2007 EQUITY INCENTIVE PLAN
Purpose . The purpose of this Equity Incentive Plan (the “ Plan ”) is to advance the interests of
Kentucky USA Energy, Inc., a Delaware corporation (the “ Company ”) and its Affiliates (as defined below) by
inducing eligible individuals of outstanding ability and potential to join and remain with, or to provide consulting or
advisory services to, the Company or its Affiliates, by encouraging and enabling eligible employees, Outside
Directors (as defined below), consultants, and advisors to acquire proprietary interests in the Company, and by
providing participating eligible employees, Outside Directors, consultants, and advisors with an additional
incentive to promote the success of the Company. These purposes are accomplished by providing for the
granting of Incentive Stock Options, Nonqualified Stock Options, Reload Options, Stock Appreciation Rights,
and Restricted Stock (all as defined below) to eligible employees, Outside Directors, consultants, and advisors.
Definitions . As used in the Plan, the following terms have the meanings indicated:
Affiliate ” means a “parent corporation” or a “subsidiary corporation” (as set forth in
Code Sections 424(e) and 424(f), respectively) of the Company.
Applicable Withholding Taxes ” means the aggregate minimum amount of federal,
state, local, and foreign income, payroll, and other taxes that the Employer is required to withhold in connection
with the grant, vesting, or exercise of any Award.
“ Award ” means an Incentive Stock Option, a Nonqualified Stock Option, a Reload
Option, a Stock Appreciation Right, or Restricted Stock.
“ Beneficiary ” means the person or entity designated by the Participant, in a form
approved by the Company, to exercise the Participant’s rights with respect to an Award after the Participant’s
death. If the Participant does not validly designate a Beneficiary, or if the designated person no longer exists, then
the Participant’s Benefi