exv10w1





Exhibit
10.1


Third Amended and Restated


Basic Energy Services, Inc.


2003 Incentive Plan


(effective May 12, 2008)


SECTION 1. Purpose of the Plan.


     The Third Amended and Restated Basic Energy Services, Inc. 2003 Incentive Plan (the “Plan”) is
intended to promote the interests of Basic Energy Services, Inc. (formerly named BES Holding Co.),
a Delaware corporation (the “Company”), by encouraging officers, employees, directors and
consultants of the Company and its Affiliates to acquire or increase their equity interest in the
Company and to provide a means whereby they may develop a sense of proprietorship and personal
involvement in the development and financial success of the Company, and to encourage them to
remain with and devote their best efforts to the business of the Company thereby advancing the
interests of the Company and its stockholders. The Plan is also contemplated to enhance the
ability of the Company and its Affiliates to attract and retain the services of individuals who are
essential for the growth and profitability of the Company.


     Effective as of the effective date of the Plan as set forth in Section 10 hereunder, all
outstanding stock options and other Awards granted under the Plan (including Awards previously
assumed by the Company under predecessor plans) prior to this amendment and restatement, are
assumed and continued hereunder. All outstanding Awards that are assumed and continued under this
Plan, as amended and restated, shall remain subject to their individual Award Agreements for each
such outstanding Award.


SECTION 2. Definitions.



     As used in the Plan, the following terms shall have the meanings set forth below:


     “Affiliate” shall mean (i) any entity in which the Company, directly or indirectly, owns 50%
or more of the combined voting power, as determined by the Committee, (ii) any “parent corporation”
of the Company (as defined in Section 424(e) of the Code) and (iii) any “subsidiary corporation” of
any such parent (as defined in Section 424(f) of the Code) thereof.


     “Award” shall mean any Option, Restricted Stock, Performance Award, Phantom Shares, Bonus
Shares, Other Stock-Based Award or Cash Award.


     “Award Agreement” shall mean any written or electronic agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be executed or acknowledged
by a Participant.


     “Board” shall mean the Board of Directors of the Company.


     “Bonus Shares” shall mean an award of Shares granted pursuant to Section 6(d) of the Plan.


 








 





     “Cash Award” shall mean an award payable in cash granted pursuant to Section 6(f) of the Plan.



     “Change in Control” shall mean the occurrence of any one of the following:



     (a) the consummation of any transaction (including without limitation, any merger,
consolidation, tender offer, or exchange offer) the result of which is that any individual or
“person” (as such term is used in Sections 13(d)(3) and 14(d)(2), of the Securities Exchange Act of
1934 (the “Exchange Act”)), other than (i) Southwest Royalties Holdings, Inc. and its “affiliates”
(as such term is defined in Rule 144 under the Exchange Act), (ii) Credit Suisse First Boston
Corporation and its “affiliates” (as such term is defined in Rule 144 under the Exchange Act),
(iii) the Company or any Affiliates controlled by the Company, (iv) any employee benefit plan of
the Company or any of its Affiliates or (v) an underwriter temporarily holding securities pursuant
to an offering of such securities, becomes the “beneficial owner” (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the Company’s then-outstanding securities;



     (b) the individuals who, as of the effective date of the Plan, constitute the Board (the
“Incumbent Board”), cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either (i) an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act), or an actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board, or (ii) a plan or agreement to replace a majority of the
members of the Board then comprising the Incumbent Board;



     (c) the sale, lease, transfer, conveyance or other disposition (including by merger or
consolidation) in one or a series of related transactions, of all or substantially all of the
assets of the Company to an unrelated person; or



     (d) the adoption of a plan relating to the liquidation or dissolution of the Company.



     Solely with respect to any Award that is subject to Section 409A of the Code, this definition
is intended to comply with the definition of change in control under Section 409A of the Code as in
effect commencing January 1, 2005 and, to the extent that the above definition does not so comply,
such definition shall be void and of no effect and, to the extent required to ensure that this
definition complies with the requirements of Section 409A of the Code, the definition of such term
set forth in regulations or other regulatory guidance issued under Section 409A of the Code by the
appropriate governmental authority is hereby incorporated by reference into and shall form part of
this Plan as fully as if set forth herein verbatim and the Plan shall be operated in accordance
with the above definition of Change in Control as modified to the extent necessary to ensure that
the above definition complies with the definition prescribed in such



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regulations or other regulatory guidance insofar as the definition relates to any Award that
is subject to Section 409A of the Code.




     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the
rules and regulations thereunder.



     “Committee” shall mean the committee appointed by the Board to administer the Plan or, if
none, the Board.



     “Company” shall mean the corporation described in Section 1 of the Plan.



     “Consultant” shall mean any individual, other than a Director or an Employee, who renders
consulting or advisory services to the Company or an Affiliate for a fee.



     “Covered Person” shall mean any of the Chief Executive Officer of the Company and the four (4)
highest paid officers of the Company other than the Chief Executive Officer as described in Section
162(m)(3) of the Code.



     “Director” shall mean a “non-employee director” of the Company, as defined in Rule 16b-3.



     “Employee” shall mean any employee of the Company or an Affiliate.



     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.



     “Fair Market Value” shall mean, with respect to Shares, the fair market value determined in
good faith by the Committee, which may be conclusively deemed by the Committee to be the closing
sales price (or, if applicable, the highest reported bid price) of a Share on the applicable date
(or if there is no trading in the Shares on such date, on the next preceding date on which there
was trading) as reported in The Wall Street Journal (or other reporting service approved by the
Committee). If the Shares are not publicly traded at the time a determination of its fair market
value is required to be made hereunder, the determination of fair market value shall be made in
good faith by the Committee.



     “Option” shall mean an option granted under Section 6(a) of the Plan. Options granted under
the Plan may constitute “incentive stock options” for purposes of Section 422 of the Code or
nonqualified stock options that are not intended to satisfy the requirements of Section 422 of the
Code.



     “Other Stock-Based Award” shall mean an award granted pursuant to Section 6(g) of the Plan
that is not otherwise specifically provided for, the value of which is based in whole or in part
upon the value of a Share.



     “Participant” shall mean any Director, Employee or Consultant granted an Award under the Plan.



     “Performance Award” shall mean any right granted under Section 6(c) of the Plan.



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     “Performance Objectives” means the objectives, if any, established by the Committee that are
to be achieved with respect to an Award granted under this Plan, which may be described in terms of
Company-wide objectives, in terms of objectives that are related to performance of a division,
subsidiary, department or function within the Company or a subsidiary in which the Participant
receiving the Award is employed or in individual or other terms, and which will relate to the
period of time determined by the Committee. The Performance Objectives intended to qualify under
Section 162(m) of the Code shall be with respect to one or more of the following: (i) net earnings;
(ii) operating income; (iii) earnings before interest and taxes (“EBIT”); (iv) earnings before
interest, taxes, depreciation, and amortization expenses (“EBITDA”); (v) earnings before taxes and
unusual or nonrecurring items; (vi) net income before interest, income and franchise taxes,
depreciation and amortization expenses, and any unusual or non-recurring non-cash expenses or
income (“Company EBITDA”); (vii) revenue; (viii) return on investment; (ix) return on equity;
(x) return on total capital; (xi) return on assets; (xii) total stockholder return; (xiii) return
on capital employed in the business; (xiv) stock price performance; (xv) earnings per share growth;
and (xvi) cash flows. Which objectives to use with respect to an Award, the weighting of the
objectives if more than one is used, and whether the objective is to be measured against a
Company-established budget or target, an index or a peer group of companies, shall be determined by
the Committee in its discretion at the time of grant of the Award. A Performance Objective need
not be based on an increase or a positive result under a particular business criterion and may
include, for example, maintaining the status quo or limiting economic losses.



     “Person” shall mean individual, corporation, partnership, association, joint-stock company,
trust, unincorporated organization, government or political subdivision thereof or other entity.



     “Phantom Shares” shall mean an Award of the right to receive Shares issued at the end of a
Restricted Period (an amount of cash equal to a specified number of Shares, or a combination
thereof) which is granted pursuant to Section 6(e) of the Plan.



     “Plan” shall mean the plan described in Section 1 of the Plan and set forth in this document,
as amended from time to time.



     “Restricted Period” shall mean the period established by the Committee with respect to an
Award during which the Award either remains subject to forfeiture or is not exercisable by the
Participant.



     “Restricted Stock” shall mean any Share, prior to the lapse of restrictions thereon, granted
under Sections 6(b) of the Plan.



     “Rule 16b-3” shall mean Rule 16b-3 promulgated by the SEC under the Exchange Act, or any
successor rule or regulation thereto as in effect from time to time.



     “SEC” shall mean the Securities and Exchange Commission, or any successor thereto.



     “Shares” or “Common Shares” or “Common Stock” shall mean the common stock of the Company, $.01
par value, and such other securities or property as may become the subject of Awards under the
Plan.



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     “Termination for Cause” shall mean, unless eliminated or otherwise defined by the Committee in
a Participant’s Award, the occurrence of any of the following events:




     (i) the commission by Participant of a material act of willful misconduct including,
but not limited to, the willful violation of any material law, rule, regulation or cease and
desist order applicable to Participant or the Company (other than a law, rule or regulation
relating to a minor traffic violation or similar offense), or an act which constitutes a
breach of a fiduciary duty owed to the Company by Participant involving personal profit;




     (ii) the commission by Participant of an act of dishonesty relating to the performance
of Participant’s duties, habitual unexcused absence from work, willful failure to perform
duties in any material respect (other than any such failure resulting from Participant’s
incapacity due to physical or mental illness or disability), or gross negligence in the
performance of duties resulting in material damage or injury to the Company, its reputation
or goodwill (provided, however, that in the event of Participant’s willful failure to
perform duties in any material respect, Participant shall be provided with written notice of
such event and shall be provided with a reasonable opportunity, and in no event more than 30
days, to cure such failure to perform his duties); or




     (iii) any felony conviction of Participant or any conviction involving dishonesty,
fraud or breach of trust (other than for a minor traffic violation or similar offense),
whether or not in the line of duty.



     “Termination for Good Reason” shall mean, unless eliminated or otherwise defined by the
Committee in a Participant’s Award, any nonconsentual (i) material reduction in the Participant’s
authority, duties or responsibilities; (ii) reduction in the Participant’s compensation by more
than 20 percent from the compensation (excluding Awards pursuant to this Plan or other stock-based
compensation) paid by the Company during the completed fiscal year prior to the Change of Control;
or (iii) change caused by the Company in the Participant’s office location of more than 35 miles
from its location on the date of the Change in Control; provided, however, that the Participant
terminates his employment with the Company and its Affiliates hereunder within 120 days following
the date on which the Participant has actual notice of the event that gives rise to the Termination
for Good Reason.



SECTION 3. Administration.




     (a) General. The Plan shall be administered by the Committee. Should any class of
Common Stock be registered under Section 12(g) of the Exchange Act, the Committee shall be composed
of not less than two (2) members of the Board, each of whom shall meet the definition of
“nonemployee director” for purposes of Rule 16b-3 promulgated by the SEC under the Exchange Act and
an “outside director” under Section 162(m) of the Code. A majority of the Committee shall
constitute a quorum, and the acts of a majority of the members of the Committee who are present at
any meeting thereof at which a quorum is present, or the acts unanimously approved by the members
of the Committee in writing, shall be the acts of the Committee.



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     (b) Committee Authority. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee by the Plan, the
Committee shall have full power and authority to: (i) designate Participants; (ii) determine the
type or types of Awards to be granted to a Participant; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights, or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent, and under what circumstances Awards may be settled or exercised in cash,
Shares, other securities, other Awards or other property, or canceled, forfeited, or suspended and
the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended;
(vi) determine whether, to what extent, and under what circumstances cash, Shares, other
securities, other Awards, other property, and other amounts payable with respect to an Award shall
be deferred either automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement relating to an Award made
under the Plan; (viii) establish, amend, suspend, or waive such rules and regulations and appoint
such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make
any other determination and take any other action that the Committee deems necessary or desirable
for the administration of the Plan; provided, however, the Committee shall not take any action
otherwise authorized under this Section 3(b) to the extent that (i) such action would cause (A) the
application of Section 162(m) or 409A of the Code to the Award or (B) create adverse tax
consequences under Section 162(m) or 409A of the Code should either or both of those Code sections
apply to the Award or (ii) materially reduce the benefit to the Participant without the consent of
the Participant. No member of the Committee shall vote or act upon any matter relating solely to
himself and grants of Awards to members of the Committee must be ratified by the Board. Unless
otherwise expressly provided in the Plan, all designations, determinations, interpretations, and
other decisions under or with respect to the Plan or any Award shall be within the sole discretion
of the Committee, may be made at any time and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any
Award, any stockholder and any Employee. No member of the Board or Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any Award granted
hereunder and the members of the Board and Committee shall be entitled to indemnification and
reimbursement by the Company and its Affiliates in respect of any claim, loss, damage or expense
(including legal fees) arising therefrom to the full extent permitted by law.



SECTION 4. Shares Available for Awards.




     (a) Shares Available. Subject to adjustment as provided in Section 4(c), the
aggregate number of Shares with respect to which Awards may be granted under the Plan shall be up
to 1,000,000 Shares. Except for withholding of Shares for payment of taxes or exercise price, if
any Award is exercised, paid, forfeited, terminated or canceled without the delivery of Shares,
then the Shares covered by such Award, to the extent of such payment, exercise, forfeiture,
termination or cancellation, shall again be Shares with respect to which Awards may be granted.
Awards will not reduce the number of Shares that may be issued pursuant to the Plan if the
settlement of the Award will not require the issuance of Shares, as, for example, an Other
Stock-Based Award that can be satisfied only by the payment of cash.



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     (b) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an
Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares and
shall be fully paid and nonassessable.



     (c) Adjustments. In the event that the Committee determines that any dividend or
other distribution (whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such that an adjustment
is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan, then the Committee
shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of
Shares (or other securities or property) with respect to which Awards may be granted, (ii) the
maximum number and type of Shares (or other securities or property) with respect to which Awards
may be granted to any single individual during any calendar year, (iii) the number and type of
Shares (or other securities or property) subject to outstanding Awards, and (iv) the grant or
exercise price with respect to any Award or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award.



SECTION 5. Eligibility.




     Any Employee, Director or Consultant shall be eligible to be designated a Participant and
receive an Award under the Plan.



SECTION 6. Awards.




     (a) Options. Subject to the provisions of the Plan, the Committee shall have the
authority to determine the Participants to whom Options shall be granted, the number of Shares to
be covered by each Option, the purchase price therefor and the conditions and limitations
applicable to the exercise of the Option, including the following terms and conditions and such
additional terms and conditions, as the Committee shall determine, that are not inconsistent with
the provisions of the Plan.




     (i) Exercise Price. The purchase price per Share purchasable under an Option
shall be determined by the Committee at the time the Option is granted, but shall not be
less than the Fair Market Value per Share on such grant date.




     (ii) Time and Method of Exercise. The Committee shall determine the time or
times at which an Option may be exercised in whole or in part (which may include the
achievement of one or more Performance Objectives), and the method or methods by which, and
the form or forms, in which payment of the exercise price with respect thereto may be made
or deemed to have been made (which may include, without limitation, cash, check acceptable
to the Company, Shares held for the period required to avoid a charge to the Company’s
reported financial earnings and owned free and clear of any liens, claims, encumbrances or
security interests, outstanding Awards, a “cashless-broker” exercise (through procedures
approved by the Committee and the Company),



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other securities or other property, notes approved by the Committee, or any combination
thereof, having a Fair Market Value on the exercise date equal to the relevant exercise
price); provided, however, in order to exercise an Option, the Person or Persons entitled to
exercise the Option shall deliver to the Company payment in full for the Shares being
purchased and, unless other arrangements have been made with, or procedures have been
established and approved by, the Committee, any required withholding taxes.


     (iii) Incentive Stock Options. The terms of any Option granted under the Plan
intended to be an incentive stock option shall comply in all respects with the provisions of
Section 422 of the Code, or any successor provision, and any regulations promulgated
thereunder. Incentive stock options may be granted only to employees of the Company and its
parent corporation and subsidiary corporations, within the meaning of Section 424 of the
Code while each such entity is a “Corporation” described in Section 7701(a)(3) of the Code
and Treas. Reg. Section 1.421-1(i)(1). To the extent the aggregate Fair Market Value of the
Shares (determined as of the date of grant) of an Option to the extent exercisable for the
first time during any calendar year (under all plans of the Company and its parent and
subsidiary corporations) exceeds $100,000, such Option Shares in excess of $100,000 shall be
nonqualified stock options. No Option that is an incentive stock option shall be
exercisable after the expiration of 10 years from its date of grant. Notwithstanding
anything herein to the contrary, in no event shall any person owning stock possessing more
than 10% of the total combined voting power of the Company and its Affiliates be granted an
incentive stock option hereunder unless (1) the Option exercise price shall be at least 110%
of the Fair Market Value of the Shares subject to such Option at the time the Option is
granted and (2) the term during which such Option is exercisable does not exceed five years
from its date of grant.



     (iv) Limits. Subject to adjustment as provided in Section 4(c), the maximum
number of Options that may be granted to any Participant during any calendar year shall not
exceed 100,000 Shares.


     (b) Restricted Stock. Subject to the provisions of the Plan, the Committee shall have
the authority to determine the Participants to whom Restricted Stock shall be granted, the number
of Shares of Restricted Stock to be granted to each such Participant, the duration of the
Restricted Period during which, and the conditions, including Performance Objectives, if any, under
which if not achieved, the Restricted Stock may be forfeited to the Company, and the other terms
and conditions of such Awards.



     (i) Dividends. Dividends paid on Restricted Stock may be paid directly to the
Participant, may be subject to risk of forfeiture and/or transfer restrictions during any
period established by the Committee or sequestered and held in a bookkeeping cash account
(with or without interest) or reinvested on an immediate or deferred basis in additional
shares of Common Stock, which account or shares may be subject to the same restrictions as
the underlying Award or such other restrictions, all as determined by the Committee in its
discretion.



     (ii) Registration. Any Restricted Stock may be evidenced in such manner as the
Committee shall deem appropriate, including, without limitation, book-entry


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registration or issuance of a stock certificate or certificates. In the event any
stock certificate is issued in respect of Restricted Stock granted under the Plan, such
certificate shall be registered in the name of the Participant and shall bear an appropriate
legend referring to the terms, conditions, and restrictions
applicable to such Restricted Stock.



     (iii) Forfeiture and Restrictions Lapse. Except as otherwise determined by the
Committee or the terms of the Award that granted the Restricted Stock, upon termination of a
Participant’s employment (as determined under criteria established by the Committee) for any
reason during the applicable Restricted Period, all Restricted Stock shall be forfeited by
the Participant and reacquired by the Company. Unrestricted Shares, evidenced in such
manner as the Committee shall deem appropriate, shall be issued to the holder of Restricted
Stock promptly after the applicable restrictions have lapsed or otherwise been satisfied.



     (iv) Transfer Restrictions. During the Restricted Period, Restricted Stock
will be subject to the limitations on transfer as provided in Section 6(h)(i).



     (v) Limits. Subject to adjustment as provided in Section 4(c), the maximum
number of Shares of Restricted Stock that may be granted to any Participant during any
calendar year shall not exceed 100,000 Shares.


     (c) Performance Awards. The Committee shall have the authority to determine the
Participants who shall receive a Performance Award, which shall be denominated as a cash amount
(e.g., $100 per award unit) at the time of grant and confer on the Participant the right to receive
payment of such Award, in whole or in part, upon the achievement of such Performance Objectives
during such performance periods as the Committee shall establish with respect to the Award.



     (i) Terms and Conditions. Subject to the terms of the Plan and any applicable
Award Agreement, the Committee shall determine the Performance Objectives to be achieved
during any performance period, the length of any performance period, the amount of any
Performance Award and the amount of any payment or transfer to be made pursuant to any
Performance Award. In the case of any Performance Award granted to a Covered Employee in
any calendar year in which any class of Common Stock is registered under Section 12(g) of
the Exchange Act, performance goals shall be designed to be objective and shall otherwise
meet the requirements of Section 162(m) of the Code and regulations issued thereunder
(including Treasury Regulation Section 1.162-27 and any successor regulation thereto),
including the requirement that the level or levels of performance targeted by the Committee
are such that the achievement of performance goals is “substantially uncertain” at the time
of grant. In addition, achievement of performance goals in respect of Performance Awards
shall be measured over a performance period of not less than six (6) months and not more
than ten (10) years, as specified by the Committee. Performance goals in the case of any
Performance Award granted to a Covered Person in any year in which any class of Common Stock
is registered under Section 12(g) of the Exchange Act shall be established not later than
ninety (90) days after the beginning of any performance period applicable to such
Performance Award, or at such other date as may be required or permitted for


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“performance-based compensation” under Section 162(m) of the Code. Subject to Section
8, the Committee shall not exercise discretion to increase any amount payable in respect of
a Performance Award which is intended to comply with Section 162(m) of the Code.


     (ii) Payment of Performance Awards. Performance Awards, to the extent earned
and vested, shall be paid (in cash and/or in Shares, in the sole discretion of the
Committee) in a lump sum following the close of the performance period. Except as may
otherwise be required under Section 409A of the Code, cash payments or tendered stock
certificates described in the immediately preceding sentence shall be made by the later of
(i) the date that is 21/2 months after the end of the Participant’s first taxable year in
which the Performance Award is earned and payable under the Plan and (ii) the date that is
21/2 months after the end of the Company’s first taxable year in which the Performance Award
is earned and payable under the Plan, and such payment shall not be subject to any election
by the Participant to defer the payment to a later period. To the extent that the final
settlement of a vested Award is to be made in Shares, the amount payable under a Performance
Award shall be divided by the FMV Per Share of Common Stock on the determination date and a
stock certificate evidencing the resulting shares of Common Stock (to the nearest full
share) shall be delivered to the Participant, or his personal representative, and the value
of any fractional shares will be paid in cash. The Company will also retain the right under
any of its deferred compensation plans to make additional contributions related to these
Awards into a deferred compensation plan, which Award will not vest until retirement or
certain conditions of termination as provided by that plan.



     (iii) Limits. The maximum value of Performance Awards that may be granted to
any Participant during any calendar year shall not exceed $500,000.


     (d) Bonus Shares. The Committee shall have the authority, in its discretion, to grant
Bonus Shares to Participants. Each Bonus Share shall constitute a transfer of an unrestricted
Share to the Participant, without other payment therefor, as additional compensation for the
Participant’s services to the Company. Bonus Shares shall be in lieu of a cash bonus that
otherwise would be granted.


     (e) Phantom Shares. The Committee shall have the authority to grant Awards of Phantom
Shares to Participants upon such terms and conditions as the Committee may determine.



     (i) Terms and Conditions. Each Phantom Share Award shall constitute an
agreement by the Company to issue or transfer a specified number of Shares or pay an amount
of cash equal to a specified number of Shares, or a combination thereof to the Participant
in the future, subject to the fulfillment during the Restricted Period of such conditions,
including Performance Objectives, if any, as the Committee may specify at the date of grant.
Payment shall be made in a lump sum no later than 2-1/2 months after the end of the
Restricted Period. During the Restricted Period, the Participant shall not have any right
to transfer any rights under the subject Award, shall not have any rights of ownership in
the Phantom Shares and shall not have any right to vote such shares.


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     (ii) Dividends. Any Phantom Share award may provide that an amount equal to
any or all dividends or other distributions paid on Shares during the Restricted Period be
credited in a cash bookkeeping account (without interest) or that equivalent additional
Phantom Shares be awarded, which account or shares may be subject to the same restrictions
as the underlying Award or such other restrictions as the Committee may determine.




     (iii) Limits. Subject to adjustment as provided in Section 4(c), the maximum
number of Phantom Shares that may be granted to any Participant during any calendar year
shall not exceed 100,000.




     (iv) Additional Limitations. Notwithstanding any other provision of this
Section 6(e) to the contrary, any such Phantom Shares Award granted under the Plan shall
contain terms that (i) are designed to avoid application of Section 409A of the Code to the
Award or (ii) are designed to avoid adverse tax consequences under Section 409A of the Code
should that Code section apply to the Award.



     (f) Cash Awards. The Committee shall have the authority to determine the Participants
to whom Cash Awards shall be granted, the amount, whether the Cash Awards may be voluntarily or
shall be involuntarily deferred in a Company deferred compensation plan, and the terms or
conditions, if any, as additional compensation or as deferred compensation for the Participant’s
services to the Company or its Affiliates. If granted, a Cash Award shall be granted
(simultaneously or subsequently) in tandem with another Award and shall entitle a Participant to
receive a specified amount of cash from the Company upon such other Award becoming taxable to the
Participant, which cash amount may be based on a formula relating to the anticipated taxable income
associated with such other Award and the payment of the Cash Award; provided, however, a Cash Award
shall not be granted in tandem or in combination with any other Award if that would (i) cause
application of Section 409A of the Code to either Award or (ii) result in adverse tax consequences
under Section 409A of the Code should that Code section apply to either Award.



     (g) Other Stock-Based Awards. The Committee may also grant to Participants an Other
Stock-Based Award, which shall consist of a right which is an Award denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to, Shares as is
deemed by the Committee to be consistent with the purposes of the Plan. Subject to the terms of
the Plan, including the Performance Objectives, if any, applicable to such Award, the Committee
shall determine the terms and conditions of any such Other Stock-Based Award. Notwithstanding any
other provision of the Plan to the contrary, any Other Stock-Based Award shall contain terms that
(i) are designed to avoid application of Section 409A of the Code or (ii) are designed to avoid
adverse tax consequences under Section 409A should that Code section apply to such Award. Payment
shall be made in a lump sum no later than 2-1/2 months after the date such other Stock-Based Award
becomes vested. Subject to adjustment as provided in Section 4(c) insofar as that provision
relates to Shares, the maximum number of Shares or value for which Other Stock-Based Awards may be
granted to any Participant during any calendar year shall not exceed 100,000 Shares, if the Award
is in Shares, or $500,000, if the Award is in dollars.



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     (h) General.


     (i) Limits on Transfer of Awards.



	 	A.	 	Except as provided in (C) below, each Award,
and each right under any Award, shall be exercisable only by the
Participant during the Participant’s lifetime, or by the person to whom
the Participant’s rights shall pass by will or the laws of descent and
distribution.
	 
	 	B.	 	Except as provided in (C) below, no Award and
no right under any such Award may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a Participant
otherwise than by will or by the laws of descent and distribution (or,
in the case of Restricted Stock, to the Company). Any such attempted
or purported assignment, alienation, pledge, attachment, sale, transfer
or encumbrance shall be void, ineffective and unenforceable against the
Company or any Affiliate, and shall give no right to the purported
transferee, and shall at the sole discretion of the Committee result in
the forfeiture of the Award with respect to the Award involved in such
attempted or perpetual transfer or encumbrance.
	 
	 	C.	 	Notwithstanding anything in the Plan to the
contrary, to the extent specifically provided by the Committee with
respect to a grant, (1) a nonqualified stock option may be transferred
to immediate family members or related family trusts, or similar
entities on such terms and conditions as the Committee may establish,
and (2) an Award other than an Incentive Stock Option may be
transferred pursuant to a qualified domestic relations order described
in Section 414(p) of the Code.




     (ii) Term of Awards. Subject to the terms of the Plan, the term of each Award
shall be for such period as may be determined by the Committee; provided, that in no event
shall the term of any Award exceed a period of 10 years from the date of its grant.


     (iii) Share Certificates. All certificates for Shares or other securities of
the Company delivered under the Plan pursuant to any Award or the exercise thereof shall be
subject to such stop transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations, and other requirements of the SEC, any
stock exchange upon which such Shares or other securities are then listed, and any
applicable federal or state laws, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.


     (iv) Consideration for Grants. Awards may be granted for no cash consideration
or for such consideration as the Committee determines including, without limitation, such
minimal cash consideration as may be required by applicable law.


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     (v) Delivery of Shares or other Securities upon Payment by Participant of
Consideration. No Shares or other securities shall be delivered pursuant to any Award
until payment in full of any amount required to be paid pursuant to the Plan or the
applicable Award Agreement is received by the Company (including Shares being withheld in
accordance with Section 8(b) or any applicable Award agreement).




     (vi) Section 409A Considerations. Notwithstanding any other provision of the
Plan to the contrary, any Award granted after December 31, 2004 shall contain terms that
(i) are designed to avoid application of Section 409A of the Code to the Award or (ii) are
designed to avoid adverse tax consequences under Section 409A of the Code should that Code
Section apply to the Award. Dividend payments under any Award (which are paid directly to
any Participant and which are otherwise subject to Section 409A) shall be made monthly (if
any) as of the last business day of each month, which payment date is intended to be a fixed
time or schedule under Treasury Regulation 1.409A-3(a)(4).




     (vii) 409A Specified Employee. If the Participant is a “specified employee,” as
defined in 409A and the applicable regulations, except to the extent permitted under Section
409A of the Code, no payment of any Award that is subject to Section 409A of the Code (after
taking into account all applicable exceptions to Section 409A of the Code, including but not
limited to the exceptions for short-term deferrals and for “separation pay only upon an
involuntary separation from service”) shall be made under the Plan on account of the
Participant’s “separation from service,” as defined in Section 409A of the Code, with the
Company until the later of the date prescribed for payment in the Award and the first day of
the seventh calendar month that begins after the date of the Participant’s separation from
service (or, if earlier, the date of death of the Participant). Any such amounts shall be
aggregated and paid in a lump sum.



SECTION 7. Amendment and Termination.




     Except to the extent prohibited by applicable law and unless otherwise expressly provided in
an Award Agreement or in the Plan:



     (a) Amendments to the Plan. Except as required by applicable law or the rules of the
principal securities exchange or market on which the shares are traded and subject to Section 7(b)
below, the Board or the Committee may amend, alter, suspend, discontinue, or terminate the Plan
without the consent of any stockholder, Participant, other holder or beneficiary of an Award, or
other Person.



     (b) Amendments to Awards. Subject to (d) below, the Committee may waive any conditions
or rights under, amend any terms of, or alter any Award theretofore granted, provided no change,
other than pursuant to Section 7(c), in any Award shall reduce the benefit to Participant without
the consent of such Participant. In no event shall the Committee, if not the Board, take action
without the approval of the Board that constitutes a “repricing” of an Option for financial
accounting purposes, and any Board-approved repricing shall be inoperative and ineffective unless
and until approved by the stockholders.



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     (c) Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events. Subject to (d) below, the Committee is hereby authorized to make adjustments in the
terms and conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in Section 4(c) of the
Plan) affecting the Company, any Affiliate, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available under the Plan;
provided, that any such election would not (i) cause the application of Section 409A of the Code to
the Award or (ii) create adverse tax consequences under Section 409A of the Code should Section
409A apply to the Award.



     (d) Section 162(m). The Committee, in its sole discretion and without the consent of
the Participant, in addition to adjustments that may be made pursuant to Section 7(c) above, may
amend (i) any stock-based Award to reflect (1) a change in corporate capitalization, such as a
stock split or dividend, (2) a corporate transaction, such as a corporate merger, a corporate
consolidation, any corporate separation (including a spinoff or other distribution of stock or
property by a corporation), any corporate reorganization (whether or not such reorganization comes
within the definition of such term in Section 368 of the Code), (3) any partial or complete
corporate liquidation, or (4) a change in accounting rules required by the Financial Accounting
Standards Board and (ii) any Award that is not intended to meet the requirements of the performance
based compensation exception to Section 162(m) of the Code, to reflect a significant event that the
Committee, in its sole discretion, believes to be appropriate to reflect the original intent in the
grant of the Award. With respect to an Award that is subject to Section 162(m) of the Code,
subject to Section 8, the Committee (i) shall not take any action that would disqualify such Award
as performance based compensation and (ii) must first certify that the Performance Objectives, if
applicable, have been achieved before the Award may be paid.



SECTION 8. Change in Control.




     (a) Awards Granted on or Prior to March 1, 2005. Notwithstanding any other
provision of this Plan to the contrary, in the event of a Change in Control of the Company all
outstanding Awards granted on or prior to March 1, 2005 shall automatically become fully vested
immediately prior to such Change in Control (or such earlier time as set by the Committee), all
restrictions, if any, with respect to such Awards shall lapse, and all performance criteria, if
any, with respect to such Awards shall be deemed to have been met in full (at the highest level).



     (b) Awards Granted After March 1, 2005. With respect to Awards granted after March 1,
2005, notwithstanding any other provision of this Plan to the contrary, in the event that a
Participant’s employment with the Company (or a successor) and all of its Affiliates terminates
within 2 years after a Change in Control of the Company and (i) such termination of employment was
initiated by the Company (or a successor) other than for a Termination for Cause or (ii) such
termination of employment was initiated by a Participant after determining in the Participant’s
good faith reasonable judgment that the termination is a Termination for Good Reason, all such
Awards of each affected Participant shall become fully vested immediately as of such employment
termination date, all restrictions, if any, with respect to such Awards shall lapse, and



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all performance criteria, if any, with respect to such Awards shall be deemed to have been met
in full (at the highest or maximum level). Unless the Company survives as an independent publicly
traded company, all Options outstanding at the time of the events that give rise to each affected
Participant’s right to Change in Control benefits hereunder shall terminate and the Optionee shall
be paid, with respect to each Option, an amount in cash equal to the excess of the Fair Market
Value of a Share over the Option’s exercise price (if the Option exercise price exceeds the Fair
Market Value of a Share on such date, the Optionee shall be paid an amount in cash equal to the
lesser of $1.00 or the Black-Scholes value of the cancelled Option as determined in good faith by
the Board), unless and except to the extent provision is made in writing in connection with such
Change in Control event or transaction for the continuation of the Plan and/or the assumption of
the Options theretofore granted, or for the substitution for such Options of new options covering
the stock of a successor entity, or the parent or subsidiary thereof, with appropriate adjustments
as to the number and kinds of shares and exercise prices, in which event the Plan and Options
theretofore granted shall continue as fully vested and immediately exercisable Options in the
manner and under the terms so provided.




SECTION 9. General Provisions.




     (a) No Rights to Awards. No Director, Employee, Consultant or other Person shall have
any claim to be granted any Award. There is no obligation for uniformity of treatment of
Participants or holders or beneficiaries of Awards, and the terms and conditions of Awards need not
be the same with respect to each recipient.



     (b) Withholding. The Company or any Affiliate is authorized to withhold from any
Award, from any payment due or transfer made under any Award or under the Plan or from any
compensation or other amount owing to a Participant the amount (in cash, Shares, other securities,
Shares that would otherwise be issued pursuant to such Award, other Awards or other property) of
any applicable taxes payable at the minimum statutory rate in respect of an Award, its exercise,
the lapse of restrictions thereon, or any payment or transfer under an Award or under the Plan and
to take such other action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes at the minimum statutory rate. In addition, the
Committee may provide, in an Award Agreement, that the Participant shall have the right to direct
the Company to satisfy the Company’s actual tax withholding obligation through the “constructive”
tender of already-owned Shares or the withholding of Shares otherwise to be acquired upon the
exercise or payment of such Award.



     (c) No Right to Employment. The grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or any Affiliate. Further, the
Company or an Affiliate may at any time dismiss a Participant from employment or other service
relationship at any time, free from any liability or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement.



     (d) Governing Law. The validity, construction, and effect of the Plan and any rules
and regulations relating to the Plan shall be governed by and construed in accordance with the laws
of the State of Delaware and applicable federal law.



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     (e) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award,
or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee, materially altering
the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction,
Person or Award and the remainder of the Plan and any such Award shall remain in full force and
effect.



     (f) Other Laws. The Committee may refuse to issue or transfer any Shares or other
consideration under an Award if, acting in its sole discretion, it determines that the issuance of
transfer or such Shares or such other consideration might violate any applicable law or regulation
or entitle the Company to recover the same under Section 16(b) of the Exchange Act, and any payment
tendered to the Company by a Participant, other holder or beneficiary in connection with the
exercise of such Award shall be promptly refunded to the relevant Participant, holder or
beneficiary.



     (g) Unfunded Plan. Neither the Plan nor the Award shall create or be construed to
create a trust or separate fund or funds. Neither the Plan nor any Award shall establish any kind
of a fiduciary relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from the Company or any
Affiliate pursuant to an Award, such right shall be no greater than the right of any general
unsecured creditor of the Company or any Affiliate.



     (h) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant
to the Plan or any Award, and the Committee shall determine whether cash, other securities, or
other property shall be paid or transferred in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.



     (i) Substitute Awards. Awards may be granted from time to time in substitution for
similar awards held by employees or directors of other corporations who become Employees or
Directors of the Company or its Affiliates as the result of a merger or consolidation of such
director or employee’s employing corporation with the Company or any Affiliate, or the acquisition
by the Company or any Affiliate of the assets of such director or employee’s employing corporation,
or the acquisition by the Company or any Affiliate of the stock of such director or employee’s
employing corporation. The terms and conditions of substitute Awards granted shall comport with
the terms and conditions set forth in the Plan.



     (j) Shareholder Agreements. The Committee may condition the grant, exercise or
payment of any Award upon such person entering into a stockholders’ agreement or repurchase
agreement in such form as approved from time to time by the Board.



     (k) Gender, Tense and Headings. Whenever the context requires, words of the masculine
gender used herein shall include the feminine and neuter and words used in the singular shall
include the plural. Headings are given to the Sections and subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision thereof.



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     (l) No Guarantee of Tax Consequences. None of the Board, the Company nor the
Committee makes any commitment or guarantee that any federal, state or local tax treatment will
apply or be available to any person participating or eligible to participate hereunder.



     (m) Section 162(m) Special Transition Rule. Should any class of Common Stock be
registered under Section 12(g) of the Exchange Act, the Plan is intended to qualify for the
transition relief provided under Treasury Regulation §1.162-27(f). Accordingly, all compensation
realized by Participants in connection with Awards granted under the Plan within the reliance
period described therein is intended to be exempt from the limitation on tax deductibility under
Section 162(m) of the Code. For purposes of the Plan, the reliance period will expire on the
earlier of (i) the expiration of the Plan, (ii) a “material modification” of the Plan (within the
meaning of Treasury Regulation §1.162-27(h)(1)(iii)), (iii) the issuance of all Common Stock that
has been allocated under the Plan, or (iv) the first meeting of stockholders of the Company at
which directors are to be elected that occurs after the close of the third calendar year following
the calendar year in which the Common Stock is first registered under Section 12(g) of the Exchange
Act.



SECTION 10. Effective Date of the Plan.




     The Plan, as hereby amended and restated, shall be effective on the date it is approved and
adopted by the Board, including with respect to all Awards granted on or after March 1, 2005,
except as otherwise provided in the Plan.



SECTION 11. Term of the Plan.




     No Award shall be granted under the Plan after the 10th anniversary of the earlier of the date
this Plan is adopted by the Board or the date the Plan is approved by the stockholders of the
Company. However, unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award granted prior to such termination, and the authority of the Board or the
Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive
any conditions or rights under such Award, shall extend beyond such termination date.



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