ for Performance Awards granted
to any one Participant or to different Participants. A Performance Award to a
Participant who is a Covered Employee shall (unless the Administrator determines
otherwise) provide that in the event of the Participant’s termination of
Continuous Service prior to the end of the performance period for any reason,
such Award will be payable only (i) if the applicable performance objectives are
achieved and (ii) to the extent, if any, the Administrator shall determine. Such
objective performance goals are not required to be based on increases in a
specific business criteria, but may be based on maintaining the status quo or
limiting economic losses.
 
(b) Restrictions on Transfer. Performance Awards and all rights with respect to
such Performance Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
 
(c) Rights as a Stockholder. A Participant receiving a Performance Award that is
denominated in shares of Common Stock or hypothetical Common Stock units shall
have the rights of a stockholder only as to shares actually received by the
Participant under the Plan and not with respect to shares subject to the Award
but not actually received by the Participant. A Participant shall be entitled to
receive a stock certificate evidencing the acquisition of shares of Common Stock
under a Performance Award only upon satisfaction of all conditions specified in
the written instrument evidencing the Performance Award (or in a performance
plan adopted by the Administrator). The Common Stock certificate shall be issued
and delivered and the Participant shall be entitled to the beneficial ownership
rights of such Common Stock not later than (i) the date that is 2 1/2 months
after the end of the Participant’s taxable year for which the Administrator
certifies that the Performance Award conditions have been satisfied and the
Participant has a legally binding right to such amounts; (ii) the date that is 2
1/2 months after the end of the Company’s taxable year for which the
Administrator certifies that the Performance Award conditions have been
satisfied and the Participant has a legally binding right to such amounts,
whichever is later; or (iii) such other date as may be necessary to avoid
application of Section 409A to such Awards.
 
(d) Termination. Except as may otherwise be provided by the Administrator at any
time, a Participant’s rights in all Performance Awards shall automatically
terminate upon the Participant’s termination of employment (or business
relationship) with the Company and its Affiliates for any reason.
 
 

--------------------------------------------------------------------------------

 
 
(e) Acceleration, Waiver, Etc. At any time prior to the Participant’s
termination of employment (or other business relationship) by the Company and
its Affiliates, the Administrator may in its sole discretion accelerate, waive
or, subject to Section 13, amend any or all of the goals, restrictions or
conditions imposed under any Performance Award. The Administrator in its
discretion may provide for an acceleration of vesting in the terms of any
Performance Award at any time, including in the event a Change in Control
occurs.
 
(f) Certification. Following the completion of each performance period, the
Administrator shall certify in writing, in accordance with the requirements of
Section 162(m) of the Code, whether the performance objectives and other
material terms of a Performance Award have been achieved or met. Unless the
Administrator determines otherwise, Performance Awards shall not be settled
until the Administrator has made the certification specified under this Section
7.2(f).
 
7.3 Stock Appreciation Rights.
 
(a) General. Stock Appreciation Rights may be granted either alone (“Free
Standing Rights”) or, provided the requirements of Section 7.3(b) are satisfied,
in tandem with all or part of any Option granted under the Plan (“Related
Rights”). In the case of a Nonstatutory Stock Option, Related Rights may be
granted either at or after the time of the grant of such Option. In the case of
an Incentive Stock Option, Related Rights may be granted only at the time of the
grant of the Incentive Stock Option.
 
(b) Grant Requirements. A Stock Appreciation Right may only be granted if the
Stock Appreciation Right: (i) does not provide for the deferral of compensation
within the meaning of Section 409A of the Code; or (ii) satisfies the
requirements of Section 7.3(i) and Section 8 hereof. A Stock Appreciation Right
does not provide for a deferral of compensation if: (A) the value of the Common
Stock the excess over which the right provides for payment upon exercise (the
“SAR exercise price”) may never be less than the Fair Market Value of the
underlying Common Stock on the date the right is granted, (B) the compensation
payable under the Stock Appreciation Right can never be greater than the
difference between the SAR exercise price and the Fair Market Value of the
Common Stock on the date the Stock Appreciation Right is exercised, (C) the
number of shares of Common Stock subject to the Stock Appreciation Right must be
fixed on the date of grant of the Stock Appreciation Right, and (D) the right
does not include any feature for the deferral of compensation other than the
deferral of recognition of income until the exercise of the right.
 
(c) Exercise and Payment. Upon exercise thereof, the holder of a Stock
Appreciation Right shall be entitled to receive from the Company, an amount
equal to the product of (i) the excess of the Fair Market Value, on the date of
such written request, of one share of Common Stock over the SAR exercise price
per share specified in such Stock Appreciation Right or its related Option,
multiplied by (ii) the number of shares for which such Stock Appreciation Right
shall be exercised. Payment with respect to the exercise of a Stock Appreciation
Right that satisfies the requirements of Section 7.3(b)(i) shall be paid on the
date of exercise and made in shares of Common Stock (with or without
restrictions as to substantial risk of forfeiture and transferability, as
determined by the Administrator in its sole discretion), valued at Fair Market
Value on the date of exercise. Payment with respect to the exercise of a Stock
Appreciation Right that does not satisfy the requirements of Section 7.3(b)(i)
shall be paid at the time specified in the Award in accordance with the
provisions of Section 7.3(i) and Section 8. Payment may be made in the form of
shares of Common Stock (with or without restrictions as to substantial risk of
forfeiture and transferability, as determined by the Administrator in its sole
discretion), cash or a combination thereof, as determined by the Administrator.
 
(d) Exercise Price. The exercise price of a Free Standing Stock Appreciation
Right shall be determined by the Administrator, but shall not be less than 100%
of the Fair Market Value of one share of Common Stock on the Date of Grant of
such Stock Appreciation Right. A Related Right granted simultaneously with or
subsequent to the grant of an Option and in conjunction therewith or in the
alternative thereto shall have the same exercise price as the related Option,
shall be transferable only upon the same terms and conditions as the related
Option, and shall be exercisable only to the same extent as the related Option;
provided, however, that a Stock Appreciation Right, by its terms, shall be
exercisable only when the Fair Market Value per share of Common Stock subject to
the Stock Appreciation Right and related Option exceeds the exercise price per
share thereof and no Stock Appreciation Rights may be granted in tandem with an
Option unless the Administrator determines that the requirements of Section
7.3(b)(i) are satisfied.
 
(e) Reduction in the Underlying Option Shares. Upon any exercise of a Stock
Appreciation Right, the number of shares of Common Stock for which any related
Option shall be exercisable shall be reduced by the number of shares for which
the Stock Appreciation Right shall have been exercised. The number of shares of
Common Stock for which a Stock Appreciation Right shall be exercisable shall be
reduced upon any exercise of any related Option by the number of shares of
Common Stock for which such Option shall have been exercised.
 
(f) Written Request. Unless otherwise determined by the Administrator in its
sole discretion, Stock Appreciation Rights shall be settled in the form of
Common Stock. If permitted in the Stock Appreciation Right’s Award Agreement, a
Participant may request that any exercise of a Stock Appreciation Right be
settled for cash, but a Participant shall not have any right to demand a cash
settlement. A request for a cash settlement may be made only by a written
request filed with the Corporate Secretary of the Company during the period
beginning on the third business day following the date of release for
publication by the Company of quarterly or annual summary statements of earnings
and ending on the twelfth business day following such date. Within 30 days of
the receipt by the Company of a written request to receive cash in full or
partial settlement of a Stock Appreciation Right or to exercise such Stock
Appreciation Right for cash, the Administrator shall, in its sole discretion,
either consent to or disapprove, in whole or in part, such written request. A
written request to receive cash in full or partial settlement of a Stock
Appreciation Right or to exercise a Stock Appreciation Right for cash may
provide that, in the event the Administrator shall disapprove such written
request, such written request shall be deemed to be an exercise of such Stock
Appreciation Right for shares of Common Stock.
 
(g) Disapproval by Administrator. If the Administrator disapproves in whole or
in part any request by a Participant to receive cash in full or partial
settlement of a Stock Appreciation Right or to exercise such Stock Appreciation
Right for cash, such disapproval shall not affect such Participant’s right to
exercise such Stock Appreciation Right at a later date, to the extent that such
Stock Appreciation Right shall be otherwise exercisable, or to request a cash
form of payment at a later date, provided that a request to receive cash upon
such later exercise shall be subject to the approval of the Administrator.
Additionally, such disapproval shall not affect such Participant’s right to
exercise any related Option.
 
(h) Restrictions on Transfer. Stock Appreciation Rights and all rights with
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
 
(i) Additional Requirements under Section 409A. A Stock Appreciation Right that
is not intended to or fails to satisfy the requirements of Section 7.3(b)(i)
shall satisfy the requirements of this Section 7.3(i) and the additional
conditions applicable to nonqualified deferred compensation under Section 409A
of the Code, in accordance with Section 8 hereof. The requirements herein shall
apply in the event any Stock Appreciation Right under this Plan is granted with
an SAR exercise price less than Fair Market Value of the Common Stock underlying
the Award on the date the Stock Appreciation Right is granted (regardless of
whether or not such SAR exercise price is intentionally or unintentionally
priced at less than Fair Market Value, or is materially modified at a time when
the Fair Market Value exceeds the SAR exercise price), provides that it is
settled in cash, or is otherwise determined to constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the Code. Any such Stock
Appreciation Right may provide that it is exercisable at any time permitted
under the governing written instrument, but such exercise shall be limited to
fixing the measurement of the amount, if any, by which the Fair Market Value of
a share of Common Stock on the date of exercise exceeds the SAR exercise price
(the “SAR Amount”). However, once the Stock Appreciation Right is exercised, the
SAR Amount may only be paid on the fixed time, payment schedule or other event
specified in the governing written instrument or in Section 8.1 hereof.
 
8. Additional Conditions Applicable to Nonqualified Deferred Compensation Under
Section 409A of the Code.
 
In the event any Award under this Plan is granted with an exercise price less
than Fair Market Value of the Common Stock subject to the Award on the Date of
Grant (regardless of whether or not such exercise price is intentionally or
unintentionally priced at less than Fair Market Value, or such Award is
materially modified and deemed a new Award at a time when the Fair Market Value
exceeds the exercise price), or is otherwise determined to constitute a 409A
Award, the following additional conditions shall apply and shall supersede any
contrary provisions of this Plan or the terms of any 409A Award agreement.
 
8.1 Exercise and Distribution. No 409A Award shall be exercisable or
distributable earlier than upon one of the following:
 
(a) Specified Time. A specified time or a fixed schedule set forth in the
written instrument evidencing the 409A Award, but not later than after the
expiration of 10 years from the Date of Grant. If the written grant instrument
does not specify a fixed time or schedule, such time shall be the date that is
the fifth anniversary of the Date of Grant.
 
(b) Separation from Service. Separation from service (within the meaning of
Section 409A of the Code) by the 409A Award recipient; provided, however, if the
409A Award recipient is a “key employee” (as defined in Section 416(i) of the
Code without regard to paragraph (5) thereof) and any of the Company’s stock is
publicly traded on an established securities market or otherwise, exercise or
distribution under this Section 8.1(b) may not be made before the date which is
six months after the date of separation from service.
 
(c) Death. The date of death of the 409A Award recipient.
 
(d) Disability. The date the 409A Award recipient becomes disabled (within the
meaning of Section 8.4(b) hereof).
 
 

--------------------------------------------------------------------------------

 
 
(e) Unforeseeable Emergency. The occurrence of an unforeseeable emergency
(within the meaning of Section 8.4(c) hereof), but only if the net value (after
payment of the exercise price) of the number of shares of Common Stock that
become issuable does not exceed the amounts necessary to satisfy such emergency
plus amounts necessary to pay taxes reasonably anticipated as a result of the
exercise, after taking into account the extent to which the emergency is or may
be relieved through reimbursement or compensation by insurance or otherwise or
by liquidation of the Participant’s other assets (to the extent such liquidation
would not itself cause severe financial hardship).
 
(f) Change in Control Event. The occurrence of a Change in Control Event (within
the meaning of Section 8.4(a) hereof), including the Company’s discretionary
exercise of the right to accelerate vesting of such Award upon a Change in
Control Event or to terminate the Plan or any 409A Award granted hereunder
within 12 months of the Change in Control Event.
 
8.2 Term. Notwithstanding anything to the contrary in this Plan or the terms of
any 409A Award agreement, the term of any 409A Award shall expire and such Award
shall no longer be exercisable on the date that is the later of: (a) 2 1/2
months after the end of the Company’s taxable year in which the 409A Award first
becomes exercisable or distributable pursuant to Section 8 hereof and is not
subject to a substantial risk of forfeiture; or (b) 2 1/2 months after the end
of the 409A Award recipient’s taxable year in which the 409A Award first becomes
exercisable or distributable pursuant to Section 8 hereof and is not subject to
a substantial risk of forfeiture, but not later than the earlier of (i) the
expiration of 10 years from the date the 409A Award was granted, or (ii) the
term specified in the 409A Award agreement.
 
8.3 No Acceleration. A 409A Award may not be accelerated or exercised prior to
the time specified in Section 8 hereof, except in the case of one of the
following events:
 
(a) Domestic Relations Order. The 409A Award may permit the acceleration of the
exercise or distribution time or schedule to an individual other than the
Participant as may be necessary to comply with the terms of a domestic relations
order (as defined in Section 414(p)(1)(B) of the Code).
 
(b) Conflicts of Interest. The 409A Award may permit the acceleration of the
exercise or distribution time or schedule as may be necessary to comply with the
terms of a certificate of divestiture (as defined in Section 1043(b)(2) of the
Code).
 
(c) Change in Control Event. The Administrator may exercise the discretionary
right to accelerate the vesting of such 409A Award upon a Change in Control
Event or to terminate the Plan or any 409A Award granted thereunder within 12
months of the Change in Control Event and cancel the 409A Award for
compensation. In addition, the Administrator may exercise the discretionary
right to accelerate the vesting of such 409A Award provided that such
acceleration does not change the time or schedule of payment of such Award and
otherwise satisfies the requirements of this Section 8 and the requirements of
Section 409A of the Code.
 
8.4 Definitions. Solely for purposes of this Section 8 and not for other
purposes of the Plan, the following terms shall be defined as set forth below:
 
(a) “Change in Control Event” means the occurrence of a change in the ownership
of the Company, a change in effective control of the Company, or a change in the
ownership of a substantial portion of the assets of the Company (as defined in
Proposed Regulations § 1.409A-3(g)(5) and any subsequent guidance interpreting
Code Section 409A). For example, a Change in Control Event will occur if:
 
(i) a person or more than one person acting as a group:
 
(A) acquires ownership of stock that brings such person’s or group’s total
ownership in excess of 50% of the outstanding stock of the Company; or
 
(B) acquires ownership of 35% or more of the total voting power of the Company
within a 12 month period; or
 
(ii) acquires ownership of assets from the Company equal to 40% or more of the
total value of the Company within a 12 month period.
 
(b) “Disabled” means a Participant (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, receiving income replacement benefits for a period of not less
than three months under an accident and health plan covering Employees.
 
(c) “Unforeseeable Emergency” means a severe financial hardship to the
Participant resulting from an illness or accident of the Participant, the
Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code)
of the Participant, loss of the Participant’s property due to casualty, or
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant.
 
9. Covenants of the Company.
 
9.1 Availability of Shares. During the terms of the Awards, the Company shall
keep available at all times the number of shares of Common Stock required to
satisfy such Awards.
 
9.2 Securities Law Compliance. Each Award Agreement shall provide that no shares
of Common Stock shall be purchased or sold thereunder unless and until (a) any
then applicable requirements of state or federal laws and regulatory agencies
shall have been fully complied with to the satisfaction of the Company and its
counsel and (b) if required to do so by the Company, the Participant shall have
executed and delivered to the Company a letter of investment intent in such form
and containing such provisions as the Administrator may require. The Company
shall use reasonable efforts to seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
grant Awards and to issue and sell shares of Common Stock upon exercise of the
Awards; provided, however, that this undertaking shall not require the Company
to register under the Securities Act the Plan, any Award or any Common Stock
issued or issuable pursuant to any such Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such
Awards unless and until such authority is obtained.
 
10. Use of Proceeds from Stock.
 
Proceeds from the sale of Common Stock pursuant to Awards shall constitute
general funds of the Company.
 
11. Miscellaneous.
 
11.1 Acceleration of Exercisability and Vesting. The Administrator shall have
the power to accelerate the time at which an Award may first be exercised or the
time during which an Award or any part thereof will vest in accordance with the
Plan, notwithstanding the provisions in the Award stating the time at which it
may first be exercised or the time during which it will vest.
 
11.2 Stockholder Rights. No Participant shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares of Common
Stock subject to such Award unless and until such Participant has satisfied all
requirements for exercise of the Award pursuant to its terms and no adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions of other rights for which the
record date is prior to the date such Common Stock certificate is issued, except
as provided in Section 12.1 hereof.
 
11.3 No Employment or Other Service Rights. Nothing in the Plan or any
instrument executed or Award granted pursuant thereto shall confer upon any
Participant any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Award was granted or shall affect the right
of the Company or an Affiliate to terminate (a) the employment of an Employee
with or without notice and with or without Cause, (b) the service of a
Consultant pursuant to the terms of such Consultant’s agreement with the Company
or an Affiliate or (c) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
 
11.4 Transfer, Approved Leave of Absence. For purposes of the Plan, no
termination of employment by an Employee shall be deemed to result from either
(a) a transfer to the employment of the Company from an Affiliate or from the
Company to an Affiliate, or from one Affiliate to another; or (b) an approved
leave of absence for military service or sickness, or for any other purpose
approved by the Company, if the Employee’s right to re-employment is guaranteed
either by a statute or by contract or under the policy pursuant to which the
leave of absence was granted or if the Administrator otherwise so provides in
writing.
 
 

--------------------------------------------------------------------------------

 
 
11.5 Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Award, (a) to give
written assurances satisfactory to the Company as to the Participant’s knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Award; and (b) to give written assurances satisfactory
to the Company stating that the Participant is acquiring Common Stock subject to
the Award for the Participant’s own account and not with any present intention
of selling or otherwise distributing the Common Stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares of Common Stock upon the exercise
or acquisition of Common Stock under the Award has been registered under a then
currently effective registration statement under the Securities Act or (ii) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the Common Stock.
 
11.6 Withholding Obligations. To the extent provided by the terms of an Award
Agreement and subject to the discretion of the Administrator, the Participant
may satisfy any federal, state or local tax withholding obligation relating to
the exercise or acquisition of Common Stock under an Award by any of the
following means (in addition to the Company’s right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such
means: (a) tendering a cash payment; (b) authorizing the Company to withhold
shares of Common Stock from the shares of Common Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Common Stock under the
Award, provided, however, that no shares of Common Stock are withheld with a
value exceeding the minimum amount of tax required to be withheld by law; (c)
delivering to the Company previously owned and unencumbered shares of Common
Stock of the Company or (d) by execution of a recourse promissory note by a
Participant who is not a Director or executive officer. Unless otherwise
provided in the terms of an Option Agreement, payment of the tax withholding by
a Participant who is an officer, director or other “insider” subject to Section
16(b) of the Exchange Act by delivering previously owned and unencumbered shares
of Common Stock of the Company or in the form of share withholding is subject to
pre-approval by the Administrator, in its sole discretion. Any such pre-approval
shall be documented in a manner that complies with the specificity requirements
of Rule 16b-3, including the name of the Participant involved in the
transaction, the nature of the transaction, the number of shares to be acquired
or disposed of by the Participant and the material terms of the Award involved
in the transaction.
 
11.7 Right of Repurchase. Each Award Agreement may provide that, following a
termination of the Participant’s Continuous Service, the Company may repurchase
the Participant’s unvested Common Stock acquired under the Plan as provided in
this Section 11.7 (the “Right of Repurchase”). The Right of Repurchase for
unvested Common Stock shall be exercisable at a price equal to the lesser of the
purchase price at which such Common Stock was acquired under the Plan or the
Fair Market Value of such Common Stock (if an Award is granted solely in
consideration of past services without payment of any additional consideration,
the unvested Common Stock shall be forfeited without any repurchase). The Award
Agreement may specify the period of time following a termination of the
Participant’s Continuous Service during which the Right of Repurchase may be
exercised.
 
12. Adjustments Upon Changes in Stock.
 
12.1 Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), then (a) the aggregate number of
shares of Common Stock or class of shares which may be purchased pursuant to
Awards granted hereunder; (b) the aggregate number of shares of Common Stock or
class of shares which may be purchased pursuant to Incentive Stock Options
granted hereunder; (c) the number and/or class of shares of Common Stock covered
by outstanding Options and Awards; (d) the maximum number of shares of Common
Stock with respect to which Options may be granted to any single Optionholder
during any calendar year; and (e) the exercise price of any Option in effect
prior to such change shall be proportionately adjusted by the Administrator to
reflect any increase or decrease in the number of issued shares of Common Stock
or change in the Fair Market Value of such Common Stock resulting from such
transaction; provided, however, that any fractional shares resulting from the
adjustment shall be eliminated. The Administrator shall make such adjustments,
and its determination shall be final, binding and conclusive. The conversion of
any securities of the Company that are by their terms convertible shall not be
treated as a transaction “without receipt of consideration” by the Company.
 
12.2 Dissolution or Liquidation. In the event of a dissolution or liquidation of
the Company, then all outstanding Awards shall terminate immediately prior to
such event.
 
12.3 Change in Control—Asset Sale, Merger, Consolidation or Reverse Merger. In
the event of a Change in Control, a dissolution or liquidation of the Company,
or any corporate separation or division, including, but not limited to, a
split-up, a split-off or a spin-off, or a sale, in one or a series of related
transactions, of all or substantially all of the assets of the Company; a merger
or consolidation in which the Company is not the Surviving Entity; or a reverse
merger in which the Company is the Surviving Entity, but the shares of Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, then the Company, to the extent permitted by applicable law, but
otherwise in the sole discretion of the Administrator may provide for: (a) the
continuation of outstanding Awards by the Company (if the Company is the
Surviving Entity); (b) the assumption of the Plan and such outstanding Awards by
the Surviving Entity or its parent; (c) the substitution by the Surviving Entity
or its parent of Awards with substantially the same terms (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this Section 12.3) for such outstanding Awards and, if appropriate,
subject to the equitable adjustment provisions of Section 12.1 hereof; (d) the
cancellation of such outstanding Awards in consideration for a payment (in the
form of stock or cash) equal in value to the Fair Market Value of vested Awards,
or in the case of an Option, the difference between the Fair Market Value and
the exercise price for all shares of Common Stock subject to exercise (i.e., to
the extent vested) under any outstanding Option; or (e) the cancellation of such
outstanding Awards without payment of any consideration. If such Awards would be
canceled without consideration for vested Awards, the Participant shall have the
right, exercisable during the later of the 10-day period ending on the fifth day
prior to such merger or consolidation or 10 days after the Administrator
provides the Award holder a notice of cancellation, to exercise such Awards in
whole or in part without regard to any installment exercise provisions in the
Option Agreement.
 
13. Amendment of the Plan and Awards.
 
13.1 Amendment of Plan. The Board at any time, and from time to time, may amend
or terminate the Plan. However, except as provided in Section 12.1 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy any applicable law or any Nasdaq or securities exchange
listing requirements. At the time of such amendment, the Board shall determine,
upon advice from counsel, whether such amendment will be contingent on
stockholder approval.
 
13.2 Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements of Section
162(m) of the Code and the regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
 
13.3 Contemplated Amendments. It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or advisable to provide
eligible Employees with the maximum benefits provided or to be provided under
the provisions of the Code and the regulations promulgated thereunder relating
to Incentive Stock Options or to the nonqualified deferred compensation
provisions of Section 409A of the Code and/or to bring the Plan and/or Awards
granted under it into compliance therewith.
 
13.4 No Impairment of Rights. Rights under any Award granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (a) the
Company requests the consent of the Participant and (b) the Participant consents
in writing. However, a cancellation of an Award where the Participant receives a
payment equal in value to the Fair Market Value of the vested Award or, in the
case of vested Options, the difference between the Fair Market Value and the
exercise price, shall not be an impairment of the Participant’s rights that
requires consent of the Participant.
 
13.5 Amendment of Awards. The Administrator at any time, and from time to time,
may amend the terms of any one or more Awards; provided, however, that the
Administrator may not effect any amendment which would otherwise constitute an
impairment of the rights under any Award unless (a) the Company requests the
consent of the Participant and (b) the Participant consents in writing. For the
avoidance of doubt, the cancellation of a vested Award where the Participant
receives a payment equal in value to the Fair Market Value of the vested Award
or, in the case of vested Options, the difference between the Fair Market Value
of the Common Stock underlying the Option and the aggregate exercise price,
shall not be an impairment of the Participant’s rights that requires consent of
the Participant.
 
14. General Provisions.
 
14.1 Other Compensation Arrangements. Nothing contained in this Plan shall
prevent the Board from adopting other or additional compensation arrangements,
subject to stockholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only in specific
cases.
 
14.2 Recapitalizations. Each Award Agreement shall contain provisions required
to reflect the provisions of Section 12.1.
 
14.3 Delivery. Upon exercise of a right granted pursuant to an Award under this
Plan, the Company shall issue Common Stock or pay any amounts due within a
reasonable period of time thereafter. Subject to any statutory or regulatory
obligations the Company may otherwise have, for purposes of this Plan, 30 days
shall be considered a reasonable period of time.
 
14.4 Other Provisions. The Award Agreements authorized under the Plan may
contain such other provisions not inconsistent with this Plan, including,
without limitation, restrictions upon the exercise of the Awards, as the
Administrator may deem advisable.
 
 

--------------------------------------------------------------------------------

 
 
14.5 Cancellation and Rescission of Awards for Detrimental Activity.
 
(a) Upon exercise, payment or delivery pursuant to an Award, the Participant
shall certify in a manner acceptable to the Company that the Participant has not
engaged in any Detrimental Activity described in Section 2.19.
 
(b) Unless the Award Agreement specifies otherwise, the Administrator may
cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired,
unpaid or deferred Awards at any time if the Participant engages in any
Detrimental Activity described in Section 2.19.
 
(c) In the event a Participant engages in Detrimental Activity described in
Section 2.19 after any exercise, payment or delivery pursuant to an Award,
during any period for which any restrictive covenant prohibiting such activity
is applicable to the Participant, such exercise, payment or delivery may be
rescinded within one year thereafter. In the event of any such rescission, the
Participant shall pay to the Company the amount of any gain realized or payment
received as a result of the exercise, payment or delivery, in such manner and on
such terms and conditions as may be required by the Company. The Company shall
be entitled to set-off against the amount of any such gain any amount owed to
the Participant by the Company.
 
14.6 Disqualifying Dispositions. Any Participant who shall make a “disposition”
(as defined in Section 424 of the Code) of all or any portion of shares of
Common Stock acquired upon exercise of an Incentive Stock Option within two
years from the Date of Grant of such Incentive Stock Option or within one year
after the issuance of the shares of Common Stock acquired upon exercise of such
Incentive Stock Option shall be required to immediately advise the Company in
writing as to the occurrence of the sale and the price realized upon the sale of
such shares of Common Stock.
 
15. Market Stand-Off.
 
Each Option Agreement and Award Agreement shall provide that, in connection with
any underwritten public offering by the Company of its equity securities
pursuant to an effective registration statement filed under the Securities Act,
the Participant shall agree not to sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the repurchase of, transfer the
economic consequences of ownership or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to
any Common Stock without the prior written consent of the Company or its
underwriters, for such period of time from and after the effective date of such
registration statement as may be requested by the Company or such underwriters
(the “Market Stand-Off”). In order to enforce the Market Stand-Off, the Company
may impose stop-transfer instructions with respect to the shares of Common Stock
acquired under this Plan until the end of the applicable stand-off period. If
there is any change in the number of outstanding shares of Common Stock by
reason of a stock split, reverse stock split, stock dividend, recapitalization,
combination, reclassification, dissolution or liquidation of the Company, any
corporate separation or division (including, but not limited to, a split-up, a
split-off or a spin-off), a merger or consolidation; a reverse merger or similar
transaction, then any new, substituted or additional securities which are by
reason of such transaction distributed with respect to any shares of Common
Stock subject to the Market Stand-Off, or into which such shares of Common Stock
thereby become convertible, shall immediately be subject to the Market
Stand-Off.
 
16. Effective Date of Plan.
 
The Plan became effective as of the Effective Date. No Award granted on or after
the Effective Date may be exercised (or, in the case of a stock Award, may be
granted) unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
 
17. Termination or Suspension of the Plan.
 
The Plan shall terminate automatically on the day before the 10th anniversary of
the Effective Date. No Award shall be granted pursuant to the Plan after such
date, but Awards theretofore granted may extend beyond that date. The Board may
suspend or terminate the Plan at any earlier date pursuant to Section 13.1
hereof. No Awards may be granted under the Plan while the Plan is suspended or
after it is terminated.
 
18. Choice of Law.
 
The law of the State of Delaware shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state’s conflict of law rules.
 
19. Execution.
 
To record the adoption of the Plan by the Board, the Company has caused its
authorized officer to execute the Plan as of the date specified below.
 

[SIGNATURE PAGE FOLLOWS]

 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, upon authorization of the Board of Directors, the
undersigned has caused the Bronco Drilling Company, Inc. 2006 Stock Incentive
Plan to be executed effective as of the 9th day of June, 2006 (subsequently
amended with stockholder approval effective as of the 10th day of December
2010).
 
BRONCO DRILLING COMPANY, INC.

By: /s/ D. FRANK HARRISON 
D. Frank Harrison,
Chief Executive Officer