Document:

EX-10.4

Exhibit 10.4

FAR EAST ENERGY CORPORATION

FORM OF INCENTIVE STOCK OPTION AGREEMENT

FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Far East Energy
Corporation (the “Company”), a Nevada corporation, hereby grants to      (the
"Option Holder”), the option to purchase shares of the common stock, $0.001 par value per
share, of the Company (“Shares”), upon the terms set forth in this incentive stock option
agreement (this “Agreement”):

WHEREAS, the Option Holder has been granted the following award in connection with his or her
retention as an employee and as compensation for services to be rendered, and the following terms
reflect the Company’s 2005 Incentive Stock Plan (the “Plan”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the
parties hereto agree as follows.

1. Defined Terms; Plan. Terms used but not defined herein shall have the same meaning
ascribed to such terms in the Plan. This Agreement and the grant herein is subject to the terms
and conditions herein and the terms and conditions of the applicable provisions of the Plan, the
terms of which are incorporated herein by reference.

2. Grant. The Option Holder is hereby granted an option (the “Option”) to
purchase      Shares (the “Option Shares”) pursuant to the Plan. The Option is
granted as of      (the “Date of Grant”). This Option is intended to qualify as an
“incentive stock option” as defined in Section 422(b) of the Code to the extent that the aggregate
Fair Market Value (determined as of the Date of Grant) of Option Shares that are exercisable for
the first time by the Option Holder during any calendar year does not exceed $100,000. The
remaining Option Shares covered by this Option, if any, shall be deemed to be non-qualified
options.

3. Status of Option Shares. The Option Shares shall upon issue rank equally in all
respects with the other Shares.

4. Option Price. The purchase price for the Option Shares shall be, except as herein
provided, $    per Option Share, hereinafter sometimes referred to as the “Option Price,”
payable immediately in full upon the exercise of the Option. In no event shall the Option Price be
less than 100% of the Fair Market Value of the Option Shares subject to this Option on the Date of
Grant (or 110% where the Option Holder owns more than 10% of the combined voting power of all
classes of stock of the Company on the Date of Grant).

5. Term of Option. The Option may be exercised only during the period (the
"Option Period”) set forth in Section 7 below and shall remain exercisable until the tenth
anniversary of the Date of Grant (or in the case that the Option Holder owns more than 10% of the
combined voting power of the Company on the Date of Grant, then the Option shall remain exercisable
until the day preceding the fifth anniversary of Date of Grant). Thereafter, the Option Holder
shall cease to have any rights in respect thereof.

6. Exercisability. Subject to the Option Holder’s continued service with the Company,
the Option will vest and become exercisable with respect to      % of the Option Shares on each of
the      ,      ,      ,      and      anniversaries of the Date of Grant, so
that the Option will be 100% vested and exercisable after the      anniversary of the Date of
Grant, as set forth in the following schedule:

	 	 	 	 	 	 	 	 	 
	Timeframe from Date of Grant

	 	

	 	

	 
	 	 	 	 	 	 	 	 
	(Vesting Date)

	 	Vesting
	 	Cumulative Vesting

	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	     , 20     (1 year)

	 	 	%	 	 	 	%	 
	 
	 	 	 	 	 	 	 	 
	     , 20     (2 years)

	 	 	%	 	 	 	%	 
	 
	 	 	 	 	 	 	 	 
	     , 20     (3 years)

	 	 	%	 	 	 	%	 
	 
	 	 	 	 	 	 	 	 
	     , 20     (4 years)

	 	 	%	 	 	 	%	 
	 
	 	 	 	 	 	 	 	 
	     , 20     (5 years)

	 	 	%	 	 	 	%	 

7. Exercise of Option. The Option may be exercised for all, or from time to time
any part, of the Option Shares for which it is then exercisable. The exercise date shall be the
date the Company receives a written notice of exercise signed by the Option Holder, specifying the
whole number of Option Shares in respect of which the Option is being exercised, accompanied by (a)
full payment for the Option Shares with respect to which the Option is exercised, in a manner
acceptable to the Company (which, at the discretion of the Company, shall include a broker assisted
exercise arrangement), of the Option Price for the Option Shares for which the Option is being
exercised and (b) payment by the Option Holder of all payroll, withholding or income taxes incurred
in connection with the Option exercise (or arrangements for the collection or payment of such tax
satisfactory to the Committee are made). The purchase price for the Shares as to which the Option
is exercised shall be paid to the Company in full at the time of exercise at the election of the
Option Holder (i) in cash, (ii) in Shares having a Fair Market Value equal to the aggregate Option
Price for the Shares being purchased and satisfying such other requirements as may be imposed by
the Committee; provided, that, such Shares have been held by the Option Holder for
no less than six months, (iii) partly in cash and partly in such Shares, or (iv) through the
delivery of irrevocable instructions to a broker to deliver promptly to the Company an amount equal
to the aggregate Option Price for the Shares being purchased. Anything to the contrary herein
notwithstanding, the Company shall not be obligated to issue any Option Shares hereunder if the
issuance of the Option Shares would violate the provision of any applicable law, in which event the
Company shall, as soon as practicable, take whatever action it reasonably can so that the Option
Shares may be issued without resulting in such violations of law.

8. Exercisability Upon Termination of Service by Death or Disability. Upon a
Termination of Service by reason of death or Disability, the Option may be exercised within 180
days following the date of death or Termination of Service due to Disability (subject to any
earlier termination of the Option as provided herein), by the Option Holder in the case of
Disability, or in the case of death, by the Option Holder’s estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but in any case only to the extent the
Option Holder was entitled to exercise the Option on the date of his or her Termination of Service
by death or Disability. To the extent that the Option Holder was not entitled to exercise the
Option at the date of his or her Termination of Service by death or Disability, or if he or she doe
not exercise the Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate. Notwithstanding anything to the contrary herein, the Committee
may at any time and from time to time prior to the termination of the Option, with the consent of
the Option Holder, extend the period of time during which the Option Holder may exercise his or her
Option following the date of Termination of Service due to death or Disability; provided,
however, that the maximum period of time during which the Option shall be exercisable
following the date of Termination of Service due to death or Disability shall not exceed the
original term of the Option and that notwithstanding any extension of time during which the Option
may be exercised, the Option, unless otherwise amended by the Committee, shall only be exercisable
to the extent the Option Holder was entitled to exercise the Option on the date of Termination of
Service due to death or Disability. Any such extension shall be designed to conform to the
requirements of Section 409A of the Code so as to avoid the imposition of the additional income
tax.

9. Effect of Other Termination of Service. Upon a Termination of Service for any
reason (other than death or Disability), the unexercised Option may thereafter be exercised during
the period ending 90 days after the date of such Termination of Service, but only to the extent to
which the Option was vested and exercisable at the time of such Termination of Service.
Notwithstanding the foregoing, the Committee may, in its sole discretion, either by prior written
agreement with the Option Holder or upon the occurrence of a Termination of Service, accelerate the
vesting of unvested Options held by the Option Holder if the Option Holder’s Termination of Service
is without “cause” (as such term is defined by the Committee in its sole discretion) by the
Company.

10. Early Disposition of Stock. Option Holder agrees that if he or she disposes of
any Option Shares received under this Option within two (2) years after the Date of Grant or within
one (1) year after such Option Shares were transferred to Option Holder, then Option Holder will
notify the Committee of such disposition within thirty (30) days after the date of any such
disposition.

11. Qualification as an Incentive Stock Option. Option Holder understands that the
Option is intended to qualify as an “incentive stock option” within the meaning of section 422(b)
of the Code. Option Holder understands, further, that the Option Price for the Option Shares has
been set by the Committee at a price that the Committee has determined to be not less than 100%
(or, if Option Holder owned at the time of grant more than 10% of the voting securities of the
Company, 110%) of the Fair Market Value of the Option Shares on the Date of Grant. The Company
believes that the methodology by which the Committee valued the Option Shares at such time
represented a good faith attempt, as defined in the Code, at reaching an accurate appraisal of the
Fair Market Value of the Option Shares. Option Holder understands and acknowledges, however, that
the Company shall not be responsible for any additional tax liability incurred by Option Holder in
the event that the Internal Revenue Service is to determine that this Option does not qualify as an
incentive stock option, for any reason, including without limitation a determination that the
Committee’s valuation did not represent a good faith attempt to value the Option Shares.

12. Lock Up Agreement. The Option Holder agrees that upon request of the Company or
the underwriters managing any underwritten offering of the Company’s securities, the Option Holder
shall agree in writing that for a period of time (not to exceed 180 days) from the effective date
of any registration of securities of the Company, the Option Holder will not sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any Option Shares
issued pursuant to the exercise of the Option, without the prior written consent of the Company or
such underwriters, as the case may be.

13. Transfer of Shares. The Option, the Option Shares, or any interest in either, may
be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other
manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set
forth in the governing instruments of the Company, applicable United States federal and state
securities laws and the terms and conditions this Agreement and the Plan.

14. Expenses of Issuance of Option Shares. The issuance of stock certificates upon
the exercise of the Option in whole or in part, shall be without charge to the Option Holder. The
Company shall pay, and indemnify the Option Holder from and against any issuance, stamp or
documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency
or official (other than income taxes) by reason of the exercise of the Option in whole or in part
or the resulting issuance of the Option Shares.

15. Withholding. No later than the date of transfer of the Shares pursuant to the
exercise of the Option granted hereunder (and in any event no later than three days after Option
exercise), the Option Holder shall pay to the Company or make arrangements satisfactory to the
Committee regarding payment of any federal, state or local taxes of any kind required by law to be
withheld upon the exercise of the Option and the Company shall, to the extent permitted or required
by law, have the right to deduct from any payment of any kind otherwise due to the Option Holder,
federal, state and local taxes of any kind required by law to be withheld upon the exercise of the
Option.

16. References. References herein to rights and obligations of the Option Holder
shall apply, where appropriate, to the Option Holder’s legal representative or estate without
regard to whether specific reference to such legal representative or estate is contained in a
particular provision of this Option.

17. Notices. Any notice required or permitted to be given under this Agreement shall
be in writing and shall be deemed to have been given when delivered personally or by courier, or
sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to
the party concerned at the address indicated below or to such changed address as such party may
subsequently by similar process give notice of:

If to the Company:

Far East Energy Corporation

	 
	 

	     

	 

	     

Attn.: Secretary

If to the Option Holder:

     

     

     

18. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas applicable to contracts made and to be performed in the State
of Texas without regard to conflict of laws principles.

19. Entire Agreement. This Agreement and the Plan constitute the entire agreement
among the parties relating to the subject matter hereof, and any previous agreement or
understanding among the parties with respect thereto is superseded by this Agreement and the Plan.

20. Counterparts. This Agreement may be executed in two counterparts, each of which
shall constitute one and the same instrument.

21. Qualification as an Incentive Stock Option. The Option Holder understands that,
subject to the terms of Section 2 of this Agreement, this Option is intended to qualify as
an “incentive stock option” within the meaning of section 422(b) of the Code. The Option Holder
understands, further, that the Option Price for the Option Shares subject to this Option has been
set by the Committee at a price that the Committee has determined to be not less than 100% (or, if
the Option Holder owns more than 10% of the combined voting power of all classes of stock of the
Company on the Date of Grant, 110%) of the Fair Market Value of the Option Shares on the Date of
Grant. The Company believes that the methodology by which the Committee valued the Option Shares
at such time represented a good faith attempt, as defined in the Code, at reaching an accurate
appraisal of the Fair Market Value of the Option Shares. The Option Holder understands and
acknowledges, however, that the Company shall not be responsible for any additional tax liability
incurred by the Option Holder in the event that the Internal Revenue Service is to determine that
this Option does not qualify as an incentive stock option, for any reason, including without
limitation a determination that the Committee’s valuation did not represent a good faith attempt to
value the Option Shares.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the Date of Grant.

	 
	 

	FAR EAST ENERGY CORPORATION

	 

	     

	 

	By:      

	 

	Name:      

	 

	Title:      

	 

	[NAME]

	 

	     

	 

	[name]Lowe’s Companies, Inc. Amended and Restated Directors’ Stock Option and Deferred Stock Unit Plan

LOWE’S
COMPANIES, INC.

AMENDED
AND RESTATED

DIRECTORS’
STOCK OPTION AND

DEFERRED
STOCK UNIT PLAN

TABLE
OF CONTENTS

	 	 	 	
      Page

	
      ARTICLE
      I DEFINITIONS
	
      1

	 	
      1.01
	
      Acceleration
      Date
	
      1

	 	
      1.02
	
      Agreement
	
      1

	 	
      1.03
	
      Award
      Date
	
      1

	 	
      1.04
	
      Board
	
      1

	 	
      1.05
	
      Change
      in Control
	
      1

	 	
      1.06
	
      Code
	
      2

	 	
      1.07
	
      Common
      Stock
	
      2

	 	
      1.08
	
      Company
	
      3

	 	
      1.09
	
      Deferral
      Account
	
      3

	 	
      1.10
	
      Deferred
      Stock Unit
	
      3

	 	
      1.11
	
      Deferred
      Stock Unit Agreement
	
      3

	 	
      1.12
	
      Effective
      Date
	
      3

	 	
      1.13
	
      Exchange
      Act
	
      3

	 	
      1.14
	
      Expiration
      Date
	
      3

	 	
      1.15
	
      Fair
      Market Value
	
      3

	 	
      1.16
	
      Option
	
      4

	 	
      1.17
	
      Option
      Agreement
	
      4

	 	
      1.18
	
      Participant
	
      4

	 	
      1.19
	
      Plan
	
      4

	 	
      1.20
	
      Vesting
      Date
	
      4

	 	 	 	 
	
      ARTICLE
      II PURPOSES
	
      4

	 	 	 	 
	
      ARTICLE
      III ADMINISTRATION
	
      5

	 	 	 	 
	
      ARTICLE
      IV ELIGIBILITY AND GRANTS
	
      5

	 	 	 	 
	
      ARTICLE
      V STOCK SUBJECT TO PLAN
	
      5

	 	
      5.01
	
      Shares
      Issued
	
      5

	 	
      5.02
	
      Aggregate
      Limit
	
      5

	 	
      5.03
	
      Reallocation
      of Shares
	
      6

	 	 	 	 
	
      ARTICLE
      VI OPTION TERMS
	
      6

	 	
      6.01
	
      Option
      Grant
	
      6

	 	
      6.02
	
      Option
      Price
	
      6

	 	
      6.03
	
      Maximum
      Option Period
	
      6

	 	
      6.04
	
      Exercise
	
      6

	 	
      6.05
	
      Merger,
      Dissolution
	
      8

	 	
      6.06
	
      Minimum
      Exercise
	
      8

	 	
      6.07
	
      Payment
	
      8

	 	 	 	
       

	
      ARTICLE
      VII DEFERRED STOCK UNIT TERMS
	
      8

	 	
      7.01
	
      Grant
	
      8

	 	
      7.02
	
      Vesting
	
      9

	 	
      7.03
	
      Dividend
      Equivalent Credits
	
      9

	 	
      7.04
	
      Distribution
      of Deferral Accounts
	
      9

	 	 	 	 
	
      ARTICLE
      VIII GENERAL
	
      9

	 	
      8.01
	
      Nontransferability
	
      9

	 	
      8.02
	
      Limited
      Transferability
	
      9

	 	
      8.03
	
      Status
	
      10

	 	
      8.04
	
      Shareholder
      Rights
	
      10

	 	 	 	 
	
      ARTICLE
      IX INDEMNIFICATION
	
      10

	 	 	 	 
	
      ARTICLE
      X ADJUSTMENT UPON CHANGE IN COMMON STOCK
	
      11

	 	 	 	 
	
      ARTICLE
      XI COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY
      BODIES
	
      11

	 	 	 	
       

	
      ARTICLE
      XII GENERAL PROVISIONS
	
      12

	 	
      12.01
	
      Effect
      on Service
	
      12

	 	
      12.02
	
      Unfunded
      Plan
	
      12

	 	
      12.03
	
      Rules
      of Construction
	
      12

	 	 	 	
       

	
      ARTICLE
      XIII AMENDMENT
	
      12

	 	 	 	 
	
      ARTICLE
      XIV DURATION OF PLAN
	
      13

	 	 	 	 
	
      ARTICLE
      XV EFFECTIVE DATE OF AMENDED AND RESTATED PLAN
	
      13

 

 

ARTICLE
I

DEFINITIONS

1.01 Acceleration
Date.

Acceleration
Date means the earlier of (i) the date that the Board approves a transaction or
series of transactions which, if consummated, would result in a Change in
Control or (ii) the date that an agreement is entered into with respect to a
transaction or series of transactions which, if consummated, would result in a
Change in Control.

1.02 Agreement. 

Agreement
means an Option Agreement or a Deferred Stock Unit Agreement.

1.03 Award
Date.

Award
Date means the date of the first Board meeting after each annual meeting of the
Company’s shareholders during the term of this Plan.

1.04 Board.

Board
means the Board of Directors of the Company.

1.05 Change
in Control.

Change in
Control means and includes the occurrence of any one of the following
events:

(i) individuals
who, at the Effective Date, constitute the Board (the “Incumbent
Directors”) cease
for any reason to constitute at least a majority of the Board, provided that any
person becoming a director after the Effective Date and whose election or
nomination for election was approved by a vote of at least a majority of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a nominee
for director, without written objection to such nomination) shall be an
Incumbent Director; provided,
however, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest (as described in Rule 14a-11
under the Exchange Act (“Election
Contest”) or
other actual or threatened solicitation of proxies or consents by or on behalf
of any “person” (as
such term is defined in Section 3(a)(9) of the Exchange Act and as used in
Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board
(“Proxy
Contest”),
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest, shall be deemed an Incumbent Director;

(ii) any
person becomes a “beneficial
owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty-five percent or more of the
combined voting power of the Company’s then outstanding securities

1

eligible
to vote for the election of the Board (the “Company
Voting Securities”);
provided,
however, that
the event described in this paragraph (ii) shall not be deemed to be a Change in
Control of the Company by virtue of any of the following acquisitions: (A) an
acquisition directly by or from the Company or any Affiliate; (B) an acquisition
by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Affiliate, (C) an acquisition by an underwriter temporarily
holding securities pursuant to an offering of such securities, or (D) an
acquisition pursuant to a Non-Qualifying Transaction (as defined in paragraph
(iii)); or

(iii) the
consummation of a reorganization, merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company that
requires the approval of the Company’s stockholders, whether for such
transaction or the issuance of securities in the transaction (a “Reorganization”), or
the sale or other disposition of all or substantially all of the Company’s
assets to an entity that is not an affiliate of the Company (a “Sale”),
unless immediately following such Reorganization or Sale: (A) more than sixty
percent of the total voting power of (x) the corporation resulting from such
Reorganization or the corporation which as acquired all or substantially all of
the assets of the Company (in either case, the “Surviving
Corporation”), or
(y) if applicable, the ultimate parent corporation that directly or indirectly
has beneficial ownership of one hundred percent of the voting securities
eligible to elect directors of the Surviving Corporation (the “Parent
Corporation”), is
represented by the Company Voting Securities that were outstanding immediately
prior to such Reorganization or Sale (or, if applicable, is represented by
shares into which Company Voting Securities were converted pursuant to such
Reorganization or Sale), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Reorganization or
Sale, (B) no person (other than (x) the Company, (y) any employee benefit plan
(or related trust) sponsored or maintained by the Surviving Corporation or the
Parent Corporation, or (z) a person who immediately prior to the Reorganization
or Sale was the beneficial owner of twenty-five percent or more of the
outstanding Company Voting Securities) is the beneficial owner, directly or
indirectly, of twenty-five percent or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation),
and (C) at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Reorganization or Sale were
Incumbent Directors at the time of the Board’s approval of the execution of the
initial agreement providing for such Reorganization or Sale (any Reorganization
or Sale which satisfies all of the criteria specified in (A), (B) and (C) above
shall be deemed to be a “Non-Qualifying
Transaction”).

1.06 Code.

Code
means the Internal Revenue Code of 1986, and any amendments
thereto.

1.07 Common
Stock.

Common
stock means the common stock of the Company.

2

1.08 Company.

Company
means Lowe’s Companies, Inc.

1.09 Deferral
Account.

Deferral
Account means the individual bookkeeping account maintained by the Company for a
Participant to record the Participant’s Deferred Stock Units awarded under the
Plan.

1.10 Deferred
Stock Unit.

Deferred
Stock Unit means a unit granted to a Participant by the Company in accordance
with Section 7.01 or credited to the Participant’s Deferral Account in
accordance with Section 7.03, with each such unit representing the right to
receive one share of Common Stock.

1.11 Deferred
Stock Unit Agreement.

Deferred
Stock Unit Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of a Deferred Stock Unit granted to such
Participant.

1.12 Effective
Date.

Effective
Date means the date this amended and restated Plan is effective as provided in
Article XV.

1.13 Exchange
Act.

Exchange
Act means the Securities Exchange Act of 1934, as amended.

1.14 Expiration
Date.

Expiration
Date means, with respect to an Option granted under this Plan, the date that is
seven years after the date on which such Option was granted.

1.15 Fair
Market Value.

Fair
Market Value means, on any given date, the closing price of a share of Common
Stock as reported on the New York Stock Exchange composite tape on such date, or
if the Common Stock was not traded on the New York Stock Exchange on such day,
then on the next preceding day that the Common Stock was traded on such
exchange, all as reported by such source as the Board may
select.

3

1.16 Option.

Option
means a stock option which entitles the holder to purchase from the Company a
stated number of shares of Common Stock at the price set forth in an
Agreement as
described in Article VI.

1.17 Option
Agreement.

Option
Agreement means a written agreement (including any amendment or supplement
thereto) between the Company and a Participant specifying the terms and
conditions of an Option granted to such Participant.

1.18 Participant.

Participant
means a member of the Board who, on the applicable Award Date, is not an
employee or officer of the
Company and who participates in the Plan.

1.19 Plan.

Plan
means the Lowe’s Companies, Inc. Amended and Restated Directors’ Stock Option
and Deferred Stock Unit Plan.

1.20 Vesting
Date.

Vesting
Date means May 15.

ARTICLE
II

PURPOSES

The Plan
is intended (i) to assist the Company in recruiting and retaining directors and
(ii) to provide a greater identity of interest between Participants and
shareholders by enabling Participants to participate in the future success of
the Company. The Plan is intended to permit the grant of Options and, after the
Effective Date of this Plan, Deferred Stock Units to non-employee directors of
the Company. The proceeds received by the Company from the sale of Common Stock
pursuant to the exercise of an Option granted under this Plan shall be used for
general corporate purposes.

4

ARTICLE
III

ADMINISTRATION

The Plan
shall be administered by the Board. The Board shall have authority to grant
Options and Deferred Stock Units upon such terms (not inconsistent with the
provisions of this Plan) as the Board may consider appropriate. In addition, the
Board shall have complete authority to interpret all provisions of this Plan; to
prescribe the form of Option Agreements and Deferred Stock Unit Agreements; to
adopt, amend, and rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of any specific power
to the Board shall not be construed as limiting any other power or authority of
the Board. Any decision made, or action taken, by the Board in connection with
the administration of this Plan shall be final and conclusive. No member of the
Board shall be liable for any act done in good faith with respect to this Plan
or any Agreement, Deferred Stock Unit or Option. All expenses of administering
this Plan shall be borne by the Company.

ARTICLE
IV

ELIGIBILITY
AND GRANTS

Each
member of the Board who is not an employee of the Company shall be eligible to
be a Participant in the Plan. Effective on and after the Effective Date of this
Plan, the Board may grant Options or Deferred Stock Units to Participants in
accordance with Section 6.01 or Section 7.01 of the Plan.

ARTICLE
V

STOCK
SUBJECT TO PLAN

5.01 Shares
Issued.

Upon the
exercise of any Option the Company shall deliver to the Participant (or the
Participant’s broker, if the Participant so directs), shares of Common Stock
from its authorized but unissued Common Stock.

5.02 Aggregate
Limit.

The
maximum aggregate number of shares of Common Stock that may be issued under this
Plan is 500,000 shares, subject to adjustment as provided in Article
X.

5

5.03 Reallocation
of Shares.

If an
Option or Deferred Stock Unit is terminated, in whole or in part, for any reason
other than the exercise of the Option or conversion of the Deferred Stock Unit
to shares of Common Stock, the number of shares of Common Stock allocated to the
Option or Deferred Stock Unit or portion thereof may be reallocated to other
Options or Deferred Stock Units to be granted under this Plan.

ARTICLE
VI

OPTION
TERMS

6.01 Option
Grant.

On any
Award Date for which the Board has elected to grant Options under the Plan, each
Participant on such Award Date shall be granted an Option for 4,000 shares of
Common Stock.

6.02 Option
Price.

The price
per share for Common Stock purchased on the exercise of an Option shall be the
Fair Market Value on the date the Option is granted.

6.03 Maximum
Option Period.

An Option
granted under this Plan may not be exercised after the Expiration Date for such
Option.

6.04 Exercise.

(a) General. Except
as provided in Sections 6.04(b) through (f), an Option granted under this
Plan shall become exercisable with respect to one-third of the shares of Common
Stock subject to the Option on each of the three Vesting Dates following the
Award Date of the Option. Once an Option has become exercisable in accordance
with the preceding sentence, it shall continue to be exercisable until the
expiration of Participant’s rights under Sections 6.04(b) through (f). Once
an Option has become exercisable it may be exercised in whole at any time or in
part from time to time at such times and in compliance with such requirements as
the Board shall determine. An Option granted under this Plan may be exercised
with respect to any number of whole shares less than the full number for which
the Option could be exercised. A partial exercise of an Option shall not affect
the right to exercise the Option from time to time in accordance with this Plan
and the applicable Agreement with respect to the remaining shares subject to the
Option.

6

(b) Exercise
in the Event of Death. An
Option granted under this Plan shall be exercisable for all or part of the
number of shares of Common Stock that the Participant was entitled to purchase
pursuant to Section 6.04(a), reduced by the number of shares for which the
Option was previously exercised, in the event the Participant dies while a
member of the Board and prior to the Expiration Date and prior to the
termination of the Participant’s rights under Section 6.04(d) or (e). In
that event the Option or Options may be exercised by the Participant’s estate,
or the person or persons to whom the Participant’s rights under the Option or
Options shall pass by will or the laws of descent and distribution.
Participant’s estate or such persons may exercise the Option or Options during
the remainder of the period preceding the Expiration Date.

(c) Exercise
in the Event of Disability. An
Option granted under this Plan shall be exercisable for all or part of the
number of shares of Common Stock that the Participant was entitled to purchase
pursuant to Section 6.04(a), reduced by the number of shares for which the
Option was previously exercised, if the Participant becomes permanently and
totally disabled within the meaning of section 22(e)(3) of the Code
(“Permanently
and Totally Disabled”) while
a member of the Board and prior to the Expiration Date and prior to the
termination of the Participant’s rights under Section 6.04(d) or (e). In
that event, the Participant may exercise the Option or Options during the
remainder of the period preceding the Expiration Date or within one year of the
date he ceases to serve on the Board on account of being Permanently and Totally
Disabled, whichever is shorter.

(d) Exercise
After Termination of Service. Except
as provided in Sections 6.04(b), (c), and (e), an Option granted under this
Plan shall be exercisable for all or part of the number of shares that the
Participant was entitled to purchase pursuant paragraph 6.04(a), reduced by the
number of shares for which the Option was previously exercised, if the
Participant ceases to be a member of the Board prior to the Expiration Date. In
that event the Participant may exercise the Option or Options during the
remainder of the period preceding the Expiration Date or until the date that is
three months after the date he ceases to serve on the Board, whichever is
shorter.

(e) Exercise
After Retirement. An
Option granted under this Plan shall be exercisable for all or part of the
number of shares that the Participant was entitled to purchase pursuant to
Section 6.04(a), reduced by the number of shares for which the Option was
previously exercised, in the event of the Participant’s Retirement prior to the
Expiration Date and prior to the termination of the Participant’s rights under
Section 6.04(c) or (d). In that event the Participant may exercise this
Option during the remainder of the period preceding the Expiration Date. For
purposes of this Section 6.04(e), the term “Retirement” shall
mean Participant’s voluntary termination of service as a member of the Board on
or after the latest of (i) 90 days after Participant has provided written notice
to the Company’s Secretary of the decision to retire, (ii) Participant’s
attainment of age 60, and (iii) with respect to a particular Option, the date
that is six months after the Award Date on which such Option was
granted.

(f) Exercise
in the Event of an Acceleration Date.
Notwithstanding any other provision of this Article VI, all outstanding
Options previously granted under the Plan shall be 

7

exercisable,
in whole or in part, on an Acceleration Date and shall remain exercisable
thereafter for the periods specified in Sections 6.04 (b) through (e), or
Section 6.05, as applicable.

6.05 Merger,
Dissolution.

Options
previously granted under this Plan shall terminate on the effective date of the
dissolution or liquidation of the Company, or of a reorganization, merger or
consolidation of the Company with one or more corporations in which the Company
is not the surviving corporation, or of a transfer of substantially all of the
property or more than fifty percent of the then outstanding shares of the
Company. The preceding sentence to the contrary notwithstanding, Options shall
not terminate to the extent that written provision is made for their
continuance, assumption, or substitution by a successor employer or its parent
or subsidiary in connection with a transaction described in the preceding
sentence.

6.06 Minimum
Exercise.

An Option
granted under this Plan may not be exercised for less than fifty shares of
Common Stock unless it is exercised for the full number of shares that remain
subject to the Option.

6.07 Payment.

Payment
of the Option price may be made in cash or a cash equivalent. Payment of all or
part of the Option price may also be made by surrendering shares of Common Stock
to the Company. If Common Stock is used to pay all or part of the Option price,
the sum of the cash and cash equivalent and the Fair Market Value (determined as
of the day preceding the date of exercise) of the shares surrendered must not be
less than the Option price of the shares for which the Option is being
exercised.

ARTICLE
VII

DEFERRED
STOCK UNIT TERMS

7.01 Grant.

On any
Award Date for which the Board has elected to grant Deferred Stock Units under
the Plan, each Participant on such Award Date shall be granted that number of
Deferred Stock Units which shall be equal to $85,000 divided by the Fair Market
Value of a share of Common Stock on such Award Date rounded up to the next 100
units. The Deferred Stock Units granted to a Participant shall be credited to a
Deferral Account established and maintained in the name of such Participant on
the books and records of the Company. Each Deferred Stock Unit granted under
this Plan shall be evidenced by a Deferred Stock Unit Agreement with the Company
which shall contain the terms and conditions of the Deferred Stock Unit and
shall otherwise be consistent with the provisions of this Plan.

8

7.02 Vesting.

Each
Deferred Stock Unit granted in accordance with Section 7.01 shall be immediately
one hundred percent (100%) vested in the Participant on the Award
Date.

7.03 Dividend
Equivalent Credits.

The
Company shall credit to a Participant’s Deferral Account within thirty (30) days
after the payment date of any cash dividend with respect to shares of the
Company’s Common Stock, that number of additional Deferred Stock Units
determined by dividing (a) the product of the total number of Deferred Stock
Units credited to the Participant’s Deferral Account as of the record date for
such dividend multiplied by the per share amount of the dividend by (b) the Fair
Market Value of a share of Common Stock on such record date. All Deferred Stock
Units credited to a Participant’s Deferral Account in accordance with this
Section 7.03 shall be fully vested in such Participant.

7.04 Distribution
of Deferral Accounts. A
Participant’s Deferral Account shall be paid to the Participant or, in the event
of the Participant’s death, to the Participant’s estate, as soon as practicable
following the date the Participant terminates service as a member of the Board.
The form of payment shall be one share of the Company’s Common Stock for each
Deferred Stock Unit credited to the Participant’s Deferral Account and cash for
any fractional unit. Distribution of the Participant’s Deferral Account shall be
made in a single sum payment of shares of Company Common Stock and cash for any
fractional unit credited to the Deferral Account.

 

ARTICLE
VIII

 

GENERAL

8.01 Nontransferability.

Except as
provided in Section 8.02, each Option or Deferred Stock Unit granted under
this Plan shall be nontransferable except by will or by the laws of descent and
distribution. Except as provided in Section 8.02, during the lifetime of
the Participant to whom an Option is granted, the Option may be exercised only
by the Participant. No right or interest of a Participant in any Option or
Deferred Stock Unit shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.

8.02 Limited
Transferability.

Section 8.01
to the contrary notwithstanding, an Option or Deferred Stock Unit may be
transferred by a Participant to the Participant’s children, grandchildren,
spouse, one or more trusts for the benefit of such family members or a
partnership in which such family members are the only partners, on such terms
and conditions as may be permitted under Securities Exchange Commission
Rule 16b-3 as in effect from time to time. The holder of an Option or
Deferred Stock Unit transferred pursuant to this section shall be bound by the
same terms and conditions that governed the Option or Deferred Stock Unit during
the period that it was held by the Participant; provided, however, that such
transferee may not transfer the Option or Deferred Stock Unit except by will or
the laws of descent and distribution.

9

8.03 Status.

The Board
may decide to what extent leaves of absence for governmental or military
service, illness, temporary disability, or other reasons shall not be deemed
interruptions of continuous service on the Board for purposes of this
Plan.

8.04 Shareholder
Rights.

No
Participant shall have any rights as a shareholder with respect to shares
subject to an Option or Deferred Stock Unit until the date of exercise of such
Option or the date the Participant receives shares of Common Stock in payment of
the Deferred Stock Units credited to the Participant’s Deferral Account under
the Plan.

ARTICLE
IX

INDEMNIFICATION

A
Participant shall be entitled to a payment under this Article IX if (i) any
benefit, payment, accelerated vesting or other right under this Plan constitutes
a “parachute payment” (as defined in Code Section 280G(b)(2)(A), but
without regard to Code Section 280G(b)(2)(A)(ii)), with respect to such
Participant and (ii) the Participant incurs a liability under Code
Section 4999. The amount payable to a Participant described in the
preceding sentence shall be the amount required to indemnify the Participant and
hold the Participant harmless from the application of Code Sections 280G
and 4999. To effect this indemnification, the Company shall pay such Participant
an amount sufficient to pay the excise tax imposed on Participant under Code
section 4999 with respect to benefits, payments, accelerated vesting and other
rights under this Plan and any other plan or agreement and any income,
self-employment, hospitalization, excise or other taxes attributable to the
indemnification payment. The benefit payable under this Article IX shall be
paid in a single cash sum not later than twenty days after the date (or extended
filing date) on which the tax return reflecting liability for the Code
Section 4999 excise tax is required to be filed with the Internal Revenue
Service. Notwithstanding the foregoing, to the extent the terms of any other
plan or agreement also require that a Participant be indemnified and held
harmless from the application of Code Sections 280G and 4999, any such
indemnification and the amount required to be paid to a Participant under this
Article XI shall be coordinated so that such indemnification is paid only
once, and the Company’s obligation under this Article XI shall be satisfied
to the extent of any such other payment.

10

ARTICLE
X

ADJUSTMENT
UPON CHANGE IN COMMON STOCK

The
maximum aggregate number of shares that may be issued under the Plan, and the
number of shares as to which Options and Deferred Stock Units may be granted
under this Plan as of the applicable Award Date, and the terms of outstanding
Options and Deferred Stock Units shall be adjusted as the Board shall determine
to be equitably required in the event that (a) the Company (i) effects one or
more stock dividends, stock split-ups, subdivisions or consolidations of shares
or (ii) engages in a transaction to which Section 424 of the Code applies
or (b) there occurs any other event which, in the judgment of the Board
necessitates such action. Any determination made under this Article X by
the Board shall be final and conclusive.

The
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the maximum
number of shares as to which Options and Deferred Stock Units may be granted or
the terms of outstanding Options and Deferred Stock Units.

ARTICLE
XI

COMPLIANCE
WITH LAW AND APPROVAL OF REGULATORY BODIES

No Option
shall be exercisable, no Common Stock shall be issued, and no certificates for
shares of Common Stock shall be delivered under this Plan except in compliance
with all applicable federal and state laws and regulations (including, without
limitation, withholding tax requirements), any listing agreement to which the
Company is a party, and the rules of all domestic stock exchanges on which the
Company’s shares may be listed. The Company shall have the right to rely on an
opinion of its counsel as to such compliance. Any share certificate issued to
evidence Common Stock when an Option is exercised or when a Deferred Stock Unit
is converted to Common Stock may bear such legends and statements as the Board
may deem advisable to assure compliance with federal and state laws and
regulations. No Option shall be exercisable, no Common Stock shall be issued,
and no certificate for shares shall be delivered under this Plan until the
Company has obtained such consent or approval as the Board may deem advisable
from regulatory bodies having jurisdiction over such matters.

11

ARTICLE
XII

GENERAL
PROVISIONS

12.01 Effect
on Service.

Neither
the adoption of this Plan, its operation, nor any documents describing or
referring to this Plan (or any part thereof), shall confer upon any individual
any right to continue in the service of the Company or in any way affect any
right and power of the Company to terminate the service of any individual at any
time with or without assigning a reason therefor.

12.02 Unfunded
Plan.

The Plan,
insofar as it provides for grants, shall be unfunded, and the Company shall not
be required to segregate any assets that may at any time be represented by
grants under this Plan. Any liability of the Company to any person with respect
to any grant under this Plan shall be based solely upon any contractual
obligations that may be created pursuant to this Plan. No such obligation of the
Company shall be deemed to be secured by any pledge of, or other encumbrance on,
any property of the Company.

12.03 Rules
of Construction.

Headings
are given to the articles and sections of this Plan solely as a convenience to
facilitate reference. The reference to any statute, regulation, or other
provision of law shall be construed to refer to any amendment to or successor of
such provision of law.

ARTICLE
XIII

AMENDMENT

The Board
may amend or terminate this Plan from time to time; provided, however, that no
amendment may become effective until shareholder approval is obtained if the
amendment (i) increases the aggregate number of shares of Common Stock that
may be issued under the Plan (other than an adjustment pursuant to
Article X), (ii) changes the class of individuals eligible to become
Participants, (iii) expands the types of awards available under the Plan, (iv)
materially extends the term of the Plan, (v) materially changes the method of
determining the exercise price of an Option, (vi) deletes or limits any
provisions regarding repricing of Options, or (vii) otherwise is considered a
“material revision” pursuant to Securities and Exchange Commission Release No.
34-48108. No amendment shall, without a Participant’s consent, adversely affect
any rights of such Participant under any Option or Deferred Stock Unit
outstanding at the time such amendment is made. Notwithstanding the preceding,
the Board may amend or modify the Plan to the extent necessary to cause the Plan
to comply with the requirements of Sections 409A(a)(2), (3) and (4) of the
Internal Revenue Code of 1986 (as amended by the American Jobs Creation Act of
2004) and any rules or regulations issued thereunder by the United States
Department of the Treasury.

12

ARTICLE
XIV

DURATION
OF PLAN

No Option
or Deferred Stock Unit may be granted under this Plan after the Award Date in
2008. Options and Deferred Stock Units granted before that date shall remain
valid in accordance with their terms.

ARTICLE
XV

EFFECTIVE
DATE OF AMENDED AND RESTATED PLAN

Options
and Deferred Stock Units may be granted under this amended and restated Plan
upon its adoption by the Board, provided that no grant of Deferred Stock Units
shall be effective or exercisable unless this Plan is approved by a majority of
the votes cast by the Company’s shareholders, voting either in person or by
proxy, at a duly held shareholders’ meeting at which a quorum is
present.

13

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