NATURAL GAS SYSTEMS, INC.
                                 2004 STOCK PLAN

                             STOCK OPTION AGREEMENT


Name of Optionee:                   Sterling H. McDonald

Optioned Shares:                    350,000 shares of common stock, $0.001 par
                                    value, of Natural Gas Systems, Inc.

Type of Option:                     INCENTIVE STOCK OPTION

Exercise Price Per Share:           $1.80

Option Grant Date:                  April 4, 2005

Vesting Commencement Date           April 4, 2005

Date Option Becomes Exercisable:    This Option may be exercised with respect to
                                    an 1/16TH of the total Optioned Shares
                                    subject to this option when the Optionee
                                    completes each three months of continuous
                                    employment starting from the Vesting
                                    Commencement Date. This option may become
                                    exercisable on an accelerated basis under
                                    Section 8 of this Stock Option Agreement.

Expiration Date of Option:          April 4, 2015 This Option expires earlier if
                                    the Optionee's employment terminates
                                    earlier, as provided in Section 11 of the
                                    Plan.

<PAGE>

         This Stock Option Agreement (this "Agreement") is executed and
delivered as of April 4, 2005 by and between Natural Gas Systems, Inc., a Nevada
corporation (the "Company") and the Sterling H. McDonald. The Optionee and the
Company hereby agree as follows:

1.       The Company, pursuant to the Natural Gas Systems, Inc. 2004 Stock Plan
         (the "Plan"), which is incorporated herein by reference, and subject to
         the terms and conditions thereof, hereby grants to the Optionee an
         option to purchase the Optioned Shares at the Exercise Price Per Share.

2.       The option granted hereby ("Option") shall be treated as an incentive
         stock option under the Internal Revenue Code.

3.       The Option granted hereby shall terminate, subject to the provisions of
         the Plan, no later than at the close of business on the Expiration
         Date.

4.       The Optionee shall comply with and be bound by all the terms and
         conditions contained in the Plan, as incorporated by reference herein.

5.       Options granted hereby shall not be transferable except by will or the
         laws of descent and distribution. During the lifetime of the Optionee,
         the Option may be exercised only by the Optionee, the guardian or legal
         representative of the Optionee.

6.       The obligation of the Company to sell and deliver any stock under this
         Option is specifically subject to all provisions of the Plan and all
         applicable laws, rules, regulations and governmental and stockholder
         approvals.

7.       Any notice by the Optionee to the Company hereunder shall be in writing
         and shall be deemed duly given only upon receipt thereof by the Company
         at its principal offices. Any notice by the Company to the Optionee
         shall be in writing and shall be deemed duly given if mailed to the
         Optionee at the address last specified to the Company by the Optionee.

8.       In addition to the change of control provisions specified under Section
         14(e) of the Plan and the other conditions set forth in this Agreement,
         the Company hereby agrees that all or part of this Option may be
         exercised prior to its expiration at the time or times set forth below:

                  (a) If the Company is subject to a Change in Control (as
         defined in below in this Agreement and not as defined in the Plan)
         before the Optionee's employment terminates, this Option shall become
         exercisable in full if and only if (i) this Option does not remain
         outstanding following the Change in Control; (ii) this Option is not
         assumed by the surviving corporation or its parent; (iii) the surviving
         corporation or its parent does not substitute an option with
         substantially the same terms for this Option; OR (iv) the full value of
         the vested shares under this Option is not settled in cash or cash
         equivalents.

                  (b) If the Option is not exercisable in full under Paragraph
         (a) above, AND if the Optionee is subject to an Involuntary Termination
         (defined below) within 12 months after the Change in Control, then this
         Option shall become exercisable in full. However, in the case of an

                                      -1-
<PAGE>

         employee incentive stock option described in Section 422(b) of the
         Code, the acceleration of exercisability shall not occur without the
         Optionee's written consent.

                  (c) If the Option is not exercisable in full under Paragraph
         (a) above, AND if the Company is subject to a Change of Control, then
         fifty percent (50%) of the remaining options shall become exercisable
         in full, and the remaining options shall become exercisable at the rate
         set forth herein, reduced by the accelerated Optioned Shares. All other
         terms and conditions shall remain unchanged.

                  (d) Definitions:

                           (i) "Change in Control" shall mean: (1)The
                  consummation of a merger or consolidation of the Company with
                  or into another entity or any other corporate reorganization,
                  if persons who were not controlling stockholders of the
                  Company immediately prior to such merger, consolidation or
                  other reorganization own immediately after such merger,
                  consolidation or other reorganization 50% or more of the
                  voting power of the outstanding securities of each of (A) the
                  continuing or surviving entity and (B) any direct or indirect
                  parent corporation of such continuing or surviving entity; OR
                  (2) The sale, transfer or other disposition of all or
                  substantially all of the Company's assets.

                  A transaction shall not constitute a Change in Control if its
                  sole purpose is to change the state of the Company's
                  incorporation or to create a holding company that will be
                  owned in substantially the same proportions by the persons who
                  held the Company's securities immediately before such
                  transaction.

                           (ii) "Involuntary Termination" shall mean the
         termination of the Optionee's employment by reason of: (1) The
         involuntary discharge of the Optionee by the Company for reasons other
         than Cause (as defined in Optionee's employment agreement with the
         Company, of even date herewith); or (2) The voluntary resignation of
         the Optionee following a reduction in the Optionee's base salary, a
         substantial reduction of the responsibilities, authority or scope of
         work of Executive, or receipt of notice that the Optionee's principal
         workplace will be relocated more than 20 miles.

9. The validity and construction of this Agreement shall be governed by the laws
of the State of Nevada.

THIS AGREEMENT IS MADE UNDER AND SUBJECT TO THE PROVISIONS OF THE PLAN, AND ALL
OF THE PROVISIONS OF THE PLAN ARE ALSO PROVISIONS OF THIS AGREEMENT. IF THERE IS
A DIFFERENCE OR CONFLICT BETWEEN THE PROVISIONS OF THIS AGREEMENT AND THE
PROVISIONS OF THE PLAN, THE PROVISIONS OF THE PLAN WILL GOVERN; PROVIDED,
HOWEVER, THE THE ACCELERATION OF THE OPTIONED SHARES DESCRIBED IN SECTION 8
ABOVE SHALL GOVERN IN THE EVENT OF ANY CONFLICT WITH THE PLAN. BY SIGNING THIS
AGREEMENT, THE OPTIONEE ACCEPTS AND AGREES TO ALL OF THE FOREGOING TERMS AND
PROVISIONS AND TO ALL OF THE TERMS AND PROVISIONS OF THE PLAN INCORPORATED
HEREIN BY REFERENCE AND CONFIRMS THAT HE OR SHE HAS RECEIVED A COPY OF THE PLAN.


                                      -2-

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized representative and the Optionee has hereunto set
his hand as of the date here above first written.

                                             NATURAL GAS SYSTEMS, INC.:


                                             By:
                                                 -----------------------------
                                                  Name:   Robert S. Herlin
                                                  Title:  President


                                             ---------------------------------
                                             Optionee:    Sterling H. McDonald


                                      -3-