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EXHIBIT 10.6

                          BLUEFIRE ETHANOL FUELS, INC.

                2006 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN

1.       PURPOSE

         This Incentive and Nonstatutory Stock Option Plan (the "Plan") is
intended to further the growth and financial success of BlueFire Ethanol Fuels,
Inc. (the "Corporation") by providing additional incentives to selected
employees, directors, and consultants to the Corporation or parent corporation
or subsidiary corporation of the Corporation as those terms are defined in
Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (the
"Code") (such parent corporations and subsidiary corporations hereinafter
collectively referred to as "Affiliates") so that such employees and consultants
may acquire or increase their proprietary interest in the Corporation. Stock
options granted under the Plan (hereinafter "Options") may be either "Incentive
Stock Options," as defined in Section 422A of the Code and any regulations
promulgated under said Section, or "Nonstatutory Options" at the discretion of
the Board of Directors of the Corporation (the "Board") and as reflected in the
respective written stock option agreements granted pursuant hereto.

2.       ADMINISTRATION

         The Plan shall be administered by the Board of Directors of the
Corporation; provided however, that the Board may delegate such administration
to a committee of not fewer than three (3) members (the "Committee"), at least
two (2) of whom are members of the Board and all of whom are disinterested
administrators, as contemplated by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3"); and provided further, that the
foregoing requirement for disinterested administrators shall not apply prior to
the date of the first registration of any of the securities of the Corporation
under the Securities Act of 1933, as amended.

         Subject to the provisions of the Plan, the Board and/or the Committee
shall have authority to (a) grant, in its discretion, Incentive Stock Options in
accordance with Section 422A of the Code or Nonstatutory Options; (b) determine
in good faith the fair market value of the stock covered by an Option; (c)
determine which eligible persons shall be granted Options and the number of
shares to be covered thereby and the term thereof; (d) construe and interpret
the Plan; (e) promulgate, amend and rescind rules and regulations relating to
its administration, and correct defects, omissions, and inconsistencies in the
Plan or any Option; (f) consistent with the Plan and with the consent of the
optionee, as appropriate, amend any outstanding Option or amend the exercise
date or dates thereof; (g) determine the duration and purpose of leaves of
absence which may be granted to option holders without constituting termination
of their employment for the purpose of the Plan; and (h) make all other
determinations necessary or advisable for the Plan's administration. The
interpretation and construction by the Board of any provisions of the Plan or of
any Option it shall be conclusive and final. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option.

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3.       ELIGIBILITY

         The persons who shall be eligible to receive Options shall be
employees, directors, or consultants of the Corporation or any of its Affiliates
("Optionees"). The term consultant shall mean any person who is engaged by the
Corporation to render services and is compensated for such services, and any
director of the Corporation whether or not compensated for such services;
provided that, if the Corporation registers any of its securities pursuant to
the Securities Act of 1933, as amended (the "Act"), the term consultant shall
thereafter not include directors who are not compensated for their services or
are paid only a director fee by the Corporation.

                  (a) INCENTIVE STOCK OPTIONS. Incentive Stock Options may only
be issued to employees of the Corporation or its Affiliates. Incentive Stock
Options may be granted to officers, whether or not they are directors, but a
director shall not be granted an Incentive Stock Option unless such director is
also an employee of the Corporation. Payment of a director fee shall not be
sufficient to constitute employment by the Corporation. Any grant of option to
an officer or director of the Corporation subsequent to the first registration
of any of the securities of the Corporation under the Act shall comply with the
requirements of Rule 16b-3. An optionee may hold more than one Option.

                  The Corporation shall not grant an Incentive Stock Option
under the Plan to any employee if such grant would result in such employee
holding the right to exercise for the first time in any one calendar year, under
all options granted to such employee under the Plan or any other stock option
plan maintained by the Corporation or any Affiliate, with respect to shares of
stock having an aggregate fair market value, determined as of the date of the
Option is granted, in excess of one hundred thousand dollars ($100,000). Should
it be determined that an Incentive Stock Option granted under the Plan exceeds
such maximum for any reason other than a failure in good faith to value the
stock subject to such option, the excess portion of such option shall be
considered a Nonstatutory Option. If, for any reason, an entire option does not
qualify as an Incentive Stock Option by reason of exceeding such maximum, such
option shall be considered a Nonstatutory Option.

                  (b) NONSTATUTORY OPTION. The provisions of the foregoing
Section 3(a) shall not apply to any option designated as a "Nonstatutory Stock
Option Agreement" or which sets forth the intention of the parties that the
option be a Nonstatutory Option.

4.       STOCK

         The stock subject to Options shall be the shares of the Corporation's
authorized but unissued or reacquired Common Stock (the "Stock").

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                  (a) NUMBER OF SHARES. Subject to adjustment as provided in
Paragraph 5(h) of this Plan, the total number of shares of Stock which may be
purchased through exercise of Options granted under this Plan shall not exceed
ten million (10,000,000) shares. If any Option shall for any reason terminate or
expire, any shares allocated thereto but remaining unpurchased upon such
expiration or termination shall again be available for the grant of Options with
respect thereto under this Plan as though no Option had been granted with
respect to such shares.

                  (b) RESERVATION OF SHARES. The Corporation shall reserve and
keep available at all times during the term of the Plan such number of shares as
shall be sufficient to satisfy the requirements of the Plan. If, after
reasonable efforts, which efforts shall not include the registration of the Plan
or Options under the Act, the Corporation is unable to obtain authority from any
applicable regulatory body, which authorization is deemed necessary by legal
counsel for the Corporation for the lawful issuance of shares hereunder, the
Corporation shall be relieved of any liability with respect to its failure to
issue and sell the shares for which such requisite authority was so deemed
necessary unless and until such authority is obtained.

5.       TERMS AND CONDITIONS OF OPTIONS

         Options granted hereunder shall be evidenced by agreements between the
Corporation and the respective Optionees, in such form and substance as the
Board or Committee shall from time to time approve. Such agreements need not be
identical, and in each case may include such provisions as the Board or
Committee may determine, but all such agreements shall be subject to and limited
by the following terms and conditions:

                  (a) NUMBER OF SHARES: Each Option shall state the number of
shares to which it pertains.

                  (b) OPTION PRICE: Each Option shall state the Option Price,
which shall be determined as follows:

                           (i) Any Incentive Stock Option granted to a person
who at the time the Option is granted owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of value of all classes of stock of the Corporation,
or of any Affiliate, ("Ten Percent Holder") shall have an Option Price of no
less than one hundred ten percent (110%) of the fair market value of the common
stock as of the date of grant; and

                           (ii) Incentive Stock Options granted to a person who
at the time the Option is granted is not a Ten Percent Holder shall have an
Option price of no less than one hundred percent (100%) of the fair market value
of the common stock as of the date of grant.

                           (iii) Nonstatutory Options granted to a person who at
the time the Option is granted is not a Ten Percent Holder shall have an Option
Price determined by the Board as of the date of grant.

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                  For the purposes of this paragraph 5(b), the fair market value
shall be as determined by the Board, in good faith, which determination shall be
conclusive and binding; provided however, that if there is a public market for
such stock, the fair market value per share shall be the average of the bid and
asked prices (or the closing price if such stock is listed on the NASDAQ
National Market System) on the date of grant of the Option, or if listed on a
stock exchange, the closing price on such exchange on such date of grant.

                  (c) MEDIUM AND TIME OF PAYMENT: To the extent permissible by
applicable law, the Option price shall be paid, at the discretion of the Board,
at either the time of grant or the time of exercise of the Option (i) in cash or
by check, (ii) by delivery of other common stock of the Corporation, provided
such tendered stock was not acquired directly or indirectly from the
Corporation, or, if acquired from the Corporation, has been held by the Optionee
for more than six (6) months, (iii) by the Optionee's promissory note in a form
satisfactory to the Corporation and bearing interest at a rate determined by the
Board, in its sole discretion, but in no event less than 6% per annum, (iv) by
the surrender of the Option (or a portion hereof) in accordance with the terms
hereof but without payment in cash (a "Cashless Exercise"), (v) with any
combination of (i) and (iv), or (iv) such other form of legal consideration
permitted by State law as may be acceptable to the Board.

The number of shares of Common Stock issuable in respect of a Cashless Exercise
shall be computed using the following formula:

                  X =    Y (A-B)
                         -------
                            A

Where:

                  X = the number of shares of Common Stock to be issued to the
Holder in respect of a Cashless Exercise

                  Y = the number of shares of Common Stock purchasable under the
Option or, if only a portion of the Option is being exercised, the portion of
the Option being canceled in connection with such Cashless Exercise (at the date
of such calculation)

                  A = the Fair Market Value (as defined below) of one share of
the Corporation's Common Stock (at the date of such calculation)

                  B = Option Exercise Price (as adjusted to the date of such
calculation).

                  (d) TERM AND EXERCISE OF OPTIONS: Any Option granted to an
Employee of the Corporation shall become exercisable over a period of no longer
than five (5) years, and no less than twenty percent (20%) of the shares covered
thereby shall become exercisable annually. No Option shall be exercisable, in
whole or in part, prior to one (1) year from the date it is granted unless the
Board shall specifically determine otherwise, as provided herein. In no event
shall any Option be exercisable after the expiration of five (5) years from the


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date it is granted. Unless otherwise specified by the Board or the Committee in
the resolution authorizing such option, the date of grant of an Option shall be
deemed to be the date upon which the Board or the Committee authorizes the
granting of such Option.

                  Each Option shall be exercisable to the nearest whole share,
in installments or otherwise, as the respective option agreements may provide.
During the lifetime of an Optionee, the Option shall be exercisable only by the
Optionee and shall not be assignable or transferable by the Optionee, and no
other person shall acquire any rights therein. To the extent not exercised,
installments (if more than one) shall accumulate, but shall be exercisable, in
whole or in part, only during the period for exercise as stated in the option
agreement, whether or not other installments are then exercisable.

                  (e) TERMINATION OF STATUS AS EMPLOYEE, DIRECTOR, OR
CONSULTANT: If Optionee's status as an employee, director, or consultant shall
terminate for any reason other than Optionee's death, then the Optionee (or if
the Optionee shall die after such termination, but prior to exercise, Optionee's
personal representative or the person entitled to succeed to the Option) shall
have the right to exercise any vested Options, in whole or in part, at any time
within thirty (30) days after such termination (or in the event Optionee's
termination was caused by permanent disability (within the meaning of Section
22(e)(3) of the Code) this 30-day period shall be extended to six (6) months) or
the remaining term of the Option, whichever is the lesser; provided, however,
that with respect to Nonstatutory Options, the Board may specify such longer
period, not to exceed six (6) months, for exercise following termination as the
Board deems reasonable and appropriate. The Option may be exercised only with
respect to installments that the Optionee could have exercised at the date of
termination of employment. Nothing contained herein or in any Option granted
pursuant hereto shall be construed to affect or restrict in any way the right of
the Corporation to terminate the employee of an Optionee with or without cause.

                  (f) DEATH OF OPTIONEE: If an Optionee dies while employed or
engaged as a director or consultant by the Corporation or an Affiliate, the
portion of such Optionee's Option or Options which were exercisable at the date
of death may be exercised, in whole or in part, by the estate of the decedent or
by a person succeeding to the right to exercise such Option or Options, at any
time within the remaining term of the Option, but only to the extent, that
Optionee could have exercised the Option as of the date of Optionee's death;
provided, in any case, that the Option may be so exercised only to the extent
that the Option has not previously been exercised by Optionee.

                  (g) NONTRANSFERABILITY OF OPTION: No Option shall be
transferable by the Optionee, except by will or by the laws of descent and
distribution.

                  (h) RECAPITALIZATION: Subject to any required action by the
stockholders, the number of shares of common stock covered by each outstanding
Option, and the price per share thereof set forth in each such Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of common stock of the Corporation resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, or any other
increase or decrease in the number of such shares affected without receipt of
consideration by the Corporation.

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                  Subject to any required action by the stockholders, if the
Corporation shall be the surviving entity in any merger or consolidation, each
outstanding Option thereafter shall pertain to and apply to the securities to
which a holder of shares of common stock equal to the shares subject to the
Option would have been entitled by reason of such merger or consolidation. A
dissolution or liquidation of the Corporation or a merger or consolidation in
which the Corporation is not the surviving entity shall cause each outstanding
Option to terminate on the effective date of such dissolution, liquidation,
merger or consolidation. In such event, if the entity which shall be the
surviving entity does not tender to Optionee an offer, for which it has no
obligation to do so, to substitute for any unexercised Option a stock option or
capital stock of such surviving entity, as applicable, which on an equitable
basis shall provide the Optionee with substantially the same economic benefit as
such unexercised Option, then the Board may grant to such Optionee, but shall
not be obligated to do so, the right for a period commencing thirty (30) days
prior to and ending immediately prior to such dissolution, liquidation, merger
or consolidation or during the remaining term of the Option, whichever is the
lesser, to exercise any unexpired Option or Options, without regard to the
installment provisions of Paragraph 5(d) of this Plan; provided, that any such
right granted shall be granted to all Optionees not receiving an offer to
substitute on a consistent basis, and provided further, that any such exercise
shall be subject to the consummation of such dissolution, liquidation, merger or
consolidation.

                  In the event of a change in the common stock of the
Corporation as presently constituted, which is limited to a change of all of its
authorized shares without par value into the same number of shares with a par
value, the shares resulting from any such change shall be deemed to be the
common stock within the meaning of this Plan.

                  To the extent that the foregoing adjustments relate to stock
or securities of the Corporation, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided in this Paragraph 5(h), the Optionee shall have no
rights by reason of any subdivision or consolidation of shares of stock or any
class or the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class, and the number or price of shares of
common stock subject to any Option shall not be affected by, and no adjustment
shall be made by reason of, any dissolution, liquidation, merger or
consolidation, or any issue by the Corporation of shares of stock of any class
or securities convertible into shares of stock of any class.

                  The grant of an Option pursuant to the Plan shall not affect
in any way the right or power of the Corporation to make any adjustments,
reclassifications, reorganizations or changes in its capital or business
structure or to merge, consolidate, dissolve, or liquidate or to sell or
transfer all or any part of its business or assets.

                  (i) RIGHTS AS A STOCKHOLDER: An Optionee shall have no rights
as a stockholder with respect to any shares covered by an Option until the date
of the issuance of a stock certificate to Optionee for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Paragraph 5(h) hereof.

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                  (j) MODIFICATION, ACCELERATION, EXTENSION, AND RENEWAL OF
OPTIONS: Subject to the terms and conditions and within the limitations of the
Plan, the Board may modify an Option, or once an Option is exercisable,
accelerate the rate at which it may be exercised, and may extend or renew
outstanding Options granted under the Plan or accept the surrender of
outstanding Options (to the extent not theretofore exercised) and authorize the
granting of new Options in substitution for such Options, provided such action
is permissible under Section 422A of the Code and state law.

                  Notwithstanding the foregoing provisions of this Paragraph
5(j), however, no modification of an Option shall, without the consent of the
Optionee, alter to the Optionee's detriment or impair any rights or obligations
under any Option theretofore granted under the Plan.

                  (k) INVESTMENT INTENT: Unless and until the issuance and sale
of the shares subject to the Plan are registered under the Act, each Option
under the Plan shall provide that the purchases of stock thereunder shall be for
investment purposes and not with a view to, or for resale in connection with,
any distribution thereof. Further, unless the issuance and sale of the stock
have been registered under the Act, each Option shall provide that no shares
shall be purchased upon the exercise of such Option unless and until (i) any
then applicable requirements of state and federal laws and regulatory agencies
shall have been fully complied with to the satisfaction of the Corporation and
its counsel, and (ii) if requested to do so by the Corporation, the person
exercising the Option shall (i) give written assurances as to knowledge and
experience of such person (or a representative employed by such person) in
financial and business matters and the ability of such person (or
representative) to evaluate the merits and risks of exercising the Option, and
(ii) execute and deliver to the Corporation a letter of investment intent, all
in such form and substance as the Corporation may require. If shares are issued
upon exercise of an Option without registration under the Act, subsequent
registration of such shares shall relieve the purchaser thereof of any
investment restrictions or representations made upon the exercise of such
Options.

                  (l) EXERCISE BEFORE EXERCISE DATE: At the discretion of the
Board, the Option may, but need not, include a provision whereby the Optionee
may elect to exercise all or any portion of the Option prior to the stated
exercise date of the Option or any installment thereof. Any shares so purchased
prior to the stated exercise date shall be subject to repurchase by the
Corporation upon termination of Optionee's employment as contemplated by
Paragraphs 5(e), 5(f) and 5(g) hereof prior to the exercise date stated in the
Option and such other restrictions and conditions as the Board or Committee may
deem advisable.

                  (m) OTHER PROVISIONS: The Option agreements authorized under
this Plan shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the Options, as the Board or the Committee
shall deem advisable. Shares shall not be issued pursuant to the exercise of an
Option, if the exercise of such Option or the issuance of shares thereunder
would violate, in the opinion of legal counsel for the Corporation, the
provisions of any applicable law or the rules or regulations of any applicable
governmental or administrative agency or body, such as the Act, the Securities
Exchange Act of 1934, the rules promulgated under the foregoing or the rules and
regulations of any exchange upon which the shares of the Corporation are listed.

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6.       AVAILABILITY OF INFORMATION

         During the term of the Plan and any additional period during which an
Option granted pursuant to the Plan shall be exercisable, the Corporation shall
make available, not later than one hundred and twenty (120) days following the
close of each of its fiscal years, such financial and other information
regarding the Corporation as is required by the bylaws of the Corporation and
applicable law to be furnished in an annual report to the stockholders of the
Corporation.

7.       EFFECTIVENESS OF PLAN; EXPIRATION

         Subject to approval by the stockholders of the Corporation, this Plan
shall be deemed effective as of the date it is adopted by the Board. The Plan
shall expire on March 31, 2011, but such expiration shall not affect the
validity of outstanding Options.

8.       AMENDMENT AND TERMINATION OF THE PLAN

         The Board may, insofar as permitted by law, from time to time, with
respect to any shares at the time not subject to Options, suspend or terminate
the Plan or revise or amend it in any respect whatsoever, except that without
the approval of the stockholders of the Corporation, no such revision or
amendment shall (i) increase the number of shares subject to the Plan, (ii)
decrease the price at which Options may be granted, (iii) materially increase
the benefits to Optionees, or (iv) change the class of persons eligible to
receive Options under this Plan; provided, however, no such action shall alter
or impair the rights and obligations under any Option outstanding as of the date
thereof without the written consent of the Optionee thereunder. No Option may be
granted while the Plan is suspended or after it is terminated, but the rights
and obligations under any Option granted while the Plan is in effect shall not
be impaired by suspension or termination of the Plan.

9.       INDEMNIFICATION OF BOARD

         In addition to such other rights or indemnifications as they may have
as directors or otherwise, and to the extent allowed by applicable law, the
members of the Board and the Committee shall be indemnified by the Corporation
against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any claim, action, suit
or proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken, or failure to act, under or
in connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his or her duties; provided that
within sixty (60) days after institution of any such action, suit or Board
proceeding the member involved shall offer the Corporation, in writing, the
opportunity, at its own expense, to handle and defend the same.

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10.      APPLICATION OF FUNDS

         The proceeds received by the Corporation from the sale of common stock
pursuant to the exercise of Options will be used for general corporate purposes.

11.      NO OBLIGATION TO EXERCISE OPTION

         The granting of an Option shall impose no obligation upon the Optionee
to exercise such Option.

12.      NOTICES

         All notice, requests, demand, and other communications pursuant this
Plan shall be in writing and shall be deemed to have been duly given on the date
of service if served personally on the party to whom notice is to be given, or
on the third day following the mailing thereof to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid.

13.      SECURITIES LAW AND OTHER RESTRICTIONS.

Notwithstanding any other provision of the Plan or any agreements entered into
pursuant to the Plan, the Corporation will not be required to issue any shares
of Common Stock under this Plan, and an Optionee may not sell, assign, transfer
or otherwise dispose of shares of Common Stock issued pursuant to Incentive
Awards granted under the Plan, unless (a) there is in effect with respect to
such shares a registration statement under the Securities Act and any applicable
securities laws of a state or foreign jurisdiction or an exemption from such
registration under the Securities Act of 1933 and applicable state or foreign
securities laws, and (b) there has been obtained any other consent, approval or
permit from any other U.S. or foreign regulatory body which the Committee, in
its sole discretion, deems necessary or advisable. The Corporation may condition
such issuance, sale or transfer upon the receipt of any representations or
agreements from the parties involved, and the placement of any legends on
certificates representing shares of Common Stock, as may be deemed necessary or
advisable by the Corporation in order to comply with such securities law or
other restrictions.

                                    * * * * *

         The foregoing Incentive and Nonstatutory Stock Option Plan was duly
adopted and approved by the Board of Directors on December 14, 2006, subject to
shareholder ratification within twelve months.

                                              _______________________________
                                              Arnold Klann, Chairman & CEO


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                       NONSTATUTORY STOCK OPTION AGREEMENT

         THIS STOCK OPTION AGREEMENT is made and entered into as of this ____
day of ______________, ____, by and between BlueFire Ethanol Fuels, Inc.
("Corporation"), and ________________________________ (referred to herein as the
"Optionee"), with reference to the following recitals of facts:

         WHEREAS, the Board has authorized the granting to Optionee of a
nonstatutory stock option ("Option") to purchase shares of common stock of the
Corporation (the "Shares") upon the terms and conditions hereinafter stated; and

         WHEREAS, the Board and stockholders of the Corporation have heretofore
adopted a 2006 Incentive and Nonstatutory Stock Option Plan (the "Plan"),
pursuant to which this Option is being granted;

         WHEREAS, it is the intention of the parties that this Option be a
Nonstatutory Stock Option;

         NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties hereto agree as follows:

         1. SHARES; PRICE. The Corporation hereby grants to Optionee the right
to purchase, upon and subject to the terms and conditions herein stated,
___________ Shares for cash (or other consideration acceptable to the Board of
Directors of the Corporation, in their sole and absolute discretion) at the
price of $____ per Share, such price being determined in accordance with the
Plan.

         2. TERM OF OPTION; CONTINUATION OF EMPLOYMENT. This Option shall
expire, and all rights hereunder to purchase the Shares shall terminate, five
(5) years from the date hereof. This Option shall earlier terminate subject to
Paragraphs 5 and 6 hereof if, and as of the date, Optionee ceases to be an
employee, director, or consultant of the Corporation. Nothing contained herein
shall be construed to interfere in any way with the right of the Corporation to
terminate the employment or engagement, as applicable, of Optionee or to
increase or decrease the compensation of Optionee from the rate in existence at
the date hereof.

         3. VESTING OF OPTION. Subject to the provisions of Paragraphs 5 and 6
hereof, this Option shall vest and become exercisable during the term of
Optionee's employment or engagement in whole or in part beginning on the date of
this Agreement, ________________________.

         4. EXERCISE. This Option shall be exercised by delivery to the
Corporation of (a) a written notice of exercise stating the number of Shares
being purchased (in whole shares only) and such other information set forth on
the form of Notice of Exercise attached hereto as Appendix A, (b) a check or
cash in the amount of the purchase price of the Shares covered by the notice,
(c) by the surrender of the Option (or a portion hereof) in accordance with the
terms hereof but without payment in cash (a "Cashless Exercise"), and (d) a
written statement as provided for in Paragraph 11 hereof. This Option shall not
be assignable or transferable, except by will or by the laws of descent and
distribution, and shall be exercisable only by Optionee during his or her
lifetime.

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The number of shares of Common Stock issuable in respect of a Cashless Exercise
shall be computed using the following formula:

                  X =    Y (A-B)
                         -------
                            A

Where:

                  X = the number of shares of Common Stock to be issued to the
Holder in respect of a Cashless Exercise

                  Y = the number of shares of Common Stock purchasable under the
Option or, if only a portion of the Option is being exercised, the portion of
the Option being canceled in connection with such Cashless Exercise (at the date
of such calculation)

                  A = the Fair Market Value (as defined below) of one share of
the Corporation's Common Stock (at the date of such calculation)

                  B = Option Exercise Price (as adjusted to the date of such
calculation).

         5. TERMINATION OF EMPLOYMENT OR ENGAGEMENT. If Optionee shall cease to
serve as an employee, director, or consultant of the Corporation for any reason,
whether voluntarily or involuntarily, other than by his or her death or the
conclusion of the term of a written consulting agreement, provided such term
exceeds one year, Optionee shall have the right at any time within thirty (30)
days after date Optionee ceases to be an employee, director, or consultant of
the Corporation, or the remaining term of this Option, whichever is the lesser,
to exercise in whole or in part this Option to the extent, but only to the
extent, that this Option was exercisable as of the last day of employment or
engagement, as applicable, and had not previously been exercised; provided,
however, that if Optionee's termination of employment or engagement was caused
by permanent disability disabled (within the meaning of Section 22(e)(3) of the
Code), the foregoing thirty (30) day period shall be extended to six (6) months.

                  Notwithstanding anything herein to the contrary, all rights
under this Option shall expire in any event on the date specified in Paragraph 2
hereof.

         6. DEATH OF OPTIONEE. If the Optionee shall die while an employee,
director, or consultant of the Corporation, Optionee's personal representative
or the person entitled to Optionee's rights hereunder may at any time during the
remaining term of this Option, exercise this Option and purchase Shares to the
extent, but only to the extent, that Optionee could have exercised this Option
as of the date of Optionee's death; provided, in any case, that this Option may
be so exercised only to the extent that this Option has not previously been
exercised by Optionee.

         7. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to the Shares covered by any installment of this Option
until the date of the issuance of a stock certificate to Optionee, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such stock certificate or certificates are issued except as
provided in Paragraph 8 hereof.

                                       11
<PAGE>

         8. RECAPITALIZATION. Subject to any required action by the stockholders
of the Corporation, the number of Shares covered by this Option, and the price
per Share thereof, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, or any other
increase or decrease in the number of such shares affected without receipt of
consideration by the Corporation; provided however that the conversion of any
convertible securities of the Corporation shall not be deemed having been
"effected without receipt of consideration by the Corporation."

         In the event of a proposed dissolution or liquidation of the
Corporation, a merger or consolidation in which the Corporation is not the
surviving entity, or a sale of all or substantially all of the assets of the
Corporation, this Option shall terminate immediately prior to the consummation
of such proposed action, unless otherwise provided by the Board. The Board may,
at its sole and absolute discretion and without obligation, declare that this
Option shall terminate as of a date fixed by the Board and grant Optionee the
right for a period commencing thirty (30) days prior to and ending immediately
prior to such date, or during the remaining term of this Option, whichever
occurs sooner, to exercise this Option as to all or any part of the Shares,
without regard to the installment provision of Paragraph 3; provided, however,
that such exercise shall be subject to the consummation of such dissolution,
liquidation, merger, consolidation or sale.

         Subject to any required action by the stockholders of the Corporation,
if the Corporation shall be the surviving entity in any merger or consolidation,
this Option thereafter shall pertain to and apply to the securities to which a
holder of Shares equal to the Shares subject to this Option would have been
entitled by reason of such merger or consolidation, and the vesting provisions
of Section 3 shall continue to apply.

         In the event of a change in the Shares of the Corporation as presently
constituted, which is limited to a change of all of its authorized Shares
without par value into the same number of Shares with a par value, the Shares
resulting from any such change shall be deemed to be the Shares within the
meaning of this Agreement.

         To the extent that the foregoing adjustments relate to shares or
securities of the Corporation, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as hereinbefore expressly provided, Optionee shall have no rights by
reason of any subdivision or consolidation of share of stock of any class or the
payment of any stock dividend or any other increase or decrease in the number of
shares of stock of any class, and the number and price of shares subject to this
Option shall not be affected by, and no adjustments shall be made by reason of,
any dissolution, liquidation, merger or consolidation, or any issue by the
Corporation of shares of stock of any class or securities convertible into
shares of stock of any class.

         The grant of this Option shall not affect in any way the right or power
of the Corporation to make adjustments, reclassifications, reorganizations or
changes in its capital or business structure or to merge, consolidate, dissolve
or liquidate or to sell or transfer all or any part of its business or assets.

                                       12
<PAGE>

         9. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of this Option, Optionee may recognize income, for federal and state
income tax purposes, in an amount equal to the amount by which the fair market
value of the Shares, determined as of the date of exercise, exceeds the exercise
price. The acceptance of the Shares by Optionee shall constitute an agreement by
Optionee to report such income in accordance with then applicable law and to
cooperate with Corporation in establishing the amount of such income and
corresponding deduction to the Corporation for its income tax purposes.
Withholding for federal or state income and employment tax purposes will be
made, if and as required by law, from Optionee's then current compensation, or,
if such current compensation is insufficient to satisfy withholding tax
liability, the Corporation may require Optionee to make cash payment to cover
such liability as a condition of the exercise of this Option.

         10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board may
modify, extend or renew this Option or accept the surrender thereof (to the
extent not theretofore exercised) and authorize the granting of a new option in
substitution therefore (to the extent not theretofore exercised), subject at all
times to the Plan. Notwithstanding the foregoing provisions of this Paragraph
10, no modification shall, without the consent of the Optionee, alter to the
Optionee's detriment or impair any rights of Optionee hereunder.

         11. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. Optionee represents
and agrees that if Optionee exercises this Option in whole or in part, Optionee
will in each case acquire the Shares upon such exercise for the purpose of
investment and not with a view to, or for resale in connection with, any
distribution thereof; and that upon such exercise of this Option in whole or in
part, Optionee (or any person or persons entitled to exercise this Option under
the provisions of Paragraphs 5 and 6 hereof) shall furnish to the Corporation a
written statement to such effect, satisfactory to the Corporation in form and
substance. The Corporation, at its option, may include a legend on each
certificate representing Shares issued pursuant to any exercise of this Option,
stating in effect that such Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"), and that the transferability thereof is
restricted. If the Shares represented by this Option are registered under the
Act, either before or after the exercise of this Option in whole or in part, the
Optionee shall be relieved of the foregoing investment representation and
agreement and shall not be required to furnish the Corporation with the
foregoing written statement.

         Optionee further represents that Optionee has had access to the
financial statements or books and records of the Corporation, has had the
opportunity to ask questions of the Corporation concerning its business,
operations and financial condition, and to obtain additional information
reasonably necessary to verify the accuracy of such information, and further
represents that Optionee has either such experience and knowledge in investment,
financial and business matters or has investments similar to the stock of the
Corporation such that Optionee is capable of evaluating the merits and risks
thereof and has the capacity to protect his or her own interest in connection
therewith.

                                       13
<PAGE>

         12.      REGISTRATION RIGHTS.

                  a. PIGGYBACK REGISTRATION RIGHTS. If the Corporation at any
time proposes to register any of its securities under the Act under an S-8
Registration Statement, it will each such time give written notice to all
holders of outstanding or exercised options of its intention so to do. Upon the
written request of a holder or holders of any such outstanding or exercised
options given within thirty (30) days after receipt of any such notice, the
Corporation will use its best efforts to cause all such outstanding or exercised
options, the holders of which shall have so requested registration thereof, to
be registered under the Act (with the securities which the Corporation at the
time propose to register), all to the extent requisite to permit the sale or
other disposition by the prospective Sellers of the outstanding or exercised
options so registered; provided, however, that the Corporation may, as a
condition precedent to its effecting such registration, require each prospective
Seller to agree with the Corporation and the managing underwriter or
underwriters of the offering to be made by the Corporation in connection with
such registration that such Seller will not sell any securities of the same
class or convertible into the same class as those registered by the Corporation
(including any class into which the securities registered by the Corporation are
convertible) for such reasonable period after such registration becomes
effective as shall then be specified in writing by such underwriter or
underwriters if in the opinion of such underwriter or underwriters the
Corporation's offering would be materially adversely affected in the absence of
such an agreement.

                  b. PROCEDURES. In connection with the registration of any
securities pursuant to Section 12.a. hereof, the Corporation and the Optionee
covenant and agree as follows:

                           (i) The Corporation shall pay all costs, fees, and
expenses incurred by the Corporation and the Optionee in connection with the
Registration Statement and the offering thereunder including, without
limitation, the Corporation's legal fees and expenses of counsel, accounting
fees, printing expenses, and blue sky fees and expenses (but excluding discounts
or selling commissions of any underwriter or broker dealer acting on behalf of
the Corporation or the Optionee).

                           (ii) The Corporation shall take all necessary action
which may be reasonably required in qualifying or registering the securities
included in the Registration Statement for offering and sale under the
securities or blue sky laws of all states reasonably requested by Optionee,
provided that the Corporation shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.

                           (iii) The Corporation shall indemnify Optionee and
each person, if any, who controls Optionee within the meaning of Section 15 of
the Act or Section 20(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from the Registration Statement.

                           (iv) The Corporation shall, as soon as practicable
after the effective date of the Registration Statement, and in any event within
fifteen (15) months thereafter, make "generally available to its security
holders" (within the meaning of Rule 158 under the Act) an earnings statement
(which need not be audited) complying with Section 11(a) of the Act and covering
a period of at least twelve (12) consecutive months beginning after the
effective date of the Registration Statement.

                                       14
<PAGE>

                           (v) The Corporation shall (A) deliver promptly to
Optionee and its counsel, upon request, copies of all correspondence between the
Commission and the Corporation, its counsel, or auditors and all memoranda
relating to discussions with the Commission or its staff with respect to the
Registration Statement; and (B) permit Optionee and its counsel to perform such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the Registration Statement, as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. Such investigation shall include, but
not be limited to, access to financial and accounting information and
opportunities to discuss the business of the Corporation with the Corporation's
officers and independent auditors, all to such reasonable extent, at such
reasonable times and as often as Optionee and its counsel shall reasonably
request.

                           (vi) The Corporation shall cause all securities of
Optionee registered pursuant to a Registration Statement to be listed on any
national securities exchange or quoted on any automated quotation system on
which similar securities of the Corporation are listed or quoted.

         13. STAND-OFF AGREEMENT. Optionee agrees that in connection with any
registration of the Corporation's securities, that upon the request of the
Corporation or any underwriter managing an underwritten offering of the
Corporation's securities, that Optionee shall not sell, short any sale of, loan,
grant an option for, or otherwise dispose of any of the Shares (other than
Shares included in the offering) without the prior written consent of the
Corporation or such managing underwriter, as applicable, for a period of at
least one hundred eighty (180) days following the effective date of registration
of such offering.

         14. NOTICES. Any notice required to be given pursuant to this Option or
the Plan shall be in writing and shall be deemed to be delivered upon receipt
or, in the case of notices by the Corporation, five (5) days after deposit in
the US. mail, postage prepaid, addressed to Optionee at the address last
provided to the Corporation by Optionee for his or her employee records.





         The remainder of this page intentionally left blank.



                                       15
<PAGE>


         15. AGREEMENT SUBJECT TO PLAN; APPLICABLE LAW. This Agreement is made
pursuant to the Plan and shall be interpreted to comply therewith. A copy of
such Plan is available to Optionee, at no charge, at the principal office of the
Corporation. Any provision of this Agreement inconsistent with the Plan shall be
considered void and replaced with the applicable provision of the Plan. This
Agreement has been granted, executed and delivered in the State of California,
and the interpretation and enforcement shall be governed by the laws thereof and
subject to the exclusive jurisdiction of the courts therein.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                            BLUEFIE ETHANOL FUELS, INC.

                                            ________________________________
                                            BY: ARNOLD KLANN
                                            ITS:  CEO



                                            ________________________________
                                                                  , Optionee


                                       16
<PAGE>


                                   Appendix A

                               NOTICE OF EXERCISE

________________
________________
________________

                              ____________________
                                     (date)

                          Re: Nonstatutory Stock Option

         Notice is hereby given pursuant to Section 4 of my Nonstatutory Stock
Option Agreement that I elect to purchase the number of shares set forth below
at the exercise price set forth in my option agreement:

         Stock Option dated:                              ______________________

         Number of shares being purchased:                ______________________

         Option Exercise Price:                           $_____________________

         (i) cash exercise:

         A check in the amount of the aggregate price of the shares being
purchased is attached;

         (ii) or in the instance of a cashless exercise, closing price on date
exercise: ___________

         Net share to be issued: ______________

         The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Option for, and to purchase thereunder,
_________________ shares of the Corporation's common stock provided for therein
and requests that certificates for such Option Shares be issued in the name
below, and, if said number of Option Shares shall not be all the shares of
Common Stock purchasable thereunder, that a new Option for the balance remaining
of the shares of Common Stock purchasable under the within Optiont be registered
in the name of the undersigned Optioneer or his or her assignee as below
indicated and delivered to the address stated below.

         I hereby confirm that such shares are being acquired by me for my own
account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof.

         Further, I understand that, as a result of this exercise of rights, I
will recognize income in an amount equal to the amount by which the fair market
value of the Shares exceeds the exercise price. I agree to report such income in
accordance with then applicable law and to cooperate with Corporation in
establishing the withholding and corresponding deduction to the Corporation for
its income tax purposes.

                                       17
<PAGE>

         I agree to provide to the Corporation such additional documents or
information as may be required pursuant to the Corporation's 2006 Incentive and
Nonstatutory Stock Option Plan.


                                                     _________________________
                                                            (Signature)

                                                     _________________________
                                                        (Name of Optionee)



                                       18
<PAGE>

                        INCENTIVE STOCK OPTION AGREEMENT

         THIS INCENTIVE STOCK OPTION AGREEMENT is made and entered into as of
this ____ day of ______________, 2006, by and between
_________________________("Corporation"), and ________________________________
(referred to herein as the "Optionee"), with reference to the following recitals
of facts:

         WHEREAS, the Board has authorized the granting to Optionee of an
incentive stock option ("Option") to purchase shares of common stock of the
Corporation (the "Shares") upon the terms and conditions hereinafter stated; and

         WHEREAS, the Board and stockholders of the Corporation have heretofore
adopted a 2005 Incentive and Nonstatutory Stock Option Plan (the "Plan"),
pursuant to which this Option is being granted;

         WHEREAS, it is the intention of the parties that this Option be an
Incentive Stock Option (a Qualified Stock Option);

         NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties hereto agree as follows:

         1. SHARES; PRICE. The Corporation hereby grants to Optionee the right
to purchase, upon and subject to the terms and conditions herein stated, _______
Shares for cash (or other consideration acceptable to the Board of Directors of
the Corporation, in their sole and absolute discretion) at the price of $____
per Share, such price being not less than the fair market value per share of the
Shares covered by these Options as of the date hereof and as determined by the
Board of Directors of the Corporation.

         2. TERM OF OPTION; CONTINUATION OF EMPLOYMENT. This Option shall
expire, and all rights hereunder to purchase the Shares shall terminate, five
(5) years from the date hereof. This Option shall earlier terminate subject to
Paragraphs 5 and 6 hereof if, and as of the date, Optionee ceases to be an
employee of the Corporation. Nothing contained herein shall be construed to
interfere in any way with the right of the Corporation to terminate the
employment or engagement, as applicable, of Optionee or to increase or decrease
the compensation of Optionee from the rate in existence at the date hereof.

         3. VESTING OF OPTION. Subject to the provisions of Paragraphs 5 and 6
hereof, this Option shall vest and become exercisable during the term of
Optionee's employment or engagement in whole or in part beginning on the date of
this Agreement, _____________________.

         4. EXERCISE. This Option shall be exercised by delivery to the
Corporation of (a) a written notice of exercise stating the number of Shares
being purchased (in whole shares only) and such other information set forth on
the form of Notice of Exercise attached hereto as Appendix A, (b) a check or
cash in the amount of the purchase price of the Shares covered by the notice,
(c) by the surrender of the Option (or a portion hereof) in accordance with the
terms hereof but without payment in cash (a "Cashless Exercise"), and (d) a
written statement as provided for in Paragraph 11 hereof. This Option shall not
be assignable or transferable, except by will or by the laws of descent and
distribution, and shall be exercisable only by Optionee during his or her
lifetime.

                                       19
<PAGE>

The number of shares of Common Stock issuable in respect of a Cashless Exercise
shall be computed using the following formula:

                  X =    Y (A-B)
                         -------
                             A

Where:

                  X = the number of shares of Common Stock to be issued to the
Holder in respect of a Cashless Exercise

                  Y = the number of shares of Common Stock purchasable under the
Option or, if only a portion of the Option is being exercised, the portion of
the Option being canceled in connection with such Cashless Exercise (at the date
of such calculation)

                  A = the Fair Market Value (as defined below) of one share of
the Corporation's Common Stock (at the date of such calculation)

                  B = Option Exercise Price (as adjusted to the date of such
calculation).

         5. TERMINATION OF EMPLOYMENT OR ENGAGEMENT. If Optionee shall cease to
serve as an employee of the Corporation for any reason, whether voluntarily or
involuntarily, other than by his or her death or the conclusion of the term of a
written consulting agreement, provided such term exceeds one year, Optionee
shall have the right at any time within thirty (30) days after date Optionee
ceases to be an employee of the Corporation, or the remaining term of this
Option, whichever is the lesser, to exercise in whole or in part this Option to
the extent, but only to the extent, that this Option was exercisable as of the
last day of employment or engagement, as applicable, and had not previously been
exercised; provided, however, that if Optionee's termination of employment or
engagement was caused by permanent disability (within the meaning of Section
22(e)(3) of the Code), the foregoing thirty (30) day period shall be extended to
six (6) months; or

                  Notwithstanding anything herein to the contrary, all rights
under this Option shall expire in any event on the date specified in Paragraph 2
hereof.

         6. DEATH OF OPTIONEE. If the Optionee shall die while an employee of
the Corporation, Optionee's personal representative or the person entitled to
Optionee's rights hereunder may at any time during the remaining term of this
Option, exercise this Option and purchase Shares to the extent, but only to the
extent, that Optionee could have exercised this Option as of the date of
Optionee's death; provided, in any case, that this Option may be so exercised
only to the extent that this option has not previously been exercised by
Optionee.

         7. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to the Shares covered by any installment of this Option
until the date of the issuance of a stock certificate to Optionee, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such stock certificate or certificates are issued except as
provided in Paragraph 8 hereof.

                                       20
<PAGE>

         8. RECAPITALIZATION. Subject to any required action by the stockholders
of the Corporation, the number of Shares covered by this Option, and the price
per Share thereof, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, or any other
increase or decrease in the number of such shares affected without receipt of
consideration by the Corporation; provided however that the conversion of any
convertible securities of the Corporation shall not be deemed having been
"effected without receipt of consideration by the Corporation."

         In the event of a proposed dissolution or liquidation of the
Corporation, a merger or consolidation in which the Corporation is not the
surviving entity, or a sale of all or substantially all of the assets of the
Corporation, this Option shall terminate immediately prior to the consummation
of such proposed action, unless otherwise provided by the Board. The Board may,
at its sole and absolute discretion and without obligation, declare that this
Option shall terminate as of a date fixed by the Board and grant Optionee the
right for a period commencing thirty (30) days prior to and ending immediately
prior to such date, or during the remaining term of this Option, whichever
occurs sooner, to exercise this Option as to all or any part of the Shares,
without regard to the installment provision of Paragraph 3; provided, however,
that such exercise shall be subject to the consummation of such dissolution,
liquidation, merger, consolidation or sale.

         Subject to any required action by the stockholders of the Corporation,
if the Corporation shall be the surviving entity in any merger or consolidation,
this Option thereafter shall pertain to and apply to the securities to which a
holder of Shares equal to the Shares subject to this Option would have been
entitled by reason of such merger or consolidation, and the vesting provisions
of Section 3 shall continue to apply.

         In the event of a change in the Shares of the Corporation as presently
constituted, which is limited to a change of all of its authorized Shares
without par value into the same number of Shares with a par value, the Shares
resulting from any such change shall be deemed to be the Shares within the
meaning of this Agreement.

         To the extent that the foregoing adjustments relate to shares or
securities of the Corporation, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as hereinbefore expressly provided, Optionee shall have no rights by
reason of any subdivision or consolidation of share of stock of any class or the
payment of any stock dividend or any other increase or decrease in the number of
shares of stock of any class, and the number and price of shares subject to this
Option shall not be affected by, and no adjustments shall be made by reason of,
any dissolution, liquidation, merger or consolidation, or any issue by the
Corporation of shares of stock of any class or securities convertible into
shares of stock of any class.

         The grant of this Option shall not affect in any way the right or power
of the Corporation to make adjustments, reclassifications, reorganizations or
changes in its capital or business structure or to merge, consolidate, dissolve
or liquidate or to sell or transfer all or any part of its business or assets.

                                       21
<PAGE>

         9. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of this Option, Optionee may recognize income, for federal and state
income tax purposes, in an amount equal to the amount by which the fair market
value of the Shares, determined as of the date of exercise, exceeds the exercise
price. The acceptance of the Shares by Optionee shall constitute an agreement by
Optionee to report such income in accordance with then applicable law and to
cooperate with Corporation in establishing the amount of such income and
corresponding deduction to the Corporation for its income tax purposes.
Withholding for federal or state income and employment tax purposes will be
made, if and as required by law, from Optionee's then current compensation, or,
if such current compensation is insufficient to satisfy withholding tax
liability, the Corporation may require Optionee to make cash payment to cover
such liability as a condition of the exercise of this Option.

         10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board may
modify, extend or renew this Option or accept the surrender thereof (to the
extent not theretofore exercised) and authorize the granting of a new option in
substitution therefore (to the extent not theretofore exercised), subject at all
times to the Plan. Notwithstanding the foregoing provisions of this Paragraph
10, no modification shall, without the consent of the Optionee, alter to the
Optionee's detriment or impair any rights of Optionee hereunder.

         11. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER. Optionee represents
and agrees that if Optionee exercises this Option in whole or in part, Optionee
will in each case acquire the Shares upon such exercise for the purpose of
investment and not with a view to, or for resale in connection with, any
distribution thereof; and that upon such exercise of this Option in whole or in
part, Optionee (or any person or persons entitled to exercise this Option under
the provisions of Paragraphs 5 and 6 hereof) shall furnish to the Corporation a
written statement to such effect, satisfactory to the Corporation in form and
substance. The Corporation, at its option, may include a legend on each
certificate representing Shares issued pursuant to any exercise of this Option,
stating in effect that such Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"), and that the transferability thereof is
restricted. If the Shares represented by this Option are registered under the
Act, either before or after the exercise of this Option in whole or in part, the
Optionee shall be relieved of the foregoing investment representation and
agreement and shall not be required to furnish the Corporation with the
foregoing written statement.

         Optionee further represents that optionee has had access to the
financial statements or books and records of the Corporation, has had the
opportunity to ask questions of the Corporation concerning its business,
operations and financial condition, and to obtain additional information
reasonably necessary to verify the accuracy of such information, and further
represents that Optionee (either such experience and knowledge in investment,
financial and business matters in investments similar to the stock of the
Corporation that Optionee is capable of evaluating the merits and risks thereof
and has the capacity to protect his or her own interest in connection therewith.

         12.      REGISTRATION RIGHTS.

                                       22
<PAGE>

                  a. PIGGYBACK REGISTRATION RIGHTS. If the Corporation at any
time proposes to register any of its securities under the Act under an S-8
Registration Statement, it will each such time give written notice to all
holders of outstanding or exercised options of its intention so to do. Upon the
written request of a holder or holders of any such outstanding or exercised
options given within thirty (30) days after receipt of any such notice, the
Corporation will use its best efforts to cause all such outstanding or exercised
options, the holders of which shall have so requested registration thereof, to
be registered under the Act (with the securities which the Corporation at the
time propose to register), all to the extent requisite to permit the sale or
other disposition by the prospective Sellers of the outstanding or exercised
options so registered; provided, however, that the Corporation may, as a
condition precedent to its effecting such registration, require each prospective
Seller to agree with the Corporation and the managing underwriter or
underwriters of the offering to be made by the Corporation in connection with
such registration that such Seller will not sell any securities of the same
class or convertible into the same class as those registered by the Corporation
(including any class into which the securities registered by the Corporation are
convertible) for such reasonable period after such registration becomes
effective as shall then be specified in writing by such underwriter or
underwriters if in the opinion of such underwriter or underwriters the
Corporation's offering would be materially adversely affected in the absence of
such an agreement.

                  b. PROCEDURES. In connection with the registration of any
securities pursuant to Section 12.a. hereof, the Corporation and the Optionee
covenant and agree as follows:

                           (i) The Corporation shall pay all costs, fees, and
expenses incurred by the Corporation and the Optionee in connection with the
Registration Statement and the offering thereunder including, without
limitation, the Corporation's legal fees and expenses of counsel, accounting
fees, printing expenses, and blue sky fees and expenses (but excluding discounts
or selling commissions of any underwriter or broker dealer acting on behalf of
the Corporation or the Optionee).

                           (ii) The Corporation shall take all necessary action
which may be reasonably required in qualifying or registering the securities
included in the Registration Statement for offering and sale under the
securities or blue sky laws of all states reasonably requested by Optionee,
provided that the Corporation shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.

                           (iii) The Corporation shall indemnify Optionee and
each person, if any, who controls Optionee within the meaning of Section 15 of
the Act or Section 20(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from the Registration Statement.

                           (iv) The Corporation shall, as soon as practicable
after the effective date of the Registration Statement, and in any event within
fifteen (15) months thereafter, make "generally available to its security
holders" (within the meaning of Rule 158 under the Act) an earnings statement
(which need not be audited) complying with Section 11(a) of the Act and covering
a period of at least twelve (12) consecutive months beginning after the
effective date of the Registration Statement.

                                       23
<PAGE>

                           (v) The Corporation shall (A) deliver promptly to
Optionee and its counsel, upon request, copies of all correspondence between the
Commission and the Corporation, its counsel, or auditors and all memoranda
relating to discussions with the Commission or its staff with respect to the
Registration Statement; and (B) permit Optionee and its counsel to perform such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the Registration Statement, as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. Such investigation shall include, but
not be limited to, access to financial and accounting information and
opportunities to discuss the business of the Corporation with the Corporation's
officers and independent auditors, all to such reasonable extent, at such
reasonable times and as often as Optionee and its counsel shall reasonably
request.

                           (vi) The Corporation shall cause all securities of
Optionee registered pursuant to a Registration Statement to be listed on any
national securities exchange or quoted on any automated quotation system on
which similar securities of the Corporation are listed or quoted.

         13. STAND-OFF AGREEMENT. Optionee agrees that in connection with any
registration of the Corporation's securities, that upon the request of the
Corporation or any underwriter managing an underwritten offering of the
Corporation's securities, that Optionee shall not sell, short any sale of, loan,
grant an option for, or otherwise dispose of any of the Shares (other than
Shares included in the offering) without the prior written consent of the
Corporation or such managing underwriter, as applicable, for a period of at
least one hundred eighty (180) days following the effective date of registration
of such offering.

         14. NOTICES. Any notice required to be given pursuant to this Option or
the Plan shall be in writing and shall be deemed to be delivered upon receipt
or, in the case of notices by the Corporation, five (5) days after deposit in
the US. mail, postage prepaid, addressed to Optionee at the address last
provided to the Corporation by Optionee for his or her employee records.

         15. AGREEMENT SUBJECT TO PLAN; APPLICABLE LAW. This Agreement is made
pursuant to the Plan and shall be interpreted to comply therewith. A copy of
such Plan is available to Optionee, at no charge, at the principal office of the
Corporation. Any provision of this Agreement inconsistent with the Plan shall be
considered void and replaced with the applicable provision of the Plan. This
Agreement has been granted, executed and delivered in the State of California,
and the interpretation and enforcement shall be governed by the laws thereof and
subject to the exclusive jurisdiction of the courts therein.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                            ________________________________
                                            BY:  Arnold Klann
                                            ITS: CEO


                                            ________________________________
                                                                  , Optionee

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<PAGE>


                                   Appendix A

                               NOTICE OF EXERCISE

________________
________________
________________
                              ____________________
                                     (date)

                           Re: Incentive Stock Option

         Notice is hereby given pursuant to Section 4 of my Incentive Stock
Option Agreement that I elect to purchase the number of shares set forth below
at the exercise price set forth in my option agreement:

         Stock Option dated:                         ______________________

         Number of shares being purchased:           ______________________

         Option Exercise Price:                      $_____________________

         A check in the amount of the aggregate price of the shares being
purchased is attached;

         or in the instance of a cashless exercise:

         The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Option for, and to purchase thereunder,
_________________ shares of the Corporation's common stock provided for therein
and requests that certificates for such Option Shares be issued in the name
below, and, if said number of Option Shares shall not be all the shares of
Common Stock purchasable thereunder, that a new Option for the balance remaining
of the shares of Common Stock purchasable under the within Option be registered
in the name of the undersigned Optioneer or his or her assignee as below
indicated and delivered to the address stated below.

         I hereby confirm that such shares are being acquired by me for my own
account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof.

         Further, I understand that, as a result of this exercise of rights, I
will recognize income in an amount equal to the amount by which the fair market
value of the Shares exceeds the exercise price. I agree to report such income in
accordance with then applicable law and to cooperate with Corporation in
establishing the withholding and corresponding deduction to the Corporation for
its income tax purposes.

                                       25
<PAGE>

         I agree to provide to the Corporation such additional documents or
information as may be required pursuant to the Corporation's 2005 Incentive and
Nonstatutory Stock Option Plan.

                                                     _________________________
                                                                (Signature)

                                                     _________________________
                                                             (Name of Optionee



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