Exhibit 10.2

 

Teton Energy Corporation

2005 Long Term Incentive Plan

ADMINISTRATION – 2006 AWARDS

 

1.               PURPOSE

 

The purpose of the Teton Energy Corporation (the “Company”) 2005 Long Term
Incentive Plan (the “Plan”), as set forth in the Plan, as amended from time to
time, is to give the Company a competitive advantage in attracting, retaining
and motivating officers, employees, directors, and certain consultants and
advisors through a long term incentive plan providing stock and
performance-based awards linked to shareholder value. The expectation is that
the Company will be able to provide incentives and rewards to Board Members,
Executive Management, Key Employees, and key consultants or operating partners,
who are expected to contribute to the financial results, revenue and profits,
growth, and increase in value of the Company, and to enhance the Company’s
ability to attract and retain persons who will make such contributions. By
meeting these objectives, the Plan is intended to benefit the interests of the
Company’s shareholders.

 

This Plan Administration document is intended to implement the rules consistent
with the Plan with respect to the issuances of Performance Share Units, as
defined below.

 

2.               DEFINITIONS

 

Unless the context clearly indicates to the contrary or otherwise is in conflict
with applicable provisions of the Plan, the following words and terms have the
meanings set forth below:

 

(a)                                  Asset Sale. A sale or other disposition of
all or substantially all of the assets of the Company or a Primary Operating
Subsidiary.

 

(b)                                 Award. A grant to a Participant of a
specified number of Performance Share Units.

 

(c)                                  Award Date. The first day of the month in
which the Award is made.

 

(d)                                 Board. The Board of Directors of the
Company.

 

(e)                                  Board Member. A member of the Board who is
not then also an employee of the Company.

 

(f)                                    Change of Control. See Plan.

 

(g)                                 Closing. The consummation of a Substantive
Transaction.

 

(h)                                 Committee. The Compensation Committee of the
Board.

 

(i)                                     Common Stock. The common capital stock
of the Company.

 

(j)                                     Company. Teton Energy Corporation, a
corporation incorporated under the laws of the state of Delaware.

 

(k)                                  Disability. See Plan.

 

(l)                                     Effective Date. The later of date on
which the Plan is approved by the Shareholders or July 1, 2005.

 

(m)                               Executive Management. The Company’s Chief
Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and, if applicable,
Chief Operating Officer

 

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(“COO”), and any other officer or executive of the Company that the Committee
designates as Executive Management.

 

(n)                                 GAAP. Generally accepted accounting
principles in effect in the United States.

 

(o)                                 Key Employee. An employee of the Company,
other than Executive Management, who is considered to hold responsibilities
critical to the success of the Company, as determined by the CEO and approved by
the Committee.

 

(p)                                 Market Value. The “Market Value” of a
Substantive Transaction will be the total consideration paid or payable directly
or indirectly to the Company and/or its Shareholders (including holders of
options or other stock rights) in connection with or in anticipation of the
Substantive Transaction, regardless of how allocated or the form of
consideration. The total consideration will include the value of any retained or
acquired interest in the Company or its successor or the right to acquire such
an interest. In the event that all or a portion of the total consideration
includes capital stock, securities, or other property (other than installment
notes), total consideration will include the fair market value of those non-cash
items, as determined by the Board in good faith and on a reasonable basis.

 

(q)                                 Market Value Payout. The payment that a
Participant is entitled to receive pursuant to Section 7(b).

 

(r)                                    Milestone Attainment Payout. A payment
that a Participant is entitled to receive pursuant to Section 7(a).

 

(s)                                  Net Proceeds. With respect to a Substantive
Transaction, the Market Value (i) reduced by the out-of-pocket expenses payable
by the Company or any of its Subsidiaries, including, without limitation,
investment banking fees and expenses, brokerage commissions, finder’s fees, and
legal and accounting fees and expenses, that are directly attributable to the
Substantive Transaction; (ii) reduced by the Performance Period Index; and (iii)
increased by any dividend paid during that period on Common Stock and preferred
stock and by any redemption or other distribution with respect to Common stock
or preferred stock.

 

(t)                                    Participant. Each member of the Board of
Directors who is granted an Award under the terms of the Plan; each member of
Executive Management who is as selected by the Committee to receive an Award
under the Plan; and any Key Employee; and any consultant or operating partners
who or which is selected by the Committee to receive an Award under the Plan.

 

(u)                                 Pendency. With respect to a Substantive
Transaction, the period between the execution of a definitive agreement
regarding the Substantive Transaction and its Closing.

 

(v)                                 Performance Measurement. A Performance
Measurement shall be that factor or those factors which the Committee reasonably
believes will best contribute to a favorable assessment of the Company’s
valuation in the market and achievement of which will provide shareholders with
the highest return upon a Substantive Transaction. The Committee shall set the
Performance Measurement annually upon the granting of each Award and shall
reassess the Performance Measurement prior to each Award Date.

 

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(w)                               Performance Period Index. With respect to the
Unit Value of a Performance Share Unit, initially, December 31, 2004, and
thereafter the last day of the fiscal year preceding the fiscal year in which
the Award Date for that Performance Share Unit occurs.

 

(x)                                   Performance Share Unit. A unit awarded to
a Participant by the Committee pursuant to the Plan, which serves as the basis
to calculate any Milestone Attainment Payout or Market Value Payout due to the
Participant under the terms of the Plan.

 

(y)                                 Performance Share Unit Award Agreement. An
agreement between the Company and a Participant that defines, among other
things, performance measurements and objectives necessary to vest Performance
Share Units.

 

(z)                                   Primary Operating Subsidiary. Any
Subsidiary through which the Company conducts a substantial portion of its
business activities.

 

(aa)                            Probable Reserves. Areas which are unproven but
presumed capable of production because of geological inference, for instance,
proximity to proven reserves in the same reservoir.

 

(bb)                          Proved Not Developed (Behind-Pipe) Reserves.
Estimates of the amount of crude oil or natural gas recoverable by recompleting
existing wells (“PDNP”).

 

(cc)                            Proved Developed Reserves. Estimates of what is
recoverable from existing wells with existing facilities from open, producing
payzones (“PDP”).

 

(dd)                          Proved Reserves. Estimates of the amount of oil or
natural gas believed to be recoverable from known reservoirs under existing
economic and operating conditions.

 

(ee)                            Proved Undeveloped Reserves. Estimates of what
is recoverable through new wells on undrilled acreage, deepening existing wells,
or secondary recovery methods (“PUD”).

 

(ff)                                Reserves. That portion of the identified
resource from which a usable mineral and energy commodity can be economically
and legally extracted at the time of determination, and specifically includes
all categories of reserves unless otherwise specifically excluded.

 

(gg)                          Retirement. The termination of a Participant’s
employment with the Company or a Participant’s Board membership, other than for
Cause, on or after the date as of which the Participant has reached age
fifty-five (55). For purposes of determining a Participant’s years of service,
breaks in service of less than one (1) full year will be disregarded.

 

(hh)                          Shareholders. The persons or entities that own,
beneficially or of record, shares of Common Stock in the Company.

 

(ii)                                  Special Adjustment Item. Any item of
income or expense that, in accordance with GAAP, constitutes an extraordinary
item.

 

(jj)                                  Subsidiary. A business entity that is
controlled by, or under common control with the Company, determined in
accordance with Regulation S-X, 17 CFR §210.1-02(n).

 

(kk)                            Substantive Transaction. A sale, merger, or
other event or transaction that constitutes or results in a Change of Control.

 

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(ll)                                  Term. The five-year period beginning July
1, 2005 and ending June 30, 2010.

 

(mm)                      Termination. With respect to a Participant, (i) a
termination of the Participant’s employment with the Company or the
Participant’s Board membership other than a Termination or for Cause, or (ii) in
the case of a Participant who is an employee of the Company, a termination of
the Participant’s employment with the Company that qualifies the Participant for
severance benefits under any applicable employment agreement.

 

(nn)                          Termination for Cause. With respect to a
Participant who has a written employment agreement with the Company, a
termination of that Participant’s employment with the Company for a reason that
constitutes cause under the terms of that employment agreement. With respect to
a Participant who does not have a written employment agreement with the Company,
“Termination for Cause” means  the termination of the Participant’s employment
with the Company or the Participant’s Board membership due to, in addition to
the elements defined in Section 2(e) of the Plan, (i) the Participant’s willful
and continued failure to substantially perform his or her duties to the Company
(other than any such failure resulting from the Participant’s Disability) after
a written demand for substantial performance is delivered to the Participant by
the Board or, in the case of an employee, the CEO, which demand specifically
identifies the manner in which the Board or the CEO, as applicable, believes
that the Participant has not substantially performed his or her duties; or (ii)
the Participant’s breach of any confidentiality agreement with the Company or
any of its Subsidiaries or any other unauthorized disclosure by the Participant
of confidential, proprietary information of the Company or any of its
Subsidiaries or affiliates; or (iii) the conviction of the Participant for the
commission of a felony including the entry of a guilty or no contest plea (and
all rights to appeal the conviction have expired or have been fully exercised),
or any willful or grossly negligent action or inaction by the Participant that
has a materially adverse effect on the Company or any of its Subsidiaries, or if
the Participant pleads guilty or no contest to any charges of having committed
any felony that involves embezzlement, theft, bribery, a violation of the
federal securities laws or other federal laws or any other business related
crime that is alleged to have been committed against the Company, or the
shareholders, as a group, or in connection with the Participant’s performance of
services to the Company.

 

(oo)                          Unit Value. The “Unit Value” of a Performance
Share Unit on a Valuation Date will be one share of common stock.

 

(pp)                          Valuation Date. The last day of each fiscal year
of the Company.

 

3.               PARTICIPANTS

 

Executive Management, Key Employee Participants, consultants, and operating
partners will be selected by the Committee, as of the date specified in the
document evidencing their selection. The CEO of the Company will keep an updated
list of all Participants, which will be attached to the Plan as Schedule “A.” 
All Board Members will be Participants as of January 1, 2006 or, if later, the
date they are first elected to the Board.

 

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4.               PERFORMANCE SHARE UNITS AVAILABLE

 

The total number of Performance Share Units that may be awarded under the Plan
in respect of the 2006 Award is two million, five hundred thousand units
(2,500,000), of which 750,000 will be allocated to the Board Members, and
1,342,250 will be allocable to Executive Management and Key Employees, 275,000
will be allocated to consultants or operating partners, and 132,750 will be held
in reserve to provide for adjustment or special circumstances in the opinion of
the Committee, with input from the CEO; provided, however, that the CEO may not
provide input with respect to his own compensation. In the event that the
132,750 Performance Share Units are not used in respect of special
circumstances, they may be divided pro rata among the remaining Participants.
Allocated Performance Share Units are in respect of both base objectives and
stretch objectives. The Committee will have no obligation to award all of the
Performance Share Units allocable to Executive Management and Key Employees,
consultants, or operating partners.

 

In the event that a Participant leaves the qualifying affiliation with the
Company, then, notwithstanding Section 10, the Performance Share Units awarded
to that Participant may be awarded to other Participants. In the case of a Board
Member’s Termination for Cause, the Performance Share Units of that Board Member
will be awarded to the person filling that Board Member’s vacancy on the Board.
In the case of a Termination for Cause of an Executive Management, Key Employee
Participant, a terminated consultant, or terminated operating partner, the
Performance Share Units of that Participant may be awarded by the Committee to
other existing Participants or new Participants.

 

The Committee shall also be empowered to issue from the Performance Share Units
held for special situations to any individual (or group of individuals),
including directors, employees, or consultants for exceptional performance or
significant contribution that causes or otherwise effects a significant,
demonstrable, and verifiable increase in the Company’s equity value.

 

5.               GRANTS OF AWARDS

 

As soon as practicable after the Effective Date and after each Valuation Date,
the Committee, in its sole discretion and in accordance with applicable
provisions of the Plan, will determine and grant Awards, if any, to Participants
under the Plan as of that Valuation Date in such number of Performance Share
Units as they may determine. Promptly after granting an Award to a Participant,
the Committee will notify the Participant of the number of Performance Share
Units included in the Award and the date as of which the Award is effective.

 

6.               ACCOUNTS AND CREDITED AMOUNTS

 

(a)                                  Accounts. Each Participant will have a
bookkeeping account under the Plan, which will be used as a record of the
amounts credited to the Participant under the Plan. The amount to be credited to
the account of each Participant as of each Valuation Date (the “Credited
Amount”) will be the aggregate of the Unit Value, as of that Valuation Date, of
all of the Performance Share Units awarded to the Participant prior to that
Valuation Date.

 

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(b)                                 Determination of Credited Amount. The
Credited Amount in each account as of each Valuation Date will be verified by
the Company’s CFO. Each such verification will be conclusive and binding on the
Company and each Participant.

 

(c)                                  Reports. Each Participant, while a
Participant, will be furnished with a written statement within one hundred and
twenty (120) days after the end of each fiscal year of the Company ending within
the Term. The statement will show the number of Performance Share Units awarded
to the Participant, the Unit Value of each such Performance Share Unit (with a
calculation, in reasonable detail, of the Unit Value), and the Credited Amount
in the Participant’s account, all as of the Valuation Date coincident with the
end of the fiscal year for which the statement is made.

 

7.               PAYMENTS

 

(a)                                  Milestone Attainment Payout.

 

1)                                      Provided the milestones established in
Performance Unit Award Agreement have been met, if the Closing of a Substantive
Transaction has not occurred on or before December 31, 2006, each Participant
will be paid his or her Credited Amount as of December 31, 2006, as soon as
practicable after the audited financial statements of the Company as of that
date and for the year then ended are available, but in no event later than March
15, 2007. If the Closing of a Substantive Transaction does occur on or before
December 31, 2006, the first scheduled Milestone Attainment Payout will not be
made.

 

2)                                      Provided the milestones established in
Performance Unit Award Agreement have been met, if the Closing of a Substantive
Transaction has not occurred on or before December 31, 2007, each Participant
will be paid his or her Credited Amount as of December 31, 2007, reduced by any
amount of previous Milestone Attainment Payment received by the Participant, as
soon as practicable after the audited financial statements of the Company as of
that date and for the year then ended are available, but in no event later than
March 15, 2008. If the Closing of a Substantive Transaction does occur on or
before December 31, 2007, the second scheduled Milestone Attainment Payout will
not be made.

 

3)                                      Provided the milestones established in
Performance Unit Award Agreement have been met, if the Closing of a Substantive
Transaction has not occurred on or before December 31, 2008, each Participant
will be paid his or her Credited Amount as of December 31, 2008, reduced by any
amount of previous Milestone Attainment Payments received by the Participant, as
soon as practicable after the audited financial statements of the Company as of
that date and for the year then ended are available, but in no event later than
March 15, 2009. If the Closing of a Substantive Transaction does occur on or
before December 31, 2008, the third scheduled Milestone Attainment Payout will
not be made.

 

(b)                                 Market Value Payout.

 

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1)                                      If the Closing of a Substantive
Transaction occurs on or prior to December 31, 2006, each Participant will be
paid, within twenty-five (25) days after the Closing of the Substantive
Transaction, the amount derived by multiplying the number of Performance Share
Units credited to that Participant’s account by the price of the stock as valued
at the Closing. In the event that the Substantive Transaction results in
Shareholders’ receiving stock of the acquiring corporation, then each
Participant shall receive stock of the acquiring corporation on the same terms
as the Shareholders assuming a distribution of shares based on the number of
Performance Share Units credited to that Participant’s account immediately prior
to such Substantive Transaction.

 

2)                                      If a Substantive Transaction has not
occurred on or before December 31, 2006, but the Closing of a Substantive
Transaction occurs on or before December 31, 2007, each Participant will be
paid, within twenty-five (25) days after the Closing of the Substantive
Transaction, the amount derived by multiplying the number of units credited to
that Participant’s account by the price of the stock as valued at the Closing.
In the event that the Substantive Transaction results in Shareholders’ receiving
stock of the acquiring corporation, then each Participant shall receive stock of
the acquiring corporation on the same terms as the Shareholders assuming a
distribution of shares based on the number of Performance Share Units credited
to that Participant’s account immediately prior to such Substantive Transaction.

 

3)                                      If a Substantive Transaction has not
occurred on or before December 31, 2007, but the Closing of a Substantive
Transaction occurs on or before December 31, 2008, each Participant will be
paid, within twenty-five (25) days after the Closing of the Substantive
Transaction, the amount derived by multiplying the number of units credited to
that Participant’s account by the price of the stock as valued at the Closing.
In the event that the Substantive Transaction results in Shareholders’ receiving
stock of the acquiring corporation, then each Participant shall receive stock of
the acquiring corporation on the same terms as the Shareholders assuming a
distribution of shares based on the number of Performance Share Units credited
to that Participant’s account immediately prior to such Substantive Transaction.

 

8.               VESTING

 

(a)                                  General Rule.

 

Vesting of grants shall be in accordance with the parameters established by the
Plan. Notwithstanding any implication to the contrary, except as provided in
Sections 8(b) and (c) below, no Participant will have the right to receive (i) a
Milestone Attainment Payout unless he or she is an employee of the Company, a
Board Member, or a consultant (or operating partner) actively providing services
to the Company as of the last day of the period with respect to which the Equity
Payout is made, or (ii) a Market Value Payout unless he or she is an employee of
the Company, a Board Member, or a consultant actively providing services to the
Company on the date of the Closing of the Substantive Transaction that gives
rise

 

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to the Market Value Payout. Except as provided in Section 9, each Participant
who is employed by the Company, or is a Board Member, or who is a consultant (or
operating partner) and providing routine services to the Company as of the
applicable date specified above with respect to a Milestone Attainment Payout or
a Market Value Payout will be entitled to the payout even though he or she may
cease to be an employee or Board Member prior to the date on which the payout is
actually made.

 

(b)                                 Special Exception. In the event that, prior
to the last day of the period with respect to which a Milestone Attainment
Payout is made, a Participant terminates employment with or service to the
Company or Board Membership due to a Termination or his or her death,
Disability, or Retirement, the Participant (or his or her beneficiary, in the
case of death) will be entitled to receive a partial Milestone Attainment Payout
for that period. The amount of the partial Milestone Attainment Payout will be
based upon the combination of (i) the Participant’s Credited Amount as of the
termination of his or her employment or Board membership, and (ii) (A) the
additional Credited Amount that would have been credited to the Participant for
that fiscal year had he or she not terminated until after the end of the
applicable performance period, multiplied by (B) a fraction, the numerator of
which is the number of full months in the applicable performance period during
which the Participant was an employee of the Company or a Board Member and the
denominator of which is equal to the total number of months in the applicable
period. The partial Milestone Attainment Payout shall be made at the time
regular Milestone Attainment Payouts for the applicable performance period are
made to other Participants pursuant to Section 6. In the event that, during the
Pendency of a Substantive Transaction for which a Closing subsequently occurs, a
Participant terminates employment with the Company or Board Membership due to a
Termination or his or her death, Disability, or Retirement, then in lieu of the
partial Milestone Attainment Payout described above, the Participant (or his or
her beneficiary in the case of death) will be entitled to a Market Value Payout.
The amount of the Market Value Payout will be based on the Performance Share
Units awarded to the Participant prior to his or her termination and will be
equal to the amount of the Market Value Payout the Participant would have
received if he or she had not terminated until after the Closing. The Market
Value Payout will be made at the time regular Market Value Payouts are made to
other Participants pursuant to Section 6.

 

(c)                                  In the event the Plan terminates, all
Participants who are then employees or consultants of the Company or Board
Members will become entitled to a partial Milestone Attainment Payout, the
amount of which will be based upon the combination of (i) the Participant’s
Credited Amount as of the Plan termination date, and (ii) (A) the additional
Credited Amount that would have been credited to the Participant for the fiscal
year if the Plan had not terminated, (B) multiplied by a fraction, the numerator
of which is the number of full months from the beginning of the applicable
Milestone Attainment Payout period during which the Plan terminated until the
effective date of the Plan termination and the denominator of which is equal to
the total number of months in the applicable period. If the Plan is terminated
during the Pendency of a Substantive Transaction or in anticipation of a
Substantive Transaction that is under serious consideration, then in the event
that a Closing occurs with respect to that

 

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Substantive Transaction, in lieu of the partial Milestone Attainment Payout
described in the preceding sentence, the Participants who are employees of the
Company, Board Members, engaged consultants, or active operating partners on the
date that Board action is taken to terminate the Plan will receive the Market
Value Payout they would have received under Section 6 had the Plan not
terminated. The Market Value Payout will be made within twenty-five (25) days of
the Closing of the Substantive Transaction.

 

9.               TERMINATION OF RIGHTS

 

Notwithstanding any other implication to the contrary in the Plan, no
Participant will be entitled to any Milestone Attainment Payout or Market Value
Payout if the Participant’s employment with the Company or membership on the
Board has been terminated for Cause (or the consultant has been termination for
reasons suggestive of cause had such consultant been an employee, or such
operating partner’s contract with the Company has been terminated). In the event
a Participant has merely been charged by a governmental authority with
committing any such crime, or the Participant has been convicted of the crime
but all rights to appeal the conviction have not expired and have not been fully
exercised, at the time any Milestone Attainment Payout or Market Value Payout is
payable, the Company may pay the amount of the payment into an interest-bearing
escrow account, and the amount, plus any interest earned on it will be paid to
(A) the Participant upon the earlier to occur (1) of the Participant having been
acquitted of the charges,  (2) the charges having been dismissed, or (3) the
conviction having been reversed on appeal, and (B) to the Company upon the
Participant (1) having been convicted of the charges, and all rights to appeal
the conviction having expired or having been fully exercised, or (2) having
entered a plea of guilty or “no contest” to the charges.

 

10.         ADJUSTMENTS

 

Notwithstanding any implication to the contrary in the Plan, if any calculation
of a Milestone Attainment Payout or Unit Value is made as of a Valuation Date
other than the last day of any fiscal year of the Company, the calculation shall
be subject to recalculation and appropriate adjustment in the event the
preparation of the audited financial statements of the Company and its
Subsidiaries for the fiscal year reveals that the initially reported Performance
Measurements are required under GAAP to be adjusted.

 

11.         MISCELLANEOUS

 

(a)                                  Assignments. A Participant’s rights and
interest under the Plan in any Performance Share Units or the appreciation of
the Unit Value of Performance Share Units may not be assigned or transferred
except by will or by the laws of descent or distribution.

 

(b)                                 No Rights Implied. No employee of the
Company, Board Member, or other person shall have any claim or right to be
granted an Award under the Plan. Neither the Plan nor any action taken under the
Plan will be construed as giving an employee of the Company or Board Member any
right to be retained in the employment or Board membership of the Company.

 

(c)                                  Withholding. Payments from the Plan
constitute compensation, and the Company will have the right to deduct from all
payments any federal, state, or local taxes required by law to be withheld with
respect to those payments.

 

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(d)                                 Status of Rights. Performance Share Units
will be used solely as a device for the measurement and determination of the
amount to be paid to Participants as provided in the Plan. Performance Share
Units will not constitute, or be treated as, the property or a trust fund of any
kind of any Participant. All amounts at any time attributable to Performance
Share Units will be and remain the sole property of the Company, and all
Participants’ rights under the Plan are limited to the rights to receive
distributions as provided in the Plan. The Plan creates only a contractual
obligation to each Participant on the part of the Company. No Participant will
have any rights against the Company with respect to the benefits under the Plan
except as a general unsecured creditor of the Company. No Participant will be
entitled to the payment of any dividend or any interest, except as specifically
provided to the contrary in the Plan, with respect to any amount to which the
Participant is otherwise entitled under the Plan. The rights with respect to all
Performance Share Units that have not been awarded as of the occurrence of a
Change of Control, or the expiration of the Term, will revert to the Company.

 

(e)                                  Effect on Other Benefits. The appreciation
in the Unit Value of the Performance Share Units awarded under the Plan to each
Participant will not be deemed salary or other compensation to the Participant
for the purpose of computing benefits to which the Participant may be entitled
under any retirement or other benefit plan maintained by the Company or under
any other arrangement for the benefit of the Participant.

 

(f)                                    Severability. The invalidity or
unenforceability of any provision of the Plan will not affect the validity or
enforceability of any other provision or any other portion of that provision.

 

(g)                                 Conflict Resolution. This plan of
administration and the rights conferred on Participants hereunder are subject to
all terms and conditions of the Plan, as the same may be amended from time to
time, as well as any such other rules and regulations (whether herein or in any
other document) as the Committee may adopt for administration of the Plan. It is
expressly understood that the Committee is authorized to administer, construe,
and make all determinations necessary or appropriate to the administration of
the Plan and this plan of administration, all of which shall be binding on the
participant. Any inconsistency between this plan of administration and the Plan
shall be resolved in favor of the Plan.

 

(h)                                 Governing Law. The Plan will be construed in
accordance with, and governed by, the laws of the State of Colorado with respect
to contracts made effective and to be performed wholly within that state.

 

(i)                                     Headings. The headings and captions of
the sections and subsections of the Plan are provided for convenience of
reference only and will not in any way affect the meaning or interpretation of
any provision of the Plan.

 

12.         BENEFICIARIES

 

Each Participant will be required to sign a form provided by the Company by
which the Participant will designate a beneficiary or beneficiaries to receive
the amount that the Participant is entitled to receive under the Plan in the
event of the Participant’s death. In the

 

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event all designated beneficiaries predecease the Participant, then the
Participant’s beneficiaries, in the priority of order listed, will be the
following:

 

(a)                                  The trustee then existing of any inter
vivos (living) trust (including any amendment to the trust up to the time of the
Participant’s death) established by the Participant for the benefit of the
Participant’s surviving spouse and/or issue, provided the Participant’s
surviving spouse, if any, is either a signatory to the trust instructions, or
acknowledges, in a writing to the Committee, the surviving spouse’s approval of
the trust;

 

(b)                                 The Participant’s surviving spouse, if any;

 

(c)                                  The Participant’s lawful living issue
(including adopted issue) who survive the Participant, with each such issue’s
beneficial interest to be determined by right of representation; and

 

(d)                                 The Participant’s estate.

 

13.         TERMINATION AND AMENDMENT OF PLAN

 

No Awards may be made after the grants made for 2010, unless such grant is in
respect of a new Participant who was not in the Company’s employ or otherwise
affiliated with the Company on the Valuation Date for 2010. The Committee may at
any time, and from time to time, amend, alter, or suspend the Plan in whole or
in part; provided, however, no such alteration, amendment, or suspension may,
without the consent of the Participant to whom any Award has been granted,
reduce the Participant’s Credited Amount as of the date of the amendment, or
materially adversely affect the Participant’s right to receive a benefit based
on that Credited Amount. Subject to the provisions of Section 8(c), the Company,
by action of the Board, may terminate the Plan any time. The Plan will terminate
automatically upon the Closing of a Substantive Transaction, subject to the
consummation of the transactions contemplated hereby.

 

IN WITNESS WHEREOF, Teton Energy Corporation, by resolutions duly adopted by its
Compensation, has caused the Administration of the Long-Term Incentive Plan,
which plan was approved by its shareholders on June 28, 2005, to be executed by
its duly authorized officer this 17th day of March, 2006.

 

 

TETON ENERGY CORPORATION

 

 

 

 

 

By:

 

 

 

 

Chairman

 

 

 

 

ATTEST:

 

 

 

 

 

 

Secretary

 

 

11

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