**Exhibit 10.4**

 

**LINN ENERGY, LLC**

**LONG-TERM INCENTIVE PLAN**

**FORM OF EXECUTIVEOPTION AGREEMENT**

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This optionagreement (“*Option Agreement*”)is made and entered into effective as of [Grant Date], (the “*Grant Date*”) by and between LINNENERGY, LLC, a Delaware limited liability company (together with itssubsidiaries, the “*Company*”),and [Executive] (“*Participant*”).

 

*WHEREAS*,the Company considers it to be in its best interest that Participant be given aproprietary interest in the Company and an added incentive to advance theinterests of the Company; and

 

*WHEREAS*,the Company desires to accomplish such objectives by affording Participant anoption to purchase Units pursuant to the Linn Energy, LLC Long-Term IncentivePlan, which is attached hereto as Appendix A and incorporated by referenceherein (the “*Plan*”).Unless otherwise defined herein, capitalized terms shall have the meaning givensuch terns in the Plan.

 

**NOW,THEREFORE**, in consideration of the mutual agreementshereinafter set forth, the parties hereby agree as follows:

 

# **1.             Grant of Option.** The Companyhereby grants to Participant an option (the “Option”) to purchase all or any part of an aggregate of[                ]Units, under and subject to the terms and conditions of this Option Agreementand the Plan.

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# **2.             Purchase Price. **The purchase price for each Unit to be purchased hereunder shall be $[            ] (the“Exercise Price”).

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# **3.             Vesting and Option Period. **Participant may exercise the Option in whole or in part.  Except as otherwise provided herein, theOption shall become vested and exercisable with respect to one third (1/3) ofthe covered Units on January 19,[              ],with respect to an additional one third (1/3) of the covered Units on January 19,[              ]and with respect to the final one third (1/3) of the covered Units on January 19,[              ].  Prior to such time, no portion of the Optionshall be exercisable unless its exercisability is accelerated as provided in thisOption Agreement or the Plan.  Except asprovided otherwise in this Option Agreement or the Plan, the Option, to theextent not theretofore exercised, shall terminate on the expiration of ten (10) yearsfrom the date of grant of the Option; provided, however, that upon thetermination Participant’s service relationship with the Company for any reasonother than (a) the death of the Participant or (b) termination of theParticipant’s service relationship with the Company as a result of a Change ofControl, Participant may, until the earlier of (i) 90 days from the dateof such termination or (ii) the expiration of the Option in accordancewith this Section 3, exercise the Option, to the extent such Option hadvested immediately prior to such termination and, thereafter, the Option shall,to the extent not previously exercised, automatically terminate and become nulland void.

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# **4.             Method of Exercise andPayment. **To the extent that the Option has become exercisable, the Option may beexercised from time to time by written notice to General Counsel, in substantiallythe form attached hereto as Appendix B or such other form as may be approvedfrom time to time by the Committee, accompanied by the aggregate Exercise Pricefor the Units to be purchased and any required tax withholding amount as may bedetermined in the discretion of General Counsel.  The Exercise Price and any withholding shallbe payable in cash, by certified check, by bank check or other means providedfor in the Plan and approved by the Committee, including without limitation bycashless-broker exercise or the withholding of Units upon the exercise of theOption.

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# **5.             General Restrictions.**  Subject tothe terms of this Option Agreement and the Plan, the Option may be exercised atany time, and from time to time, in whole or in part, until the terminationthereof as set forth herein, or until all Units covered by the Option shallhave been purchased, whichever first occurs. The Option shall not be assignable or transferable except as expresslyprovided by the Committee.

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# **6.            **Terminationby Company other than for Cause.  Upon the termination by the Company of Participant’sservice relationship with the Company other than for Cause (as defined hereinand as determined by the Committee in its sole discretion), the Option grantedhereby shall automatically and immediately vest in full.  “Cause”shall mean (a) Participant’s conviction of, or plea of nolo contendere to, any felony, anycrime or offense causing substantial harm to the Company (whether or not forpersonal gain) or involving acts of theft, fraud, embezzlement, moral turpitudeor similar conduct; (b) Participant’s repeated intoxication by alcohol ordrugs during the performance of his or her duties; (c) malfeasance in theconduct of Participant’s duties, including, but not limited to, (i) willfuland intentional misuse or diversion of any Company funds, (ii) embezzlementor (iii) fraudulent or willful and material misrepresentations orconcealments on any written reports submitted to the Company; (d) Participant’smaterial failure to perform the duties of Participant’s employment or servicerelationship consistent with Participant’s position or material failure tofollow or comply with the reasonable and lawful written directives of the Boardof the Company; or (e) a material breach by Participant of the writtenpolicies of the Company concerning employee discrimination or harassment.

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# **7.            **Terminationby Participant with Good Reason.  Upon the termination by Participant of Participant’sservice relationship with the Company with Good Reason (as defined herein), theOption granted hereby shall automatically and immediately vest in full.  “GoodReason” shall mean any of the following to which Participant doesnot consent in writing: (a) a reduction in Participant’s base salary; (b) arelocation of Participant’s primary place of employment to a location more than50 miles from [Houston, Texas]/[Pittsburgh, Pennsylvania]; or (c) anymaterial reduction in Participant’s title, authority or responsibilities as[Title] of the Company.

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# **8.            **Death or Disability.  In the case of termination of Participant’s service relationship with theCompany due to death or Disability (as defined herein), the Option grantedhereby shall automatically and immediately vest in full.  “Disability”shall mean the determination by a physician selected by the Company thatParticipant has been unable to perform substantially Participant’s usual andcustomary duties for a period of at least one 

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# **hundred twenty (120) consecutive days or a non-consecutive period of onehundred eighty (180) days during any twelve-month period as a result ofincapacity due to mental or physical illness or disease.  In the case of termination of Participant’sservice relationship with the Company due to death or Disability, Participantor Participant’s estate (or any person who acquired the right to exercise suchOption by bequest or inheritance or otherwise by reason of Participant’s deathor by reason of Participant’s Disability) may, until the earlier of (a) oneyear after the date of death or (b) the expiration of the Option inaccordance with Section 3, exercise the Option and, thereafter, the Optionshall, to the extent not previously exercised, automatically terminate andbecome null and void.**

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# **9.            **Changeof  Control.  Notwithstanding anything in the Plan to thecontrary, in the event of a Change of Control (as defined in the EmploymentAgreement), the Option granted hereby shall automatically and immediately vestin full.  In the event of the terminationof Participant’s service relationship with the Company as a result of a Changeof Control, the Participant may, until the earlier of (a) one year afterthe date of such termination or (b) the expiration of the Option inaccordance with Section 3, exercise the Option and, thereafter, the Optionshall, to the extent not previously exercised, automatically terminate andbecome null and void.

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# **10.         **Terminationby Company for Cause or by Participant without Good Reason.  In the case of (a) termination by the Company of Participant’sservice relationship with the Company for Cause or (b) termination byParticipant of Participant’s service relationship with the Company without GoodReason and other than due to Participant’s death or disability, Participantshall immediately forfeit all rights with respect to any unvestedOptions..  Participant hereby agrees toundertake any action and execute any document, instrument or papers reasonablyrequested by the Company to effect such forfeiture of the Option resulting fromany such termination.

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# **11.          Rights as a Unitholder. **Participant, or a transferee of the Option, shall have no rights as aholder of a membership interest in the Company except as to any Units actuallypurchased pursuant to the exercise of the Option.

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# **12.          Plan Controlling Document. **Participant agrees that the Plan is the controlling instrument and thatto the extent there is any conflict between the terms of the Plan and thisOption Agreement, the Plan shall control and be the governing document.

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# **13.          Limited Liability CompanyAgreement. **As a condition to the exercise of the Option,Participant agrees to be bound by all applicable provisions of the Company’slimited liability company agreement, as it may be amended from time to time.

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# **14.          Taxes.  **The Company and any affiliate thereof are authorized to withhold from anypayment relating to the Option, or any payroll or other payment to Participant,amounts of withholding and other taxes due or potentially payable in connectionwith the exercise of the Option, and to take such other action as the Committeemay deem advisable to enable the Company, any affiliate, and Participant tosatisfy obligations for the payment of withholding taxes and other taxobligations relating to the Option.  Thisauthority shall include authority to withhold or receive Units or otherproperty and to make cash payments in respect thereof in 

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# **satisfaction of Participant’s tax obligations, either on a mandatory orelective basis in the discretion of the Committee.**

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# **15.          Issuance of Units. **The Company shall not be obligated to issue any Units pursuant to theOption at any time when the Units covered by such Option have not beenregistered under the Securities Act of 1933, as amended, and such other stateand federal laws, rules or regulations as the Company or the Committeedeems applicable and, in the opinion of legal counsel for the Company, there isno exemption from the registration requirements of such laws, rules or regulationsavailable for the issuance and sale of such Units.

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# **16.          Notices. **Any notices given in connection with this Option Agreement shall, ifissued to Participant, be delivered to Participant’s current address on filewith the Company, or if issued to the Company, be delivered to the Company’sprincipal offices.

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# **17.          Execution of Receipts andReleases. **Any payment of cash or any issuance or transfer ofUnits or other property to Participant, or to Participant’s legalrepresentatives, heirs, legatees or distributees, in accordance with theprovisions hereof, shall, to the extent thereof, be in full satisfaction of allclaims of such persons hereunder.  TheCompany may require Participant or Participant’s legal representatives, heirs,legatees or distributees, as a condition precedent to such payment or issuance,to execute a release and receipt therefor in such form as it shall determine.

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# **18.          Successors. **This Option Agreement shall be binding upon Participant, Participant’slegal representatives, heirs, legatees and distributees, and upon the Company,its successors and assigns.

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**IN WITNESS WHEREOF**, the partieshereto have executed this Option Agreement to be effective as of the day andyear first above written.

 
|   | **LINN  ENERGY, LLC** |                                                                                                                                                                                                                             |   |
|--------|-----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | ** **            |                                                                                                                                                                                                                             |   |
|   | By:                   |                                                                                                                                                                                                                             |
|   | Name:                 | [                                     ] |   |
|   | Title:                | [                                     ] |   |
|        |                       |                                                                                                                                                                                                                                  |        |  |  |

 

 
|   | **PARTICIPANT:** |   |
|--------|------------------|--------|
|   |             |

 

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