Document:

exv10w2

 

Exhibit 10.2

Execution Copy

REGISTRATION RIGHTS AGREEMENT

BY AND AMONG

LINN ENERGY, LLC

AND

THE PURCHASERS NAMED HEREIN

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS
	 	 	1	 
	Section 1.01 Definitions
	 	 	1	 
	Section 1.02 Registrable Securities
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II REGISTRATION RIGHTS
	 	 	3	 
	Section 2.01 Registration
	 	 	3	 
	Section 2.02 Piggyback Rights
	 	 	5	 
	Section 2.03 Underwritten Offering
	 	 	7	 
	Section 2.04 Sale Procedures
	 	 	8	 
	Section 2.05 Cooperation by Holders
	 	 	11	 
	Section 2.06 Restrictions on Public Sale by Holders of Registrable Securities
	 	 	11	 
	Section 2.07 Expenses
	 	 	12	 
	Section 2.08 Indemnification
	 	 	12	 
	Section 2.09 Rule 144 Reporting
	 	 	14	 
	Section 2.10 Transfer or Assignment of Registration Rights
	 	 	15	 
	Section 2.11 Limitation on Subsequent Registration Rights
	 	 	15	 
	 
	 	 	 	 
	ARTICLE III MISCELLANEOUS
	 	 	15	 
	Section 3.01 Communications
	 	 	15	 
	Section 3.02 Successor and Assigns
	 	 	16	 
	Section 3.03 Aggregation of Purchased Units
	 	 	16	 
	Section 3.04 Recapitalization, Exchanges, Etc. Affecting the Units
	 	 	16	 
	Section 3.05 Specific Performance
	 	 	16	 
	Section 3.06 Counterparts
	 	 	16	 
	Section 3.07 Headings
	 	 	16	 
	Section 3.08 Governing Law
	 	 	16	 
	Section 3.09 Severability of Provisions
	 	 	16	 
	Section 3.10 Entire Agreement
	 	 	16	 
	Section 3.11 Amendment
	 	 	17	 
	Section 3.12 No Presumption
	 	 	17	 
	Section 3.13 Obligations Limited to Parties to Agreement
	 	 	17	 

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REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of
June 1, 2007 by and among Linn Energy, LLC, a Delaware limited liability company (“Linn
Energy”), and the purchasers named in Schedule 2.01 to this Agreement (each such purchaser a
“Purchaser” and, collectively, the “Purchasers”).

     WHEREAS, this Agreement is made in connection with the Closing of the sale of the Purchased
Units pursuant to the Unit Purchase Agreement, dated as of May 30, 2007, by and among Linn Energy
and the Purchasers (the “Purchase Agreement”); and

     WHEREAS, Linn Energy has agreed to provide the registration and other rights set forth in this
Agreement for the benefit of the Purchasers pursuant to the Purchase Agreement.

     NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged
by each party hereto, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.01 Definitions. Capitalized terms used herein without definition shall have the
meanings given to them in the Purchase Agreement. The terms set forth below are used herein as so
defined:

     “Agreement” has the meaning specified therefor in the introductory paragraph.

     “Class B Holders” has the meaning specified therefor in Section 2.01(a)(i).

     “Class B/C Registration Statement Effective Date” has the meaning specified therefor
in Section 2.01(a)(i).

     “Class C Holder” has the meaning specified therefor in Section 2.01(a)(i).

     “Effectiveness Period” has the meaning specified therefor in Section 2.01(a)(i) of
this Agreement.

     “Holder” means the record holder of any Registrable Securities.

     “Included Registrable Securities” has the meaning specified therefor in Section
2.02(a) of this Agreement.

     “Linn Energy” has the meaning specified therefor in the introductory paragraph.

     “Liquidated Damages” has the meaning specified therefor in Section 2.01(a)(ii) of this
Agreement.

     “Liquidated Damages Multiplier” means the product of $33.50 times the number of Units
purchased by such Purchaser.

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     “Losses” has the meaning specified therefor in Section 2.08(a) of this Agreement.

     “Managing Underwriter” means, with respect to any Underwritten Offering, the
book-running lead manager of such Underwritten Offering.

     “Opt Out Notice” has the meaning specified therefor in Section 2.02(a) of this
Agreement.

     “Partners” has the meaning specified therefor in Section 2.02(b) of this Agreement.

     “Placement Agent” means Citigroup Global Markets Inc., RBC Capital Markets
Corporation, Lehman Brothers Inc. or Jefferies & Company, Inc.

     “Purchase Agreement” has the meaning specified therefor in the Recitals of this
Agreement.

     “Purchaser” and “Purchasers” have the meanings specified therefor in the
introductory paragraph of this Agreement.

     “Purchaser Underwriter Registration Statement” has the meaning specified therefor in
Section 2.04(o) of this Agreement.

     “Registrable Securities” means: (i) the Purchased Units and (ii) any Units issued as
Liquidated Damages pursuant to this Agreement, all of which Registrable Securities are subject to
the rights provided herein until such rights terminate pursuant to the provisions hereof.

     “Registration Expenses” has the meaning specified therefor in Section 2.07(a) of this
Agreement.

     “Registration Statement” has the meaning specified therefor in Section 2.01(a)(i) of
this Agreement.

     “Selling Expenses” has the meaning specified therefor in Section 2.07(a) of this
Agreement.

     “Selling Holder” means a Holder who is selling Registrable Securities pursuant to a
registration statement.

     “Underwritten Offering” means an offering (including an offering pursuant to a
Registration Statement) in which Units are sold to an underwriter on a firm commitment basis for
reoffering to the public or an offering that is a “bought deal” with one or more investment banks.

     Section 1.02 Registrable Securities. Any Registrable Security will cease to be a Registrable Security when: (a) a registration
statement covering such Registrable Security has been declared effective by the Commission and such
Registrable Security has been sold or disposed of pursuant to such effective registration
statement; (b) such Registrable Security has been disposed of pursuant to any section of Rule 144
(or any similar provision then in force)

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under the Securities Act; (c) such Registrable Security
can be disposed of pursuant to Rule 144(k) (or any similar provision
then in force) under the
Securities Act; (d) such Registrable Security is held by Linn Energy or one of its Subsidiaries; or
(e) such Registrable Security has been sold in a private transaction in which the transferor’s
rights under this Agreement are not assigned to the transferee of such securities.

ARTICLE II

REGISTRATION RIGHTS

     Section 2.01 Registration.

          (a) Registration.

                    (i) Deadline To Go Effective. No earlier than the
date that a registration statement (the
“Class B/C Registration Statement Effective Date”) becomes effective that covers the units
(including the units issued upon conversion of the Class B Units) sold in the October 24, 2006
private placement (the holder of such units being the “Class B Holders”) and the units
(including the units issued upon conversion of the Class C Units) sold in the February 1, 2007
private placement (the holder of such units being the “Class C Holders”) but no later than
10 days after the Class B/C Registration Statement Effective Date, Linn Energy shall prepare and
file a registration statement under the Securities Act to permit the resale of the Registrable
Securities from time to time, including as permitted by Rule 415 under the Securities Act (or any
similar provision then in force) under the Act with respect to all of the Registrable Securities
(the “Registration Statement”). Linn Energy shall use its commercially reasonable efforts
to cause the Registration Statement to become effective no later than 165 days following the
Closing Date. A Registration Statement filed pursuant to this Section 2.01 shall be on such
appropriate registration form of the Commission as shall be selected by Linn Energy. Linn Energy
will use its commercially reasonable efforts to cause the Registration Statement filed pursuant to
this Section 2.01 to be continuously effective under the Securities Act until the earlier of (i)
the date as of which all such Registrable Securities are sold by the Purchasers or (ii) the date
when such Registrable Securities become eligible for resale under Rule 144(k) (or any similar
provision then in force) under the Securities Act (the “Effectiveness Period”). The
Registration Statement when declared effective (including the documents incorporated therein by
reference) shall comply as to form with all applicable requirements of the Securities Act and the
Exchange Act and shall not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein not
misleading.

                    (ii) Failure To Go Effective. If the Registration
Statement required by Section 2.01 of this
Agreement is not declared effective within 165 days after the Closing Date, then each Purchaser
shall be entitled to a payment with respect to the Purchased Units of each such Purchaser, as
liquidated damages and not as a penalty, of 0.25% of the Liquidated Damages Multiplier per 30-day
period for the first 90 days following the 165th day after the Closing Date, increasing by an
additional 0.25% of the Liquidated Damages Multiplier per 30-day period for
each subsequent 30 days, up to a maximum of 1.00% of the Liquidated Damages Multiplier per
30-day period (the “Liquidated Damages”). Initially there shall be no limitation on the
aggregate amount of the Liquidated Damages payable by Linn Energy under this Agreement to each
Purchaser; provided, however, that if there is a change in the Law or accounting principles

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generally accepted in the United States that would result in the Purchased Units being treated as
debt securities instead of equity securities for purposes of Linn Energy’s financial statements,
then the aggregate amount of the Liquidated Damages payable by Linn Energy under this Agreement to
each Purchaser shall not exceed the maximum amount of the Liquidated Damages Multiplier with
respect to such Purchaser allowed for the Purchased Units not to be treated as debt securities for
purposes of Linn Energy’s financial statements. The Liquidated Damages payable pursuant to the
immediately preceding sentence shall be payable within ten Business Days of the end of each such
30-day period. Any Liquidated Damages shall be paid to each Purchaser in cash or immediately
available funds; provided, however, if Linn Energy certifies that it is unable to pay Liquidated
Damages in cash or immediately available funds because such payment would result in a breach under
any of Linn Energy’s or Linn Energy’s Subsidiaries’ credit facilities or other indebtedness filed
as exhibits to the Linn Energy SEC Documents, then Linn Energy may pay the Liquidated Damages in
kind in the form of the issuance of additional Units. Upon any issuance of Units as Liquidated
Damages, Linn Energy shall promptly prepare and file an amendment to the Registration Statement
prior to its effectiveness adding such Units to such Registration Statement as additional
Registrable Securities. The determination of the number of Units to be issued as Liquidated
Damages shall be equal to the amount of Liquidated Damages divided by the volume weighted average
closing price of the Units (as reported by The Nasdaq Global Market) for the ten (10) trading days
immediately preceding the date on which the Liquidated Damages payment is due. The payment of
Liquidated Damages to a Purchaser shall cease at such time as the Purchased Units of such Purchaser
become eligible for resale under Rule 144(k) under the Securities Act. As soon as practicable
following the date that the Registration Statement becomes effective, but in any event within two
Business Days of such date, Linn Energy shall provide the Purchasers with written notice of the
effectiveness of the Registration Statement.

                    (iii) Waiver of Liquidated Damages. If Linn Energy
is unable to cause a Registration
Statement to go effective within 165 days following the Closing Date as a result of an acquisition,
merger, reorganization, disposition or other similar transaction, then Linn Energy may request a
waiver of the Liquidated Damages, which may be granted or withheld by the consent of the Holders of
a majority of the Purchased Units, taken as a whole, in their sole discretion. A Purchaser’s
rights (and any transferee’s rights pursuant to Section 2.10 of this Agreement) under this Section
2.01 shall terminate upon the earlier of (i) when all such Registrable Securities are sold by such
Purchaser or transferee, as applicable, and (ii) when such Registrable Securities become eligible
for resale under Rule 144(k) (or any similar provision then in force) under the Securities Act.

          (b) Delay Rights. Notwithstanding anything to the contrary contained herein, Linn
Energy may, upon written notice to any Selling Holder whose Registrable Securities are included in
the Registration Statement, suspend such Selling Holder’s use of any prospectus which is a part of
the Registration Statement (in which event the Selling Holder shall discontinue sales of the
Registrable Securities pursuant to the Registration Statement, but such Selling Holder may settle
any such sales of Registrable Securities) if (i) Linn Energy is pursuing an
acquisition, merger, reorganization, disposition or other similar transaction and Linn Energy
determines in good faith that Linn Energy’s ability to pursue or consummate such a transaction
would be materially adversely affected by any required disclosure of such transaction in the
Registration Statement or (ii) Linn Energy has experienced some other material non-public event

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the
disclosure of which at such time, in the good faith judgment of Linn Energy, would materially
adversely affect Linn Energy; provided, however, in no event shall the Purchasers be suspended for
a period that exceeds an aggregate of 30 days in any 90-day period or 90 days in any 365-day
period. Upon disclosure of such information or the termination of the condition described above,
Linn Energy shall provide prompt notice to the Selling Holders whose Registrable Securities are
included in the Registration Statement, shall promptly terminate any suspension of sales it has put
into effect and shall take such other actions to permit registered sales of Registrable Securities
as contemplated in this Agreement.

          (c) Additional Rights to Liquidated Damages. If (i) the Holders shall be prohibited
from selling their Registrable Securities under the Registration Statement as a result of a
suspension pursuant to Section 2.01(b) of this Agreement in excess of the periods permitted therein
or (ii) the Registration Statement is filed and declared effective but, during the Effectiveness
Period, shall thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded by a post-effective amendment to the Registration Statement, a supplement
to the prospectus or a report filed with the Commission pursuant to Section 13(a), 13(c), 14 or
l5(d) of the Exchange Act, then, until the suspension is lifted or a post-effective amendment,
supplement or report is filed with the Commission, but not including any day on which a suspension
is lifted or such amendment, supplement or report is filed and declared effective, if applicable,
Linn Energy shall owe the Holders an amount equal to the Liquidated Damages, following (x) the date
on which the suspension period exceeded the permitted period under Section 2.01(b) of this
Agreement or (y) the day after the Registration Statement ceased to be effective or failed to be
useable for its intended purposes, as liquidated damages and not as a penalty. For purposes of
this Section 2.01(c), a suspension shall be deemed lifted on the date that notice that the
suspension has been lifted is delivered to the Holders pursuant to Section 3.01 of this Agreement.

     Section 2.02 Piggyback Rights.

          (a) Participation. If at any time Linn Energy proposes to file (i) a prospectus
supplement to an effective shelf registration statement, other than the Registration Statement
contemplated by Section 2.01 of this Agreement and the registration statement covering the units
held by the Class B Holders and the Class C Holders, or (ii) a registration statement, other than a
shelf registration statement, in either case, for the sale of Units in an Underwritten Offering for
its own account and/or another Person, then as soon as practicable but not less than three Business
Days prior to the filing of (x) any preliminary prospectus supplement relating to such Underwritten
Offering pursuant to Rule 424(b) under the Securities Act, (y) the prospectus supplement relating
to such Underwritten Offering pursuant to Rule 424(b) under the Securities Act (if no preliminary
prospectus supplement is used) or (z) such registration statement, as the case may be, then Linn
Energy shall give notice (including, but not limited to, notification by electronic mail) of such
proposed Underwritten Offering to the Holders and such notice shall offer the Holders the
opportunity to include in such Underwritten Offering such number of Registrable Securities (the
“Included Registrable Securities”) as each such Holder may request in
writing; provided, however, that if Linn Energy has been advised by the Managing Underwriter
that the inclusion of Registrable Securities for sale for the benefit of the Holders will have a
material adverse effect on the price, timing or distribution of the Units in the Underwritten
Offering, then the amount of Registrable Securities to be offered for the accounts of Holders

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shall
be determined based on the provisions of Section 2.02(b) of this Agreement. The notice required to
be provided in this Section 2.02(a) to Holders shall be provided on a Business Day pursuant to
Section 3.01 hereof and receipt of such notice shall be confirmed by such Holder. Each such Holder
shall then have three Business Days after receiving such notice to request inclusion of Registrable
Securities in the Underwritten Offering, except that such Holder shall have one Business Day after
such Holder confirms receipt of the notice to request inclusion of Registrable Securities in the
Underwritten Offering in the case of a “bought deal” or “overnight transaction” where no
preliminary prospectus is used. If no request for inclusion from a Holder is received within the
specified time, such Holder shall have no further right to participate in such Underwritten
Offering. If, at any time after giving written notice of its intention to undertake an
Underwritten Offering and prior to the closing of such Underwritten Offering, Linn Energy shall
determine for any reason not to undertake or to delay such Underwritten Offering, Linn Energy may,
at its election, give written notice of such determination to the Selling Holders and, (x) in the
case of a determination not to undertake such Underwritten Offering, shall be relieved of its
obligation to sell any Included Registrable Securities in connection with such terminated
Underwritten Offering, and (y) in the case of a determination to delay such Underwritten Offering,
shall be permitted to delay offering any Included Registrable Securities for the same period as the
delay in the Underwritten Offering. Any Selling Holder shall have the right to withdraw such
Selling Holder’s request for inclusion of such Selling Holder’s Registrable Securities in such
offering by giving written notice to Linn Energy of such withdrawal up to and including the time of
pricing of such offering. Each Holder’s rights under this Section 2.02(a) shall terminate when
such Holder (together with any Affiliates of such Holder) holds less than $25,000,000 of Purchased
Units, based on the Commitment Amounts. Notwithstanding the foregoing, any Holder may deliver
written notice (an “Opt Out Notice”) to Linn Energy requesting that such Holder not receive
notice from Linn Energy of any proposed Underwritten Offering; provided, that such Holder may later
revoke any such notice.

          (b) Priority of Rights. If the Managing Underwriter or Underwriters of any proposed
Underwritten Offering of Units included in an Underwritten Offering involving Included Registrable
Securities advises Linn Energy, or Linn Energy reasonably determines, that the total amount of
Units that the Selling Holders and any other Persons intend to include in such offering exceeds the
number that can be sold in such offering without being likely to have a material adverse effect on
the price, timing or distribution of the Units offered or the market for the Units, then the Units
to be included in such Underwritten Offering shall include the number of Registrable Securities
that such Managing Underwriter or Underwriters advises Linn Energy, or Linn Energy reasonably
determines, can be sold without having such adverse effect, with such number to be allocated (i)
first, to Linn Energy, and (ii) second, pro rata among (A) Quantum Energy Partners II, LP, a
Delaware limited partnership, Clark Partners I, L.P., a New York limited partnership, Kings Highway
Investment, LLC, a Connecticut limited liability company and Wauwinet Energy Partners, LLC, a
Delaware limited liability company (collectively, the “Partners”), (B) the Class B holders
and the Class C Holders and (C) the Selling Holders who have requested participation in such
Underwritten Offering. The pro rata allocations for each such Partner, the Class B Holders, the
Class C Holders and each such Selling Holder shall be the
product of (a) the aggregate number of Units proposed to be sold by all Partners, Class B
Holders, Class C Holders and Selling Holders in such Underwritten Offering multiplied by (b) the
fraction derived by dividing (x) the number of Units owned on the Closing Date by such Partner,
Class B Holder, Class C Holder or Selling Holder by (y) the aggregate number of Units

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owned on the
Closing Date by all Partners, Class B Holders, Class C Holders and Selling Holders participating in
the Underwritten Offering. All participating Selling Holders shall have the opportunity to share
pro rata that portion of such priority allocable to any Selling Holder(s) not so participating.
Except for the Partners, the Class B Holders, the Class C Holders and certain members of Linn
Energy’s management team, as of the date of execution of this Agreement, there are no other Persons
with Registration Rights relating to Units other than as described in this Section 2.02(b).

     Section 2.03 Underwritten Offering.

          (a) Request for Underwritten Offering. Any one or more Holders that collectively hold
greater than $25 million of Registrable Securities, based on the purchase price per unit under the
Purchase Agreement, may deliver written notice to Linn Energy that such Holders wish to dispose of
an aggregate of at least $25 million of Registrable Securities, based on the purchase price per
unit under the Purchase Agreement, in an Underwritten Offering. Upon receipt of any such written
request, Linn Energy shall retain underwriters, effect such sale though an Underwritten Offering,
including entering into an underwriting agreement in customary form with the Managing Underwriter
or Underwriters, which shall include, among other provisions, indemnities to the effect and to the
extent provided in Section 2.08, and take all reasonable actions as are requested by the Managing
Underwriter or Underwriters to expedite or facilitate the disposition of such Registrable
Securities; provided, however, Linn Energy management will not be required to participate in any
roadshow or similar marketing effort on behalf of any such Holder.

          (b) General Procedures. In connection with any Underwritten Offering under this
Agreement, Linn Energy shall be entitled to select the Managing Underwriter or Underwriters. In
connection with an Underwritten Offering contemplated by this Agreement in which a Selling Holder
participates, each Selling Holder and Linn Energy shall be obligated to enter into an underwriting
agreement that contains such representations, covenants, indemnities and other rights and
obligations as are customary in underwriting agreements for firm commitment offerings of
securities. No Selling Holder may participate in such Underwritten Offering unless such Selling
Holder agrees to sell its Registrable Securities on the basis provided in such underwriting
agreement and completes and executes all questionnaires, powers of attorney, indemnities and other
documents reasonably required under the terms of such underwriting agreement. Each Selling Holder
may, at its option, require that any or all of the representations and warranties by, and the other
agreements on the part of, Linn Energy to and for the benefit of such underwriters also be made to
and for such Selling Holder’s benefit and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement also be conditions precedent to
its obligations. No Selling Holder shall be required to make any representations or warranties to
or agreements with Linn Energy or the underwriters other than representations, warranties or
agreements regarding such Selling Holder and its ownership of the securities being registered on
its behalf, its intended method of distribution and any other representation required by Law. If
any Selling Holder disapproves of
the terms of an underwriting, such Selling Holder may elect to withdraw therefrom by notice to
Linn Energy and the Managing Underwriter; provided, however, that such withdrawal must be made up
to and including the time of pricing of such Underwritten Offering. No such withdrawal or
abandonment shall affect Linn Energy’s obligation to pay Registration Expenses.

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     Section 2.04 Sale Procedures. In connection with its obligations under this Article II,
Linn Energy will, as expeditiously as possible:

          (a) prepare and file with the Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection therewith as may be necessary to keep the
Registration Statement effective for the Effectiveness Period and as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of all securities covered
by the Registration Statement;

          (b) if a prospectus supplement will be used in connection with the marketing of an
Underwritten Offering from the Registration Statement and the Managing Underwriter at any time
shall notify Linn Energy in writing that, in the sole judgment of such Managing Underwriter,
inclusion of detailed information to be used in such prospectus supplement is of material
importance to the success of the Underwritten Offering of such Registrable Securities, use its
commercially reasonable efforts to include such information in such prospectus supplement;

          (c) furnish to each Selling Holder (i) as far in advance as reasonably practicable before
filing the Registration Statement or any other registration statement contemplated by this
Agreement or any supplement or amendment thereto, upon request, copies of reasonably complete
drafts of all such documents proposed to be filed (including exhibits and each document
incorporated by reference therein to the extent then required by the rules and regulations of the
Commission), and provide each such Selling Holder the opportunity to object to any information
pertaining to such Selling Holder and its plan of distribution that is contained therein and make
the corrections reasonably requested by such Selling Holder with respect to such information prior
to filing the Registration Statement or such other registration statement or supplement or
amendment thereto, and (ii) such number of copies of the Registration Statement or such other
registration statement and the prospectus included therein and any supplements and amendments
thereto as such Persons may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities covered by such Registration Statement or other
registration statement;

          (d) if applicable, use its commercially reasonable efforts to register or qualify the
Registrable Securities covered by the Registration Statement or any other registration statement
contemplated by this Agreement under the securities or blue sky laws of such jurisdictions as the
Selling Holders or, in the case of an Underwritten Offering, the Managing Underwriter, shall
reasonably request; provided, however, that Linn Energy will not be required to qualify generally
to transact business in any jurisdiction where it is not then required to so qualify or to take any
action which would subject it to general service of process in any such jurisdiction where it is
not then so subject;

          (e) promptly notify each Selling Holder and each underwriter of Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered by any of them under the
Securities Act, of (i) the filing of the Registration Statement or any other registration statement
contemplated by this Agreement or any prospectus or prospectus supplement to be used in connection
therewith, or any amendment or supplement thereto, and, with respect to such Registration Statement
or any other registration statement or any post-

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effective amendment thereto, when the same has
become effective; and (ii) any written comments from the Commission with respect to any filing
referred to in clause (i) and any written request by the Commission for amendments or supplements
to the Registration Statement or any other registration statement or any prospectus or prospectus
supplement thereto;

          (f) immediately notify each Selling Holder and each underwriter of Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under the Securities Act,
of (i) the happening of any event as a result of which the prospectus or prospectus supplement
contained in the Registration Statement or any other registration statement contemplated by this
Agreement, as then in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; (ii) the issuance or threat of issuance
by the Commission of any stop order suspending the effectiveness of the Registration Statement or
any other registration statement contemplated by this Agreement, or the initiation of any
proceedings for that purpose; or (iii) the receipt by Linn Energy of any notification with respect
to the suspension of the qualification of any Registrable Securities for sale under the applicable
securities or blue sky laws of any jurisdiction. Following the provision of such notice, Linn
Energy agrees to as promptly as practicable amend or supplement the prospectus or prospectus
supplement or take other appropriate action so that the prospectus or prospectus supplement does
not include an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the light of the
circumstances then existing and to take such other action as is necessary to remove a stop order,
suspension, threat thereof or proceedings related thereto;

          (g) upon request and subject to appropriate confidentiality obligations, furnish to each
Selling Holder copies of any and all transmittal letters or other correspondence with the
Commission or any other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange) relating to such offering of
Registrable Securities;

          (h) in the case of an Underwritten Offering, furnish upon request, (i) an opinion of counsel
for Linn Energy dated the effective date of the applicable registration statement or the date of
any amendment or supplement thereto, and a letter of like kind dated the date of the closing under
the underwriting agreement, and (ii) a “cold comfort” letter, dated the date of the applicable
registration statement or the date of any amendment or supplement thereto and a letter of like kind
dated the date of the closing under the underwriting agreement, in each case, signed by the
independent public accountants who have certified Linn Energy’s financial statements included or
incorporated by reference into the applicable registration statement, and each of the opinion and
the “cold comfort” letter shall be in customary form and covering substantially the same matters
with respect to such registration statement (and the prospectus and
any prospectus supplement included therein) as are customarily covered in opinions of issuer’s
counsel and in accountants’ letters delivered to the underwriters in Underwritten Offerings of
securities and such other matters as such underwriters or Selling Holders may reasonably request;

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          (i) otherwise use its commercially reasonable efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;

          (j) make available to the appropriate representatives of the Managing Underwriter and Selling
Holders access to such information and Linn Energy personnel as is reasonable and customary to
enable such parties to establish a due diligence defense under the Securities Act; provided,
however, that Linn Energy need not disclose any such information to any such representative unless
and until such representative has entered into or is otherwise subject to a confidentiality
agreement with Linn Energy satisfactory to Linn Energy (including any confidentiality agreement
referenced in Section 8.06 of the Purchase Agreement);

          (k) cause all such Registrable Securities registered pursuant to this Agreement to be listed
on each securities exchange or nationally recognized quotation system on which similar securities
issued by Linn Energy are then listed;

          (l) use its commercially reasonable efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of Linn Energy to enable the Selling Holders to consummate
the disposition of such Registrable Securities;

          (m) provide a transfer agent and registrar for all Registrable Securities covered by such
registration statement not later than the effective date of such registration statement; and

          (n) enter into customary agreements and take such other actions as are reasonably requested by
the Selling Holders or the underwriters, if any, in order to expedite or facilitate the disposition
of such Registrable Securities.

          (o) Linn Energy agrees that, if any Purchaser could reasonably be deemed to be an
“underwriter”, as defined in Section 2(a)(11) of the Securities Act, in connection with the
registration statement in respect of any registration of Linn Energy’s securities of any Purchaser
pursuant to this Agreement, and any amendment or supplement thereof (any such registration
statement or amendment or supplement a “Purchaser Underwriter Registration Statement”),
then Linn Energy will cooperate with such Purchaser in allowing such Purchaser to conduct customary
“underwriter’s due diligence” with respect to Linn Energy and satisfy its obligations in respect
thereof. In addition, at any Purchaser’s request, Linn Energy will furnish to such Purchaser, on
the date of the effectiveness of any Purchaser Underwriter Registration Statement and thereafter
from time to time on such dates as such Purchaser may reasonably request, (i) a letter, dated such
date, from Linn Energy’s independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in an underwritten
public offering, addressed to such Purchaser, and (ii) an opinion, dated as of
such date, of counsel representing Linn Energy for purposes of such Purchaser Underwriter
Registration Statement, in form, scope and substance as is customarily given in an underwritten
public offering, including a standard “10b-5” opinion for such offering, addressed to such
Purchaser; provided, however, that with respect to any Placement Agent, Linn Energy’s obligations
with respect to this Section 2.04(o) shall be limited to one time, with an additional

10

 

bring-down request within 30 days of the date of such documents. Linn Energy will also permit legal counsel
to such Purchaser to review and comment upon any such Purchaser Underwriter Registration Statement
at least five Business Days prior to its filing with the Commission and all amendments and
supplements to any such Purchaser Underwriter Registration Statement within a reasonable number of
days prior to their filing with the Commission and not file any Purchaser Underwriter Registration
Statement or amendment or supplement thereto in a form to which such Purchaser’s legal counsel
reasonably objects.

     Each Selling Holder, upon receipt of notice from Linn Energy of the happening of any event of
the kind described in Section 2.04(e) of this Agreement, shall forthwith discontinue disposition of
the Registrable Securities until such Selling Holder’s receipt of the copies of the supplemented or
amended prospectus contemplated by Section 2.04(e) of this Agreement or until it is advised in
writing by Linn Energy that the use of the prospectus may be resumed, and has received copies of
any additional or supplemental filings incorporated by reference in the prospectus, and, if so
directed by Linn Energy, such Selling Holder will, or will request the managing underwriter or
underwriters, if any, to deliver to Linn Energy (at Linn Energy’s expense) all copies in their
possession or control, other than permanent file copies then in such Selling Holder’s possession,
of the prospectus covering such Registrable Securities current at the time of receipt of such
notice.

     If requested by a Purchaser, Linn Energy shall: (i) as soon as practicable incorporate in a
prospectus supplement or post-effective amendment such information as such Purchaser reasonably
requests to be included therein relating to the sale and distribution of Registrable Securities,
including information with respect to the number of Registrable Securities being offered or sold,
the purchase price being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; (ii) as soon as practicable make all required filings of
such prospectus supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and (iii) as soon as
practicable, supplement or make amendments to any Registration Statement.

     Section 2.05 Cooperation by Holders. Linn Energy shall have no obligation to include in
the Registration Statement Units of a Holder, or in an Underwritten Offering pursuant to Section
2.02 of this Agreement Units of a Selling Holder, who has failed to timely furnish such information
that, in the opinion of counsel to Linn Energy, is reasonably required in order for the
registration statement or prospectus supplement, as applicable, to comply with the Securities Act.

     Section 2.06 Restrictions on Public Sale by Holders of Registrable Securities. For a
period of 365 days from the Closing Date, each Holder of Registrable Securities who is included in
the Registration Statement agrees not to effect any public sale or distribution of the
Registrable Securities during the 30-day period following completion of an Underwritten Offering of
equity securities by Linn Energy (except as provided in this Section 2.06); provided, however, that
the duration of the foregoing restrictions shall be no longer than the duration of the shortest
restriction generally imposed by the underwriters on the officers or directors or any other
Unitholder of Linn Energy on whom a restriction is imposed in connection with such public offering.
In addition, the provisions of this Section 2.06 shall not apply with respect to a Holder that (A)
owns less than $25,000,000 of Purchased Units, based on the Commitment Amounts, (B) has delivered
an Opt Out Notice to Linn Energy pursuant to Section 2.02 hereof or (C) has

11

 

submitted a notice
requesting the inclusion of Registrable Securities in an Underwritten Offering pursuant to Section
2.02 or Section 2.03(a) hereof but is unable to do so as a result of the priority provisions
contained in Section 2.02(b) hereof.

     Section 2.07 Expenses.

          (a) Certain Definitions. “Registration Expenses” means all expenses incident
to Linn Energy’s performance under or compliance with this Agreement to effect the registration of
Registrable Securities on the Registration Statement pursuant to Section 2.01 hereof or an
Underwritten Offering covered under this Agreement, and the disposition of such securities,
including, without limitation, all registration, filing, securities exchange listing and The Nasdaq
Global Market fees, all registration, filing, qualification and other fees and expenses of
complying with securities or blue sky laws, fees of the National Association of Securities Dealers,
Inc., transfer taxes and fees of transfer agents and registrars, all word processing, duplicating
and printing expenses and the fees and disbursements of counsel and independent public accountants
for Linn Energy, including the expenses of any special audits or “cold comfort” letters required by
or incident to such performance and compliance. “Selling Expenses” means all underwriting
fees, discounts and selling commissions allocable to the sale of the Registrable Securities.

          (b) Expenses. Linn Energy will pay all reasonable Registration Expenses as determined
in good faith, including, in the case of an Underwritten Offering, whether or not any sale is made
pursuant to such Underwritten Offering. In addition, except as otherwise provided in Section 2.08
hereof, Linn Energy shall not be responsible for legal fees incurred by Holders in connection with
the exercise of such Holders’ rights hereunder. Each Selling Holder shall pay all Selling Expenses
in connection with any sale of its Registrable Securities hereunder.

     Section 2.08 Indemnification.

          (a) By Linn Energy. In the event of an offering of any Registrable Securities under
the Securities Act pursuant to this Agreement, Linn Energy will indemnify and hold harmless each
Selling Holder thereunder, its directors and officers, and each underwriter, pursuant to the
applicable underwriting agreement with such underwriter, of Registrable Securities thereunder and
each Person, if any, who controls such Selling Holder or underwriter within the meaning of the
Securities Act and the Exchange Act, and its directors and officers, against any losses, claims,
damages, expenses or liabilities (including reasonable attorneys’ fees and expenses) (collectively,
“Losses”), joint or several, to which such Selling Holder, director, officer, underwriter
or controlling Person may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Losses (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the Registration Statement
or any other registration statement contemplated by this Agreement, any preliminary prospectus,
free writing prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein (in the
case of a prospectus, in light of the circumstances under which they were made) not misleading, and
will reimburse each such Selling Holder, its directors and officers, each such underwriter and

12

 

each
such controlling Person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Loss or actions or proceedings; provided, however, that
Linn Energy will not be liable in any such case if and to the extent that any such Loss arises out
of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission
so made in strict conformity with information furnished by such Selling Holder, its directors or
officers or any underwriter or controlling Person in writing specifically for use in the
Registration Statement or such other registration statement, or prospectus supplement, as
applicable. Such indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Selling Holder or any such Selling Holder, its directors or officers
or any underwriter or controlling Person, and shall survive the transfer of such securities by such
Selling Holder.

          (b) By Each Selling Holder. Each Selling Holder agrees severally and not jointly to
indemnify and hold harmless Linn Energy, its directors and officers, and each Person, if any, who
controls Linn Energy within the meaning of the Securities Act or of the Exchange Act, and its
directors and officers, to the same extent as the foregoing indemnity from Linn Energy to the
Selling Holders, but only with respect to information regarding such Selling Holder furnished in
writing by or on behalf of such Selling Holder expressly for inclusion in the Registration
Statement or any preliminary prospectus or final prospectus included therein, or any amendment or
supplement thereto; provided, however, that the liability of each Selling Holder shall not be
greater in amount than the dollar amount of the proceeds (net of any Selling Expenses) received by
such Selling Holder from the sale of the Registrable Securities giving rise to such
indemnification.

          (c) Notice. Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission to so notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party other than under this Section 2.08. In any action brought
against any indemnified party, it shall notify the indemnifying party of the commencement thereof.
The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified
party and, after notice from the indemnifying party to such indemnified party of its election so to
assume and undertake the defense thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 2.08 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected; provided, however, that, (i) if the
indemnifying party has failed to assume the defense or employ counsel reasonably acceptable to the
indemnified party or (ii) if the defendants in any such action
include both the indemnified party and the indemnifying party and counsel to the indemnified
party shall have concluded that there may be reasonable defenses available to the indemnified party
that are different from or additional to those available to the indemnifying party, or if the
interests of the indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, then the indemnified party shall have the right to select a separate counsel
and to assume such legal defense and otherwise to participate in the defense of such action, with
the reasonable expenses and fees of such separate counsel and other reasonable expenses related to
such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding

13

 

any other provision of this Agreement, no indemnified party shall settle any action brought against it
with respect to which it is entitled to indemnification hereunder without the consent of the
indemnifying party, unless the settlement thereof imposes no liability or obligation on, and
includes a complete and unconditional release from all liability of, the indemnifying party.

          (d) Contribution. If the indemnification provided for in this Section 2.08 is held by
a court or government agency of competent jurisdiction to be unavailable to any indemnified party
or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Loss in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of such indemnified party
on the other in connection with the statements or omissions which resulted in such Losses, as well
as any other relevant equitable considerations; provided, however, that in no event shall such
Selling Holder be required to contribute an aggregate amount in excess of the dollar amount of
proceeds (net of Selling Expenses) received by such Selling Holder from the sale of Registrable
Securities giving rise to such indemnification. The relative fault of the indemnifying party on
the one hand and the indemnified party on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact has been made by, or relates to, information supplied by
such party, and the parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this paragraph were to be determined by pro rata
allocation or by any other method of allocation which does not take account of the equitable
considerations referred to herein. The amount paid by an indemnified party as a result of the
Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and
other expenses reasonably incurred by such indemnified party in connection with investigating or
defending any Loss which is the subject of this paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who is not guilty of such fraudulent misrepresentation.

          (e) Other Indemnification. The provisions of this Section 2.08 shall be in addition
to any other rights to indemnification or contribution which an indemnified party may have pursuant
to law, equity, contract or otherwise.

     Section 2.09 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission
that may permit the sale of the Registrable Securities to the public without registration, Linn
Energy agrees to use its commercially reasonable efforts to:

          (a) make and keep public information regarding Linn Energy available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from and after the date
hereof;

          (b) file with the Commission in a timely manner all reports and other documents required of
Linn Energy under the Securities Act and the Exchange Act at all times from and after the date
hereof; and

14

 

          (c) so long as a Holder owns any Registrable Securities, furnish, unless otherwise not
available at no charge by access electronically to the Commission’s EDGAR filing system, to such
Holder forthwith upon request a copy of the most recent annual or quarterly report of Linn Energy,
and such other reports and documents so filed as such Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing such Holder to sell any such securities
without registration.

     Section 2.10 Transfer or Assignment of Registration Rights. The rights to cause Linn
Energy to register Registrable Securities granted to the Purchasers by Linn Energy under this
Article II may be transferred or assigned by any Purchaser to one or more transferee(s) or
assignee(s) of such Registrable Securities or by total return swap; provided, however, that, except
with respect to a total return swap, (a) unless such transferee is an Affiliate of such Purchaser,
each such transferee or assignee holds Registrable Securities representing at least $25,000,000 of
the Purchased Units, based on the Commitment Amounts, (b) Linn Energy is given written notice prior
to any said transfer or assignment, stating the name and address of each such transferee and
identifying the securities with respect to which such registration rights are being transferred or
assigned, and (c) each such transferee assumes in writing responsibility for its portion of the
obligations of such Purchaser under this Agreement.

     Section 2.11 Limitation on Subsequent Registration Rights. From and after the date hereof,
Linn Energy shall not, without the prior written consent of the Holders of a majority of the
outstanding Registrable Securities, (i) enter into any agreement with any current or future holder
of any securities of Linn Energy that would allow such current or future holder to require Linn
Energy to include securities in any registration statement filed by Linn Energy on a basis that is
superior in any way to the piggyback rights granted to the Purchasers hereunder or (ii) grant
registration rights to any other Person that would be superior to the Purchasers’ registration
rights hereunder.

ARTICLE III

MISCELLANEOUS

     Section 3.01 Communications. All notices and other communications provided for or permitted hereunder shall be made in
writing by facsimile, electronic mail, courier service or personal delivery:

          (a) if to Purchaser, to the address set forth under that Purchaser’s signature block in
accordance with the provisions of this Section 3.01;

          (b) if to a transferee of Purchaser, to such Holder at the address provided pursuant to
Section 2.10 hereof; and

          (c) if to Linn Energy, at 600 Travis, Suite 7000, Houston, Texas 77002 (facsimile:
713.223.0888), notice of which is given in accordance with the provisions of this Section 3.01.

     All such notices and communications shall be deemed to have been received: at the time
delivered by hand, if personally delivered; when receipt acknowledged, if sent via facsimile or
electronic mail; and when actually received, if sent by courier service or any other means.

15

 

     Section 3.02 Successor and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including subsequent Holders of
Registrable Securities to the extent permitted herein.

     Section 3.03 Aggregation of Purchased Units. All Purchased Units held or acquired by
Persons who are Affiliates of one another shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.

     Section 3.04 Recapitalization, Exchanges, Etc. Affecting the Units. The provisions of this
Agreement shall apply to the full extent set forth herein with respect to any and all units of Linn
Energy or any successor or assign of Linn Energy (whether by merger, consolidation, sale of assets
or otherwise) which may be issued in respect of, in exchange for or in substitution of, the
Registrable Securities, and shall be appropriately adjusted for combinations, unit splits,
recapitalizations and the like occurring after the date of this Agreement.

     Section 3.05 Specific Performance. Damages in the event of breach of this Agreement by a
party hereto may be difficult, if not impossible, to ascertain, and it is therefore agreed that
each such Person, in addition to and without limiting any other remedy or right it may have, will
have the right to an injunction or other equitable relief in any court of competent jurisdiction,
enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of
the parties hereto hereby waives any and all defenses it may have on the ground of lack of
jurisdiction or competence of the court to grant such an injunction or other equitable relief. The
existence of this right will not
preclude any such Person from pursuing any other rights and remedies at law or in equity which such
Person may have.

     Section 3.06 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same Agreement.

     Section 3.07 Headings. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

     Section 3.08 Governing Law. The Laws of the State of New York shall govern this Agreement
without regard to principles of conflict of Laws.

     Section 3.09 Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting or impairing the validity or enforceability of such provision in any other
jurisdiction.

     Section 3.10 Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein with respect to the rights granted by Linn Energy set forth herein.
This Agreement, the Purchase Agreement and any Confidentiality Agreement pertaining to the sale of

16

 

the Purchased Units supersede all prior agreements and understandings between the parties with
respect to such subject matter.

     Section 3.11 Amendment. This Agreement may be amended only by means of a written amendment
signed by Linn Energy and the Holders of a majority of the then outstanding Registrable Securities;
provided, however, that no such amendment shall materially and adversely affect the rights of any
Holder hereunder without the consent of such Holder.

     Section 3.12 No Presumption. If any claim is made by a party relating to any conflict, omission or ambiguity in this
Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact
that this Agreement was prepared by or at the request of a particular party or its counsel.

     Section 3.13 Obligations Limited to Parties to Agreement. Each of the Parties hereto
covenants, agrees and acknowledges that no Person other than the Purchasers (and their permitted
assignees) and Linn Energy shall have any obligation hereunder and that, notwithstanding that one
or more of the Purchasers may be a corporation, partnership or limited liability company, no
recourse under this Agreement or the Purchase Agreement or under any documents or instruments
delivered in connection herewith or therewith shall be had against any former, current or future
director, officer, employee, agent, general or limited partner, manager, member, stockholder or
Affiliate of any of the Purchasers or any former, current or future director, officer, employee,
agent, general or limited partner, manager, member, stockholder or Affiliate of any of the
foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or
by virtue of any applicable Law, it being expressly agreed and acknowledged that no personal
liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current
or future director, officer, employee, agent, general or limited partner, manager, member,
stockholder or Affiliate of any of the Purchasers or any former, current or future director,
officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of
any of the foregoing, as such, for any obligations of the Purchasers under this Agreement or the
Purchase Agreement or any documents or instruments delivered in connection herewith or therewith or
for any claim based on, in respect of or by reason of such obligation or its creation.

[The remainder of this page is intentionally left blank]

17

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.

	 	 	 	 	 
	 	LINN ENERGY, LLC

 	 
	 	By:  	/s/
Mark E. Ellis
 	 
	 	 	Mark E. Ellis  	 
	 	 	Executive Vice President &

Chief Operating Officer 	 
	 

[Signature
Page to Registration
Rights Agreement]

 

 

	 	 	 	 	 
	 	LEHMAN BROTHERS MLP OPPORTUNITY FUND L.P.

 	 
	 	By:  	/s/ Kyri Loupis
 	 
	 	 	Name:  	Kyri Loupis  	 
	 	 	Title:  	Senior Vice President 	 
	 	 	 	 	 
	 	FIR TREE RECOVERY MASTER FUND LP

 	 
	 	By:  	Fir Tree, Inc., its investment manager
 	 
	 	 	 	 	 
	 	 	 
	 	By:  	                                                   /s/ Brian Meyer
 	 
	 	 	Name:  	Brian Meyer 	 
	 	 	Title:  	Authorized Person 	 
	 	 	 	 	 
	 	FIR TREE VALUE MASTER FUND, LP

 	 
	 	By:  	Fir Tree, Inc., its investment manager
 	 
	 	 	 	 	 
	 	 	 
	 	By:  	                                                   /s/ Brian Meyer
 	 
	 	 	Name:  	Brian Meyer 	 
	 	 	Title:  	Authorized Person 	 
	 	 	 	 	 
	 	CREDIT SUISSE MANAGEMENT LLC

 	 
	 	By:  	/s/ Shawn Sullivan
 	 
	 	 	Name:  	Shawn Sullivan 	 
	 	 	Title:  	Managing Director 	 
	 

[Signature
Page to Registration Rights Agreement]

 

 

	 	 	 	 	 
	 	CITIGROUP FINANCIAL PRODUCTS INC.

 	 
	 	By:  	/s/ Bret Engelkemier
 	 
	 	 	Name:  	Bret Engelkemier 	 
	 	 	Title:  	Managing Director 	 
	 

	 	 	 	 	 
	 	GRACIE CAPITAL, LP

 	 
	 	By:  	/s/ Greg Pearson
 	 
	 	 	Name:  	Greg Pearson  	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	GRACIE CAPITAL II, LP

 	 
	 	By:  	/s/ Greg Pearson
 	 
	 	 	Name:  	Greg Pearson  	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	GRACIE CAPITAL INTERNATIONAL, LTD.

 	 
	 	By:  	/s/ Greg Pearson
 	 
	 	 	Name:  	Greg Pearson  	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	GRACIE CAPITAL INTERNATIONAL II, LTD.

 	 
	 	By:  	/s/ Greg Pearson
 	 
	 	 	Name:  	Greg Pearson  	 
	 	 	Title:  	Chief Financial Officer 	 
	 

[Signature Page to Registration Rights Agreement]

 

 

	 	 	 	 	 
	 	GRACIE CREDIT OPPORTUNITIES MASTER FUND, LP

 	 
	 	By:  	/s/ Greg Pearson
 	 
	 	 	Name:  	Greg Pearson  	 
	 	 	Title:  	Chief Financial Officer 	 
	 	 	 	 	 
	 	GUGGENHEIM PORTFOLIO COMPANY XLII, LLC

 	 
	 	By:  	/s/ Greg Pearson
 	 
	 	 	Name:  	Greg Pearson  	 
	 	 	Title:  	Chief Financial Officer 	 
	 	 	 	 	 
	 	WAYLAND DISTRESSED OPPORTUNITIES FUND I-B, LLC

 	 
	 	By:  	Wayzata Investment Partners LLC, its Manager
 	 
	 	 	 	 	 
	 	 	 
	 	By:  	                                                   /s/ Blake M. Carlson
 	 
	 	 	Name:  	Blake M. Carlson 	 
	 	 	Title:  	Authorized Signatory 	 
	 	 	 	 	 
	 	WAYLAND DISTRESSED OPPORTUNITIES FUND I-C, LLC

 	 
	 	By:  	Wayzata Investment Partners LLC, its Manager
 	 
	 	 	 	 	 
	 	 	 
	 	By:  	                                                   /s/ Blake M. Carlson
 	 
	 	 	Name:  	Blake M. Carlson 	 
	 	 	Title:  	Authorized Signatory 	 
	 

[Signature Page to Registration Rights Agreement]

 

 

	 	 	 	 	 
	 	WAYLAND OPPORTUNITIES FUND, LLC

 	 
	 	By:  	Wayzata Investment Partners LLC, its Manager
 	 
	 	 	 	 	 
	 	By:  	                                                   /s/ Blake M. Carlson
 	 
	 	 	Name:  	Blake M. Carlson 	 
	 	 	Title:  	Authorized Signatory 	 
	 

	 	 	 	 	 
	 	STRUCTURED FINANCE AMERICAS LLC

 	 
	 	By:  	/s/ Jill H. Rathjen
 	 
	 	 	Name:  	Jill H. Rathjen   	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	STRUCTURED FINANCE AMERICAS LLC

 	 
	 	By:  	/s/ Sunil Henam
 	 
	 	 	Name:  	Sunil Henam   	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	BARON INVESTMENT FUNDS TRUST on behalf of 
     the BARON SMALL CAP FUND SERIES

 	 
	 	By:  	/s/ Illegible
 	 
	 	 	Name:  	 	 
	 	 	Title:  	Chief Operating Officer and General
Counsel 	 
	 

[Signature
Page to Registration Rights Agreement]

 

 

	 	 	 	 	 
	 	UBS AG LONDON BRANCH

 	 
	 	By:  	/s/ Chris Coward
 	 
	 	 	Name:  	Chris Coward 	 
	 	 	Title:  	Director 	 
	 

	 	 	 	 	 
	 	PETER C. GEORGIOPOULOS

 	 
	 	By:  	/s/ Peter C. Georgiopoulos
 	 
	 	 	Name:  	Peter C. Georgiopoulos 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	HARVEST FUND ADVISORS LLC on
behalf of 
    HARVEST INFRASTRUCTURE PARTNERS 
    FUND LLC

 	 
	 	By:  	/s/ Anthony Merhige
 	 
	 	 	Name:  	Anthony Merhige  	 
	 	 	Title:  	Chief Administrative Officer and
General Counsel 	 
	 

	 	 	 	 	 
	 	HOWARD L. TERRY

 	 
	 	By:  	/s/ Howard L. Terry
 	 
	 	 	Name:  	Howard L. Terry 	 
	 	 	Title:  	 	 
	 

[Signature Page to Registration Rights Agreement]

 

 

	 	 	 	 	 
	 	STROME MLP FUND, L.P.

 	 
	 	By:  	/s/ P.W.C. Davies
 	 
	 	 	Name:  	P.W.C. Davies   	 
	 	 	Title:  	Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	GERALD H. SMITH

 	 
	 	By:  	/s/ Gerald H. Smith
 	 
	 	 	Name:  	Gerald H. Smith 	 
	 	 	Title:  	 	 
	 

[Signature Page to Registration Rights Agreement]exv4w2

 

Exhibit 4.2

METROCORP BANCSHARES, INC.

2007 STOCK AWARDS AND INCENTIVE PLAN

I. PURPOSE

     The purpose of the METROCORP BANCSHARES, INC. 2007 STOCK AWARDS AND INCENTIVE PLAN (the
“Plan”) is to provide a means through which
MetroCorp Bancshares, Inc (the “Company”), and its Affiliates, may attract able persons to
enter the employ of the Company and its Affiliates and to provide a means whereby those employees,
Directors and consultants, upon whom the responsibilities of the successful administration and
management of the Company and its Affiliates rest, and whose present and potential contributions to
the welfare of the Company and its Affiliates are of importance, can acquire and maintain stock
ownership, thereby strengthening their concern for the welfare of the Company and its Affiliates
and their desire to remain in the Company’s and its Affiliates’ employ. A further purpose of the
Plan is to provide such employees, Directors and consultants with additional incentive and reward
opportunities designed to enhance the profitable growth of the Company. Accordingly, the Plan
provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Performance Awards, Phantom Stock Awards, or any combination of
the foregoing, as is best suited to the circumstances of the particular employee, Director or
consultant as provided herein.

II. DEFINITIONS

     The following definitions shall be applicable throughout the Plan unless specifically modified
by any paragraph:

     (a) “Affiliate” means any entity with whom the Company would be considered a single employer
under Code Section 414(b) or 414(c); provided, however, that in applying Code Section 1563(a)(1),
(2) and (3) for purposes of determining a controlled group of corporations under Code Section
414(b), the language “at least 50 percent” is used instead of “at least 80 percent” each place it
appears in Code Section 1563(a)(1), (2) and (3), and in applying Treasury Regulation Section
1.414(c)-2 for purposes of determining trades or businesses that are under common control for
purposes of Code Section 414(c), the language “at least 50 percent” is used instead of “at least 80
percent” each place it appears in Section 1.414(c)-2.

     (b) “Award” means, individually or collectively, any Option, Restricted Stock Award, Phantom
Stock Award, Performance Award or Stock Appreciation Right.

     (c) “Board” means the Board of Directors of the Company.

     (d) “Change of Control” means the occurrence of any of the following events: (i) the Company
shall not be the surviving entity in any merger, consolidation or other reorganization (or survives
only as a subsidiary of an entity other than a previously wholly-owned subsidiary of the Company),
(ii) the Company’s subsidiary bank is merged or consolidated into, or otherwise acquired by, an
entity other than a wholly-owned subsidiary of the Company; (iii) the Company

 

 

sells, leases or exchanges all or substantially all of its assets to any other person or
entity (other than a wholly-owned subsidiary of the Company), (iv) the Company is to be dissolved
and liquidated, (v) any person or entity, including a “group” as contemplated by Section 13(d)(3)
of the 1934 Act, acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the Company’s voting stock (based upon voting
power), or (vi) as a result of or in connection with a contested election of directors, the persons
who were directors of the Company before such election shall cease to constitute a majority of the
Board.

     (e) “Change of Control Value” shall mean (i) the per share price offered to stockholders of
the Company in any such merger, consolidation, reorganization, sale of assets or dissolution
transaction, (ii) the price per share offered to stockholders of the Company in any tender offer or
exchange offer whereby a Change of Control takes place, or (iii) if such Change of Control occurs
other than pursuant to a tender or exchange offer, the Fair Market Value per share of the shares
into which Awards are exercisable, as determined by the Committee, whichever is applicable. In the
event that the consideration offered to stockholders of the Company consists of anything other than
cash, the Committee shall determine the fair cash equivalent of the portion of the consideration
offered which is other than cash.

     (f) “Code” means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any
section of the Code shall be deemed to include any amendments or successor provisions to any
section and any regulations under such section.

     (g) “Committee” means the Board or a committee designated by the Board. If the Company is
subject to Section 16 of the 1934 Act, the Committee shall be composed entirely of not less than
two (2) non-employee directors (within the meaning of Rule 16b-3), each of whom shall be an
“outside director” for purposes of Code Section 162(m)(4), and shall be appointed by and serve at
the pleasure of the Board.

     (h) “Company” means MetroCorp Bancshares, Inc.

     (i) A “consultant” means an individual (other than a Director) who performs services for the
Employer as an independent contractor.

     (j) A “covered employee” means an individual described in Code Section 162(m)(3).

     (k) “Director” means an individual elected to the Board by the stockholders of the Company or
by the Board under applicable corporate law who is serving on the Board on the date the Plan is
adopted by the Board or is elected to the Board after such date.

     (l) An “employee” means any person (including an officer or a Director) whom the Employer has
classified as an employee, regardless of whether such person is retroactively or prospectively
classified as a common law employee by any state or federal governmental agency or court.

     (m) “Employer” means the Company or an Affiliate.

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     (n) “Fair Market Value” means, as of any specified date, the mean of the high and low sales
prices of the Stock (i) reported by any interdealer quotation system on which the Stock is quoted
on that date or (ii) if the Stock is listed on a national stock exchange, reported on the stock
exchange composite tape on that date; or, in either case, if no prices are reported on that date,
on the last preceding date on which such prices of the Stock are so reported. If the Stock is
traded over the counter at the time a determination of its fair market value is required to be made
hereunder, its fair market value shall be deemed to be equal to the average between the reported
high and low or closing bid and asked prices of Stock on the most recent date on which Stock was
publicly traded. In the event Stock is not publicly traded at the time a determination of its
value is required to be made hereunder, the determination of its fair market value shall be made by
the Committee in such manner as it deems appropriate.

     (o) “Holder” means an individual who has been granted an Award.

     (p) “Incentive Stock Option” means an incentive stock option within the meaning of section
422(b) of the Code.

     (q) “1934 Act” means the Securities Exchange Act of 1934, as amended.

     (r) “Nonqualified Stock Option” means an option granted under Paragraph VII of the Plan to
purchase Stock which does not constitute an Incentive Stock Option.

     (s) “Option” means an Award granted under Paragraph VII of the Plan and includes both
Incentive Stock Options to purchase Stock and Nonqualified Stock Options to purchase Stock.

     (t) “Option Agreement” means a written agreement between the Company and a Holder with respect
to an Option.

     (u) “Parent Corporation” means a “parent corporation” of the Company within the meaning of
Code Section 424(e).

     (v) “Performance Award” means an Award granted under Paragraph X of the Plan.

     (w) “Performance Award Agreement” means a written agreement between the Company and a Holder
with respect to a Performance Award.

     (x) “Phantom Stock Award” means an Award granted under Paragraph XI of the Plan.

     (y) “Phantom Stock Award Agreement” means a written agreement between the Company and a Holder
with respect to a Phantom Stock Award.

     (z) “Plan” means the MetroCorp Bancshares, Inc. 2007 Stock Awards and Incentive Plan, as
amended from time to time.

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     (aa) “Restricted Stock Agreement” means a written agreement between the Company and a Holder
with respect to a Restricted Stock Award.

     (bb) “Restricted Stock Award” means an Award granted under Paragraph IX of the Plan.

     (cc) “Rule 16b-3” means SEC Rule 16b-3 promulgated under the 1934 Act, as such may be amended
from time to time, and any successor rule, regulation or statute fulfilling the same or a similar
function.

     (dd) “Spread” means, in the case of a Stock Appreciation Right, an amount equal to the excess,
if any, of the Fair Market Value of a share of Stock on the date such right is exercised over the
exercise price of such Stock Appreciation Right.

     (ee) “Stock” means the common stock, $1.00 par value, of the Company.

     (ff) “Stock Appreciation Right” means an Award granted under Paragraph VIII of the Plan.

     (gg) “Stock Appreciation Rights Agreement” means a written agreement between the Company and a
Holder with respect to an Award of Stock Appreciation Rights.

     (hh) “Subsidiary Corporation” means a “subsidiary corporation” of the Company within the
meaning of Code Section 424(f).

III. EFFECTIVE DATE AND DURATION OF THE PLAN

     This Plan shall be effective on January 26, 2007, which is the date of its adoption by the
Board (the “Effective Date”), subject to the approval of the Plan by the Company’s stockholders
within twelve months after the Effective Date. If the Plan is not so approved by the Company’s
stockholders, (a) the Plan shall not be effective, and (b) any grants of Awards under the Plan
shall immediately expire and be of no force and effect. No Awards may be granted under the Plan
after the tenth anniversary of the Effective Date. The Plan shall remain in effect until all
Awards granted under the Plan have been satisfied or expired.

IV. ADMINISTRATION

     (a) Committee. The Plan shall be administered by the Committee.

     (b) Powers. Subject to the provisions of the Plan, the Committee shall have sole authority,
in its discretion, to determine which employees, Directors or consultants shall receive an Award,
the time or times when such Award shall be made, whether an Incentive Stock Option, Nonqualified
Option or Stock Appreciation Right shall be granted, the number of shares of Stock which may be
issued under each Option, Stock Appreciation Right or Restricted Stock Award, and the value of each
Performance Award and Phantom Stock Award. In making such determinations the Committee may take
into account the nature of the services rendered by the

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respective employees, their present and potential contributions to the Employer’s success and
such other factors as the Committee in its discretion shall deem relevant.

     (c) Additional Powers. The Committee shall have such additional powers as are delegated to it
by the other provisions of the Plan. Subject to the express provisions of the Plan, the Committee
is authorized to construe the Plan and the respective agreements executed thereunder, to prescribe
such rules and regulations relating to the Plan as it may deem advisable to carry out the Plan, and
to determine the terms, restrictions and provisions of each Award, including such terms,
restrictions and provisions as shall be requisite in the judgment of the Committee to cause
designated Options to qualify as Incentive Stock Options, and to make all other determinations
necessary or advisable for administering the Plan. The Committee may correct any defect or supply
any omission or reconcile any inconsistency in any agreement relating to an Award in the manner and
to the extent it shall deem expedient to carry it into effect. The determinations of the Committee
on the matters referred to in this Article IV shall be conclusive.

     (d) Expenses. All expenses and liabilities incurred by the Committee in the administration of
this Plan shall be borne by the Company. The Committee may employ attorneys, consultants,
accountants or other persons to assist the Committee in the carrying out of its duties hereunder.

V. STOCK SUBJECT TO THE PLAN

     (a) Stock Grant and Award Limits. The Committee may from time to time grant Awards to one or
more employees, Directors or consultants determined by it to be eligible for participation in the
Plan in accordance with the provisions of Paragraph VI. Subject to Paragraph XII, the maximum
aggregate number of shares of Stock that may be issued under the Plan is 350,000, any or all of
which may be issued through Incentive Stock Options. Shares of Stock shall be deemed to have been
issued under the Plan only to the extent actually issued and delivered pursuant to an Award. To
the extent that an Award (other than an Award of Restricted Stock) lapses or is canceled or the
rights of its Holder terminate or the Award is cashed-out, any Stock subject to such Award shall
again be available for grant under an Award. Should any shares of Restricted Stock be forfeited,
such shares may not again be subject to an Award under the Plan. Any shares of Stock which may
remain unissued and which are not subject to outstanding Awards at the termination of this Plan
shall cease to be reserved for the purpose of this Plan, but until termination of this Plan or the
termination of the last of the Awards granted under this Plan, whichever last occurs, the Company
shall at all times reserve a sufficient number of shares to meet the requirements of this Plan.
Separate stock certificates shall be issued by the Company for those shares acquired pursuant the
exercise of an Incentive Stock Option and for those shares acquired pursuant to the exercise of a
Nonqualified Stock Option.

     Notwithstanding any provision in the Plan to the contrary, no more than 50,000 shares of Stock
may be subject to Options granted under the Plan to any one individual during any 12 month period,
no more than 50,000 shares of Stock may be subject to Stock Appreciation Rights granted under the
Plan to any one individual during any 12 month period, and no more than 20,000 shares of Stock may
be granted under the Plan as a Restricted Stock Award to any one

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individual during any 12 month period. The number of shares of Stock that may be issued to
individuals as set forth in the preceding sentence shall be subject to adjustment in the same
manner as provided in Section XII hereof with respect to shares of Stock subject to Options, Stock
Appreciation Rights or Restricted Stock Awards then outstanding. The limitations set forth in this
paragraph shall be applied in a manner which will permit compensation generated under the Plan with
respect to “covered employees” to constitute “performance-based” compensation for purposes of
Section 162(m) of the Code, including, without limitation, counting against such maximum number of
shares of Stock, to the extent required under Section 162(m) of the Code and applicable
interpretive authority thereunder, any shares of Stock subject to Options or Stock Appreciation
Rights that expire, are canceled or repriced or Restricted Stock Awards that are forfeited.

     (b) Stock Offered. The stock to be offered pursuant to the grant of an Award may be
authorized but unissued Stock or Stock previously issued and outstanding and reacquired by the
Company.

VI. ELIGIBILITY

     The Committee, in its sole discretion, shall determine who shall receive Awards under the
Plan. Awards other than Incentive Stock Options may be granted to all employees, directors and
consultants of the Company or its Affiliates, including Affiliates that become such after adoption
of the Plan. Incentive Stock Options may be granted to all employees of the Company, a Parent
Corporation or a Subsidiary Corporation, including an entity that becomes a Parent Corporation or a
Subsidiary Corporation after adoption of the Plan. A recipient of an Award must be an employee,
Director or consultant at the time the Award is granted. An Award may be granted on more than one
occasion to the same person, and, subject to the limitations set forth in the Plan, such Award may
include an Incentive Stock Option or a Nonqualified Stock Option, a Stock Appreciation Right, a
Restricted Stock Award, a Performance Award, a Phantom Stock Award or any combination thereof.

VII. STOCK OPTIONS

     (a) Option Period. The term of each Option shall be as specified by the Committee at the date
of grant.

     (b) Limitations on Exercise of Option. An Option shall be exercisable in whole or in such
installments and at such times as determined by the Committee.

     (c) Special Limitations on Incentive Stock Options. Except as otherwise provided under the
Code or applicable regulations, to the extent that the aggregate Fair Market Value (determined at
the time the option is granted) of the Stock with respect to which Incentive Stock Options
(determined without regard to this sentence) are exercisable for the first time by any Holder
during any calendar year under all plans of the Company and its Parent Corporation or Subsidiary
Corporations exceeds $100,000, such options shall be treated as Nonqualified Stock Options. The
Committee shall determine, in accordance with applicable provisions of the Code, Treasury
Regulations and other administrative pronouncements, which of a Holder’s Incentive

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Stock Options will not constitute Incentive Stock Options because of such limitation and shall
notify the Holder of such determination as soon as practicable after such determination. No
Incentive Stock Option shall be granted to an individual if, at the time the Option is granted,
such individual owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of its Parent Corporation or Subsidiary Corporation, within the
meaning of section 422(b)(6) of the Code, unless (i) at the time such Option is granted the
exercise price is at least 110% of the Fair Market Value of the Stock subject to the Option and
(ii) such Option by its terms is not exercisable after the expiration of five years from the date
of grant.

     (d) Option Agreement. Each Option shall be evidenced by an Option Agreement in such form and
containing such provisions not inconsistent with the provisions of the Plan as the Committee from
time to time shall approve, including, without limitation, provisions to qualify an Incentive Stock
Option under section 422 of the Code. An Option Agreement may provide for the payment of the
exercise price, in whole or in part, by (i) cash, cashier’s check, bank draft, or postal or express
money order payable to the order of the Company, (ii) subject to the approval by the Committee,
certificates representing “mature shares” of Stock theretofore owned by the Optionee duly endorsed
for transfer to the Company, or (iii) any combination of the preceding, equal in value to the full
amount of the exercise price. For purposes of this Plan, “mature shares” means shares of Common
Stock for which the Optionee has good title, free and clear of all liens and encumbrances,
transferability restrictions or risk of forfeiture, and which the Optionee either (i) has held for
at least six months or (ii) has purchased on the open market. Each Option shall specify the effect
of termination of employment or service as a Director or consultant (by retirement, disability,
death or otherwise) on the exercisability of the Option. An Option Agreement may also include,
without limitation, provisions relating to (i) vesting of Options, subject to the provisions hereof
accelerating such vesting on a Change of Control, (ii) tax matters (including provisions (y)
permitting the delivery of additional shares of Stock or the withholding of shares of Stock from
those acquired upon exercise to satisfy federal or state income tax withholding requirements and
(z) dealing with any other applicable employee wage withholding requirements), and (iii) any other
matters not inconsistent with the terms and provisions of this Plan that the Committee shall in its
sole discretion determine. The terms and conditions of the respective Option Agreements need not
be identical.

     (e) Exercise price and Payment. The price at which a share of Stock may be purchased upon
exercise of an Option shall be determined by the Committee, but (i) such exercise price shall never
be less than the Fair Market Value of Stock on the date the Option is granted and (ii) such
exercise price shall be subject to adjustment as provided in Paragraph XII. The Option or portion
thereof may be exercised by delivery of an irrevocable notice of exercise to the Company. The
exercise price of the Option or portion thereof shall be paid in full in the manner prescribed by
the Committee.

     (f) Stockholder Rights and Privileges. The Holder shall be entitled to all the privileges and
rights of a stockholder only with respect to such shares of Stock as have been purchased under the
Option and for which certificates of stock have been registered in the Holder’s name.

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     (g) Options and Rights in Substitution for Stock Options Granted by Other Corporations.
Options and Stock Appreciation Rights may be granted under the Plan from time to time in
substitution for stock options held by individuals employed by corporations who become employees as
a result of a merger or consolidation of the employing corporation with the Company, an Affiliate,
or any Subsidiary Corporation, or the acquisition by the Company, an Affiliate or a Subsidiary
Corporation of the assets of the employing corporation, or the acquisition by the Company, an
Affiliate or a Subsidiary Corporation of stock of the employing corporation with the result that
such employing corporation becomes a Subsidiary Corporation.

     (h) All Options granted under this Plan are subject to, and may not be exercised before, the
approval of this Plan by the stockholders of the Company prior to the first anniversary date of the
Board meeting held to approve this Plan, by the affirmative vote of the holders of a majority of
the outstanding shares of the Company present, or represented by proxy, and entitled to vote at a
meeting at which a quorum is present, or by written consent in accordance with the laws of the
State of Texas.

VIII. STOCK APPRECIATION RIGHTS

     (a) Stock Appreciation Rights. A Stock Appreciation Right is the right to receive an amount
equal to the Spread with respect to a share of Stock upon the exercise of such Stock Appreciation
Right. Stock Appreciation Rights may be granted in connection with the grant of an Option, in
which case the Option Agreement will provide that exercise of Stock Appreciation Rights will result
in the surrender of the right to purchase the shares under the Option as to which the Stock
Appreciation Rights were exercised. Alternatively, Stock Appreciation Rights may be granted
independently of Options in which case each Award of Stock Appreciation Rights shall be evidenced
by a Stock Appreciation Rights Agreement which shall contain such terms and conditions as may be
approved by the Committee. The Spread with respect to a Stock Appreciation Right may be payable
either in cash, shares of Stock with a Fair Market Value equal to the Spread or in a combination of
cash and shares of Stock. With respect to Stock Appreciation Rights that are subject to Section 16
of the 1934 Act, however, the Committee shall, except as provided in Paragraph XII(c), retain sole
discretion (i) to determine the form in which payment of the Stock Appreciation Right will be made
(i.e., cash, securities or any combination thereof) or (ii) to approve an election by a Holder to
receive cash in full or partial settlement of Stock Appreciation Rights. Each Stock Appreciation
Rights Agreement shall specify the effect of termination of employment or service as a Director or
consultant (by retirement, disability, death or otherwise) on the exercisability of the Stock
Appreciation Rights.

     (b) Other Terms and Conditions. At the time of such Award, the Committee may, in its sole
discretion, prescribe additional terms, conditions or restrictions relating to Stock Appreciation
Rights. Such additional terms, conditions or restrictions shall be set forth in the Stock
Appreciation Rights Agreement made in conjunction with the Award. Such Stock Appreciation Rights
Agreements may also include, without limitation, provisions relating to (i) vesting of Awards,
subject to the provisions hereof accelerating vesting on a Change of Control, (ii) tax matters
(including provisions covering applicable wage withholding requirements), and (iii) any other
matters not inconsistent with the terms and provisions of this Plan, that the

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Committee shall in its sole discretion determine. The terms and conditions of the respective
Stock Appreciation Rights Agreements need not be identical.

     (c) Exercise Price. The exercise price of each Stock Appreciation Right shall be determined
by the Committee, but such exercise price (i) shall never be less than the Fair Market Value of a
share of Stock on the date the Stock Appreciation Right is granted (or such greater exercise price
as may be required if such Stock Appreciation Right is granted in connection with an Incentive
Stock Option that must have an exercise price equal to 110% of the Fair Market Value of the Stock
on the date of grant pursuant to Paragraph VII(c)) and (ii) shall be subject to adjustment as
provided in Paragraph XII.

     (d) Exercise Period. The term of each Stock Appreciation Right shall be as specified by the
Committee at the date of grant.

     (e) Limitations on Exercise of Stock Appreciation Right. A Stock Appreciation Right shall be
exercisable in whole or in such installments and at such times as determined by the Committee.

IX. RESTRICTED STOCK AWARDS

     (a) Forfeiture Restrictions to be Established by the Committee. Shares of Stock that are the
subject of a Restricted Stock Award shall be subject to restrictions on disposition by the Holder
and an obligation of the Holder to forfeit and surrender the shares to the Company under certain
circumstances (the “Forfeiture Restrictions”). The Forfeiture Restrictions shall be determined by
the Committee in its sole discretion and set forth in the Restricted Stock Agreement, and the
Committee may provide that the Forfeiture Restrictions shall lapse upon (i) the attainment of one
or more performance goals established by the Committee that are based on Earnings Per Share goal
attainment, Efficiency Ratio goal attainment, Non-Performing Loan goal attainment, and/or Asset
Growth goal attainment (ii) the Holder’s continued employment with the Employer for a specified
period of time, or (iii) a combination of the factors listed in clauses (i) and (ii) of this
sentence. Each Restricted Stock Award may have different Forfeiture Restrictions, in the
discretion of the Committee. The Forfeiture Restrictions applicable to a particular Restricted
Stock Award shall not be changed except as permitted by Paragraph IX(b) or Paragraph XII.

     (b) Other Terms and Conditions. Stock awarded pursuant to a Restricted Stock Award shall be
represented by a stock certificate registered in the name of the Holder of such Restricted Stock
Award. Unless otherwise provided in the Restricted Stock Agreement, the Holder shall have the
right to receive dividends with respect to Stock subject to a Restricted Stock Award, to vote Stock
subject thereto and to enjoy all other stockholder rights, except that (i) the Holder shall not be
entitled to delivery of the stock certificate until the Forfeiture Restrictions shall have expired,
(ii) the Company shall retain custody of the Stock until the Forfeiture Restrictions shall have
expired, (iii) the Holder may not sell, transfer, pledge, exchange, hypothecate or otherwise
dispose of the Stock until the Forfeiture Restrictions shall have expired, and (iv) a breach of the
terms and conditions established by the Committee pursuant to the Restricted Stock Agreement shall
cause a forfeiture of the Restricted Stock

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Award. Unless otherwise provided in a Restricted Stock Agreement, dividends payable with
respect to a Restricted Stock Award will be paid to a Holder in cash on the day on which the
corresponding dividend on shares of Stock is paid to shareholders, or as soon as administratively
practicable thereafter, but in no event later than the fifteenth (15th) day of the third
calendar month following the day on which the corresponding dividend on shares of Stock is paid to
shareholders. The Committee may provide in a Restricted Stock Agreement that payment of dividends
with respect to a Restricted Stock Award shall be subject to the attainment of one or more
performance goals established by the Committee that are based on the criteria set forth in
paragraph (a) above.

     At the time of such Award, the Committee may, in its sole discretion, prescribe additional
terms, conditions or restrictions relating to Restricted Stock Awards, including, but not limited
to, rules pertaining to the termination of employment or service as a Director or consultant (by
retirement, disability, death or otherwise) of a Holder prior to expiration of the Forfeiture
Restrictions. Such additional terms, conditions or restrictions shall be set forth in a Restricted
Stock Agreement made in conjunction with the Award. Such Restricted Stock Agreement may also
include, without limitation, provisions relating to (i) vesting of Awards, subject to any
provisions hereof accelerating vesting on a Change of Control, (ii) tax matters (including
provisions (y) covering any applicable employee wage withholding requirements and (z) prohibiting
an election by the Holder under section 83(b) of the Code), and (iii) any other matters not
inconsistent with the terms and provisions of this Plan that the Committee shall in its sole
discretion determine. The terms and conditions of the respective Restricted Stock Agreements need
not be identical.

     (c) Payment for Restricted Stock. The Committee shall determine the amount and form of any
payment for Stock received pursuant to a Restricted Stock Award, provided that in the absence of
such a determination, a Holder shall not be required to make any payment for Stock received
pursuant to a Restricted Stock Award, except to the extent otherwise required by law.

     (d) Agreements. At the time any Award is made under this Paragraph IX, the Company and the
Holder shall enter into a Restricted Stock Agreement setting forth each of the matters as the
Committee may determine to be appropriate. The terms and provisions of the respective Restricted
Stock Agreements need not be identical.

     (e) Acceleration. The Committee at any time may accelerate the time or conditions under which
the Forfeiture Restrictions lapse.

     (f) Certification. With respect to a Restricted Stock Award granted to a “covered employee,”
if the lapse of the Forfeiture Restrictions imposed upon such Restricted Stock Award, or the
payment of dividends with respect to such Restricted Stock Award, is conditioned in whole or in
part on the attainment of performance goals, such Forfeiture Restrictions shall not lapse and such
dividends shall not be paid unless and until the Committee certifies in writing that such
performance goals and any other conditions on the lapse of Forfeiture Restrictions or payment of
dividends have been satisfied.

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X. PERFORMANCE AWARDS

     (a) Performance Period. The Committee shall establish, with respect to and at the time of
grant of each Performance Award, a performance period over which the performance of the Holder
shall be measured.

     (b) Performance Awards. Each Performance Award shall have a maximum value established by the
Committee at the time of such Award.

     (c) Performance Measures. Prior to or upon the commencement of each performance period (or at
such later time as may be permitted for qualified performance-based compensation under Section
162(m) and the regulations thereunder), the Committee shall establish written performance goals for
each Performance Award granted to a Holder for such performance period. The performance goals
shall be based on one or more of the following criteria: Earnings Per Share goal attainment,
Efficiency Ratio goal attainment, Non-Performing Loan goal attainment, and/or Asset Growth goal
attainment.

     At the time of establishing the performance goals, the Committee shall specify (i) the formula
to be used in calculating the compensation payable to a Holder if the performance goals are
obtained, and (ii) the individual employee or class of employees to which the formula applies. The
Committee may also specify a minimum acceptable level of achievement of the relevant performance
goals, as well as one or more additional levels of achievement, and a formula to determine the
percentage of the Performance Award deemed to have been earned by the Holder upon attainment of
each such level of achievement, which percentage may exceed 100%. The performance goals and amount
of each Performance Award need not be the same as those relating to any other Performance Award,
whether made at the same or a different time. Notwithstanding the terms of any Performance Award,
the maximum payout under this Plan pursuant to a Performance Award to any individual for any
calendar year shall not exceed $100,000.

     Notwithstanding the terms of any Performance Award, the Committee, in its sole and absolute
discretion, may reduce the amount of the Performance Award payable to any Holder for any reason,
including the Committee’s judgment that the performance goals have become an inappropriate measure
of achievement, a change in the employment status, position or duties of the Holder, unsatisfactory
performance of the Holder, or the Holder’s service for less than the entire performance period.
Notwithstanding the foregoing, the reduction of a Performance Award payable to a Holder may not
result in an increase in the amount of a Performance Award payable to another Holder.

     (d) Awards Criteria. In determining the value of Performance Awards, the Committee shall take
into account a Holder’s responsibility level, contributions, performance, potential, other Awards
and such other considerations as it deems appropriate.

     (e) Certification. Promptly after the date on which the necessary information for a
particular performance period becomes available, the Committee shall determine, and certify in
writing (with respect to each Holder who is a “covered employee”), the extent to which the

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Performance Award for such performance period has been earned, through the achievement of the
relevant performance goals, by each Holder for such performance period.

     (f) Payment. As soon as administratively feasible after the Committee has determined and
certified in writing (if required with respect to a “covered employee”) the extent to which a
Performance Award has been earned, but in no event later than March 15 of the calendar year
immediately following the calendar year in which the performance period ends, the Holder of a
Performance Award shall be entitled to receive payment of an amount, not exceeding the maximum
value of the Performance Award, based on the achievement of the performance measures for such
performance period, as determined by the Committee. Payment of a Performance Award may be made in
cash, Stock or a combination thereof, as determined by the Committee. Payment shall be made in a
lump sum. Any payment to be made in Stock shall be based on the Fair Market Value of the Stock on
the payment date.

     (g) Termination of Employment. A Performance Award shall terminate if the Holder does not
remain continuously in the employ of the Employer at all times during the applicable performance
period.

     (h) Agreements. At the time any Award is made under this Paragraph X, the Committee may
require the Holder to enter into a Performance Award Agreement with the Company setting forth each
of the matters contemplated hereby, and, in addition such matters are set forth in Paragraph IX(b)
as the Committee may determine to be appropriate. The terms and provisions of the respective
agreements need not be identical.

XI. PHANTOM STOCK AWARDS

     (a) Phantom Stock Awards. Phantom Stock Awards are rights to receive shares of Stock (or cash
in an amount equal to the Fair Market Value thereof), or rights to receive an amount equal to any
appreciation in the Fair Market Value of Stock (or portion thereof) over a specified period of
time, which vest over a period of time or upon the occurrence of an event (including without
limitation a Change of Control) as established by the Committee, without payment of any amounts by
the Holder thereof (except to the extent otherwise required by law) or satisfaction of any
performance criteria or objectives. Each Phantom Stock Award shall have a maximum value
established by the Committee at the time of such Award.

     (b) Award Period. The Committee shall establish, with respect to and at the time of each
Phantom Stock Award, a period over which or the event upon which the Award shall vest with respect
to the Holder.

     (c) Awards Criteria. In determining the value of Phantom Stock Awards, the Committee shall
take into account an employee’s responsibility level, performance, potential, other Awards and such
other considerations as it deems appropriate.

     (d) Payment. Following the end of the vesting period for a Phantom Stock Award, but in no
event later than March 15 of the calendar year immediately following the calendar year in which the
vesting period ends, the Holder of a Phantom Stock Award shall be entitled to

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receive payment of an amount, not exceeding the maximum value of the Phantom Stock Award,
based on the then vested value of the Award. Payment of a Phantom Stock Award may be made in cash,
Stock or a combination thereof as determined by the Committee. Payment shall be made in a lump
sum. Any payment to be made in Stock shall be based on the Fair Market Value of the Stock on the
payment date. Cash dividend equivalents may be paid during or after the vesting period with
respect to a Phantom Stock Award, as determined by the Committee.

     (e) Termination of Employment. A Phantom Stock Award shall terminate if the Holder does not
remain continuously in the employ of the Employer at all times during the applicable vesting
period, except as may be otherwise set forth in the Award at the time of grant.

     (f) Agreements. At the time any Award is made under this Paragraph XI, the Company and the
Holder shall enter into a Phantom Stock Award Agreement setting forth each of the matters
contemplated hereby and, in addition, such matters as are set forth in Paragraph IX(b) as the
Committee may determine to be appropriate. The terms and provisions of the respective agreements
need not be identical.

XII. RECAPITALIZATION OR REORGANIZATION

     (a) The shares with respect to which Awards may be granted are shares of Stock as presently
constituted, but if, and whenever, prior to the expiration of an Award theretofore granted, the
Company shall effect a subdivision or consolidation by the Company, the number of shares of Stock
with respect to which such Award may thereafter be exercised or satisfied, as applicable, (i) in
the event of an increase in the number of outstanding shares shall be proportionately increased,
and the exercise price per share shall be proportionately reduced, and (ii) in the event of a
reduction in the number of outstanding shares shall be proportionately reduced, and the exercise
price per share shall be proportionately increased.

     (b) If the Company recapitalizes or otherwise changes its capital structure, thereafter upon
any exercise or satisfaction, as applicable, of an Award theretofore granted the Holder shall be
entitled to (or entitled to purchase, if applicable) under such Award, in lieu of the number of
shares of Stock then covered by such Award, the number and class of shares of stock and securities
to which the Holder would have been entitled pursuant to the terms of the recapitalization if,
immediately prior to such recapitalization, the Holder had been the holder of record of the number
of shares of Stock then covered by such Award.

     (c) In the event of a Change of Control, all outstanding Awards shall immediately vest and
become exercisable or satisfiable, as applicable, and the Committee, in its discretion, may take
any other action with respect to outstanding Awards that it deems appropriate, which action may
vary among Awards granted to individual Holders; provided, however, that such action shall not
reduce the value of an Award. In particular, with respect to Options, the actions the Committee
may take upon a Change of Control include, but are not limited to, the following: (i) accelerating
the time at which Options then outstanding may be exercised so that such Options may be exercised
in full for a limited period of time on or before a specified date (before or after such Change of
Control) fixed by the Committee, after which specified date all unexercised Options and all rights
of Holders thereunder shall terminate, (ii) requiring the

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mandatory surrender to the Company by selected Holders of some or all of the outstanding
Options held by such Holders (irrespective of whether such Options are then exercisable) as of a
date, before or after such Change of Control, specified by the Committee, in which event the
Committee shall thereupon cancel such Options and the Company shall pay to each such Holder an
amount of cash per share equal to the excess, if any, of the Change of Control Value of the shares
subject to such Option over the exercise price(s) under such Options for such shares, (iii) make
such adjustments to Options then outstanding as the Committee deems appropriate to reflect such
Change of Control (provided, however, that the Committee may determine in its sole discretion that
no adjustment is necessary to Options then outstanding), or (iv) provide that the number and class
of shares of Stock covered by an Option theretofore granted shall be adjusted so that such Option
shall thereafter cover the number and class of shares of Stock or other securities or property
(including, without limitation, cash) to which the Holder would have been entitled pursuant to the
terms of the agreement of merger, consolidation or sale of assets and dissolution if, immediately
prior to such merger, consolidation or sale of assets and dissolution, the Holder had been the
holder of record of the number of shares of Stock then covered by such Option. The provisions
contained in this paragraph shall not terminate any rights of the Holder to further payments
pursuant to any other agreement with the Company following a Change of Control. Notwithstanding
anything herein to the contrary, in the event of a Change of Control described in Paragraph
II(d)(ii), the Committee may determine, in its discretion, that the treatment of Awards as
described in this Paragraph shall apply only to Awards granted to employees, Directors or
consultants of the affected bank.

     (d) In the event of changes in the outstanding Stock by reason of recapitalization,
reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the date of the grant of any Award and not otherwise provided for by
this Paragraph XII, any outstanding Awards and any agreements evidencing such Awards shall be
equitably adjusted as to the number and price of shares of Stock or other consideration subject to
such Awards, but only to the same extent that any equitable adjustment is made to shares of
outstanding Stock. In the event of any such change in the outstanding Stock, the aggregate number
of shares available under the Plan may be appropriately adjusted by the Committee, whose
determination shall be conclusive.

     (e) The existence of the Plan and the Awards granted hereunder shall not affect in any way the
right or power of the Board or the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital structure or its
business, any merger or consolidation of the Company, any issue of debt or equity securities ahead
of or affecting Stock or the rights thereof, the dissolution or liquidation of the Company or any
sale, lease, exchange or other disposition of all or any part of its assets or business or any
other corporate act or proceeding.

     (f) Any adjustment provided for in Subparagraphs (a), (b), (c) or (d) above shall be subject
to any required stockholder action.

     (g) Except as hereinbefore expressly provided, the issuance by the Company of shares of stock
of any class or securities convertible into shares of stock of any class, for cash, property, labor
or services, upon direct sale, upon the exercise of rights or warrants to subscribe

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therefor, or upon conversion of shares of obligations of the Company convertible into such
shares or other securities, and in any case whether or not for fair value, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject
to Awards theretofore granted or the exercise price per share, if applicable.

XIII. AMENDMENT AND TERMINATION OF THE PLAN

     The Board in its discretion may terminate the Plan at any time with respect to any shares for
which Awards have not theretofore been granted. The Board shall have the right to alter or amend
the Plan or any part thereof from time to time; provided that, except as provided herein or in an
agreement governing an Award, no change in any Award theretofore granted may be made which would
impair the rights of the Holder without the consent of the Holder (unless such change is required
in order to cause the benefits under the Plan to qualify as performance-based compensation within
the meaning of section 162(m) of the Code, if applicable, and applicable interpretive authority
thereunder), and provided, further, that the Board may not, without approval of the stockholders,
amend the Plan:

     (a) to increase the maximum number of shares which may be issued on exercise or surrender of
an Award, except as provided in Paragraph XII;

     (b) to change the class of employees eligible to receive Awards or materially increase the
benefits accruing to employees under the Plan;

     (c) to extend the maximum period during which Awards may be granted under the Plan;

     (d) to modify materially the requirements as to eligibility for participation in the Plan;

     (e) to decrease any authority granted to the Committee hereunder in contravention of Rule
16b-3; or

     (f) if such approval is required to comply with Rule 16b-3, if applicable, any rule
promulgated by the exchange on which Stock is tradable, or Sections 162(m) or 422 of the Code or
any successor provisions, if applicable.

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XIV. MISCELLANEOUS

     (a) No Right to An Award. Neither the adoption of the Plan by the Company nor any action of
the Board or the Committee shall be deemed to give an employee any right to be granted an Award to
purchase Stock, a right to a Stock Appreciation Right, a Restricted Stock Award, a Performance
Award or a Phantom Stock Award or any of the rights hereunder except as may be evidenced by an
Award or by an Option Agreement, Stock Appreciation Rights Agreement, Restricted Stock Agreement,
Performance Award Agreement or Phantom Stock Award Agreement on behalf of the Company, and then
only to the extent and on the terms and conditions expressly set forth therein. The Plan shall be
unfunded. The Company shall not be required to establish any special or separate fund or to make
any other segregation of funds or assets to assure the payment of any Award.

     (b) Employees’ Rights Unsecured. The right of an employee to receive Stock, cash or any other
payment under this Plan shall be an unsecured claim against the general assets of the Company. The
Company may, but shall not be obligated to, acquire shares of Stock from time to time in
anticipation of its obligations under this Plan, but a Holder shall have no right in or against any
shares of Stock so acquired. All Stock shall constitute the general assets of the Company and may
be disposed of by the Company at such time and for such purposes as it deems appropriate.

     (c) No Employment Rights Conferred. Nothing contained in the Plan shall (i) confer upon any
employee any right with respect to continuation of employment with any Employer or (ii) interfere
in any way with the right of any Employer to terminate an employee’s employment at any time.

     (d) Other Laws; Withholding. The Company shall not be obligated to issue any Stock pursuant
to any Award granted under the Plan at any time when the shares covered by such Award have not been
registered under the Securities Act of 1933 and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the opinion of legal counsel
for the Company, there is no exemption from the registration requirements of such laws, rules or
regulations available for the issuance and sale of such shares. Unless the Awards and Stock
covered by this Plan have been registered under the Securities Act of 1993, or the Company has
determined that such registration is unnecessary, each Holder exercising an Award under this Plan
may be required by the Company to give representation in writing that such Holder is acquiring such
shares for his or her own account for investment and not with a view to, or for sale in connection
with, the distribution of any part thereof. No fractional shares of Stock shall be delivered, nor
shall any cash in lieu of fractional shares be paid. The Company shall have the right to deduct in
connection with all Awards any taxes required by law to be withheld and to require any payments
required to enable it to satisfy its withholding obligations.

     (e) No Restriction on Corporate Action. Nothing contained in the Plan shall be construed to
prevent the Company, an Affiliate or any Subsidiary from taking any corporate action which is
deemed by the Company, an Affiliate or any Subsidiary to be appropriate or in its best interest,
whether or not such action would have an adverse effect on the Plan or any Award

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made under the Plan. No employee, beneficiary or other person shall have any claim against
the Company, an Affiliate or any Subsidiary as a result of any such action.

     (f) Restrictions on Transfer. An Award shall not be transferable otherwise than by will or
the laws of descent and distribution and shall be exercisable during the Holder’s lifetime only by
such Holder or the Holder’s guardian or legal representative.

     (g) Beneficiary Designation. Each Holder may name, from time to time, any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is
to be paid in case of his or her death before he or she receives any or all of such benefit. Each
designation will revoke all prior designations by the same Holder, shall be in a form prescribed by
the Committee, and will be effective only when filed by the Holder in writing with the Committee
during his lifetime. In the absence of any such designation, benefits remaining unpaid at the
Holder’s death shall be paid to his estate.

     (h) Rule 16b-3. It is intended that the Plan and any grant of an Award made to a person
subject to Section 16 of the 1934 Act meet all of the requirements of Rule 16b-3. If any provision
of the Plan or any such Award would disqualify the Plan or such Award under, or would otherwise not
comply with, Rule 16b-3, such provision or Award shall be construed or deemed amended to conform to
Rule 16b-3.

     (i) Section 162(m). If the Company is subject to Section 162(m) of the Code, it is intended
that the Plan comply fully with and meet all the requirements of Section 162(m) of the Code so that
Awards may, if intended, constitute “performance-based” compensation within the meaning of such
section. If any provision of the Plan would disqualify the Plan or would not otherwise permit the
Plan to comply with Section 162(m) as so intended, such provision shall be construed or deemed
amended to conform to the requirements or provisions of Section 162(m); provided that no such
construction or amendment shall have an adverse effect on the economic value to a Holder of any
Award previously granted hereunder. With respect to any Restricted Stock Awards or Performance
Awards granted to a “covered employee,” if the lapsing of the Forfeiture Restrictions of such
Restricted Stock Awards, or the payment of such Performance Award, is contingent on the
satisfaction of performance goals, (i) such performance goals shall be established in writing by
the Committee not later than ninety (90) days after the commencement of the period of service to
which the performance goals relate; provided, however, that the performance goals must be
established before twenty-five percent (25%) of such period of service has elapsed, and (ii) the
Forfeiture Restrictions shall not lapse, and/or the Performance Award shall not be paid, unless the
shareholder approval requirements under Treasury Regulation § 1.162-27(e)(4) have been satisfied.
The performance goals shall comply with the requirements of Treasury Regulation § 1.162-27(e)(2).

     (j) Indemnification. Each person who is or shall have been a member of the Committee or of the
Board shall be indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may
be involved by reason of any action taken or failure to act under the Plan and against and from any
and all amounts paid by him in settlement thereof, with the

-17-

 

Company’s approval, or paid by him in satisfaction of any judgment in any such action, suit,
or proceeding against him, provided he shall give the Company an opportunity, at its own expense,
to handle and defend the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights or indemnification to
which such persons may be entitled under the Company’s Articles of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

     (k) Governing Law. This Plan shall be construed in accordance with the laws of the State of
Texas.

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     IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing by the Board,
MetroCorp Bancshares, Inc. has caused this document to be duly executed in its name and behalf by
its proper officer thereunto duly authorized as of this
26th day of
January, 2007.

	 	 	 	 	 
	 	 	 
	 	By:  	/s/
George M. Lee 	 
	 	  	George M. Lee 	 
	 	  	President
and Chief Executive Officer 	 
	 

-19-

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