**EXHIBIT        4.3**

 

 

 

**CRYPTOLOGICINC.**

 

 

 

**_______________________________________**

 

 

**LONG        TERM INCENTIVE PLAN (LTIP)**

**authorizing the issuance of**

 

**PERFORMANCE SHARE UNIT PLAN**

 

**_______________________________________**

 

 

**(Effective: January 1, 2005)**

 

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| 1. | **Purpose.**The Plan is intended                        to enhance the Company’s ability to attract and retain talented                        individuals to serve as officers and executives of the Company and of its                        Affiliated Entities and Associated Entities and to promote alignment of                        interests between such officers and executives and the shareholders of the                        Company by providing a performance-based incentive for the acquisition of                        cash and/or common shares under the Plan, with the common shares to be                        acquired by way of purchases in the open market by the Company or                        designated agent on behalf of participants. |
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| 2. | **Definitions.**As used in this                        Plan, the following terms have the following meanings: |
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|   | a. | **“Affiliated Entity**”                        means an affiliated body corporate of the Company within the meaning of                        the*Business Corporations Act*(Ontario) whose board of directors has adopted a resolution                        consenting to participation in the Plan. |
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|   | b. | “**Associated                        Entity**” means a body corporate in which the                        Company or one of its Affiliated Entities has a significant interest, whose                        board of directors has adopted a resolution consenting to participating in                        the Plan. |
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|   | c. | “**Board**                        ” means the Board of Directors of the Company. |
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|   | d. | “**CEO**                        ” means the chief executive officer of the Company. |
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|   | e. | “**Change of                        Control**” shall mean: |
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|   | (i) | the acquisition by any person, or any persons acting jointly                        or in concert (as determined by the Securities Act (Ontario)), whether                        directly or indirectly, of voting securities of the Company which, together                        with all other voting securities of the Company held by such persons,                        constitutes, in the aggregate, more than 25% of all outstanding voting                        securities of the Company; |
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|   | (ii) | an amalgamation, arrangement or other form of business                        combination of the Company with another corporation or entity which results                        in the holders of voting securities of that other corporation or entity                        holding, in the aggregate, more than 50% of all outstanding voting                        securities of the corporation resulting from the business                        combination; |
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|   | (iii) | a sale, disposition, lease or exchange to or with another                        person or persons (other than a corporation that is a subsidiary of the                        Company as defined in the Securities Act (Ontario)) of property of the                        Company representing 50% or more of the net book value of the assets of the                        Company, determined as of the date of the most recently published audited                        annual or unaudited quarterly interim financial statements of the Company;                        or |
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|   | (iv) | a change in the composition of the Board over any twelve                        month period such that more than 50% of the persons who were directors of                        the Company at the beginning of the period are no longer directors at the                        end of the period, unless such change is not the result of an event                        referred to in subparagraphs e (i), (ii), or (iii) above. |
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|   | f. | “**Committee**                        ” means the Compensation Committee of the Board or such other                        committee of the Board as may from time to time be responsible for matters                        relating to executive compensation. |
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|   | g. | “**Common                        Share**” means a common share in the capital                        of the Company as constituted at the date hereof or any shares or other                        securities into which such Common Shares may have been changed,                        reclassified, subdivided, consolidated or converted. |
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|   | h. | “**Company**                        ” means CryptoLogic Inc. or a successor. |
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|   | i. | “**Discontinuance                        Transaction**” means a transaction referred                        to in Section 5. |
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|   | j. | “**Effective                        Date**” means the effective date of the Plan                        set out in Section 3. |
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|   | k. | “**Fair Market                        Value**” means with respect to any particular                        date, the weighted average trading price of a Common Share on the Toronto                        Stock Exchange on the five Trading Days prior to the particular date,                        subject to adjustment for any special cash dividend declared or paid prior                        to the date of payment under the Plan, on the basis that the amount of any                        such dividend shall be added to the weighted average trading price at the                        time of calculation, unless the ex-dividend date with respect to the                        special dividend occurs after the date of payment under the Plan, in which                        case no such adjustment will be made. |
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|   | l. | “**Long-Term                        Disability**” means a permanent disability                        due to a medical condition that prevents a Participant, physically or                        mentally, from executing his or her job due to an absence from work for a                        period that exceeds 26 weeks and is expected to be permanent; such medical                        condition and long-term status requiring, unless otherwise waived by the                        CEO and Vice-President, Human Resources on behalf of the Company,                        certification by an Independent Medical Examiner (as defined in the                        Company’s “Policy & Procedure On Absenteeism Including                        Short-Term Disability”, as revised from time to time, or any                        successor policy thereof) and/or by the Medical Examiner selected by the                        Company’s Group Insurance Plan Carrier, after such 26                        weeks. |
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|   | m. | “**Participant**                        ” means (i) the CEO, president, vice-president, director or                        director-level executive and any other officer of the Company; (ii) any                        president, vice-president, director or director-level executive of an                        Affiliated |
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Entity or of an Associated Entity; or (iii) a consultant of the Company or        of an Affiliated Entity, who has been granted PSUs as designated in writing by the        Committee upon the recommendation of the CEO, but does not include members of the Board of        Directors of the Company.

         

|   | n. | “**Performance                        Cycle**” means the three (3) year period from                        the 1st day of the fiscal year during which a grant is made to                        the last day of the second fiscal year following the fiscal year during                        which the grant has been made. |
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|   | o. | “**Plan**                        ” means this Performance Share Unit Plan, as it may be amended from                        time to time. |
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|   | p. | “**Performance Share                        Unit**” or                        “**PSU**” means                        a book keeping unit maintained on the books of the Company, the value of                        which on any particular date shall be equal to the Fair Market                        Value. |
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|   | q. | “**Retirement**                        ” means retirement in accordance with the retirement policy of the                        Company as may be adopted from time to time. |
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|   | r. | “**Termination**                        ” means a Participant who ceases to be an employee of the Company or                        of an Affiliated Entity or an Associated Entity for any reason other than                        the transfer of the Participant to the employment of another Affiliated                        Entity or Associated Entity of the Company. |
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|   | s. | “**Vesting                        Conditions**” means the financial and other                        performance objectives to be attained in order for the PSUs or any portion                        thereof to become vested from time to time, in whole or in part. |
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| 3. | **Effective Date.**The Plan shall,                        subject to the obtaining of all required regulatory and shareholder                        approvals, be effective as of the fiscal year of the Company which                        commenced on January 1, 2005 and will apply to PSUs granted after such                        date. |
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| 4. | **Participation in the Plan.**Participation in the Plan will start beginning with the                        first grant or, for Participants whose employment commences after the first                        grant, from the date when they are designated in writing by the Committee,                        upon the recommendation of the CEO, to become Participants. |
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| 5. | **Corporate Direction**. If an                        Affiliated Entity and/or Associated Entity and/or the Company change(s) the                        corporate strategy or business direction as approved by the Board that                        results in a material change to Management’s ability to achieve                        Vesting Conditions during any performance cycle, the Committee shall make                        all adjustments as are appropriate to give effect to the Plan as if such                        change(s) had not occurred. |
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| 6. | **Discontinued Business.**If an                        Affiliated Entity and/or Associated Entity and/or the Company approves the                        sale of all or substantially all of their respective assets to an                        arm’s length party or to wind up or discontinue the respective                        businesses of such Affiliated Entity, Associated Entity or the Company, as                        the case may be (in each case, a                        “**Discontinuance                        Transaction**”), Participants of such                        Affiliated Entity, Associated Entity or the Company, shall, as of the date                        of such announcement, automatically and without further notice cease to be                        eligible for any further grants of PSUs hereunder, all PSUs shall                        immediately vest for such Participant as of the date of approval of the                        Discontinuance Transaction, and settlement shall be effected by the Company                        using performance criteria of earnings per share and share price as of the                        date of approval of the Discontinuance Transaction. In such event, the                        performance achieved for performance measurement purposes shall be deemed                        to be no less than target performance for purposes of satisfying vesting                        conditions as at the date of completion of the Discontinuance                        Transaction. |
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| 7. | **Administration of the Plan.**The                        Plan shall be administered by the Committee. The Committee is authorized to                        interpret, construe and administer the Plan, to establish, amend and                        rescind any rules and regulations relating to the Plan, and to make any                        other determinations and perform all other acts that it deems necessary or                        desirable for the administration of the Plan. The Committee may correct any                        defect or rectify any omission or reconcile any inconsistency in the Plan                        in the manner and to the extent the Committee deems necessary or desirable.                        Any decision of the Committee in the interpretation, construction and                        administration of the Plan, or any action, all as described herein, shall                        lie within its sole and absolute discretion and shall be final, nor any                        member thereof, not any officer or employee of the Company, shall be liable                        for connection with the Plan, and the members of the Committee and the                        officers and employees of the Company shall be entitled to indemnification                        by the Company in respect of any claim, loss, damage or expense (including                        legal fees and disbursements) arising therefrom to the fullest extent                        permitted by law. The expenses of administering the Plan shall be borne by                        the Company. |
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| 8. | **Grant of PSUs.**Periodically,                        the Committee, in consultation with the CEO, will determine the size of                        grants in respect of any Participant or class of Participants, together                        with the applicable Vesting Conditions. The Company shall notify each                        Participant in writing of the number of PSUs granted and of the Vesting                        Conditions thereof. |
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| 9. | **Vesting of PSUs Issued under this Plan.** |
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| a. | At the end of a Performance Cycle, the number of PSUs                        granted will become vested, in whole or in part, based on the level of                        achievement of the Vesting Conditions established by the Committee, upon                        the recommendation of the CEO, at the beginning of the Performance Cycle.                        The Vesting Conditions will be based on corporate and/or business unit                        objective. All PSUs in respect of which the |
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Vesting Conditions are not met at the end of a Performance Cycle shall be        automatically cancelled.

         

| b. | In the case of a Participant’s Termination before the                        end of the second year of the 2005 through 2007 Performance Cycle, or                        before the end of any subsequent Performance Cycle other than through a                        Participant’s death, Long-Term Disability or Retirement in the                        circumstances described in paragraph 8(c) or (d) below, all PSUs shall be                        cancelled immediately as of the date of Termination (without taking into                        account any applicable notice period or severance payments made in lieu of                        such notice). |
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| c. | In the case of a Participant’s death, all outstanding                        PSUs vest immediately and target performance will be deemed to be the                        performance measurement achieved as at the time of death. |
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| d. | In the case of a Participant’s Retirement or Long Term                        Disability, the PSUs will vest at the end of the Performance Cycle on the                        same basis as for active Participants. |
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| e. | Following the end of a Performance Cycle, on a date which                        shall in any event not be earlier than the date on which the audited annual                        financial statements of the Company are approved by the Board, and not be                        later than December 31 after the end of the relevant Performance Cycle, and                        subject to paragraphs 8(b), (c) and (d) above, the Participant, or his                        successor, will receive from the Company, an amount payable either in cash,                        Common Shares or a combination of each, for each PSU which has vested at                        the end of the Performance Cycle for which such PSUs have been granted ,                        regardless of whether the Participant remains in the employ of the Company                        at the time of payment, unless the Participant is terminated for Cause                        prior to the date of payment. |
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| f. | The Common Shares purchased for the benefit of Participants                        under the Plan shall be considered fully paid in consideration of past                        services rendered that are not less in value that the fair equivalent of                        the money that the Company would have received if the Common Shares had                        been issued for money. |
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| 9. | **Change Of Control – Accelerated Vesting.**Notwithstanding paragraph 8 above, |
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| A. | in the event of a Change of Control, if the Plan is not                        amended by the Company and: |
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|   | (i) | the Participant is terminated from his engagement by the                        Company upon the Change of Control, all PSUs shall immediately vest for                        such Participant as of the date of the Change of Control, and settlement                        shall be effected by the Company using performance criteria of earnings per                        share and share price at the time of such termination; |
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|   | (ii) | the Participant is terminated by the Company within one year                        of the Change of Control, all PSUs will vest at the time of such                        termination and settlement shall be effected using performance criteria of                        earnings per share and share price as of the time of the Change of Control;                        or |
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|   | (iii) | no termination of the Participant occurs within one year                        therefrom, the basic vesting rights of the Participant shall not be                        altered. |
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| B | In the event of a Change of Control and the Plan is amended                        as a result thereof, and: |
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|   | (i) | the Participant is terminated as of the date of the Change                        of Control, then all PSUs shall thereupon vest using the criteria of                        earnings per share and share price as of the time of the Change of                        Control; |
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|   | (ii) | the Participant is terminated within one year of the Change                        of Control, a number of PSUs will be deemed to have vested and be payable                        at the time of Change of Control, equal to the number of PSUs granted for                        the relevant Performance Cycle multiplied by the ratio arrived at by                        dividing by 36 the number of months elapsed in the Performance Cycle as of                        the time of the Change of Control, with any partial month being rounded up                        to the next whole month (the "Prorated Amount"), with the Prorated Amount                        to be paid out at that time and based on the criteria of earnings per share                        and share price at the time of the Change of Control, with the balance of                        the PSUs to vest and be paid out at the time of termination based on the                        criteria of earnings per share and share price as of the time of the Change                        of Control; or |
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|   | (iii) | the Participant is not terminated under subsections B(i) and                        B(ii) hereof, then the Prorated Amount shall be paid out at the time of the                        Change of Control based on the criteria of earnings per share and share                        price as of the date of Change of Control, and the unpaid balance shall                        paid out in equal annual instalments over the remaining vesting                        period. |
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| 10. | **Adjustments and Reorganizations.**In the event of any stock dividend (other than a dividend                        which may be paid in cash or in shares at the option of the shareholder),                        stock split, combination or exchange of shares, merger, consolidation,                        recapitalization, amalgamation, plan of arrangement, reorganization,                        spin-off or other distribution (other than normal cash dividends) of the                        Company’s assets to shareholders or any other change affecting the                        Common Shares, such adjustments as are required to reflect such change                        shall be made with respect to the number of PSUs in the accounts maintained                        for each Participant. |
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| 11. | **Transferability of PSUs.**The                        rights and interests of a Participant in respect of the PSUs held in such                        Participant’s account shall not be transferable or assignable other                        than by will or the laws of succession to the legal representative of                        the |
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Participant or, subject to applicable law, to a dependent or relation,        including without limitation a spouse of the Participant.

         

| 12. | **No Right to Service.**Neither                        participation in the Plan nor any action under the Plan shall be construed                        to give any Participant a right to be retained as an employee of the                        Company or of any Affiliated Entity or Associated Entity. |
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| 13. | **Successors and Assigns.**The                        Plan shall be binding on all successors and assigns of the Company and a                        Participant, including without limitation, the estate of such Participant                        and the executor, liquidator, administrator or trustee of such estate, or                        any receiver or trustee in bankruptcy or representative of the                        Participant’s creditors. |
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| 14. | **Plan Amendment.**The Board may,                        in its sole discretion and without the consent of any Participant, amend                        the Plan at any time, provided however, that no amendment shall reduce the                        number of PSUs credited to any Participant prior to such amendment. No                        amendment shall be effective until all applicable approvals, if any, of the                        regulatory authorities, the applicable stock exchanges and the shareholders                        of the Company, have been obtained. |
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| 15. | **Plan Termination.**The Board                        may, in its sole discretion and without the consent of any Participant,                        terminate the Plan at any time by giving written notice thereof to ach                        Participant. Following termination of the Plan, additional PSUs shall not                        be credited to the accounts of Participants. Previously granted PSUs shall                        become vested as per the conditions described under Section 5, as if a                        Discontinuance Transaction had occurred. |
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| 16. | **Governing Law.**The validity,                        construction and effect of the Plan and any actions taken or relating to                        the Plan shall be governed by the substantive laws, but not the choice of                        law rules, of the Province of Ontario and the laws of Canada applicable                        thereto. |
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