Exhibit
10.4


 


STROUD ENERGY, INC.

RESTRICTED STOCK PLAN


 


ARTICLE I.  ESTABLISHMENT
AND PURPOSE


 


1.1          Establishment
and Purpose. 
Stroud Energy, Inc. (“SEI”) hereby establishes the Stroud Energy, Inc.
Restricted Stock Plan, as set forth in this document.  The purposes of the Plan are to attract and
retain highly qualified senior management and other employees to perform
services for SEI and its Affiliates and to align the interests of such
employees with those of the stockholders of SEI.  SEI is committed to creating long-term
stockholder value.  SEI’s compensation
philosophy is based on a belief that SEI can best create stockholder value if senior
management and other employees act and are rewarded as business owners.  SEI believes that an equity stake through
equity compensation programs effectively aligns employee and stockholder
interests by motivating and rewarding long-term performance that will enhance
stockholder value.


 


1.2          Replacement
of SEM Class B Restricted Units.  In connection with the transactions
contemplated by that certain Combination Agreement between SEI, Stroud Energy
Management, Ltd. (“SEM”), Stroud Energy, Ltd., Stroud Oil Properties, Inc.
and the other parties thereto dated August 1, 2005 (the “Combination
Agreement”), shares of SEI Common Stock issued in exchange for the Class B
Partnership Interests in SEM that were previously issued to senior management
and other employees of Stroud Oil Properties, Inc. or its affiliates
during 2005 will be issued pursuant to this Plan.


 


1.3          Effectiveness
and Term. 
This Plan shall become effective as of September 23, 2005, (the “Effective
Date”), which is the date of approval of the Plan by the holders of at least a
majority of the shares of Common Stock by written action in lieu of a meeting
in accordance with applicable law. Unless terminated earlier by the Board pursuant to Section 9.1, this
Plan shall terminate on the day prior to the tenth anniversary of the Effective
Date.


 


ARTICLE II.  DEFINITIONS


 


2.1          “Affiliate” means (i) a “parent corporation” or a “subsidiary
corporation” of SEI, as those terms are defined in Sections 424(e) and (f) of
the Code, respectively, and (ii) any other corporation, organization,
association, partnership, sole proprietorship or other type of entity, whether
incorporated or unincorporated, directly or indirectly controlling or
controlled by or under direct or indirect common control with SEI.


 


2.2          “Award” means an award granted to a Participant in the form
of Restricted Stock.


 


2.3          “Award Agreement” means a written agreement between SEI and a
Participant that sets forth the terms, conditions, restrictions and limitations
applicable to an Award.


 


2.4          “Board” means the Board of Directors of SEI.


 





















 


2.5          “Cause” means a finding by the Committee of acts or omissions
constituting willful misconduct or gross negligence in the course of the
Participant’s employment or service with the Company.


 


2.6          “Change of Control” means any of the following events:


 


(a)           the acquisition by any “person” (including a “group”
(as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), but excluding SEI or an existing stockholder of SEI who, upon closing of
the Private Placement, holds 5% or more of the Common Stock) of “beneficial
ownership” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of SEI representing more than 20% of the combined
voting power of SEI’s then outstanding securities entitled to vote generally in
the election of directors; or


 


(b)           the consummation of a reorganization, merger,
consolidation or other form of business transaction or series of business
transactions, in each case, with respect to which persons who were stockholders
of SEI immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors
of the reorganized, merged or consolidated company’s then outstanding voting
securities; or


 


(c)           the sale, lease or disposition (in one or a series
of related transactions) by SEI of all or substantially all of SEI’s assets
(including those of its subsidiaries) to any person or its Affiliates, other
than SEI or its Affiliates; or


 


(d)           the members of the Board at the beginning of any
consecutive 24-calendar-month period (the “Incumbent Directors”) cease for any
reason other than death to constitute at least a majority of the members of the
Board, provided that any director whose election, or nomination for election by
SEI’s stockholders, was approved by a vote of at least a majority of the
members of the Board then still in office who were members of the Board at the
beginning of such 24-calendar-month period, shall be deemed to be an Incumbent
Director; or


 


(e)           the approval by the Board or the stockholders of SEI
of a complete or substantially complete liquidation or dissolution of SEI; or


 


(f)            any event similar to the foregoing that the Committee
determines in its absolute discretion would, if consummated, materially alter
the structure or business SEI.


 


Notwithstanding the foregoing, (i) a
Change of Control shall not include any acquisition, merger, or reorganization
by SEI in which the stockholders of SEI immediately prior to such acquisition,
merger, or reorganization will have substantially the same proportionate
ownership of common stock of the surviving corporation immediately thereafter
or which would be considered a Change of Control only due to the acquisition of
Common Stock by any employee benefit plan (or related trust) sponsored or
maintained by SEI or any parent or subsidiary of SEI, and (ii) a


 


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Change of Control shall not include the
transactions contemplated by the Combination Agreement, the Private Placement,
or the initial public offering of the Common Stock.


 


2.7          “Code” means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions
and regulations.


 


2.8          “Committee”
means the Compensation Committee of the Board or
such other committee of the Board as may be designated by the Board to
administer the Plan, which committee shall consist of two or more members of
the Board.  During such time as the
Common Stock is registered under Section 12 of the Exchange Act, each
member of the Committee shall be an Outside Director.  To the extent that no Committee exists that
has the authority to administer the Plan, the functions of the Committee shall
be exercised by the Board.


 


2.9          “Common Stock” means the common stock of SEI, $.001 par value
per share, or any stock or other securities of hereafter issued or issuable in
substitution or exchange for the Common Stock.


 


2.10        “Company” means SEI and any Affiliate.


 


2.11        “Effective
Date” means the date this Plan becomes effective as provided in Section 1.3.


 


2.12        “Employee” means an employee of the Company; provided,
however, that the term “Employee” does not include an Outside Director or an
individual performing services for the Company who is treated for tax purposes
as an independent contractor at the time of performance of the services.


 


2.13        “Exchange Act” means the Securities Exchange Act of 1934, as
amended.


 


2.14        “Executive” means an Employee who is an executive officer or
other member of senior management of the Company.


 


2.15        “Fair Market Value” means the fair market value of the Common
Stock, as determined in good faith by the Committee or (i) if the Common
Stock is traded in the over-the-counter market, the average of the
representative closing bid and asked prices as reported by NASDAQ for the date
the Award is granted (or if there was no quoted price for such date of grant,
then for the last preceding business day on which there was a quoted price), or
(ii) if the Common Stock is traded in the NASDAQ National Market System,
the average of the highest and lowest selling prices for such stock as quoted
on the NASDAQ National Market System for the date the Award is granted (or if
there are no sales for such date of grant, then for the last preceding business
day on which there were sales), or (iii) if the Common Stock is listed on
any national stock exchange, the average of the highest and lowest selling
prices for such stock as quoted on such exchange for the date the Award is
granted (or if there are no sales for such date of grant, then for the last
preceding business day on which there were sales).


 


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2.16        “Grant Date” means the date an Award is determined to be
effective by the Committee upon the grant of such Award.


 


2.17        “NASDAQ” means The NASDAQ Stock Market, Inc.


 


2.18        “Outside Director” means a member of the Board who: (i) meets
the independence requirements of the principal exchange or quotation system
upon which the shares of Common Stock are listed or quoted, (ii) from and
after the date on which the remuneration paid pursuant to the Plan becomes
subject to the deduction limitation under Section 162(m) of the Code,
qualifies as an “outside director” under Section 162(m) of the Code, (iii) qualifies
as a “non-employee director” of SEI under Rule 16b-3, and (iv) satisfies
independence criteria under any other applicable laws or regulations relating
to the issuance of shares of Common Stock to Employees.


 


2.19        “Participant” means an Executive or other Employee who has
been granted an Award.


 


2.20        “Plan” means the Stroud Energy, Inc. Restricted Stock Plan,
as in effect from time to time.


 


2.21        “Private Placement” means the private placement of shares of
the Common Stock to accredited investors, qualified institutional buyers and
non-U.S. persons involving SEI and/or its stockholders scheduled to close on or
about the Effective Date.


 


2.22        “Purchased Restricted Stock” shall have the meaning given
such term in Section 7.2.


 


2.23        “Restricted Period” means the period established by the
Committee with respect to an Award during which the Award remains subject to
forfeiture.


 


2.24        “Restricted Stock” means a share of Common Stock granted to a
Participant pursuant to Article VII that is subject to such terms,
conditions, and restrictions as may be determined by the Committee.


 


2.25        “Rule 16b-3” means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act, or any successor rule or
regulation that may be in effect from time to time.


 


2.26        “SEI” means Stroud Energy, Inc., a Delaware corporation,
or any successor thereto.


 


ARTICLE III.  PLAN ADMINISTRATION


 


3.1          Plan
Administrator and Discretionary Authority.  The Plan shall be administered by the
Committee.  The Committee shall have
total and exclusive responsibility to


 


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control,
operate, manage and administer the Plan in accordance with its terms.  The Committee shall have all the authority
that may be necessary or helpful to enable it to discharge its responsibilities
with respect to the Plan.  Without
limiting the generality of the preceding sentence, the Committee shall have the
exclusive right to:  (i) interpret
the Plan and the Award Agreements executed hereunder; (ii) decide all
questions concerning eligibility for, and the amount of, Awards granted under
the Plan; (iii) construe any ambiguous provision of the Plan or any Award
Agreement; (iv) prescribe the form of Award Agreements; (v) correct
any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award Agreement; (vi) issue administrative guidelines as an aid to
administering the Plan and make changes in such guidelines as the Committee
from time to time deems proper; (vii) make regulations for carrying out
the Plan and make changes in such regulations as the Committee from time to
time deems proper; (viii) to the extent permitted under the Plan, grant
waivers of Plan terms, conditions, restrictions and limitations; (ix) accelerate
the vesting or payment of an Award when such action or actions would be in the
best interests of the Company; (x) require Participants to hold a stated number
or percentage of shares of Common Stock acquired pursuant to an Award for a
stated period; and (xi) take any and all other actions the Committee deems
necessary or advisable for the proper operation or administration of the
Plan.  The Committee shall have authority
in its sole discretion with respect to all matters related to the discharge of
its responsibilities and the exercise of its authority under the Plan,
including without limitation its construction of the terms of the Plan and its
determination of eligibility for participation in, and the terms of Awards granted
under, the Plan.  The decisions of the
Committee and its actions with respect to the Plan shall be final, conclusive
and binding on all persons having or claiming to have any right or interest in
or under the Plan, including without limitation Participants and their
respective estates, beneficiaries and legal representatives.


 


3.2          Liability;
Indemnification. 
No member of the Committee, nor any person to whom it has delegated authority,
shall be personally liable for any action, interpretation or determination made
in good faith with respect to the Plan or Awards granted hereunder, and each
member of the Committee (or delegatee of the Committee) shall be fully
indemnified and protected by SEI with respect to any liability he may incur
with respect to any such action, interpretation or determination, to the
maximum extent permitted by applicable law.


 


ARTICLE IV.  SHARES SUBJECT TO THE PLAN


 


4.1          Available
Shares.


 


(a)           Subject to adjustment as
provided in Section 4.2, the maximum number of shares of Common Stock that
shall be available for grant of Awards under the Plan shall be 801,861 shares
of Common Stock.  Of the maximum number
of shares of Common Stock that are available for grant of Awards under the
Plan, 735,861 shares of Common Stock shall be available for the grant of Awards
to Executives and the remaining 66,000 shares shall be available for the grant
of Awards to Employees other than Executives.


 


(b)           Shares of Common Stock
issued pursuant to the Plan may be original issue or treasury shares or a
combination of the foregoing, as the Committee, in its sole discretion, shall
from time to time determine.  SEI will,
during the term of this Plan, will


 


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at all times reserve and keep
available such number of shares of Common Stock as shall be sufficient to
satisfy the requirements of the Plan.


 


4.2          Adjustments
for Recapitalizations and Reorganizations. Subject
to Article VIII, if there is any change in the number or kind of shares of
Common Stock outstanding (i) by reason of a stock dividend, spin-off,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization, or consolidation, (iii) by reason of a
reclassification or change in par value, or (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Common Stock as a
class without SEI’s receipt of consideration, or if the value of outstanding
shares of Common Stock is reduced as a result of a spin-off or SEI’s payment of
an extraordinary cash dividend, or distribution or dividend or distribution consisting
of any assets of SEI other than cash, the maximum number and kind of shares of
Common Stock available for issuance under the Plan and the number and kind of
shares of Common Stock covered by outstanding Awards may be appropriately
adjusted by the Committee to reflect any increase or decrease in the number of,
or change in the kind or value of, issued shares of Common Stock to preclude,
to the extent practicable, the enlargement or dilution of rights under such
Awards; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated.


 


4.3          Adjustments
for Awards. 
The Committee shall have sole discretion to determine the manner in
which shares of Common Stock available for grant of Awards under the Plan are
counted.  Without limiting the discretion
of the Committee under this Section 4.3, unless otherwise determined by
the Committee, the following rules shall apply for the purpose of
determining the number of shares of Common Stock available for grant of Awards
under the Plan:


 


(a)           Restricted
Stock.  The
grant Restricted Stock shall reduce the number of shares of Common Stock available
for grant of Awards under the Plan by the number of shares of Common Stock subject
to such an Award.


 


(b)           Cancellation,
Forfeiture and Termination.  If any Award referred to in Section 4.3(a) is
canceled or forfeited, or terminates, expires or lapses, for any reason, the
shares then subject to such Award shall again be available for grant of Awards
under the Plan.


 


(c)           Payment of Withholding
Taxes.  If
previously acquired shares of Common Stock are used to pay withholding taxes
payable upon vesting or payment of an Award, the number of shares available for
grant of Awards under the Plan shall be increased by the number of shares
delivered or withheld as payment of such withholding taxes.


 


ARTICLE V.  ELIGIBILITY


 


The Committee shall select Participants
from those Employees providing services to the Company that, in the opinion of
the Committee, are in a position to make a significant contribution to the
success of the Company.  Once a
Participant has been selected for an Award


 


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by the
Committee, the Committee shall determine the size of Award to be granted to the
Participant and shall establish in the related Award Agreement the terms, conditions,
restrictions and limitations applicable to the Award, in addition to those set
forth in the Plan and the administrative guidelines and regulations, if any,
established by the Committee.


 


ARTICLE VI.  FORM OF AWARDS


 


6.1          Form of Awards.  Awards may be granted under the Plan in the
form of Restricted Stock pursuant to Article VII.  All Awards shall be subject to the terms,
conditions, restrictions and limitations of the Plan.  The Committee may, in its sole discretion,
subject any Award to such other terms, conditions, restrictions and/or
limitations (including without limitation the time and conditions of vesting or
payment of an Award and restrictions on transferability of any shares of Common
Stock issued or delivered pursuant to an Award), provided they are not
inconsistent with the terms of the Plan. 
The Committee may, but is not required to, subject an Award to such
conditions as it determines are necessary or appropriate to ensure than an
Award constitutes “qualified performance based compensation” within the meaning
of Section 162(m) of the Code and the regulations thereunder.  Awards need not be uniform.  Subject to compliance with applicable tax
law, an Award Agreement may provide that a Participant may elect to defer
receipt of income attributable to the vesting or settlement of an Award.


 


ARTICLE VII.  RESTRICTED STOCK


 


7.1          General.  Awards may be
granted in the form of Restricted Stock in such numbers and at such times as
the Committee shall determine.  The
Committee shall impose such terms, conditions and restrictions on Restricted
Stock as it may deem advisable, including without limitation providing for vesting
upon the achievement of specified performance goals pursuant to an Award and restrictions
under applicable Federal or state securities laws.  A Participant shall not be required to make
any payment for Restricted Stock unless required by the Committee pursuant to Section 7.2.


 


7.2          Purchased Restricted Stock.  The Committee may in its sole discretion
require a Participant to pay a stipulated purchase price for each share of
Restricted Stock (“Purchased Restricted Stock”).


 


7.3          Restricted Period.  At
the time an Award is granted, the Committee shall establish a Restricted Period
applicable to the Award.  Each Award may
have a different Restricted Period in the sole discretion of the Committee.


 


7.4          Other Terms and Conditions.  Restricted Stock shall constitute issued and
outstanding shares of Common Stock for all corporate purposes.  Restricted Stock awarded to a Participant
under the Plan shall be registered in the name of the Participant or, at the
option of SEI, in the name of a nominee of SEI, and shall be issued in
book-entry form or represented by a stock certificate.  Subject to the terms and conditions of the
Award Agreement, a Participant to whom Restricted Stock has been awarded shall
have the right to receive dividends thereon during the Restricted Period, to
vote the Restricted Stock and to enjoy all other stockholder rights with


 


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respect thereto, except that (i) SEI shall retain
custody of any certificates evidencing the Restricted Stock during the Restricted
Period, and (ii) the Participant may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the Restricted Stock during the Restricted
Period.  A breach of the terms and
conditions established by the Committee pursuant to the Award may result in a
forfeiture of the Restricted Stock.  At
the time of an Award, the Committee may, in its sole discretion, prescribe
additional terms, conditions, restrictions and limitations applicable to the
Restricted Stock, including without limitation rules pertaining to the
termination of employment or service (by reason of death, permanent and total
disability, retirement, cause or otherwise) of a Participant prior to
expiration of the Restricted Period.


 


7.5          Miscellaneous.  Nothing in
this Article shall prohibit the exchange of shares of Restricted Stock
pursuant to a plan of merger or reorganization for stock or other securities of
SEI or another corporation that is a party to the reorganization, provided that
the stock or securities so received in exchange for shares of Restricted Stock
shall, except as provided in Article VIII, become subject to the
restrictions applicable to such Restricted Stock.  Any shares of Common Stock received as a
result of a stock split or stock dividend with respect to shares of Restricted
Stock shall also become subject to the restrictions applicable to such
Restricted Stock.


 


7.6          Code Section 162(m)
Requirements. 
From and after the date on which remuneration paid pursuant to the Plan
becomes subject to the deduction limitation under Section 162(m) of the
Code, the Committee shall determine in its sole discretion whether all or any
portion of an Award shall be intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code (the “162(m) Requirements”).  The performance criteria for any Award that
is intended to satisfy the 162(m) Requirements shall be established in writing
by the Committee based on one or more performance goals as set forth in Section 7.7
not later than 90 days after commencement of the performance period with
respect to such Award, provided that the outcome of the performance in respect
of the goals remains substantially uncertain as of such time.  The maximum number of shares of Common Stock
that may be awarded to any Participant during any calendar year pursuant to any
Award that is intended to satisfy the 162(m) Requirements is 100,000 shares;
provided, however, that such maximum number of shares with respect to an Award
that provides for a performance period longer than one calendar year shall be
the foregoing limit multiplied by the number of full calendar years in the
performance period.  At the time of the
grant of an Award and to the extent permitted under Code Section 162(m)
and regulations thereunder for an Award intended to satisfy the 162(m)
Requirements, the Committee may provide for the manner in which the performance
goals will be measured in light of specified corporate transactions,
extraordinary events, accounting changes and other similar occurrences.


 


7.7          Performance
Goals.  The
performance measure(s) to be used for purposes of an Award may be described in
terms of objectives that are related to the individual Participant or
objectives that are Company-wide or related to a subsidiary, division,
department, region, function or business unit of the Company in which the
Participant is employed or with respect to which the Participant performs
services, and may consist of one or more or any combination of the following
criteria:  (i) earnings or earnings
per share (whether on a pre-tax, after-tax, operational or other basis), (ii) return
on equity, (iii) return on assets or net assets, (iv) return on
capital or invested capital and other related financial measures, (v) cash
flow, (vi) revenues,


 


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(vii) income
or operating income, (viii) expenses or expense levels, (ix) one or
more operating ratios, (x) stock price, (xi) total stockholder return, (xii)
market share, (xiii) operating profit, (xiv) profit margin, (xv) growth in
production, (xvi) capital expenditures, (xvii) net borrowing, debt leverage
levels, credit quality or debt ratings, (xviii) the accomplishment of mergers,
acquisitions, dispositions, public offerings or similar extraordinary business
transactions, (xix) net asset value per share, (xx) economic value added, (xxi)
individual business objectives or (xxii) added reserves.  The performance goals based on these
performance measures may be made relative to the performance of other business
entities.


 


7.8          Certification
and Negative Discretion.  Prior to the payment of any compensation
pursuant to an Award that is intended to satisfy the 162(m) Requirements, the
Committee shall certify the extent to which the performance goals and other
material terms of the Award have been achieved or satisfied.  The Committee in its sole discretion shall
have the authority to reduce, but not to increase, the amount payable and the
number of shares to be granted, issued, retained or vested pursuant to an Award
that is intended to satisfy the Section 162(m) Requirements.


 


ARTICLE VIII.  CHANGE OF CONTROL


 


Unless otherwise determined by the Committee at the time of grant of an
Award or unless otherwise provided in the applicable Award Agreement, if the
stockholders of SEI shall approve a transaction which upon consummation would
constitute a Change of Control of SEI, or in the event of any Change of Control
of SEI not subject to stockholder approval, then effective immediately prior to
the Change of Control, all Awards shall be fully vested, all restrictions and
limitations shall lapse and all performance criteria or other conditions
related to such Awards shall be deemed to be achieved or fulfilled to the
maximum extent possible.


 


ARTICLE IX.  AMENDMENT AND TERMINATION


 


9.1          Plan Amendment and Termination.  The
Board may at any time suspend, terminate, amend or modify the Plan, in whole or
in part; provided, however, that no amendment or modification of the Plan shall
become effective without the approval of such amendment or modification by the
holders of at least a majority of the shares of Common Stock if (i) such
amendment or modification increases the maximum number of shares subject to the
Plan (except as provided in Article IV) or changes the designation or
class of persons eligible to receive Awards under the Plan, or (ii) counsel
for SEI determines that such approval is otherwise required by or necessary to
comply with applicable law or the listing requirements of NASDAQ or such other
exchange or association on which the Common Stock is then listed or quoted.  An amendment to the Plan
shall not require stockholder approval if it curtails rather than expands the
scope of the Plan, nor if it is made to conform the Plan to new statutory or
regulatory requirements that arise after submission of the Plan to stockholders
for their approval, such as, without limitation, changes to Section 409A
of the Code, or regulations issued thereunder.  Upon
termination of the Plan, the terms and provisions of the Plan shall,
notwithstanding such termination, continue to apply to Awards granted prior to
such termination.  Except as otherwise
provided herein, no suspension, termination, amendment or modification of the
Plan shall


 


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adversely affect in any material way any Award
previously granted under the Plan, without the consent of the Participant holding
such Award.


 


9.2          Award Amendment and Cancellation.  The
Committee may amend the terms of any outstanding Award granted pursuant to the
Plan, but except as otherwise provided herein, no such amendment shall adversely
affect in any material way the Participant’s rights under an outstanding Award
without the consent of the Participant holding such Award.


 


ARTICLE X.  MISCELLANEOUS


 


10.1        Award Agreements. 
After the Committee grants an Award under the Plan to a Participant, SEI
and the Participant shall enter into an Award Agreement setting forth the
terms, conditions, restrictions and limitations applicable to the Award and
such other matters as the Committee may determine to be appropriate.  The Committee may permit or
require a Participant to defer receipt of the payment of cash or the delivery
of shares of Common Stock that would otherwise be due to the Participant in
connection with any Award; provided, however, that any permitted deferrals shall be structured to avoid
negative tax consequences to the Participant under Section 409A of the
Code.  The terms and provisions of
the respective Award Agreements need not be identical.  All Award Agreements shall be subject to the
provisions of the Plan, and in the event of any conflict between an Award
Agreement and the Plan, the terms of the Plan shall govern.


 


10.2        Listing; Suspension.


 


(a)           As long as the Common Stock is listed on a
national securities exchange or system sponsored by a national securities
association, the issuance of any shares of Common Stock pursuant to an Award
shall be conditioned upon such shares being listed on such exchange or
system.  SEI shall have no obligation to
issue such shares unless and until such shares are so listed.


 


(b)           If at any time counsel to SEI or its
Affiliates shall be of the opinion that any sale or delivery of shares of
Common Stock pursuant to an Award is or may in the circumstances be unlawful or
result in the imposition of excise taxes on SEI or its Affiliates under the laws
of any applicable jurisdiction, SEI or its Affiliates shall have no obligation
to make such sale or delivery, or to make any application or to effect or to
maintain any qualification or registration under the Securities Act of 1933, as
amended, or otherwise, with respect to shares of Common Stock or Awards.


 


(c)           Upon termination of any period of
suspension under this Section, any Award affected by such suspension that shall
not then have expired or terminated shall be reinstated as to all shares
available before such suspension and as to shares that would otherwise have
become available during the period of such suspension, but no such suspension
shall extend the term of any Award unless otherwise determined by the Committee
in its sole discretion.


 


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10.3        Additional Conditions. 
Notwithstanding anything in the Plan to the contrary:  (i) the Committee may, if it shall
determine it necessary or desirable in its sole discretion, at the time of
grant of any Award or the issuance of any shares of Common Stock pursuant to
any Award, require the recipient of the Award or such shares of Common Stock,
as a condition to the receipt thereof, to deliver to SEI a written
representation of present intention to acquire the Award or such shares of
Common Stock for his own account for investment and not for distribution, (ii) the
certificate for shares of Common Stock issued to a Participant may include any
legend that the Committee deems appropriate to reflect any restrictions on
transfer, and (iii) all certificates for shares of Common Stock delivered
under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange Commission, any stock
exchange or association upon which the Common Stock is then listed or quoted,
any applicable federal or state securities law, and any applicable corporate
law, and the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.


 


10.4        Transferability.


 


(a)           Any action to be taken during
the Participant’s lifetime in connection with an Award shall be taken only by
such Participant; provided, however, that in the event of a Participant’s legal
incapacity, such action may be taken by his guardian or legal
representative.  When
a Participant dies, the personal representative, beneficiary, or other person
entitled to succeed to the rights of the Participant may acquire the rights
under an Award. Any such successor must furnish proof satisfactory to SEI of
the successor’s entitlement to receive the rights under an Award under the
Participant’s will or under the applicable laws of descent and distribution.


 


(b)           Except as otherwise provided
in this Section, no Award shall be subject to execution, attachment or similar
process, and no Award may be sold, transferred, pledged, exchanged,
hypothecated or otherwise disposed of, other than by will or pursuant to the
applicable laws of descent and distribution. 
Any attempted sale, transfer, pledge, exchange, hypothecation or other
disposition of an Award not specifically permitted by the Plan or the Award
Agreement shall be null and void and without effect.


 


(c)           Incident
to a Participant’s divorce, the Participant may request that SEI agree to
observe the terms of a domestic relations order which may or may not be part of
a qualified domestic relations order (as defined in Code Section 414(p))
with respect to all or a part of one or more Awards made to the Participant
under the Plan to the Participant’s alternate payee.  SEI’s decision regarding such a request shall
be made by the Committee, in its sole and absolute discretion, based upon the
best interests of SEI.  The Committee’s
decision need not be uniform among Participants.  As a condition of participation, a
Participant agrees to hold SEI harmless from any claim that may arise out of SEI’s
observance of the terms of any such domestic relations order.


 


10.5        Withholding Taxes.  The
Company shall be entitled to deduct from any payment made under the Plan,
regardless of the form of such payment, the amount of all applicable


 


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income and employment taxes required by law to be
withheld with respect to such payment, may require the Participant to pay to
the Company such withholding taxes prior to and as a condition of the making of
any payment or the issuance or delivery of any shares of Common Stock under the
Plan, and shall be entitled to deduct from any other compensation payable to
the Participant any withholding obligations with respect to Awards.  In accordance with any applicable
administrative guidelines it establishes, the Committee may allow a Participant
to pay the amount of taxes required by law to be withheld from or with respect
to an Award by (i) withholding shares of Common Stock from any payment of
Common Stock due as a result of such Award, or (ii) permitting the
Participant to deliver to the Company previously acquired shares of Common
Stock, in each case having an aggregate Fair Market Value equal to the amount
of such required withholding taxes.  No
shares of Common Stock shall be issued pursuant to any Award unless and until
the applicable tax withholding obligations have been satisfied.


 


10.6        No Fractional Shares.  No
fractional shares of Common Stock shall be issued or delivered pursuant to the
Plan or an Award granted hereunder, provided that the Committee in its sole
discretion may round fractional shares down to the nearest whole share or
settle fractional shares in cash.


 


10.7        Notices.  All notices
required or permitted to be given or made under the Plan or pursuant to any
Award Agreement (unless provided otherwise in such Award Agreement) shall be in
writing and shall be deemed to have been duly given or made if (i) delivered
personally, (ii) transmitted by first class registered or certified United
States mail, postage prepaid, return receipt requested, (iii) sent by
prepaid overnight courier service, or (iv) sent by telecopy or facsimile
transmission, with confirmation receipt, to the person who is to receive it at
the address that such person has theretofore specified by written notice
delivered in accordance herewith.  Such
notices shall be effective (i) if delivered personally or sent by courier
service, upon actual receipt by the intended recipient, (ii) if mailed,
upon the earlier of five days after deposit in the mail or the date of delivery
as shown by the return receipt therefor, or (iii) if sent by telecopy or
facsimile transmission, when the answer back is received.  SEI or a Participant may change, at any time
and from time to time, by written notice to the other, the address that it or
such Participant had theretofore specified for receiving notices.  Until such address is changed in accordance
herewith, notices hereunder or under an Award Agreement shall be delivered or
sent (i) to a Participant at his address as set forth in the records of
the Company or (ii) to SEI at the principal executive offices of SEI
clearly marked “Attention:  General
Counsel.”


 


10.8        Compliance with Law and Stock Exchange or
Association Requirements.  In addition, it is the intent of the SEI that
Awards intended to constitute “qualified performance-based awards” comply with
the applicable provisions of Section 162(m) of the Code and that any
deferral of the receipt of the payment of cash or the delivery of shares of
Common Stock that the Committee may permit or require, and any Award granted
that is subject to Section 409A of the Code, comply with the requirements
of Section 409A of the Code. To the extent that any legal requirement of Section 16
of the Exchange Act or Sections 162(m) or 409A of the Code as set forth in the
Plan ceases to be required under Section 16 of the Exchange Act or
Sections 162(m) or 409A of the Code, that Plan provision shall cease to
apply.  Any provision of this Plan to the
contrary notwithstanding, the Committee may revoke any Award if it is contrary
to law,


 


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governmental regulation, or
stock exchange or association requirements or modify an Award to bring it into
compliance with any government regulation or stock exchange or association
requirements.  The Committee may agree to
limit its authority under this Section.


 


10.9        Binding Effect.  The
obligations of SEI under the Plan shall be binding upon any successor
corporation or organization resulting from the merger, consolidation or other
reorganization of SEI, or upon any successor corporation or organization
succeeding to all or substantially all of the assets and business of SEI.  The terms and conditions of the Plan shall be
binding upon each Participant and his heirs, legatees, distributees and legal
representatives.


 


10.10      Severability.  If any
provision of the Plan or any Award Agreement is held to be illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining
provisions of the Plan or such agreement, as the case may be, but such
provision shall be fully severable and the Plan or such agreement, as the case
may be, shall be construed and enforced as if the illegal or invalid provision
had never been included herein or therein.


 


10.11      No Restriction of Corporate Action.  Nothing contained in the Plan shall be
construed to prevent SEI or any Affiliate from taking any corporate action
(including any corporate action to suspend, terminate, amend or modify the
Plan) that is deemed by SEI or such Affiliate to be appropriate or in its best
interest, whether or not such action would have an adverse effect on the Plan
or any Awards made or to be made under the Plan.  No Participant or other person shall have any
claim against SEI or any Affiliate as a result of such action.


 


10.12      Governing Law.  The Plan shall
be governed by and construed in accordance with the internal laws (and not the
principles relating to conflicts of laws) of the State of Texas except as
superseded by applicable federal law.


 


10.13      No Right, Title or Interest in Company Assets.  No Participant shall have any rights as a
stockholder of SEI as a result of participation in the Plan until the date of
issuance of Common Stock in his name and, in the case of Restricted Stock,
unless and until such rights are granted to the Participant pursuant to the
Plan.  To the extent any person acquires
a right to receive payments from the Company under the Plan, such rights shall
be no greater than the rights of an unsecured general creditor of the Company,
and such person shall not have any rights in or against any specific assets of
the Company.  All Awards shall be
unfunded.


 


10.14      Risk of Participation. 
Nothing contained in the Plan shall be construed either as a guarantee
by SEI or the Affiliates, or their respective stockholders, directors, officers
or employees, of the value of any assets of the Plan or as an agreement by SEI
or the Affiliates, or their respective stockholders, directors, officers or
employees, to indemnify anyone for any losses, damages, costs or expenses
resulting from participation in the Plan.


 


10.15      No Guarantee of Tax Consequences.  No
person connected with the Plan in any capacity, including without limitation SEI
and the Affiliates and their respective directors, officers, agents and
employees, makes any representation, commitment or guarantee that any tax
treatment, including without limitation federal, state and local income, estate
and gift tax treatment, will be applicable with respect to any Awards or
payments thereunder made to or for


 


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the benefit of a Participant under the Plan or that
such tax treatment will apply to or be available to a Participant on account of
participation in the Plan.


 


10.16      Continued Employment. 
Nothing contained in the Plan or in any Award Agreement shall confer
upon any Participant the right to continue in the employ of the Company, or
interfere in any way with the rights of the Company to terminate a Participant’s
employment at any time, with or without cause. 
The loss of existing or potential profit in Awards will not constitute
an element of damages in the event of termination of employment for any reason,
even if the termination is in violation of an obligation of SEI or an Affiliate
to the Participant.


 


10.17      Miscellaneous.  Headings are given
to the articles and sections of the Plan solely as a convenience to facilitate
reference.  Such headings shall not be
deemed in any way material or relevant to the construction of the Plan or any
provisions hereof.  The use of the
masculine gender shall also include within its meaning the feminine.  Wherever the context of the Plan dictates,
the use of the singular shall also include within its meaning the plural, and
vice versa.


 


IN WITNESS WHEREOF, this Plan has been executed as of the Effective Date.


 


	
   

  	
  STROUD ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Patrick J. Noyes

  
	
   

  	
   

  	
  Patrick J. Noyes

  
	
   

  	
   

  	
  President & Chief Executive
  Officer

  



 


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