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Exhibit 4.2    
    

        EXECUTION
COPY 

 
 

REGISTRATION RIGHTS AGREEMENT    
    

        THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of July 12, 2006, by and between Ellora Energy Inc., a Delaware corporation (the "Company"), Yorktown Energy Partners V,
L.P. ("Yorktown V"), Yorktown Energy Partners VI, L.P. ("Yorktown VI"; Yorktown V and Yorktown VI
collectively are referred to herein as "Yorktown"), and the participating stockholders who have executed this Agreement on the signature pages hereto or
who are listed on Schedule I ("Participating Stockholders"). 

W I T N E S S E T H:

        WHEREAS, the Company, Yorktown, and the Participating Stockholders entered into that certain Voting and Stockholders' Agreement dated as
of June 7, 2002, as amended and supplemented ("EEI Stockholders' Agreement"); 

        WHEREAS,
Ellora Oil & Gas, Inc. ("EOGI"), Yorktown, and the Participating Stockholders entered into that certain Voting and
Stockholders' Agreement dated as of April 28, 2005, as amended and supplement ("EOGI Stockholders' Agreement"; collectively, the EEI
Stockholders' Agreement and the EOGI Stockholders' Agreement are referred to herein as, "Stockholders' Agreement") 

        WHEREAS, the Company and certain existing stockholders of the Company are participating in a private placement of certain shares of the
Company's common stock, par value $0.001 per share (the "Common Stock"), in connection with which on July 12, 2006, the Company sold or placed
2,500,000 newly issued shares and the existing stockholders sold 9,900,000 shares, of the Common Stock (and
reserved an additional 1,860,000 shares to cover additional allotments, if any) of the Common Stock (the "Private Placement"); 

        WHEREAS, prior to the Private Placement, the Company and EOGI merged together with the Company being the survivor; 

        WHEREAS, the initial purchaser and placement agent of the Private Placement has requested that Yorktown and the Participating Stockholders
agree to terminate the Stockholders' Agreement in connection with the Private Placement; 

        WHEREAS, the execution of this Agreement is a condition to terminating the Stockholders' Agreement. 

        NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereto, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 

1.    Definitions.    Unless otherwise defined herein, as used in this Agreement, the following terms shall have the following
meanings: 

        "Affiliate" means, as to any specified Person, (i) any Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the specified Person, (ii) any executive officer, director, trustee or general partner of the specified Person and
(iii) any legal entity for which the specified Person acts as an executive officer, director, trustee or general partner. For purposes of this definition, "control" (including the correlative
meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly, or indirectly through one or more intermediaries, of the
power to direct or cause the direction of the management and policies of such Person, whether by contract, through the ownership of voting securities, partnership interests or other equity interests
or otherwise. 

        "Agreement" is defined in the introductory paragraph of this Agreement. 

 

        "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New
York are authorized or obligated by applicable law, regulation or executive order to close. 

        "Commission" means the Securities and Exchange Commission. 

        "Common Stock" is defined in the recitals of this Agreement. 

        "Company" is defined in the introductory paragraph of this Agreement, and includes any successor thereto. 

        "Controlling Person" is defined in Section 6(a). 

        "End of Suspension Notice" is defined in Section 5(b). 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission pursuant
thereto. 

        "Free Writing Prospectus" means a free writing prospectus, as defined in Rule 405 under the Securities Act. 

        "Holder" means any owner of Registrable Shares as defined under this Agreement. 

        "Indemnified Party" is defined in Section 6(c). 

        "Indemnifying Party" is defined in Section 6(c). 

        "IPO Registration Statement" is defined in Section 7. 

        "Issuer Free Writing Prospectus" means an issuer free writing prospectus, as defined in Rule 433 under the Securities Act. 

        "Liabilities" is defined in Section 6(a). 

        "Lock-Up Period" is defined in Section 7

        "Mandatory Shelf Registration Statement" is defined in  Section 2(a). 

        "NASD" means the National Association of Securities Dealers, Inc. 

        "No Objections Letter" is defined in Section 4(t). 

        "Participating Stockholders" is defined in the introductory paragraph of this Agreement. 

        "Permitted Assigns" means the partners of Yorktown V or Yorktown VI, respectively, that receive or are proposed to receive a distribution
of Registrable Shares under the terms of any partnership agreement of Yorktown V or Yorktown VI. 

        "Permitted Free Writing Prospectus" is defined in Section 4. 

        "Person" means an individual, limited liability company, partnership, corporation, trust, unincorporated organization, government or
agency or political subdivision thereof, or any other legal entity. 

        "Piggyback Registration Statement" is defined in Section 2(b). 

        "Private Placement" is defined in the recitals to this Agreement. 

        "Private Placement Holders Registration Rights Agreement" means that certain registration rights agreement of even date herewith between
the Company and certain investors receiving shares of Common Stock in the Private Placement. 

2

 

        "Prospectus" means the prospectus included in any Registration Statement, including any preliminary prospectus, and all other amendments
and supplements to any such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference, if any, in such
prospectus. 

        "Purchaser Indemnitee" is defined in Section 6(a). 

        "Registrable Shares" means the shares of Common Stock held by Yorktown, or its Permitted Assigns, and the Participating Stockholders,
severally, as of the date of this Agreement and as set forth opposite such stockholders' name on Schedule I hereto and any shares or other
securities issued in respect of such Registrable Shares because of or in connection with any stock dividend, stock distribution, stock split, purchase in any rights offering or in connection with any
exchange for or replacement of such Registrable Shares or any combination of shares, recapitalization, merger or consolidation, or any other equity securities issued pursuant to any other pro rata
distribution with respect to the Common Stock, until, with respect to a Registrable Share, the earliest to occur of: 

        (i)    the
date on which it has been sold pursuant to a Registration Statement or sold pursuant to Rule 144; 

        (ii)   the
date on which it is saleable, in the opinion of counsel to the Company, without registration under the Securities Act, pursuant to Rule 144(k); 

        (iii)  the
date on which it is saleable, without restriction, pursuant to an available exemption from registration under the Securities Act; or 

        (iv)  the
date on which it is sold to the Company or its subsidiaries. 

        "Registration Expenses" means any and all expenses incident to the performance of or compliance with this Agreement, including:
(i) all Commission, securities exchange, NASD registration, listing, inclusion
and filing fees, (ii) all fees and expenses incurred in connection with compliance with international, federal or state securities or blue sky laws (including any registration, listing and
filing fees and reasonable fees and disbursements of counsel in connection with blue sky qualification of any of the Registrable Shares and the preparation of a blue sky memorandum and compliance with
the rules of the NASD), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, duplicating, printing, delivering and distributing any Registration Statement,
any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements, certificates and any other documents relating to the performance under and compliance
with this Agreement, (iv) all fees and expenses incurred in connection with the listing or inclusion of any of the Registrable Shares on the New York Stock Exchange, the American Stock Exchange
or The NASDAQ Stock Market pursuant to Section 4(n), (v) the fees and disbursements of counsel for the Company and of the independent
public accountants of the Company (including the expenses of any special audit and "cold comfort" letters required by or incident to such performance) and (vi) any fees and disbursements
customarily paid in issues and sales of securities (including the fees and expenses of any experts retained by the Company in connection with any Registration Statement),  provided, however, that
Registration Expenses shall exclude brokers' or underwriters' discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of Registrable Shares by a Holder and the fees and disbursements of any counsel to the Holders other than as provided for in clause (v) above. 

        "Registration Statement" means any Mandatory Shelf Registration Statement, Piggyback Registration Statement, or S-3
Registration Statement. 

        "Rule 144", "Rule 158",
"Rule 415", or "Rule 424", respectively, means such specified rule promulgated by the
Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission as a replacement thereto having
substantially the same effect as such rule. 

3

 

        "S-3 Registration Statement" is defined in Section 2(b)(ii). 

        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission thereunder. 

        "Shares" means the shares of Common Stock. 

        "Suspension Event" is defined in Section 5(b). 

        "Suspension Notice" is defined in Section 5(b). 

        "Underwritten Offering" means a sale of securities of the Company to an underwriter or underwriters for reoffering to the public. 

        "Yorktown" is defined in the introductory paragraph of this Agreement and shall include any Permitted Assigns, such that the rights or
obligations conferred hereunder to Yorktown shall be deemed to be conferred to the Permitted Assigns, as applicable. 

2.     Registration Rights. 

        (a)    Registration Rights Applicable to Yorktown Only.    At any time after the date hereof, Yorktown an may demand
that the Company file with the Commission a shelf registration statement on Form S-1 or such other form under the Securities Act then available to the Company providing for the
resale pursuant to Rule 415 from time to time by Yorktown (including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement, the
"Mandatory Shelf Registration Statement"). If the Company has an effective Mandatory Shelf Registration Statement on Form S-1 under
the Securities Act and becomes eligible to use Form S-3 or such other short-form registration statement form under the Securities Act, the Company shall promptly give
notice of such eligibility to Yorktown and may, or at the request of Yorktown, shall promptly convert such Mandatory Shelf Registration Statement on Form S-1 to a registration
statement on Form S-3 or such other short-form registration statement by means of a post-effective amendment or otherwise, unless Yorktown notifies the
Company within 10 Business Days of receipt of the Company notice that such conversion would interfere with its distribution of Registrable Shares already in progress and provides a reasonable
explanation therefor, in which case the Company will delay the conversion of the Mandatory Shelf Registration Statement for a reasonable time after receipt of the first such notice, not to exceed
30 days in the aggregate. 

        (i)    Effectiveness and Scope.    The Company shall use its commercially reasonable efforts to cause the Mandatory
Registration Statement to be declared effective by the Commission as soon as reasonably practicable following such filing, and to remain effective until the date on which all Shares in respect thereof
cease to be Registrable Shares. No other Person would have the right to include securities on the Mandatory Shelf Registration Statement; provided however, the foregoing sentence shall not apply to
beneficiaries of the Private Placement Registration Rights Agreement or the Participating Stockholders. The Mandatory Shelf Registration Statement shall provide for the resale from time to time, and
pursuant to any method or combination of methods legally available (including an Underwritten Offering, a direct sale to purchasers, a sale through brokers or agents, or a sale over the internet), by
Yorktown. The Company shall not file any Registration Statement on behalf of or for the benefit of any Holder unless it is filed or files concurrently the mandatory shelf registration statements
required under the Private Placement Registration Rights Agreement, and the Company shall not submit an acceleration request to the Commission requesting effectiveness of any such Registration
Statement unless it has submitted or concurrently submits an acceleration request to the Commission requesting effectiveness of the mandatory shelf registration statements required under the Private
Placement Registration Rights Agreement and 

4

 

reasonably
believes based on communications with the Commission that such request with respect to such registration statements will be granted. 

        (ii)    Underwriting.    If Yorktown proposes to conduct an Underwritten Offering under the Mandatory Shelf
Registration Statement, Yorktown shall advise the Company and all other Persons whose securities are included in the Mandatory Shelf Registration Statement (if applicable), of the managing
underwriters for such proposed Underwritten Offering; such managing underwriters to be subject to the approval of the Company, not to be unreasonably withheld. In such event, the Company shall enter
into an underwriting agreement in customary form with the managing underwriters, which shall include, among other provisions, indemnities to the effect and to the extent provided in  Section 6 and
shall take all such other reasonable actions as are requested by the managing underwriter in order to expedite or facilitate the
registration and disposition of the Registrable Shares included in such Underwritten Offering; provided, however, that the Company shall be required to cause appropriate officers of the Company or its
Affiliates to participate in a "road show" or similar marketing effort being conducted by such underwriter with respect to such Underwritten Offering only if Yorktown and any other Persons who are
participating in the Underwritten Offering reasonably anticipate gross proceeds from such Underwritten Offering of at least $10 million. All Persons proposing to distribute their Registrable
Shares through such Underwritten Offering shall enter into an underwriting agreement in customary form with the managing underwriters selected for such underwriting and complete and execute any
questionnaires, powers of attorney, indemnities, securities escrow agreements and other documents reasonably required under the terms of such underwriting, and furnish to the Company such information
in writing as the Company may reasonably request for inclusion in the Registration Statement; provided, however, that Yorktown shall not be required to
make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements as are customary and reasonably requested by the
underwriters. Notwithstanding any other provision of this Agreement, with respect to an Underwritten Offering in connection with the Mandatory Shelf Registration Statement, if the managing
underwriters determine in good faith that marketing factors require a limitation on the number of shares to be included in such Underwritten Offering, then the managing underwriters may exclude shares
(including Registrable Shares) from the Underwritten Offering, and any shares included in the Underwritten Offering shall be
allocated first to Yorktown and second to any Persons requesting inclusion of their shares of Common
Stock based on a piggyback registration right. 

        (b)    Registration Rights Applicable to Participating Stockholders and Yorktown.    

        (i)    Piggyback Registration Rights.    If, after the date hereof, the Company proposes to file a registration
statement under the Securities Act providing for a public offering of the Company's equity securities, other than a mandatory shelf registration statement covering Common Stock registered for resale
by Persons receiving shares of Common Stock in the Private Placement or by Friedman, Billings, Ramsey & Co., Inc. and/or Friedman, Billings, Ramsey Group, Inc., or a registration
statement on Form S-8 or Form S-4 or any similar form hereafter adopted by the Commission as a replacement therefor (including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement, the "Piggyback Registration Statement"), the Company will notify each
Holder of the proposed filing if clause (i) or (ii) of the following sentence applies or to the affected Holder(s) if clause (iii) of the following sentence applies. If
(i) the Piggyback Registration Statement relates to an Underwritten Offering, (ii) the Mandatory Shelf Registration Statement is not then effective or (iii) Registrable Shares
eligible for inclusion on the Mandatory Shelf Registration Statement when initially declared effective were not included in the Mandatory Shelf Registration Statement (unless such shares can and will
be added to the 

5

 

Mandatory
Registration Statement at such time), then each Holder in the case of clause (i) and (ii) and Yorktown in the case of clause (iii), shall be given an opportunity to
include in such Piggyback Registration Statement all or any part of such Holder's Registrable Shares. Each such Holder desiring to include in any such Piggyback Registration Statement all or part of
such Holder's Registrable Shares shall, within 10 days after delivery of the above-described notice by the Company, so notify the Company in writing, and in such notice shall inform the Company
of the number of Registrable Shares such Holder wishes to include in such Piggyback Registration Statement and provide, as a condition to such inclusion, such information regarding itself, its
Registrable Shares and the intended method of disposition of such securities as is required pursuant to Regulation S-K promulgated under the Securities Act to effect the
registration of the Registrable Shares. Any Holder's election to include any Registrable Shares in such Piggyback Registration Statement will not affect the inclusion of such Registrable Shares in the
Mandatory Shelf Registration Statement until such Registrable Shares have been sold under the Piggyback Registration Statement, at which time the Company may remove from the Mandatory Shelf
Registration Statement such Registrable Shares. 

        (A)    Right to Terminate Piggyback Registration.    At any time, the Company may terminate or withdraw any Piggyback
Registration Statement referred to in this Section 2(b)(i), and without any obligation to any such Holder whether or not any Holder has elected
to include Registrable Shares in such registration. The Company may suspend the effectiveness and use of any Piggyback Registration Statement at any time for an unlimited amount of time whether or not
any Holder has elected to include Registrable Shares in such registration. 

        (B)    Underwriting.    The Company shall advise the Holders of the managing underwriters for any Underwritten
Offering proposed under the Piggyback Registration Statement. The right of any such Holder's Registrable Shares to be included in any Piggyback Registration Statement pursuant to this  Section 2(b)(i) shall be conditioned upon such Holder's participation in such Underwritten Offering and the inclusion of such Holder's
Registrable Shares in the Underwritten Offering to the extent provided herein. All Holders proposing to distribute their Registrable Shares through such Underwritten Offering shall enter into an
underwriting agreement in customary form with the managing underwriters selected for such underwriting and complete and execute any questionnaires, powers of attorney, indemnities, securities escrow
agreements and other documents reasonably required under the terms of such underwriting, and furnish to the Company such information in writing as the Company may reasonably request for inclusion in
the Registration Statement; provided, however, that no Holder shall be required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements as are customary and reasonably requested by the underwriters. Notwithstanding any other provision of this Agreement,
if the managing underwriters determine in good faith that marketing factors require a limitation on the number of shares to be included, then the managing underwriters may exclude shares (including
Registrable Shares) from the Piggyback Registration Statement and the Underwritten Offering, and any Shares included in the Piggyback Registration Statement and the Underwritten Offering shall be
allocated, first, to the Company, and second, to any Person exercising demand registration rights that
are the basis for such registration, and third, to each of the Holders and beneficiaries of the Private Placement Registration Rights Agreement
requesting inclusion of their Registrable Shares (as such term is defined herein and in the Private Placement Registration Rights Agreement) in such Piggyback Registration Statement on a  pro rata basis
based on the total number of such shares requested to be included; provided, however, that, notwithstanding anything in this Agreement to
the contrary, if the Registration Statement is the IPO Registration Statement, Company securities shall be allocated first, to the Company, and  second to
the Persons requesting inclusion of their Registrable Shares (as such term is defined in the Private 

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Placement
Holders Registration Rights Agreement) in the IPO Registration Statement on a pro rata basis based on the total number of Registrable Shares (as such term is defined in the Private Placement
Holders Registration Rights Agreement) requested to be included, and third, to the Holders. If any Holder disapproves of the terms of any Underwritten
Offering, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least 10 Business Days before the effective date of the Piggyback Registration
Statement. Any Registrable Shares excluded or withdrawn from such Underwritten Offering shall be excluded and withdrawn from the Piggyback Registration Statement. 

        (C)    Hold-Back Agreement.    By electing to include Registrable Shares in the Piggyback Registration
Statement, if any, the Holder shall be deemed to have agreed not to effect any sale or distribution of securities of the Company of the same or similar class or classes of the securities included in
the Registration Statement or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during such
periods as reasonably requested (but in no event longer than 30 days before or 60 days following the effective date of the Piggyback Registration Statement (subject to extension for
earnings announcement or material events as provided in Section 7), provided each of the executive officers and directors of the Company who
holds shares of Common Stock of the Company or securities convertible into or exchangeable or exercisable for shares of Common Stock of the Company is subject to the same
restriction for the entire time period required of the Holders hereunder) by the representatives of the underwriters, if an Underwritten Offering. 

        (D)    Mandatory Shelf Registration not Impacted by Piggyback Registration Statement.    The Company's obligation to
file any Mandatory Shelf Registration Statement shall not be affected by the filing or effectiveness of the Piggyback Registration Statement. 

        (ii)    S-3 Registration Rights.    At any time the Company is eligible to register a public offering of
its Common Stock on Form S-3 or any similar short form registration statement for the public offering of primary shares of Common Stock ("S-3
Registration Statement"), any Holder holding Registrable Shares not previously registered for resale on a then effective Registration Statement may cause the Company file and
cause to become effective in a commercially reasonable manner an S-3 Registration Statement which shall include such requested Registrable Shares; provided, however, the Company shall not
be required to file more than two S-3 Registration Statements in any six-month period. After filing, the provisions of Sections
2(a)(i) and 2(a)(ii) shall apply to the S-3 Registration Statement in the same manner as applicable to the Mandatory
Shelf Registration Statement. Additionally, the provisions of Section 2(b) also shall apply with respect to Persons holding piggyback
registration rights. 

        (c)    Expenses.    The Company shall pay all Registration Expenses in connection with the registration of the
Registrable Shares pursuant to this Agreement. Each Holder participating in a registration pursuant to this Section 2 shall bear such Holder's
proportionate share (based on the total number of Registrable Shares sold in such registration) of all discounts and commissions payable to underwriters or brokers and all transfer taxes in connection
with a registration of Registrable Shares pursuant to this Agreement and any other expense of the Holders not specifically allocated to the Company pursuant to this Agreement relating to the sale or
disposition of such Holder's Registrable Shares pursuant to any Registration Statement. Nothing herein shall require the Company to pay any expenses, fees, or costs relating to counsel for any Holder
unless required pursuant to Section 6(c). 

7

 

3.     Reserved. 

4.    Registration Procedures.    In connection with the obligations of the Company with respect to any registration pursuant to
this Agreement, the Company shall: 

        (a)   prepare
and file with the Commission, as specified in this Agreement, each Registration Statement, which Registration Statement shall comply as to form in all material
respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith, and use its commercially reasonable efforts to cause such
Registration Statement to become effective as soon as practicable after filing and to remain effective as appropriate; 

        (b)   subject
to Section 4(i), (i) prepare and file with the Commission such amendments and
post-effective amendments to each such Registration Statement as may be necessary to keep such Registration Statement effective as appropriate, (ii) cause each Prospectus contained
therein to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 or any similar rule that may be adopted under the Securities Act,
(iii) promptly amend or supplement each such Registration Statement to include the Company's quarterly and annual financial information and other material developments (until the Company is
eligible to incorporate such information by reference into the Registration Statement), during which time sales of the Registrable Shares under the Registration Statement will be suspended until such
amendment or supplement is filed and effective, and (iv) comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by
each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof; 

        (c)   furnish
to the Holders, without charge, as many copies of each Prospectus, including each preliminary Prospectus, any Permitted Issuer Free Writing Prospectus, and any
amendment or supplement thereto and such other documents as such Holder may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Shares; the Company
hereby consents to the use of such Prospectus, including each preliminary Prospectus, and any Permitted Issuer Free Writing Prospectus by the Holders, if any, in connection with the offering and sale
of the Registrable Shares covered by any such Prospectus; 

        (d)   use
its commercially reasonable efforts to register or qualify, or obtain exemption from registration or qualification for, all Registrable Shares by the time the
applicable Registration Statement is declared effective by the Commission under all applicable state securities or "blue sky" laws of such domestic jurisdictions as any Holder covered by a
Registration Statement shall reasonably request in writing, keep each such registration or qualification or exemption effective during the period such Registration Statement is required to be kept
effective pursuant to this Agreement and do any and all other acts and things that may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Shares owned by such Holder; provided, however, that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this  Section 4(d), (ii) subject itself
to taxation in any such jurisdiction, or (iii) submit to the general service of process in any
such jurisdiction; 

        (e)   use
its commercially reasonable efforts to cause all Registrable Shares covered by such Registration Statement to be registered and approved by such other domestic
governmental agencies or authorities, if any, as may be necessary to enable the Holders thereof to consummate the disposition of such Registrable Shares; 

        (f)    notify
each Holder with Registrable Shares covered by a Registration Statement promptly (i) when such Registration Statement has become effective and when any
post-effective amendments and supplements thereto become effective, (ii) of the issuance by the Commission or any state 

8

 

securities
authority of any stop order suspending the effectiveness of such Registration Statement or the initiation of any proceedings for that purpose, (iii) of any request by the Commission
or any other federal or state governmental authority for amendments or supplements to such Registration Statement or related Prospectus or any Issuer Free Writing Prospectus or for additional
information, and (iv) of the happening of any event during the period such Registration Statement is effective as a result of which such Registration Statement or the related Prospectus or any
Permitted Issuer Free Writing Prospectus or any document incorporated by reference therein contains any untrue statement of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading (which information shall be accompanied by an instruction to suspend the use of the Registration Statement and the Prospectus and
such Permitted Issuer Free Writing Prospectus until the requisite changes have been made); 

        (g)   use
its commercially reasonable efforts to avoid the issuance of, or if issued, to obtain the withdrawal of, any order enjoining or suspending the use or effectiveness
of a Registration Statement or suspending the qualification (or exemption from qualification) of any of the Registrable Shares for sale in any jurisdiction, as promptly as practicable; 

        (h)   upon
written request, furnish to each requesting Holder with Registrable Shares covered by a Registration Statement, without charge, at least one conformed copy of such
Registration Statement and any post-effective amendment or supplement thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); 

        (i)    except
as provided in Section 5, upon the occurrence of any event contemplated by  Section 4(f)(iv), use its commercially reasonable efforts to promptly
prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any Permitted Issuer Free Writing Prospectus or any document incorporated therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Shares, such Prospectus or Permitted Issuer Free Writing Prospectus will not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and, upon request, promptly
furnish to each requesting Holder covered by such Registration Statement a reasonable number of copies of each such supplement or post-effective amendment; 

        (j)    if
requested by the representative of the underwriters, if any, or any Holders of Registrable Shares being sold in connection with an Underwritten Offering,
(i) promptly incorporate in a Prospectus supplement or post-effective amendment such material information as the representative of the underwriters, if any, or such Holders indicate
relates to them or otherwise reasonably request be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; 

        (k)   in
the case of an Underwritten Offering, use its commercially reasonable efforts to furnish or caused to be furnished to each Holder of Registrable Shares covered by
such Registration Statement and the underwriters a signed counterpart, addressed to each such Holder and the underwriters, of: (i) an opinion of counsel for the Company, dated the date of each
closing under the underwriting agreement, reasonably satisfactory to the underwriters; (ii) a "comfort" letter, dated the effective date of such Registration Statement and the date of each
closing under the underwriting agreement, signed by the independent public accountants who have certified the Company's financial statements included in such Registration Statement, covering
substantially the same matters with respect to such Registration Statement (and the Prospectus included therein) and with respect to events subsequent to the date of such financial statements, as are
customarily covered in accountants' letters delivered to underwriters in underwritten public offerings of securities, and such other financial matters as the underwriters may reasonably request and
customarily obtained by underwriters in underwritten 

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offerings,
provided that, to be an addressee of the comfort letter, each Holder may be required to confirm that it is in the category of persons to whom a comfort letter may be delivered in accordance
with applicable accounting literature; and (iii) a "comfort" letter, dated the effective date of such Registration Statement and the date of each closing under the underwriting agreement,
signed by the independent petroleum engineering consultants who have evaluated the Company's oil and gas reserves included in such Registration Statement, covering substantially the same matters with
respect to such Registration Statement (and the Prospectus included therein) and with respect to events subsequent to the date of its evaluation of such oil and gas reserves, as are customarily
covered in engineers' letters delivered to underwriters in underwritten public offerings of securities, and such other related matters as the underwriters may reasonably request and customarily
obtained by underwriters in underwritten offerings; 

        (l)    enter
into customary agreements (including in the case of an Underwritten Offering, an underwriting agreement in customary form) and take all other action in connection
therewith to expedite or facilitate the distribution of the Registrable Shares included in such Registration Statement and, in the case of an Underwritten Offering, make representations and warranties
to the underwriters in such form and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same to the extent customary if and when requested; 

        (m)  in
connection with an Underwritten Offering, use its commercially reasonable efforts to make available for inspection by the representative of any underwriters
participating in any disposition pursuant to a Registration Statement, all financial and other records, pertinent corporate documents and properties of the Company and cause the respective officers,
directors and employees of the Company to supply all information reasonably requested by any such representatives, the representative of the underwriters, counsel thereto or accountants in connection
with a Registration Statement; provided, however, that such records, documents or information that the Company determines, in good faith, to be
confidential and notifies such representatives, representative of the underwriters, counsel thereto or accountants are confidential shall not be disclosed by the representatives, representative of the
underwriters, counsel thereto or accountants unless (i) the disclosure of such records, documents or information is necessary to avoid or correct a misstatement or omission in a Registration
Statement or Prospectus, (ii) the release of such records, documents or information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (iii) such
records, documents or information have been generally made available to the public; provided further, that to the extent practicable, the foregoing
inspection and information gathering shall be coordinated on behalf of the Holders and the other parties entitled thereto by one counsel designated by and on behalf of the Holders and the other
parties, which counsel the Company determines in good faith is reasonably acceptable; 

        (n)   use
its commercially reasonable efforts (including seeking to cure in the Company's listing or inclusion application any deficiencies cited by the exchange or market) to
list or include all Registrable Shares on the New York Stock Exchange, the American Stock Exchange or The Nasdaq Stock Market and thereafter maintain the listing on such exchange or market when such
Registrable Shares are included in a Registration Statement; 

        (o)   use
its commercially reasonable efforts to prepare and file in a timely manner all documents and reports required by the Exchange Act and, to the extent the Company's
obligation to file such reports pursuant to Section 15(d) of the Exchange Act expires before the expiration of the effectiveness period of the Registration Statement as required by  Section 2(a)(i), the Company shall register the Registrable Shares under the Exchange Act and shall maintain such registration through the
effectiveness period required by Section 2(a)(i); 

        (p)   provide
a CUSIP number for all Registrable Shares not later than the effective date of the Registration Statement; 

10

 

        (q)   (i) otherwise
use its commercially reasonable efforts to comply in all material respects with all applicable rules and regulations of the Commission,
(ii) make generally available to its stockholders, as soon as reasonably practicable, earnings statements covering at least 12 months that satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder, and (iii) delay filing any Registration Statement or Prospectus or amendment or supplement to such Registration Statement or Prospectus to
which any Holder of Registrable Shares covered by any such Registration Statement shall have reasonably objected on the grounds that such Registration Statement or Prospectus or amendment or
supplement does not comply in all material respects with the requirements of the Securities Act, such Holder having been furnished with a copy thereof at least 3 Business Days before the filing
thereof, provided that the Company may file such Registration Statement or Prospectus or amendment or supplement following such time as the Company shall have made a good faith effort to resolve any
such issue with the objecting Holder and shall have advised the Holder in writing of its reasonable belief that such filing complies in all material respects with the requirements of the Securities
Act; 

        (r)   cause
to be maintained a registrar and transfer agent for all Registrable Shares covered by any Registration Statement from and after a date not later than the effective
date of such Registration Statement; 

        (s)   in
connection with any sale or transfer of the Registrable Shares (whether or not pursuant to a Registration Statement) that will result in the securities being
delivered no longer constituting Registrable Shares, cooperate with the Holders and the representative of the underwriters, if any, to facilitate the timely preparation and delivery of certificates
representing the Registrable Shares to be sold, which certificates shall not bear any transfer restrictive legends (other than as required by the Company's charter), and to enable such Registrable
Shares to be in such denominations and registered in such names as the representative of the underwriters, if any, or the Holders may request at least 3 Business Days before any sale of the
Registrable Shares; 

        (t)    if
required under the rules of the NASD, in connection with the initial filing of a Shelf Registration Statement and each amendment thereto with the Commission pursuant
to Section 2(a), cooperate with underwriter's or other NASD member's counsel as reasonably necessary to prepare and, within one Business Day of
such filing with the Commission, to file with the NASD all forms and information required or requested by the NASD in order to obtain written confirmation from the NASD that the NASD does not object
to the fairness and reasonableness of the underwriting terms and arrangements (or any deemed underwriting terms and arrangements) (each such written confirmation, a "No
Objections Letter") relating to the resale of Registrable Shares pursuant to the Shelf Registration Statement, including, without limitation, information provided to the NASD
through its COBRADesk system, and shall pay all costs, fees and expenses incident to the NASD's review of the Shelf Registration Statement and the related underwriting terms and arrangements,
including, without limitation, all filing fees associated with any filings or submissions to the NASD and the legal expenses, filing fees and other disbursements of FBR and any other NASD member that
is the holder of, or is affiliated or associated with an owner of, Registrable Shares included in the Shelf Registration Statement (including in connection with any initial or subsequent member
filing); and 

        (u)   upon
effectiveness of the first Registration Statement filed under this Agreement, if necessary, the Company will take such actions and make such filings as are
necessary to effect the registration of the Common Stock under the Exchange Act simultaneously with or immediately following the effectiveness of the Registration Statement. 

        The
Company may require the Holders to furnish to the Company such information regarding the proposed distribution by such Holder as the Company may from time to time reasonably request
in writing or as shall be required to effect the registration of the Registrable Shares, and no Holder shall be entitled to be named as a selling stockholder in any Registration Statement and no
Holder shall be entitled to use the Prospectus forming a part thereof if such Holder does not provide such information 

11

 

to
the Company. Each Holder further agrees to furnish promptly to the Company in writing all information required from time to time to make the information previously furnished by such Holder not
misleading. 

        Each
Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in  Section 4(f)(ii), 4(f)(iii) or
4(f)(iv), such
Holder will immediately discontinue disposition of Registrable Shares pursuant to a Registration Statement until (i) any such stop order is vacated or (ii) if an event described in  Section 4(f)(iii)
 or 4(f)(iv) occurs, such Holder's receipt of the copies of the supplemented or
amended Prospectus. If so directed by the Company, such Holder will deliver to the Company (at the reasonable expense of the Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable Shares current at the time of receipt of such notice. 

        Each
Holder represents that it has not prepared or had prepared on its behalf or used or referred to, and agrees that it will not prepare or have prepared on its behalf or use or refer
to, any Free Writing Prospectus, and has not distributed and will not distribute any written materials in connection with the offer or sale of the Registrable Shares without the prior express written
consent of the Company and, in connection with any Underwritten Offering, the underwriters. Any such Free Writing Prospectus consented to by the Company and the underwriters, as the case may be, is
hereinafter referred to as a "Permitted Free Writing Prospectus." The Company represents and agrees that it has treated and will treat, as the case may
be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus, including in respect of timely filing with the Commission, legending and record keeping. 

5.     Suspension Period. 

        (a)   Subject
to the provisions of this Section 5, following the effectiveness of a Registration Statement (and the
filings with any international, federal or state securities commissions), the Company may direct the Holders, in accordance with Section 5(b), to
suspend sales of the Registrable Shares pursuant to a Registration Statement for such times as the Company reasonably may determine is necessary and advisable (but in no event, (A) in the case
of clause (i) below, for more than 45 consecutive days (or 60 consecutive days in the case of the IPO Registration Statement) and (B) in the case of clauses (i), (ii) and
(iii) below, for more than an aggregate of 90 days in any consecutive 12-month period commencing on the Closing Time or more than 60 days in any consecutive
90-day period, except (in the case of clause (B)) as a result of a review of any post-effective amendment by the Commission before declaring any
post-effective amendment to the Registration Statement effective, provided that the Company has used its commercially reasonable efforts to
cause such post-effective amendment to be declared effective), if any of the following events shall occur: (i) the representative of the underwriters of an Underwritten Offering of
primary shares by the Company has advised the Company that the sale of Registrable Shares pursuant to the Registration Statement would have a material adverse effect on such Underwritten Offering;
(ii) the majority of the members of the Board of Directors of the Company shall have determined in good faith that (1) the offer or sale of any Registrable Shares would materially
impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, merger, tender offer, business combination, corporate reorganization, consolidation or other
significant transaction involving the Company, (2) upon the advice of counsel, the sale of Registrable Shares pursuant to the Registration Statement would require disclosure of
non-public material information not otherwise required to be disclosed under applicable law, and (3) either (x) the Company has a bona fide business purpose for preserving
the confidentiality of such transaction, (y) disclosure would have a material adverse effect on the Company or the Company's ability to consummate such transaction, or (z) the proposed
transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause the Registration Statement (or
such filings) to become effective or 

12

 

to
promptly amend or supplement the Registration Statement on a post-effective basis, as applicable; or (iii) the majority of the members of the Board of Directors of the Company
shall have determined in good faith, upon the advice of counsel, that it is required by law, rule or regulation to supplement the Registration Statement or file a post-effective
amendment to the Registration Statement in order to incorporate information into the Registration Statement for the purpose of (1) including in the Registration Statement any prospectus
required under Section 10(a)(3) of the Securities Act; (2) reflecting in the prospectus included in the Registration Statement any facts or events arising after the effective date of the
Registration Statement (or of the most-recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth
therein; or (3) including in the prospectus included in the Registration Statement any material information with respect to the plan of distribution not disclosed in the Registration Statement
or any material change to such information. Upon the occurrence of any such suspension, the Company shall use its commercially reasonable efforts to cause the Registration Statement to become
effective or to promptly amend or supplement the Registration Statement on a post-effective basis or to take such action as is necessary to make resumed use of the Registration Statement
compatible with the Company's best interests, as applicable, so as to permit the Holders to resume sales of the Registrable Shares as soon as possible. 

        (b)   In
the case of an event that causes the Company to suspend the use of a Registration Statement (a "Suspension Event"),
the Company shall give written notice (a "Suspension Notice") to the Holders to suspend sales of the Registrable Shares and such notice shall state
generally the basis for the notice and that such suspension shall continue only for so long as the Suspension Event or its effect is continuing and the Company is using its best efforts and taking all
reasonable steps to terminate suspension of the use of the Registration Statement as promptly as possible. No Holder shall effect any sales of the Registrable Shares pursuant to such Registration
Statement (or such filings) at any time after it has received a Suspension Notice from the Company and before receipt of an End of Suspension Notice (as defined below). If so directed by the Company,
each Holder will deliver to the Company (at the expense of the Company) all copies other than permanent file copies then in such Holder's possession of the Prospectus and any Issuer Free Writing
Prospectus covering the Registrable Shares at the time of receipt of the Suspension Notice. The Holders may recommence effecting sales of the Registrable Shares pursuant to the Registration Statement
(or such filings) following further notice to such effect (an "End of Suspension Notice") from the Company, which End of Suspension Notice shall be
given by the Company to the Holders in the manner described above promptly following the conclusion of any Suspension Event and its effect. 

        (c)   Notwithstanding
any provision herein to the contrary, subject to any Suspension Events or as contemplated by  Section 4(f)(iv), each Registration Statement shall be maintained effective pursuant to this Agreement
until the Registrable Shares are not
Registrable Shares. 

6.     Indemnification and Contribution. 

        (a)   The
Company agrees to indemnify and hold harmless (i) each Holder and any underwriter (as determined in the Securities Act) for such Holder, (ii) each
Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) any of the foregoing (a "Controlling
Person"), and (iii) the respective officers, directors, partners, members, employees, representatives and agents of any such Person or any Controlling Person (any Person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "Purchaser Indemnitee") from and against any and all
losses, claims, damages, judgments, actions, reasonable out-of-pocket expenses, and other liabilities, including, as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and
expenses of outside counsel to any Purchaser Indemnitee, joint or several (the "Liabilities"), directly or indirectly related to, based upon, arising
out of or in connection with any untrue statement or alleged untrue statement of a 

13

 

material
fact contained in any Registration Statement, Prospectus or Issuer Free Writing Prospectus (as amended or supplemented), or any preliminary Prospectus or any other document prepared by the
Company used to sell the Registrable Shares, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case
of a Prospectus, in light of the circumstances under which they were made), not misleading, except insofar as such Liabilities arise out of or are based upon (i) any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Purchaser Indemnitee furnished to the Company or any underwriter in writing by
such Purchaser Indemnitee expressly for use therein, (ii) any untrue statement contained in or omitted from a preliminary Prospectus if such untrue statement is cured by delivery to the Holders
of an amended preliminary Prospectus or a Free Writing Prospectus prior to pricing of the sale of securities, if an Underwritten Offering, or the effectiveness of the Mandatory Shelf Registration
Statement or S-3 Registration Statement to which the preliminary Prospectus relates, or (iii) any sales by any Holder after the delivery by the Company to such Holder of a
Suspension Notice and before the delivery by the Company of an End of Suspension Notice. The Company shall notify the Holders promptly of the institution, threat or assertion of any claim, proceeding
(including any governmental investigation), or litigation which it shall have become aware in connection with the matters addressed by this Agreement which involves the Company or a Purchaser
Indemnitee. The indemnity provided for herein shall remain in full force and effect regardless of any investigation made by or on behalf of any Purchaser Indemnitee. 

        (b)   In
connection with any Registration Statement in which a Holder is participating, such Holder agrees, severally and not jointly, to indemnify and hold harmless the
Company, each Person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, and the respective officers, directors,
partners, members, representatives, employees and agents of such Person or Controlling Person to the same extent as the foregoing indemnity from the Company to each Purchaser Indemnitee, but only with
reference to (i) untrue statements or omissions or alleged untrue statements or omissions made in reliance upon and in strict conformity with information relating to such Holder furnished to
the Company in writing by such Holder expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary Prospectus and (ii) any sales by any
Holder after the delivery by the Company to such Holder of a Suspension Notice and before the delivery by the Company of an End of Suspension Notice. The liability of any Holder pursuant to
clause (i) of the immediately preceding sentence shall in no event exceed the net proceeds received by such Holder from sales of Registrable Shares giving rise to such obligations. If a Holder
elects to include Registrable Shares in an Underwritten Offering, the Holder shall be required to agree to such customary indemnification provisions as may reasonably be required by the underwriter in
connection with such Underwritten Offering. 

        (c)   If
any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of
which indemnity may be sought pursuant to Section 6(a) or 6(b), such Person (the
"Indemnified Party"), shall promptly notify the Person against whom such indemnity may be sought (the "Indemnifying
Party"), in writing (to the extent legally advisable) of the commencement thereof (but the failure to so notify an Indemnifying Party shall not relieve it from any Liability
which it may have under this Section 6, except to the extent the Indemnifying Party is materially prejudiced by the failure to give notice), and
the Indemnifying Party, upon request of the Indemnified Party, shall retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and any others the Indemnifying
Party may reasonably designate in such proceeding and shall assume the defense of such proceeding and pay the fees and expenses actually incurred by such counsel related to such proceeding.
Notwithstanding the foregoing, in any such proceeding, any Indemnified Party may retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party,
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed in writing to the contrary, (ii) the Indemnifying Party 

14

 

failed
within a reasonable time after notice of commencement of the action to assume the defense and employ counsel reasonably satisfactory to the Indemnified Party, (iii) the Indemnifying
Party and its counsel do not pursue in a reasonable manner the defense of such action or (iv) the named parties to any such action (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party, or any Affiliate of the Indemnifying Party, and such Indemnified Party shall have been reasonably advised by counsel that, either (x) there may be
one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party or such Affiliate of the Indemnifying Party or (y) a conflict may
exist between such Indemnified Party and the Indemnifying Party or such Affiliate of the Indemnifying Party, in which event the Indemnifying Party may not assume or direct the defense of such action
on behalf of such Indemnified Party, it being understood, however, that the Indemnifying Party shall not, in connection with any one such action or separate but substantially similar or related
actions arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all such
Indemnified Parties, which firm shall be designated in writing by those Indemnified Parties who sold a majority of the Registrable Shares sold by all such Indemnified Parties under the particular
Registration Statement and any such separate firm for the Company, the directors, the officers and such control Persons of the Company as shall be designated in writing by the Company. The
Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify any Indemnified Party from and against any Liability by reason of such settlement or judgment to
the extent provided in this Section 6 without reference to this sentence. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder
by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all Liability on claims that are the subject matter of such proceeding. 

        (d)   If
the indemnification provided for in Section 6(a) or 6(b) is for
any reason held to be unavailable to an Indemnified Party in respect of any Liabilities referred to therein (other than by reason of the exceptions provided therein) or is insufficient to hold
harmless a party indemnified thereunder, then each Indemnifying Party under such sections, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such Liabilities (i) in such proportion as is appropriate to reflect the relative benefits of the Indemnified Party on the one hand and the Indemnifying
Parties on the other in connection with the statements or omissions that resulted in such Liabilities, or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Parties and the
Indemnified Party, as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and any Purchaser Indemnitees, on the other, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the
Company or by such Purchaser Indemnitees and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 

        (e)   The
parties agree that it would not be just and equitable if contribution pursuant to this Section 6 were
determined by pro rata allocation (even if such Indemnified Parties were treated as one entity for such purpose), or by any other method of allocation
that does not take account of the equitable considerations referred to in Section 6(d). The amount paid or payable by an Indemnified Party as a
result of any Liabilities referred to in Section 6(d) shall be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Party in connection with investigating or defending any such action or claim. 

15

 

Notwithstanding
the provisions of this Section 6, in no event shall a Purchaser Indemnitee be required to contribute any amount in excess of the
amount by which proceeds received by such Purchaser Indemnitee from sales of Registrable Shares exceeds the amount of any damages that such Purchaser Indemnitee has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged omission. For purposes of this Section 6, each Person, if any, who
controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) a Holder shall have the same rights to contribution as such Holder, as the case may
be, and each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) the Company, and each officer, director, partner,
member, employee, representative, agent or manager of the Company shall have the same rights to contribution as the Company. Any party entitled to contribution will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom
contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have
under this Section 6 or otherwise, except to the extent that any party is materially prejudiced by the failure to give notice. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act), shall be entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. 

        (f)    The
indemnity and contribution agreements contained in this Section 6 will be in addition to any Liability which
any Indemnifying Party may otherwise have to any Indemnified Party referred to above. Each Purchaser Indemnitee's obligations to contribute pursuant to this  Section 6 are not joint but are several
in the proportion that the number of Shares sold by such Purchaser Indemnitee bears to the number of
Shares sold by all Purchaser Indemnities. 

7.    Market Stand-off Agreement.    Each Holder hereby agrees that it shall not directly or indirectly sell, offer to
sell, grant any option or otherwise transfer or dispose of any Registrable Shares or other shares of Common Stock of the Company or any securities convertible into or exchangeable or exercisable for
shares of Common Stock of the Company owned by such Holder (other than to donees or partners of the Holder who agree to be similarly bound), or enter into any other transaction designed to directly or
indirectly transfer any of the economic consequences of ownership of the Common Stock, including by shorting the Common Stock or securities convertible into or exchangeable or exercisable for shares
of the Common Stock, for a period of 60 days (the "Lock-Up Period") following the effective date of a registration statement for an
initial public offering of securities by the Company filed under the Securities Act (an "IPO Registration Statement");  provided, however, that: 

        (a)   the
restrictions above shall not apply to (i) the sale of Registrable Shares as a selling stockholder under the IPO Registration Statement or (ii) the sale
of shares of Common Stock (x) acquired by a Holder in such initial public offering or (y) acquired by a Holder on a national securities exchange or the NASDAQ Stock Market after such
initial public offering, so long as in each case such sales are made over such exchange or market, as the case may be; 

        (b)   all
executive officers and directors of the Company then holding shares of Common Stock of the Company or securities convertible into or exchangeable or exercisable for
shares of Common Stock of the Company are subject to the same restrictions for the entire time period required of the Holders hereunder; 

        (c)   the
Holders shall be allowed any concession or proportionate release allowed to any officer or director that entered into similar agreements (with such proportion being
determined by dividing the number of shares being released with respect to such officer or director by the total number of issued and outstanding shares held by such officer or director);  provided, that
nothing in this Section 7(c) shall be construed as a right to proportionate
release for the executive officers and directors of the Company 

16

 

upon
the expiration of the 60 day period applicable to all Holders other than the executive officers and directors of the Company. 

        Notwithstanding
the foregoing, if (i) during the last 17 days of the Lock-Up Period, the Company releases earnings results or announces material news or a
material event or (ii) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 15-day period following the
last day of the Lock-Up Period, then in each case the Lock-Up Period will be automatically extended until the expiration of the 18-day period beginning on the date
of release of the earnings results or the announcement of the material news or material event, as applicable, unless the Company or the underwriters, as the case may be,. waives, in writing, such
extension. 

        In
order to enforce the foregoing covenant, the Company shall have the right to place restrictive legends on the certificates representing the securities subject to this  Section 7 and to impose stop
transfer instructions with respect to the Registrable Shares and such other securities of each Holder (and the
securities of every other Person subject to the foregoing restriction) until the end of such period. 

8.     Reserved.

9.    Termination of the Company's Obligations.    The Company shall have no further obligations pursuant to this Agreement at such
time as no Registrable Shares are outstanding after their original issuance, provided, however, that the Company's obligations under Sections 3,  6 and
11 (and any related definitions) shall remain in full force and effect following such time. 

10.    Termination of Stockholders' Agreement.    By execution hereof, the Company, Yorktown and the Participating Stockholders
hereby agree to terminate the Stockholders' Agreement (both EEI Stockholders' Agreement and EOGI Stockholders' Agreement) and further agree that the Stockholders' Agreement shall no longer have any
force or effect. 

11.   Miscellaneous. 

        (a)    Remedies.    In the event of a breach by the Company of any of its obligations under this Agreement, each
Holder, in addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this
Agreement. Subject to Section 6, the Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. 

        (b)    Amendments and Waivers.    This Agreement may not be amended, modified or supplemented, and waivers or consents
to or departures from the provisions hereof may not be given, without the written consent of the Company and Holders beneficially owning a majority of the Registrable Shares;  provided, however, that for
purposes of this Agreement, Registrable Shares owned, directly or indirectly, by an entity that is an Affiliate of the
Company due to the Company's owning an interest in such entity shall not be deemed to be outstanding. Notwithstanding the foregoing, a waiver or consent to or departure from the provisions hereof with
respect to a matter that relates exclusively to (i) the Mandatory Shelf Registration Statement may be given only with the consent of Yorktown and (ii) the rights of a Holder whose
securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders may be given by such Holder;  provided that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately
preceding sentence. 

        (c)    Notices.    All notices and other communications, provided for or permitted hereunder shall be made by press
release publicly disseminated or in writing and delivered by electronic transmission, 

17

 

facsimile
(with receipt confirmed), overnight courier or registered or certified mail, return receipt requested, or by telegram, addressed as follows: 

        (i)    if
to a Holder, at the most current address given by the transfer agent and registrar of the Shares to the Company (including by email); 

        (ii)   if
to the Company, at the offices of the Company at 5480 Valmont, Suite 350, Attention: James R. Casperson, Chief Financial Officer (facsimile
(303) 417-1000); with a copy (which shall not constitute notice) to Thompson & Knight LLP, 333 Clay Street, Suite 3300, Houston, Texas 77002, Attention: Dallas Parker, Esq.
(facsimile (832) 397-8110); and 

        (iii)  if
to Yorktown, at the offices of Yorktown Partners LLC at 410 Park Avenue, 19th Floor, New York, NY 10022, Attention: Brian Lawrence, (facsimile
(212) 515-2105). 

        (d)    Successors and Assigns; Third Party Beneficiaries.    This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties hereto and shall inure to the benefit of each Holder and each Permitted Assign. The Company agrees that each Participating Stockholder
who has not executed a signature page hereof shall be third party beneficiaries to this Agreement, and each such Participating Stockholder shall have the right to enforce such agreements directly to
the extent it
deems such enforcement necessary or advisable to protect its rights hereunder; provided, however, that such Participating Stockholder fulfills all of
its obligations hereunder. 

        (e)    Counterparts.    This Agreement may be executed in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 

        (f)    Governing Law.    THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.

        (g)    Severability.    If any term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties hereto that they would have
executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 

        (h)    Entire Agreement.    This Agreement is intended by the parties hereto as a final expression of their agreement,
and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. 

        (i)    Registrable Shares Held by the Company or its Affiliates.    Whenever the consent or approval of Holders of a
specified percentage of Registrable Shares is required hereunder, Registrable Shares (or securities convertible into Registrable Shares) held by the Company or entities that are Affiliates of the
Company due to the Company's owning an interest in such entities shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. The
foregoing shall not apply to Yorktown. 

        (j)    Survival.    The indemnification and contribution obligations under  Section 6 shall survive the termination of the
Company's obligations under Section 2. 

18

 

        (k)    Headings.    The headings in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the provisions of this Agreement. All references made in this Agreement to "Section" refer to such Section of this Agreement, unless expressly stated otherwise. 

        (l)    Adjustment for Stock Splits, etc.    Wherever in this Agreement there is a reference to a specific number of
shares with respect to any securities, then upon the occurrence of any subdivision, combination, or stock dividend of such shares, the specific number of shares with respect to any securities so
referenced in this Agreement shall automatically be proportionally adjusted to reflect the effect on the outstanding shares of such class or series of stock by such subdivision, combination, or stock
dividend. 

        (m)    No Combination of Registration Statements.    The parties hereby agree that the Company shall not combine the
Mandatory Shelf Registration Statement with any other mandatory shelf registration statement required pursuant to the Private Placement Registration Rights Agreement unless agreed to by a majority of
holders of Registrable Shares (as that term is defined in the Private Placement Registration Rights Agreement) with respect to the Holders Mandatory Shelf Registration Statement (as that term is
defined in the Private Placement Registration Rights Agreement) or by Friedman, Billings, Ramsey & Co., Inc. and Friedman Billings Ramsey Group, Inc. with respect to the FBR
Mandatory Shelf Registration Statement (as that term is defined in the Private Placement Registration Rights Agreement). 

[Remainder
of this Page Intentionally Left Blank] 

19

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

	 	 	ELLORA ENERGY INC.
	

 	
 	

By:	

/s/  T. SCOTT MARTIN      
 T. Scott Martin, President

	

 	
 	
YORKTOWN:
	
 	
 	
YORKTOWN ENERGY PARTNERS V, L.P.
	
 	
 	

By: YORKTOWN V COMPANY LLC
 its general partner
	

 	
 	

By:	

/s/  BRYAN H. LAWRENCE      

	 	 	Name:	Bryan H. Lawrence

	 	 	Title:	Member

	

 	
 	
YORKTOWN ENERGY PARTNERS VI, L.P.
	
 	
 	

By: YORKTOWN VI COMPANY L.P.
 its general partner
	

 	
 	

By: YORKTOWN VI ASSOCIATES LLC
 its general partner
	

 	
 	

By:	

/s/  BRYAN H. LAWRENCE      

	 	 	Name:	Bryan H. Lawrence

	 	 	Title:	Member

	

 	
 	
PARTICIPATING STOCKHOLDERS
	

 	
 	

 	

/s/  T. SCOTT MARTIN      
 T. Scott Martin
	

 	
 	

 	

/s/  JAMES R. CASPERSON      
 James R. Casperson
	

 	
 	

 	

*

	 	 	 	Janet Martin
	

 	
 	

 	

*

	 	 	 	J. Gregory Faith
	

 	
 	

 	

*

	 	 	 	Allen Born
	

 	
 	

 	

*

	 	 	 	Richard F. McClure, Jr.
	

 	
 	

 	

*

	 	 	 	Valerie K. Walker
	

 	
 	

 	

*

	 	 	 	John W. (Bill) Minnett
	

 	
 	

 	

*

	 	 	 	Claudia Baesler
	

 	
 	

 	

*

	 	 	 	Richard and Debra Foy, as joint tenants
	

 	
 	

 	

/s/  T. SCOTT MARTIN      
 T. Scott Martin, attorney-in-fact executing on behalf of Participating Stockholder by Power of Attorney dated
June 28, 2006 and for the benefit of Participating Stockholders set forth on Schedule I

 
 

SCHEDULE I
  
    List of Shares    
    

	Stockholder
 
	 	Common Stock

	Yorktown Energy Partners V, L.P.

400 Park Avenue, 19th Floor

New York, NY 10022	 	21,039,277
	

Yorktown Energy Partners VI, L.P.

400 Park Avenue, 19th Floor

New York, NY 10022	
 	

6,422,881
	

T. Scott Martin

7310 Island Circle

Boulder, CO 80301	
 	

1,276,004
	

C. Allen Born

3773 Cherry Creek N. Drive, Suite 575

Denver, CO 80209	
 	

648,632
	

J. Gregory Faith

6788 Harvest Rd.

Boulder, Colorado 80301	
 	

348,438
	

Richard F. McClure Jr.

14340 Fairview Lane

Golden, CO 80401	
 	

261,879
	

Valerie K. Walker

4619 Field Ct

Boulder, CO 80301	
 	

261,879
	

James R. Casperson

6483 South Vance Street

Littleton, CO 80123	
 	

244,147
	

Claudia Baesler

25232 Country Club Court

Westminster, CO 80234	
 	

10,985
	

John William Minnett

8755 S. Meadow Creek Drive

Highlands Ranch, CO 80126	
 	

26,210
	

Richard and Deborah Foy, as Joint Tenants

1516 High Street

Boulder, CO 80304	
 	

42,586
	

Lubar Equity Fund, LLC c/o Lubar & Co.

700 N. Water Street, Suite 1200

Milwaukee, WI 53202	
 	

1,780,079
	

Janet Martin

7310 Island Circle

Boulder, CO 80301	
 	

12,947
	 	 	 

	

Patricia Born

3773 Cherry Creek N. Drive, Suite 575

Denver, CO 80209	
 	

1,416
	

Patty K Duignan

10722 E. Cedar Waxwing Dr.

Sun Lakes, AZ 80248	
 	

10,112
	

David N. and Joan C. Schubert, as Joint Tenants

6072 Fox Hill Drive

Longmont, CO 80501	
 	

20,225
	 	 	

	
Total Outstanding	
 	
32,407,697
	 	 	

QuickLinks

Exhibit 4.2

REGISTRATION RIGHTS AGREEMENT

SCHEDULE I List of SharesQuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.1    
    

ELLORA ENERGY INC.

AMENDED AND RESTATED

2006 STOCK INCENTIVE PLAN  

 
 TABLE OF CONTENTS  

	 
	 	 
	 	 
	 	 
	 	Page

	1.	 	PURPOSE	 	1
	2.	 	DEFINITIONS	 	1
	3.	 	ADMINISTRATION OF THE PLAN	 	4
	 	 	3.1.	 	Board	 	4
	 	 	3.2.	 	Committee	 	4
	 	 	3.3.	 	Terms of Awards	 	4
	 	 	3.4.	 	Deferral Arrangement	 	5
	 	 	3.5.	 	No Liability	 	5
	 	 	3.6.	 	Book Entry	 	6
	4.	 	STOCK SUBJECT TO THE PLAN	 	6
	5.	 	EFFECTIVE DATE, DURATION AND AMENDMENTS	 	6
	 	 	5.1.	 	Effective Date	 	6
	 	 	5.2.	 	Term	 	6
	 	 	5.3.	 	Amendment and Termination of the Plan	 	6
	6.	 	AWARD ELIGIBILITY AND LIMITATIONS	 	7
	 	 	6.1.	 	Service Providers and Other Persons	 	7
	 	 	6.2.	 	Successive Awards and Substitute Awards	 	7
	 	 	6.3.	 	Limitation on Shares of Stock Subject to Awards and Cash Awards	 	7
	7.	 	AWARD AGREEMENT	 	7
	8.	 	TERMS AND CONDITIONS OF OPTIONS	 	8
	 	 	8.1.	 	Option Price.	 	8
	 	 	8.2.	 	Vesting	 	8
	 	 	8.3.	 	Term	 	8
	 	 	8.4.	 	Termination of Service	 	8
	 	 	8.5.	 	Limitations on Exercise of Option	 	8
	 	 	8.6.	 	Method of Exercise	 	8
	 	 	8.7.	 	Rights of Holders of Options	 	9
	 	 	8.8.	 	Delivery of Stock Certificates	 	9
	 	 	8.9.	 	Transferability of Options	 	9
	 	 	8.10.	 	Family Transfers	 	9
	 	 	8.11.	 	Limitations on Incentive Stock Options	 	9
	9.	 	TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS	 	9
	 	 	9.1.	 	Right to Payment and Grant Price	 	9
	 	 	9.2.	 	Other Terms	 	10
	10.	 	TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS	 	10
	 	 	10.1.	 	Grant of Restricted Stock or Stock Units	 	10
	 	 	10.2.	 	Restrictions	 	10
	 	 	10.3.	 	Restricted Stock Certificates	 	10
	 	 	10.4.	 	Rights of Holders of Restricted Stock	 	11
	 	 	10.5.	 	Rights of Holders of Stock Units	 	11
	 	 	 	 	10.5.1.	 	Voting and Dividend Rights	 	11
	 	 	 	 	10.5.2.	 	Creditor's Rights	 	11
	 	 	10.6.	 	Termination of Service	 	11
	 	 	10.7.	 	Purchase of Restricted Stock	 	11
	 	 	10.8.	 	Delivery of Stock	 	11
	11.	 	TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS	 	12
	12.	 	FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK	 	12
	 	 	12.1.	 	General Rule	 	12
	 	 	 	 	 	 	 	 	 

i

 

	 	 	12.2.	 	Surrender of Stock	 	12
	 	 	12.3.	 	Cashless Exercise	 	12
	 	 	12.4.	 	Other Forms of Payment	 	12
	13.	 	TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS	 	12
	 	 	13.1.	 	Dividend Equivalent Rights	 	12
	 	 	13.2.	 	Termination of Service	 	13
	14.	 	TERMS AND CONDITIONS OF PERFORMANCE AND ANNUAL INCENTIVE AWARDS	 	13
	 	 	14.1.	 	Performance Conditions	 	13
	 	 	14.2.	 	Performance or Annual Incentive Awards Granted to Designated Covered Employees	 	13
	 	 	 	 	14.2.1.	 	Performance Goals Generally	 	13
	 	 	 	 	14.2.2.	 	Business Criteria	 	13
	 	 	 	 	14.2.3.	 	Timing For Establishing Performance Goals	 	14
	 	 	 	 	14.2.4.	 	Settlement of Performance or Annual Incentive Awards; Other Terms	 	14
	 	 	14.3.	 	Written Determinations	 	14
	 	 	14.4.	 	Status of Section 14.2 Awards Under Code Section 162(m)	 	14
	15.	 	PARACHUTE LIMITATIONS	 	14
	16.	 	REQUIREMENTS OF LAW	 	15
	 	 	16.1.	 	General	 	15
	 	 	16.2.	 	Rule 16b-3	 	16
	17.	 	EFFECT OF CHANGES IN CAPITALIZATION	 	16
	 	 	17.1.	 	Changes in Stock	 	16
	 	 	17.2.	 	Reorganization in Which the Company Is the Surviving Entity Which does not Constitute a Corporate Transaction	 	16
	 	 	17.3.	 	Corporate Transaction	 	17
	 	 	17.4.	 	Adjustments	 	17
	 	 	17.5.	 	No Limitations on Company	 	18
	18.	 	GENERAL PROVISIONS	 	18
	 	 	18.1.	 	Disclaimer of Rights	 	18
	 	 	18.2.	 	Nonexclusivity of the Plan	 	18
	 	 	18.3.	 	Withholding Taxes	 	18
	 	 	18.4.	 	Captions	 	19
	 	 	18.5.	 	Other Provisions	 	19
	 	 	18.6.	 	Number and Gender	 	19
	 	 	18.7.	 	Severability	 	19
	 	 	18.8.	 	Governing Law	 	19
	 	 	18.9.	 	Section 409A of the Code	 	19

ii

 
 

ELLORA ENERGY INC.
  AMENDED AND RESTATED
  2006 STOCK INCENTIVE PLAN    
    

        Ellora Energy Inc., a Delaware corporation (the "Company"), sets forth herein the terms of its Amended and
Restated 2006 Stock Incentive Plan (the "Plan"), as follows: 

1.    PURPOSE    

        The
Plan is intended to enhance the Company's and its Affiliates' (as defined herein) ability to attract and retain highly qualified officers, directors, key employees, and other
persons, and to motivate such persons to serve the Company and its Affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an
opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the Plan provides for the grant of stock options, stock appreciation
rights, restricted stock, stock units, unrestricted stock, dividend equivalent rights and cash awards. Any of these awards may, but need not, be made as performance incentives to reward attainment of
annual or long-term performance goals in accordance with the terms hereof. Stock options granted under the Plan may be non-qualified stock options or incentive stock options,
as provided herein. 

2.    DEFINITIONS    

        For
purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply: 

        2.1   "Affiliate" means, with respect to the Company, any company or other trade or business that controls, is controlled by or
is under common control with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary. 

        2.2   "Annual Incentive Award" means an Award made subject to attainment of performance goals (as described in  Section 14) over a performance period of up to one
(1) year (the fiscal year, unless otherwise specified by the Committee). 

        2.3   "Award" means a grant of an Option, Stock Appreciation Right, Restricted Stock, Unrestricted Stock, Stock Unit, Dividend
Equivalent Rights, or cash award under the Plan. 

        2.4   "Award Agreement" means the written agreement between the Company and a Grantee that evidences and sets out the terms and
conditions of an Award. 

        2.5   "Benefit Arrangement" shall have the meaning set forth in  Section 15 hereof. 

        2.6   "Board" means the Board of Directors of the Company. 

        2.7   "Cause" means, as determined by the Board and unless otherwise provided in an applicable agreement with the Company or an
Affiliate, (i) gross negligence or willful misconduct in connection with the performance of duties; (ii) conviction of a criminal offense (other than minor traffic offenses); or
(iii) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the Service
Provider and the Company or an Affiliate. 

        2.8   "Code" means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. 

        2.9   "Committee" means a committee of, and designated from time to time by resolution of, the Board, which shall be
constituted as provided in Section 3.2. 

        2.10 "Company" means Ellora Energy, Inc. 

        2.11 "Corporate Transaction" means (i) the dissolution or liquidation of the Company or a merger, consolidation, or
reorganization of the Company with one or more other entities in which the Company is not the surviving entity, (ii) a sale of substantially all of the assets of the Company to another person
or entity, or (iii) any transaction (including without limitation a merger or reorganization in which the Company is the surviving entity) which results in any person or entity (other than
persons who are 

 

stockholders
or Affiliates immediately prior to the transaction) owning fifty percent (50%) or more of the combined voting power of all classes of stock of the Company. 

        2.12 "Covered Employee" means a Grantee who is a Covered Employee within the meaning of Section 162(m)(3) of the Code. 

        2.13 "Disability" means the Grantee is unable to perform each of the essential duties of such Grantee's position by reason of
a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than twelve (12) months;  provided, however, that, with respect to rules regarding expiration of an Incentive Stock Option
following termination of the Grantee's Service, Disability shall mean the Grantee is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. 

        2.14 "Dividend Equivalent Right" means a right, granted to a Grantee under  Section 13 hereof, to receive cash, Stock, other Awards or other property equal in value to
dividends paid with respect to a specified number of
shares of Stock, or other periodic payments. 

        2.15 "Effective Date" means that day one day prior to the date on which the Company's first registration statement on
Form S-1 under the Securities Act is declared effective by the Securities and Exchange Commission. 

        2.16 "Exchange Act" means the Securities Exchange Act of 1934, as now in effect or as hereafter amended. 

        2.17 "Fair Market Value" means the value of a share of Stock, determined as follows: if on the Grant Date or other
determination date the Stock is listed on an established national or regional stock exchange, is admitted to quotation on The Nasdaq Stock Market, Inc. or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the closing price of the Stock on such exchange or in such market (if there is more than one such exchange or market the Board
shall determine the appropriate exchange or market) on the Grant Date or such other determination date (or if there is no such reported closing price, the Fair Market Value shall be the mean between
the highest bid and lowest asked prices or between the high and low sale prices on such trading day) or, if no sale of Stock is reported for such trading day, on the next preceding day on which any
sale shall have been reported. If the Stock is not listed on such an exchange, quoted on such system or traded on such a market, Fair Market Value shall be the value of the Stock as determined by the
Board in good faith. 

        2.18 "Family Member" means a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent,
grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister,
brother-in-law, or sister-in-law, including adoptive relationships, of the Grantee, any person sharing the Grantee's household (other than a tenant or
employee), a trust in which any one or more of these persons have more than fifty percent of the beneficial interest, a foundation in which any one or more of these persons (or the Grantee) control
the management of assets, and any other entity in which one or more of these persons (or the Grantee) own more than fifty percent of the voting interests. 

        2.19 "GAAP" means U.S. generally accepted accounting principles. 

        2.20 "Grant Date" means, as determined by the Board, the latest to occur of (i) the date as of which the Board
approves an Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6 hereof, or
(iii) such other date as may be specified by the Board. 

        2.21 "Grantee" means a person who receives or holds an Award under the Plan. 

2

 

        2.22 "Incentive Stock Option" means an "incentive stock option" within the meaning of Section 422 of the Code, or the
corresponding provision of any subsequently enacted tax statute, as amended from time to time. 

        2.23 "Non-qualified Stock Option" means an Option that is not an Incentive Stock Option. 

        2.24 "Option" means an option to purchase one or more shares of Stock pursuant to the Plan. 

        2.25 "Option Price" means the exercise price for each share of Stock subject to an Option. 

        2.26 "Other Agreement" shall have the meaning set forth in Section 15
hereof. 

        2.27 "Outside Director" means a member of the Board who is not an officer or employee of the Company. 

        2.28 "Performance Award" means an Award made subject to the attainment of performance goals (as described in  Section 14) over a performance period of up to ten
(10) years. 

        2.29 "Plan" means this Ellora Energy, Inc. Amended and Restated 2006 Stock Incentive Plan. 

        2.30 "Purchase Price" means the purchase price for each share of Stock pursuant to a grant of Restricted Stock or
Unrestricted Stock. 

        2.31 "Reporting Person" means a person who is required to file reports under Section 16(a) of the Exchange Act. 

        2.32 "Restricted Stock" means shares of Stock, awarded to a Grantee pursuant to  Section 10 hereof. 

        2.33 "SAR Exercise Price" means the per share exercise price of an SAR granted to a Grantee under  Section 9 hereof. 

        2.34 "Securities Act" means the Securities Act of 1933, as now in effect or as hereafter amended. 

        2.35 "Service" means service as a Service Provider to the Company or an Affiliate. Unless otherwise stated in the applicable
Award Agreement, a Grantee's change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or an
Affiliate. Subject to the preceding sentence, whether a termination of Service shall have occurred for purposes of the Plan shall be determined by the Board, which determination shall be final,
binding and conclusive. 

        2.36 "Service Provider" means an employee, officer or director of the Company or an Affiliate, or a consultant or adviser
currently providing services to the Company or an Affiliate. 

        2.37 "Stock" means the common stock, par value $.001 per share, of the Company. 

        2.38 "Stock Appreciation Right" or "SAR" means a right granted to a Grantee
under Section 9 hereof. 

        2.39 "Stock Unit" means a bookkeeping entry representing the equivalent of one or more share of Stock as indicated in the
Award Agreement awarded to a Grantee pursuant to Section 10 hereof. 

        2.40 "Subsidiary" means any "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code. 

        2.41 "Substitute Awards" means Awards granted upon assumption of, or in substitution for, outstanding awards previously
granted by a company or other entity acquired by the Company or any Affiliate or with which the Company or any Affiliate combines. 

        2.42 "Ten Percent Stockholder" means an individual who owns more than ten percent (10%) of the total combined voting power of
all classes of outstanding stock of the Company, its parent or any of its 

3

 

Subsidiaries.
In determining stock ownership, the attribution rules of Section 424(d) of the Code shall be applied. 

        2.43 "Unrestricted Stock" means an Award pursuant to Section 11
hereof. 

3.    ADMINISTRATION OF THE PLAN    

        3.1.    Board.    

        The
Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company's certificate of incorporation and by-laws and
applicable law. The Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall
have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be
necessary or appropriate to the administration of the Plan, any Award or any Award Agreement. All such actions and determinations shall be by the affirmative vote of a majority of the members of the
Board present at a meeting or by unanimous consent of the Board executed in writing in accordance with the
Company's certificate of incorporation and by-laws and applicable law. The interpretation and construction by the Board of any provision of the Plan, any Award or any Award Agreement shall
be final, binding and conclusive. 

        3.2.    Committee.    

        The
Board from time to time may delegate to the Committee such powers and authorities related to the administration and implementation of the Plan, as set forth in  Section 3.1 above and other
applicable provisions, as the Board shall determine, consistent with the certificate of incorporation and
by-laws of the Company and applicable law. 

          (i)  Except
as provided in Subsection (ii) and except as the Board may otherwise determine, the Committee, if any, appointed by the Board to administer the Plan shall
consist of two (2) or more Outside Directors of the Company who: (a) qualify as "outside directors" within the meaning of Section 162(m) of the Code and (b) meet such other
requirements as may be established from time to time by the Securities and Exchange Commission for plans intended to qualify for exemption under Rule 16b-3 (or its successor) under
the Exchange Act. 

         (ii)  The
Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Company who need not be Outside Directors, who
may administer the Plan with respect to employees or other Service Providers who are not officers or directors of the Company, may grant Awards under the Plan to such employees or other Service
Providers, and may determine all terms of such Awards. 

In
the event that the Plan, any Award or any Award Agreement entered into hereunder provides for any action to be taken by or determination to be made by the Board, such action may be taken or such
determination may be made by the Committee if the power and authority to do so has been delegated to the Committee by the Board as provided for in this Section. Unless otherwise expressly determined
by the Board, any such action or determination by the Committee shall be final, binding and conclusive. To the extent permitted by law, the Committee may delegate its authority under the Plan to a
member of the Board. 

        3.3.    Terms of Awards.    

        Subject
to the other terms and conditions of the Plan, the Board shall have full and final authority to: 

          (i)  designate
Grantees, 

4

 

         (ii)  determine
the type or types of Awards to be made to a Grantee, 

        (iii)  determine
the number of shares of Stock to be subject to an Award, 

        (iv)  establish
the terms and conditions of each Award (including, but not limited to, the exercise price of any Option, the nature and duration of any restriction or
condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the shares of Stock subject thereto, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options), 

         (v)  prescribe
the form of each Award Agreement evidencing an Award, 

        (vi)  make
Awards to Grantees who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards
to Employees employed in the United States as may, in the judgment of the Board, be necessary or desirable in order to recognize differences in local law or tax policy. The Board also may impose
conditions on the exercise or vesting of Awards in order to minimize the Company's obligation with respect to tax equalization for Employees on assignments outside their home country; and 

       (vii)  amend,
modify, or supplement the terms of any outstanding Award. 

        Notwithstanding
the foregoing, no amendment, modification or supplement of any Award shall, without the consent of the Grantee, impair the Grantee's rights under such Award. 

        The
Company may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in
conflict with any employment agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof or any
confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise in competition with the Company or any Affiliate thereof, to the extent specified in such Award Agreement
applicable to the Grantee. Furthermore, the Company may annul an Award if the Grantee is an employee of the
Company or an Affiliate thereof and is terminated for Cause as defined in the applicable Award Agreement or the Plan, as applicable. The grant of any Award shall be contingent upon the Grantee
executing the appropriate Award Agreement. 

        Notwithstanding
the foregoing, no amendment or modification may be made to an outstanding Option or SAR which reduces the Option Price or SAR Exercise Price, either by lowering the
Option Price or SAR Exercise Price or by canceling the outstanding Option or SAR and granting a replacement Option or SAR with a lower exercise price without the approval of the stockholders of the
Company, provided, that, appropriate adjustments may be made to outstanding Options and SARs pursuant to Section 17. 

        3.4.    Deferral Arrangement.    

        The
Board may permit or require the deferral of any award payment into a deferred compensation arrangement, subject to such rules and procedures as it may establish, which may include
provisions for the payment or crediting of interest or dividend equivalents, including converting such credits into deferred Stock equivalents, restricting deferrals to comply with hardship
distribution rules affecting 401(k) plans. Any such deferrals shall be made in a manner that complies with Code Section 409A. 

        3.5.    No Liability.    

        No
member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award or Award Agreement. 

5

 

        3.6.    Book Entry.    

        Notwithstanding
any other provision of this Plan to the contrary, the Company may elect to satisfy any requirement under this Plan for the delivery of stock certificates through the use
of book-entry. 

4.    STOCK SUBJECT TO THE PLAN    

        Subject
to adjustment as provided in Section 17 hereof, the number of shares of Stock available for issuance under the Plan shall
be 6,306,910. Stock issued or to be issued under the Plan shall be authorized but unissued shares; or, to the extent permitted by applicable law, issued shares that have been reacquired by the
Company. If any shares covered by an Award are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Stock subject thereto, then the number of shares of Stock
counted against the aggregate number of shares available under the Plan with respect to such Award shall, to the extent of any such forfeiture or termination, again be available for making Awards
under the Plan. 

        If
any Award of SARs is settled in shares of Stock, then the number of SARs subject to the Award shall be deemed delivered for purposes of determining the maximum number of share of
Stock available for delivery under the Plan, regardless of the number of shares of Stock that are issued upon the settlement of such SARs. 

        If
the Option Price of any Option granted under the Plan, or if pursuant to Section 18.3 the withholding obligation of any Grantee
with respect to an Option or other Award, is satisfied by tendering shares of Stock to the Company (by either actual delivery or by attestation) or by withholding shares of Stock, the number of shares
of Stock issued net of the shares of Stock tendered or withheld shall be deemed delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan. 

        The
Board shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code
applies. The number of shares of Stock reserved pursuant to Section 4 shall be increased by the corresponding number of Awards assumed and, in
the case of a substitution, by the net increase in the number of shares of Stock subject to Awards before and after the substitution. 

5.    EFFECTIVE DATE, DURATION AND AMENDMENTS    

        5.1.    Effective Date.    

        The
Plan shall be effective as of the Effective Date, subject to approval of the Plan by the Company's stockholders within one (1) year of the Effective Date. Upon approval of the
Plan by the stockholders of the Company as set forth above, all Awards made under the Plan on or after the Effective Date shall be fully effective as if the stockholders of the Company had approved
the Plan on the Effective Date. If the stockholders fail to approve the Plan within one (1) year after the Effective Date, any Awards made hereunder shall be null and void and of no effect. 

        5.2.    Term.    

        The
Plan shall terminate automatically ten (10) years after its adoption by the Board and may be terminated on any earlier date as provided in  Section 5.3. 

        5.3.    Amendment and Termination of the Plan.    

        The
Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any shares of Stock as to which Awards have not been made. An amendment shall be contingent
on approval of the Company's stockholders to the extent stated by the Board, required by applicable law or required by applicable stock exchange listing requirements. In addition, an amendment will be
contingent on approval of the Company's stockholders if the amendment would: (i) materially increase 

6

 

the
benefits accruing to participants under the Plan, (ii) materially increase the aggregate number of shares of Stock that may be issued under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan. No Awards shall be made after termination of the Plan. No amendment, suspension, or termination of the Plan shall, without the consent of
the Grantee, impair rights or obligations under any Award theretofore awarded under the Plan. 

6.    AWARD ELIGIBILITY AND LIMITATIONS    

        6.1.    Service Providers and Other Persons.    

        Subject
to this Section 6, Awards may be made under the Plan to: (i) any Service Provider to the Company or of any
Affiliate, including any Service Provider who is an officer or director of the Company, or of any Affiliate, as the Board shall determine and designate from time to time, (ii) any Outside
Director, and (iii) any other individual whose participation in the Plan is determined to be in the best interests of the Company by the Board. 

        6.2.    Successive Awards and Substitute Awards.    

        An
eligible person may receive more than one (1) Award, subject to such restrictions as are provided herein. Notwithstanding  Sections 8.1 and 9.1 the Option Price of an Option or the grant price
of an SAR that is a Substitute Award may be less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock on the original date of grant provided that the Option Price or
grant price in determined in accordance with the principles of Code Section 424 and the regulations thereunder. 

        6.3.    Limitation on Shares of Stock Subject to Awards and Cash
Awards.    

        During
any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, but only after such time as the reliance period described in
Treas. Reg. Section 1.162-27(f)(2) has expired: 

          (i)  the
maximum number of shares of Stock subject to Options or SARs that can be awarded under the Plan to any person eligible for an Award under  Section 6 hereof is 333,333 per calendar year; 

         (ii)  the
maximum number of shares that can be awarded under the Plan, other than pursuant to an Option or SARs, to any person eligible for an Award under  Section 6 hereof is 333,333 per calendar year; and

        (iii)  the
maximum amount that may be earned as an Annual Incentive Award or other cash Award in any calendar year by any one (1) Grantee shall be $2,000,000 and the
maximum amount that may be earned as a Performance Award or other cash Award in respect of a performance period by any one (1) Grantee shall be $5,000,000. 

        The
preceding limitations in this Section 6.3 are subject to adjustment as provided in  Section 17 hereof. 

7.    AWARD AGREEMENT    

        Each
Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine. Award Agreements granted from time
to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such
Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the absence of such specification such options shall be deemed Non-qualified Stock
Options. 

7

 

8.    TERMS AND CONDITIONS OF OPTIONS    

        8.1.    Option Price.    

        The
Option Price of each Option shall be fixed by the Board and stated in the Award Agreement evidencing such Option. The Option Price of each Option shall be at least the Fair Market
Value on the Grant Date of a share of Stock; provided, however, that in the event that a Grantee is a
Ten Percent Stockholder, the Option Price of an Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not less than one hundred and ten percent (110%) of the Fair
Market Value of a share of Stock on the Grant Date. In no case shall the Option Price of any Option be less than the par value of a share of Stock. 

        8.2.    Vesting.    

        Subject
to Sections 8.3 and 17.3 hereof, each Option granted under the Plan shall become
exercisable at such times and under such conditions as shall be determined by the Board and stated in the Award Agreement. For purposes of this  Section 8.2, fractional numbers of shares of Stock
subject to an Option shall be rounded down to the next nearest whole number. No Option shall
be exercisable in whole or in part prior to the date the Plan is approved by the stockholders of the Company as provided in Section 5.1 hereof. 

        8.3.    Term.    

        Each
Option granted under the Plan shall terminate, and all rights to purchase shares of Stock thereunder shall cease, upon the expiration of ten (10) years from the date such
Option is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to such Option;  provided, however, that in the event that the Grantee is a Ten Percent Stockholder, an Option granted to
such Grantee that is intended to be an Incentive Stock Option shall not be exercisable after the expiration of five (5) years from its Grant Date. 

        8.4.    Termination of Service.    

        Each
Award Agreement shall set forth the extent to which the Grantee shall have the right to exercise the Option following termination of the Grantee's Service. Such provisions shall be
determined in the sole discretion of the Board, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service. 

        8.5.    Limitations on Exercise of Option.    

        Notwithstanding
any other provision of the Plan, in no event may any Option be exercised, in whole or in part, prior to the date the Plan is approved by the stockholders of the Company
as provided herein or after the occurrence of an event referred to in Section 17 hereof which results in termination of the Option. 

        8.6.    Method of Exercise.    

        An
Option that is exercisable may be exercised by the Grantee's delivery to the Company of written notice of exercise on any business day, at the Company's principal office, on the form
specified by the Company. Such notice shall specify the number of shares of Stock with respect to which the Option is being exercised and shall be accompanied by payment in full of the Option Price of
the shares for which the Option is being exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to an Award. The
minimum number of shares of Stock with respect to which an Option may be exercised, in whole or in part, at any time shall be the lesser of (i) one hundred (100) shares or such lesser
number set forth in the applicable Award Agreement and (ii) the maximum number of shares available for purchase under the Option at the time of exercise. 

8

 

        8.7.    Rights of Holders of Options.    

        Unless
otherwise stated in the applicable Award Agreement, an individual holding or exercising an Option shall have none of the rights of a stockholder (for example, the right to receive
cash or dividend payments or distributions attributable to the subject shares of Stock or to direct the voting of the subject shares of Stock) until the shares of Stock covered thereby are fully paid
and issued to him. Except as provided in Section 17 hereof, no adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date of such issuance. 

        8.8.    Delivery of Stock Certificates.    

        Promptly
after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option. 

        8.9.    Transferability of Options.    

        Except
as provided in Section 8.10, during the lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity or
incompetency, the Grantee's guardian or legal representative) may exercise an Option. Except as provided in Section 8.10, no Option shall be
assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution. 

        8.10.    Family Transfers.    

        If
authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or part of an Option which is not an Incentive Stock Option to any Family Member. For the
purpose of this Section 8.10, a "not for value" transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic
relations order in settlement of marital property rights; or (iii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Grantee)
in exchange for an interest in that entity. Following a transfer under this Section 8.10, any such Option shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer. Subsequent transfers of transferred Options are prohibited except to Family Members of the original Grantee in accordance
with this Section 8.10 or by will or the laws of descent and distribution. The events of termination of Service of  Section 8.4 hereof shall
continue to be applied with respect to the original Grantee, following which the Option shall be exercisable by the
transferee only to the extent, and for the periods specified, in Section 8.4. 

        8.11.    Limitations on Incentive Stock Options.    

        An
Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company; (ii) to the
extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the shares of Stock
with respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee's employer and
its Affiliates) does not exceed $100,000. This limitation shall be applied by taking Options into account in the order in which they were granted. 

9.    TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS    

        9.1.    Right to Payment and Grant Price.    

        An
SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise thereof, the excess of (i) the Fair Market Value of one share of Stock on the date of
exercise over (ii) the grant price of the SAR as determined by the Board. The Award Agreement for an SAR shall specify the grant price of the SAR, which shall be at least the Fair Market Value
of a share of Stock on the date of grant. SARs may be granted in conjunction with all or part of an Option granted under the Plan or at any subsequent time during the term of such Option, in
conjunction with all or part of any 

9

 

other
Award or without regard to any Option or other Award. An SAR granted in tandem with an outstanding Option following the Grant Date of such Option may have a grant price that is equal to the
Option Price, even if such grant price is less than the Fair Market Value of a share of Stock on the grant date of the SAR.

        9.2.    Other Terms.    

        The
Board shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which an SAR may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following termination of Service or upon other conditions,
the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Stock will be delivered or deemed to be delivered to Grantees, whether or not an
SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR. 

10.    TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS    

        10.1.    Grant of Restricted Stock or Stock Units.    

        Awards
of Restricted Stock or Stock Units may be made for no consideration (other than par value of the shares which is deemed paid by Services already rendered). Stock Units may also be
referred to as performance shares. If so indicated in the Award Agreement at the time of grant, a Grantee may vest in more than one hundred percent (100%) of the number of Stock Units awarded to the
Grantee. 

        10.2.    Restrictions.    

        At
the time a grant of Restricted Stock or Stock Units is made, the Board may, in its sole discretion, establish a period of time (a "restricted period") applicable to such Restricted
Stock or Stock Units. Each Award of Restricted Stock or Stock Units may be subject to a different restricted period. The Board may, in its sole discretion, at the time a grant of Restricted Stock or
Stock Units is made, prescribe restrictions in addition to or other than the expiration of the restricted period, including the satisfaction of corporate or individual performance objectives, which
may be applicable to all or any portion of the Restricted Stock or Stock Units in accordance with Sections 14.1 and  14.2. Notwithstanding the foregoing,
Restricted Stock and Stock Units that vest solely by the passage of time shall not vest in full in less than three
(3) years from the Grant Date. Restricted Stock and Stock Units for which vesting may be accelerated by achieving performance targets shall not vest in full in less than one (1) year
from the Grant Date. Neither Restricted Stock nor Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the restricted period or prior to the
satisfaction of any other restrictions prescribed by the Board with respect to such Restricted Stock or Stock Units. 

        10.3.    Restricted Stock Certificates.    

        The
Company shall issue, in the name of each Grantee to whom Restricted Stock has been granted, stock certificates representing the total number of shares of Restricted Stock granted to
the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such certificates for
the Grantee's benefit until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse, or (ii) such certificates shall be delivered to the Grantee,  provided,
however, that such certificates shall bear a legend or legends that comply with the applicable
securities laws and regulations and makes appropriate reference to the restrictions imposed under the Plan and the Award Agreement. 

10

 

        10.4.    Rights of Holders of Restricted Stock.    

        Unless
the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such Stock and the right to receive any dividends declared or paid
with respect to such Stock. The Board may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, stock dividend, combination of
shares, or other similar transaction shall be subject to the restrictions applicable to the original Grant. 

        10.5.    Rights of Holders of Stock Units.    

        10.5.1.    Voting and Dividend Rights.    

        Unless
the Board otherwise provides in an Award Agreement, holders of Stock Units shall have no rights as stockholders of the Company. The Board may provide in an Award Agreement
evidencing a grant of Stock Units that the holder of such Stock Units shall be entitled to receive, upon the Company's payment of a cash dividend on its outstanding Stock, a cash payment for each
Stock Unit held equal to the per-share dividend paid on the Stock. Such Award Agreement may also provide that such cash payment will be deemed reinvested in additional Stock Units at a
price per unit equal to the Fair Market Value of a share of Stock on the date that such dividend is paid. 

        10.5.2.    Creditor's Rights.    

        A
holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to
the terms and conditions of the applicable Award Agreement. 

        10.6.    Termination of Service.    

        Unless
the Board otherwise provides in an Award Agreement or in writing after the Award Agreement is issued, upon the termination of a Grantee's Service, any Restricted Stock or Stock
Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of
Restricted Stock or Stock Units, the Grantee shall have no further rights with respect to such Award, including but not limited to any right to vote Restricted Stock or any right to receive dividends
with respect to shares of Restricted Stock or Stock Units. 

        10.7.    Purchase of Restricted Stock.    

        The
Grantee shall be required, to the extent required by applicable law, to purchase the Restricted Stock from the Company at a Purchase Price equal to the greater of (i) the
aggregate par value of the shares of Stock represented by such Restricted Stock or (ii) the Purchase Price, if any, specified in the Award Agreement relating to such Restricted Stock. The
Purchase Price shall be payable in a form described in Section 12 or, in the discretion of the Board, in consideration for past Services rendered
to the Company or an Affiliate. 

        10.8.    Delivery of Stock.    

        Upon
the expiration or termination of any restricted period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to shares of Restricted
Stock or Stock Units settled in Stock shall lapse, and, unless otherwise provided in the Award Agreement, a stock certificate for such shares shall be delivered, free of all such restrictions, to the
Grantee or the Grantee's beneficiary or estate, as the case may be. 

11

 

11.    TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS    

        The
Board may, in its sole discretion, grant (or sell at par value or such other higher purchase price determined by the Board) an Unrestricted Stock Award to any Grantee pursuant to
which such Grantee may receive shares of Stock free of any restrictions ("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
or sold as described in the preceding sentence in respect of past services and other valid consideration, or in lieu of, or in addition to, any cash compensation due to such Grantee. 

12.    FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK    

        12.1.    General Rule.    

        Payment
of the Option Price for the shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents
acceptable to the Company. 

        12.2.    Surrender of Stock.    

        To
the extent the Award Agreement so provides, payment of the Option Price for shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock may be
made all or in part through the tender to the Company of shares of Stock, which shares, if acquired from the Company and if so required by the Company, shall have been held for at least six months at
the time of tender and which shall be valued, for purposes of determining the extent to which the Option Price or Purchase Price has been paid thereby, at their Fair Market Value on the date of
exercise or surrender. 

        12.3.    Cashless Exercise.    

        With
respect to an Option only (and not with respect to Restricted Stock), to the extent permitted by law and to the extent the Award Agreement so provides, payment of the Option Price
for shares purchased pursuant to the exercise of an Option may be made all or in part by delivery (on a form acceptable to the Board) of an irrevocable direction to a licensed securities broker
acceptable to the Company to sell shares of Stock and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any withholding taxes described in  Section 18.3.

        12.4.    Other Forms of Payment.    

        To
the extent the Award Agreement so provides, payment of the Option Price for shares purchased pursuant to exercise of an Option or the Purchase Price for Restricted Stock may be made
in any other form that is consistent with applicable laws, regulations and rules. 

13.    TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS    

        13.1.    Dividend Equivalent Rights.    

        A
Dividend Equivalent Right is an Award entitling the recipient to receive credits based on cash distributions that would have been paid on the shares of Stock specified in the Dividend
Equivalent Right (or other award to which it relates) if such shares had been issued to and held by the recipient. A Dividend Equivalent Right may be granted hereunder to any Grantee as a component of
another Award or as a freestanding award. The terms and conditions of Dividend Equivalent Rights shall be specified in the grant. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair Market Value on
the date of reinvestment. Dividend Equivalent Rights may be settled in cash or Stock or a combination thereof, in a single installment or installments, all determined in the sole discretion of the
Board. A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend 

12

 

Equivalent
Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other award, and that such Dividend Equivalent Right shall expire or be forfeited or
annulled under the same conditions as such other award. A Dividend Equivalent Right granted as a component of another Award may also contain terms and conditions different from such other award. 

        13.2.    Termination of Service.    

        Except
as may otherwise be provided by the Board either in the Award Agreement or in writing after the Award Agreement is issued, a Grantee's rights in all Dividend Equivalent Rights or
interest equivalents shall automatically terminate upon the Grantee's termination of Service for any reason. 

14.    TERMS AND CONDITIONS OF PERFORMANCE AND ANNUAL INCENTIVE AWARDS    

        14.1.    Performance Conditions.    

        The
right of a Grantee to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Board.
The Board may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited under Sections 14.2 hereof in the case of a Performance Award or Annual
Incentive Award intended to qualify under Code Section 162(m). If and to the extent required under Code Section 162(m), any power or authority relating to a Performance Award or Annual
Incentive Award intended to qualify under Code Section 162(m), shall be exercised by the Committee and not the Board. 

        14.2.    Performance or Annual Incentive Awards Granted to Designated Covered
Employees.    

        If
and to the extent that the Committee determines that a Performance Award or Annual Incentive Award to be granted to a Grantee who is designated by the Committee as likely to be a
Covered Employee should qualify as "performance-based compensation" for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award or Annual Incentive
Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section 14.2. 

        14.2.1.    Performance Goals Generally.    

        The
performance goals for such Performance Awards or Annual Incentive Awards shall consist of one (1) or more business criteria and a targeted level or levels of performance with
respect to each of such criteria, as specified by the Committee consistent with this Section 14.2. Performance goals shall be objective and shall
otherwise meet the requirements of Code Section 162(m) and regulations thereunder including the requirement that the level or levels of performance targeted by the Committee result in the
achievement of performance goals being "substantially uncertain." The Committee may determine
that such Performance Awards or Annual Incentive Awards shall be granted, exercised and/or settled upon achievement of any one (1) performance goal or that two (2) or more of the
performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance Awards or Annual Incentive Awards. Performance goals may differ for Performance Awards or
Annual Incentive Awards granted to any one Grantee or to different Grantees. 

        14.2.2.    Business Criteria.    

        One
or more of the following business criteria for the Company, on a consolidated basis, and/or specified subsidiaries or business units of the Company (except with respect to the total
stockholder return and earnings per share criteria), shall be used exclusively by the Committee in establishing performance goals for such Performance or Annual Incentive Awards: (i) total
stockholder return; (ii) such total stockholder return as compared to total return (on a comparable basis) of a publicly available index such as, but not limited to, the Standard &
Poor's 500 Stock Index; (iii) net income; 

13

 

(iv) pretax
earnings; (v) earnings before interest expense, taxes, depreciation and amortization; (vi) pretax operating earnings after interest expense and before bonuses, service
fees, and extraordinary or special items; (vii) operating margin; (viii) earnings per share; (ix) return on equity; (x) return on capital; (xi) return on investment;
(xii) operating earnings; (xiii) working capital; (xiv) ratio of debt to stockholders' equity and (xv) revenue. Business criteria may be measured on an absolute basis or on
a relative basis (i.e., performance relative to peer companies) and on a GAAP or non-GAAP basis. 

        14.2.3.    Timing For Establishing Performance Goals.    

        Performance
goals shall be established not later than ninety (90) days after the beginning of any performance period applicable to such Performance or Annual Incentive Awards, or
at such other date as may be required or permitted for "performance-based compensation" under Code Section 162(m). 

        14.2.4.    Settlement of Performance or Annual Incentive Awards; Other
Terms.    

        Settlement
of such Performance or Annual Incentive Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection with such Performance or Annual Incentive Awards. The Committee shall specify the circumstances in which such
Performance or Annual Incentive Awards shall be paid or forfeited in the event of termination of Service by the Grantee prior to the end of a performance period or settlement of Performance Awards. 

        14.3.    Written Determinations.    

        All
determinations by the Committee as to the establishment of performance goals, the amount of any Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards, and the amount of any Annual Incentive Award pool or potential individual Annual Incentive Awards and the amount of final Annual
Incentive Awards, shall be made in writing in the case of any Award intended to qualify under Code Section 162(m). To the extent required to comply with Code Section 162(m), the
Committee may delegate any responsibility relating to such Performance Awards or Annual Incentive Awards. 

        14.4.    Status of Section 14.2 Awards Under Code
Section 162(m).    

        It
is the intent of the Company that Performance Awards and Annual Incentive Awards under Section 14.2 hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the meaning of Code Section 162(m) and regulations thereunder shall, if so designated by the Committee, constitute
"qualified performance-based compensation" within the meaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms of  Section 14.2, including the definitions of Covered
Employee and other terms used therein, shall be interpreted in a manner consistent with Code
Section 162(m) and regulations thereunder. The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Grantee will be a Covered Employee with respect
to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee, at the time of grant of Performance Awards or an Annual
Incentive Award, as likely to be a Covered Employee with respect to that fiscal year. If any provision of the Plan or any agreement relating to such Performance Awards or Annual Incentive Awards does
not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to
such requirements. 

15.    PARACHUTE LIMITATIONS    

        Notwithstanding
any other provision of this Plan or of any other agreement, contract, or understanding heretofore or hereafter entered into by a Grantee with the Company or any
Affiliate, except an agreement, contract, or understanding entered into that expressly provides tax gross-up payments for the excise tax imposed by Section 4999 of the Code, (an
"Other Agreement"), and 

14

 

notwithstanding
any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Grantee (including groups or classes of Grantees or beneficiaries of which
the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Grantee (a "Benefit
Arrangement"), if the Grantee is a "disqualified individual," as defined in Section 280G(c) of the Code, any Option, Restricted Stock or Stock Unit held by that Grantee
and any right to receive any payment or other benefit under this Plan shall not become exercisable or vested (i) to the extent that such right to exercise, vesting, payment, or benefit, taking
into account all other rights, payments, or benefits to or for the Grantee under this Plan, all Other Agreements, and all Benefit Arrangements, would cause any payment or benefit to the Grantee under
this Plan to be considered a "parachute payment" within the meaning of Section 280G(b)(2) of the Code as then in effect (a "Parachute Payment")
and (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts received by the Grantee from the Company under this Plan, all Other Agreements, and all
Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Grantee without causing any such payment or benefit to be considered a Parachute Payment.
In the event that the receipt of any such right to exercise, vesting, payment, or benefit under this Plan, in conjunction with all other rights, payments, or benefits to or for the Grantee under any
Other Agreement or any Benefit Arrangement would cause the Grantee to be considered to have received a Parachute Payment under this Plan that would have the effect of decreasing the
after-tax amount received by the Grantee as described in clause (ii) of the preceding sentence, then the Grantee shall have the right, in the Grantee's sole discretion, to designate
those rights, payments, or benefits under this Plan, any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to avoid having the payment or benefit to the Grantee
under this Plan be deemed to be a Parachute Payment. 

16.    REQUIREMENTS OF LAW    

        16.1.    General.    

        The
Company shall not be required to sell or issue any shares of Stock under any Award if the sale or issuance of such shares would constitute a violation by the Grantee, any other
individual exercising an Option, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares subject to an Award upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the Grantee
or any other individual exercising an Option pursuant to such Award unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Award. Specifically, in connection with the Securities Act, upon the exercise of any
Option or the delivery of any shares of Stock underlying an Award, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by such Award, the Company
shall not be required to sell or issue such shares unless the Board has received evidence satisfactory to it that the Grantee or any other individual exercising an Option may acquire such shares
pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Board shall be final, binding, and conclusive. The Company may, but shall in no event
be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or
the issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that an Option
shall not be exercisable until the shares of Stock covered by such Option are registered or are exempt from registration, the exercise of such Option 

15

 

(under
circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption. 

        16.2.    Rule 16b-3.    

        During
any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards pursuant to the Plan
and the exercise of Options granted hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by
the Board does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and deemed advisable by the Board, and shall not affect
the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan in any respect necessary to satisfy the
requirements of, or to take advantage of any features of, the revised exemption or its replacement. 

17.    EFFECT OF CHANGES IN CAPITALIZATION    

        17.1.    Changes in Stock.    

        If
the number of outstanding shares of Stock is increased or decreased or the shares of Stock are changed into or exchanged for a different number or kind of shares or other securities
of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of shares for which grants of
Options and other Awards may be made under the Plan shall be adjusted proportionately and accordingly by the Company. In addition, the number and kind of shares for which Awards are outstanding shall
be adjusted proportionately and accordingly so that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such
event. Any such adjustment in outstanding Options or SARs shall not change the aggregate Option Price or SAR Exercise Price payable with respect to shares that are subject to the unexercised portion
of an outstanding Option or SAR, as applicable, but shall include a corresponding proportionate adjustment in the Option Price or SAR Exercise Price per share. The conversion of any convertible
securities of the Company shall not be treated as an increase in shares effected without receipt of consideration. Notwithstanding the foregoing, in the event of any distribution to the Company's
stockholders of securities of any other entity or other assets (including an extraordinary cash dividend but excluding a non-extraordinary dividend payable in cash or in stock of the
Company) without receipt of consideration by the Company, the Company may, in such manner as the Company deems appropriate, adjust (i) the number and kind of shares subject to outstanding
Awards and/or (ii) the exercise price of outstanding Options and Stock Appreciation Rights to reflect such distribution. 

        17.2.    Reorganization in Which the Company Is the Surviving Entity Which does not Constitute a
Corporate Transaction.    

        Subject
to Section 17.3 hereof, if the Company shall be the surviving entity in any reorganization, merger, or consolidation of the
Company with one or more other entities which does not constitute a Corporate Transaction, any Option or SAR theretofore granted pursuant to the Plan shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to such Option or SAR would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding
proportionate adjustment of the Option Price or SAR Exercise Price per share so that the aggregate Option Price or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR
Exercise Price of the shares remaining subject to the Option or SAR immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement
evidencing an Award, any restrictions applicable to such Award shall apply as well to any 

16

 

replacement
shares received by the Grantee as a result of the reorganization, merger or consolidation. In the event of a transaction described in this  Section 17.2, Stock Units shall be adjusted so as to apply
to the securities that a holder of the number of shares of Stock subject to the Stock
Units would have been entitled to receive immediately following such transaction. 

        17.3.    Corporate Transaction.    

        Upon
the occurrence of a Corporate Transaction, subject to the exceptions set forth in the last sentence of this Section 17.3 and
the last sentence of Section 17.4,: 

          (i)  all
outstanding shares of Restricted Stock shall be deemed to have vested, and all Stock Units shall be deemed to have vested and the shares of Stock subject thereto
shall be delivered, immediately prior to the occurrence of such Corporate Transaction, and 

         (ii)  either
of the following two (2) actions shall be taken: 

        (A)  fifteen
(15) days prior to the scheduled consummation of a Corporate Transaction, all Options and SARs outstanding hereunder shall become immediately exercisable
and shall remain exercisable for a period of fifteen (15) days, or 

        (B)  the
Board may elect, in its sole discretion, to cancel any outstanding Awards of Options, Restricted Stock, Stock Units, and/or SARs and pay or deliver, or cause to be
paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Board acting in good faith), in the case of Restricted Stock or Stock Units, equal to the
formula or fixed price per share paid to holders of shares of Stock and, in the case of Options or SARs, equal to the product of the number of shares of Stock subject to the Option or SAR (the
"Award Shares") multiplied by the amount, if any, by which (I) the formula or fixed price per share paid to holders of shares of Stock pursuant
to such transaction exceeds (II) the Option Price or SAR Exercise Price applicable to such Award Shares. 

        With
respect to the Company's establishment of an exercise window, (i) any exercise of an Option or SAR during such fifteen-day period shall be conditioned upon the
consummation of the event and shall be effective only immediately before the consummation of the event, and (ii) upon consummation of any Corporate Transaction the Plan, and all outstanding but
unexercised Options and SARs shall terminate. The Board shall send written notice of an event that will result in such a termination to all individuals who hold Options and SARs not later than the
time at which the Company gives notice thereof to its stockholders. This Section 17.3 shall not apply to any Corporate Transaction to the extent
that provision is made in writing in connection with such Corporate Transaction for the assumption or continuation of the Options, SARs, Stock Units and Restricted Stock theretofore granted, or for
the substitution for such Options, SARs, Stock Units and Restricted Stock for new common stock options and stock appreciation rights and new common stock stock units and restricted stock relating to
the stock of a successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number of shares (disregarding any consideration that is not common stock) and option and
stock appreciation right exercise prices, in which event the Plan, Options, SARs, Stock Units and Restricted Stock theretofore granted shall continue in the manner and under the terms so provided. 

        17.4.    Adjustments.    

        Adjustments
under this Section 17 related to shares of Stock or securities of the Company shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the nearest whole share. The Board shall determine the effect of a Corporate Transaction upon Awards other than Options, SARs,
Stock Units and Restricted Stock, and such effect shall be set forth in the 

17

 

appropriate
Award Agreement. The Board may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, for different provisions to apply to an Award
in place of those described in Sections 17.1, 17.2 and 17.3. 

        17.5.    No Limitations on Company.    

        The
making of Awards pursuant to the Plan shall not affect or 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, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets. 

18.    GENERAL PROVISIONS    

        18.1.    Disclaimer of Rights.    

        No
provision in the Plan or in any Award or Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Company or any Affiliate,
or to interfere in any way with any contractual or other right or authority of the Company either to increase or decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the Company. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the
applicable Award Agreement, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company or an Affiliate. The obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those
amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or
otherwise
hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan. 

        18.2.    Nonexclusivity of the Plan.    

        Neither
the adoption of the Plan nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations upon the right and
authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a
particular individual or particular individuals) as the Board in its discretion determines desirable, including, without limitation, the granting of stock options otherwise than under the Plan. 

        18.3.    Withholding Taxes.    

        The
Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind
required by law to be withheld with respect to the vesting of or other lapse of restrictions applicable to an Award or upon the issuance of any shares of Stock upon the exercise of an Option or
pursuant to an Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to the Company or the Affiliate, as the case may be, any amount that the Company or the Affiliate may
reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Company or the Affiliate, which may be withheld by the Company or the Affiliate, as
the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or the Affiliate to withhold shares of Stock
otherwise issuable to the Grantee or (ii) by delivering to the Company or the Affiliate shares of Stock already owned by the Grantee. The shares of Stock so delivered or withheld shall have an
aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined by the Company or the
Affiliate as of the date that the amount of tax to be withheld is to 

18

 

be
determined. A Grantee who has made an election pursuant to this Section 18.3 may satisfy his or her withholding obligation only with shares of
Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements. 

        18.4.    Captions.    

        The
use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or such Award Agreement. 

        18.5.    Other Provisions.    

        Each
Award granted under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole discretion. 

        18.6.    Number and Gender.    

        With
respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires. 

        18.7.    Severability.    

        If
any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and
thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction. 

        18.8.    Governing Law.    

        The
validity and construction of this Plan and the instruments evidencing the Awards hereunder shall be governed by the laws of the State of Colorado, other than any conflicts or choice
of law rule or principle that might otherwise refer construction or interpretation of this Plan and the instruments evidencing the Awards granted hereunder to the substantive laws of any other
jurisdiction. 

        18.9.    Section 409A of the Code.    

        To
the extent that the Board determines that a Grantee would be subject to the additional twenty percent (20%) tax imposed on certain deferred compensation arrangements pursuant to
Section 409A of the Code, as a result of any provision of any Award granted under this Plan, such provision shall be deemed amended to the minimum extent necessary to avoid application of such
additional tax. The nature of any such amendment shall be determined by the Board. 

*      *      * 

19

 

        To
record adoption of the Plan by the Board as of July 11, 2006, and approval of the Plan by the stockholders on July 11, 2006, the Company has caused its authorized
officer to execute the Plan. 

	 	 	ELLORA ENERGY INC.
	

 	
 	

By:	

/s/  T. SCOTT MARTIN      

	 	 	Name:	T. Scott Martin

	 	 	Title:	CEO

20

QuickLinks

Exhibit 10.1

ELLORA ENERGY INC. AMENDED AND RESTATED 2006 STOCK INCENTIVE PLAN

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