COUGAR HOLDINGS INC.

2004 STOCK INCENTIVE PLAN

 

ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN

          1.1.  Purpose.  The purpose of the Cougar Holdings Inc. 2004 Stock
Incentive Plan (hereinafter referred to as the "Plan") is to assist in
attracting, retaining and compensating highly competent key employees,
non-employee directors and consultants ("employee(s)") and to act as an
incentive in motivating selected key employees, non-employee directors and
consultants of Cougar Holdings Inc. to achieve long-term corporate objectives,
by awarding certain options ("Stock Options") to purchase the Company's common
stock, $0.001 par value ("Common Stock"), and to receive grants of Common Stock
subject to certain restrictions ("Awards").  It is expressly understood that
consultants eligible to participate in this Plan shall specifically exclude
individuals whose services are provided in connection with the offer or sale of
securities in a capital-raising transaction and shall also exclude individuals
whose services are provided, either directly or indirectly, to promote or
maintain a market for the Company's securities.

          1.2.  Adoption and Term.  Subject to approval by the Company's Board
of Directors (the "Board") and shareholders, the Plan shall become effective as
of October 18, 2004 (the "Effective Date") and shall remain in effect until
terminated by action of the Board.

 

ARTICLE II
SHARES

          2.1.  Number of Shares Issuable.  The total number of shares initially
authorized to be issued under the Plan shall be 400,000 shares of common stock
of the Company, par value $0.001 per share ("Common Stock").

          2.2.  Reissuance of Common Stock/Stock Options.  If shares of Common
Stock awarded or issued under the Plan are reacquired by the Company due to a
forfeiture or for any other reason, such shares shall be cancelled and
thereafter shall again be available for purposes of the Plan.  If a Stock Option
expires, terminates or is cancelled for any reason without having been exercised
in full, the shares of Common Stock not purchased thereunder shall again be
available for purposes of the Plan.

 

ARTICLE III
PARTICIPATION

          Participants in the Plan shall be such key employees, consultants, and
non-employee directors of the Company as the Board (as hereinafter defined), in
its sole discretion, may designate from time to time (the "Participants").  The
Board's issuance of Common Stock or Stock Options to a participant in any year
shall not require the Board to designate such person to receive Common Stock or
Stock Options in any other year.  The Board shall consider such factors as it
deems pertinent in selecting participants and in determining the amount of
Common Stock or Stock Options to be issued.  Awards or Stock Options may be
granted under the Plan to those Employees of the Company as the Board may from
time to time select, including any Employee of an entity acquired by or merged
into the Company pursuant to the assumption, replacement or substitution of
awards previously issued by such entity.

 

 

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ARTICLE IV
ADMINISTRATION

          4.1.  This Plan shall be administered by the Board of Directors. 
Except for the terms and conditions explicitly set forth in this Plan, the Board
shall have the authority, in its discretion, to determine all matters relating
to the options to be granted under this Plan, including selection of the
individuals to be granted Awards or Stock options, the number of shares to be
subject to each grant, the date of grant, the termination of the stock options
or Awards, the stock option term, vesting schedules, and all other terms and
conditions thereof.  Such authority shall also include the authority in the
event of a spin-off or other corporate transaction to permit substitution of an
Award or stock options granted under the Plan with an award from another company
or an award denominated in other than shares of Common Stock.  Grants under this
Plan to employees need not be identical in any respect, even when made
simultaneously.

          4.2.  Stock Options shall be evidenced by written agreements ("Award
Agreements") which shall contain such terms and conditions as may be determined
by the Board.  Each agreement shall be signed on behalf of the Company by an
officer or officers delegated such authority by the Board using either manual or
facsimile signature.

          4.3.  All decisions made by the Board pursuant to the provisions of
this Plan and all determinations and selections made by the Board pursuant to
such provisions and related orders or resolutions of the Board of Directors
shall be final and conclusive.  The Board shall not have the right to cancel
outstanding stock options or stock appreciation rights for the purpose of
replacing or regranting such options or rights with a purchase price that is
less than the purchase price of the original stock option or right.

          4.4.  Limitation of Liability.  No member of the Board shall be liable
for any action, failure to act, determination or interpretation made in good
faith with respect to this Plan or any transaction hereunder, except for
liability arising from his or her own willful misfeasance, gross negligence or
reckless disregard of his or her duties.  The Company shall indemnify each
member of the Board for all costs and expenses and, to the extent permitted by
applicable law, any liability incurred in connection with defending against,
responding to, negotiation for the settlement of or otherwise dealing with any
claim, cause of action or dispute of any kind arising in connection with any
actions in administering this Plan or in authorizing or denying authorization to
any transaction hereunder.

          4.5.  All or part of any Award shall be subject to conditions and
restrictions established by the Board and set forth in the Award Agreement,
which may include, but not be limited to, continuous service with the Company
and/or the achievement of Performance Goals over a specified Performance
Period.  The Board may select one criterion or multiple criteria for measuring
performance, and the measurement may be based on total Company or business unit
performance or based on comparative performance with other companies.

          4.6.  The Board also may require or permit participants to elect to
defer the delivery of stock options or the settlement of Awards in cash under
such rules and procedures as it may establish under the Plan.  It also may
provide that deferred settlements include the payment or crediting of interest
on the deferral amounts, or the payment or crediting of dividend equivalents
where the deferral amounts are denominated in share equivalents.  In addition,
the Board may stipulate in an Award Agreement, either at the time of grant or by
subsequent amendment, that a payment or portion of a payment of an Award be
delayed in the event that Section 162(m) of the Code (or any successor or
similar provision of the Code affecting tax deductibility) would operate to
disallow a tax deduction by the Company for all or a portion of such payment. 
The period of any such delay in payment shall be until the payment or portion
thereof, is tax deductible, or such earlier date as the Board shall determine.

 

ARTICLE V
SHARES SUBJECT TO THE PLAN

          5.1.  The stock to be offered under the Plan shall be shares of the
Company's authorized Common Stock and may be unissued shares or shares now held
or subsequently acquired by the Company as treasury shares, as the Board of
Directors may from time to time determine.  Subject to adjustment as provided in
Article XIV hereof, the aggregate number of shares to be delivered under this
Plan shall not exceed 400,000.

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> If an option expires, is surrendered in exchange for another option, or
> terminates for any reason during the term of this Plan prior to its exercise
> in full, the shares subject to but not delivered under such option shall be
> available for options thereafter granted and for replacement options which may
> be granted in exchange for such surrendered or terminated options.

          5.2.  Any shares of common stock delivered upon exercise of a stock
option may be unissued shares or treasury shares, as the Board of Directors may
from time to time determine, and shall be charged against the aggregate number
of shares of stock available for purposes of this Plan.

 

ARTICLE VI
PROVISIONS RELATING TO COMMON STOCK AWARDS

          6.1.  Grant of Awards.  Subject to the provisions of the Plan, the
Board shall have full and complete authority, in its discretion, but subject to
the express provisions of this Plan, to (i) grant Awards pursuant to the Plan,
(ii) determine the number of shares of Common Stock subject to each Award
("Award Shares"), (iii) determine the terms and conditions (which need not be
identical) of each Award, including the consideration (if any) to be paid by the
Employee for such Common Stock, which may, in the Board's discretion, consist of
the delivery of the Employee's promissory note meeting the requirements of
paragraph 6.4.1, (iv) establish and modify performance criteria for Awards, and
(v) make all of the determinations necessary or advisable with respect to Awards
under the Plan.  Each award under the Plan shall consist of a grant of shares of
Common Stock subject to a restriction period (after which the restrictions shall
lapse), which shall be a period commencing on the date the award is granted and
ending on such date as the Board shall determine ("Restriction Period").  The
Board may provide for the lapse of restrictions in installments, for
acceleration of the lapse of restrictions upon the satisfaction of such
performance, or other criteria or upon the occurrence of such events as the
Board  shall determine, and for the early expiration of the Restriction Period
upon an Employee's death, Disability or Retirement, or following a Change of
Control, upon termination of an Employee's employment by the Company without
"Cause" or by the Employee for "Good Reason".

In addition to the above, any person who receives Award Shares may only sell
shares of Common Stock pursuant to the volume and certain other limitations of
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"),
for a period of one (1) year or by complying with the registration requirements
of the Securities Act; non-affiliates shall not be subject to such limitations
after holding the Common Stock for a period of two years.  The volume, manner of
sale and notice provisions of Rule 144 are applicable to any resale of Common
Stock.  In addition, Section 16 of the Exchange Act may limit an affiliate's
right to resell shares or impose reporting obligations upon any such resale. 
All such persons should consult the Company's counsel concerning their status as
affiliates and the applicability of Rule 144 and Section 16 before selling any
Company Common Stock.

          6.2.  Incentive Agreements.  Each Award granted under the Plan shall
be evidenced by a written agreement (an "Incentive Agreement") in a form
approved by the Board and executed by the Company and the Employee to whom the
Award is granted.  Each Incentive Agreement shall be subject to the terms and
conditions of the Plan and other such terms and conditions as the Board may
specify.

          6.3.  Waiver of Restrictions.  The Board may modify or amend any Award
under the Plan or waive any restrictions or conditions applicable to such
Awards; provided, however, that the Board may not undertake any such
modifications, amendments or waivers if the effect thereof materially increases
the benefits to any Employee, or adversely affects the rights of any Employee
without his or her consent.

          6.4.  Terms and Conditions of Awards.

          6.4.1.  Upon receipt of an Award of shares of Common Stock under the
Plan, even during the Restriction Period, an Employee shall be the holder of
record of the shares and shall have all the rights of a shareholder with respect
to such shares, subject to the terms and conditions of the Plan and the Award.

 

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          6.4.2.  Except as otherwise provided in this paragraph 6.4, no shares
of Common Stock received pursuant to the Plan shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period applicable to such shares.  Any purported disposition of such
Common Stock in violation of this paragraph 6.4.2 shall be null and void.

          6.4.3.  If an Employee's employment with the Company terminates prior
to the expiration of the Restriction Period for an Award, subject to any
provisions of the Award with respect to the Employee's death, Disability or
Retirement, or Change of Control, all shares of Common Stock subject to the
Award shall be immediately forfeited by the Employee and reacquired by the
Company, and the Employee shall have no further rights with respect to the
Award.  In the discretion of the Board, an Incentive Agreement may provide that,
upon the forfeiture by an Employee of Award Shares, the Company shall repay to
the Employee the consideration (if any) which the Employee paid for the Award
Shares on the grant of the Award.  In the discretion of the Board, an Incentive
Agreement may also provide that such repayment shall include an interest factor
on such consideration from the date of the grant of the Award to the date of
such repayment.

          6.4.4.  The Board may require under such terms and conditions as it
deems appropriate or desirable that (i) the certificates for Common Stock
delivered under the Plan are to be held in custody by the Company or a person or
institution designated by the Company until the Restriction Period expires, (ii)
such certificates shall bear a legend referring to the restrictions on the
Common Stock pursuant to the Plan, and (iii) the Employee shall have delivered
to the Company a stock power endorsed in blank relating to the Common Stock.

 

ARTICLE VII
TERMS OF OPTION

          7.1.  Option Term.  The term during which options may be granted under
this Plan shall expire as set in the discretion of the Board, and the option
period during which each option may be exercised shall, subject to the
provisions of Section 13 hereof, be such period as determined by the Board.

          7.2.  Option Price.  Except as set forth in section 7 herein, the
price at which shares may be purchased upon exercise of a particular option
shall be such price, as may be fixed by the Board.

          7.3.  Stock as Form o f Exercise Payment; Cashless Exercise.

          7.3.1.  An employee who owns shares of Company common stock may use
the previously acquired shares, value to be determined as the fair market value,
as a form of payment to exercise stock options under this Plan.  However, the
Board, in its discretion, may restrict or rescind this right upon notification
to the employee-participants in this Plan.  An option may be exercised with
stock only by delivering whole shares of Company stock having a fair market
value equal to or less than the exercise price.  If an option is exercised by
delivery of stock having a fair market value less then the exercise price, the
shortfall must be made up in cash.

          7.3.2.  Payment may also be made by surrendering to the Company a
portion of a particular grant and receiving from the Company in whole shares the
difference between the total shares of the option grant and the number of whole
option shares surrendered.  The number of whole option shares required to be
surrendered by an optionee shall be the number of whole option shares that is
equal to or less than the result of dividing the total exercise price of the
options being exercised by the fair market value of one share of common stock. 
If the whole number of option shares surrendered is less than the total exercise
price of the grant, the shortfall must be made up in cash.

          7.3.3.  The delivery of a properly executed notice together with such
other documentation as the Board and the broker, if applicable, shall require to
effect an exercise of an option and delivery to the Company of the sale or loan
proceeds required to pay the exercise price.

          7.3.4.  Any combination of the foregoing methods.

          7.3.5.  Such other consideration and methods as are permitted by
applicable laws.

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          7.3.6.  If the Fair Market Value of the number of whole shares
transferred or the number of whole option shares surrendered is less than the
total exercise price of the option, the shortfall must be made up in cash.

          7.4.  Vesting; Exercise of Options and Rights.

          7.4.1.  Each option granted shall be exercisable in whole or in part
at any time or from time to time during the option period as the Board may
determine, provided that the election to exercise an option shall be made in
accordance with applicable Federal laws and regulations, and further provided
that each option shall contain a provision that will prevent exercise of the
option unless the optionee remains in the employ of the Company or its
subsidiary at least one year after the granting of the option.  However, the
Board may in its discretion accelerate the vesting schedule of any option at any
time.

          7.4.2.  No option may at any time be exercised with respect to a
fractional share.

          7.4.3.  As a condition to the exercise of a Non-Qualified Stock
Option, grantees shall make such arrangements as the Board may require for the
satisfaction of any federal, state, or local withholding tax obligations that my
arise in connection with such exercise.

          7.4.4.  No shares shall be delivered pursuant to the exercise of any
option, in whole or in part, until qualified for delivery under such securities
laws and regulations as may be deemed by the Board to be applicable thereto and
until, in the case of the exercise of an option, payment in full of the option
price thereof or stock as a form of payment as provided in Section 10 hereof is
received by the Company in cash (or check) or stock.  No holder of an option, or
his/her legal representative, legatee, or distributee, shall be or be deemed to
be a holder of any shares subject to such option unless and until he/she has
received a certificate or certificates therefor.

          7.4.5.  Notwithstanding any vesting requirements contained in any
Option, all outstanding Options shall become immediately exercisable (1)
following the first purchase of Common Stock pursuant to a tender offer or
exchange offer (other than an offer made by the Company) for all or part of the
Common Stock, (2) at such time as a third person, including a "group" as defined
in Section 13(d) of the Securities Exchange Act of 1934, becomes the beneficial
owner of shares of the Company having 25% or more of the total number of votes
that may be cast for the election of Directors of the Company, (3) on the date
on which the shareholders of the Company approve (i) any agreement for a merger
or consolidation in which the Company will not survive as an independent,
publicly owned Company or (ii) any sale, exchange or other disposition of all or
substantially all of the Company's assets.  The Board's reasonable determination
as to whether such an event has occurred shall be final and conclusive.

          7.4.6.  Notwithstanding any other provisions of this Agreement to the
contrary, the right of any Employee to receive any benefits hereunder shall
terminate and shall be forever forfeited if such employee's employment with the
Company or status as an advisor or consultant is terminated because of his/her
fraud, embezzlement, dishonesty, or breach of fiduciary duty.  In such an event,
all unexercised options shall be deemed null and void.  This Section shall be
inapplicable to any such termination of employment or status as an advisor or
consultant occurring after the Plan has been terminated.

          7.5.  Transferability of Options.  The right of any optionee to
exercise an option granted under the Plan shall, during the lifetime of such
optionee, be exercisable only by such optionee or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code of 1986, as
amended, or Title I of the Employee Retirement Income Security Act, or the rules
thereunder (a "QDRO") and shall not be assignable or transferable by such
optionee other than by will or the laws of descent and distribution or a QDRO.

 

ARTICLE VIII
TERMINATION OF RELATIONSHIP

          The terms and conditions under which a stock option may be exercised
after the termination of relationship with the Company shall be determined by
the Board.

 

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ARTICLE IX
AMENDMENT AND DISCONTINUANCE

          The Board of Directors may amend, suspend, or discontinue this Plan,
but may not, without the approval of the holders of the Company's common stock,
make any amendment thereof which operates: (a) to increase the total number of
shares which may be granted under this Plan, (b) to extend the terms of this
Plan or the maximum option period provided in this Plan, (c) to materially
modify the requirements as to eligibility for participation in this Plan, or (d)
to materially increase the benefits accruing to Participants under this Plan. 
No amendment to this Plan shall, except with the consent of the Holder of the
stock option or Award, adversely affect rights under a stock option or Award
previously granted or issued.

 

ARTICLE X
INVESTMENT REPRESENTATION

          Upon demand by the Company, the Holder of the stock option or Award
shall deliver to the Company a representation in writing that the purchase of
all shares with respect to which notice of exercise of the Option has been given
by Optionee is being made for investment only and not for resale or with a view
to distribution and containing such other representations and provisions with
respect thereto as the Company may require.  Upon such demand, delivery of such
representation promptly and prior to the transfer or delivery of any such shares
and prior to the expiration of the option period, shall be a condition precedent
to the right to purchase such shares.

 

ARTICLE XI
RIGHTS AS SHAREHOLDER AND EMPLOYEE

          The Holder of the stock option or Award shall have no rights as a
shareholder of the Company with respect to any shares of Common Stock covered by
an Option or Award until the date of the issuance of the stock certificate for
such shares.  Neither the Plan, nor the granting of an option, common stock or
other rights herein, nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or implied,
that an Employee has a right to continue as an Employee for any period of time
or at any particular rate of compensation.

 

ARTICLE XII
GOVERNING LAW

          Stock Options granted or Awards under this Plan shall be construed and
shall take effect in accordance with the laws of the State of Nevada.

 

ARTICLE XIII
OTHER BENEFIT AND COMPENSATION PROGRAMS

          Unless otherwise specifically determined by the Board, settlements of
Awards received by Participants under the Plan shall not be deemed a part of a
Participant's regular, recurring compensation for purposes of calculating
payments or benefits from any Company benefit plan or severance program. 
Further, the Company may adopt other compensation programs, plans or
arrangements as it deems appropriate or necessary.

 

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ARTICLE XIV
UNFUNDED PLAN

          Unless otherwise determined by the Board, the Plan shall be unfunded
and shall not create (or be construed to create) a trust or a separate fund or
funds.  The Plan shall not establish any fiduciary relationship between the
Company and any Participant or other person.  To the extent any person holds any
rights by virtue of an Award granted under the Plan, such rights shall
constitute, general unsecured liabilities of the Company and shall not confer
upon any Participant any right, title or interest in any assets of the Company.

 

ARTICLE XV
REGULATORY APPROVALS

          The implementation of the Plan, the granting of any Award under the
Plan, and the delivery of shares of Common Stock upon the exercise or settlement
of any Award shall be subject to the Company's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the Awards granted under it or the shares issued pursuant to it.

 

ARTICLE XVI
FUTURE RIGHTS; NO PRIOR RIGHT OF AWARD

          16.1.  Future Rights.  No person shall have any claim or rights to be
granted an Award under the Plan, and no Participant shall have any rights under
the Plan to be retained in the employ of the Company.  Likewise, participation
in the Plan will not in any way affect the Company's right to terminate the
employment of the Participant at any time with or without cause.

          16.2.  No Prior Right Or Award.  Nothing in this Agreement shall be
deemed to give a Participant, or his/her legal representative or assigns, or any
other person or entity claiming under or through him/her, any contract or other
right to participate in the benefits of this Agreement.  Nothing in this
Agreement shall be construed as constituting a commitment, guarantee, agreement,
or understanding of any kind or nature that the Company shall continue to
employ, or continue any other relationship with Participant.  The Agreement
shall not affect in any way the right of the Company to terminate the employment
or such relationship of any individual Participant.

 

ARTICLE XVII
NON-COMPETITION

          Notwithstanding any other provision of this Agreement, no restrictions
on the stock options or Awards shall lapse and all rights under this Agreement
of Participant shall be forfeited if, Participant (i) shall be employed by a
competitor of or shall be engaged in any activity in competition with the
Company without the Company's written consent, (ii) divulges without the written
consent of the Company any secret or confidential information belonging to the
Company, or (iii) engages in any other activities which would constitute grounds
for his/her discharge by the Company for cause or without cause.

 

 

 

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ARTICLE XVIII
ASSIGNABILITY

          Any stock options granted or Awards made under this Plan shall be null
and void in the event that the stock options or Awards are transferred or
assignment or otherwise disposed of by Participant to any party, other than to
the Company.  The terms and provisions of this Plan shall be binding upon, and
shall inure to the benefit of each Participant, his/her heirs, executors,
administrators, successors, and personal and legal representatives.

 

ARTICLE XIX
COSTS AND EXPENSES

          All costs and expenses with respect to the adoption, implementation,
interpretation and administration of this Plan shall be borne by the Company;
provided that nothing herein shall be deemed to provide that the Company shall
pay for any expenses of any counsel engaged by Participant.

 

ARTICLE XX
ARBITRATION

          Any controversy arising out of, connected to, or relating to any
matters herein of the transactions between a Participant and Company (including
for purposes of arbitration, officers, directors, employees, controlling
persons, affiliates, professional advisors, agents, or promoters of Company,
Participant), on behalf of the undersigned, or this Agreement, or the breach
thereof, including, but not limited to any claims of violations of Federal
and/or State Securities Acts, Banking Statutes, Consumer Protection Statutes,
Federal and/or State Anti-Racketeering (e.g. RICO) claims as well as any common
law claims and any State Law claims of fraud, negligence, negligent
misrepresentations, unjust termination, breach of contract, and/or conversion
shall be settled by arbitration; and in accordance with this paragraph and
judgment on the Arbitrator's award may be entered in any court having
jurisdiction thereof in accordance with the provisions of the laws of the State
of Nevada.  In the event of such a dispute, each party to the conflict shall
select an arbitrator, which shall constitute the three person arbitration
board.  The decision of a majority of the board of arbitrators, who shall render
their decision within thirty (30) days of appointment of the final arbitrator,
shall be binding upon the parties.

 

 

 

 

 

 

 

 

 

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