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MAKEMUSIC! INC.

2003 EQUITY INCENTIVE PLAN

(AS AMENDED THROUGH APRIL 7, 2006)

SECTION 1.

DEFINITIONS

     As used herein, the following terms shall have the meanings indicated below:

     (a) “Administrator” shall mean the Board or the Committee, as the case may be.

     (b) “Affiliate” shall mean a Parent or Subsidiary of the Company.

     (c) “Award” shall mean any grant of an Option, Restricted Stock Award, Stock Appreciation
Right or Performance Award.

     (d) “Committee” shall mean a Committee of two or more directors who shall be appointed by and
serve at the pleasure of the Board. If the Company’s securities are registered pursuant to Section
12 of the Securities Exchange Act of 1934, as amended, then, to the extent necessary for compliance
with Rule 16b-3, or any successor provision, each of the members of the Committee shall be a
“non-employee director.” Solely for purposes of this Section 1(a), “non-employee director” shall
have the same meaning as set forth in Rule 16b-3, or any successor provision, as then in effect, of
the General Rules and Regulations under the Securities Exchange Act of 1934, as amended. Further,
to the extent necessary for compliance with the limitations set forth in Internal Revenue Code
Section 162(m), each of the members of the Committee shall be an “outside director” within the
meaning of Code Section 162(m) and the regulations issued thereunder.

     (e) The “Company” shall mean MakeMusic! Inc., a Minnesota corporation.

     (f) “Fair Market Value” as of any date shall mean (i) if such stock is listed on the Nasdaq
National Market, Nasdaq SmallCap Market, or an established stock exchange, the price of such stock
at the close of the regular trading session of such market or exchange on such date, as reported by
The Wall Street Journal or a comparable reporting service, or, if no sale of such stock
shall have occurred on such date, on the next preceding day on which there was a sale of stock;
(ii) if such stock is not so listed on the Nasdaq National Market, Nasdaq SmallCap Market, or an
established stock exchange, the average of the closing “bid” and “asked” prices quoted by the OTC
Bulletin Board, the National Quotation Bureau, or any comparable reporting service on such date or,
if there are no quoted “bid” and “asked” prices on such date, on the next preceding date for which
there are such quotes; or (iii) if such stock is not publicly traded as of such date, the per share
value as determined by the Board, or the Committee, in its sole discretion by applying principles
of valuation with respect to the Company’s Common Stock.

     (g) The “Internal Revenue Code” is the Internal Revenue Code of 1986, as amended from time to
time.

 

 

     (h) “Option” means an incentive stock option or nonqualified stock option granted pursuant to
the Plan.

     (i) “Option Stock,” “Stock” or “Common Stock” shall mean Common Stock of the Company (subject
to adjustment as described in Section 14) reserved for Options, Restricted Stock Awards, Stock
Appreciation Rights and Performance Shares pursuant to this Plan.

     (j) “Parent” shall mean any corporation which owns, directly or indirectly in an unbroken
chain, fifty percent (50%) or more of the total voting power of the Company’s outstanding stock.

     (k) The “Participant” means a key employee of the Company or any Subsidiary to whom an
incentive stock option has been granted pursuant to Section 9; a consultant or advisor to, or
director, key employee or officer, of the Company or any Subsidiary to whom a nonqualified stock
option has been granted pursuant to Section 10; or a consultant or advisor to, or director, key
employee or officer, of the Company or any Subsidiary to whom a Restricted Stock Award has been
granted pursuant to Section 11; or a consultant or advisor to, or director, key employee or
officer, of the Company or any Subsidiary to whom a Performance Award has been granted pursuant to
Section 12; or a consultant or advisor to, or director, key employee or officer, of the Company or
any Subsidiary to whom a Stock Appreciation Right has been granted pursuant to Section 13.

     (l) “Performance Award” shall mean any Performance Shares or Performance Units granted
pursuant to Section 12 hereof.

     (m) “Performance Period” shall mean the period, established at the time any Performance Award
is granted or at any time thereafter, during which any performance goals specified by the
Administrator with respect to such Performance Award are to be measured.

     (n) “Performance Share” shall mean any grant pursuant to Section 12 hereof of an award, which
value, if any, shall be paid to a Participant by delivery shares of Common Stock of the Company
upon achievement of such performance goals during the Performance Period as the Administrator shall
establish at the time of such grant or thereafter.

     (o) “Performance Unit” shall mean any grant pursuant to Section 12 hereof of an award, which
value, if any, shall be paid to a Participant by delivery of cash upon achievement of such
performance goals during the Performance Period as the Administrator shall establish at the time of
such grant or thereafter.

     (p) The “Plan” means the MakeMusic! Inc. 2003 Equity Incentive Plan, as amended hereafter from
time to time, including the form of Agreements as they may be modified by the Administrator from
time to time.

     (q) “Restricted Stock Award” shall mean any grant of restricted shares of Common Stock of the
Company pursuant to Section 11 hereof.

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     (r) “Stock Appreciation Right” shall mean a grant pursuant to Section 13 hereof.

     (s) A “Subsidiary” shall mean any corporation of which fifty percent (50%) or more of the
total voting power of outstanding stock is owned, directly or indirectly in an unbroken chain, by
the Company.

SECTION 2.

PURPOSE

     The purpose of the Plan is to promote the success of the Company and its Subsidiaries by
facilitating the employment and retention of competent personnel and by furnishing incentive to
officers, directors, employees, consultants, and advisors upon whose efforts the success of the
Company and its Subsidiaries will depend to a large degree.

     It is the intention of the Company to carry out the Plan through the granting of Options which
will qualify as “incentive stock options” under the provisions of Section 422 of the Internal
Revenue Code, or any successor provision, pursuant to Section 9 of this Plan, through the granting
of Options that are “nonqualified stock options” pursuant to Section 10 of this Plan, through the
granting of Restricted Stock Awards pursuant to Section 11 of this Plan, through the granting of
Performance Awards pursuant to Section 12 of this Agreement and through the granting of Stock
Appreciation Rights pursuant to Section 13 hereof. Adoption of this Plan shall be and is expressly
subject to the condition of approval by the shareholders of the Company within twelve (12) months
before or after the adoption of the Plan by the Board of Directors. In no event shall any Options,
Restricted Stock Awards, Performance Awards or Stock Appreciation Rights be granted prior to the
date this Plan is approved by the shareholders of the Company.

SECTION 3.

EFFECTIVE DATE OF PLAN

     The Plan shall be effective as of the date of adoption by the Board of Directors, subject to
approval by the shareholders of the Company as required in Section 2.

SECTION 4.

ADMINISTRATION

     The Plan shall be administered by the Board of Directors of the Company (hereinafter referred
to as the “Board”) or by a Committee which may be appointed by the Board from time to time to
administer the Plan (hereinafter collectively referred to as the “Administrator”). Except as
otherwise provided herein, the Administrator shall have all of the powers vested in it under the
provisions of the Plan, including but not limited to exclusive authority to determine, in

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its sole discretion, whether an Award shall be granted; the individuals to whom, and the time or
times at which, such Awards shall be granted; the number of shares subject to each such Award, the
performance criteria, if any, and any other terms and conditions of each Award. The Administrator
shall have full power and authority to administer and interpret the Plan, to make and amend rules,
regulations and guidelines for administering the Plan, to prescribe the form and conditions of the
respective Awards (which may vary from Participant to Participant) evidencing each Award, and to
make all other determinations necessary or advisable for the administration of the Plan. The
Administrator’s interpretation of the Plan, and all actions taken and determinations made by the
Administrator pursuant to the power vested in it hereunder, shall be conclusive and binding on all
parties concerned.

     No member of the Board or the Committee shall be liable for any action taken or determination
made in good faith in connection with the administration of the Plan. In the event the Board
appoints a Committee as provided hereunder, any action of the Committee with respect to the
administration of the Plan shall be taken pursuant to a majority vote of the Committee members or
pursuant to the written resolution of all Committee members.

SECTION 5.

PARTICIPANTS

     The Administrator shall from time to time, at its discretion and without approval of the
shareholders, designate those employees, officers, directors, consultants, and advisors of the
Company or of any Subsidiary to whom Awards shall be granted under this Plan; provided, however,
that consultants or advisors shall not be eligible to receive Awards hereunder unless such
consultant or advisor renders bona fide services to the Company or Subsidiary and such services are
not in connection with the offer or sale of securities in a capital raising transaction and do not
directly or indirectly promote or maintain a market for the Company’s securities. The
Administrator shall, from time to time, at its discretion and without approval of the shareholders,
designate those employees of the Company or any Subsidiary to whom Awards shall be granted under
this Plan. The Administrator may grant additional Awards under this Plan to some or all
Participants then holding Awards, or may grant Awards solely or partially to new Participants. In
designating Participants, the Administrator shall also determine the number of shares subject to
each Award granted to each Participant and, with respect to Performance Awards, the performance
criteria applicable to each Participant. The Administrator may from time to time designate
individuals as being ineligible to participate in the Plan.

SECTION 6.

STOCK

     The capital stock to be issued under this Plan shall consist of authorized but unissued shares
of Stock. Nine hundred fifty thousand (950,000) shares of Stock shall be reserved and available for Awards under
the Plan; provided, however, that the total number of shares of Stock reserved for Awards under
this Plan shall be subject to adjustment as provided in Section 14 of the Plan. In

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the event that any outstanding Option, Stock Appreciation Right, Performance Share Award or
Restricted Stock Award under the Plan for any reason expires or is terminated prior to the exercise
of the Option or Stock Appreciation Right, prior to the achievement of the performance criteria
under the Performance Share Award, or prior to the lapsing of the risks of forfeiture on the
Restricted Stock Award, the shares of Stock allocable to the unexercised portion of such Option or
Stock Appreciation Right, to the unearned portion of the Performance Share Award or to the
forfeited portion of the Restricted Stock Award shall continue to be reserved for Options, Stock
Appreciation Rights, Performance Share Awards and Restricted Stock Awards under the Plan and may be
optioned or awarded hereunder.

SECTION 7.

DURATION OF PLAN

     Incentive stock options may be granted pursuant to the Plan from time to time during a period
of ten (10) years from the effective date as defined in Section 3. Other Awards may be granted
pursuant to the Plan from time to time after the effective date of the Plan and until the Plan is
discontinued or terminated by the Board.

SECTION 8.

PAYMENT 

     Participants may pay for shares of Stock of the Company upon exercise of Options granted
pursuant to this Plan with cash, personal check, certified check or, if approved by the
Administrator in its sole discretion, previously-owned shares of the Company’s Common Stock, or any
combination thereof, or such other form of payment as may be authorized by the Administrator. Any
Stock so tendered as part of such payment shall be valued at such Stock’s then Fair Market Value.
The Administrator may, in its sole discretion, limit the forms of payment available to the
Participant and may exercise such discretion any time prior to the termination of the Option
granted to the Participant or upon any exercise of the Option by the Participant.
“Previously-owned shares” means shares of the Company’s Common Stock which the Participant has
owned for at least six (6) months prior to the exercise of the stock option, or for such other
period of time as may be required by generally accepted accounting principles.

     With respect to payment in the form of Common Stock of the Company, the Administrator may
require advance approval or adopt such rules as it deems necessary to assure compliance with Rule
16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under
the Securities Exchange Act of 1934, if applicable.

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SECTION 9.

TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS

     Each incentive stock option granted pursuant to this Section 9 shall be evidenced by a written
stock option agreement (the “Option Agreement”). The Option Agreement shall be in such form as may
be approved from time to time by the Administrator and may vary from Participant to Participant;
provided, however, that each Participant and each Option Agreement shall comply with and be subject
to the following terms and conditions:

     (a) Number of Shares and Option Price. The Option Agreement shall state the total
number of shares covered by the incentive stock option. Except as permitted by Section 424(d) of
the Internal Revenue Code, or any successor provision, the option price per share shall not be less
than one hundred percent (100%) of the per share Fair Market Value of the Company’s Common Stock on
the date the Administrator grants the option; provided, however, that if a Participant owns stock
possessing more than ten percent (10%) of the total combined voting power of all classes of stock
of the Company or of its Parent or any Subsidiary, the option price per share of an incentive stock
option granted to such Participant shall not be less than one hundred ten percent (110%) of the per
share Fair Market Value of the Company’s Common Stock on the date of the grant of the option. The
Administrator shall have full authority and discretion in establishing the option price and shall
be fully protected in so doing.

     (b) Term and Exercisability of Incentive Stock Option. The term during which any
incentive stock option granted under the Plan may be exercised shall be established in each case by
the Administrator. In no event shall any incentive stock option be exercisable during a term of
more than ten (10) years after the date on which it is granted; provided, however, that if a
Participant owns stock possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or of its Parent or any Subsidiary, the incentive stock option
granted to such Participant shall be exercisable during a term of not more than five (5) years
after the date on which it is granted.

     The Option Agreement shall state when the incentive stock option becomes exercisable and shall
also state the maximum term during which such option may be exercised. In the event an incentive
stock option is exercisable immediately, the manner of exercise of such option in the event it is
not exercised in full immediately shall be specified in the Option Agreement. The Administrator
may accelerate the exercisability of any incentive stock option granted hereunder which is not
immediately exercisable as of the date of grant.

     (c) Nontransferability. No incentive stock option shall be transferable, in whole or
in part, by the Participant other than by will or by the laws of descent and distribution. During
the Participant’s lifetime, the incentive stock option may be exercised only by the Participant.
If the Participant shall attempt any transfer of any incentive stock option granted under the Plan
during the Participant’s lifetime, such transfer shall be void and the incentive stock option, to
the extent not fully exercised, shall terminate.

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     (d) No Rights as Shareholder. A Participant (or the Participant’s successor or
successors) shall have no rights as a shareholder with respect to any shares covered by an
incentive stock option until the date of the issuance of a stock certificate evidencing such
shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the record date is prior to
the date such stock certificate is actually issued (except as otherwise provided in Section 14 of
the Plan).

     (e) Withholding. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts necessary to satisfy any
and all withholding and employment-related taxes attributable to the Participant’s exercise of an
incentive stock option or a “disqualifying disposition” of shares acquired through the exercise of
an incentive stock option as defined in Code Section 421(b). In the event the Participant is
required under the Option Agreement to pay the Company or its Affiliate, or make arrangements
satisfactory to the Company or its Affiliate respecting payment of, such withholding and
employment-related taxes, the Administrator may, in its discretion and pursuant to such rules as it
may adopt, permit the Participant to satisfy such obligation, in whole or in part, by electing to
have the Company or its Affiliate withhold shares of Option Stock otherwise issuable to the
Participant as a result of the exercise of the incentive stock option having a Fair Market Value
equal to the minimum required tax withholding, based on the minimum statutory withholding rates for
federal and state tax purposes, including payroll taxes, that are applicable to the supplemental
income resulting from such exercise. In no event may the Company or its Affiliate withhold shares
having a Fair Market Value in excess of such statutory minimum required tax withholding. The
Participant’s election to have shares withheld for this purpose shall be made on or before the date
the incentive stock option is exercised or, if later, the date that the amount of tax to be
withheld is determined under applicable tax law. Such election shall be approved by the
Administrator and otherwise comply with such rules as the Administrator may adopt to assure
compliance with Rule 16b-3, or any successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, if applicable.

     (f) Other Provisions. The Option Agreement authorized under this Section 9 shall
contain such other provisions as the Administrator shall deem advisable. Any such Option Agreement
shall contain such limitations and restrictions upon the exercise of the Option as shall be
necessary to ensure that such Option will be considered an “incentive stock option” as defined in
Section 422 of the Internal Revenue Code or to conform to any change therein.

SECTION 10.

TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS

     Each nonqualified stock option granted pursuant to this Section 10 shall be evidenced by a
written Option Agreement. The Option Agreement shall be in such form as may be approved from time
to time by the Administrator and may vary from Participant to Participant; provided, however, that
each Participant and each Option Agreement shall comply with and be subject to the following terms
and conditions:

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     (a) Number of Shares and Option Price. The Option Agreement shall state the total
number of shares covered by the nonqualified stock option. Unless otherwise determined by the
Administrator, the option price per share shall be one hundred percent (100%) of the per share Fair
Market Value of the Company’s Common Stock on the date the Administrator grants the option.

     (b) Term and Exercisability of Nonqualified Stock Option. The term during which any
nonqualified stock option granted under the Plan may be exercised shall be established in each case
by the Administrator. The Option Agreement shall state when the nonqualified stock option becomes
exercisable and shall also state the maximum term during which such option may be exercised. In
the event a nonqualified stock option is exercisable immediately, the manner of exercise of such
option in the event it is not exercised in full immediately shall be specified in the Option
Agreement. The Administrator may accelerate the exercisability of any nonqualified stock option
granted hereunder which is not immediately exercisable as of the date of grant.

     (c) Transferability. The Administrator may, in its sole discretion, permit the
Participant to transfer any or all nonqualified stock options to any member of the Participant’s
“immediate family” as such term is defined in Rule 16a-1(e) promulgated under the Securities
Exchange Act of 1934, or any successor provision, or to one or more trusts whose beneficiaries are
members of such Participant’s “immediate family” or partnerships in which such family members are
the only partners; provided, however, that the Participant cannot receive any consideration for the
transfer and such transferred nonqualified stock option shall continue to be subject to the same
terms and conditions as were applicable to such nonqualified stock option immediately prior to its
transfer.

     (d) No Rights as Shareholder. A Participant (or the Participant’s successor or
successors) shall have no rights as a shareholder with respect to any shares covered by a
nonqualified stock option until the date of the issuance of a stock certificate evidencing such
shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the record date is prior to
the date such stock certificate is actually issued (except as otherwise provided in Section 14 of
the Plan).

     (e) Withholding. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts necessary to satisfy any
and all withholding and employment-related taxes attributable to the Participant’s exercise of a
nonqualified stock option. In the event the Participant is required under the Option Agreement to
pay the Company or its Affiliate, or make arrangements satisfactory to the Company or its Affiliate
respecting payment of, such withholding and employment-related taxes, the Administrator may, in its
discretion and pursuant to such rules as it may adopt, permit the Participant to satisfy such
obligation, in whole or in part, by electing to have the Company or its Affiliate withhold shares
of Option Stock otherwise issuable to the Participant as a result of the exercise of the
nonqualified stock option having a Fair Market Value equal to the minimum required tax withholding,
based on the minimum statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to the supplemental income resulting from such exercise. In no
event may the Company or its Affiliate withhold shares having a Fair Market Value in excess of such
statutory minimum required tax withholding. The Participant’s

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election to have shares withheld for this purpose shall be made on or before the date the
nonqualified stock option is exercised or, if later, the date that the amount of tax to be withheld
is determined under applicable tax law. Such election shall be approved by the Administrator and
otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule
16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under
the Securities Exchange Act of 1934, if applicable.

     (f) Other Provisions. The Option Agreement authorized under this Section 10 shall
contain such other provisions as the Administrator shall deem advisable.

SECTION 11.

RESTRICTED STOCK AWARDS

     Each Restricted Stock Award granted pursuant to this Section 11 shall be evidenced by a
written restricted stock agreement (the “Restricted Stock Agreement”). The Restricted Stock
Agreement shall be in such form as may be approved from time to time by the Administrator and may
vary from Participant to Participant; provided, however, that each Participant and each Restricted
Stock Agreement shall comply with and be subject to the following terms and conditions:

     (a) Number of Shares. The Restricted Stock Agreement shall state the total number of
shares of Stock covered by the Restricted Stock Award.

     (b) Risks of Forfeiture. The Restricted Stock Agreement shall set forth the risks of
forfeiture, if any, which shall apply to the shares of Stock covered by the Restricted Stock Award,
and shall specify the manner in which such risks of forfeiture shall lapse. The Administrator may,
in its sole discretion, modify the manner in which such risks of forfeiture shall lapse but only
with respect to those shares of Stock which are restricted as of the effective date of the
modification.

     (c) Issuance of Restricted Shares. The Company shall cause to be issued one or more
stock certificates representing such shares of Stock in the Participant’s name, and shall hold each
such certificate until such time as the risk of forfeiture and other transfer restrictions set
forth in the Participant’s Restricted Stock Agreement have lapsed with respect to the shares
represented by the certificate. The Company may place a legend on such certificates describing the
risks of forfeiture and other transfer restrictions set forth in the Participant’s Restricted Stock
Agreement and providing for the cancellation of such certificates if the shares of Stock subject to
the Restricted Stock Award are forfeited.

     (d) Rights as Shareholder. Until the risks of forfeiture have lapsed or the shares
subject to such Restricted Stock Award have been forfeited, the Participant shall be entitled to
vote the shares of Stock represented by such stock certificates and shall receive all dividends
attributable to such shares, but the Participant shall not have any other rights as a shareholder
with respect to such shares.

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     (e) Withholding Taxes. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts necessary to satisfy any
and all withholding and employment-related taxes attributable to the Participant’s Restricted Stock
Award. In the event the Participant is required under the Restricted Stock Agreement to pay the
Company or its Affiliate, or make arrangements satisfactory to the Company or its Affiliate
respecting payment of, such withholding and employment-related taxes, the Administrator may, in its
discretion and pursuant to such rules as it may adopt, permit the Participant to satisfy such
obligations, in whole or in part, by delivering shares of Common Stock, including shares of Stock
received pursuant to a Restricted Stock Award on which the risks of forfeiture have lapsed. Such
shares shall have a Fair Market Value equal to the minimum required tax withholding, based on the
minimum statutory withholding rates for federal and state tax purposes, including payroll taxes,
that are applicable to the supplemental income resulting from the lapsing of the risks of
forfeiture on such Restricted Stock. In no event may the Participant deliver shares having a Fair
Market Value in excess of such statutory minimum required tax withholding. The Participant’s
election to deliver shares of Common Stock for this purpose shall be made on or before the date
that the amount of tax to be withheld is determined under applicable tax law. Such election shall
be approved by the Administrator and otherwise comply with such rules as the Administrator may
adopt to assure compliance with Rule 16b-3, or any successor provision, as then in effect, of the
General Rules and Regulations under the Securities Exchange Act of 1934, if applicable.

     (f) Nontransferability. No Restricted Stock Award shall be transferable, in whole or
in part, by the Participant, other than by will or by the laws of descent and distribution, prior
to the date the risks of forfeiture described in the Restricted Stock Agreement have lapsed. If
the Participant shall attempt any transfer of any Restricted Stock Award granted under the Plan
prior to such date, such transfer shall be void and the Restricted Stock Award shall terminate.

     (g) Other Provisions. The Restricted Stock Agreement authorized under this Section 11
shall contain such other provisions as the Administrator shall deem advisable.

SECTION 12.

PERFORMANCE AWARDS

     Each Performance Award granted pursuant to this Section 12 shall be evidenced by a written
agreement (the “Performance Award Agreement”). The Performance Award Agreement shall be in such
form as may be approved from time to time by the Administrator and may vary from Participant to
Participant; provided, however, that each Participant and each Performance Award Agreement shall
comply with and be subject to the following terms and conditions:

     (a) Awards. Performance Awards in the form of Performance Units or Performance Shares
may be granted to any Participant in the Plan. Performance Units shall consist of monetary awards
which may be earned or become vested in whole or in part if the Company achieves certain goals
established by the Administrator over a specified Performance Period. Performance Shares shall
consist of shares of Stock or other Awards denominated in shares of

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Stock that may be earned or become vested in whole or in part if the Company achieves certain goals
established by the Administrator over a specified Performance Period.

     (b) Performance Goals, Performance Period and Payment. The Performance Award
Agreement shall set forth:

          (i) the number of Performance Units or Performance Shares subject to the Performance Award,
and the dollar value of each Performance Unit;

          (ii) one or more performance goals established by the Administrator based on any one, or
combination of, earnings per share, return on equity, return on assets, total shareholder return,
net operating income, cash flow, increase in revenue, economic value added, increase in share price
or cash flow return on investment, including threshold, target and maximum levels;

          (iii) the Performance Period over which Performance Units or Performance Shares may be earned
or may become vested;

          (iv) the extent to which partial achievement of the goal(s) may result in a payment or vesting
of the Performance Award, as determined by the Administrator; and

          (v) the date upon which payment of Performance Units will be made or Performance Shares will
be issued, as the case may be, and the extent to which such payment or the receipt of such Shares
may be deferred.

     (c) Regulatory Compliance. This Section 12 is intended to comply with the
performance-based compensation requirements of Section 162(m) of the Internal Revenue Code and
shall be interpreted in accordance with the rules and regulations thereunder.

     (d) Withholding Taxes. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts necessary to satisfy any
and all withholding and employment-related taxes attributable to the Participant’s Performance
Award. In the event the Participant is required under the Performance Award Agreement to pay the
Company or its Affiliate, or make arrangements satisfactory to the Company or its Affiliate
respecting payment of, such withholding and employment-related taxes, the Administrator may, in its
discretion and pursuant to such rules as it may adopt, permit the Participant to satisfy such
obligations, in whole or in part, by delivering shares of Common Stock. Such shares shall have a
Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes. In no event may the
Participant deliver shares having a Fair Market Value in excess of such statutory minimum required
tax withholding. The Participant’s election to deliver shares of Common Stock for this purpose
shall be made on or before the date that the amount of tax to be withheld is determined under
applicable tax law. Such election shall be approved by the Administrator and otherwise comply with
such rules as the Administrator may adopt to assure compliance with Rule

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16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under
the Securities Exchange Act of 1934, if applicable.

     (e) Nontransferability. No Performance Award shall be transferable, in whole or in
part, by the Participant, other than by will or by the laws of descent and distribution. If the
Participant shall attempt any transfer of any Performance Award granted under the Plan, such
transfer shall be void and the Performance Award shall terminate.

     (f) No Rights as Shareholder. A Participant (or the Participant’s successor or
successors) shall have no rights as a shareholder with respect to any shares covered by a
Performance Award until the date of the issuance of a stock certificate evidencing such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is prior to the date such
stock certificate is actually issued (except as otherwise provided in Section 14 of the Plan).

     (g) Other Provisions. The Performance Award Agreement authorized under this Section
12 shall contain such other provisions as the Administrator shall deem advisable.

SECTION 13.

STOCK APPRECIATION RIGHTS

     Each Stock Appreciation Right granted pursuant to this Section 13 shall be evidenced by a
written agreement (the “Stock Appreciation Agreement”). The Stock Appreciation Agreement shall be
in such form as may be approved from time to time by the Administrator and may vary from
Participant to Participant; provided, however, that each Participant and each Stock Appreciation
Agreement shall comply with and be subject to the following terms and conditions:

     (a) Awards. A Stock Appreciation Right shall entitle the Participant to receive, upon
exercise, cash, shares of Stock, or any combination thereof, having a value equal to the excess of
(i) the Fair Market Value of a specified number of shares of Stock on the date of such exercise,
over (ii) a specified exercise price. Unless otherwise determined by the Administrator, the
specified exercise price shall not be less than 100% of the Fair Market Value of such shares of
Stock on the date of grant of the Stock Appreciation Right. A Stock Appreciation Right may be
granted independent of or in tandem with a previously or contemporaneously granted Option.

     (b) Term and Exercisability. The term during which any Stock Appreciation Right
granted under the Plan may be exercised shall be established in each case by the Administrator.
The Stock Appreciation Agreement shall state when the Stock Appreciation Right becomes exercisable
and shall also state the maximum term during which such Stock Appreciation Right may be exercised.
In the event a Stock Appreciation Right is exercisable immediately, the manner of exercise of such
Stock Appreciation Right in the event it is not exercised in full immediately shall be specified in
the Stock Appreciation Agreement. The Administrator may accelerate the exercisability of any
Stock Appreciation Right granted hereunder which is not immediately exercisable as of the date of
grant. If a Stock Appreciation Right is granted in tandem with an

- 12 -

 

Option, Stock Appreciation Agreement shall set forth the extent to which the exercise of all or a
portion of the Stock Appreciation Right shall cancel a corresponding portion of the Option, and the
extent to which the exercise of all or a portion of the Option shall cancel a corresponding portion
of the Stock Appreciation Right.

     (c) Withholding Taxes. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts necessary to satisfy any
and all withholding and employment-related taxes attributable to the Participant’s Stock
Appreciation Right. In the event the Participant is required under the Stock Appreciation Right to
pay the Company or its Affiliate, or make arrangements satisfactory to the Company or its Affiliate
respecting payment of, such withholding and employment-related taxes, the Administrator may, in its
discretion and pursuant to such rules as it may adopt, permit the Participant to satisfy such
obligations, in whole or in part, by delivering shares of Common Stock. Such shares shall have a
Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes. In no event may the
Participant deliver shares having a Fair Market Value in excess of such statutory minimum required
tax withholding. The Participant’s election to deliver shares of Common Stock for this purpose
shall be made on or before the date that the amount of tax to be withheld is determined under
applicable tax law. Such election shall be approved by the Administrator and otherwise comply with
such rules as the Administrator may adopt to assure compliance with Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations under the Securities Exchange
Act of 1934, if applicable.

     (d) Nontransferability. No Stock Appreciation Right shall be transferable, in whole
or in part, by the Participant, other than by will or by the laws of descent and distribution. If
the Participant shall attempt any transfer of any Stock Appreciation Right granted under the Plan,
such transfer shall be void and the Stock Appreciation Right shall terminate.

     (e) No Rights as Shareholder. A Participant (or the Participant’s successor or
successors) shall have no rights as a shareholder with respect to any shares covered by a Stock
Appreciation Right until the date of the issuance of a stock certificate evidencing such shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities
or other property), distributions or other rights for which the record date is prior to the date
such stock certificate is actually issued (except as otherwise provided in Section 14 of the Plan).

     (f) Other Provisions. The Stock Appreciation Agreement authorized under this Section
13 shall contain such other provisions as the Administrator shall deem advisable, including but not
limited to any restrictions on the exercise of the Stock Appreciation Right which may be necessary
to comply with Rule 16b-3 of the Securities Exchange Act of 1934, as amended.

- 13 -

 

SECTION 14.

RECAPITALIZATION, SALE, MERGER, EXCHANGE

OR LIQUIDATION

     In the event of an increase or decrease in the number of shares of Common Stock resulting from
a subdivision or consolidation of shares, stock dividend, or stock split, the Board may, in its
sole discretion, adjust the number of shares of Stock reserved under Section 6 hereof, the number
of shares of Stock covered by each Award, and, if applicable, the price per share thereof to
reflect such change. Additional shares which may be credited pursuant to such adjustment shall be
subject to the same restrictions as are applicable to the shares with respect to which the
adjustment relates.

     Unless otherwise provided in the agreement with respect to an Award, in the event of an
acquisition of the Company through the sale of substantially all of the Company’s assets and the
consequent discontinuance of its business or through a merger, consolidation, exchange,
reorganization, reclassification, extraordinary dividend, divestiture or liquidation of the Company
(collectively referred to as a “transaction”), the Board may provide for one or more of the
following:

     (a) the equitable acceleration of the exercisability of any outstanding Options or Stock
Appreciation Rights, the vesting and payment of any Performance Awards, or the lapsing of the risks
of forfeiture on any Restricted Stock Awards;

     (b) the complete termination of this Plan, the cancellation of outstanding Options or Stock
Appreciation Rights not exercised prior to a date specified by the Board (which date shall give
Participants a reasonable period of time in which to exercise such Award prior to the effectiveness
of such transaction), the cancellation of any Performance Award and the cancellation of any
Restricted Stock Awards for which the risks of forfeiture have not lapsed;

     (c) that Participants holding outstanding Options and Stock Appreciation Rights shall receive,
with respect to each share of Stock subject to such Awards, as of the effective date of any such
transaction, cash in an amount equal to the excess of the Fair Market Value of such Stock on the
date immediately preceding the effective date of such transaction over the price per share of such
Options or Stock Appreciation Rights; provided that the Board may, in lieu of such cash payment,
distribute to such Participants shares of Common Stock of the Company or shares of stock of any
corporation succeeding the Company by reason of such transaction, such shares having a value equal
to the cash payment herein;

     (d) that Participants holding outstanding Restricted Stock Awards and Performance Share Awards
shall receive, with respect to each share of Stock subject to such Awards, as of the effective date
of any such transaction, cash in an amount equal to the Fair Market Value of such Stock on the date
immediately preceding the effective date of such transaction; provided that the Board may, in lieu
of such cash payment, distribute to such Participants shares of Common Stock of the Company or
shares of stock of any corporation succeeding the Company by reason of such transaction, such
shares having a value equal to the cash payment herein;

- 14 -

 

     (e) the continuance of the Plan with respect to the exercise of Options or Stock Appreciation
Rights which were outstanding as of the date of adoption by the Board of such plan for such
transaction and provide to Participants holding such Options and Stock Appreciation Rights the
right to exercise their respective Options or Stock Appreciation Rights as to an equivalent number
of shares of stock of the corporation succeeding the Company by reason of such transaction; and

     (f) the continuance of the Plan with respect to Restricted Stock Awards for which the risks of
forfeiture have not lapsed as of the date of adoption by the Board of such plan for such
transaction and provide to Participants holding such Awards the right to receive an equivalent
number of shares of stock of the corporation succeeding the Company by reason of such transaction.

     The Board may restrict the rights of or the applicability of this Section 14 to the extent
necessary to comply with Section 16(b) of the Securities Exchange Act of 1934, the Internal Revenue
Code or any other applicable law or regulation. The grant of an Award pursuant to the Plan shall
not limit in any way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

SECTION 15.

INVESTMENT PURPOSE

     No shares of Stock shall be issued pursuant to the Plan unless and until there has been
compliance, in the opinion of Company’s counsel, with all applicable legal requirements, including
without limitation, those relating to securities laws and stock exchange listing requirements. As
a condition to the issuance of Stock to Participant, the Administrator may require Participant to
(a) represent that the shares of Stock are being acquired for investment and not resale and to make
such other representations as the Administrator shall deem necessary or appropriate to qualify the
issuance of the shares as exempt from the Securities Act of 1933 and any other applicable
securities laws, and (b) represent that Participant shall not dispose of the shares of Stock in
violation of the Securities Act of 1933 or any other applicable securities laws.

     As a further condition to the issuance of Stock to Participant, Participant agrees to the
following:

     (a) In the event the Company advises Participant that it plans an underwritten public offering
of its Common Stock in compliance with the Securities Act of 1933, as amended, and the
underwriter(s) seek to impose restrictions under which certain shareholders may not sell or
contract to sell or grant any option to buy or otherwise dispose of part or all of their rights to
the Common Stock underlying Awards, Participant will not, for a period not to exceed 180 days from
the prospectus, sell or contract to sell or grant an option to buy or otherwise dispose of any
Award granted to Participant pursuant to the Plan or any of the underlying shares of Common Stock
without the prior written consent of the underwriter(s) or its representative(s).

- 15 -

 

     (b) In the event the Company makes any public offering of its securities and determines in its
sole discretion that it is necessary to reduce the number of issued but unexercised Options or
Stock Appreciation Rights so as to comply with any state’s securities or Blue Sky law limitations
with respect thereto, the Board shall have the right (i) to accelerate the exercisability of any
Award and the date on which such Award must be exercised, provided that the Company gives
Participant prior written notice of such acceleration, and (ii) to cancel any Awards or portions
thereof which Participant does not exercise prior to or contemporaneously with such public
offering.

     (c) In the event of a transaction (as defined in Section 14 of the Plan), Participant will
comply with Rule 145 of the Securities Act of 1933 and any other restrictions imposed under other
applicable legal or accounting principles if Participant is an “affiliate” (as defined in such
applicable legal and accounting principles) at the time of the transaction, and Participant will
execute any documents necessary to ensure compliance with such rules.

     The Company reserves the right to place a legend on any stock certificate issued upon the
exercise of an Award pursuant to the Plan to assure compliance with this Section 15.

SECTION 16.

AMENDMENT OF THE PLAN

     The Board may from time to time, insofar as permitted by law, suspend or discontinue the Plan
or revise or amend it in any respect; provided, however, that no such revision or amendment, except
as is authorized in Section 14, shall impair the terms and conditions of any Award which is
outstanding on the date of such revision or amendment to the material detriment of the Participant
without the consent of the Participant. Notwithstanding the foregoing, no such revision or
amendment shall (i) materially increase the number of shares subject to the Plan except as provided
in Section 14 hereof, (ii) change the designation of the class of employees eligible to receive
Awards, (iii) decrease the price at which Options may be granted, or (iv) materially increase the
benefits accruing to Participants under the Plan without the approval of the shareholders of the
Company if such approval is required for compliance with the requirements of any applicable law or
regulation. Furthermore, the Plan may not, without the approval of the shareholders, be amended in
any manner that will cause incentive stock options to fail to meet the requirements of Section 422
of the Internal Revenue Code.

- 16 -

 

SECTION 17.

NO OBLIGATION TO EXERCISE OPTION

     The granting of an Option or Stock Appreciation Right shall impose no obligation upon the
Participant to exercise such Option or Stock Appreciation Right. Further, the granting of any
Award hereunder shall not impose upon the Company or any Affiliate any obligation to retain the
Participant in its employ for any period.

- 17 -exv4w2

 

Exhibit 4.2

AMENDMENT NO. 1 TO RIGHTS AGREEMENT

     AMENDMENT NO. 1 TO RIGHTS AGREEMENT, dated as of May 22, 2006 (the “Amendment”),
between Pioneer Natural Resources Company, a Delaware corporation (the “Company”), and
Continental Stock Transfer & Trust Company, as rights agent (the “Rights Agent”).

     WHEREAS, the Company and the Rights Agent are parties to a Rights Agreement, dated as of July
20, 2001 (the “Rights Agreement”);

     WHEREAS, the Distribution Date (as defined in the Rights Agreement) has not occurred; and

     WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of Directors of the Company
has determined that an amendment to the Rights Agreement as set forth herein is necessary and
desirable, and the Company and the Rights Agent desire to evidence such amendment in writing.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and
other good and valuable consideration, and intending to be legally bound hereby, the Company hereby
amends the Rights Agreement as follows:

     1. Amendment of Recital. The second paragraph of the Rights Agreement is hereby amended and
restated to read, in its entirety, as follows:

     WHEREAS, the board of directors of the Company has authorized and declared a dividend
of one preferred share purchase right (a “Right”) for each Common Share (as defined
below) of the Company outstanding on July 31, 2001 (the “Record Date”), each Right
representing the right to purchase one one-thousandth of a Preferred Share (as defined
below), upon the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each share of Capital
Stock (as defined below) of the Company that shall become outstanding between the Record
Date and the earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date (as such terms are defined below).

     2. Amendment of Section 1(a). Section 1(a) of the Rights Agreement is hereby amended and
restated to read, in its entirety, as follows:

     “Acquiring Person” shall mean any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of 20% or more of
the Capital Stock of the Company then outstanding, but shall not include (i) the Company,
(ii) any Subsidiary of the Company, (iii) any employee benefit plan or employee stock
ownership plan of the Company or any Subsidiary of the Company or (iv) any entity holding
Capital Stock for or pursuant to the terms of any such plan. Notwithstanding the foregoing,
no Person shall become an “Acquiring Person” as the result of an acquisition of Capital
Stock by the Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or more of the
Capital Stock of the Company then outstanding; provided, however, that if a Person shall

 

 

become the Beneficial Owner of 20% or more of the Capital Stock of the Company then
outstanding by reason of share purchases by the Company and shall, after such share
purchases by the Company, become the Beneficial Owner of any additional Capital Stock of the
Company, then such Person shall be deemed to be an “Acquiring Person.” Notwithstanding the
foregoing, if the board of directors of the Company determines in good faith that a Person
who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing
provisions of this Section 1(a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares of Capital Stock so that such Person
would no longer be an “Acquiring Person,” as defined pursuant to the foregoing provisions of
this Section 1(a), then such Person shall not be deemed to be an “Acquiring Person” for any
purposes of this Agreement.

     3. Amendment of Section 1(e). Section 1(e) of the Rights Agreement is hereby amended and
restated to read, in its entirety, as follows:

     “Capital Stock” shall mean the Common Shares.

     4. Amendment of Section 1(i). Section 1(i) of the Rights Agreement is hereby amended and
restated to read, in its entirety, as follows:

     [Intentionally omitted.]

     5. Amendment of Section 1(l). Section 1(l) of the Rights Agreement is hereby amended and
restated to read, in its entirety, as follows:

     [Intentionally omitted.]

     6. Amendment of Section 1(m). Section 1(m) of the Rights Agreement is hereby amended and
restated to read, in its entirety, as follows:

     [Intentionally omitted.]

     7. Amendment of Section 1(q). Section 1(q) of the Rights Agreement is hereby amended and
restated to read, in its entirety, as follows:

     [Intentionally omitted.]

     8. Amendment of Section 1(s). Section 1(s) of the Rights Agreement is hereby amended and
restated to read, in its entirety, as follows:

     [Intentionally omitted.]

     9. Amendment of Section 3. Section 3 of the Rights Agreement is hereby amended and restated
to read, in its entirety, as follows:

     Issue of Right Certificates. (a) Until the earlier of (i) the tenth day after
the Shares Acquisition Date or (ii) the tenth Business Day (or such later date as may be
determined by action of the board of directors of the Company prior to such time as any
Person becomes an

2

 

Acquiring Person) after the date of commencement by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan or employee stock
ownership plan of the Company or of any Subsidiary of the Company, or any entity holding
Capital Stock for or pursuant to the terms of any such plan) of, or after the date of the
first public announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan or employee stock ownership plan of the
Company or of any Subsidiary of the Company, or any entity holding Capital Stock for or
pursuant to the terms of any such plan) to commence, a tender or exchange offer the
consummation of which would result in any Person becoming the Beneficial Owner of Capital
Stock aggregating 20% or more of the then outstanding Capital Stock (including any such date
which is after the date of this Agreement and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the “Distribution Date”), (x) the
Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the
certificates for Common Shares of the Company registered in the names of the holders thereof
(which certificates in each case shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of Capital Stock. As soon as practicable
after the Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights Agent will, if
requested, send) by first-class, insured, postage-prepaid mail, to each record holder of
Capital Stock as of the Close of Business on the Distribution Date, at the address of such
holder shown on the records of the Company, a Right Certificate, in substantially the form
of Exhibit B hereto (a “Right Certificate”), evidencing one Right for each
share of Capital Stock so held. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.

     (b) On the Record Date, or as soon as practicable thereafter, the Company will send a
copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form of
Exhibit C hereto (the “Summary of Rights”), by first-class, postage-prepaid
mail, to each record holder of Capital Stock as of the Close of Business on the Record Date,
at the address of such holder shown on the records of the Company. With respect to
certificates for Capital Stock outstanding as of the Record Date, until the Distribution
Date, the Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration Date), the
surrender for transfer of any certificate for Capital Stock outstanding on the Record Date,
with or without a copy of the Summary of Rights attached thereto, shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.

     (c) Certificates for Common Shares which become outstanding (including reacquired
Common Shares referred to in Section 3(d)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following legend:

        This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement dated as of July 20, 2001 (as amended, the
“Rights Agreement”), between Pioneer Natural Resources Company (the
“Company”) and Continental Stock Transfer & Trust Company, the terms of
which are hereby

3

 

incorporated herein by reference and a copy of which is on file at
the principal executive offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The Company will
mail to the holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. As described in the Rights Agreement,
Rights issued to any Person who becomes an Acquiring Person (as defined in the
Rights Agreement) become null and void.

     With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by such
certificates shall be evidenced by such certificates alone, and the surrender for transfer
of any such certificate shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby.

     (d) In the event that the Company purchases or acquires any Capital Stock after the
Record Date but prior to the Distribution Date, any Rights associated with such Capital
Stock shall be deemed cancelled and retired so that the Company shall not be entitled to
exercise any Rights associated with the shares of Capital Stock that are no longer
outstanding.

     10. Amendment of Section 16. Section 16 of the Rights Agreement is hereby amended and
restated to read, in its entirety, as follows:

     Agreement of Right Holders. Every holder of a Right, by accepting the same,
consents and agrees with the Company and the Rights Agent and with every other holder of a
Right that:

     (a) prior to the Distribution Date, the Rights will be transferable only in connection
with the transfer of the Capital Stock;

     (b) after the Distribution Date, the Right Certificates are transferable only on the
registry books of the Rights Agent if surrendered at the principal office of the Rights
Agent, duly endorsed or accompanied by a proper instrument of transfer; and

     (c) the Company and the Rights Agent may deem and treat the person in whose name the
Right Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificates or the
associated Common Shares certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.

     11. Amendment of Section 27 . Section 27 of the Rights Agreement is hereby amended and restated to read, in its entirety, as
follows:

     Supplements and Amendments. The Company may from time to time supplement or
amend this Agreement without the approval of any holders of Right Certificates in order to

4

 

cure any ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or to make any other provisions
with respect to the Rights which the Company may deem necessary or desirable, any such
supplement or amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that, from and after such time as any Person becomes an Acquiring
Person, this Agreement shall not be amended in any manner which would adversely affect the
interests of the holders of Rights. Without limiting the foregoing, the Company may at any
time prior to such time as any Person becomes an Acquiring Person amend this Agreement to
lower the thresholds set forth in Sections 1(a) and 3(a) hereof to not less than the greater
of (a) the sum of .001% and the largest percentage of the outstanding Capital Stock then
known by the Company to be beneficially owned by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan or employee stock ownership plan of the
Company or any Subsidiary of the Company, or any entity holding Capital Stock for or
pursuant to the terms of any such plan) and (b) 10%.

     12. Amendment of Exhibit C. The first and second paragraph of Exhibit C to the Rights
Agreement are hereby amended and restated to read, in their entirety, as follows:

     On July 19, 2001, the board of directors of Pioneer Natural Resources Company (the
“Company”) declared a dividend of one preferred share purchase right (a
“Right”) for each outstanding share of common stock, par value $0.01 per share (the
“Common Shares” or “Capital Stock”), of the Company. The dividend was paid
on July 31, 2001 (the “Record Date”) to the holders of Capital Stock of record on
that date. Each Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01
per share (the “Preferred Shares”), of the Company at a price of $95.00 per one
one-thousandth of a Preferred Share (the “Purchase Price”), subject to adjustment.
The description and terms of the Rights are set forth in a Rights Agreement dated as of July
20, 2001 (as amended, the “Rights Agreement”), between the Company and Continental
Stock Transfer & Trust Company, as Rights Agent (the “Rights Agent”).

     Until the earlier to occur of (i) the tenth business day following a public
announcement that a person has acquired beneficial ownership of 20% or more of the
outstanding Capital Stock (an “Acquiring Person”) or (ii) the tenth business day
(subject to extension) after a person commences, or announces its intention to commence, a
tender offer or exchange offer the consummation of which would result in any person becoming
the beneficial owner of the number of shares necessary to be an Acquiring Person (the
earlier of such dates being called the “Distribution Date”), the Rights will be
evidenced, with respect to any of the Common Share certificates outstanding as of the Record
Date, by such Common Share certificates with a copy of this Summary of Rights attached
thereto. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred
with and only with the Capital Stock. Until the Distribution Date (or earlier redemption or
expiration of the Rights), new Capital Stock certificates issued after the Record Date, upon
transfer or new issuance of Capital Stock will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Capital Stock, outstanding
as of the Record Date, even without such notation or a copy of this Summary of Rights being
attached thereto, will

5

 

also constitute the transfer of the Rights associated with the
Capital Stock represented by such certificate.

     13. Effectiveness. This Amendment shall be deemed effective as of the date first written
above. Except as amended hereby, the Rights Agreement shall remain in full force and effect and
shall be otherwise unaffected hereby.

     14. Severability. If any term, provision, covenant or restriction of this Amendment is held
by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

     15. Governing Law. This Amendment shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts made and to be performed entirely within such State.

     16. Counterparts. This Amendment may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.

     17. Descriptive Headings. Descriptive headings of the several Sections of this Amendment are
inserted for convenience only and shall not control or affect the meaning or construction of any of
the provisions hereof.

     18. Definitions. Capitalized terms used herein that are not defined herein shall have the
meanings given such terms in the Rights Agreement.

[Remainder of page is intentionally blank.]

6

 

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and
attested, all as of the day and year first above written.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	PIONEER NATURAL RESOURCES COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Attest:

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Mark H. Kleinman
	 	 	 	By:
	 	/s/ Mark S. Berg	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Mark H. Kleinman
	 	 	 	 	 	Mark S. Berg	 	 
	 

	 	Corporate Secretary
	 	 	 	 	 	Executive Vice President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	CONTINENTAL STOCK TRANSFER & TRUST

COMPANY, as Rights Agent	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Attest:
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Tuulikki Huovinen
	 	 	 	By:
	 	/s/ Steven G. Nelson	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name:

	 	Tuulikki Huovinen
	 	 	 	Name:
	 	 Steven G. Nelson	 	 
	Title:

	 	Assistant Secretary
	 	 	 	Title:
	 	Chairman of the Board & President	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO RIGHTS AGREEMENT]

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