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DIRECTOR / OFFICER NON-QUALIFIED STOCK OPTION AGREEMENT OF
TERRACE VENTURES INC.A Nevada Corporation

THIS AGREEMENT is made between TERRACE VENTURES
INC., a Nevada corporation (hereinafter referred to as the "Company"), and
HOWARD THOMSON of 4734 S. Golf Course Drive Blaine, WA 98230 (hereinafter
referred to as the Optionee), a director or officer of the Company, effective
as of the 21st day of March, 2006.

1.       Option
Granted

The Company hereby grants the Optionee a non-qualified option
to purchase Two Hundred Thousand (200,000)shares of the Companys Common
Stock at a purchase price of $0.27 US per share for a term commencing on the
effective date of this Agreement and expiring at 5:00 pm (Pacific Time) on the
21st day of March, 2008 (the Expiration Date), subject to termination as set
forth herein. All options will be fully vested upon execution of this
Agreement.

2.       Time of Exercise
of Option

The Optionee may exercise the option granted herein at any time
after the effective date of this Agreement until the date of termination of the
option as provided herein.

3.       Method of
Exercise

This option shall be exercised by written notice delivered to
the Company at its principal place of business, stating the number of shares for
which the option is being exercised. The notice must be accompanied by a check
or other methods of payment acceptable to the Plan Administrator for the amount
of the purchase price, and comply with all the requirements of the Companys
2006 Stock Incentive Plan dated March 21, 2006, attached hereto and made a part
hereof by this reference.

4.       Capital
Adjustments

The existence of this option shall not affect in any way the
right or power of the Company or its stockholders to: (1) make or authorize any
or all adjustments, recapitalizations, reorganizations, or other changes in the
Company's capital structure or its business; (2) enter into any merger or
consolidation; (3) issue any bonds, debentures, preferred or prior preference
stocks ahead of or affecting the common stock or the rights thereof, (4) issue
any securities convertible into any common stock, (5) issue any rights, options,
or warrants to purchase any common stock, (6) dissolve or liquidate the Company,
(7) sell or transfer all or any part of its assets or business, or (8) take any
other corporate act or proceedings, whether of a similar character or
otherwise.

5.       Reorganization,
Merger, Amalgamation and Consolidation

If there shall, prior to the exercise of any of the options
provided for by this Agreement, be any reorganization of the authorized capital
of the Company by way of consolidation, merger, subdivision, amalgamation or
otherwise, or the payment of any stock dividends, then there shall automatically
be an adjustment in either or both of the number of shares which may be
purchased pursuant hereto or the price at which such shares may be purchased so
that the rights evidenced hereby shall thereafter as reasonably as possible be
equivalent to those originally granted hereby. The Company shall have the sole
and exclusive power to make such adjustments as it considers necessary and
desirable.

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In the event of a complete liquidation of the Company or a
merger, reorganization, or consolidation of the Company with any other
corporation in which the Company is not the surviving corporation, or the
Company becomes a wholly-owned subsidiary of another corporation, any
unexercised options granted under this Agreement shall be deemed cancelled
unless the surviving corporation in any such merger, reorganization, or
consolidation elects to assume the options under this Agreement or to issue
substitute options in place thereof; provided, however, that notwithstanding the
foregoing, if such options would be cancelled in accordance with the foregoing,
the Optionee shall have the right exercisable during a ten-day period ending on
the fifth day prior to such liquidation, merger, or consolidation to exercise
such option in whole or in part without regard to any installment exercise
provisions in this Agreement.

6.       Transfer of this
Option

During the Optionee's lifetime, this option shall be
exercisable only by the Optionee. This option shall not be transferable by the
Optionee other than by the laws of descent and distribution upon the Optionee's
death. In the event of the Optionee's death during the term of this Agreement,
the Optionee's personal representatives may exercise any portion of this option
that remains vested and unexercised at the time of the Optionee's death,
provided that any such exercise must be made, if at all, during the period
within six (6) months after the Optionee's death, and subject to the option
termination date specified in Paragraph 7(d) below.

7.       Termination of
Option

This Agreement and the Optionee's right to exercise any options
shall terminate on the earliest of the following dates:

| | (a) | Subject to subsection (b) below, the date which is thirty
      (30) days from the later of the dates on which: (i) the Optionee ceases to
      act as a director or officer of the Company or any subsidiary of the
      Company; (ii) the Optionee ceases to be engaged as a consultant of the
      Company or any subsidiary of the Company, if applicable; (iii) the
      Optionee ceases to be an employee of the Company or any subsidiary of the
      Company, if applicable;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b) | In the event of the termination of the Optionee as a
      director, officer, employee or consultant as a result of a breach of the
      Optionees obligations to the Company or any subsidiary of the Company,
      the earliest date on which the Optionee is terminated as a director,
      officer, employee or consultant;                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (c) | The date which is six months from the date of the
      Optionee's death, in the event of termination as a result of the death of
      the Optionee; or                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (d) | The Expiration Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

8.       Rights as
Shareholder

The Optionee will not be deemed to be a holder of any shares
pursuant to the exercise of this option until he or she pays the option price
and a stock certificate is delivered to him or her for those shares. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date the stock certificate is delivered.

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9.       Integration with
the Companys 2006 Stock Incentive Plan

All of the terms and conditions of the Companys 2006 Stock
Incentive Plan, attached hereto and made a part hereof by this reference, are
specifically made a part of this Agreement and shall control with regard to the
interpretation or construction of any provision that is inconsistent herewith.
This Agreement will be governed by and construed in accordance with the laws of
the State of Nevada.

IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the 21st day of March, 2006.

TERRACE VENTURES INC.by its authorized
signatory:

|/s/ Gordon F.
      Burley      | 
|------------------------------- | 
|GORDON F. BURLEY, DIRECTOR      | 
|                                | 
|                                | 
|OPTIONEE:                       | 
|                                | 
|/s/ Howard
      Thomson        | 
|SIGNATURE OF DIRECTOR / OFFICER | 
|                                | 
|HOWARD
      THOMSON            | 
|NAME OF DIRECTOR / OFFICER      | 
|                                | 
|4734 S. Golf
      Course Drive | 
|ADDRESS                         | 
|                                | 
|Blaine, WA 98230                | 
|                                | 
|200,000                         | 
|NUMBER OF OPTIONS               | 

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