Exhibit 10.1

                              Validian Corporation

                              INCENTIVE EQUITY PLAN

May 2003


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                              Validian Corporation

                              INCENTIVE EQUITY PLAN
                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
ARTICLE 1  PURPOSE.............................................................3
ARTICLE 2  DEFINITIONS.........................................................3
ARTICLE 3  ADMINISTRATION......................................................5
ARTICLE 4  ELIGIBILITY.........................................................6
ARTICLE 5  SHARES SUBJECT TO PLAN..............................................7
ARTICLE 6  GRANT OF AWARDS.....................................................7
   In General..................................................................7
   Maximum ISO Grants..........................................................7
   SAR.........................................................................7
   Maximum Individual Grants...................................................8
   Tandem Awards...............................................................8
ARTICLE 7  OPTION PRICE; SAR PRICE.............................................8
ARTICLE 8  AWARD PERIOD; VESTING...............................................8
   Award Period................................................................8
   Vesting.....................................................................8
ARTICLE 9  TERMINATION OF SERVICE..............................................9
ARTICLE 10 EXERCISE OF INCENTIVE...............................................9
   In General..................................................................9
   Disqualifying Disposition of ISO...........................................10
ARTICLE 11 AMENDMENT OR DISCONTINUANCE........................................10
ARTICLE 12 TERM...............................................................11
ARTICLE 13 CAPITAL ADJUSTMENTS................................................11
ARTICLE 14 RECAPITALIZATION, MERGER AND CONSOLIDATION.........................11
ARTICLE 15 LIQUIDATION OR DISSOLUTION.........................................12
ARTICLE 16 SUBSTITUTION FOR INCENTIVES GRANTED BY OTHER CORPORATIONS..........12
ARTICLE 17 MISCELLANEOUS PROVISIONS...........................................13
   Investment Intent..........................................................13
   No Right to Continued Employment...........................................13
   Indemnification of Board and Committee.....................................13
   Effect of the Plan.........................................................13
   Compliance With Other Laws and Regulations.................................13
   Tax Requirements...........................................................13
   Assignability..............................................................14
   Use of Proceeds............................................................14


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                              Validian Corporation
                              INCENTIVE EQUITY PLAN

      The name of the plan is the INCENTIVE EQUITY PLAN (the "Plan") of Validian
Corporation, a Nevada corporation (the "Company"). Effective May 30th 2003,
Validian's Board of Directors approved, subject to stockholder approval, this
Incentive Equity Plan.

                                    ARTICLE 1

                                     PURPOSE

      The purpose of the Plan is to attract and to retain the services of
Employees and Consultants of the Company and its Subsidiaries and to provide
such persons with a proprietary interest in the Company through the granting of
incentive stock options, non-qualified stock options, stock appreciation rights,
or whether granted singly, or in combination, or in tandem, that will

      (a)   increase the interest of such persons in the Company's welfare and
            success;

      (b)   furnish an incentive to such persons to continue their services for
            the Company; and

      (c)   provide a means through which the Company may attract able persons
            as Employees and Consultants.

      With respect to Reporting Participants, the Plan and all transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (the "1934 Act"). To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void ab initio, to the extent permitted by
law and deemed advisable by the Committee.

                                    ARTICLE 2

                                   DEFINITIONS

      Unless the context requires otherwise, the following terms shall have the
meanings indicated:

"Award" means the grant of any Incentive Stock Option, Non-qualified Stock
      Option, or Stock Appreciation Rignt whether granted singly, in combination
      or in tandem (each individually referred to herein as an "Incentive").

"Award Agreement" means a written agreement between a Participant and the
      Company, which sets out the terms of the grant of an Award.

"Award Period" means the period during which one or more Incentives granted
      under an Award may be exercised.

"Board" means the board of directors of the Company.

"Change of Control" means any of the following: (i) any consolidation, merger or
      share exchange of the Company in which the Company is not the continuing
      or surviving corporation or pursuant to which shares of the Company's
      Common Stock would be converted into cash, securities or other property of
      another entity, other than a consolidation, merger or share exchange of
      the Company in which the holders of the Company's Common Stock immediately
      prior to such transaction have the same proportionate ownership of Common
      Stock of the surviving entity immediately after such transaction; (ii) any
      sale, lease, exchange or other transfer (excluding transfer by way of
      pledge or hypothecation) in one transaction or a series of related
      transactions, of all or


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      substantially all of the assets of the Company; (iii) the stockholders of
      the Company approve any plan or proposal for the liquidation or
      dissolution of the Company; (iv) the cessation of control (by virtue of
      their not constituting a majority of directors) of the Board by the
      individuals (the "Continuing Directors") who (x) at the date of this Plan
      were directors or (y) become directors after the date of this Plan and
      whose election or nomination for election by the Company's stockholders
      was approved by a vote of at least two-thirds of the directors (1) then in
      office who were directors at the date of this Plan or (2) whose election
      or nomination for election was previously so approved; (v) the acquisition
      of beneficial ownership (within the meaning of Rule 13d-3 under the 1934
      Act) of an aggregate of twenty percent (20%) of the voting power of the
      Company's outstanding voting securities by any person or group (as such
      term is used in Rule 13d-5 under the 1934 Act) who beneficially owned less
      than fifteen percent (15%) of the voting power of the Company's
      outstanding voting securities on the date of this Plan, or the acquisition
      of beneficial ownership of an additional five percent (5%) of the voting
      power of the Company's outstanding voting securities by any person or
      group who beneficially owned at least fifteen percent (15%) of the voting
      power of the Company's outstanding voting securities on the date of this
      Plan, provided, however, that notwithstanding the foregoing, an
      acquisition shall not constitute a Change of Control hereunder if the
      acquiror is (x) a trustee or other fiduciary holding securities under an
      employee benefit plan of the Company and acting in such capacity, (y) a
      Subsidiary of the Company or a corporation owned, directly or indirectly,
      by the stockholders of the Company in substantially the same proportions
      as their ownership of voting securities of the Company or (z) any other
      person whose acquisition of shares of voting securities is approved in
      advance by a majority of the Continuing Directors; or (vi) in a Title 11
      bankruptcy proceeding, the appointment of a trustee or the conversion of a
      case involving the Company to a case under Chapter 7.

"Code" means the Internal Revenue Code of 1986, as amended, or any successor
      legislation.

"Committee" means the committee appointed or designated by the Board to serve as
      the Compensation and Stock Option Committee (or a similarly named
      Committee generally intended to administer and oversee employee
      compensation plans such as the Plan) of the Board to administer the Plan
      in accordance with Article 3 of this Plan.

"Common Stock" means the common stock, par value $0.001 per share, which the
      Company is currently authorized to issue or may in the future be
      authorized to issue.

"Company" means Validian Corporation, a Nevada corporation, and any successor
      entity.

"Consultant" means any person performing advisory or consulting services for the
      Company or a Subsidiary, with or without compensation, to whom the Company
      chooses to grant an Award in accordance with the Plan, provided that bona
      fide services must be rendered by such person and such services shall not
      be rendered in connection with the offer or sale of securities in a
      capital raising transaction.

"Date of Grant" means the effective date on which an Award is made to a
      Participant as set forth in the applicable Award Agreement; provided,
      however, that solely for purposes of Section 16 of the 1934 Act and the
      rules and regulations promulgated thereunder, the Date of Grant of an
      Award shall be the date of stockholder approval of the Plan if such date
      is later than the effective date of such Award as set forth in the Award
      Agreement.

"Employee" means common law employee (as defined in accordance with the
      Regulations and Revenue Rulings then applicable under Section 3401(c) of
      the Code) of the Company or any Subsidiary of the Company.

"Fair Market Value" of a share of Common Stock is the mean of the highest and
      lowest prices per share on any exchange or stock quotation system that
      reports daily high and low sales prices, or in the


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      absence of reported sales on such day, the most recent previous day for
      which sales were reported.

"Incentive Stock Option" or "ISO" means an incentive stock option within the
      meaning of Section 422 of the Code, granted pursuant to this Plan.

"Non-qualified Stock Option" or "NQSO" means a non-qualified stock option,
      granted pursuant to this Plan.

"Option Price" means the price, which must be paid by a Participant upon
      exercise of a Stock Option to purchase a share of Common Stock.

"Participant" shall mean an Employee or a Consultant of the Company or a
      Subsidiary to whom an Award is granted under this Plan.

"Plan" means this Validian Corporation INCENTIVE EQUITY PLAN, as amended from
      time to time.

"Reporting Participant" means a Participant who is subject to the reporting
      requirements of Section 16 of the 1934 Act.

"Retirement" means any Termination of Service solely due to retirement upon
      attainment of age 65, or permitted early retirement as determined by the
      Committee.

"SAR" means a Stock Appreciation Right or the right to receive a payment, in
      cash and/or Common Stock, equal to the excess of the Fair Market Value of
      a specified number of shares of Common Stock on the date the SAR is
      exercised over the SAR Price for such shares.

"SAR Price" means the Fair Market Value of each share of Common Stock covered by
      a Stock Appreciation Right (SAR), determined on the Date of Grant of the
      SAR.

"Stock Option" means a Non-qualified Stock Option or an Incentive Stock Option.

"Subsidiary" means (i) any corporation in an unbroken chain of corporations
      beginning with the Company, if each of the corporations other than the
      last corporation in the unbroken chain owns stock possessing a majority of
      the total combined voting power of all classes of stock in one of the
      other corporations in the chain, (ii) any limited partnership, if the
      Company or any corporation described in item (i) above owns a majority of
      the general partnership interest and a majority of the limited partnership
      interests entitled to vote on the removal and replacement of the general
      partner, and (iii) any partnership or limited liability company, if the
      partners or members thereof are composed only of the Company, any
      corporation listed in item (i) above or any limited partnership listed in
      item (ii) above. "Subsidiaries" means more than one of any such
      corporations, limited partnerships, partnerships or limited liability
      companies.

"Termination of Service" occurs when a Participant who is an Employee or a
      Consultant of the Company or any Subsidiary shall cease to serve as an
      Employee or a Consultant of the Company and its Subsidiaries, for any
      reason.

"Total and Permanent Disability" means a Participant is qualified for long-term
      disability benefits under the Company's disability plan or insurance
      policy; or, if no such plan or policy is then in existence, that the
      Participant, because of ill health, physical or mental disability or any
      other reason beyond his or her control, is unable to perform his or her
      duties of employment for a period of six (6) continuous months, as
      determined in good faith by the Committee; provided that, with respect to
      any Incentive Stock Option, Total and Permanent Disability shall have the
      meaning given it under the rules governing Incentive Stock Options under
      the Code.


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                                    ARTICLE 3

                                 ADMINISTRATION

      The Plan shall be administered by a committee appointed by the Board (the
"Committee"). The Committee shall consist of not fewer than two persons unless
during any period of time there is only one director of the Company. Any member
of the Committee may be removed at any time, with or without cause, by
resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.

      At such time as the Company has two or more Non-employee Directors,
membership on the Committee shall be limited to those members of the Board who
are Non-employee Directors as defined in Rule 16b-3 of the Securities Exchange
Act of 1934, as amended, and who are "outside directors" under Section 162(m) of
the Code. The Committee shall select one of its members to act as its Chairman.
A majority of the Committee shall constitute a quorum, and the act of a majority
of the members of the Committee present at a meeting at which a quorum is
present shall be the act of the Committee.

      The Committee shall determine and designate from time to time the eligible
persons to whom Awards will be granted and shall set forth in each related Award
Agreement the Award Period, the Date of Grant, and such other terms, provisions,
limitations, and performance requirements, as approved by the Committee, but not
inconsistent with the Plan. The Committee shall determine whether an Award shall
include one type of Incentive, two or more Incentives granted in combination, or
two or more Incentives granted in tandem (that is, a joint grant where exercise
of one Incentive results in cancellation of all or a portion of the other
Incentive).

      The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in the administration
of the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.

      With respect to restrictions in the Plan that are based on the
requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the
Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer
quotation system upon which the Company's securities are listed or quoted, or
any other applicable law, rule or restriction (collectively, "applicable law"),
to the extent that any such restrictions are no longer required by applicable
law, the Committee shall have the sole discretion and authority to grant Awards
that are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.


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                                    ARTICLE 4

                                   ELIGIBILITY

      Any Employee (including an Employee who is also a director or an officer)
or Consultant whose judgment, initiative, and efforts contributed or may be
expected to contribute to the successful performance of the Company is eligible
to participate in the Plan; provided that only Employees shall be eligible to
receive Incentive Stock Options. The Committee, upon its own action, may grant,
but shall not be required to grant, an Award to any Employee or Consultant of
the Company or any Subsidiary. Awards may be granted by the Committee at any
time and from time to time to new Participants, or to then Participants, or to a
greater or lesser number of Participants, and may include or exclude previous
Participants, as the Committee shall determine. Except as required by this Plan,
Awards granted at different times need not contain similar provisions. The
Committee's determinations under the Plan (including without limitation
determinations of which Employees or Consultants, if any, are to receive Awards,
the form, amount and timing of such Awards, the terms and provisions of such
Awards and the agreements evidencing same) need not be uniform and may be made
by it selectively among Employees and Consultants who receive, or are eligible
to receive, Awards under the Plan.

                                    ARTICLE 5

                             SHARES SUBJECT TO PLAN

      Subject to adjustment as provided in Articles 13 and 14, the maximum
number of shares of Common Stock that may be delivered pursuant to Awards
granted under the Plan is (a) five million (5,000,000) shares; plus (b) shares
of Common Stock previously subject to Awards which are forfeited, terminated,
settled in cash in lieu of Common Stock, or exchanged for Awards that do not
involve Common Stock, or expired unexercised; plus (c) without duplication for
shares counted under the immediately preceding clause, a number of shares of
Common Stock equal to the number of shares repurchased by the Company in the
open market or otherwise and having an aggregate repurchase price no greater
than the amount of cash proceeds received by the Company from the sale of shares
of Common Stock under the Plan; plus (d) any shares of Common Stock surrendered
to the Company in payment of the exercise price of options issued under the
Plan.

      Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the number
of shares of Common Stock that shall be sufficient to satisfy the requirements
of this Plan.

                                    ARTICLE 6

                                 GRANT OF AWARDS

6.1      In General. The grant of an Award shall be authorized by the Committee
         and shall be evidenced by an Award Agreement setting forth the
         Incentive or Incentives being granted, the total number of shares of
         Common Stock subject to the Incentive(s), the Option Price (if
         applicable), the Award Period, the Date of Grant, and such other terms,
         provisions, limitations, and performance objectives, as are approved by
         the Committee, but not inconsistent with the Plan. The Company shall
         execute an Award Agreement with a Participant after the Committee
         approves the issuance


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         of an Award. Any Award granted pursuant to this Plan must be granted
         within five (5) years of the date of adoption of this Plan. The Plan
         shall be submitted to the Company's stockholders for approval; however,
         the Committee may grant Awards under the Plan prior to the time of
         stockholder approval. Any such Award granted prior to such stockholder
         approval shall be made subject to such stockholder approval. The grant
         of an Award to a Participant shall not be deemed either to entitle the
         Participant to, or to disqualify the Participant from, receipt of any
         other Award under the Plan

6.2      Maximum ISO Grants. The Committee may not grant Incentive Stock Options
         under the Plan to any Employee which would permit the aggregate Fair
         Market Value (determined on the Date of Grant) of the Common Stock with
         respect to which Incentive Stock Options (under this and any other plan
         of the Company and its Subsidiaries) are exercisable for the first time
         by such Employee during any calendar year to exceed $200,000. To the
         extent any Stock Option granted under this Plan, which is designated as
         an Incentive Stock Option exceeds this limit or otherwise fails to
         qualify as an Incentive Stock Option, such Stock Option shall be a
         Non-qualified Stock Option.

6.3      SAR. An SAR shall entitle the Participant at his election to surrender
         to the Company the SAR, or portion thereof, as the Participant shall
         choose, and to receive from the Company in exchange therefor cash in an
         amount equal to the excess (if any) of the Fair Market Value (as of the
         date of the exercise of the SAR) per share over the SAR Price per share
         specified in such SAR, multiplied by the total number of shares of the
         SAR being surrendered. In the discretion of the Committee, the Company
         may satisfy its obligation upon exercise of an SAR by the distribution
         of that number of shares of Common Stock having an aggregate Fair
         Market Value (as of the date of the exercise of the SAR) equal to the
         amount of cash otherwise payable to the Participant, with a cash
         settlement to be made for any fractional share interests, or the
         Company may settle such obligation in part with shares of Common Stock
         and in part with cash.

6.4      Maximum Individual Grants. No participant may receive during any
         calendar year of the Company Awards covering an aggregate of more than
         one million five hundred thousand (1,500,000) shares of Common Stock.

6.5      Tandem Awards. The Committee may grant two or more Incentives in one
         Award in the form of a "tandem award," so that the right of the
         Participant to exercise one Incentive shall be canceled if, and to the
         extent, the other Incentive is exercised. For example, if a Stock
         Option and an SAR are issued in a tandem Award, and the Participant
         exercises the SAR with respect to one hundred (100) shares of Common
         Stock, the right of the Participant to exercise the related Stock
         Option shall be canceled to the extent of one hundred (100) shares of
         Common Stock.

                                    ARTICLE 7

                             OPTION PRICE; SAR PRICE

      The Option Price for a Non-qualified Stock Option shall be such price as
determined by the Committee; provided, however, such Option Price shall not be
less than the par value per share of the Common Stock. The Option Price for an
Incentive Stock Option and the SAR Price for any share of Common Stock subject
to an SAR shall be at least one hundred percent (100%) of the Fair Market Value
of the share on the Date of Grant. If an Incentive Stock Option is granted to an
Employee who owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than ten percent (10%) of the combined voting
power of all classes of stock of the Company (or any parent or Subsidiary), the
Option Price shall be at least one hundred and ten percent (110%) of the Fair
Market Value of the Common Stock on the Date of Grant.


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                                    ARTICLE 8

                              AWARD PERIOD; VESTING

8.1      Award Period. Subject to the other provisions of this Plan, the
         Committee may, in its discretion, provide that an Incentive may not be
         exercised in whole or in part for any period or periods of time or
         beyond any date specified in the Award Agreement. Except as provided in
         the Award Agreement, an Incentive may be exercised in whole or in part
         at any time during its term. The Award Period for an Incentive shall be
         reduced or terminated upon Termination of Service in accordance with
         this Article 8 and Article 9. No Incentive granted under the Plan may
         be exercised at any time after the end of its Award Period. No portion
         of any Incentive may be exercised after the expiration of five (5)
         years from its Date of Grant. However, if an Employee owns or is deemed
         to own (by reason of the attribution rules of Section 424(d) of the
         Code) more than ten percent (10%) of the combined voting power of all
         classes of stock of the Company (or any parent or Subsidiary) and an
         Incentive Stock Option is granted to such Employee, the term of such
         Incentive Stock Option (to the extent required by the Code at the time
         of grant) shall be no more than five (5) years from the Date of Grant.

8.2      Vesting. The Committee, in its sole discretion, may determine that an
         Incentive will be immediately exercisable, in whole or in part, or that
         all or any portion may not be exercised until a date, or dates,
         subsequent to its Date of Grant, or until the occurrence of one or more
         specified events, subject in any case to the terms of the Plan. If the
         Committee imposes conditions upon exercise, then subsequent to the Date
         of Grant, the Committee may, in its sole discretion, accelerate the
         date on which all or any portion of the Incentive may be exercised.

                                    ARTICLE 9

                             TERMINATION OF SERVICE

      In the event of Termination of Service of a Participant, an Incentive may
only be exercised as determined by the Committee and provided in the Award
Agreement.

                                   ARTICLE 10

                              EXERCISE OF INCENTIVE

10.1     In General . A vested Incentive may be exercised during its Award
         Period, subject to limitations and restrictions set forth therein and
         in Article 9. A vested Incentive may be exercised at such times and in
         such amounts as provided in this Plan and the applicable Award
         Agreement, subject to the terms, conditions, and restrictions of the
         Plan.

         In no event may an Incentive be exercised or shares of Common Stock be
         issued pursuant to an Award if a necessary listing or quotation of the
         shares of Common Stock on a stock exchange or inter-dealer quotation
         system or any registration under state or federal securities laws
         required under the circumstances has not been accomplished. No
         Incentive may be exercised for a fractional share of Common Stock. The
         granting of an Incentive shall impose no obligation upon the
         Participant to exercise that Incentive.

         (a)      Stock Options. Subject to such administrative regulations as
                  the Committee may from time to time adopt, a Stock Option may
                  be exercised by the delivery of written notice to the
                  Committee setting forth the number of shares of Common Stock
                  with respect to which the Stock Option is to be exercised and
                  the date of exercise thereof (the "Exercise Date") which shall
                  be at least three (3) days after giving such notice unless an
                  earlier time shall have been mutually agreed upon. On the
                  Exercise Date, the Participant shall deliver to the Company


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                  consideration with a value equal to the total Option Price of
                  the shares to be purchased, payable as follows: (a) cash,
                  check, bank draft, or money order payable to the order of the
                  Company, (b) Common Stock owned by the Participant on the
                  Exercise Date, valued at its Fair Market Value on the Exercise
                  Date and which the Participant has not acquired from the
                  Company within six (6) months prior to the Exercise Date, (c)
                  by delivery (including by FAX) to the Company or its
                  designated agent of an executed irrevocable option exercise
                  form together with irrevocable instructions from the
                  Participant to a broker or dealer, reasonably acceptable to
                  the Company, to sell certain of the shares of Common Stock
                  purchased upon exercise of the Stock Option or to pledge such
                  shares as collateral for a loan and promptly deliver to the
                  Company the amount of sale or loan proceeds necessary to pay
                  such purchase price, and/or (d) in any other form of valid
                  consideration that is acceptable to the Committee in its sole
                  discretion.

                  Upon payment of all amounts due from the Participant, the
                  Company shall cause certificates for the Common Stock then
                  being purchased to be delivered as directed by the Participant
                  (or the person exercising the Participant's Stock Option in
                  the event of his death) at its principal business office
                  promptly after the Exercise Date; provided that if the
                  Participant has exercised an Incentive Stock Option, the
                  Company may at its option retain physical possession of the
                  certificate evidencing the shares acquired upon exercise until
                  the expiration of the holding periods described in Section
                  422(a)(1) of the Code. The obligation of the Company to
                  deliver shares of Common Stock shall, however, be subject to
                  the condition that if at any time the Committee shall
                  determine in its discretion that the listing, registration, or
                  qualification of the Stock Option or the Common Stock upon any
                  securities exchange or inter-dealer quotation system or under
                  any state or federal law, or the consent or approval of any
                  governmental regulatory body, is necessary or desirable as a
                  condition of, or in connection with, the Stock Option or the
                  issuance or purchase of shares of Common Stock thereunder, the
                  Stock Option may not be exercised in whole or in part unless
                  such listing, registration, qualification, consent, or
                  approval shall have been effected or obtained free of any
                  conditions not acceptable to the Committee.

                  If the Participant fails to pay for any of the Common Stock
                  specified in such notice or fails to accept delivery thereof,
                  the Participant's right to purchase such Common Stock may be
                  terminated by the Company.

         (b)      SARs. Subject to the conditions of this Section 10.1(b) and
                  such administrative regulations as the Committee may from time
                  to time adopt, an SAR may be exercised by the delivery
                  (including by FAX) of written notice to the Committee setting
                  forth the number of shares of Common Stock with respect to
                  which the SAR is to be exercised and the date of exercise
                  thereof (the "Exercise Date") which shall be at least three
                  (3) days after giving such notice unless an earlier time shall
                  have been mutually agreed upon. On the Exercise Date, the
                  Participant shall receive from the Company in exchange
                  therefor cash in an amount equal to the excess (if any) of the
                  Fair Market Value (as of the date of the exercise of the SAR)
                  per share of Common Stock over the SAR Price per share
                  specified in such SAR, multiplied by the total number of
                  shares of Common Stock of the SAR being surrendered. In the
                  discretion of the Committee, the Company may satisfy its
                  obligation upon exercise of an SAR by the distribution of that
                  number of shares of Common Stock having an aggregate Fair
                  Market Value (as of the date of the exercise of the SAR) equal
                  to the amount of cash otherwise payable to the Participant,
                  with a cash settlement to be made for any fractional share
                  interests, or the Company may settle such obligation in part
                  with shares of Common Stock and in part with cash.

10.2     Disqualifying Disposition of ISO. If shares of Common Stock acquired
         upon exercise of an Incentive Stock Option are disposed of by a
         Participant prior to the expiration of either two (2)


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<PAGE>

         years from the Date of Grant of such Stock Option or one (1) year from
         the transfer of shares of Common Stock to the Participant pursuant to
         the exercise of such Stock Option, or in any other disqualifying
         disposition within the meaning of Section 422 of the Code, such
         Participant shall notify the Company in writing of the date and terms
         of such disposition. A disqualifying disposition by a Participant shall
         not affect the status of any other Stock Option granted under the Plan
         as an Incentive Stock Option within the meaning of Section 422 of the
         Code.

                                   ARTICLE 11

                           AMENDMENT OR DISCONTINUANCE

      Subject to the limitations set forth in this Article 11, the Board may at
any time and from time to time, without the consent of the Participants, alter,
amend, revise, suspend, or discontinue the Plan in whole or in part; provided,
however, that no amendment which requires stockholder approval in order for the
Plan and Incentives awarded under the Plan to continue to comply with Section
162(m) of the Code, including any successors to such Section, shall be effective
unless such amendment shall be approved by the requisite vote of the
stockholders of the Company entitled to vote thereon. Any such amendment shall,
to the extent deemed necessary or advisable by the committee, be applicable to
any outstanding Incentives theretofore granted under the Plan, notwithstanding
any contrary provisions contained in any stock option agreement. In the event of
any such amendment to the Plan, the holder of any Incentive outstanding under
the Plan shall, upon request of the Committee and as a condition to the
exercisability thereof, execute a conforming amendment in the form prescribed by
the Committee to any Award Agreement relating thereto. Notwithstanding anything
contained in this Plan to the contrary, unless required by law, no action
contemplated or permitted by this Article 11 shall adversely affect any rights
of Participants or obligations of the Company to Participants with respect to
any Incentive theretofore granted under the Plan without the consent of the
affected Participant.

                                   ARTICLE 12

                                      TERM

      The Plan shall be effective from the date that this Plan is approved by
the Board. Unless sooner terminated by action of the Board, the Plan will
terminate on January 1, 2011, but Incentives granted before that date will
continue to be effective in accordance with their terms and conditions.

                                   ARTICLE 13

                               CAPITAL ADJUSTMENTS

      If at any time while the Plan is in effect, or Incentives are outstanding,
there shall be any increase or decrease in the number of issued and outstanding
shares of Common Stock resulting from (1) the declaration or payment of a stock
dividend, (2) any recapitalization resulting in a stock split-up, combination,
or exchange of shares of Common Stock, or (3) other increase or decrease in such
shares of Common Stock effected without receipt of consideration by the Company,
then and in such event:

      (i) An appropriate adjustment shall be made in the maximum number of
      shares of Common Stock then subject to being awarded under the Plan and in
      the maximum number of shares of Common Stock that may be awarded to a
      Participant to the end that


                                       14
<PAGE>

      the same proportion of the Company's issued and outstanding shares of
      Common Stock shall continue to be subject to being so awarded.

      (ii) Appropriate adjustments shall be made in the number of shares of
      Common Stock and the Option Price thereof then subject to purchase
      pursuant to each such Stock Option previously granted and unexercised, to
      the end that the same proportion of the Company's issued and outstanding
      shares of Common Stock in each such instance shall remain subject to
      purchase at the same aggregate Option Price.

      (iii) Appropriate adjustments shall be made in the number of SARs and the
      SAR Price thereof then subject to exercise pursuant to each such SAR
      previously granted and unexercised, to the end that the same proportion of
      the Company's issued and outstanding shares of Common Stock in each
      instance shall remain subject to exercise at the same aggregate SAR Price.

      Except as otherwise expressly provided herein, the issuance by the Company
of shares of its capital stock of any class, or securities convertible into
shares of capital stock of any class, either in connection with 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 (i) the number of or Option Price of shares of Common
Stock then subject to outstanding Stock Options granted under the Plan, or (ii)
the number of or SAR Price or SARs then subject to outstanding SARs granted
under the Plan.

      Upon the occurrence of each event requiring an adjustment with respect to
any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.

                                   ARTICLE 14

                   RECAPITALIZATION, MERGER AND CONSOLIDATION

The existence of this Plan and Incentives granted hereunder shall not affect in
any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations, or other
changes in the Company's capital structure and its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
preference stocks ranking prior to or otherwise affecting the Common Stock or
the rights thereof (or any rights, options, or warrants to purchase same), or
the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise. Subject to any required action by
the stockholders, if the Company shall be the surviving or resulting corporation
in any reorganization, merger, consolidation or share exchange, any Incentive
granted hereunder shall pertain to and apply to the securities or rights
(including cash, property, or assets) to which a holder of the number of shares
of Common Stock subject to the Incentive would have been entitled.
Notwithstanding the foregoing, however, all such Incentives may be canceled by
the Company as of the effective date of any such reorganization, merger,
consolidation or share exchange by giving notice to each holder thereof or his
personal representative of its intention to do so and by permitting the purchase
during the thirty (30) day period next preceding such effective date of all of
the shares of Common Stock subject to such outstanding Incentives.

In the event of any reorganization, merger, consolidation or share exchange
pursuant to which the Company is not the surviving or resulting corporation,
there shall be substituted for each


                                       15
<PAGE>

share of Common Stock subject to the unexercised portions of such outstanding
Incentives, that number of shares of each class of stock or other securities or
that amount of cash, property, or assets of the surviving, resulting or
consolidated company which were distributed or distributable to the stockholders
of the Company in respect to each share of Common Stock held by them, such
outstanding Incentives to be thereafter exercisable for such stock, securities,
cash, or property in accordance with their terms.

                                   ARTICLE 15

                           LIQUIDATION OR DISSOLUTION

      In case the Company shall, at any time while any Incentive under this Plan
shall be in force and remain unexpired, (i) sell all or substantially all of its
property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the expiration
of any Incentive, make any partial distribution of its assets, in the nature of
a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) then in such event the Option Prices or SAR Prices then in effect with
respect to each Stock Option or SAR shall be reduced, on the payment date of
such distribution, in proportion to the percentage reduction in the tangible
book value of the shares of the Company's Common Stock (determined in accordance
with generally accepted accounting principles) resulting by reason of such
distribution.

                                   ARTICLE 16

                           INCENTIVES IN SUBSTITUTION

                  FOR INCENTIVES GRANTED BY OTHER CORPORATIONS

      Incentives may be granted under the Plan from time to time in substitution
for similar instruments held by employees of a corporation who become or are
about to become management Employees of the Company or any Subsidiary as a
result of a merger or consolidation of the employing corporation with the
Company or the acquisition by the Company of stock of the employing corporation.
The terms and conditions of the substitute Incentives so granted may vary from
the terms and conditions set forth in this Plan to such extent as the Board at
the time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the Incentives in substitution for which they are granted.

                                   ARTICLE 17

                            MISCELLANEOUS PROVISIONS

17.1     Investment Intent. The Company may require that there be presented to
         and filed with it by any Participant under the Plan, such evidence as
         it may deem necessary to establish that the Incentives granted or the
         shares of Common Stock to be purchased or transferred are being
         acquired for investment and not with a view to their distribution.

17.2     No Right to Continued Employment. Neither the Plan nor any Incentive
         granted under the


                                       16
<PAGE>

         Plan shall confer upon any Participant any right with respect to
         continuance of employment by the Company or any Subsidiary.

17.3     Indemnification of Board and Committee. No member of the Board or the
         Committee, nor any officer or Employee of the Company acting on behalf
         of the Board or the Committee, shall be personally liable for any
         action, determination, or interpretation taken or made in good faith
         with respect to the Plan, and all members of the Board or the Committee
         and each and any officer or employee of the Company acting on their
         behalf shall, to the extent permitted by law, be fully indemnified and
         protected by the Company in respect of any such action, determination,
         or interpretation.

17.4     Effect of the Plan. Neither the adoption of this Plan nor any action
         of the Board or the Committee shall be deemed to give any person any
         right to be granted an Award or any other rights except as may be
         evidenced by an Award Agreement, or any amendment thereto, duly
         authorized by the Committee and executed on behalf of the Company, and
         then only to the extent and upon the terms and conditions expressly set
         forth therein.

17.5     Compliance With Other Laws and Regulations. Notwithstanding anything
         contained herein to the contrary, the Company shall not be required to
         sell or issue shares of Common Stock under any Incentive if the
         issuance thereof would constitute a violation by the Participant or the
         Company of any provisions of any law or regulation of any governmental
         authority or any national securities exchange or inter-dealer quotation
         system or other forum in which shares of Common Stock are quoted or
         traded (including without limitation Section 16 of the 1934 Act and
         Section 162(m) of the Code); and, as a condition of any sale or
         issuance of shares of Common Stock under an Incentive, the Committee
         may require such agreements or undertakings, if any, as the Committee
         may deem necessary or advisable to assure compliance with any such law
         or regulation. The Plan, the grant and exercise of Incentives
         hereunder, and the obligation of the Company to sell and deliver shares
         of Common Stock, shall be subject to all applicable federal and state
         laws, rules and regulations and to such approvals by any government or
         regulatory agency as may be required.

17.6     Tax Requirements. The Company shall have the right to deduct from all
         amounts hereunder paid in cash or other form, any Federal, state, or
         local taxes required by law to be withheld with respect to such
         payments. The Participant receiving shares of Common Stock issued under
         the Plan shall be required to pay the Company the amount of any taxes
         which the Company is required to withhold with respect to such shares
         of Common Stock. Notwithstanding the foregoing, in the event of an
         assignment of a Non-qualified Stock Option or SAR pursuant to Section
         17.7, the Participant who assigns the Non-qualified Stock Option or SAR
         shall remain subject to withholding taxes upon exercise of the
         Non-qualified Stock Option or SAR by the transferee to the extent
         required by the Code or the rules and regulations promulgated
         thereunder. Such payments shall be required to be made prior to the
         delivery of any certificate representing such shares of Common Stock.
         Such payment may be made in cash, by check, or through the delivery of
         shares of Common Stock owned by the Participant (which may be effected
         by the actual delivery of shares of Common Stock by the Participant
         that the Participant has not acquired from the Company within six (6)
         months prior to the Exercise Date, or by the Company's withholding a
         number of shares to be issued upon the exercise of a Stock Option, if
         applicable), which shares have an aggregate Fair Market Value equal to
         the required minimum withholding payment, or any combination thereof.

17.7     Assignability. Incentive Stock Options may not be transferred or
         assigned other than by will or the laws of descent and distribution and
         may be exercised during the lifetime of the Participant only by the
         Participant or the Participant's legally authorized representative, and
         each Award Agreement in respect of an Incentive Stock Option shall so
         provide. The designation


                                       17
<PAGE>

         by a Participant of a beneficiary will not constitute a transfer of the
         Stock Option. The Committee may waive or modify any limitation
         contained in the preceding sentences of this Section 17.7 that is not
         required for compliance with Section 422 of the Code. The Committee
         may, in its discretion, authorize all or a portion of a Non-qualified
         Stock Option or SAR to be granted to a Participant to be on terms which
         permit transfer by such Participant to (i) the spouse, children or
         grandchildren of the Participant ("Immediate Family Members"), (ii) a
         trust or trusts for the exclusive benefit of such Immediate Family
         Members, or (iii) a partnership in which such Immediate Family Members
         are the only partners, (iv) an entity exempt from federal income tax
         pursuant to Section 501(c)(3) of the Code or any successor provision,
         or (v) a split interest trust or pooled income fund described in
         Section 2522(c)(2) of the Code or any successor provision, provided
         that (x) there shall be no consideration for any such transfer, (y) the
         Award Agreement pursuant to which such Non-qualified Stock Option or
         SAR is granted must be approved by the Committee and must expressly
         provided for transferability in a manner consistent with this Section,
         and (z) subsequent transfers of transferred Non-qualified Stock Options
         or SARs shall be prohibited except those by will or the laws of descent
         and distribution or pursuant to a qualified domestic relations order as
         defined in the Code or Title I of the Employee Retirement Income
         Security Act of 1974, as amended. Following transfer, any such
         Non-qualified Stock Option and SAR shall continue to be subject to the
         same terms and conditions as were applicable immediately prior to
         transfer, provided that for purposes of Articles 10, 11, 13, 15 and 17
         hereof the term "Participant" shall be deemed to include the
         transferee. The events of Termination of Service shall continue to be
         applied with respect to the original Participant, following which the
         Non-qualified Stock Options and SARs shall be exercisable by the
         transferee only to the extent and for the periods specified in the
         Award Agreement. The Committee and the Company shall have no obligation
         to inform any transferee of a Non-qualified Stock Option or SAR of any
         expiration, termination, lapse or acceleration of such Option. The
         Company shall have no obligation to register with any federal or state
         securities commission or agency any Common Stock issuable or issued
         under a Non-qualified Stock Option or SAR that has been transferred by
         a Participant under this Section 17.7.

17.8     Use of Proceeds. Proceeds from the sale of shares of Common Stock
         pursuant to Incentives granted under this Plan shall constitute general
         funds of the Company.

      A copy of this Plan shall be kept on file in the office of the Company at
30 Metcalfe St, Suite 620, Ottawa, Ontario, Canada or any successor location of
the Company's principal executive offices.

      IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its duly authorized representative pursuant to prior action taken by the
Board.

                                       Validian Corporation

                                       By: /s/ Andre Maisonneuve
                                           ------------------------------
                                           Name: Andre Maisonneuve
                                           Title: President and CEO


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