Exhibit 10.1


The EXCO
Resources, Inc.


 


AMENDED AND RESTATED


2005
LONG-TERM INCENTIVE PLAN


 


The EXCO Resources, Inc.
Amended and Restated 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 Plan was amended pursuant to an amendment approved by (i) the Board of
Directors of the Company on June 29, 2007 and (ii) the shareholders
of the Company on August 30, 2007. The Plan was amended and restated by
the Board of Directors of the Company on November 14, 2007. 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.
Amended and Restated 2005 Long-Term Incentive Plan from and after November 14,
2007.


 


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, nonqualified 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, Consultants 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”).
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, 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”).


 


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 any of the following, except as otherwise
provided herein:  (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 February 14, 2006 were directors or (y) become directors
after February 14, 2006 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 February 14, 2006 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 February 14,
2006; 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,  (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.


 


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Notwithstanding
the foregoing provisions of this Section 2.6, in the event an Award
issued under the Plan is subject to Section 409A of the Code, then, to the
extent necessary to comply with the requirements of Section 409A of the
Code, in lieu of the foregoing definition, the definition of “Change in Control”
for purposes of such Award shall be the definition provided for under Section 409A
of the Code and the regulations or other guidance issued thereunder.


 


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


 


2.8          “Committee”
means the Compensation Committee of the Board.


 


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, who is not an Employee, 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.


 


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, 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 or a “covered employee” as defined in Section 162(m)(3) of
the Code.


 


2.17        “Exempt
Shares” means shares of Common Stock designated as “Exempt
Shares” pursuant to Section 5.1(b).


 


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2.18        “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 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 Committee
(acting on the advice of an Independent Third Party, should the Committee 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
accordance with the requirements, as applicable, of Section 422 of the
Code  and Section 409A of the Code
and the regulations and other guidance issued thereunder.


 


2.19        “Full
Value Award” means any Award with a net benefit to the
Participant, without regard to any restrictions such as those described in Section 6.4(b),
equal to the aggregate Fair Market Value of the total shares of Common Stock
subject to the Award. Full Value Awards include Restricted Stock and Restricted
Stock Units, but do not include Stock Options and SARs.


 


2.20        “Incentive”
is defined in Section 2.1 hereof.


 


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


 


2.22        “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 Committee may utilize
one or more Independent Third Parties.


 


2.23        “Nonqualified
Stock Option” 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
or Consultant.


 


2.27        “Participant”
means an Employee, Consultant or Outside Director of the Company or a
Subsidiary to whom an Award is granted under this Plan.


 


2.28        “Plan”
means this EXCO Resources, Inc. Amended and Restated 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.


 


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


 


2.31        “Reporting
Participant” means a Participant who is subject to the reporting
requirements of Section 16 of the 1934 Act.


 


2.32        “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.


 


2.33        “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.


 


2.34        “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.


 


2.35        “SAR”
or “stock appreciation right” means the
right to receive an amount, in cash and/or Common Stock, equal to the excess of
the Fair Market Value of a specified number of shares of Common Stock as of the
date the SAR is exercised (or, as provided in the Award Agreement, converted)
over the SAR Price for such shares.


 


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


 


2.37        “Stock
Option” means a Nonqualified Stock Option or an Incentive Stock Option.


 


2.38        “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.


 


2.39        “Tenure
Award” means an Award hereunder of cash, shares of Common Stock,
units or rights based upon, payable in, or otherwise related to, Common Stock
that vests over time based upon the Participant’s continued employment with or
service to the Company.


 


2.40        “Termination
of Service” occurs when
a Participant who is (i) an Employee of the Company or any Subsidiary
ceases to serve as an Employee of the Company and its Subsidiaries, for any
reason; (ii) an Outside Director of the Company or a Subsidiary ceases to
serve as a director of the Company and its Subsidiaries for any reason; or (iii) a
Consultant of the Company or a Subsidiary ceases to serve as a Consultant 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 Consultant 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


 


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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 foregoing
provisions of this Section 2.40, in the event an Award issued under
the Plan is subject to Section 409A of the Code, then, to the extent
necessary to comply with the requirements of Section 409A of the Code, in
lieu of the foregoing definition, the definition of “Termination of Service”
for purposes of such Award shall be the definition of “separation from service”
provided for under Section 409A of the Code and the regulations or other
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, is unable to perform 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 foregoing provisions of this Section 2.41,
in the event an Award issued under the Plan is subject to Section 409A of
the Code, then, to the extent necessary to comply with the requirements of Section 409A
of the Code, in lieu of the foregoing definition, the definition of “Total and
Permanent Disability” for purposes of such Award shall be the definition of “disability”
provided for under Section 409A of the Code and the regulations or other
guidance issued thereunder.


 


ARTICLE 3


ADMINISTRATION


 


3.1          General Administration;
Compensation Committee. Subject
to the terms of this Article 3, the Plan shall be administered by
the Compensation Committee of the Board (the “Committee”). The Committee shall consist
of not fewer than two persons.


 


If
at any time the Committee shall include members who are not “outside directors”
under Section 162(m) of the Code and/or “non-employee directors” as
defined in Rule 16b-3 promulgated under the 1934 Act, then to the extent
necessary to satisfy the requirements of Section 162(m) of the Code and/or
Rule 16b-3 promulgated under the 1934 Act, any function relating to a
Reporting Participant or a covered employee (as defined in Section 162(m)
of the Code) may be performed solely by a subcommittee of the Committee
consisting of two or more members, which shall be solely comprised of Committee
members who are “outside directors” under Section 162(m) of the Code
and/or “non-employee directors” as defined in Rule 16b-3 promulgated under
the 1934 Act.


 


Notwithstanding
anything contained herein to the contrary, discretionary Awards granted to
Outside Directors shall be administered by the Compensation Committee of the
Board (or a subcommittee thereof), which shall be comprised solely of
independent directors under rules promulgated by the New York Stock
Exchange.


 


3.2          Designation of Participants and
Awards.


 


(a)           The Committee 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


 


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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). 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 Section 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 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. Notwithstanding
the foregoing, to the extent necessary to satisfy the requirements of Section 162(m)
of the Code and/or Rule 16b-3 promulgated under the 1934 Act, any function
relating to a Reporting Participant or a covered employee (as defined in Section 162(m)
of the Code) shall be performed solely by the Committee or  a subcommittee thereof consisting of two or
more members of the Committee.


 


With
respect to restrictions in the Plan that are based on the requirements of Rule 16b-3
promulgated 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.


 


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ARTICLE 4


ELIGIBILITY


 


Any
Employee (including an Employee who is also a director or an officer),
Consultant 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 a corporation shall 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, Consultant 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 then 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, Consultants 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.


 


(a)           In General. 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 twenty million (20,000,000) shares, of which  up to twenty million (20,000,000) shares may delivered
pursuant to Incentive Stock Options. 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.


 


(b)           Exempt
Shares. No more than ten percent (10%) of the shares of Common Stock
that may be delivered pursuant to Awards under Section 5.1(a) may be
shares designated as “Exempt 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. Notwithstanding any provisions of the Plan to
the contrary, only shares forfeited back to the Company, shares canceled on
account of termination, expiration or lapse of an


 


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Award,
shares surrendered in payment of the exercise price of an option or shares
withheld for payment of applicable employment taxes and/or withholding
obligations resulting from the exercise of an option shall again be available
for grant of Incentive Stock Options under the Plan, but shall not increase the
maximum  number of shares described in Section 5.1
above as the maximum number of shares of Common Stock that may be
delivered pursuant to Incentive Stock Options.


 


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 (i) not inconsistent with the Plan and (ii) to the extent an Award issued under the Plan is subject
to Section 409A of the Code, in compliance with the applicable
requirements of Section 409A of the Code and the regulations or other
guidance issued thereunder. The Company shall execute an 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 interest 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 on 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)


 


9

















 


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 Restricted Stock, which shall be consistent with this Plan and, to the extent Restricted Stock granted
under the Plan is subject to Section 409A of the Code, in compliance with
the applicable requirements of Section 409A of the Code and the
regulations or other guidance issued thereunder. 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. 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 and subject to Section 7.2 below, 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 on 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


 


10

















 


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 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, provided that
such terms and conditions are (i)  not inconsistent with the Plan and (ii) to
the extent a SAR issued under the Plan is subject to Section 409A of the
Code, in compliance with the applicable requirements of Section 409A of
the Code and the regulations or other guidance issued thereunder. 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.


 


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, provided, however, that such terms and conditions are (i) not
inconsistent with the Plan and (ii) to the extent a Restricted Stock Unit
issued under the Plan is subject to Section 409A of the Code, in
compliance with the applicable requirements of Section 409A of the Code
and the regulations or other guidance issued thereunder). Restricted
Stock Units shall be


 


11

















 


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.


 


6.8          Performance Awards.


 


(a)           The Committee may grant
Performance Awards to one or more Participants. The terms and conditions of
such Performance Awards shall be specified at the time of the grant and may include
provisions establishing the performance period (subject to Section 6.8(d)),
the Performance Goals to be achieved during a performance period, and the
maximum or minimum settlement values,
provided that such terms and conditions are (i) not inconsistent with the
Plan and (ii) to the extent a Performance Award issued under the Plan is
subject to Section 409A of the Code, in compliance with the applicable
requirements of Section 409A of the Code and the regulations or other
guidance issued thereunder. If the Performance Award is to be in shares of
Common Stock, the Performance Awards may provide for the issuance of the
shares of Common Stock at the time of the grant of the Performance Award or at
the time of  the certification by the
Committee that the Performance Goals for the performance period have been met;
provided, however, if shares of Common Stock are issued at the time of the
grant of the Performance Award and if, at the end of the performance period,
the Performance Goals are not certified by the Committee to have been fully
satisfied, then, notwithstanding any other provisions of this Plan to the
contrary, the Common Stock shall be forfeited in accordance with the terms of
the grant to the extent the Committee determines that the Performance Goals
were not met. The forfeiture of shares of Common Stock issued at the time of
the grant of the Performance Award due to failure to achieve the established
Performance Goals shall be separate from and in addition to any other
restrictions provided for in this Plan that may be applicable to such
shares of Common Stock. Each Performance Award granted to one or more
Participants shall have its own terms and conditions.


 


If it is determined to be necessary in order to satisfy Section 162(m)
of the Code, at the time of the grant of a Performance Award (other than a
Stock Option) and to the extent permitted under Section 162(m) of the Code
and the regulations issued thereunder, the Committee shall provide
for the manner in which the Performance Goals shall be reduced to take into
account the negative effect on the achievement of specified levels of the
Performance Goals which may result from enumerated corporate transactions,
extraordinary events, accounting changes and other similar occurrences which
were unanticipated at the time the Performance Goal was initially established. In
no event, however, may the Committee increase the amount earned under a
Performance Award, unless the reduction in the Performance Goals would reduce
or eliminate the amount to be earned under the Performance Award and the
Committee determines not to make such reduction or elimination.


 


With respect to a Performance Award that is not
intended to satisfy the requirements of Code Section 162(m), 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


 


12

















 


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. 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.


 


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 which, where
applicable, shall be within the meaning of Section 162(m) of the Code and
consist of one or more or any combination of the following criteria: cash flow;
cost; revenues;  sales; ratio of debt to
debt plus equity; net borrowing, credit quality or debt ratings; profit before
tax; economic profit; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; gross margin; earnings per
share (whether on a pre-tax, after-tax, operational or other basis); operating
earnings; capital expenditures; expenses or expense levels; economic value
added; ratio of operating earnings to capital spending or any other operating
ratios; free cash flow; net profit; net sales; net asset value per share; the
accomplishment of mergers, acquisitions, dispositions, public offerings or
similar extraordinary business transactions; sales growth; price of the Company’s
Common Stock; return on assets, equity or stockholders’ equity; market share;
inventory levels, inventory turn or shrinkage; 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


 


13

















 


issuance
of an Award which is consistently applied and identified in the audited
financial statements, including footnotes, or the Compensation 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.


 


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.


 


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.


 


(a)           General. Except
as otherwise provided by Section 7.2(b), 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, except as otherwise provided
by Section 7.2(b), 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; provided, however, that shares of Common
Stock underlying all or any portion of a Nonqualified Stock Option or Incentive
Stock Option for which the Committee accelerates the vesting date other than in
the event of the Participant’s death, Total and Permanent Disability or
Retirement, or the occurrence of a Change in Control shall be Exempt Shares.


 


(b)           Full Value
Award Vesting. Except as otherwise provided herein, the Committee
must grant all Full Value Awards in accordance with the following provisions:


 


(i)      All Full Value Awards
granted by the Committee that constitute Performance Awards must vest no
earlier than one (1) year after the Date of Grant.


 


14

















 


(ii)     All Full Value Awards granted
by the Committee that constitute Tenure Awards must vest no earlier than over
the three (3) year period commencing on the Date of Grant on a pro rata
basis.


 


(iii)    The Committee may not
accelerate the date on which all or any portion of a Full Value Award may be
vested or waive the Restriction Period on a Full Value Award except upon the
Participant’s death, Total and Permanent Disability or Retirement or the
occurrence of a Change in Control.


 


Notwithstanding the
foregoing, the Committee may, in its sole discretion, grant Full Value Awards
with more favorable vesting provisions than set forth in this Section 7.2(b) or
accelerate the vesting or waive the Restriction Period for Full Value Awards at
any time, provided that the shares of Common Stock subject to such Awards shall
be Exempt Shares.


 


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 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 (or such person or persons designated in the Award Agreement)
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


 


15

















 


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)           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 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.


 


(d)           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 and only if permissible under Section 409A
of the Code and the regulations or other guidance issued thereunder (or, if not
so permissible, at such time as permitted by Section 409A of the Code and
the regulations or other guidance issued thereunder), the Participant shall
receive from the Company in exchange therefor in the discretion of the
Committee, and subject to the terms of the Award Agreement:


 


(i)            cash in an amount equal to the excess (if
any) of the Fair Market Value (as of the date of the exercise, or if provided
in the Award Agreement, conversion, 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;


 


16

















 


(ii)           that number of shares of Common Stock having
an aggregate Fair Market Value (as of the date of the exercise, or if provided
in the Award Agreement, conversion, 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


 


(iii)          the Company may settle such obligation
in part with shares of Common Stock and in part with cash.


 


The
distribution of any cash or Common Stock pursuant to the foregoing sentence
shall be made at such time as set forth in the Award Agreement.


 


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 part; provided, however,
that no amendment for
which stockholder approval is required either (i) by any securities
exchange or inter-dealer quotation system on which the Common Stock is listed
or traded or (ii) 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, or other applicable law, shall be
effective unless such amendment shall be approved by the requisite vote of the
stockholders. Notwithstanding the foregoing, no amendment to the Plan that increases
the benefits accrued to Participants, increases the maximum number of shares of
Common Stock which may be issued under the Plan,  reprices any Stock Options or modifies the
requirements for participation in the Plan shall be effective unless such
amendment shall be approved by the stockholders of the Company entitled to vote
thereon in the manner set forth in the Company’s articles of incorporation and
bylaws. Any amendments made pursuant to this Article 9 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.


 


17

















 


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 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 fair value of an Award, then the Committee shall adjust any or all
of the following so that the fair value of the Award immediately after the
transaction or event is equal to the fair value of the Award immediately prior
to the transaction or event (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 under Section 5.1
of the Plan, (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. Notwithstanding
the foregoing, no such adjustment shall be made or authorized to the extent
that such adjustment would cause the Plan or any Stock Option to violate Section 422
of the Code or Section 409A 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.


 


Upon
the occurrence of any such adjustment, the Company shall provide notice to each
affected Participant of its computation of such adjustment 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 Change in Control, 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.


 


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12.2        Conversion of Incentives
Where Company Survives. Subject to any required action by the stockholders,
and except as otherwise provided by Section 12.4
hereof or as may be required to comply with Section 409A of the Code
and the regulations or other guidance issued thereunder, 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. Except as otherwise provided by Section 12.4 hereof or as may be
required to comply with Section 409A of the Code and the regulations or
other guidance issued thereunder, 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.


 


12.4        Cancellation of Incentives.
Notwithstanding the provisions of Sections
12.2 and 12.3 hereof,  and except as may be
required to comply with Section 409A of the Code and the regulations or
other guidance issued thereunder, all Incentives granted hereunder may be
canceled by the Company, in its sole discretion, as of the effective date of
any Change in Control, 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 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.


 


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(c)           An Award that by its
terms would be fully vested or exercisable upon a Change in Control will be
considered vested or exercisable for purposes of Section 12.4(a) hereof.


 


ARTICLE 13


LIQUIDATION
OR DISSOLUTION


 


Subject to Section 12.4
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, consultants or directors of a corporation,
partnership, or limited liability company who become or are about to become
Employees, Consultants 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.


 


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


 


20

















 


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 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
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


 


21

















 


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 (“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) such
Immediate Family Members and/or (2) entities which are controlled by
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        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. Amended and Restated
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


 


22

















 


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.”


 


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.


 


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


 


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IN WITNESS WHEREOF, the
Company has caused this instrument to be executed as of November 14, 2007,
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/ William L. Boeing

  	
   

  	
   

  
	
  William L. Boeing

  	
   

  	
   

  
	
  Vice President, General
  Counsel and Secretary

  	
   

  	
   

  



 


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