Exhibit 10.27


 


The EXCO Holdings Inc.


 


2004 LONG-TERM INCENTIVE PLAN


 


The EXCO
Holdings Inc. 2004 Long-Term Incentive Plan (the “Plan”) was adopted by the
Board of Directors of EXCO Holdings Inc., a Delaware corporation (the
“Company”), effective as of June 3, 2004, subject to approval by the Company’s
stockholders.


 


ARTICLE 1


PURPOSE


 


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


 


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


 


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


 


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


 


With respect
to Reporting Participants, the Plan and all transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 promulgated
under the Securities Exchange Act of 1934 (the “1934 Act”) in the event the
Common Stock as a class should ever be registered  under the 1934 Act.  To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void ab initio, to the extent permitted by law
and deemed advisable by the Committee.


 


ARTICLE 2


DEFINITIONS


 


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


 


2.1           “Award” means the grant
of any Incentive Stock Option, Nonqualified Stock Option, Reload Option, Restricted Stock, SAR,
Restricted Stock Units, Performance Award, Dividend Equivalent Right or Other
Award, whether granted singly or in combination or in tandem (each individually
referred to herein as an “Incentive”). 
Notwithstanding the above, for purposes of any Award granted to the
Administrator (as defined in the ESPP) of the ESPP on behalf of the
participants and beneficiaries of the ESPP or to an independent contractor
providing services to the Company, the term Award shall not include the grant
of any Incentive Stock Option.


 


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”
shall have the meaning ascribed thereto in subsections (i), (ii) and (iii) of
the definition of “Change in Control” in that certain Stock Repurchase
Agreement, dated as of July 29, 2003, among the Company and certain of its
stockholders signatory thereto; provided, however, that following
an IPO, “Change in Control” shall instead mean any of the following:  (i) any “person” (as such term is used in
Sections 13(d) and 14(d) of the 1934 Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and
13d-5 under the 1934 Act, except that for purposes of this clause (i) such
person shall be deemed to have “beneficial ownership” of all shares that any
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% of the total voting power of the Voting Stock of the Company; provided,
however, that the Permitted Holders beneficially own (as defined above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company than such other person and do
not have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the Board (for purposes of this clause
(i), such other person shall be deemed to beneficially own any Voting Stock of
a specified person held by a parent entity, if such other person is the
beneficial owner (as defined in rules 13d-3 and 13d-5 under the 1934 Act),
directly or indirectly, of more than 35% of the voting power of the Voting
Stock of such parent entity and the Permitted Holders beneficially own (as
defined in this proviso), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent entity and do
not have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the board of directors of such parent
entity); (ii) individuals who on the effective date of this Plan constituted
the Board (together with any new directors whose election by such Board or
whose nomination for election by the stockholders of the Company was approved
by a vote of 66-2/3% of the directors of the Company then still in office who
were either directors on the effective date of this Plan or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board then in office; (iii) the adoption of a plan
relating to the liquidation or dissolution of the Company; or (iv) the merger
or consolidation of the Company with or into another Person or the merger of
another Person with or into the Company, or the sale of all or substantially
all the assets of the Company (determined on a consolidated basis) to another
Person other than (A) a transaction in which the survivor or transferee is a
Person that is controlled by the Permitted Holders or (B) a transaction
following which, in the case of a merger or consolidation transaction, holders
of securities that represented 100% of the Voting Stock of the Company
immediately prior to such transaction (or other securities into which such
securities are converted as part of such merger or consolidation transaction)
own directly or indirectly at least a majority of the voting power of the
Voting Stock of the surviving Person in such merger or consolidation
transaction immediately after such transaction.


 


Notwithstanding
the foregoing, a Permitted MLP Transaction shall not constitute a Change in
Control.


 


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


 


2.8           “Committee” means the
committee appointed or designated by the Board to administer the Plan in
accordance with Article 3 of this Plan.


 


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2.9           “Common Stock” means
the Class A 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
Holdings Inc., a Delaware corporation, and any successor entity.


 


2.11         “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.


 


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


 


2.13         “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.


 


2.14         “ESPP” means the EXCO
Holdings Inc. Employee Stock Participation Plan.


 


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


 


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


 


2.17         “Fair Market Value”
means, as of a particular date, (a) if the shares of Common Stock are
listed on a national securities exchange, the closing sales price per share of
Common Stock on the consolidated transaction reporting system for the principal
securities exchange for the Common Stock on that date, or, if there shall have
been no such sale so reported on that date, on the last preceding date on which
such a sale was so reported, (b) if the shares of Common Stock are not so
listed but are quoted on the Nasdaq National Market System, the closing sales
price per share of Common Stock on the Nasdaq National Market System on that
date, or, if there shall have been no such sale so reported on that date, on
the last preceding date on which such a sale was so reported, (c) if the
Common Stock is not so listed or quoted, the mean between the closing bid and
asked price on that date, or, if there are no quotations available for such
date, on the last preceding date on which such quotations shall be available,
as reported by Nasdaq, or, if not reported by Nasdaq, by the National Quotation
Bureau, Inc., or (d) if none of the above is applicable, such amount as may be
determined by the Board (acting on the advice of an Independent Third Party,
should the Board elect in its sole discretion to utilize an Independent Third
Party for this purpose), in good faith, to be the fair market value per share
of Common Stock.


 


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


 


2.19         “Incentive” is defined in
Section 2.1 hereof.


 


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


 


2.21         “IPO” means the first
public offering after the effective date of the Plan of any class of equity
securities of the Company pursuant to a registration statement filed with and
declared effective by the Securities and Exchange Commission, provided that
such offering resulted in minimum net proceeds to the Company of at least
$30,000,000.


 


2.22         “Nonpublicly Traded”
means Company Stock as it exists prior to an IPO (as defined in the Company’s
Amended and Restated Certificate of Incorporation).


 


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.


 


2.27         “Participant” means an
Employee or Outside Director of the Company or a Subsidiary to whom an Award is
granted under this Plan and for any grant that is not an Incentive Stock
Option, the term “Participant” shall also include the Administrator of the ESPP
to hold Awards other than Incentive Stock Options on behalf of the ESPP and its
participants and beneficiaries and an independent contractor providing services
to the Company.


 


2.28         “Plan” means this EXCO
Holdings Inc. 2004 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.


 


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


 


2.31         “Permitted Holders” means
any combination of Persons that beneficially own capital stock of the Company
as of the effective date of this Plan.


 


2.32         “Permitted MLP
Transaction” shall have the meaning ascribed thereto in that certain Indenture,
dated as of January 20, 2004, of EXCO Resources, Inc., and certain of its
subsidiaries as guarantors, in respect of its 7-1/4 Senior Notes due 2011.


 


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2.33         “Person” means any
individual, corporation, partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.


 


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


 


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


 


2.36         “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.


 


2.37         “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.


 


2.38         “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.


 


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


 


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


 


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


 


2.42         “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.


 


2.43         “Termination of Service”
occurs when a Participant who is an Employee of the Company or any Subsidiary
shall cease to serve as an Employee of the Company and its Subsidiaries, for
any reason; or, when a Participant who is an Outside Director of the Company or
a Subsidiary shall cease to serve as a director of the Company or its
Subsidiaries for any reason.  Except as
may be necessary or desirable to comply with applicable federal or state law, a
“Termination of Service” shall not be deemed to have occurred when a
Participant who is an Employee becomes an Outside Director or vice versa.  If, however, a Participant who is an
Employee and who has an Incentive Stock Option ceases to be an Employee but
does not suffer a Termination of Service, and if that Participant does not
exercise the Incentive Stock Option within the time


 


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required under Section 422 of
the Code upon ceasing to be an Employee, the Incentive Stock Option shall
thereafter become a Nonqualified Stock Option.


 


2.44         “Total and Permanent
Disability” means a Participant is qualified for long-term disability benefits
under the Company’s or Subsidiary’s disability plan or insurance policy; or, if
no such plan or policy is then in existence or if the Participant is not
eligible to participate in such plan or policy, that the Participant, because
of a physical or mental condition resulting from bodily injury, disease, or
mental disorder which prevents the Participant from performing his or her
duties of employment for a period of six (6) continuous months, as determined
in good faith by the Committee, based upon medical reports or other evidence
satisfactory to the Committee, with or without reasonable accommodation; 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.


 


2.45         “Voting Stock” of a
Person means all classes of capital stock of such Person (or, in the case of a
partnership subsidiary, the general partnership interests of such partnership
subsidiary) then outstanding and normally entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof.


 


ARTICLE 3


ADMINISTRATION


 


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


 


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


 


3.2          Designation of
Participants and Awards.


 


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


 


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


 


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


 


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


 


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


 


ARTICLE 4


ELIGIBILITY


 


Any Employee
(including an Employee who is also a director or an officer), or Outside
Director of the Company or any Subsidiary whose judgment, initiative, and
efforts contributed or may be expected to contribute to the successful
performance of the Company or any Subsidiary is eligible to participate in the
Plan; provided that only Employees of the Company or any Subsidiary shall be
eligible to receive Incentive Stock Options. 
The Administrator of the ESPP in its capacity as the Administrator of
the ESPP by and on behalf of the ESPP’s participants and beneficiaries shall be
eligible to receive Awards; provided that the Administrator shall not be
eligible to receive Incentive Stock Options. 
An independent contractor providing services to the Company or any
Subsidiary whose judgment, initiative, and efforts contributed or may be expected
to contribute to the successful performance of the Company or any Subsidiary is
eligible to participate in the Plan; provided that only Employees of the
Company or any Subsidiary shall be eligible to receive Incentive Stock Options
and independent contractors shall not be eligible to receive Incentive Stock
Options.  The Committee, upon its own
action, may grant, but shall not be required to grant, an Award to any Employee
or Outside Director of the Company or any Subsidiary.  Awards may be granted by the Committee at any time and from time
to time to new Participants, or to then Participants, or to a greater or lesser
number of Participants, and


 


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may include or exclude previous
Participants, as the Committee shall determine.  Except as required by this Plan, Awards granted at different
times need not contain similar provisions. 
The Committee’s determinations under the Plan (including without
limitation determinations of which Employees or Outside Directors, if any, are
to receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same) need not be
uniform and may be made by it selectively among Participants who receive, or
are eligible to receive, Awards under the Plan.


 


ARTICLE 5


SHARES
SUBJECT TO PLAN


 


5.1          Number
Available for Awards.  Subject to
adjustment as provided in Articles 11 and 12, the maximum number of shares
of Common Stock that may be delivered pursuant to Awards granted under the Plan
is 12,962,968 shares.  Shares to be
issued may be made available from authorized but unissued Common Stock, Common
Stock held by the Company in its treasury, or Common Stock purchased by the
Company on the open market or otherwise. 
During the term of this Plan, the Company will at all times reserve and
keep available the number of shares of Common Stock that shall be sufficient to
satisfy the requirements of this Plan.


 


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


 


ARTICLE 6


GRANT OF AWARDS


 


6.1          In
General.


 


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


 


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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 grant.


 


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 less than, equal to, or greater 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) 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, (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.  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 15.10 of the Plan.


 


9

















 


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


 


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


 


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


 


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


 


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


 


10

















 


impose.  The grant of the SAR may provide that the
holder may be paid for the value of the SAR either in cash or in shares of
Common Stock, or a combination thereof. 
In the event of the exercise of a SAR payable in shares of Common Stock,
the holder of the SAR shall receive that number of whole shares of Common Stock
having an aggregate Fair Market Value on the date of exercise equal to the
value obtained by multiplying (i) the difference between the Fair Market Value
of a share of Common Stock on the date of exercise over the  SAR Price as set forth in such SAR (or other
value specified in the agreement granting the SAR), by (ii) the number of
shares of Common Stock as to which the SAR is exercised, with a cash settlement
to be made for any fractional shares of Common Stock.  The Committee, in its sole discretion, may place a ceiling on the
amount payable upon exercise of a SAR, but any such limitation shall be
specified at the time that the SAR is granted. 
The exercise price of any SAR shall in no event be less than the Fair
Market Value of the Shares at the time of the grant.


 


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


 


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


 


6.8          Performance Awards.


 


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


 


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


 


11

















 


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


 


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.


 


12

















 


ARTICLE 7


AWARD PERIOD; VESTING


 


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


 


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


 


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.


 


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
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


 


13

















 


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


 


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


 


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


 


14

















 


governmental
regulatory body, is necessary as a condition of, or in connection with, the
Stock Option or the issuance or purchase of shares of Common Stock thereunder,
the Stock Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not reasonably acceptable to the Committee.


 


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


 


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


 


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


 


ARTICLE 9


AMENDMENT OR
DISCONTINUANCE


 


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


 


15

















 


contemplated or permitted by
this Article 9 shall adversely affect any rights of Participants or obligations
of the Company to Participants with respect to any Incentive theretofore
granted under the Plan without the consent of the affected Participant.


 


ARTICLE 10


TERM


 


The Plan shall be
effective from the date that this Plan is approved by the Board.  Unless sooner terminated by action of the
Board, the Plan will terminate on June 3, 2014, but Incentives granted before
that date will continue to be effective in accordance with their terms and
conditions.


 


ARTICLE 11


CAPITAL ADJUSTMENTS


 


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


 


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


 


ARTICLE 12


RECAPITALIZATION,
MERGER AND CONSOLIDATION


 


12.1        No
Effect on Company’s Authority.  The
existence of this Plan and Incentives granted hereunder shall not affect in any
way the right or power of the Company or its stockholders to make or


 


16

















 


authorize any or all
adjustments, recapitalizations, reorganizations, or other changes in the
Company’s capital structure and its business, or any merger or consolidation of
the Company, or any issuance of bonds, debentures, preferred or preference
stocks ranking prior to or otherwise affecting the Common Stock or the rights
thereof (or any rights, options, or warrants to purchase same), or the
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.


 


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


 


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


 


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


 


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


 


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


 


17

















 


charges,
including but not limited to taxes, payable by the Company before such
liquidation could be completed.


 


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


 


ARTICLE 13


LIQUIDATION
OR DISSOLUTION


 


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


 


ARTICLE 14


INCENTIVES IN
SUBSTITUTION FOR


INCENTIVES GRANTED BY
OTHER ENTITIES


 


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


 


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.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


15.9        Compliance
With Other Agreements.  Any
shares of Common Stock issued upon exercise of an Incentive awarded under this
Plan shall be subject to all of the terms and provisions of (i) the EXCO
Holdings Inc. Stockholders’ Agreement (herein so called), dated as of July 29,
2003, among the Company and the stockholders signatory thereto, (ii) that
certain Registration Rights Agreement (herein so called), dated as of July 29,
2003, among the Company and the stockholders signatory thereto, and (iii) that
certain Stock Repurchase Agreement (herein so called), dated as of July 29,
2003, among the Company and the stockholders signatory thereto.  Upon the Award of any Incentive the
Participant shall enter into such joinder agreements or other appropriate
instruments binding them and any shares of Common Stock they may acquire under
any Incentive to said agreements.


 


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


 


20

















 


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 Holdings Inc. 2004 Long-Term Incentive Plan,
a copy of which is on file at the principal office of the Company in Dallas,
Texas.  No transfer or pledge of the
shares evidenced hereby may be made except in accordance with and subject to
the provisions of said Plan.  By
acceptance of this certificate, any holder, transferee or pledgee hereof agrees
to be bound by all of the provisions of said Plan.”


 


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


 


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


 


Any legend
required by any of the terms of the EXCO Holdings Inc. Stockholders’ Agreement,
the Registration Rights Agreement or the Stock Repurchase Agreement.


 


A copy of this
Plan shall be kept on file in the principal office of the Company in Dallas,
Texas.


 


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


 


21

















 


IN WITNESS
WHEREOF, the Company has caused this instrument to be executed as of June 3,
2004, by its Chief Executive Officer and Secretary pursuant to prior action
taken by the Board.


 


 


	
   

  	
  EXCO HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/
  T. W. EUBANK

  
	
   

  	
  Name:

  	
  T. W. Eubank

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
    /s/ J. DOUGLAS
  RAMSEY

  	
   

  	
   

  
					



 


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