Document:

exv10w5

Exhibit 10.5

PIONEER DRILLING COMPANY

AMENDED AND RESTATED

2007 INCENTIVE PLAN

(Adopted May 16, 2008)

     1. Plan. This 2007 Incentive Plan of Pioneer Drilling Company (this “Plan”) was adopted by
Pioneer Drilling Company, a Texas corporation (the “Company”), to reward certain corporate
officers, key employees, consultants and directors of the Company or its Subsidiaries by enabling
them to acquire shares of common stock of the Company and/or through the provision of cash
payments.

     2. Objectives. This Plan is designed to attract and retain officers, key employees and
consultants of the Company and its Subsidiaries, to attract and retain qualified directors of the
Company, to encourage the sense of proprietorship of such officers, employees, consultants and
directors and to stimulate the active interest of such persons in the development and financial
success of the Company and its Subsidiaries. These objectives are to be accomplished by making
Awards under this Plan and thereby providing Participants with a proprietary interest in the growth
and performance of the Company and its Subsidiaries.

     3. Definitions. As used herein, the terms set forth below shall have the following respective
meanings:

     “Authorized Officer” means the Chairman of the Board or the Chief Executive Officer of the
Company (or any other senior officer of the Company to whom either of them shall delegate the
authority to execute any Award Agreement).

     “Award” means the grant of any Option, SAR, Stock Award, Performance Award or Cash Award,
whether granted singly, in combination or in tandem, to a Participant pursuant to such applicable
terms, conditions and limitations as the Committee may establish in accordance with the objectives
of the Plan.

     “Award Agreement” means any written agreement between the Company and a Participant setting
forth the terms, conditions and limitations applicable to an Award.

     “Board” means the Board of Directors of the Company.

     “Cash Award” means an award denominated in cash.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     “Committee” means the Compensation Committee of the Board or such other committee of the Board
as may be designated by the Board to administer the Plan.

     “Common Stock” means the Common Stock, par value $0.10 per share, of the Company.

 

 

     “Director” means an individual serving as a member of the Board.

     “Dividend Equivalents” means, with respect to shares of Restricted Stock or Restricted Stock
Units, with respect to which shares are to be issued at the end of the Restriction Period, an
amount equal to all dividends and other distributions (or the economic equivalent thereof) that are
payable to shareholders of record during the Restriction Period on a like number of shares of
Common Stock.

     “Employee” means an employee of the Company or any of its Subsidiaries and an individual who
has agreed to become an employee of the Company or any of its Subsidiaries and actually becomes
such an employee within the following six months.

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

     “Fair Market Value” of a share of Common Stock means, as of a particular date, (i) if shares
of Common Stock are listed on a national securities exchange, the closing sales price per share of
Common Stock on the consolidated transaction reporting system for the principal national securities
exchange on which shares of Common Stock are listed on that date, or, if there shall have been no
such sales reported on that date, on the last preceding date on which such a sale was so reported,
(ii) if the Common Stock is not so listed, the mean between the closing bid and asked price on that
date, or, if there are no such prices available for such date, on the last preceding date on which
such prices shall be available, as reported by the National Quotation Bureau Incorporated, or (iii)
if shares of Common Stock are not publicly traded, the most recent value determined by an
independent appraiser appointed by the Company for such purpose.

     “Incentive Option” means an Option that is intended to comply with the requirements set forth
in Section 422 of the Code.

     “Option” means a right to purchase a specified number of shares of Common Stock at a specified
price.

     “Nonqualified Option” means an Option that is not intended to comply with the requirements set
forth in Section 422 of the Code.

     “Participant” means an Employee, consultant or Director to whom an Award has been made under
this Plan.

     “Performance Award” means an award made pursuant to this Plan to a Participant who is an
Employee, which Award is subject to the attainment of one or more Performance Goals. Performance
Awards may be Stock Awards or Cash Awards.

     “Performance Goal” means a standard established by the Committee, to determine in whole or in
part whether a Performance Award shall be earned.

     “Restricted Stock” means any Common Stock that is restricted or subject to forfeiture
provisions.

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     “Restricted Stock Unit” means a unit evidencing the right to receive one share of Common Stock
or equivalent value (as determined by the Committee) that is restricted or subject to forfeiture
provisions.

     “Restriction Period” means a period of time beginning as of the date upon which an Award of
Restricted Stock or Restricted Stock Units is made pursuant to this Plan and ending as of the date
upon which the Common Stock subject to such Award is issued (if not previously issued), no longer
restricted or subject to forfeiture provisions.

     “SAR” means a right to receive a payment, in cash or Common Stock, equal to the excess of the
Fair Market Value or other specified valuation of a specified number of shares of Common Stock on
the date the right is exercised over a specified strike price, in each case, as determined by the
Committee.

     “Stock Award” means an award in the form of shares of Common Stock or units denominated in
shares of Common Stock.

     “Subsidiary” means (i) in the case of a corporation, any corporation of which the Company
directly or indirectly owns shares representing 50% or more of the combined voting power of the
shares of all classes or series of capital stock of such corporation which have the right to vote
generally on matters submitted to a vote of the shareholders of such corporation and (ii) in the
case of a partnership or other business entity not organized as a corporation, any such business
entity of which the Company directly or indirectly owns 50% or more of the voting, capital or
profits interests (whether in the form of partnership interests, membership interests or
otherwise).

     4. Eligibility.

     (a) Employees. Employees eligible for Awards under this Plan are: (i) the officers of
the Company; and (ii) those other employees who hold positions of responsibility and whose
performance, in the judgment of the Committee, can have a significant effect on the success
of the Company and its Subsidiaries.

     (b) Consultants. Consultants eligible for Awards under this Plan are those consultants
to the Company or Subsidiaries whose performance, in the judgment of the Committee, can have
or have had a significant effect on the success of the Company and its Subsidiaries.

     (c) Directors. Directors eligible for Awards under this Plan, in their capacities as
Directors, are those who are not employees of the Company or any of its Subsidiaries
(“Nonemployee Directors”).

     5. Common Stock Available for Awards. Subject to the provisions of paragraph 15 hereof, there
shall be available for Awards under this Plan granted wholly or partly in Common Stock (including
rights or options that may be exercised for or settled in Common Stock) an aggregate of 3,000,000
shares of Common Stock. In the discretion of the Committee, all 3,000,000 shares of Common Stock
may be granted as Incentive Options. No more than 1,000,000 shares of Common Stock shall be
available under this Plan for Awards other than

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Options or SARs. Additionally, the number of shares of Common Stock that are the subject of
Awards under this Plan, that are cancelled, forfeited, terminated or expire unexercised, shall
again immediately become available for Awards hereunder. The number of shares reserved for
issuance under the Plan shall be reduced only to the extent that shares of Common Stock are
actually issued in connection with the exercise or settlement of an Award; provided, however, that
the number of shares reserved for issuance shall be reduced by the total number of Options or SARs
exercised. The number of shares reserved for issuance under the Plan shall not be increased by (i)
any shares tendered or Award surrendered in connection with the purchase of shares upon the
exercise of an Option as described in paragraph 11 or (ii) any shares deducted from an Award
payment in connection with the Company’s tax withholding obligations as described in paragraph 12.
The Committee may from time to time adopt and observe such procedures concerning the counting of
shares against the Plan maximum as it may deem appropriate. The Committee and the appropriate
officers of the Company shall be authorized to, from time to time, take all such actions as any of
them may determine are necessary or appropriate to file any documents with governmental
authorities, stock exchanges and transaction reporting systems as may be required to ensure that
shares of Common Stock are available for issuance pursuant to Awards.

     6. Administration.

     (a) Authority of the Committee. This Plan shall be administered by the Committee.
Subject to the provisions hereof, the Committee shall have full and exclusive power and
authority to administer this Plan and to take all actions that are specifically contemplated
hereby or are necessary or appropriate in connection with the administration hereof. The
Committee shall also have full and exclusive power to interpret this Plan and to adopt such
rules, regulations and guidelines for carrying out this Plan as it may deem necessary or
proper, all of which powers shall be exercised in the best interests of the Company and in
keeping with the objectives of this Plan. Subject to paragraph 6(c) hereof, the Committee
may, in its discretion, provide for the extension of the exercisability of an Award,
accelerate the vesting or exercisability of an Award, eliminate or make less restrictive any
restrictions contained in an Award, waive any restriction or other provision of this Plan or
an Award or otherwise amend or modify an Award in any manner that is (i) not adverse to the
Participant to whom such Award was granted, (ii) consented to by such Participant or
(iii) authorized by paragraph 15(c) hereof; provided, however, that no such action shall
permit the term of any Option to be greater than ten years from the applicable grant date.
The Committee may make an Award to an individual who it expects to become an employee of the
Company or any of its Subsidiaries within the next six months, with such Award being subject
to the individual’s actually becoming an employee within such time period, and subject to
such other terms and conditions as may be established by the Committee. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in this Plan or in
any Award in the manner and to the extent the Committee deems necessary or desirable to
further the Plan purposes. Any decision of the Committee in the interpretation and
administration of this Plan shall lie within its sole and absolute discretion and shall be
final, conclusive and binding on all parties concerned.

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     (b) Limitation of Liability. No member of the Committee or officer of the Company to
whom the Committee has delegated authority in accordance with the provisions of paragraph 7
of this Plan shall be liable for anything done or omitted to be done by him or her, by any
member of the Committee or by any officer of the Company in connection with the performance
of any duties under this Plan, except for his or her own willful misconduct or as expressly
provided by statute.

     (c) Repricing and Other Limitations. No Award may be repriced, replaced, regranted
through cancellation or modified without shareholder approval (except in connection with a
change in the Company’s capitalization), if the effect would be to reduce the exercise price
for the shares underlying such Award. No Award may be modified or extended in a manner that
would cause the Award to be subject to, or result in a violation of, Section 409A of the
Code.

     7. Delegation of Authority. The Committee may delegate to the Chief Executive Officer and to
other senior officers of the Company its duties under this Plan pursuant to such conditions or
limitations as the Committee may establish.

     8. Awards. (a) The Committee shall determine the type or types of Awards to be made under
this Plan and shall designate from time to time the Participants who are to be the recipients of
such Awards. Each Award shall be embodied in an Award Agreement, which shall contain such terms,
conditions and limitations as shall be determined by the Committee in its sole discretion and shall
be signed by the Participant to whom the Award is made and by an Authorized Officer for and on
behalf of the Company. Awards may consist of those listed in this paragraph 8(a) and may be
granted singly, in combination or in tandem. Awards may also be made in combination or in tandem
with, in replacement of, or as alternatives to, grants or rights under this Plan or any other plan
of the Company or any of its Subsidiaries, including the plan of any acquired entity; provided
that, except as contemplated in paragraph 15 hereof, no Option may be issued in exchange for the
cancellation of an Option with a higher exercise price nor may the exercise price of any Option be
reduced. All or part of an Award may be subject to conditions established by the Committee, which
may include, but are not limited to, continuous service with the Company and its Subsidiaries,
achievement of specific business objectives, increases in specified indices, attainment of
specified growth rates and other comparable measurements of performance. Upon the termination of
employment by a Participant who is an Employee, any unexercised, deferred, unvested or unpaid
Awards shall be treated as set forth in the applicable Award Agreement.

     (i) Option. An Award may be in the form of an Option. An Option awarded pursuant to
this Plan may consist of an Incentive Option or a Nonqualified Option. Incentive Options
may not be awarded to Nonemployee Directors. The price at which shares of Common Stock may
be purchased upon the exercise of an Option shall be not less than the Fair Market Value of
the Common Stock on the date of grant. The term of an Option shall not exceed ten years
from the date of grant. Subject to the foregoing provisions, the terms, conditions and
limitations applicable to any Options awarded pursuant to this Plan, including the term of
any Options and the date or dates upon which they become exercisable, shall be determined by
the Committee.

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     (ii) Stock Appreciation Right. An Award may be in the form of an SAR. The strike
price for an SAR shall not be less than the Fair Market Value of the Common Stock on the
date on which the SAR is granted. The term of an SAR shall not exceed ten years from the
date of grant. Subject to the foregoing limitations, the terms, conditions and limitations
applicable to any SARs awarded pursuant to this Plan, including the term of any SARs and the
date or dates upon which they become exercisable, shall be determined by the Committee.

     (iii) Stock Award. An Award may be in the form of a Stock Award. Subject to the Plan,
the vesting and other terms, conditions and limitations applicable to any Stock Awards
granted pursuant to this Plan shall be determined by the Committee, acting in its
discretion.

     (iv) Cash Award. An Award may be in the form of a Cash Award. The terms, conditions
and limitations applicable to any Cash Awards granted pursuant to this Plan shall be
determined by the Committee.

     (v) Performance Award. Without limiting the type or number of Awards that may be made
under the other provisions of this Plan, an Award may be in the form of a Performance Award.
Subject to the Plan, the terms, conditions and limitations applicable to any Performance
Awards granted to Participants pursuant to this Plan shall be determined by the Committee,
acting in its discretion. The Committee shall set Performance Goals in its discretion
which, depending on the extent to which they are met, will determine the value and/or amount
of Performance Awards that will be paid out to the Participant and/or the portion of an
Award that may be exercised.

          (A) Nonqualified Performance Awards. Performance Awards granted to Employees or
Nonemployee Directors that are not intended to qualify as qualified performance-based
compensation under Section 162(m) of the Code shall be based on achievement of such
Performance Goals and be subject to such terms, conditions and restrictions as the Committee
or its delegate shall determine.

          (B) Qualified Performance Awards. Performance Awards granted to Employees under the
Plan that are intended to qualify as qualified performance-based compensation under Section
162(m) of the Code shall be paid, vested or otherwise deliverable solely on account of the
attainment of one or more pre-established, objective Performance Goals established by the
Committee in accordance with Section 162(m) of the Code prior to the earlier to occur of
(x) 90 days after the commencement of the period of service to which the Performance Goal
relates and (y) the lapse of 25% of the period of service (as scheduled in good faith at the
time the goal is established), and in any event while the outcome is substantially
uncertain. A Performance Goal is objective if a third party having knowledge of the
relevant facts could determine whether the goal is met. Such a Performance Goal may be
based on one or more business criteria that apply to the Employee, one or more business
units, divisions or sectors of the Company, or the Company as a whole, and if so desired by
the Committee, by comparison with a peer group of companies. A Performance Goal may include
one or more of the following:

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	 	•	 	increased revenue;
	 
	 	•	 	net income measures (including but not limited to income after
capital costs and income before or after taxes);
	 
	 	•	 	stock price measures (including but not limited to growth measures
and total shareholder return);
	 
	 	•	 	price per share of Common Stock;
	 
	 	•	 	market share;
	 
	 	•	 	net earnings;
	 
	 	•	 	earnings per share (actual or targeted growth);
	 
	 	•	 	earnings before interest, taxes, depreciation, and amortization
(“EBITDA”);
	 
	 	•	 	earnings before interest, taxes and amortization (“EBITA”);
	 
	 	•	 	economic value added (or an equivalent metric);
	 
	 	•	 	market value added;
	 
	 	•	 	debt to equity ratio;
	 
	 	•	 	cash flow measures (including but not limited to cash flow per
share, cash flow return on capital, cash flow return on tangible
capital, net cash flow, net cash flow before financing activities and
improvement in or attainment of working capital levels);
	 
	 	•	 	return measures (including but not limited to return on equity,
return on average assets, return on capital, risk-adjusted return on
capital, return on investors’ capital and return on average equity);
	 
	 	•	 	operating measures (including operating income, funds from
operations, cash from operations, after-tax operating income; net
operating profit after tax, revenue volumes, operating efficiency, rig
fleet day rates and rig fleet utilization);
	 
	 	•	 	expense measures (including but not limited to overhead cost,
general and administrative expense and improvement in or attainment of
expense levels);
	 
	 	•	 	margins;
	 
	 	•	 	shareholder value;

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	 	•	 	proceeds from dispositions;
	 
	 	•	 	total market value;
	 
	 	•	 	reliability;
	 
	 	•	 	productivity;
	 
	 	•	 	corporate values measures (including ethics compliance,
environmental, and safety) and
	 
	 	•	 	debt reduction.

Unless otherwise stated, such a Performance Goal need not be based upon an
increase or positive result under a particular business criterion and could
include, for example, maintaining the status quo, performance relative to a
peer group determined by the Committee or limiting economic losses
(measured, in each case, by reference to specific business criteria). In
interpreting Plan provisions applicable to Performance Goals and Qualified
Performance Awards, it is the intent of the Plan to conform with the
standards of Section 162(m) of the Code and Treasury Regulation
§1.162-27(e)(2)(i), as to grants to those Employees whose compensation is,
or is likely to be, subject to Section 162(m) of the Code, and the Committee
in establishing such goals and interpreting the Plan shall be guided by such
provisions. Prior to the payment of any compensation based on the
achievement of Performance Goals applicable to Qualified Performance Awards,
the Committee must certify in writing that applicable Performance Goals and
any of the material terms thereof were, in fact, satisfied. Subject to the
foregoing provisions, the terms, conditions and limitations applicable to
any Qualified Performance Awards made pursuant to this Plan shall be
determined by the Committee.

     (b) Notwithstanding anything to the contrary contained in this Plan, the following
limitations shall apply to any Awards made hereunder:

     (i) no Participant may be granted, during any one-year period, Awards
consisting of Options or SARs that are exercisable for more than 400,000 shares of
Common Stock;

     (ii) no Participant may be granted, during any one-year period, Stock Awards
covering or relating to more than 200,000 shares of Common Stock (the limitation set
forth in this clause (ii), together with the limitation set forth in clause (i)
above, being hereinafter collectively referred to as the “Stock-based Awards
Limitations”); and

     (iii) no Participant may be granted Awards consisting of cash or in any other
form permitted under this Plan (other than Awards consisting of Options or

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SARs or otherwise consisting of shares of Common Stock or units denominated in
such shares) in respect of any one-year period having a value determined on the date
of grant in excess of $3,000,000.

     9. (Intentionally left blank.)

     10. Award Payment; Dividends; Substitution.

     (a) General. Payment of Awards may be made in the form of cash or Common Stock, or a
combination thereof, and may include such restrictions as the Committee shall determine,
including, in the case of Common Stock, restrictions on transfer and forfeiture provisions.
If payment of an Award is made in the form of Restricted Stock, the applicable Award
Agreement relating to such shares shall specify whether they are to be issued at the
beginning or end of the Restriction Period. In the event that shares of Restricted Stock
are to be issued at the beginning of the Restriction Period, the certificates evidencing
such shares (to the extent that such shares are so evidenced) shall contain appropriate
legends and restrictions that describe the terms and conditions of the restrictions
applicable thereto. In the event that shares of Restricted Stock are to be issued at the
end of the Restricted Period, the right to receive such shares shall be evidenced by book
entry registration or in such other manner as the Committee may determine.

     (b) Deferral. With the approval of the Committee, amounts payable in respect of Awards
may be deferred and paid either in the form of installments or as a lump-sum payment;
provided, however, that if deferral is permitted, each provision of the Award shall be
interpreted to permit the deferral only as allowed in compliance with the requirements of
Section 409A of the Code and any provision that would conflict with such requirements shall
not be valid or enforceable. The Committee intends that any Awards under the Plan satisfy
the applicable requirements of Section 409A of the Code to avoid imposition of applicable
taxes thereunder. The Committee may permit selected Participants to elect to defer payments
of some or all types of Awards in accordance with procedures established by the Committee.
Any deferred payment of an Award, whether elected by the Participant or specified by the
Award Agreement or by the Committee, may be forfeited if and to the extent that the Award
Agreement so provides.

     (c) Dividends and Interest. Rights to dividends or Dividend Equivalents may be
extended to and made part of any Award consisting of shares of Common Stock or units
denominated in shares of Common Stock, subject to such terms, conditions and restrictions as
the Committee may establish. The Committee may also establish rules and procedures for the
crediting of interest on deferred cash payments and Dividend Equivalents for Awards
consisting of shares of Common Stock or units denominated in shares of Common Stock.

     11. Stock Option Exercise. The price at which shares of Common Stock may be purchased under
an Option shall be paid in full at the time of exercise in cash or, if permitted by the Committee,
the Participant may purchase such shares by means of tendering Common Stock valued at Fair Market
Value on the date of exercise, or any combination thereof. The Committee

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shall determine acceptable methods for Participants to tender Common Stock; provided that any
Common Stock that was the subject of an Award may be so tendered only if it has been held by the
Participant for at least six months. The Committee may provide for procedures to permit the
exercise or purchase of such Awards by use of the proceeds to be received from the sale of Common
Stock issuable pursuant to an Award.

     12. Taxes. The Company shall have the right to deduct applicable taxes from any Award payment
and withhold, at the time of delivery or vesting of cash or shares of Common Stock under this Plan,
an appropriate amount of cash or number of shares of Common Stock or a combination thereof for
payment of taxes required by law or to take, or cause the Participant to take, such other action as
may be necessary in the opinion of the Company to satisfy all obligations for withholding of such
taxes. The Committee may also permit withholding to be satisfied by the transfer to the Company of
shares of Common Stock theretofore owned by the holder of the Award with respect to which
withholding is required. If shares of Common Stock are used to satisfy tax withholding, such
shares shall be valued based on the Fair Market Value when the tax withholding is required to be
made.

     13. Amendment, Modification, Suspension or Termination. The Board may amend, modify, suspend
or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements
or for any other purpose permitted by law, except that (i) no amendment or alteration that would
adversely affect the rights of any Participant under any Award previously granted to such
Participant shall be made without the consent of such Participant and (ii) no amendment or
alteration shall be effective prior to its approval by the shareholders of the Company to the
extent shareholder approval is otherwise required by applicable legal requirements.

     14. Assignability. Unless otherwise determined by the Committee in the Award Agreement, no
Award or any other benefit under this Plan shall be assignable or otherwise transferable, except
upon the Participant’s death to a beneficiary designated by the Participant in a manner acceptable
to the Committee, or, if no beneficiary has been duly designated or no duly designated beneficiary
shall survive the Participant, pursuant to the Participant’s Will or the laws of descent and
distribution. Any attempted assignment of an Award or any other benefit under this Plan in
violation of this paragraph 14 shall be null and void.

     15. Adjustments.

     (a) The existence of outstanding Awards shall not affect in any manner the right or
power of the Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the capital stock of the Company or
its business or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock (whether or not such issue is prior to, on a
parity with or junior to the Common Stock) or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any other corporate
act or proceeding of any kind, whether or not of a character similar to that of the acts or
proceedings enumerated above.

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     (b) In the event of any subdivision, consolidation of outstanding shares of Common
Stock, declaration of a dividend payable in shares of Common Stock or other stock split, any
other recapitalization or capital reorganization of the Company, any consolidation or merger
of the Company with another corporation or entity, the adoption by the Company of any plan
of exchange affecting the Common Stock or any distribution to holders of Common Stock of
securities or property (other than normal cash dividends or dividends payable in Common
Stock), then (i) the number of shares of Common Stock reserved under this Plan, (ii) the
number of shares of Common Stock covered by outstanding Awards in the form of Common Stock
or units denominated in Common Stock, (iii) the exercise or other price in respect of such
Awards, and (iv) the Stock-based Award Limitations described in paragraph 8(b) hereof shall
each be proportionately adjusted to the extent and in the manner the Board, in its
discretion, deems appropriate or necessary to reflect such transaction; provided that such
adjustments shall only be such as are necessary to maintain the proportionate interest of
the holders of the Awards and preserve, without exceeding, the value of such Awards.

     (c) In the event of a corporate merger, consolidation, sale or other disposition of
stock or assets, acquisition of property or stock, separation, reorganization or
liquidation, the Board may make such adjustments to Awards or other provisions for the
disposition of Awards as it deems equitable, and shall be authorized, in its discretion,
(i) to provide for the substitution of a new Award or other arrangement (which, if
applicable, may be exercisable for such property or stock as the Board determines) for an
Award or the assumption of the Award, regardless of whether in a transaction to which
Section 424(a) of the Code applies, (ii) to provide, prior to the transaction, for the
acceleration of the vesting and exercisability of, or lapse of restrictions with respect to,
the Award and, if the transaction is a cash merger, provide for the termination of any
portion of the Award that remains unexercised at the time of such transaction or (iii) to
provide for the acceleration of the vesting and exercisability of an Award and the
cancellation thereof in exchange for such payment as shall be mutually agreeable to the
Participant and the Board.

     16. Restrictions. No Common Stock or other form of payment shall be issued with respect to
any Award unless the Company shall be satisfied based on the advice of its counsel that such
issuance will be in compliance with applicable federal and state securities laws. Certificates
evidencing shares of Common Stock delivered under this Plan (to the extent that such shares are so
evidenced) may be subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other requirements of the Securities and Exchange
Commission, any securities exchange or transaction reporting system upon which the Common Stock is
then listed or to which it is admitted for quotation and any applicable federal or state securities
law. The Committee may cause a legend or legends to be placed upon such certificates (if any) to
make appropriate reference to such restrictions.

     17. Unfunded Plan. Insofar as it provides for Awards of cash, Common Stock or rights thereto,
this Plan shall be unfunded. Although bookkeeping accounts may be established with respect to
Participants who are entitled to cash, Common Stock or rights thereto under this Plan, any such
accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets that may at any time be represented by cash,

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Common Stock or rights thereto, nor shall this Plan be construed as providing for such
segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any
cash, Common Stock or rights thereto to be granted under this Plan. Any liability or obligation of
the Company to any Participant with respect to an Award of cash, Common Stock or rights thereto
under this Plan shall be based solely upon any contractual obligations that may be created by this
Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to
be secured by any pledge or other encumbrance on any property of the Company. Neither the Company
nor the Board nor the Committee shall be required to give any security or bond for the performance
of any obligation that may be created by this Plan.

     18. Section 409A of the Code. Notwithstanding anything in this Plan to the contrary, if any
Plan provision or Award under the Plan would result in the imposition of an applicable tax under
Section 409A of the Code and related regulations and Treasury pronouncements, that Plan provision
or Award will be reformed to avoid imposition of the applicable tax and no such action shall be
deemed to adversely affect the Participant’s rights to an Award.

     19. Governing Law. This Plan and all determinations made and actions taken pursuant hereto,
to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of
the United States, shall be governed by and construed in accordance with the laws of the State of
Texas.

     20. No Right to Employment or Directorship. Nothing in the Plan or an Award Agreement shall
interfere with or limit in any way the right of the Company or a Subsidiary to terminate any
Participant’s employment or other service relationship at any time, nor confer upon any Participant
any right to continue in the capacity in which he or she is employed or otherwise serves the
Company or any Subsidiary. Further, nothing in the Plan or an Award Agreement constitutes any
assurance or obligation of the Board to nominate any Director for re-election by the Company’s
shareholders.

     21. Successors. All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.

     22. Effectiveness. This Plan shall be effective upon the approval by the holders of a
majority of shares of votes entitled to vote on the approval of this Plan and who vote for or
against or expressly abstain from voting with respect to the approval of this Plan at the 2007
annual meeting of the Company’s shareholders to be held on August 3, 2007 or any adjournment or
postponement thereof. If the shareholders of the Company should fail to so approve this Plan prior
to such date, this Plan shall terminate and cease to be of any further force or effect, and all
grants of Awards hereunder shall be null and void. Notwithstanding the foregoing, the Plan shall
continue in effect for a term of ten years after the date on which the shareholders of the Company
approve the Plan, unless sooner terminated by action of the Board.

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     IN WITNESS WHEREOF, Pioneer Drilling Company has caused this Plan to be executed by its duly
authorized officer, effective as provided herein.

	 	 	 	 	 
	 	PIONEER DRILLING COMPANY

 	 
	 	By:  	 	 
	 	 	Joyce M. Schuldt 	 
	 	 	Corporate Secretary 	 
	 

-13-exv10w1

Exhibit 10.1

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) dated June 11, 2008, is made by and between
Sourcefire, Inc., a Delaware corporation (the “Company”), and John C. Burris (the “Executive”).

          Whereas, the Company desires to employ the Executive, and the Executive is willing to
serve in the employ of the Company upon the terms and conditions provided in this Agreement; and

          Whereas, the Executive and the Company desire to enter into this Agreement effective
as of July 14, 2008 (the “Effective Date”).

          Now Therefore, in consideration of the promises and mutual covenants herein and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive agree as follows:

     1. Term of Employment. Subject to the provisions of Section 8 of this Agreement,
Executive shall be employed by the Company for the period commencing on the Effective Date and
continuing for an indefinite term (such period, the “Employment Term”) on the terms and subject to
the conditions set forth in this Agreement.

     2. Position.

          2.1 During the Employment Term, Executive shall serve as the Company’s Chief Executive Officer
and a member of the Board of Directors of the Company (the “Board”). In such position, Executive
shall have such duties and authority as shall be determined from time to time by the Board.
Executive shall continue to serve as a member of the Board without additional compensation for so
long as he remains the Chief Executive Officer of the Company.

          2.2 During the Employment Term, Executive will devote Executive’s full business time and
reasonable best efforts to the performance of Executive’s duties hereunder and will not engage in
any other business, profession or occupation for compensation or otherwise which would conflict or
interfere with the rendition of such services either directly or indirectly, without the prior
written consent of the Board; provided that nothing herein shall preclude Executive (i)
subject to the prior approval of the Board, from accepting appointment to or from continuing to
serve on any board of directors or trustees of any business corporation or any charitable
organization, (ii) managing his personal investments and affairs or (iii) continuing to serve in
his current capacity as a member of the board of directors of Artifact Software; provided
in each case, and in the aggregate, that such activities do not conflict or interfere with the
performance of Executive’s duties hereunder or conflict with Section 9 of this Agreement.

     3. Base Salary. During the Employment Term, the Company shall pay Executive a base
salary at the annual rate of $400,000, payable in regular installments in accordance with the
Company’s usual payment practices. Executive shall be entitled to such increases (but not
decreases) in Executive’s base salary, if any, as may be determined on an annual basis in the sole
discretion of the Board. Executive’s annual base salary, as in effect from time to time, is
hereinafter referred to as the “Base Salary.”

 

 

     4. Bonus Opportunity. With respect to each full fiscal year during the Employment Term
Executive shall be eligible to earn an annual performance bonus of up to 100% of Executive’s Base
Salary (the “Target Bonus”) under the Company’s Annual Executive Incentive Plan (“AIP”), though at
the sole discretion of the Company’s Compensation Committee Executive may be entitled to an annual
performance bonus in excess of the Target Bonus pursuant to the AIP. Any bonuses awarded under the
AIP shall be payable at the time and in the manner specified in the AIP. A copy of the 2008
Executive Annual Incentive Plan and the Executive’s AIP Participation Agreement for 2008 is
attached as Exhibit A hereto. Executive will also be paid a one-time signing bonus of
$25,000 payable in accordance with the Company’s ordinary payroll practices.

     5. Equity Arrangements.

          5.1 Subject to the approval of the Compensation Committee of the Board (the “Compensation
Committee”), Executive shall be awarded an initial grant of 495,000 options to purchase shares of
Common Stock of the Company (the “Initial Time-Based Option Grant”), subject to the vesting
schedule and the other terms and conditions set forth in a stock option agreement between Executive
and the Company in the form substantially similar to Exhibit B1 attached hereto. The
Initial Time-Based Option Grant shall vest 25% on the one-year anniversary of the Effective Date
and 1/48 monthly thereafter.

          5.2 Subject to the approval of the Compensation Committee, Executive shall be awarded an
initial grant of 99,924 options to purchase shares of Common Stock of the Company (the “Initial
Performance-Based Option Grant”), subject to the vesting schedule and the other terms and
conditions set forth in a stock option agreement between Executive and the Company in the form
substantially similar to Exhibit B2 attached hereto. The Initial Performance-Based Option
Grant stock option agreement shall provide for vesting based upon the trading value of the
Company’s Common Stock.

          5.3 Subject to the approval of the Compensation Committee, Executive shall be awarded an
initial grant of 50,000 shares of restricted Common Stock of the Company at a per share purchase
price of $0.001 (the “Initial Time-Based Restricted Stock Award” and, together with the Initial
Time-Based Option Grant and the Initial Performance-Based Option Grant, the “Initial Awards”),
subject to the vesting schedule, repurchase right and the other terms and conditions set forth in a
restricted stock agreement between Executive and the Company in the form substantially similar to
Exhibit B3 attached hereto. The Initial Time-Based Restricted Stock Award restricted stock
agreement will provide that the percentage of the restricted stock that the Company will be
entitled to repurchase shall begin at 100 percent and decrease by 25 percent after one (1) year
from the Effective Date, with a subsequent decrease by 25 percent each anniversary thereafter, such
that the right of repurchase shall be reduced to zero percent by the fourth anniversary of the
Effective Date. Executive’s current equity award of 27,538 shares for Executive’s service on the
Board is not affected by the Initial Awards.

          5.4 Beginning with the Fiscal Year 2010 compensation cycle, during the Employment Term,
Executive shall be entitled to participate in the Company’s equity arrangements as in effect from
time to time on the same basis as those equity arrangements are generally made available to other
senior executives of the Company.

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     6. Employee Benefits.

          6.1 During the Employment Term, Executive shall be entitled to participate in the Company’s
employee benefit plans as in effect from time to time (collectively “Employee Benefits”), on the
same basis as those benefits are generally made available to other senior executives of the
Company. Executive shall be eligible to accrue up to 20 days of paid time off (“PTO”) per calendar
year, pro-rated for partial years of service, in accordance with the Company’s policy on PTO
accrual and use applicable to senior executives. In addition, Executive shall be entitled to
receive the Company-paid supplemental death benefits set forth in Exhibit C. The Company
further agrees to take commercially reasonable efforts to increase Executive’s coverage under the
Company’s long-term disability plan, directly or through the use of a supplemental policy, to a non
taxable monthly benefit of $28,000, provided, however, that the premium for such coverage does not
exceed an amount five times the amount of the Company’s current premium.

          6.2 Executive shall use his commercially reasonable efforts to relocate and establish his
principal residence within sixty (60) miles of the Company’s headquarters located at 9770 Patuxent
Woods Drive, Columbia, Maryland 21046, as soon as reasonably practicable, provided,
however, that if Executive is unable to sell his current principal residence within three (3)
months of the Effective Date without incurring a substantial loss, upon approval by the
Compensation Committee the Company shall provide to the Executive, at the Company’s expense, a
short-term corporate apartment until he is able to sell his residence, for a period up to one (1)
year. The Company shall provide to Executive a payment of up to 50% of the Selling Cost of
Executive’s current principal residence, not to exceed $100,000 (the “Selling Cost Payment”). The
Selling Cost Payment vests monthly over a four-year period. If, during the four-year vesting
period, Executive terminates his employment without Good Reason (as defined below) or if Executive
is terminated for Cause (as defined below), Executive shall reimburse the Company the amount of the
unvested portion of the Selling Cost Payment. For purposes of this Agreement, “Selling Cost” shall
mean the actual and necessary selling costs which may include brokerage commission, title
insurance, escrow fees, prepayment penalties, taxes, charges and fees fixed by a local authority to
consummate the sale of the residence and customary miscellaneous seller’s costs.

          6.3 The Company shall also provide an additional $60,000 payment to off-set Executive’s
anticipated costs in relocating his principal residence (the “Relocation Payment”); provided,
however, that any taxes payable with respect to the Relocation Payment shall be the
responsibility of Executive.

     7. Business Expenses. During the Employment Term, reasonable business expenses
incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the
Company in accordance with Company policies and practices applicable to senior executives.

     8. Termination. The Employment Term and Executive’s employment hereunder may be
terminated by either party at any time and for any reason. Executive’s rights upon termination of
employment with the Company and its affiliates shall be governed by the Agreement.

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          8.1 By the Company For Cause, By Executive’s Resignation Without Good Reason or Upon Death
or Disability.

               (a) The Employment Term and Executive’s employment hereunder may be terminated by the Company
for Cause (as defined below) or as a result of Executive’s Disability (as defined below), and shall
terminate automatically upon Executive’s death or his resignation without Good Reason (as defined
below).

               (b) If Executive’s employment is terminated by the Company for Cause, or as a result of
Executive’s Disability or death, or if Executive resigns without Good Reason (as defined below),
Executive shall be entitled to receive:

                    (i) the Base Salary through the date of termination;

                    (ii) an amount representing any accrued, but unused PTO;

                    (iii) any Target Bonus earned, but unpaid, as of the date of termination for the immediately
preceding fiscal period, payable in accordance with the applicable AIP Participation Agreement;

                    (iv) reimbursement for any unreimbursed business expenses properly incurred by Executive, in
each case, in accordance with Company policy on or prior to the date of Executive’s termination;
provided claims for such reimbursement (accompanied by appropriate supporting
documentation) are submitted to the Company within 90 days following the date of Executive’s
termination of employment; and

                    (v) such Employee Benefits, if any, as to which Executive may be entitled under the employee
benefit plans of the Company (the amounts described in clauses 8.1(b)(i) through (v) hereof,
reduced by any amounts owed to the Company by Executive, being referred to as the “Accrued
Rights”).

Following such termination of Executive’s employment by the Company for Cause, or on account of
Executive’s Disability, upon Executive’s death, or by Executive without Good Reason, Executive
shall have no further rights to any compensation or any other benefits under this Agreement except
as set forth in this Section 8.1.

          8.2 By the Company Without Cause or Resignation by Executive for Good Reason.

               (a) The Employment Term and Executive’s employment hereunder may be terminated by the Company
without Cause or by Executive’s resignation for Good Reason.

               (b) If Executive’s employment is terminated by the Company without Cause (and other than by
reason of death or Disability) or if Executive resigns for Good Reason, in either case other than
in the one month period prior to, or the 13 month period following a Change in Control (as defined
below), Executive shall be entitled to receive:

                    (i) the Accrued Rights; and

-4-

 

                    (ii) subject to Executive’s (x) delivery of a valid and irrevocable general release of all
claims against the Company and its affiliates, substantially in the form attached hereto as
Exhibit D, as may be modified to take into account any changes in law or the underlying
circumstances (the “General Release”), and (y) continued compliance, in all material respects, with
the restrictive covenants set forth in Sections 9 and 10 below):

                         (A) continued payment of the Base Salary in accordance with the Company’s normal payroll
practices for a period of 12 months following the date of such termination; and

                         (B) (i) subject to Executive’s continued co-payment of premiums in the same amount as
Executive paid immediately prior to termination, continued participation (to the extent permitted
under applicable law and the terms of such plan) for Executive and his then-eligible dependents in
the Company’s group health plan in which they were participating at the time of termination for the
first 12 months following termination at the Company’s expense, or if such coverage is not
permitted by the terms of the Company’s group health plan as in effect at the relevant time,
continuation coverage under the Consolidated Budget Omnibus Reconciliation Act of 1985, as amended
(“COBRA”) and any state or local law of similar effect, at the same out-of-pocket cost to the
Executive as would have otherwise been applicable, for a period of 12 months, and (ii) following
such 12 month period the right to continuation coverage under COBRA and any state or local law of
similar effect;

                         (C) the unvested stock options under the Initial Time-Based Option Grant shall accelerate and
become vested; by twenty-five percent (25%) of the total shares originally under the Initial
Time-Based Option Grant; and

                         (D) the unvested restricted stock under the Initial Time-Based Restricted Stock Award shall
accelerate and become vested by twenty-five percent (25%) of the total shares originally under the
Initial Time-Based Restricted Stock Award.

The aggregate amount described in this Section 8.2 shall be reduced by the present value of any
other severance or termination benefits payable to Executive under any other plans, programs or
arrangements of the Company or its affiliates. Following Executive’s termination of employment by
the Company without Cause (other than by reason of Executive’s death or Disability) or by
Executive’s resignation for Good Reason, except as set forth in this Section 8.2, Executive shall
have no further rights to any compensation or any other benefits under this Agreement.

          8.3 By the Company Without Cause or Resignation by Executive for Good Reason in Connection
With a Change in Control.

               (a) The Employment Term and Executive’s employment hereunder may be terminated by the Company
without Cause or by Executive’s resignation for Good Reason, in either case within one month prior
to, or within 13 months following, the consummation of a Change in Control.

               (b) If Executive’s employment is terminated by the Company without Cause (and other than by
reason of death or Disability) or if Executive resigns for Good Reason,

-5-

 

in either case in the one month period prior to or the 13 month period following the
consummation of a Change in Control, Executive shall be entitled to receive:

                    (i) the Accrued Rights; and

                    (ii) subject to Executive’s (i) delivery of a valid and irrevocable General Release in the
form attached hereto as Exhibit D, and (ii) continued compliance, in all material respects,
with the restrictive covenants set forth in Sections 9 and 10 below:

                         (A) a single cash payment equal to Executive’s annual Base Salary and Target Bonus amount;

                         (B) (i) subject to Executive’s continued co-payment of premiums in the same amount as
Executive paid immediately prior to termination, continued participation (to the extent permitted
under applicable law and the terms of such plan) for Executive and his then-eligible dependents in
the Company’s group health plan in which they were participating at the time of termination for the
first 12 months following termination at the Company’s expense, or if such coverage is not
permitted by the terms of the Company’s group health plan as in effect at the relevant time,
continuation coverage under the Consolidated Budget Omnibus Reconciliation Act of 1985, as amended
(“COBRA”) and any state or local law of similar effect, at the same out-of-pocket cost to the
Executive as would have otherwise been applicable, for a period of 12 months, and (ii) following
such 12 month period the right to continuation coverage under COBRA and any state or local law of
similar effect;

                         (C) the unvested stock options under the Initial Time-Based Option Grant shall accelerate and
become fully vested; and

                         (D) the unvested restricted stock under the Initial Time-Based Restricted Stock Award shall
accelerate and become fully vested.

The aggregate amount described in this Section 8.3 shall be reduced by the present value of any
other severance or termination benefits payable to Executive under any other plans, programs or
arrangements of the Company or its affiliates. Following Executive’s termination of employment by
the Company without Cause (other than by reason of Executive’s death or Disability) or by
Executive’s resignation for Good Reason, except as set forth in this Section 8.3, Executive shall
have no further rights to any compensation or any other benefits under this Agreement.

          8.4 Definitions.

               (a) For purposes of this Agreement, “Cause” shall mean (i) theft, fraud, material dishonesty
or gross negligence in the conduct of the Company’s business, (ii) continuing neglect of the
Executive’s duties and responsibilities that has a material adverse effect on the Company, (iii)
engaging in personal conduct that would constitute grounds for liability for sexual harassment or
discrimination (as proscribed by the U.S. Equal Employment Opportunity Commission Guidelines or any
other applicable state or local regulatory body), (iv) conviction of, or plea of guilty or nolo
contendere to, a felony (other than a violation of traffic or motor vehicle laws), or (v) willful
and continued material breach by the Executive of his or her

-6-

 

“Assignment of Inventions, Non-Disclosure, Non-Solicitation and Non-Competition Agreement” or
of any other employment-related agreements (including, without limitation, any employment agreement
or offer letter) between the Executive and the Company that has a material adverse effect on the
Company; provided, however, that for purposes of the Plan, any purported termination of the
Executive’s employment shall be presumed to be other than for Cause, unless (A) the Company first
provides written notice to the Executive which includes a copy of a resolution duly adopted by the
Board at a meeting of the Board called and held for the purpose of considering such termination
which finds “Cause” to exist and specifies the particulars of such conduct, and (B) the Executive
has been provided a period of at least thirty (30) days after receipt of the Company’s notice
during which to cure, rescind or otherwise remedy the actions, events, or circumstances described
in the Company’s notice to the extent they are based on clauses (ii), (iii) or (v) above.

               (b) For purposes of this Agreement, “Disabled” or “Disability” shall have the meaning set
forth in the Company’s long-term disability plan applicable to senior executives.

               (c) For purposes of this Agreement, “Good Reason” shall mean (i) a material decrease in the
Executive’s Base Salary, (ii) a material reduction or material adverse change in the Executive’s
authority, duties, title or, job responsibilities, or reporting structure, (iii) a geographic
relocation of the Executive without his or her consent more than thirty (30) miles from the current
location of his or her office as of the date hereof), or (iv) a willful and continued material
breach by the Company of this Agreement or the “Assignment of Inventions, Non-Disclosure,
Non-Solicitation and Non-Competition Agreement” that has a material adverse effect on the
Executive; provided, however, that any proposed termination of employment by the Executive shall be
presumed to be other than for Good Reason, unless the Executive first provides written notice to
the Company within ninety (90) days following the effective date of such event, and the Company has
been provided a period of at least thirty (30) days after receipt of the Executive’s notice during
which to cure, rescind or otherwise remedy the actions, events, or circumstances described in such
notice. The Executive’s termination of employment shall not be considered to be for Good Reason
unless it occurs no more than one hundred and twenty (120) days following the initial occurrence of
the purported Good Reason event(s) as described above.

               (d) For purposes of this Agreement, “Change in Control” shall mean (A) the direct or indirect
acquisition by any person or related group of persons (other than an acquisition from or by the
Company or by a Company sponsored employee benefit plan or by a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company) of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act)) of securities possessing more than fifty percent (50%) of the total combined voting power of
the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the
Company’s stockholders which a majority of the Continuing Directors who are not Affiliates or
Associates of the offeror do not recommend such stockholders accept; (B) a change in the
composition of the Board over a period of twelve (12) months or less such that a majority of the
Board members (rounded up to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who are Continuing Directors; (C) a
merger or consolidation in which the Company is not the surviving entity, except for a transaction
the principal purpose of which

-7-

 

is to change the state in which the Company is incorporated; (D) the sale, transfer or other
disposition of all or substantially all of the assets of the Company; (E) the complete liquidation
or dissolution of the Company; (F) any reverse merger or series of related transactions culminating
in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in
which the Company is the surviving entity but (i) the shares of the Company’s common stock
outstanding immediately prior to such merger are converted or exchanged by virtue of the merger
into other property, whether in the form of securities, cash or otherwise, or (ii) in which
securities possessing more than fifty percent (50%) of the total combined voting power of the
Company’s outstanding securities are transferred to a person or persons different from those who
held such securities immediately prior to such merger or the initial transaction culminating in
such merger, and excluding any such transaction or series of related transactions that the Company
determines shall not be a Change in Control; or (G) acquisition in a single or series of related
transactions by any person or related group of persons (other than the Company or by a
Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3
of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined
voting power of the Company’s outstanding securities. As used herein, “Continuing Directors” means
members of the Board who either (i) have been Board members continuously for a period of at least
twelve (12) months or (ii) have been Board members for less than twelve (12) months and were
elected or nominated for election as Board members by at least a majority of the Board members
described in clause (i) who were still in office at the time such election or nomination was
approved by the Board. As used herein, “Affiliate” and “Associate” shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. Notwithstanding
the foregoing, no payment of amounts subject to Section 409A of the Internal Revenue Code of 1986,
as amended (the “Code’) shall be triggered by any Change of Control that does not constitute a
“change in the ownership or effective control, or in the ownership of a substantial portion of the
assets,” each as defined in Section 409A of the Code and its related Treasury regulations.

          8.5 No Mitigation or Offset. The amount of any payment or benefit provided for in
Section 8 shall not be reduced, offset or subject to recovery by the Company or any of its
subsidiaries or affiliates by reason of any compensation earned by Executive as the result of
employment by another employer after Executive’s employment with the Company terminates for any
reason. In addition, Executive shall be under no obligation to seek other employment or to take any
other actions to mitigate the amounts payable under Section 8.

          8.6 Section 4999

               (a) In the event of a Change in Control, or other event constituting a change in the ownership
or effective control of the Company or ownership of a substantial portion of the assets of the
Company described in Section 280G(b)(2)(A)(i) of the Code, the Company, at its sole expense, shall
cause its independent auditors promptly to review all payments, accelerations, distributions and
benefits that have been made to or provided to, and are to be made, or may be made, to or provided
to, the Executive under this Agreement, and any other agreement or plan benefiting the Executive
(collectively the “Original Payments”), to determine the applicability of Section 4999 of the Code
to the Executive in connection with such event (other than under this Section 8.6(a)). If the
Company’s independent auditors determine that the Original Payments are subject to excise taxes
under Section 4999 of the Code (the “Excise Tax”), then:

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                    (i) If (A) the aggregate Original Payments exceed an amount (the “Parachute Threshold”) equal
to two hundred ninety nine percent (299%) of the Executive’s “base amount,” as defined in Section
280G(b)(3) of the Code, and (B) such excess is equal to four and six-tenths percent (4.6%) of the
Parachute Threshold or less, the Original Payments shall be reduced to an aggregate amount that is
two hundred ninety-nine percent (299%) of the Executive’s “base amount”; or

                    (ii) If (A) the aggregate Original Payments exceed the Parachute Threshold, and (B) such
excess is equal to more than four and six-tenths percent (4.6%) of the Parachute Threshold, then an
additional amount shall be paid to the Executive (the “Gross-Up Amount”) such that the net proceeds
of the Gross-Up Amount to the Executive, after deduction of the Excise Tax (including interest and
penalties) and any federal, state and local income taxes and employment taxes (including interest
and penalties) upon the Gross-Up Amount, shall be equal to the Excise Tax on the Original Payments.

               (b) The Company’s independent auditors will perform the calculations in conformity with the
foregoing provisions and will provide the Executive with a copy of their calculations. The intent
of the parties is that, except as set forth in Section 8.6(a)(i), the Company shall be solely
responsible for, and shall pay, any Excise Tax on the Original Payments and Gross-Up Amount and any
income and employment taxes (including, without limitation, penalties and interest) imposed on any
Gross-Up Amount payable hereunder.

               (c) If no determination by the Company’s independent auditors is made prior to the time the
Executive is required to file a tax return reflecting Excise Taxes on any portion of the Original
Payments, the Executive will be entitled to receive a Gross-Up Amount calculated on the basis of
the Excise Tax that the Executive reports in such tax return, within thirty (30) days after the
filing of such tax return. The Executive agrees that, for the purposes of the foregoing sentence,
the Executive is not required to file a tax return until the Executive has obtained the maximum
number and length of filing extensions available, and Executive shall have provided a copy of the
relevant portions of such tax return to the Company not less than ten (10) days prior to filing
such tax return. If, subsequent to the Executive’s filing of such tax return but within one
hundred eighty (180) days thereafter, the Company’s independent auditors determine that the
aggregate Original Payments should be reduced pursuant to Section 8.6(a)(i), the Executive shall
reimburse the Company the amount of such reduction, promptly file an amended tax return reflecting
such reduction, and promptly take any steps reasonably required to obtain a refund of any Excise
Tax paid with respect to the Original Payments.

               (d) If any tax authority finally determines that a greater Excise Tax should be imposed upon
the Original Payments or the Gross-Up Amount than is determined by the Company’s independent
auditors or reflected in the Executive’s tax returns, the Executive shall be entitled to receive an
additional Gross-Up Amount calculated on the basis of the additional amount of Excise Tax
determined to be payable by such tax authority (including related penalties and interest) from the
Company within thirty (30) days after such determination. The Executive shall cooperate with the
Company as it may reasonably request to permit the Company (at its sole expense) to contest the
determination of such taxing authority in order to minimize the amount payable under this Section
8.6.

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               (e) If any tax authority finally determines the Excise Tax payable by the Executive to be less
than the amount taken into account hereunder in calculating the Gross-Up Amount, the Executive
shall repay to the Company, within thirty (30) days after the Executive’s receipt of a tax refund
resulting from that determination, to the extent of such refund, the portion of the Gross-Up Amount
attributable to such reduction (including the refunded portion of Gross-Up Amount attributable to
the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up
Amount being repaid, less any additional income tax resulting from receipt of such refund).

               (f) Notwithstanding the foregoing, if on the date of the Executive’s termination, the
Executive is a “specified employee” within the meaning of Section 409A of the Code and any Original
Payments are made on account of the Executive’s termination of employment, any Gross-Up Amount that
would otherwise be due under this Section 8.6 and that would constitute deferred compensation
within the first six (6) months following the Executive’s termination of employment shall instead
be subject to the six (6) month delay to the extent required by Section 11.8 below.

               (g) The Executive’s receipt of a Gross-Up Amount for Excise Tax due in one taxable year shall
not affect the Executive’s eligibility for a Gross-Up Amount for Excise Tax due in another taxable
year. The Executive’s rights under this Section 8.6 are not subject to liquidation or exchange for
another benefit.

          8.7 Board/Committee Resignation. Upon termination of Executive’s employment for any
reason, Executive agrees to resign, as of the date of such termination and to the extent
applicable, from all positions he holds with the Company or its affiliates, including any position
on the Board (and any committees thereof).

     9. Proprietary Information, Inventions, and Non-Competition Agreement. As a condition
to his employment with the Company, Executive shall execute and comply with the Company’s Employee
Proprietary Information, Inventions, and Non-Competition Agreement, in the form attached hereto as
Exhibit E.

     10. Specific Performance. Executive acknowledges and agrees that the Company’s
remedies at law for a breach or threatened breach of any of the provisions of Section 9 or the
Employee Proprietary Information, Inventions, and Non-Competition Agreement would be inadequate and
the Company would suffer irreparable damages as a result of such breach or threatened breach. In
recognition of this fact, Executive agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the Company, without posting any bond, shall be
entitled to cease making any payments or providing any benefit otherwise required by this Agreement
and obtain equitable relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may then be available.

     11. Miscellaneous.

          11.1 Governing Law; Jurisdiction. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to conflicts of laws
principles thereof. Any and all disputes between the parties which may arise pursuant to

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this Agreement shall be heard and determined before an appropriate state or federal court
serving Howard County, Maryland. The parties acknowledge that such courts have jurisdiction to
interpret and enforce the provisions of this Agreement, and the parties consent to, and waive any
and all objections that they may have as to, personal jurisdiction and/or venue in such courts.

          11.2 Expenses. In the event of any dispute between the Company and Executive as to
the interpretation, terms, validity or enforceability of (including any dispute about the amount of
any payment pursuant to) this Agreement, the prevailing party shall be entitled to recover from the
non-prevailing party any and all of such prevailing party’s costs and expenses incurred in
connection with any such dispute, including reasonable attorneys’ fees.

          11.3 Entire Agreement; Amendments. This Agreement, together with the Exhibits hereto,
contains the entire understanding of the parties with respect to the employment of Executive by the
Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings
between the parties with respect to the subject matter herein other than those expressly set forth
herein. This Agreement may not be altered, modified, or amended except by written instrument signed
by the parties hereto.

          11.4 No Waiver. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive
such party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.

          11.5 Severability. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.

          11.6 Assignment. This Agreement and all of Executive’s rights and duties hereunder,
shall not be assignable or delegable by Executive; except to the extent permitted by the Company in
writing. Any purported assignment or delegation by Executive in violation of the foregoing shall be
null and void ab initio and of no force and effect. This Agreement may be assigned by the Company
to a person or entity which is a successor in interest to substantially all of the business
operations of the Company. Upon such assignment, the rights and obligations of the Company
hereunder shall become the rights and obligations of such successor person or entity.

          11.7 Set Off. The Company’s obligation to pay Executive the amounts provided for in
Section 8 hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by
Executive to the Company or its affiliates.

          11.8 Compliance with IRC Section 409A. Notwithstanding any other provision of this
Agreement whatsoever, the Company shall have the right, after consulting with and securing the
approval of Executive, to provide for the application and effects of Section 409A of the Code
(relating to deferred compensation arrangements) and any related regulatory or administrative
guidance issued by the Internal Revenue Service such that the severance and other benefits provided
under this Agreement shall not trigger the additional tax, interest, and any related penalties
imposed by Section 409A(l)(B) of the Code. Further, if at the time of

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Executive’s termination of employment with the Company Executive is a “specified employee” as
defined in Section 409A of the Code and the deferral of the commencement of any payments or
benefits otherwise payable hereunder as a result of such termination of employment is necessary in
order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company
will defer the commencement of the payment of any such payments or benefits hereunder (without any
reduction in such payments or benefits ultimately paid or provided to Executive) until the date
that is six months following Executive’s termination of employment with the Company (or the
earliest date as is permitted under Section 409A of the Code without the imposition of any
accelerated or additional tax). The Company shall consult with Executive in good faith regarding
the implementation of the provisions of this Section 11.8; provided that neither the Company nor
any of its employees or representatives shall have any liability to Executive with respect to
thereto.

          11.9 Successors; Binding Agreement. This Agreement shall inure to the benefit of and
be binding upon personal or legal representatives, executors, administrators, successors, assigns,
agents, affiliates, heirs, distributees, devisees and legatees. The Company shall require any
successor to all or substantially all of the assets or business of the Company to agree to assume
the Agreement.

          11.10 Notice. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or overnight courier or three days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the respective addresses
set forth below in this Agreement, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.

          If to the Company:

          Sourcefire, Inc.

          9770 Patuxent Woods Drive

          Columbia, Maryland 21046

          Attention: General Counsel

          If to Executive:

               To the most recent address of Executive set forth in the personnel records of
the Company.

          11.11 Executive Representation. Executive hereby represents to the Company that the
execution and delivery of this Agreement by Executive and the performance by Executive of
Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms
of any employment agreement or other agreement or policy to which Executive is a party or otherwise
bound.

          11.12 Prior Agreements. This Agreement supersedes all prior agreements and
understandings (including verbal agreements) between Executive and the Company and/or its

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affiliates regarding the terms and conditions of Executive’s employment with the Company
and/or its affiliates.

          11.13 Cooperation. Executive shall provide Executive’s reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or proceeding) which
relates to events occurring during Executive’s employment hereunder; provided that the Company
reimburses Executive for any costs or expenses reasonably incurred in connection with such
cooperation. This provision shall survive any termination of this Agreement.

          11.14 Withholding Taxes. The Company may withhold from any amounts payable under this
Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation, including, without limitation, any payments pursuant to Section 6
above.

          11.15 Legal Fees. The Company shall reimburse Executive for all reasonable legal fees
and costs incurred in connection with the negotiation and initial execution of this Agreement, its
exhibits and attachments, and any other agreements contemplated hereby.

          11.16 Counterparts. This Agreement may be signed in counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.

          11.17 Dispute Resolution. Any dispute, difference, controversy or claim arising in
connection with or related or incidental to, or question occurring under, this Agreement or the
subject matter hereof shall be finally settled under the Commercial Arbitration Rules (the “Rules”)
of the American Arbitration Association (“AAA”), unless otherwise agreed, by an arbitral tribunal
composed of one (1) arbitrator. The arbitrator shall be a neutral arbitrator and subject to Rule
19 of the Rules. The arbitrator shall not have the authority to add to, detract from, or modify
any provision hereof. A decision by the arbitrator shall be final, conclusive and binding. The
arbitrator shall deliver a written and reasoned award with respect to the dispute to each of the
parties, who shall promptly act in accordance therewith. Any arbitration proceeding shall be held
in Howard County, Maryland. Any decision as to the scope and nature of Executive’s duties shall be
made by the Board, in its sole discretion, and shall not be subject to dispute resolution.

[Signatures appear on following page.]

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     In Witness Whereof, the parties hereto have duly executed this Agreement as of the
day and year first above written.

	 	 	 	 	 
	 	SOURCEFIRE, INC.

 	 
	 	By:  	/s/ Todd P. Headley          6/11/08
 	 
	 	 	Name:  	Todd P. Headley 	 
	 	 	Title:  	Chief Financial Officer and Treasurer 	 
	 
	 	 	 
	 	                                              /s/ John C. Burris          6/11/08
 	 
	 	John C. Burris 	 
	 	 	 
	 

 

 

EXHIBIT C

SOURCEFIRE, INC.

DEATH BENEFITS

As provided in Section 6.1 of the Agreement, promptly following the date hereof, the Company, after
consulting with and securing the approval of Executive, shall adopt an arrangement (the
“Arrangement”) providing for death insurance benefits in an amount equal to five (5) times
Executive’s annual compensation as reported on the Form W-2 issued to Executive from time to time
by the Company but excluding any amounts attributable to equity compensation awards (the
“Benefits”). The costs of providing the Benefits shall be borne by the Company; provided,
however, that Executive shall be responsible for any applicable taxes associated with the provision
of the Benefits.

In the event of Executive’s death during the Employment Term, the Arrangement shall provide for the
payment of the Benefits, less an amount equal to the premiums paid by the Company to maintain the
Benefits, to Executive’s estate. If Executive’s employment with the Company terminates prior to
Executive’s Retirement (as defined below) for any reason other than his death, no Benefits shall be
payable to Executive; for purposes of the Agreement, Executive’s Retirement shall mean his
termination of employment with the Company on or after attaining age sixty five (65). Following
Executive’s termination of employment for any reason, he shall be entitled to purchase any
insurance policy through which the Benefits are provided for its then-current cash surrender value.

The parties agree to cooperate to structure the Arrangement in a manner intended to minimize the
tax effects associated with the provision of the Benefits; provided, however, that the Company
makes no undertaking that the Arrangement will, in fact, result in any particular tax treatment for
the Benefits.

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