**Exhibit 10.7**

 

**BLACK RAVEN ENERGY, INC. EQUITY COMPENSATION PLAN**

 

TheBoard of Directors (the “Board”) of Black Raven Energy, Inc.  desires to adopt the Black Raven Energy, Inc.Compensation Plan (the “Plan”),  as setforth herein, effective as of the Effective Date.

 

Thepurpose of the Plan is to provide (i) designated employees of the Companyand its subsidiaries and eligible affiliates (a “related entity”), (ii) certainconsultants and advisors who perform services for the Company or its relatedentities, and (iii) non-employee members of the Board with the opportunityto receive grants of nonqualified stock options, stock appreciation rights,stock awards or other equity-based awards. The Company believes that the Planwill encourage the participants to contribute materially to the growth of theCompany, thereby benefiting the Company’s stockholders, and will align theeconomic interests of the participants with those of the stockholders.

 

**1.Administration**

 

(a) *   Committee.*    ThePlan shall be administered and interpreted by a committee consisting of membersof the Board, which shall be appointed by the Board (the “Committee”) or by thefull Board. The Committee shall consist of two or more persons who are “non-employeedirectors” as defined under Rule 16b-3 under the Securities Exchange Actof 1934, as amended (the “Exchange Act”). However, the Board may ratify orapprove any grants as it deems appropriate, and the Board shall approve andadminister all grants made to Non-Employee Directors. To the extent consistentwith Company corporate governance documents and applicable law, the Committeemay delegate authority to one or more subcommittees or officers, as it deemsappropriate. To the extent the Board or a subcommittee administers the Plan,references in the Plan to the “Committee” shall be deemed to refer to the Boardor subcommittee.

 

(b) *   Committee Authority.*    Exceptas provided in section 1(a) and section 3(a), the Committeeshall have the sole authority to (i) determine the individuals to whomgrants shall be made under the Plan, (ii) determine the type, size andterms of the grants to be made to each such individual, (iii) determinethe time when the grants will be made and the duration of any applicableexercise or restriction period, including the criteria for exercisability andthe acceleration of exercisability, (iv) amend the terms of any previouslyissued grant, and (v) deal with any other matters arising under the Plan.Notwithstanding anything herein to the contrary, the Board shall approve andadminister all grants made to Non-Employee Directors.

 

(c) *   Committee Determinations.*    TheCommittee shall have full power and authority to administer and interpret thePlan, to make factual determinations and to adopt or amend such rules, regulations,agreements and instruments for implementing the Plan and for the conduct of itsbusiness as it deems necessary or advisable, in its sole discretion. TheCommittee’s interpretations of the Plan and all determinations made by theCommittee pursuant to the powers vested in it hereunder shall be conclusive andbinding on all persons having any interest in the Plan or in any awards grantedhereunder. All powers of the Committee shall be executed in its solediscretion, in the best interest of the Company, not as a fiduciary, and inkeeping with the objectives of the Plan and need not be uniform as to similarlysituated individuals.

 

**2.Grants**

 

Awardsunder the Plan may consist of grants of nonqualified stock options as describedin Section 5 (“Nonqualified Stock Options” or “Options”), stockappreciation rights as described in Section 6 (“Stock Appreciation Rights”or “SARs”), stock awards as described in Section 7 (“Stock Awards) andother equity-based awards as described in Section 8 (“Other Equity Awards”),(hereinafter collectively referred to as “Grants”). All Grants shall be subjectto the terms and conditions set forth herein and to such other terms andconditions consistent with this Plan as the Committee deems appropriate and asare specified in writing by the Committee to the individual in a grantinstrument or an amendment to the grant instrument (the “Grant Instrument”).The Committee shall approve the form and provisions of each Grant Instrument.Grants under a particular Section of the Plan need not be uniform as amongthe grantees.

 

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**3.Shares Subject to the Plan**

 

(a) *   Shares Authorized.*    Subjectto adjustment as described below, the aggregate number of shares of commonstock of the Company (“Company Stock”) that may be issued or transferred underthe Plan is 3,791,666 shares (the “Share Amount”). On each anniversary of theEffective date during the term of the Plan, the Share Amount shall be increasedwithout further action by the Board or the Committee, and without furtherapproval by the Company’s stockholders, in such amount as shall cause the ShareAmount to equal 25% of the sum of (i) the Company’s issued and outstandingcommon shares as of such anniversary date, and (ii) any Company commonshares issuable pursuant to the conversion of any then outstanding convertiblepreferred stock.   If, and to the extentOptions or SARs granted under the Plan terminate, expire, or are canceled,forfeited, exchanged or surrendered without having been exercised or if anyother Grants are forfeited, the shares subject to such Grants shall again beavailable for purposes of the Plan. If shares of Company Stock are used to paythe exercise price of an Option, only the net number of shares received by thegrantee pursuant to such exercise shall be considered to have been issued ortransferred under the Plan with respect to such Option, and the remainingnumber of shares subject to the Option shall again be available for purposes ofthe Plan. To the extent any Grants are paid in cash, those Grants shall notreduce the shares of Company stock available for issuance or transfer under thePlan.

 

(b) *   Adjustments.*    Ifthere is any change in the number or kind of shares of Company Stockoutstanding (i) by reason of a stock dividend, spinoff, recapitalization,stock split, or combination or exchange of shares, (ii) by reason of amerger, reorganization or consolidation in which the Company is the survivingcorporation, (iii) by reason of a reclassification or change in par value,or (iv) by reason of any other extraordinary or unusual event affectingthe outstanding Company Stock as a class without the Company’s receipt ofconsideration, or if the value of outstanding shares of Company Stock issubstantially reduced as a result of a spinoff or the Company’s payment of anextraordinary dividend or distribution, the maximum number of shares of CompanyStock available for Grants, the maximum number of shares of Company Stock thatany individual participating in the Plan may be granted in any year, the numberof shares covered by outstanding Grants, the kind of shares issued under thePlan, and the price per share of such Grants shall be appropriately adjusted bythe Committee to reflect any increase or decrease in the number of, or changein the kind or value of, issued shares of Company Stock to preclude, to theextent practicable, the enlargement or dilution of rights and benefits undersuch Grants; provided, however, that any fractional shares resulting from suchadjustment shall be eliminated. Any adjustments determined by the Committeeshall be final, binding and conclusive.

 

**4.Eligibility for Participation**

 

(a) *   Eligible Persons.*    Allemployees of the Company and its subsidiaries (“Employees”), includingEmployees who are officers, members of the Board who are not Employees (“Non-EmployeeDirectors”) and consultants or advisors who perform services for the Company orany of its related entities (“Key Advisors”) shall be eligible to participatein the Plan**.** Key Advisors shall be eligibleto participate in the Plan if the Key Advisors render bona fide services to theCompany or its subsidiaries, the services are not in connection with the offerand sale of securities in a capital-raising transaction, and the Key Advisorsdo not directly or indirectly promote or maintain a market for the Company’ssecurities.

 

(b) *   Selection of Grantees.*    Exceptas provided in Section 1(a), the Committee shall select the Employees,Non-Employee Directors and Key Advisors to receive Grants and shall determinethe number of shares of Company Stock subject to a particular Grant in suchmanner as the Committee determines. Employees, Key Advisors and Non-EmployeeDirectors who receive Grants under this Plan shall hereinafter be referred toas “Grantees”.

 

**5.Granting of Options**

 

(a) *   Number of Shares.*    TheCommittee shall determine the number of shares of Company Stock that will besubject to each Grant of Options to Employees, Non-Employee Directors and KeyAdvisors.

 

(b) *   Type of Option and Price.*

 

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(i)                                     The Committee may grant NonqualifiedStock Options in accordance with the terms and conditions set forth herein.Nonqualified Stock Options may be granted to Employees, Non-Employee Directorsand Key Advisors.

 

(ii)                                  The purchase price (the “Exercise Price”)of Company Stock subject to an Option shall be determined by the Committee andshall be equal to or greater than the Fair Market Value (as defined below) of ashare of Company Stock on the date the Option is granted, except in the case ofsubstitute Option Grants made in accordance with Section 22(a).

 

(iii)                               “Fair Market Value” means the fair marketvalue of a share of Company Stock determined as follows: (x) if the Sharesare readily tradable on an established securities market (as determined under Section 409Aof the Internal Revenue Code of 1986, as amended (the “Code”)), then FairMarket Value will be the closing or last sales price for a share of CompanyStock on the principal securities market on which it trades on the date forwhich it is being determined, or if no sale of such shares occurred on thatdate, on the next preceding date on which a sale of such shares occurred, asreported in*The Wall Street Journal*or such othersource as the Committee deems reliable; or (y) if the shares of CompanyStock are not then readily tradable on an established securities market (asdetermined under Code Section 409A), then Fair Market Value will bedetermined by the Committee as the result of a reasonable application of areasonable valuation method that satisfies the requirements of Code Section 409A.

 

(c) *   Option Term.*    TheCommittee shall determine the term of each Option. The term of any Option shallnot exceed ten years from the date of grant.

 

(d) *   Exercisability of Options.*    Optionsshall become exercisable in accordance with such terms and conditions,consistent with the Plan, as may be determined by the Committee and specifiedin the Grant Instrument. The Committee may accelerate the exercisability of anyor all outstanding Options at any time for any reason.

 

(e) *   Termination of Employment,Disability or Death.*

 

(i)                                     Except as provided below, an Option mayonly be exercised while the Grantee is employed by, or providing service to,the Company as an Employee, Key Advisor or Non-Employee Director. In the eventthat a Grantee ceases to be employed by, or provide service to, the Company forany reason other than Disability, death, or termination for Cause, any Optionwhich is otherwise exercisable by the Grantee shall terminate unless exercisedwithin 90 days after the date on which the Grantee ceases to be employedby, or provide service to, the Company (or within such other period of time asmay be specified by the Committee), but in any event no later than the date ofexpiration of the Option term. Except as otherwise provided by the Committee,any of the Grantee’s Options that are not otherwise exercisable as of the dateon which the Grantee ceases to be employed by, or provide service to, theCompany shall terminate as of such date.

 

(ii)                                  In the event the Grantee ceases to beemployed by, or provide service to, the Company on account of a termination forCause by the Company, any Option held by the Grantee shall terminate as of thedate the Grantee ceases to be employed by, or provide service to, the Company.In addition, notwithstanding any other provisions of this Section 5, ifthe Committee determines that the Grantee has engaged in conduct thatconstitutes Cause at any time while the Grantee is employed by, or providingservice to, the Company or after the Grantee’s termination of employment orservice, any Option held by the Grantee shall immediately terminate, and theGrantee shall automatically forfeit all shares underlying any exercised portionof an Option for which the Company has not yet delivered the sharecertificates, upon refund by the Company of the Exercise Price paid by theGrantee for such shares. Upon any exercise of an Option, the Company maywithhold delivery of share certificates pending resolution of an inquiry thatcould lead to a finding resulting in forfeiture.

 

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(iii)                               In the event the Grantee ceases to beemployed by, or provide service to, the Company because the Grantee has aDisability, any Option which is otherwise exercisable by the Grantee shallterminate unless exercised within one year after the date on which the Granteeceases to be employed by, or provide service to, the Company (or within suchother period of time as may be specified by the Committee), but in any event nolater than the date of expiration of the Option term. Except as otherwiseprovided by the Committee, any of the Grantee’s Options which are not otherwiseexercisable as of the date on which the Grantee ceases to be employed by, orprovide service to, the Company shall terminate as of such date.

 

(iv)                              If the Grantee dies while employed by, orproviding service to, the Company or within 90 days after the date onwhich the Grantee ceases to be employed or provide service on account of atermination specified in Section 5(e)(i) above (or within such otherperiod of time as may be specified by the Committee), any Option that isotherwise exercisable by the Grantee shall terminate unless exercised withinone year after the date on which the Grantee ceases to be employed by, orprovide service to, the Company (or within such other period of time as may bespecified by the Committee), but in any event no later than the date ofexpiration of the Option term. Except as otherwise provided by the Committee,any of the Grantee’s Options that are not otherwise exercisable as of the dateon which the Grantee ceases to be employed by, or provide service to, theCompany shall terminate as of such date.

 

(v)                                 For purposes of this Section 5(e) andSections 6, 7 and 8: 

 

(A)                              The term “Company” shall mean the Companyand its parent and related entities to the extent consistent with applicablelaws.

 

(B)                                “Employed by, or provide service to, theCompany” shall mean employment or service as an Employee, Key Advisor orNon-Employee Director (so that, for purposes of exercising Options and satisfyingconditions with respect to Stock Awards, a Grantee shall not be considered tohave terminated employment or service until the Grantee ceases to be anEmployee, Key Advisor and Non-Employee Director), unless the Committeedetermines otherwise.

 

(C)                                “Disability” shall mean a Grantee’sbecoming disabled within the meaning of section 22(e)(3) of the Code.

 

(D)                               “Cause” shall mean, except to the extentspecified otherwise by the Board and/or Committee, a finding by the Boardand/or Committee that the Grantee (i) has breached his or her employmentor service contract with the Company, (ii) has engaged in disloyalty tothe Company, including, without limitation, fraud, embezzlement, theft,commission of a felony or proven dishonesty in the course of his or heremployment or service, (iii) has disclosed trade secrets or confidentialinformation of the Company to persons not entitled to receive such informationor (iv) has engaged in such other behavior detrimental to the interests ofthe Company as the Board and/or Committee determines.

 

(f) *   Exercise of Options.*    AGrantee may exercise an Option that has become exercisable, in whole or inpart, by delivering a notice of exercise to the Company with payment of theExercise Price. The Grantee shall pay the Exercise Price for an Option asspecified by the Committee (x) in cash, (y) with the approval of theCommittee, by delivering shares of Company Stock owned by the Grantee(including Company Stock acquired in connection with the exercise of an Option,subject to such restrictions as the Committee deems appropriate) and having aFair Market Value on the date of exercise equal to the Exercise Price or byattestation (on a form prescribed by the Committee) to ownership of shares of

 

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Company Stock having aFair Market Value on the date of exercise equal to the Exercise Price, or (z) bysuch other method as the Committee may approve, including a broker-assistedcashless exercise program in accordance with procedures permitted byRegulation T of the Federal Reserve Board. The Committee may authorizeloans by the Company to Grantees in connection with the exercise of an Option,to the extent permitted by applicable law and upon such terms and conditions asthe Committee, in its sole discretion, deems appropriate. The Grantee shall paythe Exercise Price and the amount of any withholding tax due (pursuant to Section 13)at the time of exercise.

 

**6. StockAppreciation Rights**

 

TheCommittee may grant stock appreciation rights (“SARs”) to an Employee,Non-Employee Director or Key Advisor separately or in tandem with any Option.The following provisions are applicable to SARs:

 

(a) *   Base Amount.*    TheCommittee shall establish the base amount of the SAR at the time the SAR isgranted. The base amount of each SAR shall be equal to or greater than the FairMarket Value of a share of Company Stock as of the date of Grant of the SAR,except in the case of substitute SAR Grants made in accordance with Section 22(a) andexcept as provided in Section 6(b).

 

(b) *   Tandem SARs.*    TheCommittee may grant tandem SARs either at the time the related Option isgranted or at any time thereafter while the Option remains outstanding;provided, however, that, if a tandem SAR is granted after the related Optionwas granted, the base amount per share of the SAR may be equal to the exerciseprice per share of the related Option only if the terms of the SAR areidentical in all respects to the terms of the related Option except for themedium of payment. In the case of tandem SARs, the number of SARs granted to aGrantee that shall be exercisable during a specified period shall not exceedthe number of shares of Company Stock that the Grantee may purchase upon theexercise of the related Option during such period. Upon the exercise of an Option,the SARs relating to the Company Stock covered by such Option shall terminate.Upon the exercise of SARs, the related Option shall terminate to the extent ofan equal number of shares of Company Stock.

 

(c) *   Exercisability.*    AnSAR shall be exercisable during the period specified by the Committee in theGrant Instrument and shall be subject to such vesting and other restrictions asmay be specified in the Grant Instrument or in the Grantee’s employmentagreement, if any, with the Employer. The Committee may accelerate theexercisability of any or all outstanding SARs at any time for any reason. SARsmay only be exercised while the Grantee is employed by, or providing serviceto, the Employer or during the applicable period after termination of employmentor service as described in Section 5(e). A tandem SAR shall be exercisableonly during the period when the Option to which it is related is alsoexercisable.

 

(d) *   Grants to Non-Exempt Employees.*    Notwithstandingthe foregoing provisions of Sections 5 and 6, Options and SARs granted topersons who are non-exempt employees under the Fair Labor Standards Act of1938, as amended, may not be exercisable for at least six months after the dateof grant (except that such Options and SARs may become exercisable, asdetermined by the Committee, upon the Grantee’s death, Disability orretirement, or upon a Change of Control or other circumstances permitted byapplicable regulations).

 

(e) *   Value of SARs.*    Whena Grantee exercises SARs, the Grantee shall receive in settlement of such SARsan amount equal to the value of the stock appreciation for the number of SARsexercised, payable in cash, Company Stock or a combination thereof. The stockappreciation for an SAR is the amount by which the Fair Market Value of theunderlying Company Stock on the date of exercise of the SAR exceeds the baseamount of the SAR as described in subsection (a).

 

(f) *   Form of Payment.*    TheCommittee shall determine whether the appreciation in an SAR shall be paid inthe form of cash, shares of Company Stock, or a combination of the two, in suchproportion as the Committee deems appropriate. For purposes of calculating thenumber of shares of Company Stock to be received, shares of Company Stock shallbe valued at their Fair Market Value on the date of exercise of the SAR. Ifshares of Company Stock are to be received upon exercise of an SAR, cash shallbe delivered in lieu of any fractional share.

 

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**7. StockAwards**

 

TheCommittee may issue or transfer shares of Company Stock to an Employee,Non-Employee Director or Key Advisor under a Stock Award, upon such terms asthe Committee deems appropriate. The following provisions are applicable toStock Awards:

 

(a) *   General Requirements.*    Sharesof Company Stock issued or transferred pursuant to Stock Awards may be issuedor transferred for cash, other property and/or for consideration in the form ofservices, and subject to restrictions or no restrictions, as determined by theCommittee. The Committee may establish conditions under which restrictions onStock Awards shall lapse over a period of time or according to such othercriteria as the Committee deems appropriate. The period of time during whichthe Stock Award will remain subject to restrictions will be designated in the GrantInstrument as the “Restriction Period.”

 

(b) *   Number of Shares.*    TheCommittee shall determine the number of shares of Company Stock to be issued ortransferred pursuant to a Stock Award and the restrictions applicable to suchshares.

 

(c) *   Requirement of Employment orService.*    If the Grantee ceases to be employedby, or provide service to, the Company (as defined in Section 5(e)) duringa period designated in the Grant Instrument as the Restriction Period, or ifother specified conditions are not met, the Stock Award shall terminate as toall shares covered by the award as to which the restrictions have not lapsed,and those shares of Company Stock must be immediately returned to the Company.The Committee may, however, provide for complete or partial exceptions to thisrequirement as it deems appropriate.

 

(d) *   Restrictions on Transfer and Legendon Stock Certificate.*    During the RestrictionPeriod, a Grantee may not sell, assign, transfer, pledge or otherwise disposeof the shares of the Stock Award except to a Successor Grantee under Section 12(a).Each certificate for Stock Awards shall contain a legend giving appropriatenotice of the restrictions in the Grant. The Grantee shall be entitled to havethe legend removed from the stock certificate covering the shares subject torestrictions when all restrictions on such shares have lapsed. The Committeemay determine that the Company will not issue certificates for Stock Awardsuntil all restrictions on such shares have lapsed, or that the Company willretain possession of certificates for Stock Awards until all restrictions onsuch shares have lapsed.

 

(e) *   Right to Vote and to ReceiveDividends.*    During the Restriction Period, theGrantee shall have the right to vote shares subject to Stock Awards and toreceive any dividends or other distributions paid on such shares, subject toany restrictions deemed appropriate by the Committee.

 

(f) *   Lapse of Restrictions.*    Allrestrictions imposed on Stock Awards shall lapse upon the expiration of theapplicable Restriction Period and the satisfaction of all conditions imposed bythe Committee. The Committee may determine, as to any or all Stock Awards, thatthe restrictions shall lapse without regard to any Restriction Period.

 

**8. OtherEquity Awards**

 

TheCommittee may grant Other Equity Awards, which are awards (other than thosedescribed in Sections 5, 6, 7, 8 and 10 of the Plan) that are based on,measured by or payable in Company Stock to any Employee, Non-Employee Directoror Key Advisor, on such terms and conditions as the Committee shall determine.Other Equity Awards may be awarded subject to the achievement of performancegoals or other conditions and may be payable in cash, Company Stock or anycombination of the foregoing, as the Committee shall determine.

 

**9.Dividend Equivalents**

 

TheCommittee may include in a Grant Instrument with respect to any Grant adividend equivalent right (“Dividend Equivalents”) entitling the Grantee toreceive amounts equal to the ordinary dividends that would be paid, during thetime the Grant is outstanding and unexercised, on the shares of Company Stockcovered by the Grant as if such shares were then outstanding. The Committeeshall determine whether

 

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Dividend Equivalentsshall be paid currently or credited to a bookkeeping account as a dollaramount. The Committee shall determine whether Dividend Equivalents shall bepaid in cash, in shares of Company Stock or in a combination, whether theyshall be conditioned upon the exercise, vesting or payment of the Grant towhich they relate, and such other terms and conditions as the Committee deemsappropriate.  To the extent any Option orSAR Grant is intended to avoid the application of Code Section 409A, theright to any Dividend Equivalent in connection therewith shall not becontingent, directly or indirectly, upon the exercise of the related Option orSAR.

 

**10.Right of Recapture**

 

TheCommittee may provide in a Grant Instrument that if at any time within the oneyear period after the date on which a Grantee exercises an Option or SAR, or onwhich a Stock Award, Stock Unit or Other Equity Award vests, is paid or isdisposed of (each of which events is referred to as a “Realization Event”), theGrantee (a) is terminated for Cause or (b) engages in any activity thatconstitutes Cause, the Grantee shall be required to pay to the Company any gainrealized by the Grantee from the Realization Event, upon notice from theCompany. Such gain shall be determined as of the date of the Realization Event,without regard to any subsequent change in the Fair Market Value of CompanyStock. The Company shall have the right to offset such gain against any amountsotherwise owed to the Grantee by the Company (whether as wages, vacation pay,or pursuant to any benefit plan or other compensatory arrangement orotherwise), to the extent permitted by applicable law.

 

**11.Withholding of Taxes**

 

(a) *   Required Withholding.*    AllGrants under the Plan shall be subject to applicable federal (including FICA),state and local tax withholding requirements. The Company may require that theGrantee or other person receiving or exercising Grants pay to the Company theamount of any federal, state or local taxes that the Company is required towithhold with respect to such Grants, or the Company may deduct from otherwages paid by the Company the amount of any withholding taxes due with respectto such Grants.

 

(b) *   Election to Withhold Shares.*    Ifthe Committee so permits, a Grantee may elect to satisfy the Company’s incometax withholding obligation with respect to a Grant by having shares withheld upto an amount that does not exceed the Grantee’s minimum applicable withholdingtax rate for federal (including FICA), state and local tax liabilities. Theelection must be in a form and manner prescribed by the Committee and may besubject to the prior approval of the Committee.

 

**12.Transferability of Grants**

 

(a) *   Nontransferability of Grants.*    Exceptas provided below, only the Grantee may exercise rights under a Grant duringthe Grantee’s lifetime. A Grantee may not transfer those rights except by willor by the laws of descent and distribution or if permitted in any specific caseby the Committee, pursuant to a domestic relations order (as defined under theCode or Title I of the Employee Retirement Income Security Act of 1974, asamended, or the regulations thereunder). When a Grantee dies, the personalrepresentative or other person entitled to succeed to the rights of the Grantee(“Successor Grantee”) may exercise such rights. A Successor Grantee mustfurnish proof satisfactory to the Company of his or her right to receive theGrant under the Grantee’s will or under the applicable laws of descent anddistribution.

 

(b) *   Transfer of Options.*    Notwithstandingthe foregoing, the Committee may provide, in a Grant Instrument, that a Granteemay transfer Options to family members, or one or more trusts or other entitiesfor the benefit of or owned by family members, consistent with applicablesecurities laws, according to such terms as the Committee may determine;provided that the Grantee receives no consideration for the transfer of anOption and the transferred Option shall continue to be subject to the sameterms and conditions as were applicable to the Option immediately before thetransfer.

 

**13.Change of Control of the Company**

 

Asused herein, a “Change of Control” shall be deemed to have occurred if:

 

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(a)                                  Any “person” (as such term is used inSections 13(d) and 14(d) of the Exchange Act) (other than persons whoare stockholders on the effective date of the Plan) becomes a “beneficial owner”(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,of securities of the Company representing more than 50% of the voting power ofthe then outstanding securities of the Company; provided that a Change ofControl shall not be deemed to occur as a result of a change of ownershipresulting from the death of a stockholder or the reduction below 50% of thevoting power of the then outstanding securities of the Company held by WestCoast Opportunity Fund, LLC and its affiliates, provided that their reductionin equity ownership is associated with capital raises, and a Change of Controlshall not be deemed to occur as a result of a transaction in which the Companybecomes a subsidiary of another corporation and in which the stockholders ofthe Company immediately prior to the transaction will beneficially own,immediately after the transaction, shares entitling such stockholders to morethan 50% of all votes to which all stockholders of the parent corporation wouldbe entitled in the election of directors (without consideration of the rightsof any class of stock to elect directors by a separate class vote); or

 

(b)                                 The stockholders of the Company approve(or, if stockholder approval is not required, the Board approves)  an agreement providing for (i) themerger or consolidation of the Company with another corporation where thestockholders of the Company immediately prior to the merger or consolidationwill not beneficially own, immediately after the merger or consolidation,shares entitling such stockholders to more than 50% of all votes to which allstockholders of the surviving corporation would be entitled in the election ofdirectors (without consideration of the rights of any class of stock to electdirectors by a separate class vote), (ii) the sale or other disposition ofall or substantially all of the assets of the Company, or (iii) aliquidation or dissolution of the Company.

 

Notwithstanding theforegoing, for purposes of Grants hereunder that are subject to the provisionsof Code Section 409A and the regulations promulgated thereunder, no Changeof Control shall be deemed to have occurred upon an event described inSubsections (a) or (b) above that would have the effect of changingthe time or form of payment of such Grant unless such event would alsoconstitute a change in the ownership or effective control of, or a change inthe ownership of a substantial portion of the assets of, the Company forpurposes of Code Section 409A.

 

**14.Consequences of a Change of Control**

 

(a) *   Notice and Acceleration.*    Upona Change of Control, unless the Committee determines otherwise, (i) theCompany shall provide each Grantee with outstanding Grants written notice ofsuch Change of Control, (ii) all outstanding Options and SARs shallautomatically accelerate and become fully exercisable, and (iii) therestrictions and conditions on all outstanding Stock Awards, or Other EquityAwards shall immediately lapse.

 

(b) *   Assumption of Grants.*    Upona Change of Control where the Company is not the surviving corporation (orsurvives only as a subsidiary of another corporation), unless the Committeedetermines otherwise, all outstanding Options that are not exercised shall beassumed by, or replaced with comparable options by, the surviving corporation.

 

(c) *   Other Alternatives.*    Notwithstandingthe foregoing, subject to subsection (d) below, in the event of a Changeof Control, the Committee may take one or both of the following actions: the Committeemay (i) require that Grantees surrender their outstanding Options andOther Equity Awards in exchange for a payment by the Company, in cash orCompany Stock as determined by the Committee, in an amount equal to the amountby which the then Fair Market Value of the shares of Company Stock subject tothe Grantee’s unexercised Options exceeds the Exercise Price of the Options, or(ii) after giving Grantees an opportunity to exercise their outstandingOptions and SARs, terminate any or all unexercised Options at such time as theCommittee deems appropriate. Such surrender or termination shall take place asof the date of the Change of Control or such other date as the Committee mayspecify.

 

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(d) *   Limitations.*    Notwithstandinganything in the Plan to the contrary, in the event of a Change of Control, (i) theCommittee shall not have the right to take any actions described in the Plan(including without limitation actions described in Subsection (a) above)that would make the Change of Control ineligible for desired tax treatment if,in the absence of such right, the Change of Control would qualify for suchtreatment and the Company intends to use such treatment with respect to theChange of Control; and (ii) the Committee shall not be obligated to treatall Grants similarly in connection with the Change of Control transaction..

 

**15.Requirements for Issuance or Transfer of Shares**

 

(a) *   Stockholder’s Agreement.*    TheCommittee may require that a Grantee execute a stockholder’s agreement, withsuch terms as the Committee deems appropriate, with respect to any CompanyStock issued or distributed pursuant to this Plan.

 

(b) *   Limitations on Issuance or Transferof Shares.*    No Company Stock shall be issuedor transferred in connection with any Grant hereunder unless and until alllegal requirements applicable to the issuance or transfer of such Company Stockhave been complied with to the satisfaction of the Committee. The Committeeshall have the right to condition any Grant made to any Grantee hereunder onsuch Grantee’s undertaking in writing to comply with such restrictions on hisor her subsequent disposition of such shares of Company Stock as the Committeeshall deem necessary or advisable, and certificates representing such sharesmay be legended to reflect any such restrictions. Certificates representingshares of Company Stock issued or transferred under the Plan will be subject tosuch stop-transfer orders and other restrictions as may be required byapplicable laws, regulations and interpretations, including any requirementthat a legend be placed thereon.

 

**16. Amendment and Termination of the Plan**

 

(a) *   Amendment.*    TheBoard may amend or terminate the Plan at any time; provided, however, that theBoard shall not amend the Plan without stockholder approval if such approval isrequired in order to comply with the Code or applicable laws or to comply withapplicable stock exchange requirements.

 

(b) *   Termination of Plan.*    ThePlan shall terminate on the day immediately preceding the tenth anniversary ofthe Effective Date, unless the Plan is terminated earlier by the Board or isextended by the Board.

 

(c) *   Termination and Amendment ofOutstanding Grants.*    A termination oramendment of the Plan that occurs after a Grant is made shall not materiallyimpair the rights of a Grantee unless the Grantee consents or unless theCommittee acts under Section 22(b). The termination of the Plan shall notimpair the power and authority of the Committee with respect to an outstandingGrant. Whether or not the Plan has terminated, an outstanding Grant may beterminated or amended under Section 22(b) or may be amended byagreement of the Company and the Grantee consistent with the Plan.

 

(e) *   Governing Document.*    ThePlan shall be the controlling document. No other statements, representations,explanatory materials or examples, oral or written, may amend the Plan in anymanner. The Plan shall be binding upon and enforceable against the Company andits successors and assigns.

 

**17.Funding of the Plan**

 

ThisPlan shall be unfunded. The Company shall not be required to establish anyspecial or separate fund or to make any other segregation of assets to assurethe payment of any Grants under this Plan. In no event shall interest be paidor accrued on any Grant, including unpaid installments of Grants.

 

**18.Rights of Participants**

 

Nothingin this Plan shall entitle any Employee, Key Advisor, Non-Employee Director orother person to any claim or right to be granted a Grant under this Plan.Neither this Plan nor any action taken hereunder

 

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shall be construed asgiving any individual any rights to be retained by or in the employ of theCompany or any other employment rights.

 

**19. NoFractional Shares**

 

Nofractional shares of Company Stock shall be issued or delivered pursuant to thePlan or any Grant. The Committee shall determine whether cash, other awards orother property shall be issued or paid in lieu of such fractional shares orwhether such fractional shares or any rights thereto shall be forfeited or otherwiseeliminated.

 

**20.Headings**

 

Section headingsare for reference only. In the event of a conflict between a title and thecontent of a Section, the content of the Section shall control.

 

**21.Effective Date.**

 

(a) *   Effective Date.*    ThePlan, as set forth herein, shall be adopted and become effective upon approvalby the Board.

 

**22.Miscellaneous**

 

(a) *   Grants in Connection with CorporateTransactions and Otherwise.*    Nothing containedin this Plan shall be construed to (i) limit the right of the Committee tomake Grants under this Plan in connection with the acquisition, by purchase,lease, merger, consolidation or otherwise, of the business or assets of anycorporation, firm or association, including Grants to employees thereof whobecome Employees of the Company, or for other proper corporate purposes, or (ii) limitthe right of the Company to grant stock options or make other awards outside ofthis Plan. Without limiting the foregoing, the Committee may make a Grant to anemployee of another corporation who becomes an Employee by reason of acorporate merger, consolidation, acquisition of stock or property,reorganization or liquidation involving the Company or any of its subsidiariesin substitution for stock option or stock award grant made by such corporation.The terms and conditions of the substitute grants may vary from the terms andconditions required by the Plan and from those of the substituted stockincentives. The Committee shall prescribe the provisions of the substitutegrants.

 

(b) *   Compliance with Law.*    ThePlan, the exercise of Options and the obligations of the Company to issue ortransfer shares of Company Stock under Grants shall be subject to allapplicable laws and to approvals by any governmental or regulatory agency as maybe required. With respect to persons subject to section 16 of the ExchangeAct, it is the intent of the Company that the Plan and all transactions underthe Plan comply with all applicable provisions of Rule 16b-3 or itssuccessors under the Exchange Act. To the extent that any legal requirement ofsection 16 of the Exchange Act as set forth in the Plan ceases to berequired under section 16 of the Exchange Act, that Plan provision shallcease to apply. The Board and the Committee also intend that the Plan and itsoperations shall conform at all times to any applicable requirements imposed bythe Sarbanes-Oxley Act of 2002, as it may be amended. The Committee may revokeany Grant if it is contrary to law or modify a Grant to bring it intocompliance with any valid and mandatory government regulation. The Committeemay also adopt rules regarding the withholding of taxes on payments toGrantees. The Committee may, in its sole discretion, agree to limit itsauthority under this Section.

 

(c) *   Modification to Price of Grants.*    The Committee or the Board may determine to revise the exercise price or othereconomic price provision of any Grant without obtaining stockholder approvalfor such action, including but not limited to Option repricings, Option exchangesor similar offers.

 

(d) *   Governing Law.*    Thevalidity, construction, interpretation and effect of the Plan and GrantInstruments issued under the Plan shall be governed and construed by anddetermined in accordance with the laws of the State of Nevada, without givingeffect to the conflict of laws provisions thereof.

 

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(e)     *Compliance with Code Section 409A*.  If any amount shall be payable with respectto any Grant hereunder as a result of a Grantee’s termination of employment orother service and such amount is subject to the provisions of Code Section 409A,then notwithstanding any other provision of this Plan, a termination ofemployment or other service will be deemed to have occurred only at such timeas the Grantee has experienced a “separation from service” as such term isdefined for purposes of Code Section 409A. If any amount shall be payable with respect to any Grant hereunder as aresult of a Grantee’s “separation from service” at such time as the Grantee isa “specified employee” and such amount is subject to the provisions of Code Section 409A,then notwithstanding any other provision of this Plan, no payment shall bemade, except as permitted under Code Section 409A, prior to the first dayof the seventh (7th) calendar month beginning after the Grantee’s separationfrom service (or the date of his or her earlier death).

 

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