Exhibit 4.13


 


The EXCO
Resources, Inc.


 


2005
LONG-TERM INCENTIVE PLAN


 


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


 


ARTICLE 1


PURPOSE


 


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


 


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


 


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


 


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


 


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


 


ARTICLE 2


DEFINITIONS


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


2.6                                 “Change
in Control” means that following an offering of the Common Stock pursuant to an
IPO, a “Change in Control” shall mean any of the following:  (i) any consolidation, merger or share
exchange of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company’s Common Stock would be
converted into cash, securities or other property, other than a consolidation,
merger or share exchange of the Company in which the holders of the Company’s
Common Stock immediately prior to such transaction have the same proportionate
ownership of Common Stock of the surviving corporation immediately after such
transaction or the merger of the Company into one of its subsidiaries; (ii) any
sale, lease, exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of
all or substantially all of the assets of the Company; (iii) the
stockholders of the Company approve any plan or proposal for the liquidation or
dissolution of the Company; (iv) the cessation of control (by virtue of
their not constituting a majority of directors) of the Board by the individuals
(the “Continuing Directors”) who (x) at the date of an IPO were directors
or (y) become directors after the date of an IPO and whose election or
nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds of the directors then in office who were directors at the
date of an IPO or whose election or nomination for election was previously so
approved; (v) the acquisition of beneficial ownership (within the meaning
of Rule 13d-3 under the 1934 Act) of an aggregate of 50% or more of the voting power of the
Company’s outstanding voting securities by any person or group (as such term is
used in Rule 13d-5 under the 1934 Act) who beneficially owned less than 50% of the voting power of the Company’s
outstanding voting securities on the date of an IPO; provided, however,
that notwithstanding the foregoing, an acquisition shall not constitute a
Change in Control hereunder if the acquirer is (x) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company and acting in
such capacity, (y) a Subsidiary of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of voting securities of the Company or
(z) any other person whose acquisition of shares of voting securities is
approved in advance by a majority of the Continuing Directors or (aa) a
purchase(s) of the shares are sold pursuant to effective registration under
applicable federal and state securities laws; or (vi) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case
involving the Company to a case under Chapter 7. Notwithstanding the above, no
amount may become payable under a SAR or any other Award which is subject
to Code section 409A unless the Change in Control also satisfies the
definition of a Change in Control under the guidance issued under section 409A
of the Code, and the payment occurs within the time specified in such guidance
for the payment to be treated as on account of the Change in Control.


 


2

















 


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


 


2.8                                 “Committee”
means the committee appointed or designated by the Board to serve as the
Compensation Committee (or a similarly named Committee generally intended to
administer and oversee employee compensation plans such as the Plan) of the
Board to administer the Plan in accordance with Article 3 of this Plan.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2.17                           “Fair
Market Value” means, as of a particular date, (a) if the shares of Common
Stock are listed on a national securities exchange, the closing sales price per
share of Common Stock on the consolidated transaction reporting system for the
principal securities exchange for the Common Stock on that date, or, if there
shall have been no such sale so reported on that date, on the last preceding
date on which such a sale was so reported, (b) if the shares of Common
Stock are not so listed but are quoted on the Nasdaq National Market


 


3

















 


System, the closing sales
price per share of Common Stock on the Nasdaq National Market System on that
date, or, if there shall have been no such sale so reported on that date, on
the last preceding date on which such a sale was so reported, (c) if the
Common Stock is not so listed or quoted, the mean between the closing bid and
asked price on that date, or, if there are no quotations available for such
date, on the last preceding date on which such quotations shall be available,
as reported by Nasdaq, or, if not reported by Nasdaq, by the National Quotation
Bureau, Inc., or (d) if none of the above is applicable, such amount
as may be determined by the Board (acting on the advice of an Independent
Third Party, should the Board elect in its sole discretion to utilize an
Independent Third Party for this purpose), in good faith, to be the fair market
value per share of Common Stock and in compliance with the valuation methods
permitted under Treasury Regulations § 1.422-2(e) and § 20.2031-2.


 


2.18                           “Incentive”
is defined in Section 2.1 hereof.


 


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


 


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


 


2.21                           “IPO”
means the first public offering of any class of equity securities of this
Company (or any successor or assign of the Company whether by merger,
consolidation, sale of assets or otherwise occurring after this Plan is
effective) pursuant to a registration statement filed with and declared
effective by the Securities Exchange Commission.


 


2.22                           “Nonpublicly
Traded” means Company Stock as it exists prior to an IPO.


 


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


 


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


 


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


 


2.26                           “Outside
Director” means a director of the Company who is not an Employee. Outside
Directors are not eligible to receive an Incentive Stock Option.


 


2.27                           “Participant”
means an Employee, Consultant, independent contractor, or Outside Director of
the Company or a Subsidiary to whom an Award is granted under this Plan for any
grant that is not an Incentive Stock Option. A Participant also includes an
Employee to whom an Award for an Incentive Stock Option is granted.


 


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


 


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


 


4

















 


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


 


2.31                           “Reload
Stock Option” means a Nonqualified Stock Option or an Incentive Stock Option
granted pursuant to Section 8.3(c) hereof.


 


2.32                           “Reporting
Participant” means a Participant who is subject to the reporting requirements
of Section 16 of the 1934 Act in the event the Common Stock should ever be
registered under the 1934 Act.


 


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


 


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


 


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


 


2.36                           “SAR”
or “stock appreciation right” means the right to receive a payment, in cash
and/or Common Stock, equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock on a specified date, provided the
amount is fixed on the date the SAR is exercised over the SAR Price for such
shares.


 


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


 


2.38                           “Stock
Option” means a Nonqualified Stock Option, a Reload Stock Option or an Incentive Stock Option.


 


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


 


2.40                           “Termination
of Service” occurs when a Participant who is an Employee of the Company or any
Subsidiary shall cease to serve as an Employee of the Company and its Subsidiaries,
for any reason; or, when a Participant who is an Outside Director of the
Company or a Subsidiary shall cease to serve as a director of the Company and
its Subsidiaries for any reason. Except as may be necessary or desirable
to comply with applicable federal or state law, a “Termination of Service”
shall not be deemed to have occurred when a Participant who is an Employee
becomes an Outside Director or vice versa. If, however, a Participant who is an
Employee and who has an Incentive Stock Option ceases to be an Employee but
does not suffer a Termination of Service, and if that Participant does not
exercise the Incentive Stock Option within the time required under Section 422
of the Code upon ceasing to be an Employee, the Incentive Stock Option shall thereafter
become a Nonqualified Stock Option. Notwithstanding the above, effective on and
after January 1,


 


5

















 


2005, for any Award which
is deferred compensation subject to Section 409A of the Code, “Termination
from Service” shall have the same meaning as “Separation from Service” under Section 409A(a)(2)(A)(i) and
any guidance issued thereunder.


 


2.41                           “Total
and Permanent Disability” means a Participant is qualified for long-term
disability benefits under the Company’s or Subsidiary’s disability plan or
insurance policy; or, if no such plan or policy is then in existence or if the
Participant is not eligible to participate in such plan or policy, that the
Participant, because of a physical or mental condition resulting from bodily
injury, disease, or mental disorder which prevents the Participant from
performing his or her duties of employment for a period of six (6) continuous
months, as determined in good faith by the Committee, based upon medical
reports or other evidence satisfactory to the Committee; provided  that,
with respect to any Incentive Stock Option, Total and Permanent Disability
shall have the meaning given it under the rules governing Incentive Stock
Options under the Code. Notwithstanding the above, for purposes of any Award
hereunder which is deemed to be deferred compensation subject to Section 409A
of the Code, effective for all periods on or after January 1, 2005, “Total
and Permanent Disability” shall mean a participant who either (a) is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to last for a
continuous period of not less than 12 months, or (b) is, by reason of any
medically determinable physical or mental impairment which can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than 3 months under an accident
and health plan covering employees of the participant’s employer, or otherwise
satisfies such definition as it is modified by any guidance issued under or
regarding Section 409A of the Code.


 


ARTICLE 3


ADMINISTRATION


 


3.1                               General
Administration; Establishment of Committee. Subject to the terms of this Article 3,
the Plan shall be administered by the Board or such committee of the Board as
is designated by the Board to administer the Plan (the “Committee”). The
Committee shall consist of not fewer than two persons. Any member of the
Committee may be removed at any time, with or without cause, by resolution
of the Board. Any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board. At any time there is no Committee to
administer the Plan, any references in this Plan to the Committee shall be
deemed to refer to the Board.


 


Membership on the
Committee shall be limited to those members of the Board who are “outside
directors” under Section 162(m) of the Code and “non-employee directors”
as defined in Rule 16b-3 promulgated under the 1934 Act only in the event
the Common Stock should ever be registered under the 1934 Act. The Committee
shall select one of its members to act as its Chairman. A majority of the
Committee shall constitute a quorum, and the act of a majority of the members
of the Committee present at a meeting at which a quorum is present shall be the
act of the Committee.


 


3.2                               Designation
of Participants and Awards.


 


(a)                                  The
Committee or the Board shall determine and designate from time to time the
eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement, where applicable, the Award Period, the Date of Grant,
and such other terms, provisions, limitations, and performance requirements, as
are approved by the Committee, but not inconsistent with the Plan. The
Committee shall determine whether an Award shall include one type of Incentive
or two or more Incentives granted in combination or two or more Incentives
granted in tandem (that is, a joint grant where exercise of one Incentive
results in cancellation of all or a portion of the other Incentive).


 


6

















 


Although
the members of the Committee shall be eligible to receive Awards, all
decisions with respect to any Award, and the terms and conditions thereof, to
be granted under the Plan to any member of the Committee shall be made solely
and exclusively by the other members of the Committee, or if such member is the
only member of the Committee, by the Board.


 


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


 


3.3                               Authority
of the Committee. The Committee, in its discretion, shall (i) interpret
the Plan, (ii) prescribe, amend, and rescind any rules and
regulations necessary or appropriate for the administration of the Plan, (iii) establish
performance goals for an Award and certify the extent of their achievement, and
(iv) make such other determinations or certifications and take such other
action as it deems necessary or advisable in the administration of the Plan. Any
interpretation, determination, or other action made or taken by the Committee
shall be final, binding, and conclusive on all interested parties. The
Committee’s discretion set forth herein shall not be limited by any provision
of the Plan, including any provision which by its terms is applicable
notwithstanding any other provision of the Plan to the contrary.


 


The Committee may delegate
to officers of the Company, pursuant to a written delegation, the authority to
perform specified functions under the Plan. Any actions taken by any
officers of the Company pursuant to such written delegation of authority shall
be deemed to have been taken by the Committee.


 


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


 


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


 


ARTICLE 4


ELIGIBILITY


 


Any Employee (including
an Employee who is also a director or an officer), or Outside Director of the
Company or any Subsidiary whose judgment, initiative, and efforts contributed
or may be expected to contribute to the successful performance of the
Company or any Subsidiary is eligible to participate in the Plan; provided that
only Employees of the Company or any Subsidiary shall be eligible to receive
Incentive Stock Options. An independent contractor providing services to the
Company or any Subsidiary whose judgment, initiative, and efforts contributed
or may be expected to contribute to the successful performance of the


 


7

















 


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


 


ARTICLE 5


SHARES
SUBJECT TO PLAN


 


5.1                               Number
Available for Awards. Subject to adjustment as provided in Articles 11
and 12, the maximum number of shares of Common Stock that may be delivered
pursuant to Awards granted under the Plan is ten million (10,000,000) shares. Shares
to be issued may be made available from authorized but unissued Common
Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the number
of shares of Common Stock that shall be sufficient to satisfy the requirements
of this Plan. The maximum number of shares of Common Stock that may be
delivered pursuant to Awards under the Plan that are Incentive Stock Option
grants is ten million (10,000,000) shares.


 


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


 


ARTICLE 6


GRANT OF
AWARDS


 


6.1                               In
General.


 


(a)                                  The
grant of an Award shall be authorized by the Committee and shall be evidenced
by an Award Agreement setting forth the Incentive or Incentives being granted,
the total number of shares of Common Stock subject to the Incentive(s), the
Option Price (if applicable), the Award Period, the Date of Grant, and such
other terms, provisions, limitations, and performance objectives, as are
approved by the Committee, but not inconsistent with the Plan. The Company
shall execute an


 


8

















 


Award Agreement with a
Participant after the Committee approves the issuance of an Award. Any Award
granted pursuant to this Plan must be granted within ten (10) years of the
date of adoption of this Plan. The Plan shall be submitted to the Company’s
stockholders for approval; however, the Committee may grant Awards under
the Plan prior to the time of stockholder approval. Any such Award granted
prior to such stockholder approval shall be made subject to such stockholder
approval. The grant of an Award to a Participant shall not be deemed either to
entitle the Participant to, or to disqualify the Participant from, receipt of
any other Award under the Plan.


 


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


 


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


 


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


 


6.3                               Maximum
ISO Grants. The Committee may not grant Incentive Stock Options under
the Plan to any Employee which would permit the aggregate Fair Market Value
(determined on the Date of Grant) of the Common Stock with respect to which
Incentive Stock Options (under this and any other plan of the Company and its
Subsidiaries) are exercisable for the first time by such Employee during any
calendar year to exceed $100,000. To the extent any Stock Option granted under
this Plan which is designated as an Incentive Stock Option exceeds this limit
or otherwise fails to qualify as an Incentive Stock Option, such Stock Option
(or any such portion thereof) shall be a Nonqualified Stock Option. In such
case, the Committee shall designate which stock will be treated as Incentive
Stock Option stock by causing the issuance of a separate stock certificate and
identifying such stock as Incentive Stock Option stock on the Company’s stock
transfer records.


 


6.4                               Restricted
Stock. If Restricted Stock is granted to or received by a Participant under
an Award (including a Stock Option), the Committee shall set forth in the
related Award Agreement: (i) the number of shares of Common Stock awarded,
(ii) the price, if any, to be paid by the Participant for such Restricted
Stock and the method of payment of the price, (iii) the time or times
within which such Award may be subject to forfeiture, in whole or in part,
or the schedule which determines when the Participant earns a vested
interest in the shares of Common Stock (subject to the Restricted Stock Award),
(iv) specified Performance Goals of the Company, a Subsidiary, any
division thereof or any group of Employees of the Company, or other criteria,
which the Committee determines must be met in order to remove any restrictions
(including vesting) on such Award, and (v) all other terms, limitations,
restrictions, and conditions of the


 


9

















 


Restricted Stock, which
shall be consistent with this Plan. The provisions of Restricted Stock need not
be the same with respect to each Participant.


 


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


 


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


 


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


 


(ii)                                  Except
as provided in sub-paragraph (i) above or in the applicable Award
Agreement, the Participant shall have, with respect to his or her Restricted
Stock, all of the rights of a stockholder of the Company, including the right
to vote the shares, and the right to receive any dividends thereon. Certificates
for shares of Common Stock free of restriction under this Plan shall be
delivered to the Participant promptly after, and only after, the Restriction
Period shall expire without forfeiture in respect of such shares of Common
Stock or after any other restrictions imposed in such shares of Common Stock by
the applicable Award Agreement or other agreement have expired. Certificates
for the shares of Common Stock forfeited under the provisions of the Plan and
the applicable Award Agreement shall be promptly returned to the Company by the
forfeiting Participant. Each Award Agreement shall require that (x) each Participant, by his or her acceptance
of Restricted Stock, shall irrevocably grant to the Company a power of attorney
to transfer any shares so forfeited to the Company and agrees to execute any
documents requested by the Company in connection with such forfeiture and
transfer, and (y) such provisions regarding returns and transfers of stock
certificates with respect to forfeited shares of Common Stock shall be
specifically performable by the Company in a court of equity or law.


 


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


 


(iv)                              Except
as otherwise provided in the particular Award Agreement, upon Termination of
Service for any reason during the Restriction Period, the nonvested shares of
Restricted Stock shall be forfeited by the Participant. In the event a
Participant has paid any consideration to the Company for such forfeited
Restricted Stock, the Committee shall specify in the Award Agreement that
either (i) the Company shall be obligated to, or (ii) the Company


 


10

















 


may, in its sole
discretion, elect to, pay to the Participant, as soon as practicable after the
event causing forfeiture, in cash, an amount equal to the lesser of the total
consideration paid by the Participant for such forfeited shares or the Fair
Market Value of such forfeited shares as of the date of Termination of Service,
as the Committee, in its sole discretion shall select. Upon any forfeiture, all
rights of a Participant with respect to the forfeited shares of the Restricted
Stock shall cease and terminate, without any further obligation on the part of
the Company.


 


6.5                               SARs.
The Committee may grant SARs to any Participant, either as a separate
Award or in connection with a Stock Option. SARs shall be subject to such terms
and conditions as the Committee shall impose. The grant of the SAR may provide
that the holder may be paid for the value of the SAR either in cash or in
shares of Common Stock, or a combination thereof. In the event of the exercise
of a SAR payable in shares of Common Stock, the holder of the SAR shall receive
that number of whole shares of Common Stock having an aggregate Fair Market
Value on the date of exercise equal to the value obtained by multiplying (i) the
difference between the Fair Market Value of a share of Common Stock on the date
of exercise over the SAR Price as set forth in such SAR (or other value
specified in the agreement granting the SAR), by (ii) the number of shares
of Common Stock as to which the SAR is exercised, with a cash settlement to be
made for any fractional shares of Common Stock. The Committee, in its sole
discretion, may place a ceiling on the amount payable upon exercise of a
SAR, but any such limitation shall be specified at the time that the SAR is
granted.


 


Effective for any SAR
granted on or after January 1, 2005, the exercise price of any SAR shall
in no event be less than the Fair Market Value of the Shares at the time of the
grant. The Award of the SAR shall provide for a period during which the
Participant may exercise the SAR which shall be prior to the specified
payment date. The Award of the SAR shall provide the specified date on which
payment will be made. The payment amount shall be based upon the difference in
the Fair Market Value of the shares at the exercise date and the SAR exercise
price set in the Award multiplied by the number of shares exercised (the “Spread”).
The Award for the SAR may provide for crediting of interest equivalents
from the date of exercise to the specified payment date at a rate specified in
the Award provided the interest rate used is permissible under Section 409A
of the Code and the guidance issued thereunder. If the Award does not specify
any interest equivalent, no interest equivalents shall be credited on the
Spread from the date of exercise to the specified payment date. A SAR shall
only be issued following the date the Company’s Common Stock is offered in a
transaction registered under the applicable federal and state securities laws,
when its securities are publicly traded on an established market; however, if
guidance under Code Section 409A provides for any fewer or different
requirements in order for the SAR to avoid being deferred compensation, the
issuance of the SAR shall be permitted when such fewer or different
requirements are satisfied as determined by the Committee in its sole
discretion.


 


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


 


6.7                               Restricted
Stock Units. Restricted Stock Units may be awarded or sold to any
Participant under such terms and conditions as shall be established by the
Committee. Restricted Stock Units shall be subject to such restrictions as the
Committee determines, including, without limitation, (a) a prohibition
against sale, assignment, transfer, pledge, hypothecation or other encumbrance
for a specified period; or (b) a requirement that the holder forfeit (or
in the case of shares of Common Stock or units sold to the Participant, resell
to the Company at cost) such shares or units in the event of Termination of
Service during the period of restriction.


 


11

















 


6.8                               Performance
Awards.


 


(a)                                  The
Committee may grant Performance Awards to any Participant upon such terms
and conditions as shall be specified at the time of the grant and may include
provisions establishing the performance period, the Performance Goals to be
achieved during a performance period, and the maximum or minimum settlement
values. Each Performance Award shall have its own terms and conditions. If the
Committee determines, in its sole discretion, that the established performance
measures or objectives are no longer suitable because of a change in the
Company’s business, operations, corporate structure, or for other reasons that
the Committee deemed satisfactory, the Committee may modify the
performance measures or objectives and/or the performance period. However, the
Committee may not, in any event, increase the number of shares of Common
Stock earned by any Executive Officer upon satisfaction of any Performance
Goal.


 


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


 


6.9                               Dividend
Equivalent Rights. For grants prior to January 1, 2005, the Committee may grant
a Dividend Equivalent Right to any Participant, either as a component of
another Award or as a separate Award. The terms and conditions of the Dividend
Equivalent Right shall be specified by the grant. Dividend equivalents credited
to the holder of a Dividend Equivalent Right may be paid currently or may be
deemed to be reinvested in additional shares of Common Stock (which may thereafter
accrue additional dividend equivalents). Any such reinvestment shall be at the
Fair Market Value at the time thereof. Dividend Equivalent Rights may be
settled in cash or shares of Common Stock, or a combination thereof, in a
single payment or in installments. A Dividend Equivalent Right granted as a
component of another Award may provide that such Dividend Equivalent Right
shall be settled upon exercise, settlement, or payment of, or lapse of
restrictions on, such other Award, and that such Dividend Equivalent Right
granted as a component of another Award may also contain terms and
conditions different from such other Award.


 


Effective for grants on
or after January 1, 2005, the Committee may grant a Dividend
Equivalent Right to any Participant, either as a component of another Award or
as a separate Award. The terms and conditions of the Dividend Equivalent Right
shall be specified by the grant and will comply with the requirements of Section 409A
of the Code to the extent applicable. Dividend equivalents credited to the
holder of a Dividend Equivalent Right may be paid currently or may be
deemed to be reinvested in additional shares of Common Stock (which may thereafter
accrue additional dividend equivalents) and will be paid at a date specified in
the Award. Any such reinvestment shall be at the Fair Market Value at the time
thereof. Dividend Equivalent Rights may be settled in cash or shares of
Common Stock, or a combination thereof, in a single payment or in installments
which payment date or dates shall be specified in the Award. A Dividend
Equivalent Right granted as a component of another Award may provide that
such Dividend Equivalent Right shall be settled upon a specified date or a schedule of
specified payment dates in the Award, and that such Dividend


 


12

















 


Equivalent Right granted
as a component of another Award may also contain terms and conditions
different from such other Award.


 


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


 


6.11                        Performance
Goals. Awards of Restricted Stock, Restricted Stock Units, Performance
Award and Other Awards (whether relating to cash or shares of Common Stock)
under the Plan may be made subject to the attainment of Performance Goals
relating to one or more business criteria within the meaning of Section 162(m)
of the Code, including, but not limited to, cash flow; cost; ratio of debt to
debt plus equity; profit before tax; economic profit; earnings before interest
and taxes; earnings before interest, taxes, depreciation and amortization;
earnings per share; operating earnings; economic value added; ratio of
operating earnings to capital spending; free cash flow; net profit; net sales;
sales growth; price of the Company’s Common Stock; return on net assets, equity
or stockholders’ equity; market share; or total return to stockholders (“Performance
Criteria”). Any Performance Criteria may be used to measure the
performance of the Company as a whole or any business unit of the Company and may be
measured relative to a peer group or index. Any Performance Criteria may include
or exclude (i) extraordinary, unusual and/or non-recurring items of gain
or loss, (ii) gains or losses on the disposition of a business, (iii) changes
in tax or accounting regulations or laws, or (iv) the effect of a merger
or acquisition, as identified in the Company’s quarterly and annual earnings
releases. In all other respects, Performance Criteria shall be calculated in
accordance with the Company’s financial statements, under generally accepted
accounting principles, or under a methodology established by the Committee
prior to the issuance of an Award which is consistently applied and identified
in the audited financial statements, including footnotes, or the Management
Discussion and Analysis section of the Company’s annual report. However,
the Committee may not in any event increase the amount of compensation
payable to an individual upon the attainment of a Performance Goal. Any
Performance Goal Award issued on or after January 1, 2005, shall only be
paid at a time specified or pursuant to a fixed schedule specified in the
Award if such Performance Goal Award constitutes deferred compensation under Section 409A
of the Code and the guidance issued thereunder or related thereto.


 


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


 


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


 


6.14                        Option
Price. The Option Price for a Nonqualified Stock Option shall be such price
as determined by the Committee; provided, however, such Option Price shall not
be less than the Fair Market Value of the Common Stock on the date of the Grant.
The Option Price for an Incentive Stock Option shall be at least one hundred
percent (100%) of the Fair Market Value of the share on the Date of Grant. If
an Incentive Stock Option is granted to an Employee who owns or is deemed to
own (by reason of attribution rules of Section 424(d) of the
Code) more than ten percent (10%) of the combined voting power of all classes


 


13

















 


of the Company’s stock
(or of any parent or Subsidiary), the Option Price shall be at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock on the
Date of Grant.


 


ARTICLE 7


AWARD
PERIOD; VESTING; TERMINATION OF SERVICE


 


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


 


7.2                               Vesting.
The Committee, in its sole discretion, may determine that an Incentive
will be immediately vested in whole or in part, or that all or any portion may not
be vested until a date, or dates, subsequent to its Date of Grant, or until the
occurrence of one or more specified events, subject in any case to the terms of
the Plan. If the Committee imposes conditions upon vesting, then, subsequent to
the Date of Grant, the Committee may, in its sole discretion, accelerate the
date on which all or any portion of the Incentive may be vested.


 


7.3                               Termination
of Service. In the event of Termination of Service of a Participant, an
Incentive or Award may only be exercised as determined by the Committee
and as provided in the Award Agreement.


 


ARTICLE 8


EXERCISE
OF INCENTIVE


 


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


 


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


 


8.3                               Exercise
of Stock Option.


 


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


 


14

















 


Stock Option may be
exercised for a fractional share of Common Stock. The granting of a Stock
Option shall impose no obligation upon the Participant to exercise that Stock
Option.


 


(b)                                  Notice
and Payment. Subject to such administrative regulations as the Committee may from
time to time adopt, a Stock Option may be exercised by the delivery of
written notice to the Company setting forth the number of shares of Common
Stock with respect to which the Stock Option is to be exercised and the date of
exercise thereof (the “Exercise Date”) which shall be at least three (3) days
after giving such notice unless an earlier time shall have been mutually agreed
upon. On the Exercise Date, the Participant shall deliver to the Company
consideration with a value equal to the total Option Price of the shares to be
purchased, payable as provided in the Award Agreement, which may provide
for payment in any one or more of the following ways:  (a) cash or check, bank draft, or money
order payable to the order of the Company, (b) Common Stock (including
Restricted Stock) owned by the Participant on the Exercise Date, valued at its
Fair Market Value on the Exercise Date, and which the Participant has not
acquired from the Company within six (6) months prior to the Exercise
Date, (c) by delivery (including by FAX) to the Company or its designated
agent of an executed irrevocable option exercise form together with
irrevocable instructions from the Participant to a broker or dealer, reasonably
acceptable to the Company, to sell certain of the shares of Common Stock
purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any
other form of valid consideration that is acceptable to the Committee in
its sole discretion. In the event that
shares of Restricted Stock are tendered as consideration for the exercise of a
Stock Option, a number of shares of Common Stock issued upon the exercise of
the Stock Option equal to the number of shares of Restricted Stock used as
consideration therefor shall be subject to the same restrictions and provisions
as the Restricted Stock so tendered.


 


(c)                                  Reload
Stock Options. In the event that shares of Common Stock are
delivered by a Participant in payment of all or a portion of the exercise price
of a Stock Option as set forth in Section 8.3(b) above and/or shares
of Common Stock are delivered to or withheld by the Company in satisfaction of
the Company’s tax withholding obligations upon exercise in accordance with Section 15.6
hereof, then, subject to Article 10 hereof, the Committee may authorize
the automatic grant to a Participant so exercising a Nonqualified Stock Option,
a replacement Nonqualified Stock Option, and to a Participant so exercising an
Incentive Stock Option, a replacement Incentive Stock Option (in either case, a
“Reload Stock Option”), to purchase that number of shares so delivered to or
withheld by the Company, as the case may be, at an option exercise price
equal to the Fair Market Value per share of the Common Stock on the date of
exercise of the original Stock Option (subject to the provisions of the Plan
regarding Incentive Stock Options and, in any event not less than the par value
per share of the Common Stock). The option period for a Reload Stock Option
will commence on its Date of Grant and expire on the expiration date of the
original Stock Option it replaces (subject to the provisions of the Plan
regarding Incentive Stock Options), after which period the Reload Stock Option
cannot be exercised. The Date of Grant of a Reload Stock Option shall be the
date that the Stock Option it replaces is exercised. A Reload Stock Option
shall automatically vest and be exercisable in full after the expiration of six
(6) months from its Date of Grant. It shall be a condition to the grant of
a Reload Stock Option that promptly after its Date of Grant, a stock option
agreement shall be delivered to the Participant and executed by the Participant
and the Company which sets forth the total number of shares subject to the
Reload Stock Option, the option exercise price, the option period of the Reload
Stock Option and such other terms and provisions as are consistent with the
Plan.


 


(d)                                  Issuance
of Certificate. Except as otherwise provided in Section 6.4 hereof
(with respect to shares of Restricted Stock) or in the applicable Award
Agreement, upon payment of all amounts due from the Participant, the Company
shall cause certificates for the Common Stock then


 


15

















 


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


 


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


 


8.4                               SARs.
Subject to the conditions of this Section 8.4 and such administrative
regulations as the Committee may from time to time adopt, a SAR may be
exercised by the delivery (including by FAX) of written notice to the Committee
setting forth the number of shares of Common Stock with respect to which the
SAR is to be exercised and the date of exercise thereof (the “Exercise Date”)
which shall be at least three (3) days after giving such notice unless an
earlier time shall have been mutually agreed upon. Subject to the terms of the
Award Agreement, on the Exercise Date, the Participant shall be credited by the
Company with cash in an amount equal to the excess (if any) of the Fair Market
Value (as of the date of the exercise of the SAR) per share of Common Stock
over the SAR Price per share specified in such SAR, multiplied by the total
number of shares of Common Stock of the SAR being surrendered, which shall be
paid to the Participant at the date specified in the SAR. In the discretion of
the Committee, and subject to the terms of the Award Agreement, the Company may satisfy
its obligation upon exercise of a SAR by distributing on the specified date for
the Award, that number of shares of Common Stock having an aggregate Fair
Market Value (as of the date of the exercise of the SAR) equal to the amount of
cash otherwise payable to the Participant, with a cash settlement to be made
for any fractional share interests, or the Company may settle such
obligation in part with shares of Common Stock and in part with cash.


 


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


 


ARTICLE 9


AMENDMENT
OR DISCONTINUANCE


 


Subject to the
limitations set forth in this Article 9, the Board may at any time
and from time to time, without the consent of the Participants, alter, amend,
revise, suspend, or discontinue the Plan in whole or in


 


16

















 


part; provided, however,
that no amendment which requires stockholder approval in order for the Plan and
Incentives awarded under the Plan to continue to comply with Sections 162(m),
421, and 422 of the Code, including any successors to such Sections, shall be
effective unless such amendment shall be approved by the requisite vote of the
stockholders of the Company entitled to vote thereon. Any such amendment shall,
to the extent deemed necessary or advisable by the Committee, be applicable to
any outstanding Incentives theretofore granted under the Plan, notwithstanding
any contrary provisions contained in any Award Agreement. In the event of any
such amendment to the Plan, the holder of any Incentive outstanding under the
Plan shall, upon request of the Committee and as a condition to the
exercisability thereof, execute a conforming amendment in the form prescribed
by the Committee to any Award Agreement relating thereto. Notwithstanding anything
contained in this Plan to the contrary, unless required by law, no action
contemplated or permitted by this Article 9 shall adversely affect any
rights of Participants or obligations of the Company to Participants with
respect to any Incentive theretofore granted under the Plan without the consent
of the affected Participant.


 


ARTICLE 10


TERM


 


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


 


ARTICLE 11


CAPITAL
ADJUSTMENTS


 


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


 


17

















 


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


 


ARTICLE 12


RECAPITALIZATION,
MERGER AND CONSOLIDATION


 


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


 


12.2                        Conversion
of Incentives Where Company Survives. Subject to any required action by the
stockholders, if the Company shall be the surviving or resulting corporation in
any merger, consolidation or share exchange, any Incentive granted hereunder
shall pertain to and apply to the securities or rights (including cash,
property, or assets) to which a holder of the number of shares of Common Stock
subject to the Incentive would have been entitled.


 


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


 


Notwithstanding the
foregoing, however, all such Incentives may be canceled by the Company, in
its sole discretion, as of the effective date of any such reorganization,
merger, consolidation, or share exchange, or of any proposed sale of all or
substantially all of the assets of the Company, or of any dissolution or
liquidation of the Company, by either:


 


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


 


(b)                                 in
the case of Incentives that are either (i) settled only in shares of
Common Stock, or (ii) at the election of the Participant, settled in
shares of Common Stock, paying the holder thereof an amount equal to a
reasonable estimate of the difference between the net amount per share payable
in such transaction or as a result of such transaction, and the price per share
of such Incentive to be paid by the Participant (hereinafter the “Spread”),
multiplied by the number of shares subject to the


 


18

















 


Incentive. In cases where
the shares constitute, or would after exercise, constitute Restricted Stock,
the Company, in its discretion may include some or all of those shares in
the calculation of the amount payable hereunder. In estimating the Spread,
appropriate adjustments to give effect to the existence of the Incentives shall
be made, such as deeming the Incentives to have been exercised, with the
Company receiving the exercise price payable thereunder, and treating the
shares receivable upon exercise of the Incentives as being outstanding in
determining the net amount per share. In cases where the proposed transaction
consists of the acquisition of assets of the Company, the net amount per share
shall be calculated on the basis of the net amount receivable with respect to
shares of Common Stock upon a distribution and liquidation by the Company after
giving effect to expenses and charges, including but not limited to taxes,
payable by the Company before such liquidation could be completed.


 


(c)                                  An
Award that by its terms would be fully vested or exercisable upon a Change of
Control will be considered vested or exercisable for purposes of Section 12.3(a) hereof.


 


ARTICLE 13


LIQUIDATION
OR DISSOLUTION


 


Subject to Section 12.3
hereof, in case the Company shall, at any time while any Incentive under this
Plan shall be in force and remain unexpired, (i) sell all or substantially
all of its property, or (ii) dissolve, liquidate, or wind up its affairs,
then each Participant shall be entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the expiration
of any Incentive, make any partial distribution of its assets, in the nature of
a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) and an adjustment is determined by the Committee to be appropriate to
prevent the dilution of the benefits or potential benefits intended to be made
available under the Plan, then the Committee shall, in such manner as it may deem
equitable, make such adjustment in accordance with the provisions of Article 11
hereof.


 


ARTICLE 14


INCENTIVES
IN SUBSTITUTION FOR


INCENTIVES
GRANTED BY OTHER ENTITIES


 


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


 


19

















 


ARTICLE 15


MISCELLANEOUS
PROVISIONS


 


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


 


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


 


15.3                        Indemnification of Board and Committee. No member of the
Board or the Committee, nor any officer or Employee of the Company acting on
behalf of the Board or the Committee, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board and the Committee, each
officer of the Company, and each Employee of the Company acting on behalf of
the Board or the Committee shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination, or interpretation.


 


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


 


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


 


15.6                        Tax Requirements. The Company or, if applicable, any
Subsidiary (for purposes of this Section 15.6, the term “Company” shall be
deemed to include any applicable Subsidiary), shall have the right to deduct
from all amounts paid in cash or other form in connection with the Plan,
any Federal, state, local, or other taxes required by law to be withheld in
connection with an Award granted under this Plan. The Company may, in its sole
discretion, also require the Participant receiving shares of Common Stock
issued under the Plan to pay the Company the amount of any taxes that the
Company is required to withhold in connection with the Participant’s income
arising with respect to the Award. Such payments shall be required to be made
when requested by Company and may be required to be made prior to the
delivery of any certificate representing shares of Common Stock. Such payment may be
made (i) by the delivery of cash to the Company in an amount that equals
or exceeds (to avoid the issuance of fractional shares under (iii) below)
the required tax withholding obligations of the Company; (ii) if the
Company, in its sole discretion, so consents in writing, the actual delivery by
the exercising Participant to the Company of shares of Common Stock that the


 


20

















 


Participant has not
acquired from the Company within six (6) months prior to the date of
exercise, which shares so delivered have an aggregate Fair Market Value that
equals or exceeds (to avoid the issuance of fractional shares under (iii) below)
the required tax withholding payment; (iii) if the Company, in its sole
discretion, so consents in writing, the Company’s withholding of a number of
shares to be delivered upon the exercise of the Stock Option, which shares so
withheld have an aggregate fair market value that equals (but does not exceed)
the required tax withholding payment; or (iv) any combination of (i), (ii),
or (iii). The Company may, in its sole discretion, withhold any such taxes from
any other cash remuneration otherwise paid by the Company to the Participant. The
Committee may in the Award Agreement impose any additional tax
requirements or provisions that the Committee deems necessary or desirable.


 


15.7                        Assignability.
Incentive Stock Options may not be transferred, assigned, pledged,
hypothecated or otherwise conveyed or encumbered other than by will or the laws
of descent and distribution and may be exercised during the lifetime of
the Participant only by the Participant or the Participant’s legally authorized
representative, and each Award Agreement in respect of an Incentive Stock
Option shall so provide. The designation by a Participant of a beneficiary will
not constitute a transfer of the Stock Option. The Committee may waive or
modify any limitation contained in the preceding sentences of this Section 15.7
that is not required for compliance with Section 422 of the Code.


 


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


 


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


 


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


 


15.9                        Compliance With Other Agreements. Any
shares of Common Stock issued upon exercise of an Incentive awarded under this
Plan prior to such date on which such shares of Common Stock are offered


 


21

















 


in a transaction
registered under the applicable state and federal securities laws, shall be
subject to all of the terms and provisions of that certain First Amended and
Restated Registration Rights Agreement (the “Registration Rights Agreement”),
effective as of January 5, 2006, among the Company (as successor by merger
to Holdings) and the stockholders signatory thereto. Upon the Award of any
Incentive prior to the date on which such shares of Common Stock were offered
in a transaction registered under the applicable state and federal securities
laws, the Participant shall enter into such joinder agreement or other appropriate
instruments binding them and any shares of Common Stock they may acquire
under any Incentive to said agreement.


 


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


 


On the face of the
certificate:


 


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


 


On the reverse:


 


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


 


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


 


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


 


Any legend required by
any of the terms of the Registration Rights Agreement.


 


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


 


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


 


22

















 


IN WITNESS WHEREOF, the
Company has caused this instrument to be executed as of February 14, 2006,
by its Chairman, Chief Executive Officer and Vice Chairman, President and
Secretary pursuant to prior action taken by the Board.


 


 


	
   

  	
  EXCO
  RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ DOUGLAS H. MILLER

  	
   

  
	
   

  	
  Name:  Douglas
  H. Miller

  
	
   

  	
  Title:  Chairman
  and Chief Executive Officer

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ STEPHEN F. SMITH

  	
   

  	
   

  
	
  Stephen F. Smith

  	
   

  
	
  Vice Chairman,
  President and Secretary

  	
   

  
					



 


23