Document:

EXHIBIT
      10.1

     

    SETTLEMENT
      AGREEMENT

    AND
      RELEASE OF ALL CLAIMS

     

    This
      Settlement Agreement and Release of All Claims (“Agreement”)
      is
      made and entered into as of January 22, 2007 by and among Deep Well Oil &
Gas, Inc., a Nevada corporation (hereinafter sometimes referred to as “Deep
      Well”), and Grey K Fund LP, Grey K Offshore Fund Ltd., Provident Premier Master
      Fund Ltd., Atlas Master Fund Ltd. and Gemini Master Fund, Ltd. (hereinafter
      sometimes referred to collectively as the “Investors” and each an
“Investor”).

     

    RECITALS

     

    1.  WHEREAS,
      Deep Well and the Investors have entered into a Stock Purchase Agreement, dated
      effective March 10, 2005 (hereinafter referred to as the “SPA”), with respect to
      the issuance and sale to the Investors by Deep Well of certain securities,
      the
      provision to the Investors of certain registration rights, and certain other
      matters; 

     

    2.  
      WHEREAS,
      Deep Well and the Investors have entered into a Registration Rights Agreement,
      dated effective March 10, 2005 (hereinafter referred to as the “RRA”), with
      respect to the provision to the Investors by Deep Well of certain registration
      rights contemplated by the SPA;

     

    3.  WHEREAS,
      the Investors claim that Deep Well has breached certain provisions of the SPA
      and RRA; 

     

    4.  WHEREAS,
      Deep Well does not admit the Investors’ allegations of breach of the SPA and
      RRA; and

     

    5.  WHEREAS,
      Deep Well and the Investors desire to settle fully and finally all differences
      between them, including, but in no way limited to, those differences described
      above.

     

    AGREEMENTS

     

    In
      consideration of the mutual covenants and promises contained in this Agreement,
      the parties agree as follows:

     

    1.  No
      Admission of Liability.
      The
      parties hereto acknowledge and agree that this Agreement reflects a settlement
      of disputed claims and that it does not constitute and shall not be construed
      as
      an admission of liability on the part of any party, its officers, agents,
      directors, securityholders, affiliates, subsidiaries, supervisors, employees,
      attorneys or representatives, or acknowledgement of any wrongdoing
      whatsoever.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.  Advice
      of Counsel.
      Each
      party hereto acknowledges that it has had adequate time to consult with an
      attorney of such party’s choice and to consider the terms of this
      Agreement.

     

    3.  Amendment
      of Agreements.
      

     

    (a)    
      The
      SPA
      is hereby amended by deleting Section 4.2(g) and Section 4.11 thereof, which
      Sections, effective immediately, shall be of no further force or
      effect.

     

    (b)    
      The
      RRA
      is hereby terminated effective immediately, and shall be of no further force
      or
      effect.

     

    (c)    
      Except
      as
      amended by the terms of this Agreement, all other provisions of the SPA shall
      remain in full force and effect.

     

    4.  Issuance
      of Shares.
      Within
      10 days following Deep Well’s receipt from each of the Investors of a fully
      signed and executed original of this Agreement, and as a condition to the
      obligations and release of the Investors under this Agreement, Deep Well shall
      issue, and cause to be delivered certificates representing a total of 1,600,000
      (one million six hundred thousand) shares of common stock of Deep Well,
      registered in the names and amounts included on Schedule A hereto (the
“Shares”).

     

    5.  Investor
      Representations.
      Each of
      the Investors represents that (a) it is an institutional “accredited investor”
within the meaning of Rule 501(a)(1),(2),(3) or (7) under the U.S. Securities
      Act of 1933, as amended (the “1933 Act”); (b) it is acquiring the Shares for its
      own account for investment purposes and not with a view to resale or
      distribution of the Shares in violation of United States federal or state
      securities laws; (c) it is not acquiring the Shares as a result of any “general
      solicitation” or “general advertising” as those terms are used in Regulation D
      under the 1933 Act; (d) it is aware that the Shares have not been registered
      under the 1933 Act or any state securities laws and therefore are, and will
      be,
“restricted securities” within the meaning of Rule 144 under the 1933 Act (“Rule
      144”), certificates representing all Shares will bear a restrictive legend to
      such effect, and the Shares may be resold or otherwise transferred only pursuant
      to an effective registration statement under the 1933 Act or an available
      exemption from the registration requirements of the 1933 Act and applicable
      state securities laws (and Deep Well may require a satisfactory legal opinion
      or
      other evidence to the effect that any transfer does not require registration
      under the 1933 Act of applicable state securities laws) (it being understood
      that the provisions relating to the removal of restrictive legends from the
      Securities (as defined in the SPA) contained in Section 2.5 of the SPA shall
      apply to the removal of any such restrictive legend from the Shares); (e) it
      has
      all necessary corporate or LLC power and authority to execute and deliver this
      Agreement and to perform
      its obligations hereunder and to consummate the transactions contemplated
      hereby; (f)
      it is
      authorized to execute this Agreement and consummate the transactions
      contemplated hereby, and the
      execution, delivery and performance of this Agreement by it has been duly
      authorized by all necessary corporate or LLC action on its part;
      (g)
this
      Agreement constitutes the valid and binding obligation of it, enforceable
      against it in accordance with this Agreement’s terms, except
      as
      (i) the enforceability thereof may be limited by bankruptcy, insolvency
      (including, without limitation, all laws relating to fraudulent conveyance)
      or
      similar laws affecting creditors' rights generally and (ii) the availability
      of
      equitable remedies may be limited by equitable principles of general
      applicability (regardless of whether enforcement is considered in a proceeding
      in equity or at law);
      (h)
      the
      execution, delivery and performance by
      it of
      this
      Agreement,
      will
      not
(i) conflict
      with,
      or
      constitute a breach of, as applicable, its certificate of incorporation,
      operating agreement or by-laws, (ii)
      conflict with, or constitute a breach of, any agreement or other instrument
      to
      which it is a party,
      except
      such conflict, breach or default as would not have, singly or in the aggregate,
      a Material Adverse Effect (as defined below), or (iii)
      violate
      any applicable law or any rule, regulation, judgment, order or decree of any
      court or any governmental body or agency having jurisdiction over it, except
      such violations or conflicts as would not have, singly or in the aggregate,
      a
      Material Adverse Effect; and (h) except as would not have a Material Adverse
      Effect, there are no pending or (to its knowledge) threatened legal or
      governmental proceedings to which it is or could be a party; and (i) it has
      had
      the opportunity to ask questions and receive answers concerning the Shares
      and
      to obtain any additional information that Deep Well possesses or can acquire
      without unreasonable effort or expense that it has deemed necessary in
      connection with its decision to acquire the Shares.

     

    
      
        
        

      

      
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    6.  Deep
      Well Representations and Warranties.
      Deep
      Well represents and warrants that (a) Deep Well has
      all
      necessary corporate power and authority to execute and deliver this Agreement
      and to perform its obligations hereunder and to consummate the transactions
      contemplated hereby; (b) the execution, delivery and performance of this
      Agreement by Deep Well has been duly authorized by all necessary corporate
      action on the part of Deep Well; (c) this Agreement constitutes the valid and
      binding obligation of Deep Well, enforceable against Deep Well in accordance
      with its terms, except
      as
      (i) the enforceability thereof may be limited by bankruptcy, insolvency
      (including, without limitation, all laws relating to fraudulent conveyance)
      or
      similar laws affecting creditors' rights generally and (ii) the availability
      of
      equitable remedies may be limited by equitable principles of general
      applicability (regardless of whether enforcement is considered in a proceeding
      in equity or at law);
      (c)
      the
      execution, delivery and performance by
      Deep
      Well of
      this
      Agreement,
      will
      not
(i) conflict
      with,
      or
      constitute a breach of, Deep Well’s certificate of incorporation or by-laws,
(ii)
      conflict with, or constitute a breach of, any agreement
      or other instrument to which Deep Well is a party or
      by
      which Deep Well is bound, except such conflict, breach or default as would
      not
      have, singly or in the aggregate, a Material Adverse Effect, or (iii)
      violate
      any applicable law or any rule, regulation, judgment, order or decree of any
      court or any governmental body or agency having jurisdiction over Deep Well,
      except such violations or conflicts as would not have, singly or in the
      aggregate, a Material Adverse Effect;
      and (c)
      except as would not have a Material Adverse Effect, there are no pending or
      (to
      Deep Well’s knowledge) threatened legal or governmental proceedings to which
      Deep Well is or could be a party.

     

    7.  For
      purposes of this Agreement, the term “Material Adverse Effect” means a material
      adverse effect on the business, properties, prospects, financial condition
      or
      results of operations of either (i) Deep Well and its subsidiaries, taken as
      a
      whole, or (ii) any Investor and its subsidiaries, taken as a whole.

     

    8.  Indemnification.
      (a)
      Deep
      Well
      shall indemnify, defend and hold harmless each Investor, and its affiliates,
      members, partners, shareholders, officers and directors, from and against any
      losses, liabilities, claims (including those made by a governmental entity),
      demands, third party claims, tax levies or assessments, executions,
      contingencies, damages, costs and expenses, judgments, amounts paid in
      settlements, court costs and reasonable attorneys’ fees and expenses incurred:
      (a) in enforcing this Agreement against Deep Well and (b) in connection with,
      related to or arising out of (i) the untruth, inaccuracy or breach of any
      representation or warranty given or made by Deep Well in this Agreement or
      (ii)
      any nonfulfillment of, failure to comply with or breach of any obligation,
      covenant or agreement on the part of Deep Well in this Agreement. 

     

    
      
        
        

      

      
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    (b)
      Each
      Investor shall indemnify, defend and hold harmless Deep Well, and its
      affiliates, shareholders, officers and directors, from and against any losses,
      liabilities, claims (including those made by a governmental entity), demands,
      third party claims, tax levies or assessments, executions, contingencies,
      damages, costs and expenses, judgments, amounts paid in settlements, court
      costs
      and reasonable attorneys’ fees and expenses incurred: (a) in enforcing this
      Agreement against such Investor and (b) in connection with, related to or
      arising out of (i) the untruth, inaccuracy or breach of any representation
      or
      warranty given or made by such Investor in this Agreement or (ii) any
      nonfulfillment of, failure to comply with or breach of any obligation, covenant
      or agreement on the part of such Investor in this Agreement. 

     

    9.  Tax
      Implications.
      Each
      Investor acknowledges and agrees that Deep Well has made no representations
      to
      it regarding the tax consequences associated with receiving securities pursuant
      to this Agreement. Each Investor agrees to pay federal or state taxes, if any,
      which are required by law to be paid by it with respect to this Agreement.
      

     

    10.  No
      Other Claims Filed or Pending.
      (a)
      Each Investor represents that it has not filed any complaints, claims, or
      actions against Deep Well, its officers, agents, directors, securityholders,
      affiliates, subsidiaries, supervisors, employees, attorneys or representatives,
      with any state, federal, or local agency or court and that it will not do so
      at
      any time hereafter with regard to events that have occurred as of the date
      of
      this Agreement. 

     

    (b) Deep
      Well
      represents that it has not filed any complaints, claims, or actions against
      any
      Investor, its officers, agents, members, partners, directors, securityholders,
      affiliates, subsidiaries, supervisors, employees, attorneys or representatives,
      with any state, federal, or local agency or court and that Deep Well will not
      do
      so at any time hereafter with regard to events that have occurred as of the
      date
      of this Agreement. 

     

    11.  Settlement
      of All Claims.
      The
      parties agree and acknowledge that this Agreement shall constitute the full
      and
      final settlement of all claims or potential claims between them at law or in
      equity, for damages or attorneys fees in connection with or arising from the
      SPA
      or RRA, from the beginning of time to the date of this Agreement; provided,
      however, that nothing herein shall constitute a waiver or release of any claims
      or causes of action arising out of or in connection with (i) any breach of
      this
      Agreement or (ii) circumstances or events occurring after the effective date
      of
      this Agreement. Each party further agrees that it shall pay its own attorneys’
fees incurred in connection with negotiating and drafting this
      Agreement.

     

    12.  Mutual
      Release.
      Notwithstanding the provisions of any law stating that a general release does
      not extend to claims which a party does not know of or suspect to exist in
      its
      favor at the time of executing the release, and in consideration of the mutual
      releases set forth herein, the issuance of the Shares pursuant to this Agreement
      and other good and valuable consideration:

     

    
      
        
        

      

      
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    (a) Each
      of
      the Investors hereby irrevocably and unconditionally releases and forever
      discharges Deep Well and each and all of Deep Well’s officers, agents,
      directors, securityholders, affiliates, subsidiaries, supervisors, employees,
      attorneys or representatives, and their successors and assigns, from any and
      all
      charges, complaints, claims, and liabilities of any kind or nature whatsoever,
      known or unknown, suspected or unsuspected (hereinafter referred to as
“claim”
or
      “claims”)
      that
      such Investor at any time heretofore had or claimed to have or which such
      Investor may have or claim to have regarding events that have occurred as of
      the
      date of this Agreement, including, without limitation, any and all claims in
      connection with, or arising from, the SPA or RRA, and any and all claims for
      intentional or negligent infliction of emotional distress; fraud, deceit or
      defamation; express or implied breach of contract; and any claim for stock,
      stock options, warrants, or related shareholder rights; provided, however,
      that
      nothing herein shall constitute a waiver or release of any claims or causes
      of
      action arising out of or in connection with (i) any breach of this Agreement
      or
      (ii) circumstances or events occurring after the effective date of this
      Agreement. Notwithstanding the foregoing, this Section 12 shall not apply to
      any
      and all claims of any Investor against Deep Well that may arise out of or in
      connection with the non-convertible gross overriding royalty as referenced
      in
      the Royalty Agreement, dated December 12, 2003, between Mikwec Energy Canada
      Ltd. and Nearshore Petroleum Corporation. 

     

    (b) Deep
      Well
      hereby irrevocably and unconditionally releases and forever discharges each
      of
      the Investors and all of such Investor’s officers, agents, members, partners,
      directors, securityholders, affiliates, subsidiaries, supervisors, employees,
      attorneys or representatives, and their successors and assigns, from any and
      all
      claims that Deep Well at any time heretofore had or claimed to have or which
      Deep Well may have or claim to have regarding events that have occurred as
      of
      the date of this Agreement, including, without limitation, any and all claims
      in
      connection with, or arising from, the SPA or RRA, and any and all claims for
      intentional or negligent infliction of emotional distress; fraud, deceit or
      defamation; express or implied breach of contract; and any claim for stock,
      stock options, warrants, or related shareholder rights; provided, however,
      that
      nothing herein shall constitute a waiver or release of any claims or causes
      of
      action arising out of or in connection with (i) any breach of this Agreement
      or
      (ii) circumstances or events occurring after the effective date of this
      Agreement

     

    (c) The
      parties understand the word “claims” to include all actions, claims, and
      grievances, whether actual or potential, known or unknown, and specifically
      but
      not exclusively all claims that have or may have arisen as of the date of this
      Agreement out of or in connection with the SPA and RRA. All such claims
      (including related attorneys’ fees and costs) that have or may have arisen as of
      the date of this Agreement are forever barred without regard to whether those
      claims are based on any alleged breach of a duty arising in a statute, contract,
      or tort; any alleged unlawful act; or any other claim or cause of action; and
      regardless of the forum in which it might be brought; provided, however, that
      nothing herein shall constitute a waiver or release of any claims or causes
      of
      action arising out of or in connection with (i) any breach of this Agreement
      or
      (ii) circumstances or events occurring after the effective date of this
      Agreement.

     

    13. Informed
      Waiver of Claims.

     

    
      	
            	(a)	
              Each
                party hereto understands and agrees
                that:

            

    

     

    
      
        
        

      

      
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                	(i)	
                  its
                    waiver of rights under this Agreement is knowing and voluntary;
                    

                

        

      

    

     

    
      	
            	(ii)	
              it
                understands the terms of this Agreement;
                and

            

    

     

    
      	
            	(iii)	
              it
                has consulted with an attorney prior to executing this
                Agreement.

            

    

     

    (b)  Each
      party further represents that it has reviewed all aspects of this Agreement,
      that it has carefully read and fully understands all the provisions of this
      Agreement, that it understands that in agreeing to this document it is releasing
      the other party or parties hereto, as the case may be, from any and all claims
      it may have against such party or parties; provided, however, that nothing
      herein shall constitute a waiver or release of any claims or causes of action
      arising out of or in connection with (i) any breach of this Agreement or (ii)
      circumstances or events occurring after the effective date of this Agreement,
      that it voluntarily agrees to all the terms set forth in this Agreement, that
      it
      knowingly and willingly intends to be legally bound by the same, that it was
      given the opportunity to consider the terms of this Agreement and discuss them
      with counsel, and that the terms of this Agreement were determined through
      negotiation between the respective representatives of the parties.

     

    14. Nondisparagement.
      Following the execution of this Agreement, each party agrees that it shall
      avoid
      and refrain from communicating any disparaging, derogatory, libelous or
      scandalous statements to any third party regarding any other party to this
      Agreement, or regarding any officer, agent, member, partner, director,
      securityholder, affiliate, subsidiary, supervisor, employee, attorney, customer,
      supplier or representative of such other party, or regarding their respective
      predecessors or successors, or regarding any such person or entity’s conduct in
      this matter or in the events underlying this matter.

    

    15. Piggyback
      Registration Rights. If
      Deep
      Well proposes to register any shares of its common stock under the 1933 Act
      in
      connection with the public offering by it or any of its security holders of
      such
      securities solely for cash (other than a registration on Form S-8, Form S-4
      or
      Form F-4, or any successor forms thereto), Deep Well shall promptly give each
      Investor written notice of such proposed registration. Upon the written request
      of any Investor, given within 20 days after the delivery of such notice by
      Deep
      Well to such Investor, Deep Well will, subject to its obligations under any
      applicable registration rights agreements, use its commercial best efforts
      to
      cause a registration statement covering the resale of any of the Shares and
      shares of common stock acquired by each Investor on the Original Purchase Date,
      and any shares of common stock acquired after the date hereof by any Investor
      pursuant to the cashless exercise provisions of the Warrants (as defined in
      the
      SPA) (collectively, the “Securities”) so requested, so long as such Securities
      are held by such Investor and are not eligible for resale pursuant to Rule
      144(k), to become effective under the 1933 Act. In the event an Investor wishes
      to include Securities held by it in a registration statement filed pursuant
      to
      the terms of a registration rights agreement, each such Investor agrees that
      it
      will comply with the terms of such agreement that apply to a person or entity
      whose securities have been accepted for inclusion in such registration
      statement. For greater certainty, (i) such registration shall not be subject
      to
      any provisions of any registration rights agreement that are applicable only
      to
“demand” registrations, and (ii) each Investor acknowledges that except as
      contemplated by this Section 15, Deep Well is under no obligation hereunder
      to
      register any of its securities, to complete any registration or offering of
      its
      securities it proposes to make, or to maintain the effectiveness of any
      registration statement filed by Deep Well pursuant to the 1933 Act for any
      prescribed period of time, and Deep Well will therefore incur no liability
      (including any penalties that may be incurred under a registration rights
      agreement) to any Investor for Deep Well’s failure to register any of its
      securities, complete any registration or offering of its securities, or maintain
      the effectiveness of any such registration statement, except to the extent
      such
      failure constitutes a breach of this Agreement. In connection with any such
      registration statement or offering in which an Investor requests its Securities
      to be included, such Investor hereby understands and agrees that a pre-condition
      to the inclusion of any Securities held by such Investor in any registration
      statement or offering is that such Investor shall provide to Deep Well any
      information about itself or its plans, including its plan of distribution,
      required to be included in such registration statement and the related
      prospectus or prospectus supplement. Furthermore, each Investor acknowledges
      and
      agrees that (a) in the case of an underwritten offering, customary “cut back”
provisions requested by the managing or lead underwriter of such offering shall
      apply to the inclusion of the Securities in any registration statement,
      prospectus or prospectus supplement relating to such offering and for greater
      certainty, (i) in the case of a registration statement, prospectus or prospectus
      supplement relating to an underwritten offering initiated by Deep Well, the
      securities proposed to be registered or sold by Deep Well shall have priority
      over any Securities proposed to be included in such registration or offering,
      and in connection with such registration or offering the Securities shall rank
      pari passu with any other securities proposed to be registered or sold pursuant
      to piggyback registration rights and (ii) in the case of a registration
      statement, prospectus or prospectus supplement relating to an underwritten
      offering pursuant to any demand registration rights held by any person, the
      securities proposed to be registered or sold by Deep Well and the securities
      proposed to be registered or sold by the person exercising such demand
      registration rights shall have priority over any Securities proposed to be
      included in such registration or offering, and in connection with such
      registration or offering the Securities shall rank pari passu with any other
      securities proposed to be registered or sold pursuant to piggyback registration
      rights. Deep Well agrees that it will not enter into any agreement with a third
      party that restricts the right of the Investors to include Securities on a
      registration statement filed by Deep Well for use by such third party. Notices
      given under this Section 15 or otherwise under this Agreement shall be made
      in
      accordance with the notice provisions of the SPA.

     

    
      
        
        

      

      
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    16. Acknowledgement
      of Original Issuance Date.
      Deep
      Well acknowledges and agrees that (i) the shares of common stock of Deep Well
      issued on March 10, 2005 to the persons listed on Schedule B hereto (including
      any shares of common stock issued after the date hereof pursuant to the cashless
      exercise provisions of the Warrants (as defined in the SPA)) (the “Original
      Investors”), were fully paid for on the date(s) set forth opposite each such
      Original Investor’s name on Schedule B (with respect to each Original Investor,
      the “Original Purchase Date”), and (ii) provided that on and after the date that
      is two years after the Original Purchase Date (the “Rule 144(k) Date”), the
      applicable Original Investor or any transferee of the Original Investor, as
      the
      case may be, is not, and has not been for a period of at least three months
      prior to any proposed sale of such shares pursuant to Rule 144(k) under the
      1933
      Act, an “affiliate” (as such term is defined in Rule 405 under the 1933 Act) of
      Deep Well, such shares will be eligible to be sold under such Rule 144(k) on
      and
      after the Rule 144(k) Date and Deep Well will use its reasonable best efforts
      to
      cause the transfer agent for the shares of common stock of Deep Well to remove
      any restrictive legend contained on such shares within three days following
      the
      request of any such Original Investor or transferee.

     

    17. Covenants
      of Deep Well. Deep
      Well
      agrees with each Investor that Deep Well will, on or prior to 8:30 a.m. (eastern
      prevailing time), on the second business day immediately following the date
      of
      this Agreement, issue a press release disclosing the material terms of this
      Agreement and the transactions contemplated hereby, and (ii) on or prior to
      5:00
      p.m. (eastern prevailing time) on such business day, file with the United States
      Securities and Exchange Commission (the “Commission”) a Current Report on Form
      8-K disclosing the material terms of this Agreement; provided, however, that
      each Investor shall have a reasonable opportunity to review and comment on
      any
      such press release or Form 8-K prior to the issuance or filing thereof; and
      provided, further, that if Deep Well fails to issue a press release disclosing
      the material terms of this Agreement within the time frames described herein,
      any Investor may issue a press release disclosing such information; provided,
      however, that Deep Well shall have a reasonable opportunity to review and
      comment on any such press release. Thereafter, Deep Well shall timely file
      any
      filings and notices required by the Commission or applicable law with respect
      to
      the transactions contemplated hereby.

     

    
      
        
        

      

      
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    18.   
      General
      Provisions.

     

    (a)    
      No
      Other Representations.
      The
      parties hereto represent and acknowledge that in executing this Agreement they
      are not relying on any representation or statement made by any of the parties
      or
      by any of the parties’ agents, attorneys, or representatives with regard to the
      subject matter, basis, or effect of this Agreement or otherwise, other than
      those specifically stated in this Agreement.

     

    (b)     Successors
      and Assigns.
      This
      Agreement shall be binding upon the parties hereto and upon their respective
      heirs, administrators, representatives, executors, successors, and assigns,
      and
      shall inure to the benefit of said parties and each of them and to their heirs,
      administrators, representatives, executors, successors, and assigns. Each party
      hereto expressly represents and warrants that it has not transferred to any
      person or entity any rights, causes of action, or claims released in this
      Agreement. Each Investor may assign its rights under Section 15 (Piggyback
      Registration Rights) and Section 16 (Acknowledgement of Original Issue Date)
      of
      this Agreement to any person or entity to which it transfers any Securities,
      as
      long as: (i) such Securities constitute “restricted securities” as defined in
      Rule 144 and, because two years have not elapsed since the date on which such
      Securities were originally purchased and fully paid for, such Securities are
      not
      then eligible to be sold pursuant to Rule 144(k) under the 1933 Act, (ii) Deep
      Well is, within a reasonable period of time following such transfer, furnished
      with written notice of the name and address of such transferee, (iii) the
      transferee agrees in writing with Deep Well to be bound by all of the provisions
      hereof, (iv) such assignment does not require the filing of a post-effective
      amendment to a registration statement filed pursuant to the 1933 Act, provided
      that for greater certainty, a prospectus supplement filed pursuant to Rule
      424
      under the 1933 Act shall not be deemed to be a post-effective amendment of
      the
      applicable registration statement, and (v) such transfer is made in accordance
      with the applicable requirements of the SPA or this Agreement, as
      applicable.

    

    (c)  Severability
      and Governing Law.
      Should
      any provision of this Agreement be declared or be determined by any court of
      competent jurisdiction to be wholly or partially illegal, invalid, or
      unenforceable, the court may reform said provision to enforce it to the maximum
      extent possible, or, if not possible, said provision shall be struck from this
      Agreement and the legality, validity, and enforceability of the remaining parts,
      terms, or provisions shall not be affected thereby. This Agreement and any
      claim
      or dispute arising out of, or relating to, this Agreement, shall be governed
      by
      and construed in accordance with the laws of the State of New York. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (d)  Jurisdiction;
      Attorneys Fees.
      In the
      event of any controversy or claim arising out of or relating to this Agreement,
      or the breach thereof, the parties hereto agree that a proceeding relating
      to
      such controversy or claim may be brought and pursued only in the Supreme Court
      of the State of New York, County of New York or in the United States Federal
      Courts for the Southern District of New York and the parties hereby irrevocably
      submit to the jurisdiction of such courts for such purpose, irrevocably waive
      any defense or objection to the New York forums designated above and waive
      any
      defense or objection based on personal or subject matter jurisdiction, and
      agree
      to be bound by any judgment rendered by such courts in connection with any
      such
      litigation or proceeding. The prevailing party shall be entitled to recover
      its
      costs and expenses and reasonable attorneys’ fees actually incurred in
      connection with any such litigation or proceeding. 

     

    (e)  Entire
      Agreement.
      This
      Agreement sets forth the entire agreement between the parties hereto and fully
      supersedes any and all prior agreements or understandings, written or oral,
      between the parties hereto pertaining to the subject matter hereof. This
      Agreement may not be modified except in a writing signed by all
      parties.

     

    (f)  Interpretation.
      This
      Agreement shall be interpreted in accordance with the plain meaning of its
      terms
      and not strictly for or against any of the parties hereto.

     

    (g)  Specific
      Performance.
      It is
      further understood and agreed that if, at any time, a violation of any term
      of
      this Agreement is asserted by any party hereto, that party shall have the right
      to seek specific performance of that term and/or any other necessary and proper
      relief, including but not limited to damages, from any court of competent
      jurisdiction.

     

    (h)  Counterparts.
      This
      Agreement may be executed in counterparts, each of which shall be deemed an
      original, and all of which together constitute one and the same
      instrument.

    

    (i)       
      Amendments;
      Modifications.
      This
      Agreement may not be altered, amended or modified, or otherwise changed in
      any
      respect whatsoever, except by a subsequent writing executed by authorized
      representatives of the parties.

    

     

    
      	
              Dated:

            	
              January
                29, 2007

            	 	
              Deep
                Well Oil & Gas, Inc.

            
	 	 	 	 
	 	 	 	
              /s/
                Horst A. Schmid

            
	 	 	 	
              Name:

            	
              Horst
                A. Schmid

            
	 	 	 	
              Title:

            	
              President
                and CEO

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    
      	
              Dated:

            	
              January
                22, 2007

            	 	
              Grey
                K Fund LP 

            
	 	 	 	 	
              By:
                RNK Capital LLC, its Investment

            
	 	 	 	 	
              Manager

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	
              /s/
                Robert Kolton

            
	 	 	 	
              Name:

            	
              Robert
                Kolton

            
	 	 	 	
              Title:

            	
              Managing
                Member

            
	 	 	 	 	 
	 	 	 	 	 
	
              Dated:

            	
              January
                22, 2007

            	 	
              Grey
                K Offshore Fund Ltd.

            
	 	 	 	 	
              By:
                RNK Capital LLC, its Investment

            
	 	 	 	 	
              Manager

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	
              /s/
                Robert Kolton

            
	 	 	 	
              Name:

            	
              Robert
                Kolton

            
	 	 	 	
              Title:

            	
              Managing
                Member

            
	 	 	 	 	 
	 	 	 	 	 
	
              Dated:

            	
              January
                22, 2007

            	 	
              Provident
                Premier Master Fund Ltd.

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	
              /s/
                Steven W. Winters

            
	 	 	 	
              Name:

            	
              Steven
                W. Winters

            
	 	 	 	
              Title:

            	
              Attorney-In-Fact

            
	 	 	 	 	 
	 	 	 	 	 
	
              Dated:

            	
              undated

            	 	
              Atlas
                Master Fund Ltd.

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	
              /s/
                Scott Schroeder

            
	 	 	 	
              Name:

            	
              Scott
                Schroeder

            
	 	 	 	
              Title:

            	
              Authorized
                Signatory

            
	 	 	 	 	 
	 	 	 	 	 
	
              Dated:

            	
              January
                22, 2007

            	 	
              Gemini
                Master Fund, Ltd.

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	
              /s/
                Steven W. Winters

            
	 	 	 	
              Name:

            	
              Steven
                W. Winters

            
	 	 	 	
              Title:

            	
              President
                of the Investment Manager

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      A

     

    This
      is
      SCHEDULE A attached to and forming part of a Settlement Agreement and Release
      of
      all Claims, dated as of January 22, 2007, among Deep Well Oil & Gas, Inc.,
      Grey K Fund LP, Grey K Offshore Fund Ltd., Provident Premier Master Fund Ltd.,
      Atlas Master Fund Ltd. and Gemini Master Fund, Ltd.

    

    
      	
              NAME

               

            	
              NUMBER
                OF SHARES

            
	
              Provident
                Premier Master Fund, Ltd.

              c/o
                Gemini Strategies, LLC

              12220
                El Camino Real, Suite 400

              San
                Diego, CA 92130 U.S.A. 

               

              Contact:
                Mr. Steven Winters

              (858)
                480-2828

               

            	
              200,000

            
	
              Grey
                K Fund, LP

              c/o
                RNK Capital LLC

              6th
                Floor, 527 Madison Ave.

              New
                York, NY 10022 U.S.A.

               

              Contact:
                Mr. Andrew Farago

              (212)
                419-3967

               

            	
              373,333

            
	
              Grey
                K Offshore Fund, Ltd.

              c/o
                RNK Capital LLC

              6th
                Floor, 527 Madison Avenue

              New
                York, NY 10022 U.S.A.

               

              Contact:
                Mr. Andrew Farago

              (212)
                419-3967

               

            	
              288,000

            
	
              Atlas
                Master Fund, Ltd.

              c/o
                RNK Capital LLC

              6th
                Floor, 527 Madison Avenue

              New
                York NY 10022 U.S.A.

               

              Contact:
                Mr. Andrew Farago

              (212)
                419-3967

               

            	
              256,000

            
	
              Gemini
                Master Fund, Ltd.

              c/o
                Gemini Strategies, LLC

              12220
                El Camino Real, Suite 400

              San
                Diego, CA 92130 U.S.A.

               

              Contact:
                Mr. Steven Winters

              (858)
                480-2828

               

            	
              482,667

            
	
              TOTAL
                SHARES

               

            	
              1,600,000
                (one million six hundred
                thousand)

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      B

     

    This
      is
      SCHEDULE B attached to and forming part of a Settlement Agreement and Release
      of
      all Claims, dated as of January 22, 2007, among Deep Well Oil & Gas, Inc.,
      Grey K Fund LP, Grey K Offshore Fund Ltd., Provident Premier Master Fund Ltd.,
      Atlas Master Fund Ltd. and Gemini Master Fund, Ltd.

    

    
      	
              NAME

               

            	
              NUMBER
                OF SHARES

            
	
               

              Provident
                Premier Master Fund, Ltd.

            	
               

              1,250,000
                

            
	
               

              Grey
                K Fund, LP

            	
               

              625,000

            

    

     

    
      
        
        

      

      
        12METALLINE
      MINING COMPANY

    2000
      EQUITY INCENTIVE PLAN

    

    ARTICLE
      I

    ESTABLISHMENT
      AND TERM

    

    Section
      1.01 Establishment; Definitions.
      This
      Plan was adopted by the Board on December 22, 2000 to become effective on
      December 22, 2000. All capitalized terms used in this Plan are defined in
      Appendix A attached to the Plan.

    

    Section
      1.02 Term.
      The
      Board may suspend or terminate the Plan at any time. Unless sooner terminated,
      the Plan shall terminate on December 21, 2010, which shall be within ten (10)
      years from the date the Plan is adopted by the Board or approved by the
      stockholders of the Company, whichever is earlier. No Equity Awards may be
      granted under the Plan while the Plan is suspended or after it is terminated.
      Rights and obligations under any Equity Award granted while the Plan is in
      effect shall not be impaired by suspension or termination of the Plan, except
      with the consent of the person to whom the Equity Award was
      granted.

    

    ARTICLE
      II

    STRUCTURE
      AND PURPOSE

    

    Section
      2.01 Structure of Plan.
      The
      Equity Awards issued under the Plan shall be either, in the discretion of the
      Board, (a) Options granted pursuant to Article VI of the Plan, including
      Incentive Stock Options and Non-statutory Stock Options, or (b) Stock bonuses
      or
      restricted Stock awards granted pursuant to Article VII of the Plan. All Options
      shall be designated as Incentive Stock Options or Non-statutory Stock Options
      at
      the time of grant.

    

    Section
      2.02 Purpose.
      The
      purpose of the Plan is to promote the interests of the Company by aligning
      the
      interests of selected eligible persons under the Plan with the interests of
      the
      stockholders of the Company and by providing to such persons an opportunity
      to
      obtain the benefits from ownership of the Company's Stock through the granting
      to such persons of Equity Awards. The Company, through the use of the Plan,
      seeks to attract and retain the services of Employees, Directors and
      Consultants, and to provide incentives for such persons to exert maximum efforts
      for the success of the Company and its Affiliates.

    

    ARTICLE
      III

    ADMINISTRATION

    

    Section
      3.01 Board; Delegation to Committee.
      The
      Board shall administer the Plan unless and until the Board delegates
      administration to a Committee. The Board may delegate administration of the
      Plan
      to a Committee composed of one or more members of the Board. In the discretion
      of the Board, the Committee may consist solely of Outside Directors. If
      administration is delegated to a Committee, the Committee shall have, in
      administering the Plan, all of the powers that were possessed by the Board
      prior
      to such delegation, subject, however, to such resolutions, not inconsistent
      with
      the provisions of the Plan, as may be adopted from time to time by the Board.
      If
      administration is delegated to a Committee, all references in this Plan to
      the
      Board shall thereafter be to the Committee. The Board may abolish the Committee
      at any time and revest in the Board the administration of the Plan.

    

    Section
      3.02 Administration.
      The
      Board shall have the power, consistent with the express provisions of the
      Plan:

    

    
      	 	
              (a)

            	
              To
                determine from time to time which of the eligible persons under the
                Plan
                shall be granted Equity Awards;

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 	
              (b)

            	
              To
                determine whether an Equity Award shall be an Incentive Stock Option,
                a
                Non-statutory Stock Option, a Stock bonus, a right to purchase restricted
                Stock, or a combination of the
                foregoing;

            

    

    

    
      	 	
              (c)

            	
              To
                determine how and when each Equity Award shall be granted, the provisions
                of each Equity Award granted including the time or times when a person
                shall be permitted to receive Stock pursuant to an Equity Award,
                and the
                number of shares with respect to which an Equity Award shall be granted
                to
                each such person;

            

    

    

    
      	 	
              (d)

            	
              To
                construe and interpret the Plan and Equity Awards granted under it,
                and to
                establish, amend and revoke rules and regulations for the Administration
                of such Plan and Equity Awards;

            

    

    

    
      	 	
              (e)

            	
              To
                correct any defect, omission or inconsistency in the Plan or in any
                Equity
                Award Agreement, in a manner and to the extent it shall deem necessary
                or
                expedient to make the Plan fully
                effective;

            

    

    

    
      	 	
              (f)

            	
              To
                amend the Plan or an Equity Award as provided in Article
                XI;

            

    

    

    
      	 	
              (g)

            	
              Generally,
                to exercise such powers and to perform such acts as the Board deems
                necessary or expedient to promote the best interests of the Company
                that
                are not in conflict with the provisions of the
                Plan.

            

    

    

    ARTICLE
      IV

    ELIGIBILITY

    

    Section
      4.01 Persons Eligible for Equity Awards.
      Incentive Stock Options may be granted only to Employees. Equity Awards other
      than Incentive Stock Options may be granted only to Employees, Directors, or
      Consultants.

    

    Section
      4.02 Other Limitations.
      Subject
      to the provisions of Article VIII relating to adjustments upon changes in Stock,
      no person shall be eligible to be granted Equity Awards covering more than
      250,000 shares of Stock in any calendar year.

    

    ARTICLE
      V

    SHARES
      SUBJECT TO THE PLAN

    

    Section
      5.01
      Subject
      to the provisions of Article VIII relating to adjustments upon changes in Stock,
      no more than 1,000,000 shares of Stock may be issued pursuant to Equity Awards.
      If any Equity Award shall for any reason expire or otherwise terminate, in
      whole
      or in part, without having been exercised in full, the Stock not acquired under
      such Equity Award shall revert to and again become available for issuance under
      the Plan. The Stock subject to the Plan may be unissued shares or reacquired
      shares, bought on the market or otherwise.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
      VI

    TERMS
      OF OPTIONS

    

    Section
      6.01 Form of Option.
      Subject
      to the provisions of the Plan, each Option shall be in such form and shall
      contain such terms and conditions as the Board shall determine. The provisions
      of separate Options need not be identical.

    

    Section
      6.02 Term.
      No
      Option shall be exercisable after the expiration of ten (10) years from the
      date
      it was granted.

    

    Section
      6.03 Exercise Price.
      The
      exercise price of each Incentive Stock Option shall be not less than one hundred
      percent (100%) of the Fair Market Value of the Stock subject to the Option
      on
      the date the Option is granted. The exercise price of each Non-statutory Stock
      Option shall be the exercise price determined by the Board of Directors.
      Notwithstanding the foregoing, an Option (whether an Incentive Stock Option
      or a
      Non-statutory Stock Option) may be granted with an exercise price lower than
      that otherwise provided in this Section 6.03 if such Option is granted pursuant
      to an assumption or substitution for another option in a manner satisfying
      the
      provisions of Section 424(a) of the Code.

    

    Section
      6.04 Payment.
      The
      purchase price of Stock acquired pursuant to an Option shall be paid, to the
      extent permitted by applicable statutes and regulations, either (a) in cash
      at
      the time the Option is exercised, or (b) at the discretion of the Board or
      the
      Committee, determined at the time of the grant of the Option, (1) by delivery
      to
      the Company of other equity securities of the Company, (2) according to a
      deferred payment or other arrangement with the person to whom the Option is
      granted or to whom the Option is transferred pursuant to Section 6.05, (3)
      in
      any other form of legal consideration that may be acceptable to the Board,
      or
      (4) any combination of the foregoing.

    

    Section
      6.05 Transferability.
      An
      Incentive Stock Option shall not be transferable except by will or by the laws
      of descent and distribution, and shall be exercisable during the lifetime of
      the
      person to whom the Incentive Stock Option is granted only by such person. Unless
      otherwise provided in the Equity Award Agreement, a Non-statutory Stock Option
      shall not be transferable except by will or by the laws of descent and
      distribution or pursuant to a qualified domestic relations order.

    

    Section
      6.06 Vesting.
      The
      total number of shares of Stock subject to an Option may, but need not, be
      allotted in periodic installments (which may, but need not, be equal). The
      Option may be subject to such other terms and conditions on the time or times
      when it may be exercised (which may be based on performance or other criteria)
      as the Board may deem appropriate.

    

    Section
      6.07 Termination of Employment or Relationship as a Director or
      Consultant.
      Unless
      otherwise provided in the Equity Award Agreement relating to an Option, in
      the
      event of a Termination (other than upon the Optionee’s death or Disability), the
      Optionee may exercise his or her Option (to the extent that the Optionee was
      entitled to exercise it at the date of Termination) but only within such period
      of time ending on the earlier of (a) the date that is [thirty (30) days] after
      the date of Termination, or (b) the expiration of the term of the Option as
      set
      forth in the Equity Award Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
      6.08 Disability of Optionee. Unless
      otherwise provided in the Equity Award Agreement relating to an Option, in
      the
      event of a Termination as a result of the Optionee’s Disability, the Optionee
      may exercise his or her Option (to the extent that the Optionee was entitled
      to
      exercise it at the date of Termination), but only within such period of time
      ending on the earlier of (a) the date six (6) months after the date of
      Termination, or (b) the expiration of the term of the Option as set forth in
      the
      Equity Award Agreement.

    

    Section
      6.09 Death of Optionee.
      Unless
      otherwise provided in the Equity Award Agreement relating to an Option, in
      the
      event of a Termination as a result of the Optionee’s death, the Option may be
      exercised (to the extent the Optionee was entitled to exercise it at the date
      of
      Termination) by the Optionee’s estate or by a person who acquired the right to
      exercise the Option by bequest or inheritance, but only within the period ending
      on the earlier of (a) the date twelve (12) months after the date of Termination,
      or (b) the expiration of the term of the Option as set forth in the Equity
      Award
      Agreement.

    

    Section
      6.10 Incentive Stork Option Limitations.
      The
      following limitations shall apply to a grant of an Incentive Stock
      Option:

    

    
      	 	
              (a)

            	
              If,
                at the time of the grant of an Incentive Stock Option, the Optionee
                owns
                (or is deemed to own pursuant to Section 424(d) of the Code) equity
                securities possessing more than ten percent (10%) of the total combined
                voting power of all classes of equity securities of the Company or
                of any
                of its Affiliates, the exercise price of such Incentive Stock Option
                shall
                be at least one-hundred and ten percent (110%) of the Fair Market
                Value of
                such Stock on the date of grant and the Incentive Stock Option shall
                terminate on the date that is within five (5) years after the date
                of
                grant.

            

    

    

    
      	 	
              (b)

            	
              If
                the aggregate Fair Market Value (determined at the time of grant)
                of Stock
                with respect to which Incentive Stock Options are exercisable for
                the first time by the Optionee during any calendar year under all
                plans of
                the Company and its Affiliates exceeds one-hundred thousand dollars
                ($100,000), the Options or portions thereof that exceed such limit
                (according to the order in which they were granted) shall be treated
                as
                Non-statutory Stock Options.

            

    

    

    Section
      6.11 Re-Load Options.
      The
      Board may, in its discretion, include as part of any Equity Award Agreement
      relating to an Option a provision entitling the Optionee to a further Option
      in
      the event the to
      Optionee
      exercises the Option, in whole or in part, by surrendering other shares of
      Stock
      in accordance with this Plan and the terms and conditions of the Equity Award
      Agreement. Any such Re-Load Option (a) shall be for a number of shares equal
      to
      the number of shares surrendered as part or all of the exercise price of such
      Option, (b) shall have the same expiration date as the original Option, and
      (c)
      shall have an exercise price equal to one-hundred percent (100%) of the Fair
      Market Value of the Stock subject to the Re-Load Option on the date of exercise
      of the original Option. Any such Re-Load Option may be an Incentive Stock Option
      or a Non-statutory Stock Option, as the Board or Committee may designate at
      the
      time of the grant of the original Option, provided, however, that if a Re-Load
      Option is granted as an Incentive Stock Option, the terms of such Re-Load Option
      shall be subject to the provisions of Section 6.10 hereof. There shall be no
      Re-Load Options on a Re-Load Option. Any such Re-Load Option shall be subject
      to
      the availability of sufficient shares under Article V and shall be subject
      to
      such other terms and conditions as the Board may determine that are not
      inconsistent with the express provisions of the Plan.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
      6.12 Cancellation and Regrant.
      The
      Board shall have the authority to effect, at any time and from time to time,
      (a)
      the repricing of any outstanding Options under the Plan, or (b) with the consent
      of the affected holders of Options, the cancellation of any outstanding Options
      under the Plan and the grant in substitution therefore of new Options under
      the
      Plan covering the same or different numbers of shares of Stock and having an
      exercise price per share as determined by the Board. Stock subject to an Option
      canceled under this Article VI, as well as Stock underlying a substitute Option
      that was granted at a reduced exercise price, shall both be counted against
      the
      maximum number of shares of Stock permitted to be granted as Equity Awards
      to
      any person in a single calendar year pursuant to Section 4.02 hereof. The
      provisions of this Section 6.12 shall be applicable only to the extent required
      by Section 162(m) of the Code.

    

    ARTICLE
      VII

    TERMS
      OF STOCK BONUSES AND RESTRICTED STOCK AWARDS

    

    Section
      7.01 Form of Stock Bonus or Restricted Stock Award.
      Subject
      to the provisions of the Plan, each Stock bonus or restricted Stock award shall
      be in such form and shall contain such terms and conditions as the Board shall
      determine. The provisions of separate stock bonuses or restricted stock awards
      need not be identical.

    

    Section
      7.02 Purchase Price.
      The
      purchase price, if any, for any Stock granted as a Stock bonus or restricted
      Stock award shall be such amount as the Board shall determine and designate
      in
      the Equity Award Agreement. Notwithstanding the foregoing, the Board may
      determine that eligible participants in the Plan may be awarded Stock in
      consideration for past services rendered to the Company or an Affiliate thereof
      or for the benefit of the Company or an Affiliate thereof.

    

    Section
      7.03 Transferability.
      Unless
      otherwise provided in the Equity Award Agreement, Stock awarded or purchased
      pursuant to this Article VII may not be transferred to any person, except by
      will or the laws of descent and distribution or pursuant to a qualified domestic
      relations order, until any restrictions on transfer set forth in the Equity
      Award Agreement lapse.

    

    Section
      7.04 Payment.
      The
      purchase price, if any, of Stock acquired pursuant to a Stock bonus or
      restricted Stock award shall be paid, to the extent permitted by applicable
      statutes and regulations, either (a) in cash, or (b) at the discretion of the
      Board or the Committee, determined at the time of the grant of the Stock award,
      (1) by delivery to the Company of other equity securities of the Company, (2)
      according to a deferred payment or other arrangement with the person to whom
      the
      Stock award is granted or to whom the Option is transferred pursuant to Section
      7.03, (3) by electing to receive the Stock in lieu of other compensation payable
      to the person by the Company or an Affiliate thereof or for the benefit of
      the
      Company or an Affiliate thereof, (4) in consideration for past services rendered
      by the person to the Company or for its benefit, (5) in any other form of legal
      consideration that may be acceptable to the Board, or (6) any combination of
      the
      foregoing.

    

    Section
      7.05 Vesting.
      Shares
      of Stock sold or awarded under Article VII of the Plan may, but need not, be
      subject to repurchase option or right of first refusal in favor of the
      Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
      VIII

    ADJUSTMENTS
      UPON CHANGES IN STOCK; CHANGE IN CONTROL

    

    Section
      8.01 Change in Stock.
      If any
      change is made in the Stock subject to the Plan, through a merger,
      consolidation, reorganization, recapitalization, reincorporation, stock
      dividend, dividend in property other than cash, stock split, liquidating
      dividend, combination of shares, exchange of shares, change in corporate
      structure or other transaction not involving the receipt of consideration by
      the
      Company, the Plan will be appropriately adjusted in the class(es) and maximum
      number of shares subject to the Plan pursuant to Article V, and the outstanding
      Equity Awards will be appropriately adjusted in the class(es) and number of
      shares subject to and the exercise price of such outstanding Equity Awards.
      Such
      adjustments shall be made by the Board at the time of the change in the Stock,
      whether or not specifically provided for in any outstanding Equity Award. The
      Board’s determination shall be final, binding and conclusive.

    

    Section
      8.02 Change in Control.
      The
      Board may, in its discretion, provide for the acceleration of the time at which
      an Equity Award may first be exercised or the time during which an Equity Award
      or any part thereof will vest upon a change of control of the Company under
      terms and conditions set forth in the Equity Award Agreement.

    

    ARTICLE
      IX

    COVENANTS
      OF THE COMPANY

    

    Section
      9.01 Reservation of Stock.
      The
      Company shall reserve from its authorized but unissued Stock the number of
      shares of Stock issuable pursuant to outstanding Equity Awards.

    

    Section
      9.02 Regulatory Authority.
      The
      Company shall seek to obtain from each regulatory commission or agency having
      jurisdiction over the Plan such authority as may be required to issue and sell
      shares of Stock upon the exercise of outstanding Equity Awards, provided,
      however, that this undertaking shall not require the Company to register under
      the Securities Act of 1933, as amended, either the Plan, any Equity Award or
      any
      Stock issued or issuable pursuant to any such Equity Award. If, after reasonable
      efforts, the Company is unable to obtain from any such regulatory commission
      or
      agency the authority for the lawful issuance and sale of Stock under the Plan,
      the Company shall be relieved from any liability for failure to issue and sell
      Stock upon exercise of such Equity Awards unless and until such authority is
      obtained.

    

    ARTICLE
      X

    GENERAL
      PROVISIONS

    

    Section
      10.01 Acceleration of Vesting.
      Notwithstanding any provision in any Equity Award Agreement, the Board may,
      in
      its discretion, accelerate the time at which an Equity Award may first be
      exercised or the time during which an Equity Award or any part thereof will
      vest.

    

    Section
      10.02 Stockholder Rights.
      Except
      as set forth in the Equity Award Agreement, no holder of any Equity Award shall
      be deemed to be the holder of, or to have any of the rights of a holder with
      respect to, any Stock subject to such Equity Award unless and until such person
      has satisfied all requirements for vesting or exercise of the Equity Award
      pursuant to its terms.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Section
      10.03 Employment or Other Services.
      Nothing
      in the Plan, any Equity Award Agreement or any instrument executed pursuant
      thereto shall (a) confer upon any Employee or other holder of a Equity Award
      any
      right to continue in the employ of the Company or any Affiliate, (b) confer
      upon
      any Director or Consultant or other holder of an Equity Award any right to
      continue acting as a Director or Consultant, (c) affect the right of the Company
      or any Affiliate to terminate the employment of any Employee with or without
      cause, (d) affect the right of the Company's Board of Directors and/or the
      Company’s stockholders to remove any Director pursuant to the terms of the
      Company’s charter documents and the provisions of applicable law, or (e) affect
      the right of the Company to terminate the relationship of any Consultant
      pursuant to the terms of such Consultant’s agreement with the Company or
      Affiliate.

    

    Section
      10.04 Securities Requirements.
      The
      Company may require any person to whom an Equity Award is granted, or any person
      to whom an Equity Award is transferred, as a condition of exercising or
      acquiring Stock under any Equity Award, to give written assurances satisfactory
      to the Company (a) as to such person’s knowledge and experience in financial and
      business matters, (b) that he or she is capable of evaluating, alone or together
      with a purchaser representative, the merits and risks of exercising the Equity
      Award, and (c) that such person is acquiring the Stock subject to the Equity
      Award for such person's own account and not with any view to a distribution
      of
      the Stock. The Company may, upon advice of counsel to the Company, place legends
      on stock certificates issued under the Plan as such counsel deems necessary
      or
      appropriate in order to comply with applicable securities laws, including,
      but
      not limited to, legends restricting the transfer of the Stock.

    

    Section
      10.05 Tax Withholding.
      If
      provided for in an Equity Award Agreement, the holder of a Equity Award may
      satisfy any federal, state or local tax withholding obligation relating to
      the
      exercise or acquisition of Stock under an Equity Award by (a) tendering a cash
      payment, (b) authorizing the Company to withhold shares from the shares of
      the
      Stock otherwise issuable to such person as a result of the exercise or
      acquisition of Stock under the Equity Award, (c) delivering to the Company
      unencumbered shares of equity securities of the Company held by such person
      by,
      or (d) any combination of the foregoing.

    

    ARTICLE
      XI

    AMENDMENT
      OF THE PLAN AND EQUITY AWARDS

    

    Section
      11.01 Amendment of Plan; Stockholder Approval.
      The
      Board may, in its discretion, amend the Plan. Such amendment shall be effective
      on the date the Board determines, except for amendments that require the
      approval of the Company’s stockholders, in which case such amendments shall be
      effective on the date the Company’s stockholders approve the amendment. No such
      amendment shall adversely affect any outstanding Equity Award without the
      holder’s written consent. The Board may, in its discretion, submit any amendment
      to the Plan for stockholder approval.

    

    Section
      11.02 Changes in Law.
      The
      Board may amend the Plan as it deems necessary or advisable to provide eligible
      Employees, Director or Consultants with the maximum benefits provided or to
      be
      provided under the provisions of the Plan relating to Incentive Stock Options
      and to bring the Plan or Incentive Stock Options granted under the Plan into
      compliance therewith. The Board may also, in its discretion, amend the Plan
      to
      take into account changes in law and tax and accounting rules (including any
      pooling-of-interest rules), as well as other developments, and to grant Equity
      Awards that qualify for beneficial treatment under such rules.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    APPENDIX
      A

    DEFINITIONS

    

    "Affiliate"
      means
      any parent corporation or subsidiary corporation, whether now or hereafter
      existing, as those terms are defined in Sections 424(e) and (f) respectively,
      of
      the Code.

    

    "Board"
      means
      the Board of Directors of the Company.

    

    "Code"
      means
      the Internal Revenue Code of 1986, as amended, and the regulations promulgated
      thereunder.

    

    "Committee"
      means a
      Committee appointed by the Board in accordance with Section 3.01 of the
      Plan.

    

    "Company"
      means
      Metalline Mining Company, a Nevada corporation.

    

    "Consultant"
      means
      any person, including an advisor, engaged by the Company or an Affiliate to
      render bona fide consulting services (other than services in connection with
      the
      offer or sale of securities in a capital-raising transaction) and who is
      compensated for such services provided, however, that the term "Consultant"
      shall not include Directors who are paid only a director's fee by the Company
      or
      who are not compensated by the Company for their services as
      Directors.

    

    "Director"
      means a
      member of the Board.

    

    "Disability"
      means
      the physical inability, as determined in good faith by the Board, to serve
      in
      the person’s capacity as an Employee, Director or Consultant, for a period of at
      least six (6) months.

    

    "Employee"
      means
      any person, including officers and Directors, employed by the Company or any
      Affiliate of the Company. Neither service as a Director nor payment of a
      director’s fee by the Company shall be sufficient to constitute "employment" by
      the Company.

    

    "Equity
      Award"
      means
      any right granted under the Plan, including any Option, any Stock bonus or
      any
      right to purchase restricted Stock.

    

    "Equity
      Award Agreement"
      means a
      written agreement between the Company and a holder of an Equity Award evidencing
      the terms and conditions of an individual Equity Award grant. Each Equity Award
      Agreement shall be subject to the terms and conditions of the Plan.

    

    "Fair
      Market Value" means,
      as
      of any date, the value of the Stock determined as follows:

    

    
      	 	
              ·

            	
              [If
                the Stock is listed on any established stock exchange or a national
                market
                system, including without limitation the Nasdaq National Market or
                Nasdaq
                Small Cap Market, the Fair Market Value of a share of Stock shall
                be the
                last sales price for the Stock (or the closing bid, if no sales were
                reported) as quoted on such system or exchange, as reported in the
                Wall
                Street Journal or such other source as the Board deems
                reliable.]

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 	
              ·

            	
              In
                the absence of an established market for the Stock, the Fair Market
                Value
                shall be determined in good faith by the
                Board.

            

    

    

    "Incentive
      Stock Option"
      means an
      Option intended to qualify as an incentive stock option within the meaning
      of
      Section 422 of the Code and the regulations promulgated thereunder.

    

    "Non-statutory
      Stock Option"
      means an
      Option not intended to qualify as an Incentive Stock Option.

    

    "Option"
      means a
      stock option granted pursuant to the Plan.

    

    "Optionee"
      means an
      Employee, Director or Consultant who holds an outstanding Option.

    

    "Outside
      Director"
      means a
      Director who either (a) is not a currant Employee of the Company or an
      "affiliated corporation" (within the meaning of Treasury regulations promulgated
      under Section 162(m) of the Code), is not a former Employee of the Company
      or an
      "affiliated corporation" receiving compensation for prior services (other than
      benefits under a tax qualified pension plan), was not an officer of the Company
      or an "affiliated corporation” at any time, and is not currently receiving
      direct or indirect remuneration from the Company or an "affiliated corporation"
      for services in any capacity other than as a Director, or (b) is otherwise
      considered an "outside director" for purposes of Section 162(m) of the
      Code.

    

    "Plan"
      means
      this Equity Incentive Plan.

    

    "Re-Load
      Option"
      means an
      Option, granted in the event the Optionee exercises another Option by
      surrendering other shares of Stock, to purchase the number of shares of Stock
      so
      surrendered.

    

    "Stock"
      means
      the Company's Common Stock, $0.01 par value.

    

    "Termination"
      means
      the termination or interruption of an Employee's, Director’s or Consultant’s
      employment or relationship with the Company. The Board, in its sole discretion,
      may determine whether a Termination has occurred in the case of: any leave
      of
      absence approved by the Board, including sick leave, military leave, or any
      other personal leave.

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