ex107.htm


    
Exhibit
10.7

    
 

     

     

     

     

    TXCO
RESOURCES, INC.

     

    2005
STOCK INCENTIVE PLAN

     

    AS
AMENDED AND RESTATED

    (effective
January 1, 2008)

     

     

     

    


     

    


    
      
        
           


        

        
          
            

          

        

         

      

    

    


    TABLE
OF CONTENTS

    


    
      	 
      	 
      	
              Page

            
	
              ARTICLE I

            	
              PURPOSE

            	
              1

            
	
              Section
      1.1

            	
                   Purpose

            	
              1

            
	
              Section
      1.2

            	
                   Establishment

            	
              1

            
	
              Section
      1.3

            	
                   Number
      of Shares Available For Grant

            	
              1

            
	
              Section
      1.4

            	
                   Shareholder
      Approval

            	
              1

            
	
              ARTICLE
      II

            	
              DEFINITIONS

            	
              1

            
	
              ARTICLE
      III

            	
              ADMINISTRATION

            	
              5

            
	
              Section
      3.1

            	
                   Administration
      of the Plan; the Committee

            	
              5

            
	
              Section
      3.2

            	
                   Committee
      to Make Rules and Interpret Plan

            	
              6

            
	
              ARTICLE
      IV

            	
              GRANT
      OF AWARDS

            	
              6

            
	
              ARTICLE
      V

            	
              STOCK
      OPTIONS

            	
              6

            
	
              Section
      5.1

            	
                   Grant
      of Options

            	
              6

            
	
              Section
      5.2

            	
                   Conditions
      of Options

            	
              6

            
	
              Section
      5.3

            	
                   Options
      Not Qualifying as Incentive Stock Options

            	
              8

            
	
              Section
      5.4

            	
                   Restrictions
      on Assignment

            	
              9

            
	
              ARTICLE
      VI

            	
              RESTRICTED
      STOCK AWARDS

            	
              10

            
	
              Section
      6.1

            	
                   Grant
      of Restricted Stock Awards

            	
              10

            
	
              Section
      6.2

            	
                   Conditions
      of Restricted Stock Awards

            	
              10

            
	
              ARTICLE
      VII

            	
              STOCK
      ADJUSTMENTS

            	
              11

            
	
              ARTICLE
      VIII

            	
              GENERAL

            	
              11

            
	
              Section
      8.1

            	
                   Amendment
      or Termination of Plan

            	
              11

            
	
              Section
      8.2

            	
                   Acceleration
      of Awards on Death, Disability or Other Special
    Circumstance

            	
              12

            
	
              Section
      8.3

            	
                   Withholding
      Taxes

            	
              12

            
	
              Section
      8.4

            	
                   Certain
      Additional Payments by the Company

            	
              12

            
	
              Section
      8.5

            	
                   Regulatory
      Approval and Listings

            	
              12

            
	
              Section
      8.6

            	
                   Right
      to Continued Employment

            	
              13

            
	
              Section
      8.7

            	
                   Reliance
      on Reports

            	
              13

            
	
              Section
      8.8

            	
                   Construction

            	
              13

            
	
              Section
      8.9

            	
                   Governing
      Law

            	
              13

            


    

    


    
      
        
           


        

        
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    TABLE
OF CONTENTS

    (continued)

    


    
      	 
      	 
      	
              Page

            
	
              ARTICLE
      IX

            	
              ACCELERATION
      OF AWARDS UPON CORPORATE EVENT

            	
              13

            


    

    


    


    


    


    
      
        
           


        

        
          -ii-

        

         

      

    

    


    TXCO
RESOURCES, INC.

    2005
STOCK INCENTIVE PLAN

    AS
AMENDED AND RESTATED

    (effective January 1,
2008)

    


    ARTICLE
I

     

    PURPOSE

     

    Section
1.1                                Purpose.  The TXCO
Resources, Inc. 2005 Stock Incentive Plan as Amended and Restated, effective
January 1, 2008 (the "Plan"), is established by TXCO Resources, Inc. (the
"Company") to create incentives which are designed to motivate Employees,
Consultants and Directors to put forth maximum effort toward the success and
growth of the Company and to enable the Company to attract and retain
experienced individuals who by their position, ability and diligence are able to
make important contributions to the Company's success. Toward these objectives,
the Plan provides for the granting of Options and Restricted Stock Awards to
Employees, Consultants and Directors on the terms and subject to the conditions
set forth in the Plan. The Plan is designed to align the interests of
participants with those of shareholders through the use of stock-based
incentives.

     

    Section
1.2                                Establishment and
Amendment.  The Plan was effective as of April 29, 2005 and for
a period of 10 years from such date. The Plan will terminate on April 28, 2015;
however, it will continue in effect until all matters relating to the exercise
of Options, distribution of Awards and administration of the Plan have been
settled.  The Plan was amended and restated effective January 1, 2008
to (i) change the name of the Plan to the TXCO Resources, Inc. 2005 Stock
Incentive Plan as Amended and Restated, and (ii) change the references in the
Plan from The Exploration Company of Delaware, Inc. to TXCO Resources,
Inc.

     

    Section
1.3                                Number of Shares Available For
Grant.  Subject to the limitations and adjustments set forth in
this Plan, the maximum number of Shares that may be issued with respect to
future Awards under this Plan shall be ten percent (10%) of the total number of
then issued and outstanding Shares (rounded downward, if necessary, to eliminate
fractional shares) of Company, reduced by shares issued under, and outstanding
grants issued under the 1995 Flexible Incentive Plan. The Shares issued pursuant
to this Plan may be authorized but unissued Shares, or may be issued Shares
which have been reacquired by the Company. At Plan inception, 828,056 shares
registered and still available under the 1995 Flexible Incentive Plan are
transferred to this Plan, as well as 20,000 shares available under that Plan but
not yet registered.

     

    Section
1.4                                Shareholder
Approval.  The Plan shall be subject to Shareholder Approval,
which must occur within the period ending twelve months after the date the Plan
is adopted by the Board. Pending such Shareholder Approval, Awards under the
Plan may be granted, but Options may not be exercised nor may Restricted Stock
Awards vest prior to receipt of such Shareholder Approval. In the event such
Shareholder Approval is not obtained within such twelve-month period, all such
Awards shall be void.

     

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    ARTICLE  II

     

    DEFINITIONS

     

    Section
2.1                                "Affiliated Entity" means any
partnership or limited liability company in which a majority of voting power
thereof is owned or controlled, directly or indirectly, by the Company or one or
more of its Subsidiaries or Affiliated Entities or a combination
thereof.

     

    Section
2.2                                "Award" means, individually or
collectively, any Option or Restricted Stock Award granted under the Plan to an
Eligible Person by the applicable Committee pursuant to such terms, conditions,
restrictions, and/or limitations, if any, as the applicable Committee may
establish by the Award Agreement or otherwise.

     

    Section
2.3                                "Award Agreement" means any
written instrument that establishes the terms, conditions, restrictions, and/or
limitations applicable to an Award in addition to those established by this Plan
and by the Committee's exercise of its administrative powers.

     

    Section
2.4                                "Board" means the Board of
Directors of the Company.

     

    Section
2.5                                "Change of Control" means, for
Participants other than employees, the occurrence of any of the
following:

     

    
      	
               
      

            	
              (i)

            	
              the
      acquisition by any individual, entity or group (within the meaning of
      Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
      beneficial ownership (within the meaning of Rule 13d-3 promulgated under
      the Exchange Act) of 20% or more of either (A) the then outstanding shares
      of common stock of the Company (the "Outstanding Company Common Stock") or
      (B) the combined voting power of the then outstanding voting securities of
      the Company entitled to vote generally in the election of directors (the
      "Outstanding Company Voting Securities"). For purposes of this paragraph
      2.5 the following acquisitions by a Person will not constitute a Change of
      Control: (1) any acquisition directly from the Company; (2) any
      acquisition by the Company; (3) any acquisition by any employee benefit
      plan (or related trust) sponsored or maintained by the Company or any
      corporation controlled by the Company; or (4) any acquisition by any
      corporation pursuant to a transaction which complies with clauses (A), (B)
      and (C) of paragraph (iii) below;

            


    

     

    
      	
               
      

            	
              (ii)

            	
              the
      individuals who, as of the date hereof, constitute the board of directors
      (the "Incumbent Board") cease for any reason to constitute at least a
      majority of the board of directors. Any individual becoming a director
      subsequent to the date hereof whose election, or nomination for election
      by the Company's shareholders, is approved by a vote of at least a
      majority of the directors then comprising the Incumbent Board will be
      considered a member of the Incumbent Board as of the date hereof, but any
      such individual whose initial assumption of office occurs as a result of
      an actual or threatened election contest with respect to the election or
      removal of directors or other actual or threatened solicitation of proxies
      or consents by or on behalf of a Person other than the Incumbent Board
      will not be deemed a member of the Incumbent Board as of the date
      hereof;

            


    

     

    


    
      
        
           


        

        
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              (iii)

            	
              the
      consummation of a reorganization, merger, consolidation or sale or other
      disposition of all or substantially all of the assets of the Company (a
      "Business Combination"), unless following such Business Combination: (A)
      all or substantially all of the individuals and entities who were the
      beneficial owners, respectively, of the Outstanding Company Common Stock
      and Outstanding Company Voting Securities immediately prior to such
      Business Combination beneficially own, directly or indirectly, more than
      60% of, respectively, the then outstanding shares of common stock and the
      combined voting power of the then outstanding voting securities entitled
      to vote generally in the election of directors, as the case may be, of the
      corporation resulting from such Business Combination (including, without
      limitation, a corporation which as a result of such transaction owns the
      Company or all or substantially all of the Company's assets either
      directly or through one or more subsidiaries) in substantially the same
      proportions as their ownership, immediately prior to such Business
      Combination of the Outstanding Company Common Stock and Outstanding
      Company Voting Securities, as the case may be, (B) no Person (excluding
      any corporation resulting from such Business Combination or any employee
      benefit plan (or related trust) of the Company or such corporation
      resulting from such Business Combination) beneficially owns, directly or
      indirectly, 20% or more of, respectively, the then outstanding shares of
      common stock of the corporation resulting from such Business Combination
      or the combined voting power of the then outstanding voting securities of
      such corporation except to the extent that such ownership existed prior to
      the Business Combination and (C) at least a majority of the members of the
      board of directors of the corporation resulting from such Business
      Combination were members of the Incumbent Board at the time of the
      execution of the initial agreement, or of the action of the Board,
      providing for such Business
Combination;

            


    

     

    
      	
               
      

            	
              (iv)

            	
              the
      approval by the shareholders of the Company of a complete liquidation or
      dissolution of the Company; or

            


    

     

    For
employees, a Change of Control means the occurrence of any of the foregoing
events or a change of control as defined in such employee's change of control
agreement, in force at the time of determination.

     

    Section
2.6                                "Code" means the Internal
Revenue Code of 1986, as amended. Reference in the Plan to any Section of the
Code shall be deemed to include any amendments or successor provisions to such
Section and any regulations under such Section.

     

    Section
2.7                                "Committee" has the meaning
set forth in Section 3.1.

     

    Section
2.8                                "Common Stock" means the
common stock, par value $.01 per share, of the Company and, after substitution,
such other stock as shall be substituted therefor as provided in Article VII or
Article IX of the Plan.

     

    Section
2.9                                "Compensation Committee" means
a committee designated by the Board which will consist of not less than two
members of the Board who meet the definition of "non

     

    


    
      
        
           


        

        
          - 3
-

        

         

      

    

    


    employee
directors" pursuant to Rule 16b-3, or any successor rule, promulgated under
Section 16 of the Exchange Act unless another committee is designated by the
Board of Directors.

     

    Section
2.10                                "Consultant" means any person
who is engaged by the Company, a Subsidiary or an Affiliated Entity to render
consulting or advisory services.

     

    Section
2.11                                "Date of Grant" means the date
on which the grant of an Award is authorized by the Committee or such later date
as may be specified by the Committee in such authorization.

     

    Section
2.12                                "Director" means a
non-employee member of the Company's Board of Directors.

     

    Section
2.13                                "Disability" has the meaning
set forth in Section 22(e)(3) of the Code.

     

    Section
2.14                                "Eligible Person" means any
Employee, Director or Consultant.

     

    Section
2.15                                "Employee" means any employee
of the Company, a Subsidiary or an Affiliated Entity.

     

    Section
2.16                                "Employee Compensation
Committee" means a committee designated by the Board which shall consist
of not less than two members of the Board.

     

    Section
2.17                                "Exchange Act" means the
Securities Exchange Act of 1934, as amended.

     

    Section
2.18                                "Executive Officer
Participants" means Participants who are subject to the provisions of
Section 16 of the Exchange Act with respect to the Common Stock.

     

    Section
2.19                                "Fair Market Value" means, as
of any date, (i) if the principal market for the Common Stock is a national
securities exchange or the Nasdaq stock market, the closing price of the Common
Stock on that date on the principal exchange on which the Common Stock is then
listed or admitted to trading; or (ii) if sale prices are not available or if
the principal market for the Common Stock is not a national securities exchange
and the Common Stock is not quoted on the Nasdaq stock market, the average of
the highest bid and lowest asked prices for the Common Stock on such day as
reported on the Nasdaq OTC Bulletin Board Service or by the National Quotation
Bureau, Incorporated or a comparable service. If the day is not a business day,
and as a result, clauses (i) and (ii) are inapplicable, the Fair Market Value of
the Common Stock shall be determined as of the last preceding business day. If
clauses (i) and (ii) are otherwise inapplicable, the Fair Market Value of the
Common Stock shall be determined in good faith by the Committee.

     

    Section
2.20                                "Incentive Stock Option" means
an Option within the meaning of Section 422 of the Code.

     

    Section
2.21                                "Non-Executive Officer
Participants" means Participants who are not subject to the provisions of
Section 16 of the Exchange Act.

     

    Section
2.22                                "Nonqualified Stock Option"
means an Option to purchase shares of Common Stock which is not an Incentive
Stock Option within the meaning of Section 422(b) of the Code.

     

    


    
      
        
           


        

        
          - 4
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    Section
2.23                                "Option" means an Incentive
Stock Option or Nonqualified Stock Option granted under Article V of the
Plan.

     

    Section
2.24                                "Participant" means an
Eligible Person to whom an Award has been granted by the Committee under the
Plan.

     

    Section
2.25                                "Plan" means the TXCO
Resources, Inc. 2005 Stock Incentive Plan as Amended and Restated.

     

    Section
2.26                                "Restricted Stock Award" means
an Award granted to an Eligible Person under Article VI of the
Plan.

     

    Section
2.27                                "Shareholder Approval" means
approval by the holders of a majority of the outstanding shares of Common Stock,
present or represented and entitled to vote at a meeting called for such
purposes.

     

    Section
2.28                                "Subsidiary" shall have the
same meaning set forth in Section 424(f) of the Code.

     

    ARTICLE
III

     

    ADMINISTRATION

     

    Section
3.1                                Administration of the Plan; the
Committee.  The Compensation Committee shall administer the
Plan with respect to all Participants, including the grant of Awards. Although
the Committee is generally responsible for the administration of the Plan, the
Board in its sole discretion may take any action under the Plan that would
otherwise be the responsibility of the Committee.

     

    Unless
otherwise provided in the bylaws of the Company or resolutions adopted from time
to time by the Board establishing the Committee, the Board may from time to time
remove members from, or add members to, the Committee. Vacancies on the
Committee, however caused, shall be filled by the Board. The Committee shall
hold meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present shall be the valid acts of
the Committee. Any action which may be taken at a meeting of the Committee may
be taken without a meeting if all the members of the Committee consent to the
action in writing.

     

    Subject
to the provisions of the Plan and review by the Board, the Committee shall have
exclusive power to:

     

    
      	
               
      

            	
              (a)

            	
              Select
      the Eligible Persons to participate in the
Plan;

            


    

     

    
      	
               
      

            	
              (b)

            	
              Determine
      the time or times when Awards will be
granted;

            


    

     

    
      	
               
      

            	
              (c)

            	
              Determine
      the form of Award, whether an Incentive Stock Option, a Nonqualified Stock
      Option or a Restricted Stock Award, the number of shares of Common Stock
      subject to any Award, all the terms, conditions (including performance
      requirements), restrictions and/or limitations, if any, of an Award,
      including the time and conditions of exercise or vesting, and the terms of
      any Award

            


    

     

    


    
      
        
           


        

        
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              Agreement,
      which may include the waiver or amendment of prior terms and conditions or
      acceleration of the vesting or exercise of an Award under certain
      circumstances determined by the Committee. However, the Committee will not
      reprice outstanding Awards;

            


    

     

    
      	
               
      

            	
              (d)

            	
              Determine
      whether Awards will be granted singly or in
  combination;

            


    

     

    
      	
               
      

            	
              (e)

            	
              Take
      any and all other action it deems necessary or advisable for the proper
      operation or administration of the
Plan.

            


    

     

    Section
3.2                                Committee to Make Rules and
Interpret Plan.  The Committee in its sole discretion shall
have the authority, subject to the provisions of the Plan and review by the
Board, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any Awards granted pursuant hereto and all decisions and determinations by
the Committee with respect to the Plan shall be final, binding, and conclusive
on all parties unless otherwise determined by the Board.

     

    ARTICLE
IV

     

    GRANT
OF AWARDS

     

    The
Committee may, from time to time, grant Awards to one or more Participants,
provided, however, that:

     

    
      	
               
      

            	
              (a)

            	
              Any
      shares of Common Stock related to Awards which terminate by expiration,
      forfeiture, cancellation or otherwise shall be available again for grant
      under the Plan;

            


    

     

    
      	
               
      

            	
              (b)

            	
              Common
      Stock delivered by the Company upon exercise of an Option or upon payment
      of an Award under the Plan may be authorized and unissued Common Stock or
      Common Stock held in the treasury of the
  Company;

            


    

     

    
      	
               
      

            	
              (c)

            	
              The
      Committee shall, in its sole discretion, determine the manner in which
      fractional shares arising under this Plan shall be
  treated;

            


    

     

    
      	
               
      

            	
              (d)

            	
              Subject
      to Article VII, the aggregate number of shares of Common Stock made
      subject to Options and Restricted Stock Awards granted to any Employee in
      any calendar year may not exceed two million
  shares.

            


    

     

    ARTICLE
V

     

    STOCK
OPTIONS

     

    Section
5.1                                Grant of
Options.  The Committee may, from time to time, subject to the
provisions of the Plan and such other terms and conditions as it may determine,
grant Nonqualified Stock Options to any Eligible Persons and Incentive Stock
Options to Employees. Subject to the limitations of Section 5.2(e), these
Options may be Incentive Stock Options or Nonqualified Stock Options, or a
combination of both. Each grant of an Option shall be evidenced by an Award
Agreement executed by the Company and the Participant, and shall

     

    


    
      
        
           


        

        
          - 6
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    contain
such terms and conditions and be in such form as the Committee may from time to
time approve, subject to the requirements of Section 5.2.

     

    Section
5.2                                Conditions of
Options.  Each Option so granted shall be subject to the
following conditions:

     

    
      	
               
      

            	
              (a)

            	
              Exercise Price. As
      limited by Section 5.2(e) below, the Award Agreement for each Option shall
      state the exercise price set by the Committee on the Date of Grant. No
      Option shall be granted at an exercise price which is less than the Fair
      Market Value of the Common Stock on the Date of
  Grant.

            


    

     

    
      	
               
      

            	
              (b)

            	
              Form of
      Payment.  The payment of the exercise price of an Option
      shall be subject to the following:

            


    

     

    
      	
               
      

            	
              (i)

            	
              The
      full exercise price for shares of Common Stock purchased upon the exercise
      of any Option shall be paid at the time of such
  exercise;

            


    

     

    
      	
               
      

            	
              (ii)

            	
              The
      exercise price shall be payable in cash (including a check acceptable to
      the Committee, bank draft or money order) or by tendering, by either
      actual delivery of shares or by attestation, shares of Common Stock
      acceptable to the Committee and valued at Fair Market Value as of the day
      of exercise, or any combination thereof, as determined by the
      Committee;

            


    

     

    
      	
               
      

            	
              (iii)

            	
              The
      Committee may permit an Option granted under the Plan to be exercised by a
      participant in conjunction with a broker-dealer acting on behalf of a
      Participant, such broker-dealer to remit the exercise price and any
      applicable withholding taxes directly to the Company, through procedures
      approved by the Committee.

            


    

     

    
      	
               
      

            	
              (c)

            	
              Exercise of
      Options.  Options granted under the Plan shall be
      exercisable, in whole or in such installments and at such times, and shall
      expire at such time, as shall be provided by the Committee in the Award
      Agreement. Exercise of an Option shall be by written notice stating the
      election to exercise in the form and manner determined by the Committee.
      Every share of Common Stock acquired through the exercise of an Option
      shall be deemed to be fully paid at the time of exercise and payment of
      the exercise price. Upon the exercise of any Option, the Company shall
      issue and deliver to the Participant who exercised the Option a
      certificate representing the number of shares of Common Stock purchased
      thereby.

            


    

     

    
      	
               
      

            	
              (d)

            	
              Other Terms and
      Conditions.  Among other conditions that may be imposed
      by the Committee, if deemed appropriate, are those relating to (i) the
      period or periods and the conditions of exercisability of any Option; (ii)
      the minimum periods during which Participants must be employed by the
      Company, a Subsidiary or Affiliated Entity, or must hold Options before
      they may be exercised; (iii) the minimum periods during which shares
      acquired upon exercise must be held before sale or transfer shall be
      permitted; (iv) the maximum period that Participants will be allowed to be
      inactively employed or on a leave
of

            


    

     

    


    
      
        
           


        

        
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              absence
      before their vesting is suspended until they return to active employment;
      (v) conditions under which such Options or shares may be subject to
      forfeiture; (vi) the frequency of exercise or the minimum or maximum
      number of shares that may be acquired at any one time; (vii) the
      achievement by the Company of specified performance criteria; and (viii)
      protection of business matters.

            


    

     

    
      	
               
      

            	
              (e)

            	
              Special Restrictions Relating
      to Incentive Stock Options.  Options issued in the form
      of Incentive Stock Options shall only be granted to Employees of the
      Company or a Subsidiary and not to Employees of an Affiliated Entity
      unless such entity is classified as a "disregarded entity" of the Company
      or the applicable Subsidiary under the Code. In addition to being subject
      to all applicable terms, conditions, restrictions and/or limitations
      established by the Committee, Options issued in the form of Incentive
      Stock Options shall comply with the requirements of Section 422 of the
      Code (or any successor Section thereto), including, without limitation,
      the requirement that the exercise price of an Incentive Stock Option not
      be less than 100% of the Fair Market Value of the Common Stock on the Date
      of Grant, the requirement that each Incentive Stock Option, unless sooner
      exercised, terminated or canceled, expire no later than 10 years from its
      Date of Grant, and the requirement that the aggregate Fair Market Value
      (determined on the Date of Grant) of the Common Stock with respect to
      which Incentive Stock Options are exercisable for the first time by a
      Participant during any calendar year (under this Plan or any other plan of
      the Company or any Subsidiary) not exceed $100,000. Incentive Stock
      Options which are in excess of the applicable $100,000 limitation will be
      automatically recharacterized as Nonqualified Stock Options as provided
      under Section 5.3 of this Plan. No Incentive Stock Options shall be
      granted to any Employee if, immediately before the grant of an Incentive
      Stock Option, such Employee owns more than 10% of the total combined
      voting power of all classes of stock of the Company or its Subsidiaries
      (as determined in accordance with the stock attribution rules contained in
      Sections 422 and 424(d) of the Code). Provided, the preceding sentence
      shall not apply if, at the time the Incentive Stock Option is granted, the
      exercise price is at least 110% of the Fair Market Value of the Common
      Stock subject to the Incentive Stock Option, and such Incentive Stock
      Option by its terms is exercisable no more than ten years from the date
      such Incentive Stock Option is
granted.

            


    

     

    
      	
               
      

            	
              (f)

            	
              Application of
      Funds.  The proceeds received by the Company from the
      sale of Common Stock issued upon the exercise of Options will be used for
      general corporate purposes.

            


    

     

    
      	
               
      

            	
              (g)

            	
              Shareholder
      Rights.  No Participant shall have any rights as a
      shareholder with respect to any share of Common Stock subject to an Option
      prior to the purchase of such share of Common Stock by exercise of the
      Option.

            


    

     

    Section
5.3                                Options Not Qualifying as Incentive
Stock Options.  With respect to all or any portion of any
Option granted under this Plan not qualifying as an "incentive stock option"
under Section 422 of the Code, such Option shall be considered a Nonqualified
Stock Option granted

     

    


    
      
        
           


        

        
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    under
this Plan for all purposes. Further, this Plan and any Incentive Stock Options
granted hereunder shall be deemed to have incorporated by reference all the
provisions and requirements of Section 422 of the Code (and the Treasury
Regulations issued thereunder) necessary to ensure that all Incentive Stock
Options granted hereunder shall be "incentive stock options" described in
Section 422 of the Code. Further, in the event that the $100,000 limitation
contained in Section 5.2(e) herein is exceeded in any Incentive Stock Option
granted under this Plan, the portion of the Incentive Stock Option in excess of
such limitation shall be treated as a Nonqualified Stock Option under this Plan
subject to the terms and provisions of the applicable Award Agreement, except to
the extent modified to reflect recharacterization of the Incentive Stock Option
as a Nonqualified Stock Option.

     

    Section
5.4                                Restrictions on Assignment.
Options are not transferable except as otherwise provided below:

     

    
      	
               
      

            	
              (a)

            	
              Incentive Stock
      Options. Incentive Stock Options may not be transferred other than
      by will or the laws of descent and distribution. Any attempted transfer,
      assignment, pledge, hypothecation or other disposition of, or the levy of
      execution, attachment or similar process upon, any Incentive Stock Option
      contrary to the provisions hereof shall be void and ineffective, shall
      give no right to any purported transferee, and may, at the sole discretion
      of the Committee, result in forfeiture of the Incentive Stock Option
      involved in such attempt.

            


    

     

    
      	
               
      

            	
              (b)

            	
              Nonqualified Stock
      Options. Nonqualified Stock Options may be transferred by the
      Participants to whom such Nonqualified Stock Options were granted without
      consideration, subject to such rules as the Committee may adopt to
      preserve the purposes of the Plan,
to:

            


    

     

    
      	
               
      

            	
              (i)

            	
              The
      Participant's spouse, children or grandchildren, including adopted
      children and stepchildren (collectively, the "Immediate
      Family");

            


    

     

    
      	
               
      

            	
              (ii)

            	
              A
      trust solely for the benefit of the Participant and/or his or her
      Immediate Family; or

            


    

     

    
      	
               
      

            	
              (iii)

            	
              A
      partnership, corporation or limited liability company whose only partners,
      members or shareholders are the Participant and his or her Immediate
      Family.

            


    

     

    any
Nonqualified Stock Option transferred in accordance with the immediately
preceding sentence shall apply to the Permitted Transferee and any reference in
the Plan or in an Award Agreement to a Participant shall be deemed to refer to
the Permitted Transferee, except that (i) Permitted Transferees shall not be
entitled to transfer any Nonqualified Stock Options, other than by will or the
laws of descent and distribution, (ii) Permitted Transferees shall not be
entitled to exercise any transferred Nonqualified Stock Options unless there
shall be in effect a registration statement on an appropriate form covering the
Shares to be acquired pursuant to the exercise of such Nonqualified Stock Option
if the Committee determines that such a registration statement is necessary or
appropriate, (iii) the Committee or the Company shall not be required to provide
any notice to a Permitted

     

    


    
      
        
           


        

        
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    Transferee,
whether or not such notice is or would otherwise have been required to be given
to the original Participant under the Plan or otherwise, and (iv) the
consequences of termination of the original Participant's employment by, or
services to, the Company under the terms of the Plan and the applicable Award
Agreement shall continue to be applied with respect to the Permitted Transferee,
following which the Nonqualified Stock Options shall be exercisable by the
Permitted Transferee only to the extent, and for the periods, specified in the
Plan and the applicable Award Agreement.

     

    ARTICLE
VI

     

    RESTRICTED
STOCK AWARDS

     

    Section
6.1                                Grant of Restricted Stock
Awards.  The Committee may, from time to time, subject to the
provisions of the Plan and such other terms and conditions as it may determine,
grant a Restricted Stock Award to any Eligible Person. Restricted Stock Awards
shall be awarded in such number and at such times during the term of the Plan as
the Committee shall determine. Each Restricted Stock Award may be evidenced in
such manner as the Committee deems appropriate, including, without limitation, a
book-entry registration or issuance of a stock certificate or certificates into
escrow until the restrictions associated with such Award are satisfied, and by
an Award Agreement setting forth the terms of such Restricted Stock
Award.

     

    Section
6.2                                Conditions of Restricted Stock
Awards.  The grant of a Restricted Stock Award shall be subject
to the following:

     

    
      	
               
      

            	
              (a)

            	
              Restriction
      Period.  Each Restricted Stock Award shall require the
      holder to remain in the employment of the Company, a Subsidiary, or an
      Affiliated Entity for a prescribed period (a "Restriction Period"). The
      Committee shall determine the Restriction Period or Periods that shall
      apply to the shares of Common Stock covered by each Restricted Stock Award
      or portion thereof. In addition to any time vesting conditions determined
      by the Committee, Restricted Stock Awards may be subject to the
      achievement by the Company of specified performance criteria based upon
      the Company's achievement of target levels of earnings per share, share
      price, net income, cash flows, reserve additions or replacements,
      production volume, finding and operating costs, drilling results,
      acquisitions and divestitures, risk management activities, return on
      equity, and/or total or comparative shareholder return, or other
      individual criteria as determined by the Committee. At the end of the
      Restriction Period, assuming the fulfillment of any other specified
      vesting conditions, the restrictions imposed by the Committee shall lapse
      with respect to the shares of Common Stock covered by the Restricted Stock
      Award or portion thereof.

            


    

     

    
      	
               
      

            	
              (b)

            	
              Restrictions.  The
      holder of a Restricted Stock Award may not sell, transfer, pledge,
      exchange, hypothecate, or otherwise dispose of the shares of Common Stock
      represented by the Restricted Stock Award during the applicable
      Restriction Period. The Committee shall impose such other restrictions and
      conditions on any shares of Common Stock covered by a Restricted Stock
      Award as it may deem advisable including, without limitation, restrictions
      under applicable Federal or state securities laws, and may legend the
      certificates representing the shares
of

            


    

     

    


    
      
        
           


        

        
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              Common
      Stock subject to the Restricted Stock Award to give appropriate notice of
      such restrictions.

            


    

     

    
      	
               
      

            	
              (c)

            	
              Shareholder
      Rights.  During any Restriction Period, the Committee
      may, in its discretion, grant to the holder of a Restricted Stock Award
      all or any of the rights of a shareholder with respect to the shares,
      including, but not by way of limitation, the right to vote such shares and
      to receive dividends. If any dividends or other distributions are paid in
      shares of Common Stock, all such shares shall be subject to the same
      restrictions on transferability as the shares of Common Stock subject to
      the Restricted Stock Award with respect to which they were
      paid.

            


    

     

    ARTICLE
VII

     

    STOCK
ADJUSTMENTS

     

    Subject
to the provisions of Article IX of this Plan, in the event that the shares of
Common Stock, as presently constituted, shall be changed into or exchanged for a
different number or kind or shares of stock or other securities of the Company
or of another corporation (whether by reason of merger, consolidation,
recapitalization, reclassification, stock split, combination of shares or
otherwise), or if the number of such shares of Common Stock shall be increased
through the payment of a stock dividend, then there shall be substituted for or
added to each share available under and subject to the Plan as provided in
Section 1.3 hereof, and each share then subject or thereafter subject or which
may become subject to Awards under the Plan, the number and kind of shares of
stock or other securities into which each outstanding share of Common Stock
shall be so changed or for which each such share shall be exchanged or to which
each such share shall be entitled, as the case may be, on a fair and equivalent
basis in accordance with the applicable provisions of Section 424 of the Code;
provided, however, in no such event will such adjustment result in a
modification of any Award as defined in Section 424(h) of the Code. In the event
there shall be any other change in the number or kind of the outstanding shares
of Common Stock, or any stock or other securities into which the Common Stock
shall have been changed or for which it shall have been exchanged, then if the
Committee shall, in its sole discretion, determine that such change equitably
requires an adjustment in the shares available under and subject to the Plan, or
in any Award theretofore granted or which may be granted under the Plan, such
adjustments shall be made in accordance with such determination, except that no
adjustment of the number of shares of Common Stock available under the Plan or
to which any Award relates that would otherwise be required shall be made unless
and until such adjustment either by itself or with other adjustments not
previously made would require an increase or decrease of at least 1% of the
number of shares of Common Stock available under the Plan or to which any Award
relates immediately prior to the making of such adjustment (the "Minimum
Adjustment"). Any adjustment representing a change of less than such minimum
amount shall be carried forward and made as soon as such adjustment together
with other adjustments required by this Article VII and not previously made
would result in a Minimum Adjustment. Notwithstanding the foregoing, any
adjustment required by this Article VII which otherwise would not result in a
Minimum Adjustment shall be made with respect to shares of Common Stock relating
to any Award immediately prior to exercise or settlement of such
Award.

     

    


    
      
        
           


        

        
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    No
fractional shares of Common Stock or units of other securities shall be issued
pursuant to any such adjustment, and any fractions resulting from any such
adjustment shall be eliminated in each case by rounding downward to the nearest
whole share.

     

    ARTICLE
VIII

     

    GENERAL

     

    Section
8.1                                Amendment or Termination of
Plan.  The Board may suspend or terminate the Plan at any time.
In addition, the Board may, from time to time, amend the Plan in any manner, but
may not adopt any amendment without Shareholder Approval if (i) the amendment
relates to Incentive Stock Options and Section 422 of the Code requires
Shareholder Approval of such amendment, or (ii) in the opinion of counsel to the
Company, Shareholder Approval is required by any federal or state laws or
regulations or the rules of any stock exchange on which the common stock may be
listed.

     

    Section
8.2                                Acceleration of Awards on Death,
Disability or Other Special Circumstance.  With respect to (i)
a Participant who terminates employment due to a Disability, (ii) the personal
representative of a deceased Participant, or (iii) any other Participant who
terminates employment upon the occurrence of special circumstances (as
determined by the Committee), the Committee, in its sole discretion, may permit
the purchase of all or any part of the shares subject to any unvested Option or
waive the vesting requirements of a Restricted Stock Award on the date of the
Participant's termination of employment due to a Disability, death or special
circumstances, or as the Committee otherwise so determines. With respect to
Options which have already vested at the date of such termination or the vesting
of which is accelerated by the Committee in accordance with the foregoing
provision, the Participant or the personal representative of a deceased
Participant shall have the right to exercise such vested Options within such
period(s) as the Committee shall determine.

     

    Section
8.3                                Withholding
Taxes.  A Participant must pay in cash to the Company the
amount of taxes required to be withheld by law upon the exercise of an Option.
Required withholding taxes associated with a Restricted Stock Award must also be
paid in cash unless the Committee permits a Participant to pay the amount of
taxes required by law to be withheld from a Restricted Stock Award by directing
the Company to withhold from any Award the number of shares of Common Stock
having a Fair Market Value on the date of vesting equal to the amount of
required withholding taxes.

     

    Section
8.4                                Certain Additional Payments by the
Company.  The Committee may, in its sole discretion, provide in
any Award Agreement for certain payments by the Company in the event that
acceleration of vesting of any Award under the Plan is subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties with respect to
such excise tax (such excise tax, interest and penalties, collectively, the
"Excise Tax"). An Award Agreement may provide that the Participant shall be
entitled to receive a payment (a "Gross-Up Payment") in an amount such that
after payment by the Participant of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon such acceleration of vesting of any
Award.

     

    


    
      
        
           


        

        
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    Section
8.5                                Regulatory Approval and
Listings.  The Company has transferred into this plan 828,056
shares of its common stock that were registered and still available under the
predecessor plan, the 1995 Flexible Incentive Plan. The Company shall use its
best efforts to file with the Securities and Exchange Commission within one year
after the date this Plan is approved by the shareholders, and keep continuously
effective and usable, a Registration Statement on Form S-8 with respect to
shares of Common Stock subject to Awards hereunder. Notwithstanding anything
contained in this Plan to the contrary, the Company shall have no obligation to
issue or deliver certificates representing shares of Common Stock evidencing
Awards prior to:

     

    
      	
               
      

            	
              (a)

            	
              the
      obtaining of any approval from, or satisfaction of any waiting period or
      other condition imposed by, any governmental agency which the Committee
      shall, in its sole discretion, determine to be necessary or
      advisable;

            


    

     

    
      	
               
      

            	
              (b)

            	
              the
      listing of such shares on any exchange on which the Common Stock may be
      listed; and

            


    

     

    
      	
               
      

            	
              (c)

            	
              the
      completion of any registration or other qualification of such shares under
      any state or federal law or regulation of any governmental body which the
      Committee shall, in its sole discretion, determine to be necessary or
      advisable.

            


    

     

    Section
8.6                                Right to Continued
Employment.  Participation in the Plan shall not give any
Participant any right to remain in the employ of the Company, a Subsidiary or an
Affiliated Entity. Further, the adoption of this Plan shall not be deemed to
give any Employee, Director or Consultant or any other individual any right to
be selected as a Participant or to be granted an Award.

     

    Section
8.7                                Reliance on
Reports.  Each member of the Committee and each member of the
Board shall be fully justified in relying or acting in good faith upon any
report made by the independent public accountants of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than the Committee or Board member. In no
event shall any person who is or shall have been a member of the Committee or
the Board be liable for any determination made or other action taken or any
omission to act in reliance upon any such report or information or for any
action taken, including the furnishing of information, or failure to act, if in
good faith.

     

    Section
8.8                                Construction.  The
titles and headings of the sections in the Plan are for the convenience of
reference only, and in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.

     

    Section
8.9                                Governing Law.  The
Plan shall be governed by and construed in accordance with the laws of the State
of Delaware except as superseded by applicable federal law.

     

    ARTICLE
IX

     

    ACCELERATION
OF AWARDS UPON CORPORATE EVENT

     

    If the
Company shall, pursuant to action by the Board, at any time propose to dissolve
or liquidate or merge into, consolidate with, or sell or otherwise transfer all
or substantially all of its assets to another corporation and provision is not
made pursuant to the terms of such transaction

     

    


    
      
        
           


        

        
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    for the
assumption by the surviving, resulting or acquiring corporation of outstanding
Options under the Plan, or for the substitution of new awards therefor, the
Committee shall cause written notice of the proposed transaction to be given to
each Participant no less than 40 days prior to the anticipated effective date of
the proposed transaction, and the Participant's Award shall become 100% vested.
Prior to a date specified in such notice, which shall be not more than 10 days
prior to the anticipated effective date of the proposed transaction, each
Participant shall have the right to exercise his or her Option to purchase any
or all of the Common Stock then subject to such Option or to receive the shares
subject to any unvested Restricted Stock Award, free of any restrictions. Each
Participant, by so notifying the Company in writing, may, in exercising his or
her Option, condition such exercise upon, and provide that such exercise shall
become effective immediately prior to the consummation of the transaction, in
which event such Participant need not make payment for the Common Stock to be
purchased upon exercise of such Option until five days after receipt of written
notice by the Company to such Participant that the transaction has been
consummated. If the transaction is consummated, each Option, to the extent not
previously exercised prior to the date specified in the foregoing notice, shall
terminate on the effective date such transaction is consummated. If the
transaction is abandoned, (i) any Common Stock not purchased upon exercise of
such Option shall continue to be available for purchase in accordance with the
other provisions of the Plan and (ii) to the extent that any Option not
exercised prior to such abandonment and any Restricted Stock Award shall have
vested solely by operation of this Article IX, such vesting shall be deemed
voided as of the time such acceleration otherwise occurred pursuant to Article
IX, and the vesting schedule set forth in the Participant's Award Agreement
shall be reinstituted as of the date of such abandonment.

     

    Upon the
occurrence of a Change of Control, in the event that the provisions of the
foregoing paragraph are not already invoked, each Participant shall have the
right to exercise his or her Option to purchase any or all of the Common Stock
then subject to such Option or to receive the shares subject to any unvested
Restricted Stock Award, free of any restrictions. Each Participant, by so
notifying the Company in writing, may, in exercising his or her Option,
condition such exercise upon, and provide that such exercise shall become
effective immediately prior to the Change of Control, in which event such
Participant need not make payment for the Common Stock to be purchased upon
exercise of such Option until five days after receipt of written notice by the
Company to such Participant that the Change of Control has occurred. If the
Change of Control has occurred, each Option, to the extent not previously
exercised prior to the date specified in the foregoing notice, shall terminate
on the effective date of such Change of Control. If the Change of Control is
abandoned, (i) any Common Stock not purchased upon exercise of such Option shall
continue to be available for purchase in accordance with the other provisions of
the Plan and (ii) to the extent that any Option not exercised prior to such
abandonment and any Restricted Stock Award shall have vested solely by operation
of this Article IX, such vesting shall be deemed voided as of the time such
acceleration otherwise occurred pursuant to Article IX, and the vesting schedule
set forth in the Participant's Award Agreement shall be reinstituted as of the
date of such abandonment.

     

    


    
      
        
           


        

        
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