Exhibit 10.3


        


        
        BLUE STAR ENERGY, INC.


        


        
        NON-QUALIFIED STOCK OPTION AND STOCK GRANT
        PLAN


        


        
             This Non-Qualified Stock Option
        and Stock Grant Plan (the "Plan") is adopted this 1st. day of June, 2005, in consideration
        of services rendered and to be rendered by key personnel to Blue Star Energy, Inc., its
        subsidiaries and affiliates.

         

         1.     
        Definitions.

         

                 The terms used in this Plan shall, unless
        otherwise indicated or required by the particular context, have the following meanings:

         

                
        Board:  
        The Board of Directors of Blue Star Energy, Inc., or any duly authorized committee of the
        Board.

         

                 Common
        Stock:   The $.001 par value Common
        Stock of Blue Star Energy, Inc.

         

                 
        Company:  
        Blue Star Energy, Inc., a corporation incorporated under the laws of Colorado, and any
        successors in interest by merger, operation of law, assignment or purchase of all or
        substantially all of the property, assets or business of the Company.

         

                 Date of
        Grant:   The date on which an Option
        (see below) is granted under the Plan.

         

                 Fair
        Market Value:   The Fair Market Value of
        the Option Shares. Such Fair Market Value as of any date shall be reasonably determined by
        the Board; provided, however, that if there is a public market for the Common Stock, the
        Fair Market Value of the Option Shares as of any date shall not be less than the bid price
        for the Common Stock on that date (or on the preceding business day if such date is a
        Saturday, Sunday, or a holiday), on either an over-the-counter market or national exchange,
        as reported thereby, or if not available there, in the
        Wall Street Journal
        or other public news source; provided, further, that if no
        such published bid price is available, the Fair Market Value of such shares shall not be
        less than the average of the means between the bid and asked prices quoted on that date by
        any two independent persons or entities making a market for the Common Stock, such persons
        or entities to be selected by the Board. Fair Market Value shall be determined without
        regard to any restriction other than a restriction which, by its terms, will never
        lapse.

         

                Key
        Person:   A person (including, without
        limitation, employees, directors, officers, consultants or advisors) designated by the
        Board upon whose judgment, initiative and efforts the Company or a Related Company may
        rely.

         

               
        Option:  
        The rights granted to a Key Person to purchase Common Stock pursuant to the terms and
        conditions of an Option Agreement (see below).

         


        
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                Option
        Agreement: The written agreement (and any
        amendment or supplement thereto) between the Company and a Key Person designating the terms
        and conditions of an Option.

         

                  Option
        Shares: The shares of Common Stock underlying an
        Option granted to a Key Person.

         

                
        Optionee: A Key
        Person who has been granted an Option.

         

                
        Recipient: A Key
        Person who has been granted a Stock Grant.

         

                 Related
        Company: Any subsidiary or affiliate of the
        Company. The determination of whether a corporation is a Related Company shall be made
        without regard to whether the entity or the relationship between the entity and the Company
        now exists or comes into existence hereafter.

         

                 Stock
        Grant: The grant of shares of the Company's Common
        Stock to a Key Person pursuant to the terms of the Plan.

         

                 Stock
        Grant Shares: The shares of Common Stock
        represented by a Stock Grant.

         

         2.      Purpose and
        Scope.

         

                (a)     The purpose of the
        Plan is to advance the interests of the Company and its stockholders by affording Key
        Persons, upon whose judgment, initiative and efforts the Company may rely for the
        successful conduct of its businesses, an opportunity for investment in the Company and the
        incentive advantages inherent in stock ownership in the Company.

         

                (b)     This Plan authorizes
        the Board to grant Options and make Stock Grants to Key Persons selected by the Board while
        considering criteria such as employment position or other relationship with the Company,
        duties and responsibilities, ability, productivity, length of service or association,
        morale, interest in the Company, recommendations by supervisors, and other matters.

         

         3.      Administration of
        the Plan.

         

              The Plan shall be administered by the Board. The Board shall
        have the authority granted to it under this section and under each other section of the
        Plan.

         

              In accordance with and subject to the provisions of the
        Plan, the Board shall select the Optionees and Recipients, shall determine (i) the number
        of shares of Common Stock to be subject to each Option and/or Stock Grant, (ii) the time at
        which each Option and/or Stock Grant is to be granted, (iii) whether an Option shall be
        granted in exchange for the cancellation and termination of a previously granted option or
        options under the Plan or otherwise, (iv) the purchase price for Option Shares, (v) the
        option period, (vi) the consideration (if any) for a Stock Grant, and (vii) the manner in
        which an Option becomes exercisable. In addition, the Board shall fix such other terms of
        each Option and/or Stock Grant as it may deem necessary or desirable. The Board shall
        determine the form of Option Agreement to evidence each Option.

         


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             The Board from time to time
        may adopt such rules and regulations for carrying out the purposes of the Plan as it may
        deem proper and in the best interests of the Company.

         

              The Board may from time to time make such changes in and
        additions to the Plan as it may deem proper and in the best interest of the Company
        provided, however, that no such change or addition shall impair any Option or Stock Grant
        previously granted under the Plan.

         

              Each determination, interpretation or other action made or
        taken by the Board shall be final, conclusive and binding on all persons, including without
        limitation, the Company, the Related Companies, the stockholders, directors, officers and
        employees of the Company and the Related Companies, and the Optionees, the Recipients and
        their respective successors in interest.

         

         4.   The Common
        Stock.

         

              The Board is authorized to appropriate, grant Options and
        make Stock Grants with respect to, and otherwise issue and sell for the purposes of the
        Plan, a total number not in excess of 2,500,000 shares of Common Stock, either treasury or
        authorized but unissued, or the number and kind of shares of stock or other securities
        which in accordance with Section 9 shall be substituted for the 2,500,000 shares or into
        which such 2,500,000 shares shall be adjusted. All or any unsold shares subject to an
        Option that for any reason expires or otherwise terminates may again be made subject to
        Options and Stock Grants under the Plan.

         

         5.  
        Eligibility.

         

              Options and Stock Grants shall be granted only to Key
        Persons. Key Persons may hold more than one Option or Stock Grant under the Plan and may
        hold Options and Stock Grants under the Plan and options granted pursuant to other plans or
        otherwise.

         

         6.   Option
        Price.

         

              The Board shall determine the purchase price for the Option
        Shares in its discretion.

          

         7.   Duration and Exercise of
        Options.

         

              (a)     The option period shall
        commence on the Date of Grant and shall be up to 10 years in length subject to the
        limitations in this Section 7 and the Option Agreement.

         

              (b)     During the lifetime of the
        Optionee, the Option shall be exercisable only by the Optionee. Any Option held by an
        Optionee at the time of his death may be exercised by his estate only within six months of
        his death or such longer period as the Board may determine.

         

        


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             (c)     The Board may determine
        whether an Option shall be exercisable as provided in Paragraph (a) of this Section 7 or
        whether the Option shall be exercisable in installments only or otherwise subject to
        vesting; if the Board determines the latter, it shall determine the number of installments
        and the percentage of the Option exercisable at each installment date. All such
        installments shall be cumulative.

         

             (d)     In the case of an Optionee
        who is an employee of the Company or a Related Company, if, for any reason, other than the
        Optionee's death, the Optionee ceases to be employed by either the Company or a Related
        Company, any option held by the Optionee at the time his employment ceases may be exercised
        within 90 days after the date that his employment ceased, (subject to the limitations of
        Paragraph (a) above), but only to the extent that the option was exercisable according to
        its terms on the date the Optionee's employment ceased. After such 90 day period, any
        unexercised portion of an Option shall expire.

         

             (e)     Notwithstanding the
        provision of Paragraph (d) of this Section 7, in the case of an Optionee who is an employee
        of the Company or a Related Company, if the Optionee's employment by the Company or a
        Related Company ceases due to the Company's or Related Company's termination of such
        Optionee's employment for cause, any unexercised portion of any Option held by the Optionee
        shall immediately expire. The determination of cause for purposes of this subsection (e)
        shall be made by the Board of Directors which decision shall be final and binding.

         

             (f)     Each Option shall be
        exercised in whole or in part by delivering to the office of the Treasurer of the Company
        written notice of the number of shares with respect to which the Option is to be exercised
        and by paying in full the purchase price for the Option Shares purchased as set forth in
        Section 8; provided, that an Option may not be exercised in part unless the purchase price
        for the Option Shares Purchased is at least $1,000.00.

         

        8.  Payment for Option
        Shares.

         

              If the purchase price of the Option Shares purchased by any
        Optionee at one time exceeds $2,000, the Board may permit all or part of the purchase price
        for the Option Shares to be paid by delivery to the Company for cancellation shares of the
        Company's Common Stock previously owned by the Optionee with a Fair Market Value as of the
        date of the payment equal to the portion of the purchase price for the Option Shares that
        the Optionee does not pay in cash. In the case of all other Option exercises, the purchase
        price shall be paid in cash or certified funds upon exercise of the Option.

         

         9.   Change in Stock, Adjustments
        Etc.

         

              In the event that each of the outstanding shares of Common
        Stock (other than shares held by dissenting stockholders that are not changed or exchanged)
        should be changed into, or exchanged for, a different number or kind of shares of stock or
        other securities of the Company, or, if further changes or exchanges of any stock or other
        securities into which the Common Stock shall have been changed, or for which it shall have
        been exchanged, shall be made (whether by reason of merger, consolidation, reorganization,
        recapitalization, stock dividends, reclassification, split-up, combination of shares or
        otherwise), then there shall be substituted for each share of Common Stock that is subject
        to the Plan, the number and kind of shares of stock or other securities into which each
        outstanding share of Common Stock (other than shares held by dissenting stockholders which
        are not changed or exchanged) shall be so changed or for which each outstanding share of
        Common Stock (other than shares held by dissenting stockholders) shall be so changed or for
        which each such share shall be exchanged. Any securities so substituted shall be subject to
        similar successive adjustments. In the event of any such changes or exchanges, the Board
        shall determine whether, in order to prevent dilution or enlargement of rights, an
        adjustment should be made in the number, kind, or option price of the shares or other
        securities then subject to an Option or Stock Grant granted pursuant to the Plan and the
        Board shall make any such adjustment, and such adjustments shall be made and shall be
        effective and binding for all purposes of the Plan.

         


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        10.  
        Relationship to
        Employment.

         

               Nothing contained in the Plan, or in any Option or Stock
        Grant granted pursuant to the Plan, shall confer upon any Optionee or Recipient any right
        with respect to employment by the Company, or interfere in any way with the right of the
        Company to terminate the Optionee's or Recipient's employment or services at any time.

         

         11.    Nontransferability of Option
        or Stock Grant.

         

                No Option or Stock Grant granted under the Plan shall
        be transferable by the Optionee or Recipient, either voluntarily or involuntarily, except
        by will or the laws of descent and distribution, and any attempt to do so shall be null and
        void.

         

         12.    Rights as a
        Stockholder.

         

                No person shall have any rights as a stockholder with
        respect to any share covered by an Option or Stock Grant until that person shall become the
        holder of record of such shares and, except as provided in Section 9, no adjustments shall
        be made for dividends or other distributions or other rights as to which there is an
        earlier record date.

         

         13.    Securities Laws
        Requirements.

         

                No Option Shares or Stock Grants shall be issued
        unless and until, in the opinion of the Company, any applicable registration requirements
        of the Securities Act of 1933, as amended, any applicable listing requirements of any
        securities exchange on which stock of the same class is then listed, and any other
        requirements of law or of any regulatory bodies having jurisdiction over such issuance and
        delivery, have been fully complied with. Each Option and each Option and Stock Grant Share
        certificate may be imprinted with legends reflecting federal and state securities laws
        restrictions and conditions, and the Company shall comply therewith and issue "stop
        transfer" instructions to its transfer agent and registrar in good faith without
        liability.

         

        


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        14.   Disposition of
        Shares.

         

                Each Optionee, as a condition of exercise, and each
        Recipient shall represent, warrant and agree, in a form of written certificate approved by
        the Company, as follows: (a) that all Option and Stock Grant Shares are being acquired
        solely for his own account and not on behalf of any other person or entity; (b) that no
        Option or Stock Grant Shares will be sold or otherwise distributed in violation of the
        Securities Act of 1933, as amended, or any other applicable federal or state securities
        laws; (c) that if he is subject to reporting requirements under Section 16(a) of the
        Securities Exchange Act of 1934, as amended, he will (i) not sell any shares of Common
        Stock within six months of the date he acquired any Option or Stock Grant, (ii) furnish the
        Company with a copy of each Form 3, 4 or 5 filed by him, and (iii) timely file all reports
        required under the federal securities laws; and (d) that he will report all sales of Option
        and/or Stock Grant Shares to the Company in writing on a form prescribed by the
        Company.

         

         15.    Effective Date of Plan;
        Termination Date of Plan.

         

                The Plan shall be deemed effective as of June 1st.,
        2005. The Plan shall terminate at midnight on June 1st., 2015 except as to Options
        previously granted and outstanding under the Plan at that time. No Options or Stock Grants
        shall be granted after the date on which the Plan terminates. The Plan may be amended,
        extended, abandoned or terminated at any earlier time by the Board, except with respect to
        any Options or Stock Grant then outstanding under the Plan.

         

         16.    Other
        Provisions.

         

                The following provisions are also in effect under the
        Plan:

         

                (a)     The use of a
        masculine gender in the Plan shall also include within its meaning the feminine, and the
        singular may include the plural, and the plural may include the singular, unless the
        context clearly indicates to the contrary.

         

                (b)     Any expense of
        administering the Plan shall be borne by the Company.

         

                (c)     This Plan shall be
        construed to be in addition to any and all other compensation plans or programs. The
        adoption of the Plan by the Board shall not be construed as creating any limitations on the
        power or authority of the Board to adopt such other additional incentive or other
        compensation arrangements as the Board may deem necessary or desirable.

         

                (d)     The validity,
        construction, interpretation, administration and effect of the Plan and of its rules and
        regulations, and the rights of any and all personnel having or claiming to have an interest
        therein or thereunder shall be governed by and determined exclusively and solely in
        accordance with the laws of the State of Colorado.

         

        


        
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             IN WITNESS
        WHEREOF, the Company adopts this Plan on the date
        first set forth above.

         

         BLUE STAR ENERGY, INC.

         

          

          

         By:    /s/ Raymond E. McElhaney


        
        Raymond E. McElhaney,
        President


        
         


        
         


        
         


        
         


        
         


        
         


        
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