s8101.htm


    
      

      

    

    EXHIBIT 10.1

    


    CHINA
FORESTRY INC.

    2008
NON-QUALIFIED STOCK COMPENSATION PLAN

    


    1.           Purpose of Plan

     

    1.1           This
2008 NON-QUALIFIED STOCK COMPENSATION PLAN
(the “Plan”) of China Forestry Inc., a Nevada corporation (the “Company”) for
employees, directors, officers, consultants, advisors and its Affiliates and is
intended to advance the best interests of the Company, its Affiliates and its
stockholders by providing those persons who have a substantial responsibility
for its management and growth of the Company and its Affiliates with additional
incentive and an opportunity to obtain or increase their proprietary interest in
the success of the Company, thereby encouraging them to continue in the employ
of the Company or any of its Affiliates.  Further, the availability
and offering of stock options and common stock under the Plan supports and
increases the Company's ability to attract and retain individuals of exceptional
talent upon whom, in large measure, the sustained progress, growth and
profitability of the Company depends.

    


    2.           Definitions

    


    For Plan purposes, except where the
context might clearly indicate otherwise, the following terms shall have the
meanings set forth below:

    


    2.1  “Board” shall mean the
Board of Directors of the Company.

    


    2.2  “Committee” shall mean
the Compensation Committee of the Board of Directors, or such other committee
appointed by the Board, which shall be designated by the Board to administer the
Plan, or the Board if no committees have been established.  The
Committee shall be composed of three or more persons
as from time to time are appointed to serve by the Board.  Each member
of the Committee, while serving as such, shall be a disinterested person with
the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of
1934.

    


    2.3  “Common Shares” shall
mean the Company's Common Shares, $.001 par value per share, or, in the event
that the outstanding Common Shares are hereafter changed into or exchanged for
different shares of securities of the Company, such other shares or
securities.

    


    2.4  “Company” shall mean
China Forestry Inc., a Nevada corporation, and any parent or subsidiary
corporation of CHFY, as such terms are defined in Sections 425(e) and 425(f),
respectively, of the Code.

    


    2.5  “Eligible Persons” shall
mean, with respect to the Plan, those persons who, at the time that a stock
option is granted, are (i) Employees and all other key personnel, including
officers and directors, of the Company or Affiliate, or (ii) Consultants or
independent contractors who provide valuable services to the Company or
Affiliates as determined by the Committee.

    


    2.6  “Employee” shall mean an
employee of the company or any Affiliate to whom  one or more Stock
Options under the Plan is granted

    


    2.7  “Fair Market Value”
shall mean, with respect to the date a given stock option is granted or
exercised, the average of the highest and lowest reported sales prices of the
Common Shares, as reported by such responsible reporting service as the
Committee may select, or if there were not transactions in the Common Shares on
such day, then the last preceding day on which transactions took
place.  The above withstanding, the Committee may determine the Fair
Market Value in such other manner as it may deem more equitable for Plan
purposes or as is required by applicable laws or regulations.

    


    2.8  “Common Stock” shall
mean shares of common stock which are issued by the Company pursuant to Section
5, below.

    


    2.9  “Common
Stockholder” means
the employee of, consultant to, or director of the Company or other person to
whom shares of Common Stock are issued pursuant to this Plan.

    


    2.10 “Common Stock Agreement”
means an agreement executed by a Common Stockholder and the Company as
contemplated by Section 5, below, which imposes on the shares of Common Stock
held by the Common Stockholder such restrictions as the Board or Committee deem
appropriate.

    


    2.11  “Option” means both an
Incentive Option and a  “Non-Qualified Stock Option” (“NQSO”) granted
under this Plan to purchase shares of Stock.

    


    2.12  “Option Agreement”
shall mean the agreement between the Company and the an Eligible Person, which
sets out the terms of an Option.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    3.           Administration of the
Plan

    


    3.1           The
Committee shall administer the Plan and accordingly, it shall have full power to
grant Stock Options and Common Stock, construe and interpret the Plan, establish
rules and regulations and perform all other acts, including the delegation of
administrative responsibilities, it believes reasonable and proper.

    


    3.2           The
determination of those eligible to receive Stock Options and Common Stock, and
the amount, type and timing of each grant and the terms and conditions of the
respective stock option agreements and Common Stock Agreements shall rest in the
sole discretion of the Committee, subject to the provisions of the
Plan.

    


    3.3           The
Committee may cancel any Stock Options awarded under the Plan if an Eligible
Person conducts himself in a manner which the Committee determines to be
inimical to the best interest of the Company, as set forth more fully in
paragraph 8 of Article 11 of the Plan.

    


    3.4           The
Board, or the Committee, may correct any defect, supply any omission or
reconcile any inconsistency in the Plan, or in any granted Stock Option, in the
manner and to the extent it shall deem necessary to carry it into
effect.

    


    3.5           Any
decision made, or action taken, by the Committee or the Board arising out of or
in connection with the interpretation and administration of the Plan shall be
final and conclusive.

    


    3.6           The
Committee shall, in its discretion, have the power to issue Common Shares to
holders of non-qualified incentive stock option agreements which are outstanding
as of the date hereof , pursuant to the terms of those option
agreements.

    


    3.7           Meetings
of the Committee shall be held at such times and places as shall be determined
by the Committee.  A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of those members present at any meeting shall decide any question brought before
that meeting.  In addition, the Committee may take any action
otherwise proper under the Plan by the affirmative vote, taken without a
meeting, of a majority of its members.

    


    3.8           No
member of the Committee shall be liable for any act or omission of any other
member of the Committee or for any act or omission on his own part, including,
but not limited to, the exercise of any power or discretion given to him under
the Plan, except those resulting from his own gross negligence or willful
misconduct.

    


    3.9           The
Company, through its management, shall supply full and timely information to the
Committee on all matters relating to the eligibility of Eligible Persons, their
duties and performance, and current information on any Eligible Person's death,
retirement, disability or other termination of association with the Company, and
such other pertinent information as the Committee may require.  The
Company shall furnish the Committee with such clerical and other assistance as
is necessary in the performance of its duties hereunder.

    


    4.           Shares Subject to the
Plan

    


    4.1           The
total number of shares of the Company available for grants of Stock Options and
Common Stock under the Plan shall be 6,000,000 Common Shares, subject to
adjustment in accordance with Article 7 of the Plan, which shares may be either
authorized but unissued or reacquired Common Shares of the Company.

    


    4.2           If
a Stock Option or portion thereof shall expire or terminate for any reason
without having been exercised in full, the forfeited shares covered by such NQSO
shall be available for future grants of Stock Options.

    


    5.           Award of Common
Stock

    


    5.1           The
Board or Committee from time to time, in its absolute discretion, may (a) award
Common Stock to employees of, consultants to, and directors of the Company, and
such other persons as the Board or Committee may select, and (b) permit Holders
of Options to exercise such Options prior to full vesting therein and hold the
Common Shares issued upon exercise of the Option as Common Stock.  In
either such event, the owner of such Common Stock shall hold such stock subject
to such vesting schedule as the Board or Committee may impose or such vesting
schedule to which the Option was subject, as determined in the discretion of the
Board or Committee.

    


    5.2           Common
Stock shall be issued only pursuant to a Common Stock Agreement, which shall be
executed by the Common Stockholder and the Company and which shall contain such
terms and conditions as the Board or Committee shall determine consistent with
this Plan, including such restrictions on transfer as are imposed by the Common
Stock Agreement.

    


    5.3           Upon
delivery of the shares of Common Stock to the Common Stockholder, below, the
Common Stockholder shall have, unless otherwise provided by the Board or
Committee, all the rights of a stockholder with respect to said shares, subject
to the restrictions in the Common Stock Agreement, including the right to
receive all dividends and other distributions paid or made with respect to the
Common Stock.

    


    
      
        
        

      

      
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    5.4.           Notwithstanding
anything in this Plan or any Common Stock Agreement to the contrary, no Common
Stockholders may sell or otherwise transfer, whether or not for value, any of
the Common Stock prior to the date on which the Common Stockholder is vested
therein.

    


    5.5           All
shares of Common Stock issued under this Plan (including any shares of Common
Stock and other securities issued with respect to the shares of Common Stock as
a result of stock dividends, stock splits or similar changes in the capital
structure of the Company) shall be subject to such restrictions as the Board or
Committee shall provide, which restrictions may include, without limitation,
restrictions concerning voting rights, transferability of the Common Stock and
restrictions based on duration of employment with the Company, Company
performance and individual performance; provided that the Board or Committee
may, on such terms and conditions as it may determine to be appropriate, remove
any or all of such restric­tions.  Common Stock may not be sold or
encumbered until all applicable restrictions have terminated or
expire.  The restrictions, if any, imposed by the Board or Committee
or the Board under this Section 5 need not be identical for all Common Stock and
the imposition of any restrictions with respect to any Common Stock shall not
require the imposition of the same or any other restrictions with respect to any
other Common Stock.

    


    5.6           Each
Common Stock Agreement shall provide that the Company shall have the right to
repurchase from the Common Stockholder the unvested Common Stock upon a
termination of employment, termination of directorship or termination of a
consultancy arrangement, as applicable, at a cash price per share equal to the
purchase price paid by the Common Stockholder for such Common
Stock.

    


    5.7           In
the discretion of the Board or Committee, the Common Stock Agreement may provide
that the Company shall have the a right of first refusal with respect to the
Common Stock and a right to repurchase the vested Common Stock upon a
termination of the Common Stockholder's employment with the Company, the
termination of the Common Stockholder's consulting arrangement with the Company,
the termination of the Common Stockholder's service on the Company's Board, or
such other events as the Board or Committee may deem appropriate.

    


    5.8           The
Board or Committee shall cause a legend or legends to be placed on certificates
representing shares of Common Stock that are subject to restrictions under
Common Stock Agreements, which legend or legends shall make appropriate
reference to the applicable restrictions.

    


    6.           Stock Option Terms and
Conditions

    


    6.1           Consistent
with the Plan's purpose, Stock Options may be granted to non-employee directors
of the Company or other persons who are performing or who have been engaged to
perform services of special importance to the management, operation or
development of the Company.

    


    6.2           All
Stock Options granted under the Plan shall be evidenced by agreements which
shall be subject to applicable provisions of the Plan, and such other provisions
as the Committee may adopt, including the provisions set forth in paragraphs 2
through 11 of this Section 6.

    


    6.3           All
Stock Options granted hereunder must be granted within ten years from the
earlier of the date of this Plan is adopted or approved by the Company's
shareholders.

    


    6.4           No
Stock Option granted to any employee or 10% Shareholder shall be exercisable
after the expiration of ten years from the date such NQSO is
granted.  The Committee, in its discretion, may provide that an Option
shall be exercisable during such ten year period or during any lesser period of
time.

    


    The Committee may establish installment
exercise terms for a Stock Option such that the NQSO becomes fully exercisable
in a series of cumulating portions.  If an Eligible Person shall not,
in any given installment period, purchase all the Common Shares which such
Optionee is entitled to purchase within such installment period, such Eligible
Person's right to purchase any Common Shares not purchased in such installment
period shall continue until the expiration or sooner termination of such
NQSO.  The Committee may also accelerate the exercise of any NQSO.
However, no NQSO, or any portion thereof, may be exercisable until thirty (30)
days following date of grant (“30-Day Holding Period.”).

    


    6.5           A
Stock Option, or portion thereof, shall be exercised by delivery of
(i)  a written notice of exercise of the Company specifying the number
of common shares to be purchased, and (ii)  payment of the full price
of such Common Shares, as fully set forth in paragraph 6 of this Section
6.

    


    No NQSO or installment thereof shall be
exercisable except with respect to whole shares, and fractional share interests
shall be disregarded.  Not less than 100 Common Shares may be
purchased at one time unless the number purchased is the total number at the
time available for purchase under the NQSO. Until the Common Shares represented
by an exercised NQSO are issued to an Eligible Person, he shall have none of the
rights of a shareholder.

    


    
      
        
        

      

      
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    6.6           The
exercise price of a Stock Option, or portion thereof, may be paid:

    


    A.           In
United States dollars, in cash or by cashier's check, certified check, bank
draft or money order, payable to the order of the Company in an amount equal to
the option price;  or

    


    B.           At
the discretion of the Committee, through the delivery of fully paid and
nonassessable Common Shares, with an aggregate Fair Market Value on the date the
NQSO is exercised equal to the option price, provided such tendered Shares have
been owned by the Eligible Person for at least one year prior to such
exercise;  or

    


    C.           By
a combination of both A and B above.

    


    D.           A
Stock Option, or a portion thereof, may also be exercised by means of
a

    “cashless
exercise” in which Eligible Person shall be entitled to receive a certificate
for the number of Common Shares equal to the quotient obtained by dividing
[(A-B) (X)] by (A), where:

    


    (A)
=                      the
closing price on the trading day preceding the date of such
election;

     

    (B)
=                      the
exercise price of a Stock Option, as adjusted; and

     

    
      	
              (X)
      =

            	
              the
      number of Common Shares issuable upon exercise of a Stock Option in
      accordance with the terms of the Stock
Option.

            


    

     

    The Committee shall determine
acceptable methods for tendering Common Shares as payment upon exercise of a
Stock Option and may impose such limitations and prohibitions on the use of
Common Shares to exercise an NQSO as it deems appropriate.

    


    6.7           With
the Eligible Persons’ consent, the Committee may cancel any Stock Option issued
under this Plan and issue a new NQSO to such Eligible Persons.

    


    6.8           Except
by will or the laws of descent and distribution, no right or interest in any
Stock Option granted under the Plan shall be assignable or transferable, and no
right or interest of any Eligible Persons shall be liable for, or subject to,
any lien, obligation or liability of the Eligible Person.  Stock
Options shall be exercisable during the Eligible Persons’ lifetime only by the
Eligible Persons or the duly appointed legal representative of an incompetent
Eligible Person.

    


    6.9           If
the Eligible Person shall die while associated with the Company or within three
months after termination of such association, the personal representative or
administrator of the Eligible Person's estate or the person(s) to whom an NQSO
granted hereunder shall have been validly transferred by such personal
representative or administrator pursuant to the Eligible Person's will or the
laws of descent and distribution, shall have the right to exercise the NQSO for
one year after the date of the Eligible Person's death, to the extent
(i)  such NQSO was exercisable on the date of such termination of
employment by death, and (ii) such NQSO was not exercised, and
(iii)  the exercise period may not be extended beyond the expiration
of the term of the Option.

    


    No transfer of a Stock Option by the
will of an Eligible Person or by the laws of descent and distribution shall be
effective to bind the Company unless the Company shall have been furnished with
written notice thereof and an authenticated copy of the will and/or such other
evidence as the Committee may deem necessary to establish the validity of the
transfer and the acceptance by the transferee or transferee of the terms and
conditions by such Stock Option.

    


    In the event of death following
termination of the Eligible Persons' association with the Company while any
portion of an NQSO remains exercisable, the Committee, in its discretion, may
provide for an extension of the exercise period of up to one year after the
Eligible Person's death but not beyond the expiration of the term of the Stock
Option.

    


    6.10           Any
Eligible Person who disposes of Common Shares acquired on the exercise of a NQSO
by sale or exchange either (i) within two years after the date of the grant of
the NQSO under which the stock was acquired, or (ii) within one year after the
acquisition of such Shares, shall notify the Company of such disposition and of
the amount realized upon such disposition.  The transfer of Common
Shares may also be Common by applicable provisions of the Securities Act of
1933, as amended.

    


    
      
        
        

      

      
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    7.           Adjustments or Changes in
Capitalization

    


    7.1           In
the event that the outstanding Common Shares of the Company are hereafter
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of merger, consolidation, other
reorganization, recapitalization, reclassification, combination of shares, stock
split-up or stock dividend:

    


    A.           Prompt,
proportionate, equitable, lawful and adequate adjustment shall be made of the
aggregate number and kind of shares subject to Stock Options which may be
granted under the Plan, such that the Eligible Persons shall have the right to
purchase such Common Shares as may be issued in exchange for the Common Shares
purchasable on exercise of the NQSO had such merger, consolidation, other
reorganization, recapitalization, reclassification, combination of shares, stock
split-up or stock dividend not taken place;

    


    B.           Rights
under unexercised Stock Options or portions thereof granted prior to any such
change, both as to the number or kind of shares and the exercise price per
share, shall be adjusted appropriately, provided that such adjustments shall be
made without change in the total exercise price applicable to the unexercised
portion of such NQSO's but by an adjustment in the price for each share covered
by such NQSO's; or

    


    C.           Upon
any dissolution or liquidation of the Company or any merger or combination in
which the Company is not a surviving corporation, each outstanding Stock Option
granted hereunder shall terminate, but the Eligible Persons shall have the
right, immediately prior to such dissolution, liquidation, merger or
combination, to exercise his NQSO in whole or in part, to the extent that it
shall not have been exercised, without regard to any installment exercise
provisions in such NQSO.

    


    7.2           The
foregoing adjustments and the manner of application of the foregoing provisions
shall be determined solely by the Committee, whose determination as to what
adjustments shall be made and the extent thereof, shall be final, binding and
conclusive. No fractional Shares shall be issued under the Plan on account of
any such adjustments.

    


    8.           Merger, Consolidation or Tender
Offer

    


    8.1           If
the Company shall be a party to a binding agreement to any merger, consolidation
or reorganization or sale of substantially all the assets of the Company, each
outstanding Stock Option shall pertain and apply to the securities and/or
property which a shareholder of the number of Common Shares of the Company
subject to the NQSO would be entitled to receive pursuant to such merger,
consolidation or reorganization or sale of assets.

    


    8.2           In
the event that:

    


    A.           Any
person other than the Company shall acquire more than 20% of the Common Shares
of the Company through a tender offer, exchange offer or otherwise;

    


    B.           A
change in the “control” of the Company occurs, as such term is defined in Rule
405 under the Securities Act of 1933;

    


    C.           There
shall be a sale of all or substantially all of the assets of the
Company;

    


    any then
outstanding Stock Option held by an Eligible Person, who is deemed by the
Committee to be a statutory officer (“Insider”) for purposes of Section 16 of
the Securities Exchange Act of 1934 shall be entitled to receive, subject to any
action by the Committee revoking such an entitlement as provided for below, in
lieu of exercise of such Stock Option, to the extent that it is then
exercisable, a cash payment in an amount equal to the difference between the
aggregate exercise price of such NQSO, or portion thereof, and,
(i)  in the event of an offer or similar event, the final offer price
per share paid for Common Shares, or such lower price as the Committee may
determine to conform an option to preserve its Stock Option status, times the
number of Common Shares covered by the NQSO or portion thereof, or
(ii)  in the case of an event covered by B or C above, the aggregate
Fair Market Value of the Common Shares covered by the Stock Option, as
determined by the Committee at such time.

    


    8.3           Any
payment which the Company is required to make pursuant to paragraph 8.2 of this
Section 8 shall be made within 15 business days, following the event which
results in the Eligible Person’s right to such payment.  In the event
of a tender offer in which fewer than all the shares which are validly tendered
in compliance with such offer are purchased or exchanged, then only that portion
of the shares covered by an NQSO as results from multiplying such shares by a
fraction, the numerator of which is the number of Common Shares acquired
pursuant to the offer and the denominator of which is the number of Common
Shares tendered in compliance with such offer shall be used to determine the
payment thereupon.  To the extent that all or any portion of a Stock
Option shall be affected by this provision, all or such portion of the NQSO
shall be terminated.

     

    8.4           Notwithstanding
paragraphs 8.1 and 8.3 of this Section 8, the Committee may, by unanimous vote
and resolution, unilaterally revoke the benefits of the above provisions;
provided, however, that such vote is taken no later than ten business days
following public announcement of the intent of an offer or the change of
control, whichever occurs earlier.

    


    
      
        
        

      

      
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    9.           Amendment and Termination of
Plan

    


    9.1           The
Board may at any time, and from time to time, suspend or terminate the Plan in
whole or in part or amend it from time to time in such respects as the Board may
deem appropriate and in the best interest of the Company.

    


    9.2           No
amendment, suspension or termination of this Plan shall, without the Eligible
Person's consent, alter or impair any of the rights or obligations under any
Stock Option theretofore granted to him under the Plan.

    


    9.3           The
Board may amend the Plan, subject to the limitations cited above, in such manner
as it deems necessary to permit the granting of Stock Options meeting the
requirements of future amendments or issued regulations, if any, to the
Code.

    


    9.4           No
NQSO may be granted during any suspension of the Plan or after termination of
the Plan.

    


    10.           Government and Other
Regulations

    


    10.1           The
obligation of the Company to issue, transfer and deliver Common Shares for Stock
Options exercised under the Plan shall be subject to all applicable laws,
regulations, rules, orders and approval which shall then be in effect and
required by the relevant stock exchanges on which the Common Shares are traded
and by government entities as set forth below or as the Committee in its sole
discretion shall deem necessary or advisable.  Specifically, in
connection with the Securities Act of 1933, as amended, upon exercise of any
Stock Option, the Company shall not be required to issue Common Shares unless
the Committee has received evidence satisfactory to it to the effect that the
Eligible Persons will not transfer such shares except pursuant to a registration
statement in effect under such Act or unless an opinion of counsel satisfactory
to the Company has been received by the Company to the effect that such
registration is not required.  Any determination in this connection by
the Committee shall be final, binding and conclusive.  The Company
may, but shall in no event be obligated to, take any other affirmative action in
order to cause the exercise of a Stock Option or the issuance of Common Shares
pursuant thereto to comply with any law or regulation of any government
authority.

    


    11.           Miscellaneous
Provisions

    


    11.1           No
person shall have any claim or right to be granted a Stock Option or Common
Stock under the Plan, and the grant of an NQSO or Common Stock under the Plan
shall not be construed as giving an Eligible Person or Common Stockholder the
right to be retained by the Company.  Furthermore, the Company
expressly reserves the right at any time to terminate its relationship with an
Eligible Person with or without cause, free from any liability, or any claim
under the Plan, except as provided herein, in an option agreement, or in any
agreement between the Company and the Eligible Person.

    


    11.2           Any
expenses of administering this Plan shall be borne by the Company.

    


    11.3           The
payment received from Eligible Person from the exercise of Stock Options under
the Plan shall be used for the general corporate purposes of the
Company.

    


    11.4           The
place of administration of the Plan shall be in the State of Nevada, and the
validity, construction, interpretation, administration and effect of the Plan
and of its rules and regulations, and rights relating to the Plan, shall be
determined solely in accordance with the laws of the State of
Nevada.

    


    11.5           Without
amending the Plan, grants may be made to persons who are foreign nationals or
employed outside the United States, or both, on such terms and conditions,
consistent with the Plan's purpose, different from those specified in the Plan
as may, in the judgment of the Committee, be necessary or desirable to create
equitable opportunities given differences in tax laws in other
countries.

    


    11.6           In
addition to such other rights of indemnification as they may have as members of
the Board or the Committee, the members of the Committee shall be indemnified by
the Company against all costs and expenses reasonably incurred by them in
connection with any action, suit or proceeding to which they or any of them may
be party by reason of any action taken or failure to act under or in connection
with the Plan or any Stock 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 Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except a
judgment based upon a finding of bad faith;  provided that upon the
institution of any such action, suit or proceeding a Committee member shall, in
writing, give the Company notice thereof and an opportunity, at its own expense,
to handle and defend the same, with counsel acceptable to the Eligible Person,
before such Committee member undertakes to handle and defend it on his own
behalf.

    


    
      
        
        

      

      
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    11.7           Stock
Options may be granted under this Plan from time to time, in substitution for
stock options held by employees of other corporations who are about to become
employees of the Company as the result of a merger or consolidation of the
employing corporation with the Company or the acquisition by the Company of the
assets of the employing corporation or the acquisition by the Company of stock
of the employing corporation as a result of which it becomes a subsidiary of the
Company.  The terms and conditions of such substitute stock options so
granted may vary from the terms and conditions set forth in this Plan to such
extent as the Board of Directors of the Company at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted, but no such variations shall
be such as to affect the status of any such substitute stock options as a stock
option under Section 422A of the Code.

    


    11.8           Notwithstanding
anything to the contrary in the Plan, if the Committee finds by a majority vote,
after full consideration of the facts presented on behalf of both the Company
and the Eligible Person, that the Eligible Person has been engaged in fraud,
embezzlement, theft, insider trading in the Company's stock, commission of a
felony or proven dishonesty in the course of his association with the Company or
any subsidiary corporation which damaged the Company or any subsidiary
corporation, or for disclosing trade secrets of the Company or any subsidiary
corporation, the Eligible Person shall forfeit all unexercised Stock Options and
all exercised NQSO's under which the Company has not yet delivered the
certificates and which have been earlier granted to the Eligible Person by the
Committee.  The decision of the Committee as to the cause of an
Eligible Person's discharge and the damage done to the Company shall be
final.  No decision of the Committee, however, shall affect the
finality of the discharge of such Eligible Person by the Company or any
subsidiary corporation in any manner.

    


    12.           Written Agreement

    


    12.1           Each
Stock Option granted hereunder shall be embodied in a written Stock Option
Agreement which shall be subject to the terms and conditions prescribed above
and shall be signed by the Eligible Person and by the Chairman of the Company,
for and in the name and on behalf of the Company.  Such Stock Option
Agreement shall contain such other provisions as the Committee, in its
discretion shall deem advisable.

    



    
      
         


      

      
        - 7
-

        
          

        

      

      
         


      

    

     

    
      	
              Number
      of Shares: ______________________________

            	 
      	
              Date
      of Grant:  

            


    

     

    FORM OF NON-QUALIFIED STOCK OPTION
AGREEMENT

    


    AGREEMENT made this ____ day
of ___________ 2008, between ___________________ (the “Eligible
Person”), and China Forestry Inc. (the “Company”).

    


    1.           Grant of Option

    


    The Company, pursuant to the provisions
of the 2008 Non-Qualified Stock Compensation Plan (the “Plan”), adopted by the
Board of Directors on June __, 2008, the Company hereby grants to the Eligible
Person, subject to the terms and conditions set forth or incorporated herein, an
option to purchase from the Company all or any part of an aggregate
of  shares of its $.001 par value common stock, as such common stock
is now constituted, at the purchase price of $____ per share. The
provisions of the Plan governing the terms and conditions of the Option granted
hereby are incorporated in full herein by reference.

    


    2.           Exercise

    


    The Option evidenced hereby shall be
exercisable in whole or in part on or after _________ and on or before ______,
provided that the cumulative number of shares of common stock as to which this
Option may be exercised (except in the event of death, retirement, or permanent
and total disability, as provided in paragraph 6.9 of the Plan) shall not exceed
the following amounts:

    


    
      	
              Cumulative Number

              of Shares

            	 
      	
              Prior to Date

              (Not Inclusive
  of)

            


    

    
 

    


    The
Option evidenced hereby shall be exercisable by the delivery to and receipt by
the Company of (i)  written notice of election to exercise, in the
form set forth in Attachment B hereto, specifying the number of shares to be
purchased;  (ii)  accompanied by payment of the full
purchase price thereof in cash or certified check payable to the order of the
Company, or by fully paid and nonassessable common stock of the Company properly
endorsed over to the Company, or by a combination thereof,
and  (iii)  by return of this Stock Option Agreement for
endorsement of exercise by the Company on Schedule I hereof.  In the
event fully paid and nonassessable common stock is submitted as whole or partial
payment for shares to be purchased hereunder, such common stock will be valued
at their Fair Market Value (as defined in the Plan) on the date such shares
received by the Company are applied to payment of the exercise
price.

    


    3.           Transferability

    


    The Option evidenced hereby is not
assignable or transferable by the Eligible Person other than by the Eligible
Person's will or by the laws of descent and distribution, as provided in
paragraph 6.9 of the Plan.  The Option shall be exercisable only by
the Eligible Person during his lifetime.


     

                China
Forestry Inc.

    


    


                                                                                       By:
_________________________

       Name: 

    ATTEST:                                                                 
Title: 

     

    ___________________________________

    Secretary

    


    Eligible Person hereby acknowledges
receipt of a copy of the Plan, attached hereto and accepts this Option subject
to each and every term and provision of such Plan.  Eligible Person
hereby agrees to accept as binding, conclusive and final, all decisions or
interpretations of the Board of Directors administering the Plan on any
questions arising under such Plan.  Eligible Person recognizes that if
Eligible Person's employment with the Company or any subsidiary thereof shall be
terminated without cause, or by the Eligible Person, prior to completion or
satisfactory performance by Eligible Person (except as otherwise provided in
paragraph 6 of the Plan) all of the Eligible Person's rights hereunder shall
thereupon terminate; and that, pursuant to paragraph 6 of the Plan, this Option
may not be exercised while there is outstanding to Eligible Person any
unexercised Stock Option granted to Eligible Person before the date of grant of
this Option.

    


    
      	
              Dated:
      __________

            	 
      	 
      
	 
      	 
      	
              Eligible
      Person

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              Print
      Name

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
	 
      	 
      	
              Address

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              Social
      Security No.

            


    

    

      
        
           


        

        
          - 8
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    ATTACHMENT
B

    


    NOTICE OF
EXERCISE

    


    


    


    To:           China
Forestry Inc.

    


    


    (1) The
undersigned hereby elects to purchase ________ shares of Common Shares (the
“Common Shares”), of China Forestry pursuant to the terms of the attached
Non-Qualified Stock Option Agreement, and tenders herewith payment of the
exercise price in full, together with all applicable transfer taxes, if
any.

     

    (2) Please
issue a certificate or certificates representing said shares of Common Shares in
the name of the undersigned or in such other name as is specified
below:

     

    Dated:

    


    _______________________________

    


    


    


    _______________________________

    (Name)

    


    _______________________________

    (Address)

    


    _______________________________

    Social
Security No.

    


    


    _______________________________

    Signature

    


    


    


    Eligible
Person: ___________________                                     

    
 

    Grant
Date: ______________________

    



    
      
         


      

      
        - 9
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    SCHEDULE
I

     

    


    
      	
              DATE

            	 
      	
              SHARES

              PURCHASED

            	 
      	
              PAYMENT
      RECEIVED

            	 
      	
              UNEXERCISED

              SHARES

              REMAINING

            	 
      	
              ISSUING OFFICER INITIALS

            
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      


    

    


    



    
      
         


      

      
        - 10
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