**Exhibit 10.4**

 

INCENTIVE PLAN OF

EDGE PETROLEUMCORPORATION

 

(AS AMENDED ANDRESTATED EFFECTIVE AS OF AUGUST 2, 2006)

 

1. Plan. This IncentivePlan of Edge Petroleum Corporation (the “Plan”) was adopted by Edge PetroleumCorporation to reward certain corporate officers and key employees of EdgePetroleum Corporation and certain independent consultants by enabling them toacquire shares of common stock of Edge Petroleum Corporation.

 

2. Objectives. This Planis designed to attract and retain key employees of the Company and itsSubsidiaries (as hereinafter defined), to attract and retain qualifieddirectors of the Company, to attract and retain consultants and otherindependent contractors, to encourage the sense of proprietorship of suchemployees, directors and independent contractors and to stimulate the activeinterest of such persons in the development and financial success of theCompany and its Subsidiaries. These objectives are to be accomplished by makingAwards (as hereinafter defined) under this Plan and thereby providingParticipants (as hereinafter defined) with a proprietary interest in the growthand performance of the Company and its Subsidiaries.

 

3. Definitions. As usedherein, the terms set forth below shall have the following respective meanings:

 

“Annual Director AwardDate” means, for each year beginning on or after the IPO Closing Date, thefirst business day of the month next succeeding the date upon which the annualmeeting of stockholders of the Company is held in such year.

 

“Authorized Officer”means the Chairman of the Board or the Chief Executive Officer of the Company(or any other senior officer of the Company to whom either of them shalldelegate the authority to execute any Award Agreement).

 

“Award” means an EmployeeAward, a Director Award or an Independent Contractor Award.

 

“Award Agreement” meansany Employee Award Agreement, Director Award Agreement or IndependentContractor Award Agreement.

 

“Board” means the Boardof Directors of the Company.

 

“Cash Award” means anaward denominated in cash.

 

“Code” means the InternalRevenue Code of 1986, as amended from time to time.

 

“Committee” means theCompensation Committee of the Board or such other committee of the Board as isdesignated by the Board to administer the Plan.

 

“Common Stock” means theCommon Stock, par value $.01 per share, of the Company.

 

“Company” means EdgePetroleum Corporation, a Delaware corporation.

 

“Director” means anindividual serving as a member of the Board.

 

“Director Award” meansthe grant of a Director Option or a Director Stock Award.

 

“Director Award Agreement”means a written agreement between the Company and a Participant who is aNonemployee Director setting forth the terms, conditions and limitationsapplicable to a Director Award.

 

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“Director Stock Award”means a Stock Award granted to a Non-employee Director pursuant to theapplicable terms, conditions and limitations specified in paragraph 9(b)hereof.

 

“Disability” means, withrespect to a Non-employee Director, the inability to perform the duties of aDirector for a continuous period of more than three months by reason of anymedically determinable physical or mental impairment.

 

“Dividend Equivalents”means, with respect to shares of Restricted Stock that are to be issued at theend of the Restriction Period, an amount equal to all dividends and otherdistributions (or the economic equivalent thereof) that are payable tostockholders of record during the Restriction Period on a like number of sharesof Common Stock.

 

“Employee” means anemployee of the Company or any of its Subsidiaries and an individual who hasagreed to become an Employee of the Company or any of its Subsidiaries andactually becomes such an Employee within the following six months.

 

“Employee Award” meansthe grant of any Option, SAR, Stock Award, Cash Award or Performance Award,whether granted singly, in combination or in tandem, to a Participant who is anEmployee pursuant to such applicable terms, conditions and limitations as theCommittee may establish in order to fulfill the objectives of the Plan.

 

“Employee Award Agreement”means a written agreement between the Company and a Participant who is anEmployee setting forth the terms, conditions and limitations applicable to anEmployee Award.

 

“Exchange Act” means theSecurities Exchange Act of 1934, as amended from time to time.

 

“Fair Market Value” of ashare of Common Stock means, as of a particular date, (i) if shares of CommonStock are listed on a national securities exchange, the mean between thehighest and lowest sales price per share of Common Stock on the consolidatedtransaction reporting system for the principal national securities exchange onwhich shares of Common Stock are listed on that date, or, if there shall havebeen no such sale so reported on that date, on the last preceding date on whichsuch a sale was so reported, (ii) if shares of Common Stock are not so listedbut are quoted on the Nasdaq National Market, the mean between the highest andlowest sales price per share of Common Stock reported by the Nasdaq NationalMarket on that date, or, if there shall have been no such sale so reported onthat date, on the last preceding date on which such a sale was so reported,(iii) if the Common Stock is not so listed or quoted, the mean between theclosing bid and asked price on that date, or, if there are no quotationsavailable for such date, on the last preceding date on which such quotationsshall be available, as reported by the Nasdaq Stock Market, or, if not reportedby the Nasdaq Stock Market, by the National Quotation Bureau Incorporated or(iv) if shares of Common Stock are not publicly traded, the most recent valuedetermined by an independent appraiser appointed by the Company for suchpurpose; provided that, notwithstanding the foregoing, “Fair Market Value” inthe case of any Award made in connection with the IPO, means the price pershare to the public of the Common Stock in the IPO, as set forth in the finalprospectus relating to the IPO.

 

“Incentive Option” meansan Option that is intended to comply with the requirements set forth inSection 422 of the Code.

 

“Independent Contractor”means a person providing services to the Company or any of its Subsidiariesexcept an Employee or Non-employee Director.

 

“Independent ContractorAward” means the grant of any Nonqualified Stock Option, SAR, Stock Award, CashAward or Performance Award, whether granted singly, in combination or intandem, to a Participant who is an Independent Contractor pursuant to suchapplicable terms, conditions and limitations as the Committee may establish inorder to fulfill the objectives of the Plan.

 

“Independent ContractorAward Agreement” means a written agreement between the Company and aParticipant who is an Independent Contractor setting forth the terms,conditions and limitations applicable to an Independent Contractor Award.

 

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“IPO” means the firsttime a registration statement filed under the Securities Act of 1933 and respectingan underwritten primary offering by the Company of shares of Common Stock isdeclared effective under that Act and the shares registered by thatregistration statement are issued and sold by the Company (otherwise thanpursuant to the exercise of any over-allotment option).

 

“IPO Closing Date” meansthe date on which the Company first receives payment for the shares of CommonStock it sells in the IPO.

 

“Non-employee Director”has the meaning set forth in paragraph 4(b) hereof.

 

“Nonqualified StockOption” means an Option that is not an Incentive Option.

 

“Option” means a right topurchase a specified number of shares of Common Stock at a specified price.

 

“Participant” means anEmployee, Director or Independent Contractor to whom an Award has been madeunder this Plan.

 

“Performance Award” meansan award made pursuant to this Plan to a Participant who is an Employee orIndependent Contractor who is subject to the attainment of one or morePerformance Goals.

 

“Performance Goal” meansa standard established by the Committee, to determine in whole or in partwhether a Performance Award shall be earned.

 

“Restricted Stock” meansany Common Stock that is restricted or subject to forfeiture provisions.

 

“Restriction Period”means a period of time beginning as of the date upon which an Award ofRestricted Stock is made pursuant to this Plan and ending as of the date uponwhich the Common Stock subject to such Award is no longer restricted or subjectto forfeiture provisions.

 

“Rule 16b-3” meansRule 16b-3 promulgated under the Exchange Act, or any successor rule.

 

“SAR” means a right toreceive a payment, in cash or Common Stock, equal to the excess of the FairMarket Value or other specified valuation of a specified number of shares ofCommon Stock on the date the right is exercised over a specified strike price,in each case, as determined by the Committee.

 

“Stock Award” means anaward in the form of shares of Common Stock or units denominated in shares ofCommon Stock.

 

“Subsidiary” means (i) inthe case of a corporation, any corporation of which the Company directly orindirectly owns shares representing more than 50% of the combined voting powerof the shares of all classes or series of capital stock of such corporationwhich have the right to vote generally on matters submitted to a vote of thestockholders of such corporation and (ii) in the case of a partnership or otherbusiness entity not organized as a corporation, any such business entity ofwhich the Company directly or indirectly owns more than 50% of the voting,capital or profits interests (whether in the form of partnership interests,membership interests or otherwise).

 

4. Eligibility.

 

(a) Employees. KeyEmployees eligible for Employee Awards under this Plan are those who holdpositions of responsibility and whose performance, in the judgment of theCommittee, can have a significant effect on the success of the Company and itsSubsidiaries, including those individuals who are expected to become Employeeswithin six months.

 

(b) Directors. Directorseligible for Director Awards under this Plan are those who are not employees ofthe Company or any of its Subsidiaries (“Non-employee Directors”).

 

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(c) IndependentContractors. Independent Contractors eligible for Independent Contractor Awardsunder this Plan are those Independent Contractors providing services to, or whowill provide services to, the Company or any of its Subsidiaries.

 

5. Common Stock Availablefor Awards. Subject to the provisions of paragraph 15 hereof, there shall beavailable for Awards under this Plan granted wholly or partly in Common Stock(including rights or options that may be exercised for or settled in CommonStock) an aggregate of 2,200,000 shares of Common Stock, all of which shall beavailable for Incentive Options. The number of shares of Common Stock that arethe subject of Awards under this Plan, that are forfeited or terminated, expireunexercised, are settled in cash in lieu of Common Stock or in a manner such thatall or some of the shares covered by an Award are not issued to a Participantor are exchanged for Awards that do not involve Common Stock, shall againimmediately become available for Awards hereunder. The Committee may from timeto time adopt and observe such procedures concerning the counting of sharesagainst the Plan maximum as it may deem appropriate. The Board and theappropriate officers of the Company shall from time to time take whateveractions are necessary to file any required documents with governmentalauthorities, stock exchanges and transaction reporting systems to ensure thatshares of Common Stock are available for issuance pursuant to Awards.

 

6. Administration.

 

(a) This Plan, as itapplies to Participants who are Employees or Independent Contractors but notwith respect to Participants who are Non-employee Directors, shall beadministered by the Committee. To the extent required in order for EmployeeAwards to be exempt from Section 16 of the Exchange Act by virtue of theprovisions of Rule 16b-3, the Committee shall consist of at least twomembers of the Board who meet the requirements of the definition of “non-employeedirector” set forth in Rule 16b-3(b)(3)(i) promulgated under the ExchangeAct.

 

(b) Subject to theprovisions hereof, insofar as this Plan relates to the Employee Awards orIndependent Contractor Awards, the Committee shall have full and exclusivepower and authority to administer this Plan and to take all actions that arespecifically contemplated hereby or are necessary or appropriate in connectionwith the administration hereof. Insofar as this Plan relates to the EmployeeAwards or Independent Contractor Awards, the Committee shall also have full andexclusive power to interpret this Plan and to adopt such rules, regulations andguidelines for carrying out this Plan as it may deem necessary or proper, allof which powers shall be exercised in the best interests of the Company and inkeeping with the objectives of this Plan. The Committee may, in its discretion,provide for the extension of the exercisability of an Employee Award orIndependent Contractor Award, accelerate the vesting or exercisability of anEmployee Award or Independent Contractor Award, eliminate or make lessrestrictive any restrictions contained in an Employee Award or IndependentContractor Award, waive any restriction or other provision of this Plan(insofar as such provision relates to Employee Awards or to IndependentContractor Awards) or an Employee Award or Independent Contractor Award or otherwiseamend or modify an Employee Award or Independent Contractor Award in any mannerthat is either (i) not adverse to the Participant to whom such Employee Awardor Independent Contractor Award was granted or (ii) consented to by suchParticipant; provided, however, that no Option awarded as an Employee Award orIndependent Contractor Award pursuant to this Plan may be repriced, replacedwith Stock Awards or Cash Awards, or regranted through cancellation without theapproval of the shareholders of the Company (except in connection with a changein the Company’s capitalization or as otherwise provided in Section 15 hereof),if the effect would be to reduce the exercise price for the shares underlyingsuch Employee Award or Independent Contractor Award. The Committee may make anaward to an individual who it expects to become an Employee of the Company orany of its Subsidiaries within the next six months, with such award beingsubject to the individuals actually becoming an Employee within such timeperiod, and subject to such other terms and conditions as may be established bythe Committee. The Committee may correct any defect or supply any omission orreconcile any inconsistency in this Plan or in any Employee Award orIndependent Contractor Award in the manner and to the extent the Committeedeems necessary or desirable to further the Plan purposes. Any decision of theCommittee in the interpretation and administration of this Plan shall liewithin its sole and absolute discretion and shall be final, conclusive andbinding on all parties concerned.

 

(c) No member of theCommittee or officer of the Company to whom the Committee has delegatedauthority in accordance with the provisions of paragraph 7 of this Planshall be liable for anything done or omitted to be done by him or her, by anymember of the Committee or by any officer of the Company in connection with the

 

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performance of any dutiesunder this Plan, except for his or her own willful misconduct or as expresslyprovided by statute.

 

7. Delegation ofAuthority. The Committee may delegate to the Chief Executive Officer and toother senior officers of the Company its duties under this Plan pursuant tosuch conditions or limitations as the Committee may establish, except that theCommittee may not delegate to any person the authority to grant Awards to, ortake other action with respect to, Participants who are subject toSection 16 of the Exchange Act.

 

8. Employee andIndependent Contractor Awards.

 

(a) The Committee shalldetermine the type or types of Employee Awards to be made under this Plan andshall designate from time to time the Employees who are to be the recipients ofsuch Awards. Each Employee Award may be embodied in an Employee Award Agreement,which shall contain such terms, conditions and limitations as shall bedetermined by the Committee in its sole discretion and shall be signed by theParticipant to whom the Employee Award is made and by an Authorized Officer forand on behalf of the Company. Employee Awards may consist of those listed inthis paragraph 8(a) hereof and may be granted singly, in combination or intandem. Employee Awards may also be made in combination or in tandem with, inreplacement of, or as alternatives to, grants or rights under this Plan or anyother employee plan of the Company or any of its Subsidiaries, including theplan of any acquired entity. An Employee Award may provide for the grant orissuance of additional, replacement or alternative Employee Awards upon theoccurrence of specified events, including the exercise of the original EmployeeAward granted to a Participant. All or part of an Employee Award may be subjectto conditions established by the Committee, which may include, but are notlimited to, continuous service with the Company and its Subsidiaries,achievement of specific business objectives, increases in specified indices,attainment of specified growth rates and other comparable measurements ofperformance. Upon the termination of employment by a Participant who is anEmployee, any unexercised, deferred, unvested or unpaid Employee Awards shallbe treated as set forth in the applicable Employee Award Agreement.

 

(i) Stock Option. AnEmployee Award may be in the form of an Option. An Option awarded pursuant tothis Plan may consist of an Incentive Option or a Nonqualified Option. Theprice at which shares of Common Stock may be purchased upon the exercise of anIncentive Option shall be not less than the Fair Market Value of the CommonStock on the date of grant. The price at which shares of Common Stock may bepurchased upon the exercise of a Nonqualified Option shall be not less than theFair Market Value of the Common Stock on the date of grant. Subject to theforegoing provisions, the terms, conditions and limitations applicable to anyOptions awarded pursuant to this Plan, including the term of any Options andthe date or dates upon which they become exercisable, shall be determined bythe Committee.

 

(ii) Stock AppreciationRight. An Employee Award may be in the form of an SAR. The terms, conditionsand limitations applicable to any SARs awarded pursuant to this Plan, includingthe term of any SARs and the date or dates upon which they become exercisable,shall be determined by the Committee.

 

(iii) Stock Award. AnEmployee Award may be in the form of a Stock Award. The terms, conditions andlimitations applicable to any Stock Awards granted pursuant to this Plan shallbe determined by the Committee.

 

(iv) Cash Award. AnEmployee Award may be in the form of a Cash Award. The terms, conditions andlimitations applicable to any Cash Awards granted pursuant to this Plan shallbe determined by the Committee.

 

(v) Performance Award.Without limiting the type or number of Employee Awards that may be made underthe other provisions of this Plan, an Employee Award may be in the form of aPerformance Award. A Performance Award shall be paid, vested or otherwisedeliverable solely on account of the attainment of one or more pre-established,objective Performance Goals established by the Committee prior to the earlierto occur of (x) 90 days after the commencement of the period of service towhich the Performance Goal relates and (y) the lapse of 25% of the period ofservice (as scheduled in good faith at the time the goal is established), andin any event while the outcome is substantially uncertain. A Performance Goalis objective if a third party having knowledge of the relevant facts coulddetermine whether the goal is met. Such a Performance Goal may be based on oneor more 

 

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business criteria thatapply to the individual, one or more business units of the Company, or theCompany as a whole, and may include one or more of the following: increasedrevenue, net income, stock price, market share, earnings per share, return onequity, return on assets or decrease in costs. Unless otherwise stated, such aPerformance Goal need not be based upon an increase or positive result under aparticular business criterion and could include, for example, maintaining thestatus quo or limiting economic losses (measured, in each case, by reference tospecific business criteria). In interpreting Plan provisions applicable toPerformance Goals and Performance Awards, it is the intent of the Plan toconform with the standards of Section 162(m) of the Code and TreasuryRegulations 1.16227(e)(2)(i), and the Committee in establishing such goalsand interpreting the Plan shall be guided by such provisions. Prior to thepayment of any compensation based on the achievement of Performance Goals, theCommittee must certify in writing that applicable Performance Goals and any ofthe material terms thereof were, in fact, satisfied. Subject to the foregoingprovisions, the terms, conditions and limitations applicable to any PerformanceAwards made pursuant to this Plan shall be determined by the Committee.

 

(b) Notwithstandinganything to the contrary contained in this Plan, the following limitationsshall apply to any Employee Awards made hereunder:

 

(i) no Participant may begranted, during any one-year period, Employee Awards consisting of Options orSARs that are exercisable for more than 135,000 shares of Common Stock;

 

(ii) no Participant maybe granted, during any one-year period, Stock Awards covering or relating tomore than 135,000 shares of Common Stock (the limitation set forth in thisclause (ii), together with the limitation set forth in clause (i) above, beinghereinafter collectively referred to as the “Stock Based Awards Limitations”);and

 

(iii) no Participant maybe granted Employee Awards consisting of cash or in any other form permittedunder this Plan (other than Employee Awards consisting of Options or SARs orotherwise consisting of shares of Common Stock or units denominated in suchshares) in respect of any one-year period having a value determined on the dateof grant in excess of $500,000.

 

(c) The Committee shallhave the sole responsibility and authority to determine the type or types ofIndependent Contractor Awards to be made under this Plan and may make any suchAwards as could be made to an Employee, other than Incentive Options; providedthat the limitations described in paragraph 8(b) shall be inapplicable toIndependent Contractor Awards.

 

9. Director Awards. Each Non-employeeDirector of the Company shall be granted Director Awards in accordance withthis paragraph 9 and subject to the applicable terms, conditions andlimitations set forth in this Plan and the applicable Director Award Agreement.Notwithstanding anything to the contrary contained herein, Director Awardsshall not be made in any year in which a sufficient number of shares of CommonStock are not available to make such Awards under this Plan.

 

(a) Director Options.

 

(i) On the IPO ClosingDate, each Non-employee Director shall be automatically awarded a DirectorOption for the number of shares of Common Stock determined in the followingtable:

 
| **Years of Service With the Company or its Predecessors** | ** ** | **Number of Shares Subject to Option** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| 4 years or  greater                                                                               |       | 8,000                                                           |       |
| 3 to 4 years                                                                                      |       | 6,000                                                           |       |
| 2 to 3 years                                                                                      |       | 4,000                                                           |       |
| 2 years or less                                                                                   |       | 2,000                                                           |       |

 

(ii) Each Non-employeeDirector who was first appointed or elected to the Board of Directors duringthe year ended December 31, 2002, shall be granted a Director Option that: (A)provides for the purchase of 5,000 Shares of Common Stock; (B) expires(notwithstanding any earlier termination of the status of the holder as aNon-employee Director) as set forth on Annex A hereto; (C) vests and becomesexercisable as set forth on Annex A; and (D) has a purchase price of eachshare of Common Stock subject to such Director Option as set forth onAnnex A (which in any event is equal to or greater than the Fair MarketValue as of February 20, 2003).

 

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(iii) Effective beginningFebruary 20, 2003, on the date of his or her first appointment orelection to the Board of Directors, a Non-employee Director may, in thediscretion of the Board of Directors, be granted a Director Option that providesfor the purchase of up to 5,000 shares of Common Stock.

 

(iv) Effective beginningon and including June 1, 2004, on each Annual Director Award Date,each Non-employee Director may, in the discretion of the Board, be granted aDirector Option that provides for the purchase of up to 3,000 shares of CommonStock.

 

(v) Except as provided inor pursuant to (ii): (A) each Director Option shall have a term of ten yearsfrom the date of grant, notwithstanding any earlier termination of the statusof the holder as a Non-employee Director; (B) the purchase price of each shareof Common Stock subject to a Director Option shall be equal to the Fair MarketValue of the Common Stock on the date of grant; and (C) all Director Optionsgranted after July 27, 1999 shall vest and become exercisable on thesecond anniversary of the date of grant.

 

(vi) All unvestedDirector Options shall be forfeited if the Non-employee Director resigns as aDirector without the consent of a majority of the other Directors.

 

(vii) Any Award ofDirector Options shall be embodied in a Director Award Agreement, which shallcontain the terms, conditions and limitations set forth above and shall besigned by the Participant to whom the Director Options are granted and by anAuthorized Officer for and on behalf of the Company.

 

(b) Director StockAwards. Effective beginning on and including June 1, 2004, on eachAnnual Director Award Date, each Non-employee Director who was serving as suchon the date immediately preceding the most recent annual meeting ofstockholders, may, in the discretion of the Board, be awarded shares of CommonStock in respect of all or a portion of the annual retainer to be paid to theNon-employee Director for the preceding twelve months. The Board may providethat all or a portion of any such shares of Common Stock be Restricted Stockand specify the restrictions thereon (unless otherwise specified by the Board,no shares of Common Stock issued as a retainer shall be Restricted Stock).

 

10. Payment of Awards.

 

(a) General. Payment ofEmployee Awards or Independent Contractor Awards may be made in the form ofcash or Common Stock, or a combination thereof, and may include suchrestrictions as the Committee shall determine, including, in the case of CommonStock, restrictions on transfer and forfeiture provisions. If payment of anEmployee Award or Independent Contractor Award is made in the form ofRestricted Stock, the applicable Award Agreement relating to such shares shallspecify whether they are to be issued at the beginning or end of theRestriction Period. In the event that shares of Restricted Stock are to beissued at the beginning of the Restriction Period, the certificates evidencingsuch shares (to the extent that such shares are so evidenced) shall containappropriate legends and restrictions that describe the terms and conditions ofthe restrictions applicable thereto. In the event that shares of RestrictedStock are to be issued at the end of the Restricted Period, the right toreceive such shares shall be evidenced by book entry registration or in suchother manner as the Committee may determine.

 

(b) Deferral. With theapproval of the Committee, amounts payable in respect of Employee Awards orIndependent Contractor Awards may be deferred and paid either in the form ofinstallments or as a lump sum payment. The Committee may permit selectedParticipants to elect to defer payments of some or all types of Employee Awardsor Independent Contractor Awards in accordance with procedures established bythe Committee. Any deferred payment of an Employee Award or IndependentContractor Award, whether elected by the Participant or specified by the AwardAgreement or by the Committee, may be forfeited if and to the extent that theAward Agreement so provides.

 

(c) Dividends andInterest. Rights to dividends or Dividend Equivalents may be extended to andmade part of any Employee Award or Independent Contractor Award consisting ofshares of Common Stock or units denominated in shares of Common Stock, subjectto such terms, conditions and restrictions as the Committee may establish. TheCommittee may also establish rules and procedures for the crediting of intereston deferred cash 

 

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payments and DividendEquivalents for Employee Awards or Independent Contractor Awards consisting ofshares of Common Stock or units denominated in shares of Common Stock.

 

(d) Substitution ofAwards. At the discretion of the Committee, a Participant who is an Employee orIndependent Contractor may be offered an election to substitute an EmployeeAward or Independent Contractor Award for another Employee Award or IndependentContractor Award or Employee Awards or Independent Contractor Awards of thesame or different type.

 

11. Stock OptionExercise. The price at which shares of Common Stock may be purchased under anOption shall be paid in full at the time of exercise in cash or, if elected bythe optionee, the optionee may purchase such shares by means of tenderingCommon Stock or surrendering another Award, including Restricted Stock orDirector Restricted Stock, valued at Fair Market Value on the date of exercise,or any combination thereof. The Committee shall determine acceptable methodsfor Participants who are Employees or Independent Contractors to tender- CommonStock or other Employee Awards or Independent Contractor Awards; provided thatany Common Stock that is or was the subject of an Employee Award or IndependentContractor Award may be so tendered only if it has been held by the Participantfor six months. The Committee may provide for procedures to permit the exerciseor purchase of such Awards by use of the proceeds to be received from the saleof Common Stock issuable pursuant to an Employee Award or IndependentContractor Award. Unless otherwise provided in the applicable Award Agreement,in the event shares of Restricted Stock are tendered as consideration for theexercise of an Option, a number of the shares issued upon the exercise of theOption, equal to the number of shares of Restricted Stock or DirectorRestricted Stock used as consideration therefore, shall be subject to the samerestrictions as the Restricted Stock or Director Restricted Stock so submittedas well as any additional restrictions that may be imposed by the Committee.

 

12. Taxes. The Companyshall have the right to deduct applicable taxes from any Employee Award paymentand withhold, at the time of delivery or vesting of cash or shares of CommonStock under this Plan, an appropriate amount of cash or number of shares ofCommon Stock or a combination thereof for payment of taxes required by law orto take such other action as may be necessary in the opinion of the Company tosatisfy all obligations for withholding of such taxes. The Committee may alsopermit withholding to be satisfied by the transfer to the Company of shares ofCommon Stock theretofore owned by the holder of the Employee Award with respectto which withholding is required. If shares of Common Stock are used to satisfytax withholding, such shares shall be valued based on the Fair Market Valuewhen the tax withholding is required to be made. Except to the extentprohibited by the Section 402 of the Sarbanes-Oxley Act of 2002 or otherapplicable law, the Committee may provide for loans, on either a short term ordemand basis, from the Company to a Participant who is an Employee orIndependent Contractor to permit the payment of taxes required by law.

 

13. Amendment,Modification, Suspension or Termination. The Board may amend, modify, suspendor terminate this Plan for the purpose of meeting or addressing any changes inlegal requirements or for any other purpose permitted by law, except that (i)no amendment or alteration that would adversely affect the rights of anyParticipant under any Award previously granted to such Participant shall bemade without the consent of such Participant and (ii) no amendment oralteration shall be effective prior to its approval by the stockholders of theCompany to the extent such approval is then required pursuant to Rule 16b-3in order to preserve the applicability of any exemption provided by such ruleto any Award then outstanding (unless the holder of such Award consents) or tothe extent stockholder approval is otherwise required by applicable legalrequirements.

 

14. Assignability. Unlessotherwise determined by the Committee and provided in the Award Agreement, noAward or any other benefit under this Plan constituting a derivative securitywithin the meaning of Rule 16a-1(c) under the Exchange Act shall beassignable or otherwise transferable except by will or the laws of descent anddistribution or pursuant to a qualified domestic relations order as defined bythe Code or Title I of the Employee Retirement Income Security Act, or therules thereunder. The Committee may prescribe and include in applicable AwardAgreements other restrictions on transfer. Any attempted assignment of an Awardor any other benefit under this Plan in violation of this paragraph 14 shall benull and void.

 

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15. Adjustments.

 

(a) The existence ofoutstanding Awards shall not affect in any manner the right or power of theCompany or its stockholders to make or authorize any or all adjustments,recapitalizations, reorganizations or other changes in the capital stock of theCompany or its business or any merger or consolidation of the Company, or anyissue of bonds, debentures, preferred or prior preference stock (whether or notsuch issue is prior to, on a parity with or junior to the Common Stock) or thedissolution or liquidation of the Company, or any sale or transfer of all orany part of its assets or business, or any other corporate act or proceeding ofany kind, whether or not of a character similar to that of the acts orproceedings enumerated above.

 

(b) In the event of anysubdivision or consolidation of outstanding shares of Common Stock, declarationof a dividend payable in shares of Common Stock or other stock split, then,except with respect to the Existing Options, (i) the number of shares of CommonStock reserved under this Plan, (ii) the number of shares of Common Stockcovered by outstanding Awards in the form of Common Stock or units denominatedin Common Stock, (iii) the exercise or other price in respect of such Awards,(iv) the appropriate Fair Market Value and other price determinations for suchAwards, (v) the number of shares of Common Stock covered by Director Optionsgranted pursuant to paragraph 9(a) hereof and (vi) the Stock Based AwardsLimitations shall each be proportionately adjusted by the Board to reflect suchtransaction. In the event of any other recapitalization or capitalreorganization of the Company, any consolidation or merger of the Company withanother corporation or entity, the adoption by the Company of any plan ofexchange affecting the Common Stock or any distribution to holders of CommonStock of securities or property (other than normal cash dividends or dividendspayable in Common Stock), the Board shall make appropriate adjustments to (i)the number of shares of Common Stock covered by Awards in the form of CommonStock or units denominated in Common Stock, (ii) the exercise or other price inrespect of such Awards, (iii) the appropriate Fair Market Value and other pricedeterminations for such Awards, (iv) the number of shares of Common Stockcovered by Director Options granted pursuant to paragraph 9(a) hereof and (v)the Stock Based Awards Limitations to give effect to such transaction shalleach be proportionately adjusted by the Board to reflect such transaction;provided that such adjustments shall only be such as are necessary to maintainthe proportionate interest of the holders of the Awards and preserve, withoutexceeding, the value of such Awards. In the event of a corporate merger,consolidation, acquisition of property or stock, separation, reorganization orliquidation, the Board shall be authorized to issue or assume Awards by meansof substitution of new Awards, as appropriate, for previously issued Awards orto assume previously issued Awards as part of such adjustment.

 

(c) In the event of acorporate merger, consolidation, acquisition of property or stock, separation,reorganization or liquidation, the Board may make such adjustments tooutstanding Awards or other provisions for the disposition of outstandingAwards as it deems equitable, and shall be authorized, in its discretion, (i)to provide for the substitution of a new Award or other arrangement (which, ifapplicable, may be exercisable for such property or stock as the Board determines)for an outstanding Award or the assumption of an outstanding Award, regardlessof whether in a transaction to which Section 424(a) of the Code applies,(ii) to provide, prior to the transaction, for the acceleration of the vestingand exercisability of, or lapse of restrictions with respect to, theoutstanding Award and, if the transaction is a cash merger, to provide for thetermination of any portion of the Award that remains unexercised at the time ofsuch transaction or (iii) to provide for the acceleration of the vesting andexercisability of an outstanding Award and the cancellation thereof in exchangefor such payment as shall be mutually agreeable to the Participant and theBoard.

 

16. Restrictions. NoCommon Stock or other form of payment shall be issued with respect to any Awardunless the Company shall be satisfied based on the advice of its counsel thatsuch issuance will be in compliance with applicable federal and statesecurities laws. It is the intent of the Company that grants of Awards underthis Plan comply with Rule 16b-3 with respect to persons subject toSection 16 of the Exchange Act unless otherwise provided herein or in anAward Agreement, that any ambiguities or inconsistencies in the construction ofsuch an Award or this Plan be interpreted to give effect to such intention.Certificates evidencing shares of Common Stock delivered under this Plan (tothe extent that such shares are so evidenced) may be subject to such stoptransfer orders and other restrictions as the Committee may deem advisableunder the rules, regulations and other requirements of the Securities andExchange Commission, any securities exchange or transaction reporting systemupon which the Common Stock is then listed or to which it is admitted forquotation and any applicable federal or state securities law. The Committee maycause a legend or legends to be placed upon such certificates (if any) to makeappropriate reference to such restrictions.

 

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17. Unfunded Plan.Insofar as it provides for Awards of cash, Common Stock or rights thereto, thisPlan shall be unfunded. Although bookkeeping accounts may be established withrespect to Participants who are entitled to cash, Common Stock or rightsthereto under this Plan, any such accounts shall be used merely as abookkeeping convenience. The Company shall not be required to segregate anyassets that may at any time be represented by cash, Common Stock or rightsthereto, nor shall this Plan be construed as providing for such segregation,nor shall the Company, the Board or the Committee be deemed to be a trustee ofany cash, Common Stock or rights thereto to be granted under this Plan. Anyliability or obligation of the Company to any Participant with respect to an Awardof cash, Common Stock or rights thereto under this Plan shall be based solelyupon any contractual obligations that may be created by this Plan and any AwardAgreement, and no such liability or obligation of the Company shall be deemedto be secured by any pledge or other encumbrance on any property of theCompany. Neither the Company nor the Board nor the Committee shall be requiredto give any security or bond for the performance of any obligation that may becreated by this Plan.

 

18. Governing Law. ThisPlan and all determinations made and actions taken pursuant hereto, to theextent not otherwise governed by mandatory provisions of the Code or thesecurities laws of the United States, shall be governed by and construed inaccordance with the laws of the State of Delaware.

 

19. Effectiveness. ThePlan as hereby amended and restated shall be effective as of August 2, 2006.

 

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ANNEX A

 
| **NAME**            | ** ** | **EXPIRATION DATE** | ** ** | **VESTING/ EXERCISABILITY (1)** | ** ** | **PER SHARE PURCHASE PRICE** | ** ** |
|---------------------|------------|--------------------------|------------|-------------------------------------------|------------|---------------------------------------------|------------|
| Joseph R.  Musolino |       | 06/03/2012               |       | 06/03/2004                                |       | $                                           |       | 5.69 |   |
| Thurmon Andress     |       | 01/23/2013               |       | 01/23/2005                                |       | $                                           | 3.88       |   |
| David F. Work       |       | 01/23/2013               |       | 01/23/2005                                |       | $                                           | 3.88       |   |

 

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(1) Options vest andbecome exercisable in full on the date set forth opposite the name of theapplicable Non-employee Director.

 

A-1

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