exv10w3



 





Exhibit 10.3




CANARGO ENERGY COPORATION

2004 LONG TERM STOCK INCENTIVE PLAN



     Section 1. Purpose of the Plan. The purpose of the 2004 Long Term Stock
Incentive Plan (the “Plan”) is to aid CanArgo Energy Corporation (the
“Corporation”) and its subsidiaries in securing and retaining directors,
consultants, officers and other key employees of outstanding ability and to
motivate such employees to exert their best efforts on behalf of the
Corporation and its subsidiaries. In addition, the Corporation expects that it
will benefit from the added interest which the respective optionees and
AWARDEES will have in the welfare of the Corporation as a result of their
ownership or increased ownership of the Common Stock of the Corporation (the
“Stock”).



     Section 2. Administration. (a) the Board of Directors of the Corporation
(the “Board”) shall designate the Compensation Committee of the Board or
another Committee, which may be a sub-committee of the Compensation Committee,
to be composed of not less than two (2) Directors (such Committee being
referred to herein as the “Committee”) who shall serve at the pleasure of the
Board. Each member of the Committee shall be a “non-employee” director within
the meaning of Rule 16b-3(b)(3)(i) under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), as such Rule or any other comparable rule may
be in effect from time to time, while serving on the Committee. The Board
shall fill any vacancies on the Committee and may remove any member of the
Committee at any time with or without cause. The Committee shall select its
chairman and hold its meetings at such times and places as it may determine. A
majority of the whole Committee present at a meeting at which a quorum is
present, or an act approved in writing by all members of the Committee, shall
be an act of the Committee. The Committee shall have full power and authority,
subject to such resolutions not inconsistent with the provisions of the Plan as
may from time to time be issued or adopted by the Board (provided the entire
Board acting on the matter are disinterested persons), to grant to Eligible
Persons (as defined herein) pursuant to the provisions of the Plan (i) stock
options to purchase shares, (ii) stock appreciation rights, (iii) restricted
stock, (iv) deferred stock, or (v) other Stock-based awards permitted hereunder
(each of the foregoing being an “AWARD” and collectively, the “AWARDS” and the
recipients of such Awards being sometimes referred to herein as “AWARDEES”).
The Committee shall also interpret the provisions of the Plan and any AWARD
issued under the Plan (and any agreements relating thereto) and supervise the
administration of the Plan.



          (b) The Committee shall: (i) select the directors, consultants, officers
and other key employees of the Corporation and its subsidiaries to whom AWARDS
may from time to time be granted hereunder; (ii) determine whether incentive
stock options (“QSOs”) under Section 422 of the Internal Revenue Code of 1986,
as the same may be amended from time to time (hereinafter referred to as the
“Code”), nonqualified stock options (“NQSOs”), stock appreciation rights,
restricted stock, deferred stock, or other Stock-based awards, or a combination
of the foregoing, are to be granted hereunder; (iii) determine the number of
shares



 









 






to be covered by each AWARD granted hereunder; (iv) determine the terms and
conditions, not inconsistent with the provisions of the Plan, of any AWARD
granted hereunder (including but not limited to any restriction and forfeiture
condition on such AWARD and/or the shares of Stock relating thereto); (v)
determine whether, to what extent and under what circumstances AWARDS may be
settled in cash; (vi) determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an AWARD under
this Plan shall be deferred either automatically or at the election of the
AWARDEE; and (vii) determine whether, to what extent, and under what
circumstances option grants and/or other AWARDS under the Plan are to be made,
and operate, on a tandem basis.



          (c) All decisions made by the Committee pursuant to the provisions of the
Plan and related orders or resolutions of the Board (as and to the extent
permitted hereunder) shall be final, conclusive and binding on all persons,
including the Corporation, its shareholders, employees and Plan AWARDEES.



          (d) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any AWARD
thereunder.



     Section 3. Stock Subject to the Plan. Except as otherwise provided by this
Section 3, the total number of shares of Stock available for distribution under
the Plan is ten million (10,000,000). The total number of shares of stock with
respect to which AWARDS may be granted to any AWARDEE in any year is 5,000,000
shares. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares. If any shares that have been optioned
cease to be subject to option because the option has expired or has been deemed
to have expired or has been surrendered pursuant to the Plan, or if any shares
of restricted stock are forfeited or such AWARD otherwise terminates without
the actual or deemed delivery of such shares, such shares shall be added back
into the total number of shares of Stock available for grant and distribution
under the Plan and again be subject to grant as an AWARD under the Plan.



     In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, extraordinary cash dividend, or other change
in corporate structure affecting the Stock, such adjustment shall be made in
the aggregate number of shares which may be delivered under the Plan, in the
number and/or option price of shares subject to outstanding options granted
under the Plan, and/or in the number of shares subject to restricted stock,
deferred stock, or other Stock-based awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion; provided
that the number of shares subject to any AWARDS shall always be a whole number;
and provided further that, with respect to QSOs, no such adjustment shall be
authorized to the extent that such adjustment would constitute a modification
as defined in Section 424(h)(3) of the Code or cause the Plan to violate
Section 422(b)(1) of the Code or any successor provision thereto. Such
adjusted option price shall also be used to determine the amount payable by the
Corporation upon the exercise of any stock appreciation right associated with
any option. In addition, subject to the limitations provided in Section 11,
the Committee is authorized to make adjustments in the terms and conditions of,
and performance criteria relating to, AWARDS in recognition of unusual or
nonrecurring events (including, without limitation, events described in this
paragraph) affecting the Corporation or



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the financial statements of the Corporation, or in response to changes in
applicable laws, regulations or accounting principles.



     Section 4. Eligibility. Directors, consultants, officers and other key
employees of the Corporation and its subsidiaries who are responsible for the
management, growth, profitability and protection of the business of the
Corporation and its subsidiaries are eligible to be granted AWARDS under the
Plan (each an “Eligible Person” and collectively “Eligible Persons”). The
AWARDEES under the Plan shall be selected from time to time by the Committee,
in its sole discretion, from among those eligible, and the Committee shall
determine, in its sole discretion, the number of shares covered by each stock
option, the number of stock appreciation rights (if any) granted to each
optionee, and the number of shares (if any) subject to restricted stock,
deferred stock or other Stock-based awards granted to each AWARDEE.



     For purposes of the Plan, a “Subsidiary” of the Corporation shall be any
corporation which at the time qualifies as a subsidiary thereof under the
definition of “subsidiary corporation” in Section 424(f) of the Code.



     Section 5. Stock Options. Any stock option granted under the Plan shall
be in such form as the Committee may from time to time approve. Any such
option shall be subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall deem desirable.



          (a) Option Price. The purchase price per share of the Stock purchasable
under a stock option shall be determined by the Committee, but will be not less
than 100% of the fair market value of the Stock on the date of the grant of the
option, as determined in accordance with procedures established by the
Committee. Notwithstanding the foregoing, the purchase price per share of the
Stock purchasable under any QSO granted to any person who is the beneficial
owner of more than 10% of the Corporation’s issued and outstanding Stock (a
“10% owner”) shall not be less then 110% of the fair market value of the Stock
on the date of the grant of the option, as determined in accordance with
procedures established by the Committee.



          (b) Option Period. The term of each stock option shall be fixed by the
Committee, but no QSO shall be exercisable after the expiration of five (5)
years from the date the option is granted unless otherwise determined by the
Committee, but in no event longer than ten (10) years. Notwithstanding the
foregoing, no QSO granted to a 10% owner shall be exercisable after the
expiration of five years from the date the option is granted.



          (c) Exercisability. (1) Stock options shall be exercisable at such time
or times as determined by the Committee at or subsequent to the date of grant;
provided, however, that notwithstanding the foregoing from and after a Change
of Control (as hereinafter defined) all stock options shall become immediately
exercisable to the full extent of the AWARD.



               (2) Solely for Federal income tax purposes, to the extent that the
aggregate fair market value of Stock with respect to which QSOs are exercisable
for the first time by a AWARDEE during any calendar year exceeds $100,000.00
(as of the date of grant),



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such options shall be treated as options which are not QSOs. For purposes of
this rule, options shall be taken into account in the order in which they were
granted.



               (3) As used herein, “Change of Control” shall mean any of the following
events:




(A) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 15% or more of either (i) the then outstanding shares of
common stock of the Corporation (the “Outstanding Common Stock”) or (ii)
the combined voting power of the then outstanding voting securities of
the Corporation entitled to vote generally in the election of directors
(the “Outstanding Voting Securities”); provided, however, that for
purposes of this subsection (A), the following acquisitions of stock
shall not constitute a Change of Control: (i) any acquisition directly
from the Corporation, (ii) any acquisition by the Corporation, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the
Corporation or (iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection
(C) of this Section 5(c)(3); or




(B) Individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election
by the Corporation’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or




(C) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Corporation (a “Business Combination”), in each case, unless, following
such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which
as a result of such transaction owns the Corporation or all or
substantially all of the Corporation’s assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Common Stock and Outstanding Voting Securities, as



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the case may be, (ii) no Person (excluding any employee benefit plan (or
related trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation or such corporation resulting
from such Business Combination) beneficially owns, directly or
indirectly, 15% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed prior
to the Business Combination, and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or




(D) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.



          (d) Method of Exercise. Stock options may be exercised, in whole or in
part, by giving written notice of exercise to the Corporation specifying the
number of shares to be purchased. Such notice shall be accompanied by payment
in full of the purchase price in cash, either by certified or bank check;
provided, however, that after a Change of Control (x) an optionee (other than
an optionee who initiated a Change of Control in a capacity other than as an
officer or director of the Corporation) who is an officer or director of the
Corporation (within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder), during the 60-day period after six (6)
months after a Change of Control, with respect to an option that is
unaccompanied by a stock appreciation right and (y) any other optionee, during
the six month (6) period from and after a Change of Control, who at the time of
exercise is not an officer or director with respect to an option that is
unaccompanied by a stock appreciation right shall, unless the Committee shall
determine otherwise at the time of grant, have the right, in lieu of the
payment of the full purchase price of the shares of the Stock being purchased
under the stock option and by giving written notice to the Corporation, to
elect (within such respective periods) to surrender all or part of the stock
option to the Corporation and to receive in cash an amount equal to the amount
by which the fair market value per share of the Stock on the date of exercise
shall exceed the purchase price per share under the stock option multiplied by
the number of shares of the Stock granted under the stock option as to which
the right granted by this proviso shall have been exercised. However, any
officer, director or 10% owner (collectively, “Insider”) may only settle the
right granted by this proviso pursuant to an irrevocable election to settle the
right no earlier than six (6) months after the date of such election, provided
that the transaction giving rise to the award of the right is approved by the
Company’s shareholders (excluding Insider shareholders).



          The written notice provided by the optionee shall specify the optionee’s
election to purchase shares subject to the stock option or to receive the cash
payment herein provided.



          Notwithstanding the foregoing, the Committee may, in its sole discretion,
authorize payment in whole or in part of the purchase price to be made in
unrestricted stock already owned by the optionee, or, in the case of the
nonqualified stock option, in restricted stock, or deferred stock subject to an
AWARD hereunder (based upon the fair market value of



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the Stock on the date the option is exercised as determined by the Committee)
or such other method of exercise as the Committee may determine at or after
grant, consistent (i) in the case of a QSO, with all applicable requirements of
the Code and the Treasury Regulations promulgated thereunder, and (ii) in the
case of option grants to an Insider, with Section 16 of the Exchange Act and
rules and regulations promulgated thereunder. The Committee may authorize such
payment at or after grant, except that in the case of a QSO, any right to make
payment in unrestricted stock already owned must be included in the option at
the time of grant. No shares of Stock shall be issued until full payment
therefor has been made. Subject to paragraph (i) of this Section 5, an
optionee shall have the rights to dividends or other rights of a stockholder
with respect to shares subject to the option when the optionee has given
written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in paragraph (a) of Section
14.



          As used in this paragraph (d) of Section 5, the fair market value of the
Stock on the date of exercise shall mean:




(i) with respect to an election by an optionee to receive cash in
respect of a stock option which is not a QSO, the “Change of
Control Fair Market Value”, as defined below; and




(ii) with respect to an election by an optionee to receive cash in
respect of a stock option which is a QSO, the fair market value of
the Stock on the date of exercise, determined in the same manner as
the fair market value of the Stock on the date of grant of a stock
option is determined pursuant to paragraph (a) of Section 5 of the
Plan.



          (e) Restrictions on Transferability. The Committee, in its sole
discretion, may impose such restrictions on the transferability of stock
options granted hereunder as it deems appropriate. Any such restrictions shall
be set forth in the stock option agreement with respect to such stock options.
QSOs may not be transferred by an optionee other than by will or by the laws of
descent and distribution.



          (f) Termination by Death. Except to the extent otherwise provided by the
Committee at or after the time of grant, if an optionee’s relationship with or
employment by the Corporation and/or any of its subsidiaries terminates by
reason of death, the stock option may thereafter be immediately exercised in
full by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of eighteen (18) months
from the date of such death or until the expiration of the stated period of the
option whichever period is the shorter.



          (g) Termination by Reason of Retirement or Permanent Disability. Except
to the extent otherwise provided by the Committee at or after the time of
grant, if an optionee’s relationship with or employment by the Corporation
and/or any of its subsidiaries terminates by reason of Retirement or permanent
disability, any stock option held by such optionee may thereafter be exercised
in full, but may not be exercised after twelve (12) months from the date of
such termination or the expiration of the stated period of the option,
whichever



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period is the shorter; provided, however, that if the optionee dies within such
twelve (12) month period, any unexercised stock option held by such optionee
shall thereafter be exercisable to the extent to which it was exercisable at
the time of death for a period of eighteen (18) months from the date of the
optionee’s death or for the stated period of the option, whichever period is
the shorter. As used herein, “Retirement” means, in the case of an AWARDEE
employed by the Corporation or any of its affiliates, attainment of age 68 or
such later date as the Committee may determine at or after grant. An AWARDEE
must, however, voluntarily terminate his or her employment in order for his or
her termination of employment to be for “Retirement.”



          (h) Other Termination. Unless otherwise determined by the Committee at
or after grant, if an optionee’s relationship with or employment by the
Corporation terminates for any reason other than death, permanent disability or
Retirement, the stock option shall thereupon terminate; provided, however, that
if such termination is by action of the Corporation and other than discharge
for reason of willful violation of the rules of the Corporation or by voluntary
resignation of the optionee, in either case within six (6) months following a
Change of Control, any stock options held by the optionee may be exercised by
the optionee until the earlier of three (3) months and one day after such
termination or the expiration of such options in accordance with their terms.



          (i) Option Buyout. The Committee may at any time offer to repurchase an
option (other than an option which has been held for less than six months by an
Insider) based on such terms and conditions as the Committee shall establish
and communicate to the optionee at the time that such offer is made.



          (j) Form of Settlement. In its sole discretion, the Committee may
provide, at the time of grant, that the shares to be issued upon an option’s
exercise shall be in the form of restricted stock or deferred stock, or may
reserve other than with respect to QSOs the right to so provide after the time
of grant.



     Section 6. Stock Appreciation Rights. (a) Grant and Exercise. Stock
appreciation rights may be granted in conjunction with (or in accordance with
Section 9, separated from) all or part of any stock option granted under the
Plan, as follows: (i) in the case of a NQSO, such rights may be granted either
at the time of the grant of such option or at any subsequent time during the
term of the option; and (ii) in the case of an QSO, such rights may be granted
only at the time of the grant of the option. A “stock appreciation right” is a
right to receive cash or Stock, as provided in this Section 6, in lieu of the
purchase of a share under a related option. A stock appreciation right, or
applicable portion thereof, shall terminate and no longer be exercisable upon
the termination or exercise of the related stock option, except that a stock
appreciation right granted with respect to less than the full number of shares
covered by a related stock option shall not be reduced until the exercise or
termination of the related stock option exceeds the number of shares not
covered by the stock appreciation right. A stock appreciation right may be
exercised by an optionee, in accordance with paragraph (b) of this Section 6,
by surrendering the applicable portion of the related stock option. Upon such
exercise and surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in paragraph (b) of this Section 6.
Options which have been so surrendered, in whole



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or in part, shall no longer be exercisable to the extent the related stock
appreciation rights have been exercised.



          (b) Terms and Conditions. Stock appreciation rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the
following:




(i) Stock appreciation rights shall be exercisable only at such
time or times and to the extent that the stock options to which
they relate shall be exercisable. Except as otherwise provided in
Section 5, an Insider (as previously defined in Section 5(d)) may
only settle a stock appreciation right by satisfying either of the
following conditions:




(A) the stock appreciation right is settled at least six (6) months
after its date of grant; or else




(B) the settlement of the stock appreciation right is made pursuant
to an irrevocable election to settle the right no earlier than six
(6) months after the date of such election.




None of the conditions of this Section 6(b)(i) shall be applicable
in the event of death or permanent disability of the optionee.




(ii) Upon the exercise of a stock appreciation right, an optionee
shall be entitled to receive up to, but no more than, an amount in
cash or whole shares of the Stock as determined by the Committee in
its sole discretion equal to the excess of the fair market value
of one share of Stock over the option price per share specified in
the related stock option multiplied by the number of shares in
respect of which the stock appreciation right shall have been
exercised; provided, however, that the payment in settlement of
stock appreciation rights during the period from and after a Change
of Control shall be entirely in cash. Each stock appreciation
right may be exercised only at the time and so long as a related
option, if any, would be exercisable or as otherwise permitted by
applicable law; provided however, that no stock appreciation right
granted under the Plan to an Insider then subject to Section 16 of
the Exchange Act shall be exercised during the first six months of
its term. The fair market value of the Stock on the date of
exercise of a stock appreciation right shall be determined in the
same manner as the fair market value of the Stock on the date of
grant of a stock option is determined pursuant to paragraph (a) of
Section 5 of the Plan; provided, however, that during the 60-day
period from and after a Change of Control, the fair market value of
the Stock on the date of exercise shall mean, with respect to the
exercise of a stock appreciation right accompanying an option which
is not an QSO, the “Change of Control Fair Market Value.”




For purposes of this Plan, the “Change of Control Fair Market
Value” shall mean the higher of (x) the highest reported sale
price, regular way, of a share of the



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Stock on the Composite Tape for American Stock Exchange Listed
Stock during the 60-day period prior to the date of the Change of
Control or, if such security is not listed or admitted to trading
on the American Stock Exchange, on the principal national
securities exchange on which such security is listed or admitted to
trading or, if not listed or admitted to trading on any national
securities exchange, on the Nasdaq National Market or, if such
security is not quoted on such Nasdaq National Market, the average
of the closing bid and asked prices during such 60-day period in
the over-the-counter market as reported by the National Association
of Securities Dealers Automated Quotation (“NASDAQ”) system or, if
bid and asked prices for such security during such period shall not
have been reported through NASDAQ, the average of the bid and asked
prices for such period as furnished by any American Stock Exchange
member firm regularly making a market in such security selected for
such purpose by the Board of Directors of the Corporation or a
committee thereof or, if such security is not publicly traded, the
fair market value thereof as determined by an independent
investment banking or appraisal firm experienced in the valuation
of such securities selected in good faith by the Board of Directors
of the Corporation or a committee thereof or, if no such investment
banking or appraisal firm is in the good faith judgment of the
Board of Directors or such committee available to make such
determination, as determined in good faith by the Board of
Directors of the Corporation or such committee and (y) if the
Change of Control is the result of a transaction or series of
transactions described in paragraph (i) or (iii) of the definition
of Change of Control set forth in Section 5(c), the highest price
per share of the Stock paid in such transaction or series of
transactions (in the case of a Change of Control described in such
paragraph (i) of Section 5(c), as reflected in any Schedule 13D
filed by the person having made the acquisition).




(iii) The Committee, in its sole discretion, may impose such
restrictions on the transferability of stock appreciation rights as
it deems appropriate. Any such restrictions shall be set forth in
the written agreement between the Corporation and the optionee with
respect to such rights.




(iv) Upon the exercise of a stock appreciation right, the stock
option or part thereof to which such stock appreciation right is
related shall be deemed to have been exercised for the purpose of
the limitation of the number of shares of the Stock to be issued
under the Plan, as set forth in Section 3 of the Plan.




(v) Stock appreciation rights granted in connection with QSOs may
be exercised only when the market price of the Stock subject to the
QSO exceeds the option price of the QSO.



     Section 7. Restricted Stock. (a) Stock and Administration. Shares of
restricted stock may be issued either alone or in addition to stock options,
stock appreciation rights, deferred stock or other Stock-based awards granted
under the Plan. The Committee shall determine the directors, consultants,
officers and key employees of the Corporation and its subsidiaries to whom, and
the time or times at which, grants of restricted stock will be made, the number
of



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shares to be awarded, the time or times within which such AWARDS may be subject
to forfeiture, and all other conditions of the AWARDS. The provisions of
restricted stock AWARDS need not be the same with respect to each recipient.



          (b) Awards and Certificates. The prospective AWARDEE of shares of
restricted stock shall not, with respect to such AWARD, be deemed to have
become an AWARDEE, or to have any rights with respect to such AWARD, until and
unless such AWARDEE shall have executed an agreement or other instrument
evidencing the AWARD and delivered a fully executed copy thereof to the
Corporation and otherwise complied with the then applicable terms and
conditions.




(i) Each AWARDEE shall be issued a stock certificate in respect of
vested shares of restricted stock awarded under the Plan. Such
certificate shall be registered in the name of the AWARDEE, and, in
addition to any legends required under applicable law, shall,
unless determined otherwise by the Committee, bear an appropriate
legend referring to the terms, conditions, and restrictions
applicable to such AWARD, substantially in the following form:




“The transferability of this certificate and the shares of stock of
CanArgo Energy Corporation (the “Corporation”) represented hereby
are subject to the terms and conditions (including forfeiture) of
the Corporation’s 2004 Long Term Incentive Stock Option Plan and
Agreement. Copies of such Plan are on file in the offices of the
Corporation, P.O Box 291, St. Peter Port, Guernsey GY1 3RR, British
Isles and may be inspected upon written request to the Secretary of
the Corporation.”




(ii) The Committee may require that the stock certificates
evidencing such shares be held in custody by the Corporation until
the restrictions thereon shall have lapsed, and may require, as a
condition of any restricted stock AWARD, that the AWARDEE shall
have delivered a stock power, endorsed in blank, relating to the
Stock covered by such AWARD.



          (c) Restrictions and Conditions. The shares of restricted stock awarded
pursuant to the Plan may, subject to the determination made by the Committee,
be subject to the following restrictions and conditions:




(i) Subject to the provisions of this Plan during a period set by
the Committee commencing with the date of such AWARD (the
“restriction period”), the AWARDEE shall not be permitted to sell,
transfer, pledge, or assign shares of restricted stock awarded
under the Plan. Within these limits the Committee may provide for
the lapse of such restrictions (other than those set forth in the
Corporation’s bylaws) in installments where deemed appropriate.




(ii) Except as provided in paragraph (c) of this Section 7, the
AWARDEES shall have, with respect to the awarded shares of
restricted stock, all of the rights of a stockholder of the
Corporation, including the right to vote the restricted stock and
the right to receive any cash dividends both for vested shares
only. The



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Committee, in its sole discretion, may permit or require the
payment of cash dividends to be deferred and, if the Committee so
determines, reinvested in additional restricted stock or otherwise
reinvested. Certificates for shares of unrestricted stock shall be
delivered to the AWARDEE promptly after, and only after, any period
of forfeiture shall expire without forfeiture in respect of such
            shares of restricted stock.




(iii) Subject to the provisions of paragraph (c)(iv) of this
Section 7, upon termination of employment of any reason during the
restriction period, all shares still subject to restriction shall
be forfeited by the AWARDEE and reacquired by the Corporation.




(iv) In the event of an AWARDEE’s Retirement, permanent disability,
or death, or in cases of special circumstances, the Committee may,
in its sole discretion, when it finds that a waiver would be in the
best interests of the Corporation, waive in whole or in part any or
all restrictions with respect to such AWARDEE’s shares of restricted stock.




(v) Notwithstanding anything in the foregoing to the contrary, upon
a Change of Control any and all restrictions on restricted stock
shall lapse regardless of the restriction period established by the
Committee and all such restricted stock shall become fully vested
and nonforfeitable.



     Section 8. Deferred Stock Awards. (a) Stock and Administration. AWARDS
of the right to receive Stock that is not to be distributed to the AWARDEE
until after a specified deferral period (such AWARD and the deferred stock
delivered thereunder hereinafter as the context shall require, referred to as
the “deferred stock”) may be made either alone or in addition to stock options,
stock appreciation rights, or restricted stock, or other Stock-based awards
granted under the Plan. The Committee shall determine the directors,
consultants, officers and key employees of the Corporation and its subsidiaries
to whom and the time or times at which deferred stock shall be awarded, the
number of shares of deferred stock to be awarded to any AWARDEE, the duration
of the period (the “Deferral Period”) during which, and the conditions under
which, receipt of the Stock will be deferred, and the terms and conditions of
the AWARD in addition to those contained in paragraph (b) of this Section 8.
In its sole discretion, the Committee may provide for a minimum payment at the
beginning or end of the applicable Deferral Period based on a stated percentage
of the fair market value on the date of grant of the number of shares covered
by a deferred stock AWARD. Such payment may include an election to defer
receipt of a bonus or other compensation payable by the Corporation and to
receive a deferred stock AWARD in lieu of such compensation. The Committee may
also provide for the grant of deferred stock upon the completion of a specified
performance period. The provisions of deferred stock AWARDS need not be the
same with respect to each recipient.



          (b) Terms and Conditions. Deferred stock AWARDS made pursuant to this
Section 8 shall be subject to the following terms and conditions:



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(i) Subject to the provisions of the Plan, the shares to be issued
pursuant to a deferred stock AWARD may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral
Period or Elective Deferral Period (defined below), where
applicable, and may be subject to a risk of forfeiture during all
or such portion of the Deferral Period as shall be specified by the
Committee. At the expiration of the Deferral Period and Elective
Deferral Period, share certificates shall be delivered to the
AWARDEE, or the AWARDEE’s legal representative, in a number equal
to the number of shares covered by the deferred stock AWARD.




(ii) Amounts equal to any dividends declared during the Deferral
Period with respect to the number of shares covered by a deferred
stock AWARD will be paid to the AWARDEE currently, or deferred and
deemed to be reinvested in additional deferred stock or otherwise
reinvested, as determined at the time of the AWARD by the
Committee, in its sole discretion.




(iii) Subject to the provisions of paragraph (b)(iv) of this
Section 8, upon termination of the relationship with or employment
by the Corporation for any reason during the Deferral Period for a
given deferred stock AWARD, the deferred stock in question shall be
forfeited by the AWARDEE.




(iv) In the event of the AWARDEE’s Retirement, permanent disability
or death during the Deferral Period (or Elective Deferral Period,
where applicable), or in cases of special circumstances, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interests of the Corporation, waive in whole
or in part any or all of the deferral limitations imposed hereunder
with respect to any or all of the AWARDEE’s deferred stock.
Anything in the Plan to the contrary notwithstanding, upon the
occurrence of a Change of Control, the Deferral Period and the
Elective Deferral Period with respect to each deferred stock AWARD
shall expire immediately and all share certificates relating to
such deferred stock AWARDS shall be delivered to each AWARDEE or
the AWARDEE’s legal representative.




(v) Prior to completion of the Deferral Period, an AWARDEE may
elect to defer further the receipt of the deferred stock AWARD for
a specified period or until a specified event (the “Elective
Deferred Period”), subject in each case to the approval of the
Committee and under such terms as are determined by the Committee,
all in its sole discretion.




(vi) Each deferred stock AWARD shall be confirmed by a deferred
stock agreement or other instrument executed by the Corporation,
acting under the authority of the Committee, and by the AWARDEE.



     Section 9. Other Stock-Based Awards. (a) Stock and Administration.
Other AWARDS of the Stock and other AWARDS that are valued in whole or in part
by reference to, or are otherwise based on the Stock (“Other Stock-based
AWARDS”), including (without



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limitation) performance shares and convertible debentures, may be granted
either alone or in addition to other AWARDS granted under the Plan. Subject to
the provisions of the Plan, the Committee shall have sole and complete
authority to determine the directors, consultants, officers and key employees
of the Corporation and/or any of its subsidiaries to whom and the time or times
at which such Other Stock-based AWARDS shall be made, the number of shares of
the Stock to be awarded pursuant to such Other Stock-based AWARDS and all other
conditions of the Other Stock-based AWARDS. The Committee may also provide for
the grant of the Stock upon the completion of a specified performance period.
The provisions of Other Stock-based AWARDS need not be the same with respect to
each recipient.



          (b) Terms and Conditions. Other Stock-based AWARDS made pursuant to this
Section 9 shall be subject to the following terms and conditions:




(i) Subject to the provisions of this Plan, shares or interests in
shares subject to Other Stock-based AWARDS made under this Section
9 may not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the shares are issued, or, if
later, the date on which any applicable restriction, performance or
deferral period lapses.




(ii) Subject to the provisions of this Plan and the Other
Stock-based AWARD agreement, the AWARDEES of Other Stock-based
AWARDS under this Section 9 shall be entitled to receive, currently
or on a deferred basis, interest or dividends or interest or
dividend equivalents with respect to the number of shares or
interests therein covered by the Other Stock-based AWARDS, as
determined at the time of the Other Stock-based AWARDS by the
Committee, in its sole discretion, and the Committee may provide
that such amounts (if any) shall be deemed to have been reinvested
in additional Stock or otherwise reinvested.




(iii) Any Other Stock-based AWARDS under this Section 9 and any
Stock covered by any such Other Stock-based AWARD may be forfeited
to the extent so provided in the Other Stock-based AWARD agreement,
as determined by the Committee, in its sole discretion.




(iv) In the event of the AWARDEE’s Retirement, permanent disability
or death, or in cases of special circumstances, the Committee may,
in its sole discretion, when it finds that a waiver would be in the
best interests of the Corporation, waive in whole or in part any or
all of the limitations imposed hereunder (if any) with respect to
any or all Other Stock-based AWARDS under this Section 9. Anything
in the Plan to the contrary notwithstanding, any limitations
imposed with respect to any Other Stock-based AWARD under this
Section 9, including any provision providing for the forfeiture of
any Other Stock-based AWARD under any circumstance, shall terminate
immediately upon a Change of Control and the number of shares of or
interests in the Stock subject to such Other Stock-based AWARD
shall be delivered to the AWARDEE (or, in the case of an Other
Stock-based AWARD with respect to which such number is not



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determinable, such number of shares of or interests in the Stock as
is determined by the Committee and set forth in the terms of such
Other Stock-based AWARD).




(v) Each Other Stock-based AWARD under this Section 9 shall be
confirmed by an agreement or other instrument executed by the
Corporation and by the AWARDEE.




(vi) The Stock or interests therein (including securities
convertible into the Stock) paid or awarded on a bonus basis under
this Section 9 shall be issued for no cash consideration; the Stock
or interests therein (including securities convertible into the
Stock) purchased pursuant to a purchase right awarded under this
Section 9 shall be priced at least 50% of the fair market value of
the Stock on the date of grant.




(vii) The Committee, in its sole discretion, may impose such
restrictions on the transferability of Other Stock-based Awards as
it deems appropriate. Any such restrictions shall be set forth in
the written agreement between the Corporation and the AWARDEE with
respect to such Award.




(viii) Each Other Stock-based AWARD to an Insider under this
Section 9 shall be subject to all of the limitations and
qualifications that may be required by Section 16 of the Exchange
Act and all of the rules and regulations promulgated thereunder.



     Section 10. Transfer, Leave of Absence, etc. For purposes of the Plan:
(a) a transfer of an employee from the Corporation to a Subsidiary, or vice
versa, or from one Subsidiary to another; (b) a leave of absence, duly
authorized in writing by the Corporation, for military service or sickness, or
for any other purposes approved by the Corporation if the period of such leave
does not exceed 90 days; and (c) a leave of absence in excess of 90 days, duly
authorized in writing by the Corporation, shall not be deemed a termination of
employment.



     Section 11. Amendments and Termination. The Board may amend, alter, or
discontinue the Plan, but no amendment, alteration, or discontinuation shall be
made which would impair the rights of an AWARDEE under any AWARD theretofore
granted, without the AWARDEE’s consent, or which without the approval of the
shareholders would:




(a) except as is provided in Section 3 of the Plan, increase the total
number of shares available for the purpose of the Plan;




(b) subsequent to the date of grant decrease the option price of any
stock option to less than 100% (110% in the case of a 10% owner of an
QSO) of the fair market value on the date of the granting of the option;




(c) extend the maximum option period under Section 5(b) of the Plan; or



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(d) otherwise materially increase the benefits accruing to AWARDEES
under, or materially modify the requirements as to eligibility for
participation in, the Plan.



          The Committee may amend the terms of any AWARD theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights
of any holder without such holder’s consent. Notwithstanding the foregoing,
the Board or the Committee may, in its discretion, amend the Plan or terms of
any outstanding AWARD held by a person then subject to Section 16 of the
Exchange Act without the consent of any holder in order to preserve exemptions
under said Section 16 which are or become available from time to time under
rules of the Securities and Exchange Commission. The Committee may also
substitute new stock options for previously granted options, including
previously granted options having higher option prices.



     Section 12. Unfunded Status of the Plan. The Plan is intended to
constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments not yet made to an AWARDEE by the Corporation, nothing
contained herein shall give any such AWARDEE any rights that are greater than
those of a general creditor of the Corporation. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver the Stock; provided, however,
that the existence of such trusts or other arrangements is consistent with the
unfunded status of the Plan.



     Section 13. Employment at Will. Nothing contained in the Plan, or in any
option granted pursuant to the Plan, nor in any agreement made pursuant to the
Plan, shall confer upon any AWARDEE any right with respect to continuance of
employment by the Company or its subsidiaries, nor interfere in any way with
the right of the Company or its subsidiaries to terminate the AWARDEE’s
employment at will or change the AWARDEE’s compensation at any time.



     Section 14. General Provisions. (a) The Committee may require each
AWARDEE purchasing shares pursuant to an AWARD under the Plan to represent to
and agree with the Corporation in writing that such AWARDEE is acquiring the
shares without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.



          (b) All certificates for shares of the Stock delivered under the Plan
pursuant to any AWARD shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any stock
exchange upon which the Stock is then listed, and any applicable Federal or
state securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.



          (c) Recipients of shares of restricted stock, deferred stock and other
Stock-based awards under the Plan (other than options) shall not be required to
make any payment or provide consideration other than the rendering of services.



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          (d) AWARDS granted under the Plan may, in the discretion of the Committee,
be granted either alone or in addition to, in tandem with, or in substitution
for, any other AWARDS granted under the Plan. If AWARDS are granted in
substitution for other AWARDS, the Committee shall require the surrender of
such other AWARDS in consideration for the grant of the new AWARDS. AWARDS
granted in addition to or in tandem with other AWARDS may be granted either at
the same time as or at a different time from the grant of such other AWARDS.
The exercise price of any option or the purchase price of any Other Stock-based
AWARD in the nature of a purchase right:




(i) granted in substitution for outstanding AWARDS or in lieu of
any other right to payment by the Corporation shall be the fair
market value of shares at the date such substitute AWARDS are
granted or shall be such fair market value at that date reduced to
reflect the fair market value of the AWARDS or other right to
payment required to be surrendered by the AWARDEE as a condition to
receipt of the substitute AWARD; or




(ii) retroactively granted in tandem with outstanding AWARDS shall
be either the fair market value of shares at the date of grant of
later AWARDS or the fair market value of shares at the date of
grant of earlier AWARDS.



          (e) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.



     Section 15. Taxes. (a) AWARDEES shall make arrangements satisfactory to
the Committee regarding payment of any Federal, state, or local taxes of any
kind required by law to be withheld with respect to any income which the
AWARDEE is required, or elects, to include in his or her gross income and the
Corporation and its subsidiaries shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due
to the AWARDEE. Anything contained herein to the contrary notwithstanding, the
Committee may, in its sole discretion, authorize acceptance of Stock received
in connection with the grant or exercise of an AWARD or otherwise previously
acquired in satisfaction of withholding requirements.



          (b) Notwithstanding any provisions to the contrary in this Section 15, an
Insider may only satisfy tax withholding requirements with the settlement of a
stock appreciation right or with shares of the Company’s Common Stock if he or
she has held such stock or stock appreciation right for at least six (6) months
or the cash settlement of the tax obligation occurs no earlier than six (6)
months after the date of an irrevocable election made by an Insider.



     Section 16. Effective Date of the Plan. The Plan shall be effective on
the date it is approved by a majority of the votes cast at a duly convened
meeting of shareholders.



     Section 17. Term of the Plan. No AWARD shall be granted pursuant to the
Plan after May 18, 2014, but AWARDS theretofore granted may extend beyond that
date.




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