Document:

EX10-9

EXHIBIT 10.9

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2007 STOCK INCENTIVE PLAN

 

 

 

 

 

For:

 

 

STRATEGIC AMERICAN OIL CORPORATION

 

 

 

 

 

 

Strategic American Oil Corporation

Suite 320, 1111 West Hastings Street, Vancouver, British Columbia, Canada, V6E 2J3

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STRATEGIC AMERICAN OIL CORPORATION

 

2007 STOCK INCENTIVE PLAN

 

1.                      PURPOSE

1.1                   The purpose of this Stock Incentive Plan of Strategic American Oil Corporation (the "Company") is to advance the interests of the Company by encouraging Eligible Participants (as herein defined) to acquire shares of the Company, thereby increasing their proprietary interest in the Company, encouraging them to remain associated with the Company and furnish them with additional incentive in their efforts on behalf of the Company in the conduct of their affairs. 

1.2                   This Plan is specifically designed for Eligible Participants of the Company who are residents of the United States and/or subject to taxation in the United States, although Awards (as herein defined) under this Plan may be issued to other Eligible Participants.

2.                      DEFINITIONS

2.1                   As used herein, the following definitions shall apply:
(a)        "Administrator" means a Committee of the Board duly appointed by the Board, or otherwise the Board; 

(b)         "Affiliate" and "Associate" have the meanings ascribed to such terms in Rule 12b 2 promulgated under the Exchange Act;

(c)         "Applicable Laws" means the legal requirements relating to the administration of stock incentive plans, if any, under applicable provisions of federal securities laws, state corporate laws, state or provincial securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any foreign jurisdiction applicable to Awards granted to residents therein;

(d)         "Award" means the grant of an Option, SAR, Restricted Stock, unrestricted Shares, Restricted Stock Unit, Deferred Stock Unit or other right or benefit under this Plan; 

(e)         "Award Agreement" means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto;

(f)         "Award Right" means each right to acquire a Share pursuant to an Award;

(g)         "Board" means the Board of Directors of the Company;

(h)         "Cause" means, with respect to the termination by the Company or a Related Entity of the Grantee's Continuous Service, that such termination is for 'Cause' as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee's:

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 (i)        refusal or failure to act in accordance with any specific, lawful direction or order of the Company or a Related Entity;

(ii)       unfitness or unavailability for service or unsatisfactory performance (other than as a result of Disability);

(iii)      performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity;

(iv)       dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; or

(v)        commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person;

(i)         "Change in Control" means, except as provided below, a change in ownership or control of the Company effected through any of the following transactions:
(i)        the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d 3 of the Exchange Act) of securities possessing more than 50% of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's shareholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such shareholders accept;

(ii)       a change in the composition of the Board over a period of 36 months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors; 

(iii)      the sale or exchange by the Company (in one or a series of transactions) of all or substantially all of its assets to any other person or entity; or

(iv)       approval by the shareholders of the Company of a plan to dissolve and liquidate the Company. 

Notwithstanding the foregoing, the following transactions shall not constitute a "Change of Control":

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(i)        the closing of any public offering of the Company's securities pursuant to an effective registration statement filed under the United States Securities Act of 1933, as amended, 

(ii)       the closing of a public offering of the Company's securities through the facilities of any stock exchange; or

(iii)      with respect to an Award that is subject to Section 409A of the Code, and payment or settlement of such Award is to be accelerated in connection with an event that would otherwise constitute a Change of Control, no event set forth previously in this definition shall constitute a Change of Control for purposes of this Plan or any Award Agreement unless such event also constitutes a "change in the ownership", "change in the effective control" or "change in the ownership of a substantial portion of the assets of the corporation" as defined under Section 409A of the Code and Treasury guidance formulated thereunder which guidance currently provides that: 
(A)        a "change in ownership" of a corporation shall be deemed to have occurred if any one person or more than one person acting as a group acquires stock of a corporation that constitutes more than 50% of the total Fair Market Value or total voting power of the stock of the corporation. Stock acquired by any person or group of people who already owns more than 50% of such total Fair Market Value or total voting power of stock shall not trigger a change in ownership;

(B)        a "change in the effective control" of a corporation generally shall be deemed to have occurred if within a 12-month period either: 
(I)        any one person or more than one person acting as a group acquires ownership of stock possessing 35% or more of the total voting power of the stock of the corporation; or 

(II)     a majority of the members of the corporation's board of directors is replaced by directors whose appointment or election is not endorsed by a majority of the members of the corporation's board of directors prior to the date of the appointment or election; and

(C)        a "change in the ownership of a substantial portion of the corporation's assets" generally is deemed to occur if within a 12-month period any person, or more than one person acting as a group, acquires assets from the corporation that have a total gross fair market value at least equal to 40% of the total gross fair market value of all the corporation's assets immediately prior to such acquisition.  The gross fair market value of assets is determined without regard to any liabilities;

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(j)         "Code" means the United States Internal Revenue Code of 1986, as amended;

(k)         "Committee" means the Compensation Committee or any other committee appointed by the Board to administer this Plan in accordance with the provisions of this Plan;

(l)         "Common Stock" means the common stock of the Company;

(m)         "Company" means Strategic American Oil Corporation, a Nevada corporation;

(n)         "Consultant" means any person (other than an Employee) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity;

(o)         "Continuing Directors" means members of the Board who either (i) have been Board members continuously for a period of at least 36 months, or (ii) have been Board members for less than 36 months and were appointed or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such appointment or nomination was approved by the Board;

(p)         "Continuous Service" means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant that is not interrupted or terminated. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers between locations of the Company or among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, maternity or paternity leave, military leave, or any other authorized personal leave. For purposes of incentive stock options, no such leave may exceed 90 calendar days, unless reemployment upon expiration of such leave is guaranteed by statute or contract;

(q)         "Corporate Transaction" means any of the following transactions:
(i)        a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the jurisdiction in which the Company is organized;

(ii)       the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company's subsidiary corporations) in connection with the complete liquidation or dissolution of the Company; or

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(iii)     any reverse merger in which the Company is the surviving entity but in which securities possessing more than 50% of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger;

(r)         "Covered Employee" means an Employee who is a "covered employee" under Section 162(m)(3) of the Code;

(s)         "Deferred Stock Units" means Awards that are granted to Directors and are subject to the additional provisions set out in Subpart A which is attached hereto and which forms a material part hereof;

(t)         "Director" means a member of the Board or the board of directors of any Related Entity;

(u)         "Disability" or "Disabled" means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment.  A Grantee shall not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.  Notwithstanding the above, (i) with respect to an Incentive Stock Option, "Disability" or "Disabled" shall mean permanent and total disability as defined in Section 22(e)(3) of the Code and (ii) to the extent an Option is subject to Section 409A of the Code, and payment or settlement of the Option is to be accelerated solely as a result of the Eligible Participant's Disability, Disability shall have the meaning ascribed thereto under Section 409A of the Code and the Treasury guidance promulgated thereunder;

(v)         "Disinterested Shareholder Approval" means approval by a majority of the votes cast by all the Company's shareholders at a duly constituted shareholders' meeting, excluding votes attached to shares beneficially owned by Insiders;

(w)         "Eligible Participant" means any person who is an Officer, a Director, an Employee or a Consultant, including individuals who are foreign nationals or are employed or reside outside the United States;

(x)         "Employee" means any person who is a full-time or part-time employee of the Company or any Related Entity;

(y)         "Exchange Act" means the United States Securities Exchange Act of 1934, as amended;

(z)         "Fair Market Value" means, as of any date, the value of a Share determined in good faith by the Administrator.  By way of illustration, but not limitation, for the purpose of this definition, good faith shall be met if the Administrator employs the following methods:

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(i)        Listed Stock. If the Common Stock is traded on any established stock exchange or quoted on a national market system, fair market value shall be (A) the closing sales price for the Common Stock as quoted on that stock exchange or system for the date the value is to be determined (the "Value Date") as reported in The Wall Street Journal or a similar publication, or (B) if the rules of the applicable stock exchange require, the volume-weighted average trading price for five days prior to the date the Board approves the grant of the Award.  If no sales are reported as having occurred on the Value Date, fair market value shall be that closing sales price for the last preceding trading day on which sales of Common Stock is reported as having occurred.  If no sales are reported as having occurred during the five trading days before the Value Date, fair market value shall be the closing bid for Common Stock on the Value Date.  If the Common Stock is listed on multiple exchanges or systems, fair market value shall be based on sales or bids on the primary exchange or system on which Common Stock is traded or quoted.  If the rules of any applicable stock exchange or system require a different method of calculating fair market value, then such method as is required by those rules;

(ii)       Stock Quoted by Securities Dealer. If Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported on any established stock exchange or quoted on a national market system, fair market value shall be the mean between the high bid and low asked prices on the Value Date.  If no prices are quoted for the Value Date, fair market value shall be the mean between the high bid and low asked prices on the last preceding trading day on which any bid and asked prices were quoted;

(iii)      No Established Market. If Common Stock is not traded on any established stock exchange or quoted on a national market system and is not quoted by a recognized securities dealer, the Administrator will determine fair market value in good faith.  The Administrator will consider the following factors, and any others it considers significant, in determining fair market value: (A) the price at which other securities of the Company have been issued to purchasers other than Employees, Directors, or Consultants; (B) the Company's net worth, prospective earning power, dividend-paying capacity, and non-operating assets, if any; and (C) any other relevant factors, including the economic outlook for the Company and the Company's industry, the Company's position in that industry, the Company's goodwill and other intellectual property, and the values of securities of other businesses in the same industry;

(iv)       Additional Valuation.  For publicly traded companies, any valuation method permitted under Section 20.2031-2 of the Estate Tax Regulations; or

(v)        Non-Publicly Traded Stock.  For non-publicly traded stock, the fair market value of the Common Stock at the Grant Date based on an average of the fair market values as of such date set forth in the opinions of completely independent and well-qualified experts (the Participant's status as a majority or minority shareholder may be taken into consideration).

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Regardless of whether the Common Stock offered under the Award is publicly traded, a good faith attempt under this definition shall not be met unless the fair market value of the Common Stock on the Grant Date is determined with regard to nonlapse restrictions (as defined in Section 1.83-3(h) of the Treasury Regulations) and without regard to lapse restrictions (as defined in Section 1.83-3(i) of the Treasury Regulations);

(aa)       "Grantee" means an Eligible Participant who receives an Award pursuant to an Award Agreement;

(bb)       "Grant Date" means the date the Administrator approves that grant of an Award.  However, if the Administrator specifies that an Award's Grant Date is a future date or the date on which a condition is satisfied, the Grant Date for such Award is that future date or the date that the condition is satisfied;

(cc)       "Incentive Stock Option" means an Option within the meaning of Section 422 of the Code;

(dd)       "Insider" means:
(i)       a Director or Senior Officer of the Company;

(ii)      a Director or Senior Officer of a person that is itself an Insider or Subsidiary of the Company;

(iii)     a person that has
(A)       direct or indirect beneficial ownership of, 

(B)       control or direction over, or

(C)       a combination of direct or indirect beneficial ownership of and control or direction over,

securities of the Company carrying more than 10% of the voting rights attached to all the Company's outstanding voting securities, excluding, for the purpose of the calculation of the percentage held, any securities held by the person as underwriter in the course of a distribution; or 

(vi)      the Company itself, if it has purchased, redeemed or otherwise acquired any securities of its own issue, for so long as it continues to hold those securities;

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(ee)       "Named Executive Officer" means, if applicable, an Eligible Participant who, as of the date of vesting and/or payout of an Award, is one of the group of "Covered Employees," as defined;

(ff)       "Non-Qualified Stock Option" means an Option which is not an Incentive Stock Option;

(gg)       "Officer" means a person who is an officer, including a Senior Officer, of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder;

(hh)       "Option" means an option to purchase Shares pursuant to an Award Agreement granted under the Plan;

(ii)       "Parent" means a "parent corporation", whether now or hereafter existing, as defined in Section 424(e) of the Code;

(jj)       "Performance - Based Compensation" means compensation qualifying as "performance-based compensation" under Section 162(m) of the Code;

(kk)       "Plan" means this 2006 Stock Incentive Plan as amended from time to time;

(ll)       "Related Entity" means any Parent or Subsidiary, and includes any business, corporation, partnership, limited liability company or other entity in which the Company, a Parent or a Subsidiary holds a greater than 50% ownership interest, directly or indirectly;

(mm)       "Related Entity Disposition" means the sale, distribution or other disposition by the Company of all or substantially all of the Company's interests in any Related Entity effected by a sale, merger or consolidation or other transaction involving that Related Entity or the sale of all or substantially all of the assets of that Related Entity;

(nn)       "Restricted Stock" means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as, established by the Administrator and specified in the related Award Agreement;

(oo)       "Restricted Stock Unit" means a notional account established pursuant to an Award granted to a Grantee, as described in this Plan, that is (i) valued solely by reference to Shares, (ii) subject to restrictions specified in the Award Agreement, and (iii) payable only in Shares; 

(pp)       "Restriction Period" means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance objectives, or the occurrence of other events as determined by the Administrator, in its sole discretion) or the Restricted Stock is not vested; 

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(qq)       "SAR" means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock;

(rr)       "Senior Officer" means:
(i)       the chair or vice chair of the Board, the president, a vice-president, the secretary, the treasurer or the general manager of the Company or a Related Entity;

(ii)      any individual who performs functions for a person similar to those normally performed by an individual occupying any office specified in Section 2.1(rr)(i) above; and

(iii)     the five highest paid employees of the Company or a Related Entity, including any individual referred to in Section 2.1(rr)(i) or 2.1(rr)(ii) and excluding a commissioned salesperson who does not act in a managerial capacity;

(ss)       "Share" means a share of the Common Stock; and

(tt)       "Subsidiary" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code.

3.                      STOCK SUBJECT TO THE PLAN

                         Number of Shares Available

	
3.1
	
(a)       Subject to the provisions of Section 18, the maximum aggregate number of Shares which may be issued pursuant to all Awards under this Plan is 10,000,000 (the "Maximum Number").  The maximum aggregate number of Shares that may be granted in the form of Incentive Stock Options shall be 10,000,000.  See Section 29 for Reservation of Shares.

(b)       Shares that have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan except that Shares (i) covered by an Award (or portion of an Award) which is forfeited or cancelled, expires or is settled in cash, or (ii) withheld to satisfy a Grantee's minimum tax withholding obligations, shall be deemed not to have been issued for purposes of determining the Maximum Number of Shares which may be issued under the Plan.  Also, only the net numbers of Shares that are issued pursuant to the exercise of an Award shall be counted against the Maximum Number.

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(c)       However, in the event that prior to the Award's cancellation, termination, expiration, forfeiture or lapse, the holder of the Award at any time received one or more elements of "beneficial ownership" pursuant to such Award (as defined by the United States Securities Exchange Commission (the "SEC"), pursuant to any rule or interpretations promulgated under Section 16 of the Exchange Act), the Shares subject to such Award shall not again be made available for regrant under the Plan.

                         Shares to Insiders

3.2                    Subject to Section 15.1(c) and 15.1(d), no Insider of the Company is eligible to receive an Award where:
(a)       the Insider is not a Director or Senior Officer of the Company;

(b)       any Award, together with all of the Company's other previously established or proposed Awards under the Plan could result at any time in:
(i)       the number of Shares reserved for issuance pursuant to Options granted to Insiders exceeding 50% of the outstanding issue of Common Stock; or

(ii)      the issuance to Insiders pursuant to the exercise of Options, within a one year period of a number of Shares exceeding 50% of the outstanding issue of the Common Stock;

provided, however, that this restriction on the eligibility of Insiders to receive an Award shall cease to apply if it is no longer required under any Applicable Laws.

                         Limitations on Award

3.3                    Unless and until the Administrator determines that an Award to a Grantee is not designed to qualify as Performance-Based Compensation, the following limits ("Award Limits") shall apply to grants of Awards to Grantees subject to the Award Limits by Applicable Laws under this Plan: 
(a)       Options and SARs.  Notwithstanding any provision in the Plan to the contrary (but subject to adjustment as provided in Section 18), the maximum number of Shares with respect to one or more Options and/or Stock Appreciation Rights that may be granted during any one calendar year under the Plan to any one Grantee shall be 5,000,000; all of which may be granted as Incentive Stock Options); and

(b)       Other Awards.  The maximum aggregate grant with respect to Awards of Restricted Stock, unrestricted Shares, Restricted Stock Units and Deferred Stock Units (or used to provide a basis of measurement for or to determine the value of Restricted Stock Units and Deferred Stock Units) in any one calendar year to any one Grantee (determined on the date of payment of settlement) shall be 5,000,000.

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4.                      ADMINISTRATION

                         Authority of Plan Administrator

4.1                    Authority to control and manage the operation and administration of this Plan shall be vested in a committee consisting of two or more members of the Board (the "Committee").  It is intended that the directors appointed to serve on the Committee shall be "non-employee directors" (within the meaning of Rule 16b-3 promulgated under the Exchange Act) and "outside directors" (within the meaning of Section 162(m) of the Code) to the extent that Rule 16b-3 and, if necessary for relief from the limitation under Section 162(m) of the Code and such relief sought by the Company, Section 162(m) of the Code, respectively, are applicable.  However, the mere fact that a Committee member shall fail to qualify under either of the foregoing requirements shall not invalidate any Award made by the Committee which Award is otherwise validly made under the Plan.  Members of the Committee may be appointed from time to time by, and shall serve at the pleasure of, the Board.  As used herein, the term "Administrator" means the Committee.

                         Powers of the Administrator

4.2                    Subject to Applicable Laws and the provisions of the Plan or subplans hereof (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the exclusive power and authority, in its discretion:
(a)       to construe and interpret this Plan and any agreements defining the rights and obligations of  the Company and Grantees under this Plan; 

(b)       to select the Eligible Participants to whom Awards may be granted from time to time hereunder;

(c)       to determine whether and to what extent Awards are granted hereunder;

(d)       to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder; 

(e)       to approve forms of Award Agreements for use under the Plan, which need not be identical for each Grantee;

(f)       to determine the terms and conditions of any Award granted under the Plan, including, but not limited to, the exercise price, grant price or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of the Award, and acceleration or waivers thereof, based in each case on such considerations as the Committee in its sole discretion determines that is not inconsistent with any rule or regulation under any tax or securities laws or includes an alternative right that does not disqualify an Incentive Stock Option under applicable regulations;

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(g)       to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee's rights under an existing Award shall not be made without the Grantee's consent unless as a result of a change in Applicable Law; 

(h)       to suspend the right of a holder to exercise all or part of an Award for any reason that the Administrator considers in the best interest of the Company;

(i)       subject to regulatory approval, amend or suspend the Plan, or revoke or alter any action taken in connection therewith, except that no general amendment or suspension of the Plan, shall, without the written consent of all Grantees, alter or impair any Award granted under the Plan unless as a result of a change in the Applicable Law;

(j)       to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable foreign jurisdictions and to afford Grantees favorable treatment under such laws; provided, however, that no Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan; 

(k)       to further define the terms used in this Plan; 

(l)       to correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award Agreement; 

(m)       to provide for rights of refusal and/or repurchase rights; 

(n)       to amend outstanding Award Agreements to provide for, among other things, any change or modification which the Administrator could have provided for upon the grant of an Award or in furtherance of the powers provided for herein that does not disqualify an Incentive Stock Option under applicable regulations unless the Grantee so consents;

(o)       to prescribe, amend and rescind rules and regulations relating to the administration of this Plan; and 

(q)       to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

                         Effect of Administrator's Decision

4.3                    All decisions, determinations and interpretations of the Administrator shall be conclusive and binding on all persons.  The Administrator shall not be liable for any decision, action or omission respecting this Plan, or any Awards granted or Shares sold under this Plan.  In the event an Award is granted in a manner inconsistent with the provisions of this Section 4, such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

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                         Action by Committee

4.4                    Except as otherwise provided by committee charter or other similar corporate governance documents, for purposes of administering the Plan, the following rules of procedure shall govern the Committee.  A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved unanimously in writing by the members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee.  Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Parent or Affiliate, the Company's independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

                         Limitation on Liability

4.5                    To the extent permitted by applicable law in effect from time to time, no member of the Committee shall be liable for any action or omission of any other member of the Committee nor for any act or omission on the member's own part, excepting only the member's own wilful misconduct or gross negligence, arising out of or related to this Plan.  The Company shall pay expenses incurred by, and satisfy a judgment or fine rendered or levied against, a present or former member of the Committee in any action against such person (whether or not the Company is joined as a party defendant) to impose liability or a penalty on such person for an act alleged to have been committed by such person while a member of the Committee arising with respect to this Plan or administration thereof or out of membership on the Committee or by the Company, or all or any combination of the preceding, provided, the Committee member was acting in good faith, within what such Committee member reasonably believed to have been within the scope of his or her employment or authority and for a purpose which he or she reasonably believed to be in the best interests of the Company or its stockholders.  Payments authorized hereunder include amounts paid and expenses incurred in settling any such action or threatened action.  The provisions of this Section 4.5 shall apply to the estate, executor, administrator, heirs, legatees or devisees of a Committee member, and the term "person" as used on this Section 4.5 shall include the estate, executor, administrator, heirs, legatees, or devisees of such person.

5.                      ELIGIBILITY

                         Except as otherwise provided, all types of Awards may be granted to Eligible Participants. An Eligible Participant who has been granted an Award may be, if he or she continues to be eligible, granted additional Awards.

6.                      AWARDS

                         Type of Awards

6.1                    The Administrator is authorized to award any type of arrangement to an Eligible Participant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of:

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(a)       Shares, including unrestricted Shares; 

(b)       Options;

(c)       SARs or similar rights with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions;

(d)       any other security with the value derived from the value of the Shares, such as Restricted Stock and Restricted Stock Units;

(e)       Deferred Stock Units;

(f)       Dividend Equivalent Rights, as defined in Section 13; or

(g)       any combination of the foregoing.

                         Designation of Award

6.2                    Each type of Award shall be designated in the Award Agreement.  In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option.  But see Section 7.3(a) regarding exceeding the Incentive Stock Option threshold.

7.                      GRANT OF OPTIONS; TERMS AND CONDITIONS OF GRANT

                         Grant of Options

	
7.1
	
(a)       One or more Options may be granted to any Eligible Participant.  Subject to the express provisions of this Plan, the Administrator shall determine from the Eligible Participants those individuals to whom Options under this Plan may be granted.  The Shares underlying a grant of an Option may be in the form of Restricted Stock or unrestricted Stock.

(b)       Further, subject to the express provisions of this Plan, the Administrator shall specify the Grant Date, the number of Shares covered by the Option, the exercise price and the terms and conditions for exercise of the Options.  As soon as practicable after the Grant Date, the Company shall provide the Grantee with a written Award Agreement in the form approved by the Administrator, which sets out the Grant Date, the number of Shares covered by the Option, the exercise price and the terms and conditions for exercise of the Option.

(c)       The Administrator may, in its absolute discretion, grant Options under this Plan at any time and from time to time before the expiration of this Plan.

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                         General Terms and Conditions

7.2                    Except as otherwise provided herein, the Options shall be subject to the following terms and conditions and such other terms and conditions not inconsistent with this Plan as the Administrator may impose:
(a)       Exercise of Option. The Administrator may determine in its discretion whether any Option shall be subject to vesting and the terms and conditions of any such vesting.  The Award Agreement shall contain any such vesting schedule;

(b)       Option Term.  Each Option and all rights or obligations thereunder shall expire on such date as shall be determined by the Administrator, but not later than ten years after the Grant Date (five years in the case of an Incentive Stock Option when the Optionee owns more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary (a "Ten Percent Stockholder")), and shall be subject to earlier termination as hereinafter provided;

(c)       Exercise Price.  The Exercise Price of any Option shall be determined by the Administrator when the Option is granted, at such Exercise Price as may be determined by the Administrator in the Administrator's sole and absolute discretion; provided, however, that the Exercise Price may not be less than 100% of the Fair Market Value of the Shares on the Grant Date with respect to any Incentive Stock Options which are granted and, provided further, that the Exercise Price of any Incentive Stock Option granted to a Ten Percent Stockholder shall not be less than 100% of the Fair Market Value of the Shares on the Grant Date.  Payment for the Shares purchased shall be made in accordance with Section 16 of this Plan.  The Administrator is authorized to issue Options, whether Incentive Stock Options or Non-qualified Stock Options, at an option price in excess of the Fair Market Value on the Grant Date, to determine the terms and conditions of any Award granted under the Plan, including, but not limited to, the exercise price, grant price or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of the Award, and acceleration or waivers thereof, based in each case on such considerations as the Committee in its sole discretion determines that is not inconsistent with any rule or regulation under any tax or securities laws or includes an alternative right that does not disqualify an Incentive Stock Option under applicable regulations;

(d)       Method of Exercise.  Options may be exercised only by delivery to the Company of a stock option exercise agreement (the "Exercise Agreement") in a form approved by the Administrator (which need not be the same for each Grantee), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and such representations and agreements regarding the Grantee's investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the exercise price for the number of Shares being purchased;

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 (e)       Exercise After Certain Events.
(i)       Termination of Continuous Services.
(A)       Options.
(I)       Termination of Continuous Services.  If for any reason other than Disability or death, a Grantee terminates Continuous Services with the Company or a Subsidiary, vested Options held at the date of such termination may be exercised, in whole or in part, at any time within three months after the date of such termination or such lesser period specified in the Award Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Award Agreement, and (ii) ten years from the Grant Date (five years for a Ten Percent Stockholder if the Option is an Incentive Stock Option)). 

(II)     Continuation of Services as Consultant/Advisor.  If a Grantee granted an Incentive Stock Option terminates employment but continues as a Consultant (no termination of Continuous Services), Grantee need not exercise an Incentive Stock Option within three months of termination of employment but shall be entitled to exercise within three months of termination of Continuous Services to the Company or the Subsidiary (one year in the event of Disability or death) or such lesser period specified in the Award Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Award Agreement, and (ii) ten years from the Grant Date).  However, if Grantee does not exercise within three months of termination of employment, pursuant to Section 422 of the Code the Option shall not qualify as an Incentive Stock Option. 

(B)       Disability and Death.  If a Grantee becomes Disabled while rendering Continuous Services to the Company or a Subsidiary, or dies while employed by the Company or Subsidiary or within three months thereafter, vested Options then held may be exercised by the Grantee, the Grantee's personal representative, or by the person to whom the Option is transferred by the laws of descent and distribution, in whole or in part, at any time within one year after the termination because of the Disability or death or any lesser period specified in the Award Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Award Agreement, and (ii) ten years from the Grant Date (five years for a Ten Percent Stockholder if the Option is an Incentive Stock Option).

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                        Limitations on Grant of Incentive Stock Options

	
7.3
	
(a)       Threshold.  The aggregate Fair Market Value (determined as of the Grant Date) of the Shares for which Incentive Stock Options may first become exercisable by any Grantee during any calendar year under this Plan, together with that of Shares subject to Incentive Stock Options first exercisable by such Grantee under any other plan of the Company or any Parent or Subsidiary, shall not exceed $100,000.  For purposes of this Section 7.3(a), all Options in excess of the $100,000 threshold shall be treated as Non-Qualified Stock Options notwithstanding the designation as Incentive Stock Options.  For this purpose, Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the date the Option with respect to such Shares is granted.

(b)       Compliance with Section 422 of the Code.  There shall be imposed in the Award Agreement relating to Incentive Stock Options such terms and conditions as are required in order that the Option be an "incentive stock option" as that term is defined in Section 422 of the Code.

(c)       Requirement of Employment.  No Incentive Stock Option may be granted to any person who is not an Employee of the Company or a Parent or Subsidiary of the Company.

8.                      RESTRICTED STOCK AWARDS

                         Grant of Restricted Stock Awards

8.1                    Subject to the terms and provisions of this Plan, the Administrator is authorized to make awards of Restricted Stock to any Eligible Participant in such amounts and subject to such terms and conditions as may be selected by the Administrator.  The restrictions may lapse separately or in combination at such times, under such circumstances, in such instalments, time-based or upon the satisfaction of performance goals or otherwise, as the Administrator determines at the time of the grant of the Award or thereafter. (See Performance Goals, Section 14.4).  All awards of Restricted Stock shall be evidenced by Award Agreements.

                         Consideration

8.2                    Restricted Stock may be issued in connection with:
(a)       Services.  Services rendered to the Company or an Affiliate (i.e. bonus); and/or

(b)       Purchase Price.  A purchase price, as specified in the Award Agreement related to such Restricted Stock. 

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                         Voting and Dividends

8.3                    Unless the Administrator in its sole and absolute discretion otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such Restricted Stock and the right to receive any dividends declared or paid with respect to such Restricted Stock.  The Administrator may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and restrictions applicable to such Restricted Stock.  All distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, stock dividend, combination of shares, or other similar transaction shall be subject to the restrictions applicable to the original Award.  

                         Forfeiture

8.4                    In the case of an event of forfeiture pursuant to the Award Agreement, including failure to satisfy the restriction period or a performance objective during the applicable restriction period, any Restricted Stock that has not vested prior to the event of forfeiture shall automatically expire, and all of the rights, title and interest of the Grantee thereunder shall be forfeited in their entirety including but not limited to any right to vote and receive dividends with respect to the Restricted Stock.  Notwithstanding the foregoing, the Administrator may provide in any Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Administrator may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock, provided such waiver is in accordance with the Applicable Laws. 

                         Certificates for Restricted Stock

8.5                    Restricted Stock granted under this Plan may be evidenced in such manner as the Administrator shall determine, including by way of certificates.  The Administrator may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the Grantee's benefit until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse, (see Escrow; Pledge of Shares, Section 23) or (ii) such certificates shall be delivered to the Grantee, provided, however, that such certificates shall bear a legend or legends that comply with the applicable securities laws and regulations and make appropriate reference to the restrictions imposed under this Plan and the Award Agreement.

9.                      UNRESTRICTED STOCK AWARDS

                         The Administrator may, in its sole discretion, grant (or sell at Fair Market Value or such other higher purchase price determined by the Administrator in the Award Agreement) an Award of unrestricted Shares to any Grantee pursuant to which such Grantee may receive Shares free of any restrictions under this Plan.

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10.                    RESTRICTED STOCK UNITS

                         Grant of Restricted Stock Units

10.1                  Subject to the terms and provisions of this Plan, the Administrator is authorized to make awards of Restricted Stock Units to any Eligible Participant in such amounts and subject to such terms and conditions as may be selected by the Administrator.  These restrictions may lapse separately or in combination at such times, under such circumstances, in such instalments, time-based or upon the satisfaction of performance goals or otherwise, as the Administrator determines at the time of the grant of the Award or thereafter. (See Performance Goals, Section 14.4).  All awards of Restricted Stock Units shall be evidenced by Award Agreements. 

                         Number of Restricted Stock Units

10.2                  The Award Agreement shall specify the number of Share equivalent units granted and such other provisions as the Administrator determines.

                         Consideration

10.3                  Restricted Stock Units may be issued in connection with: 
(a)       Services.  Services rendered to the Company or an Affiliate (i.e. bonus); and/or

(b)       Purchase Price.  A purchase price as specified in the Award Agreement related to such Restricted Stock Units. 

                         No Voting Rights

10.4                  The holders of Restricted Stock Units shall have no rights as stockholders of the Company.

                         Dividend Equivalency

10.5                  The Administrator, in its sole and absolute discretion, may provide in an Award Agreement evidencing a grant of Restricted Stock Units that the holder shall be entitled to receive, upon the Company's payment of a cash dividend on its outstanding Shares, a cash payment for each Restricted Stock Unit.  (See Section 13, Dividend Equivalent Right).  Such Award Agreement may also provide that such cash payment shall be deemed reinvested in additional Restricted Stock Units at a price per unit equal to the Fair Market Value of a Share on the date that such dividend is paid.

                         Creditor's Rights

10.6                  A holder of Restricted Stock Units shall have no rights other than those of a general creditor of the Company.  Restricted Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Award Agreement.

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                         Settlement of Restricted Stock Units

10.7                  Each Restricted Stock Unit shall be paid and settled by the issuance of Restricted Stock or unrestricted Shares in accordance with the Award Agreement and if such settlement is subject to Section 409A of the Code only upon any one or more of the following as provided for in the Award Agreement:
(a)       a specific date or date determinable by a fixed schedule; 

(b)       upon the Eligible Participant's termination of Continuous Services to the extent the same constitutes a separation from services for purposes of Section 409A of the Code except that if an Eligible Participant is a "key employee" as defined in Section 409A of the Code for such purposes, then payment or settlement shall occur 6 months following such separation of service;

(c)       as a result of the Eligible Participant's death or Disability; or

(d)       in connection with or as a result of a Change in Control in compliance with Section 409A of the Code.

                         Forfeiture

10.8                  Upon failure to satisfy any requirement for settlement as set forth in the Award Agreement, including failure to satisfy any restriction period or performance objective, any Restricted Stock Units held by the Grantee shall automatically expire, and all of the rights, title and interest of the Grantee thereunder shall be forfeited in their entirety including but not limited to any right to receive dividends with respect to the Restricted Stock Units.

11.                    DIRECTOR SHARES AND DIRECTOR DEFERRED STOCK UNITS

                         The grant of Awards of Shares to Directors and the election by Directors to defer the receipt of the Awards of Shares ("Deferred Stock Units") shall be governed by the provisions of Subpart A which is attached hereto.  The provisions of Subpart A are attached hereto as part of this Plan and are incorporated herein by reference.

12.                    STOCK APPRECIATION RIGHTS

                         Awards of SARs

12.1                  An SAR is an award to receive a number of Shares (which may consist of Restricted Stock), or cash, or Shares and cash, as determined by the Administrator in accordance with Section 12.4 below, for services rendered to the Company.  A SAR may be awarded pursuant to an Award Agreement that shall be in such form (which need not be the same for each Grantee) as the Administrator shall from time to time approve, and shall comply with and be subject to the terms and conditions of this Plan.  A SAR may vary from Grantee to Grantee and between groups of Grantees, and may be based upon performance objectives (See Performance Goals in Section 14.4).

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                          Term

12.2                  The term of a SAR shall be set forth in the Award Agreement as determined by the Administrator.

                         Exercise

12.3                  A Grantee desiring to exercise a SAR shall give written notice of such exercise to the Company, which notice shall state the proportion of Shares and cash that the Grantee desires to receive pursuant to the SAR exercised, subject to the discretion of the Administrator.  Upon receipt of the notice from the Grantee, subject to the Administrator's election to pay cash as provided in Section 12.4 below, the Company shall deliver to the person entitled thereto (i) a certificate or certificates for Shares and/or (ii) a cash payment, in accordance with Section 12.4 below.  The date the Company receives written notice of such exercise hereunder is referred to in this Section 12 as the "exercise date". 

                         Number of Shares or Amount of Cash

12.4                  Subject to the discretion of the Administrator to substitute cash for Shares, or some portion of the Shares for cash, the amount of Shares that may be issued pursuant to the exercise of a SAR shall be determined by dividing: (i) the total number of Shares as to which the SAR is exercised, multiplied by the amount by which the Fair Market Value of the Shares on the exercise date exceeds the Fair Market Value of a Share on the date of grant of the SAR; by (ii) the Fair Market Value of a Share on the exercise date; provided, however, that fractional Shares shall not be issued and in lieu thereof, a cash adjustment shall be paid.  In lieu of issuing Shares upon the exercise of a SAR, the Administrator in its sole discretion may elect to pay the cash equivalent of the Fair Market Value of the Shares on the exercise date for any or all of the Shares that would otherwise be issuable upon exercise of the SAR. 

                         Effect of Exercise

12.5                  A partial exercise of a SAR shall not affect the right to exercise the remaining SAR from time to time in accordance with this Plan and the applicable Award Agreement with respect to the remaining shares subject to the SAR.

                         Forfeiture

12.6                  In the case of an event of forfeiture pursuant to the Award Agreement, including failure to satisfy any restriction period or a performance objective, any SAR that has not vested prior to the date of termination shall automatically expire, and all of the rights, title and interest of the Grantee thereunder shall be forfeited in their entirety.

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13.                    DIVIDEND EQUIVALENT RIGHT

                         A dividend equivalent right is an Award entitling the recipient to receive credits based on cash distributions that would have been paid on the Shares specified in the dividend equivalent right (or other Award to which it relates) if such Shares had been issued to and held by the recipient (a "Dividend Equivalent Right").  A Dividend Equivalent Right may be granted hereunder to any Grantee as a component of another Award or as a freestanding Award.  The terms and conditions of Dividend Equivalent Right shall be specified in the grant.  Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional Shares, which may thereafter accrue additional equivalents.  Any such reinvestment shall be at Fair Market Value on the date of reinvestment. Dividend Equivalent Rights may be settled in cash or Shares or a combination thereof, in a single instalment or instalments, all determined in the sole discretion of the Administrator.  A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other Award.  A Dividend Equivalent Right granted as a component of another Award may also contain terms and conditions different from such other Award. 

14.                    TERMS AND CONDITIONS OF AWARDS

                         In General

14.1                  Subject to the terms of the Plan and Applicable Laws, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. 

                         Term of Award

14.2                  The term of each Award shall be the term stated in the Award Agreement.

                         Transferability

	
14.3
	
(a)       Limits on Transfer.  No right or interest of a Grantee in any unexercised or restricted Award may be pledged, encumbered or hypothecated to or in favor of any party other than to the Company or a Related Entity or Affiliate.  No Award shall be sold, assigned, transferred or disposed of by a Grantee other than by the laws of descent and distribution or, in the case of an Incentive Stock Option, pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award under the Plan; provided, however, that the Administrator may (but need not) permit other transfers where the Administrator concludes that such transferability (i) does not result in accelerated taxation or other adverse tax consequences, (ii) does not cause any Option intended to be an Incentive Stock Option to fail to be described in Section 422(b) of the Code, and (iii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including, without limitation, state or federal tax or securities laws applicable to transferable Awards.

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(b)       Beneficiaries.  Notwithstanding Section 14.3(a), a Grantee may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Grantee and to receive any distribution with respect to any Award upon the Grantee's death.  A beneficiary, legal guardian, legal representative or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Grantee, except to the extent the Plan and such Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator.  If no beneficiary has been designated or survives the Grantee, payment shall be made to the Grantee's estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Grantee at any time, provided the change or revocation is filed with the Administrator.

                         Performance Goals

14.4                  In order to preserve the deductibility of an Award under Section 162(m) of the Code, the Administrator may determine that any Award granted pursuant to this Plan to a Grantee that is or is expected to become a Covered Employee shall be determined solely on the basis of (a) the achievement by the Company or Subsidiary of a specified target return, or target growth in return, on equity or assets, (b) the Company's stock price, (c) the Company's total shareholder return (stock price appreciation plus reinvested dividends) relative to a defined comparison group or target over a specific performance period, (d) the achievement by the Company or a Parent or Subsidiary, or a business unit of any such entity, of a specified target, or target growth in, net income, earnings per share, earnings before income and taxes, and earnings before income, taxes, depreciation and amortization, or (e) any combination of the goals set forth in (a) through (d) above.  If an Award is made on such basis, the Administrator shall establish goals prior to the beginning of the period for which such performance goal relates (or such later date as may be permitted under Section 162(m) of the Code or the regulations thereunder but not later than 90 days after commencement of the period of services to which the performance goal relates), and the Administrator has the right for any reason to reduce (but not increase) the Award, notwithstanding the achievement of a specified goal.  Any payment of an Award granted with performance goals shall be conditioned on the written certification of the Administrator in each case that the performance goals and any other material conditions were satisfied.

                         In addition, to the extent that Section 409A is applicable, (i) performance-based compensation shall also be contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months in which the Eligible Participant performs services and (ii) performance goals shall be established not later than 90 calendar days after the beginning of any performance period to which the performance goal relates, provided that the outcome is substantially uncertain at the time the criteria are established.

                         Acceleration

14.5                  The Administrator may, in its sole discretion (but subject to the limitations of and compliance with Section 409A of the Code and Section 14.7 in connection therewith), at any time (including, without limitation, prior to, coincident with or subsequent to a Change of Control) determine that (a) all or a portion of a Grantee's Awards shall become fully or partially exercisable, and/or (b) all or a part of the restrictions on all or a portion of the outstanding Awards shall lapse, in each case, as of such date as the Administrator may, in its sole discretion, declare.  The Administrator may discriminate among Grantees and among Awards granted to a Grantee in exercising its discretion pursuant to this Section 14.5.

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                         Compliance with Section 162(m) of the Code

14.6                  Notwithstanding any provision of this Plan to the contrary, if the Administrator determines that compliance with Section 162(m) of the Code is required or desired, all Awards granted under this Plan to Named Executive Officers shall comply with the requirements of Section 162(m) of the Code.  In addition, in the event that changes are made to Section 162(m) of the Code to permit greater flexibility with respect to any Award or Awards under this Plan, the Administrator may make any adjustments it deems appropriate.  

                         Compliance with Section 409A of the Code

14.7                  Notwithstanding any provision of this Plan to the contrary, if any provision of this Plan or an Award Agreement contravenes any regulations or Treasury guidance promulgated under Section 409A of the Code or could cause an Award to be subject to the interest and penalties under Section 409A of the Code, such provision of this Plan or any Award Agreement shall be modified to maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A of the Code.  In addition, in the event that changes are made to Section 409A of the Code to permit greater flexibility with respect to any Award under this Plan, the Administrator may make any adjustments it deems appropriate. 

                         Section 280G of the Code

14.8                  Notwithstanding any other provision of this Plan to the contrary, unless expressly provided otherwise in the Award Agreement, if the right to receive or benefit from an Award under this Plan, either alone or together with payments that a Grantee has a right to receive from the Company, would constitute a "parachute payment" (as defined in Section 280G of the Code), all such payments shall be reduced to the largest amount that shall result in no portion being subject to the excise tax imposed by Section 4999 of the Code.

                         Exercise of Award Following Termination of Continuous Service

14.9                  An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee's Continuous Service only to the extent provided in the Award Agreement.  Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee's Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.

                         Cancellation of Awards

14.10                In the event a Grantee's Continuous Services has been terminated for "Cause", he or she shall immediately forfeit all rights to any and all Awards outstanding.  The determination that termination was for Cause shall be final and conclusive.  In making its determination, the Board shall give the Grantee an opportunity to appear and be heard at a hearing before the full Board and present evidence on the Grantee's behalf.  Should any provision to this Section 14.10. be held to be invalid or illegal, such illegality shall not invalidate the whole of this Section 14, but, rather, this Plan shall be construed as if it did not contain the illegal part or narrowed to permit its enforcement, and the rights and obligations of the parties shall be construed and enforced accordingly.

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15.                    ADDITIONAL TERMS IF THE COMPANY BECOMES LISTED ON A STOCK EXCHANGE

15.1                  In the event the Shares become listed on a stock exchange, and only to the extent required by the rules of such stock exchange, then the following terms and conditions shall apply to an Award in addition to those contained herein, as applicable:
(a)       the exercise price of an Award must not be lower than the Fair Market Value (without discount) of the Shares on the stock exchange at the time the Award is granted;

(b)       the exercise price of an Award granted to an Insider cannot be reduced, or the term of the Award cannot be extended to benefit an Insider, unless the Company obtains Disinterested Shareholder Approval;

(c)       the number of securities issuable to Insiders, at any time, under all of the Company's security based compensation arrangements (whether entered into prior to or subsequent to such listing), cannot exceed 10% of the Company's total issued and outstanding Common Stock, unless the Company obtains Disinterested Shareholder Approval; and

(d)       the number of securities issued to Insiders, within any one year period, under all of the Company's security based compensation arrangements (whether entered into prior to or subsequent to such listing), cannot exceed 10% of the issued and outstanding Common Stock, unless the Company obtains Disinterested Shareholder Approval.

16.                    PAYMENT FOR SHARE PURCHASES

                         Payment

16.1                  Payment for Shares purchased pursuant to this Plan may be made:
(a)       Cash.  By cash, cashier's check or wire transfer or, at the discretion of the Administrator expressly for the Grantee and where permitted by law as follows:

(b)       Surrender of Shares.  By surrender of shares of Common Stock of the Company that have been owned by the Grantee for more than six months, or lesser period if the surrender of shares is otherwise exempt from Section 16 of the Exchange Act, (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares);

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(c)       Deemed Net-Stock Exercise.  By forfeiture of Shares equal to the value of the exercise price pursuant to a "deemed net-stock exercise" by requiring the Grantee to accept that number of Shares determined in accordance with the following formula, rounded down to the nearest whole integer:

	 	

	 
	 	
where:

a  =       net Shares to be issued to Grantee;

b  =       number of Awards being exercised;

c  =       Fair Market Value of a Share; and

d  =       Exercise price of the Awards; or

(d)       Broker-Assisted.  By delivering a properly executed exercise notice to the Company together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the exercise price and the amount of any required tax or other withholding obligations.

                         Combination of Methods

16.2                  By any combination of the foregoing methods of payment or any other consideration or method of payment as shall be permitted by applicable corporate law.

17.                    WITHHOLDING TAXES

                         Withholding Generally

17.1                  Whenever Shares are to be issued in satisfaction of Awards granted under this Plan or Shares are forfeited pursuant to a "deemed net-stock exercise," the Company may require the Grantee to remit to the Company an amount sufficient to satisfy the foreign, federal, state, provincial, or local income and employment tax withholding obligations, including, without limitation, on exercise of an Award.  When, under applicable tax laws, a Grantee incurs tax liability in connection with the exercise or vesting of any Award, the disposition by a Grantee or other person of an Award or an Option prior to satisfaction of the holding period requirements of Section 422 of the Code, or upon the exercise of a Non-Qualified Stock Option, the Company shall have the right to require such Grantee or such other person to pay by cash, or check payable to the Company, the amount of any such withholding with respect to such transactions.  Any such payment must be made promptly when the amount of such obligation becomes determinable.

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                         Stock for Withholding

17.2                  To the extent permissible under applicable tax, securities and other laws, the Administrator may, in its sole discretion and upon such terms and conditions as it may deem appropriate, permit a Grantee to satisfy his or her obligation to pay any such withholding tax, in whole or in part, with Shares up to an amount not greater than the Company's minimum statutory withholding rate for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income.  The Administrator may exercise its discretion, by (i) directing the Company to apply Shares to which the Grantee is entitled as a result of the exercise of an Award, or (ii) delivering to the Company Shares that have been owned by the Grantee for more than six months, unless the delivery of Shares is otherwise exempt from Section 16 of the Exchange Act.  A Grantee who has made an election pursuant to this Section 17.2 may satisfy his or her withholding obligation only with Shares that are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.  The Shares so applied or delivered for the withholding obligation shall be valued at their Fair Market Value as of the date of measurement of the amount of income subject to withholding.

18.                      ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

                         In General

18.1                  Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been effected without receipt of consideration. The Administrator shall make the appropriate adjustments to (i) the maximum number and/or class of securities issuable under this Plan; and (ii) the number and/or class of securities and the exercise price per Share in effect under each outstanding Award in order to prevent the dilution or enlargement of benefits thereunder; provided, however, that the number of Shares subject to any Award shall always be a whole number and the Administrator shall make such adjustments as are necessary to insure Awards of whole Shares. Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive. 

                         Company's Right to Effect Changes in Capitalization

18.2                  The existence of outstanding Awards shall not affect the Company's right to effect adjustments, recapitalizations, reorganizations or other changes in its or any other corporation's capital structure or business, any merger or consolidation, any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Shares, the dissolution or liquidation of the Company's or any other corporation's assets or business or any other corporate act whether similar to the events described above or otherwise.  

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19.                    CORPORATE TRANSACTIONS/CHANGES IN CONTROL/RELATED ENTITY DISPOSITIONS

                         Company is Not the Survivor

19.1                  Subject to Section 19.3 and except as may otherwise be provided in an Award Agreement, the Administrator shall have the authority, in its absolute discretion, exercisable either in advance of any actual or anticipated Corporate Transaction, Change in Control or Related Entity Disposition in which the Company is not the surviving corporation, or at the time of an actual Corporate Transaction, Change in Control or Related Entity Disposition in which the Company is not the surviving corporation (a) to cancel each outstanding Award upon payment in cash to the Grantee of the amount by which any cash and the Fair Market Value of any other property which the Grantee would have received as consideration for the Shares covered by the Award if the Award had been exercised before such Corporate Transaction, Change in Control or Related Entity Disposition exceeds the exercise price of the Award, or (b) to negotiate to have such Award assumed by the surviving corporation.  The determination as to whether the Company is the surviving corporation is at the sole and absolute discretion of the Administrator.

                         In addition to the foregoing, in the event of a dissolution or liquidation of the Company, or a Corporate Transaction or Related Entity Disposition in which the Company is not the surviving corporation, the Administrator, in its absolute discretion, may accelerate the time within which each outstanding Award may be exercised.  Section 19.3 shall control with respect to any acceleration in vesting in the event of Change of Control.

                         The Administrator shall also have the authority:
(a)       to release the Awards from restrictions on transfer and repurchase or forfeiture rights of such Awards on such terms and conditions as the Administrator may specify; and

(b)       to condition any such Award's vesting and exercisability or release from such limitations upon the subsequent termination of the Continuous Service of the Grantee within a specified period following the effective date of the Corporate Transaction, Change in Control or Related Entity Disposition. 

                         Effective upon the consummation of a Corporate Transaction, Change in Control or Related Entity Disposition governed by this Section 19.1, all outstanding Awards under this Plan not exercised by the Grantee or assumed by the successor corporation shall terminate.

                         Company is the Survivor

19.2                  In the event of a Corporate Transaction, Change in Control or Related Entity Disposition in which the Company is the surviving corporation, the Administrator shall determine the appropriate adjustment of the number and kind of securities with respect to which outstanding Awards may be exercised, and the exercise price at which outstanding Awards may be exercised.  The Administrator shall determine, in its sole and absolute discretion, when the Company shall be deemed to survive for purposes of this Plan.  Subject to any contrary language in an Award Agreement evidencing an Award, any restrictions applicable to such Award shall apply as well to any replacement shares received by the Grantee as a result.

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                         Change in Control

19.3                  If there is a Change of Control, all outstanding Awards shall fully vest immediately upon the Company's public announcement of such a change.

20.                    PRIVILEGES OF STOCK OWNERSHIP

                         No Grantee shall have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Grantee.  After Shares are issued to the Grantee, the Grantee shall be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Grantee may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company shall be subject to the same restrictions as the Restricted Stock.  The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Award.

21.                    RESTRICTION ON SHARES

                         At the discretion of the Administrator, the Company may reserve to itself and/or its assignee(s) in the Award Agreement that the Grantee not dispose of the Shares for a specified period of time, or that the Shares are subject to a right of first refusal or a right to repurchase by the Company at the Shares' Fair Market Value at the time of sale.  The terms and conditions of any such rights or other restrictions shall be set forth in the Award Agreement evidencing the Award.

22.                    CERTIFICATES

                         All certificates for Shares or other securities delivered under this Plan shall be subject to such stock transfer orders, legends and other restrictions as the Administrator may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.

23.                    ESCROW; PLEDGE OF SHARES

                         To enforce any restrictions on a Grantee's Shares, the Administrator may require the Grantee to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Administrator, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Administrator may cause a legend or legends referencing such restrictions to be placed on the certificates.  

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24.                    SECURITIES LAW AND OTHER REGULATORY COMPLIANCE

                         Compliance With Applicable Law

24.1                  An Award shall not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the Grant Date and also on the date of exercise or other issuance.  Notwithstanding any other provision in this Plan, the Company shall have no obligation to issue or deliver certificates for Shares under this Plan prior to (i) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (ii) completion of any registration or other qualification of such Shares under any state or federal laws or rulings of any governmental body that the Company determines to be necessary or advisable.  The Company shall be under no obligation to register the Shares with the Securities Exchange Commission or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company shall have no liability for any inability or failure to do so.  Evidences of ownership of Shares acquired pursuant to an Award shall bear any legend required by, or useful for purposes of compliance with, applicable securities laws, this Plan or the Award Agreement.

                         During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards pursuant to this Plan and the exercise of Awards granted hereunder shall qualify for the exemption provided by Rule 16b-3 under the Exchange Act.  To the extent that any provision of this Plan or action by the Board or the Administrator does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and deemed advisable by the Board or the Administrator, and shall not affect the validity of this Plan.  In the event that Rule 16b-3 is revised or replaced, the Administrator may exercise its discretion to modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement. 

                         Investment Representation

24.2                  As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

25.                    NO OBLIGATION TO EMPLOY

                         Nothing in this Plan or any Award granted under this Plan shall confer or be deemed to confer on any Grantee any right to continue in the employ of, or to continue any other relationship with, the Company or to limit in any way the right of the Company to terminate such Grantee's employment or other relationship at any time, with or without Cause.

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26.                    EFFECTIVE DATE AND TERM OF PLAN

                         This Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the shareholders of the Company. It shall continue in effect for a term of ten years unless sooner terminated.

27.                    SHAREHOLDER APPROVAL

                         If required under Applicable Laws, this Plan shall be subject to approval by the shareholders of the Company.  The Administrator may grant Awards under this Plan prior to approval by the shareholders.

28.                    AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN OR AWARDS

                         The Board may amend, suspend or terminate this Plan at any time and for any reason.  To the extent necessary to comply with Applicable Laws, the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required.  Shareholder approval shall be required for the following types of amendments to this Plan: (i) any increase in Maximum Number of Shares issuable under the Plan except for a proportional increase in the Maximum Number as a result of stock split or stock dividend, or a change from a fixed Maximum Number of Shares to a fixed maximum percentage; (ii) any change to those persons who are entitled to become participants under the Plan which would have the potential of broadening or increasing Insider participation; or (iii) the addition of any form of financial assistance or amendment to a financial assistance provision which is more favourable to Grantees. 

                         Further, the Board may, in its discretion, determine that any amendment should be effective only if approved by the shareholders even if such approval is not expressly required by this Plan or by law.  No Award may be granted during any suspension of this Plan or after termination of this Plan. 

                         Any amendment, suspension or termination of this Plan shall not affect Awards already granted, and such Awards shall remain in full force and effect as if this Plan had not been amended, suspended or terminated, unless mutually agreed otherwise between the Grantee and the Administrator, which agreement must be in writing and signed by the Grantee and the Company.  At any time and from time to time, the Administrator may amend, modify, or terminate any outstanding Award or Award Agreement without approval of the Grantee; provided however, that subject to the applicable Award Agreement, no such amendment, modification or termination shall, without the Grantee's consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination.  

                         Notwithstanding any provision herein to the contrary, the Administrator shall have broad authority to amend this Plan or any outstanding Award under this Plan without approval of the Grantee to the extent necessary or desirable: (i) to comply with, or take into account changes in, applicable tax laws, securities laws, accounting rules and other applicable laws, rules and regulations; or (ii) to ensure that an Award is not subject to interest and penalties under Section 409A of the Code or the excise tax imposed by Section 4999 of the Code. 

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                         Further, notwithstanding any provision herein to the contrary, and subject to Applicable Law, the Administrator may, in its absolute discretion, amend or modify this Plan: (i) to make amendments which are of a "housekeeping" or clerical nature; (ii) to change the vesting provisions of an Award granted hereunder, as applicable; (iii) to change the termination provision of an Award granted hereunder, as applicable, which does not entail an extension beyond the original expiry date of such Award; and (iv) the addition of a cashless exercise feature, payable in cash or securities, which provides for a full deduction of the number of underlying securities from the Maximum Number.

29.                    RESERVATION OF SHARES

                         The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of this Plan.

                         The Shares to be issued hereunder upon exercise of an Award may be either authorized but unissued; supplied to the Plan through acquisitions of Shares on the open market; Shares forfeited back to the Plan; Shares surrendered in payment of the exercise price of an Award; or Shares withheld for payment of applicable employment taxes and/or withholding obligations resulting from the exercise of an Award.  

                         The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.  

30.                    EXCHANGE AND BUYOUT OF AWARDS

                         The Administrator may, at any time or from time to time, authorize the Company, with the consent of the respective Grantees, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards.  The Administrator may at any time buy from a Grantee an Award previously granted with payment in cash, Shares (including Restricted Stock) or other consideration, based on such terms and conditions as the Administrator and the Grantee may agree.  

31.                    APPLICABLE TRADING POLICY

                         The Administrator and each Eligible Participant will ensure that all actions taken and decisions made by the Administrator or an Eligible Participant, as the case may be, pursuant to this Plan comply with any Applicable Laws and policies of the Company relating to insider trading or "blackout" periods.

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32.                    GOVERNING LAW

                         The Plan shall be governed by the laws of the State of Nevada, U.S.A.; provided, however, that any Award Agreement may provide by its terms that it shall be governed by the laws of any other jurisdiction as may be deemed appropriate by the parties thereto.

33.                    MISCELLANEOUS

                         Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement Income Security Act of 1974, as amended.

__________

 

 

SUBPART A

STOCK AND DEFERRED STOCK UNITS FOR ELIGIBLE DIRECTORS

A.                     Stock Award.  The Administrator shall pay Eligible Remuneration to each Director pursuant to an Award Agreement.

B.                     Election.  Further, the Administrator may, in its sole discretion, permit each Eligible Director to receive all or any portion of his Eligible Remuneration during the Remuneration Period in the form of Deferred Stock Units under this Plan (an "Election").  All deferrals pursuant to such an Election shall be evidenced by an Award Agreement. 

                        For purposes of this Subpart A, the following definitions shall apply:

"Annual Retainer" for a particular Director means the retainer (including any additional amounts payable for serving as lead Director or on any committee of the Board), payable to that Director for serving as a Director for the relevant Remuneration Period, as determined by the Board;

"Attendance Fee" means amounts payable annually to a Director as a Board meeting attendance fee or a committee meeting attendance fee, or any portion thereof;

"Canadian Director" means a Director who is a resident of Canada for the purposes of the Canadian Tax Act, and whose income from employment by the Company or Related Entity is subject to Canadian income tax, notwithstanding any provision of the Canada-United States Income Tax Convention (1980), as amended;

"Canadian Tax Act" and "Canadian Tax Regulations" means respectively the Income Tax Act (Canada), as amended and the Income Tax Regulation promulgated thereunder, as amended;

"Deferred Stock Unit" means a right granted by the Company to an Eligible Director to receive, on a deferred payment basis, Shares under this Plan; 

"Eligible Director" is any Director of this Company or Related Entity that the Administrator determines is eligible to elect to receive Deferred Stock Units under this Plan;

"Eligible Remuneration" means all amounts payable to an Eligible Director in Shares, including all or part of amounts payable in satisfaction of the Annual Retainer, Attendance Fees or any other fees relating to service on the Board which are payable to an Eligible Director or in satisfaction of rights or property surrendered by an Eligible Director to the Company; it being understood that the amount of Eligible Remuneration payable to any Eligible Director may be calculated by the Administrator in a different manner than Eligible Remuneration payable to another Eligible Director in its sole and absolute discretion;

"Prescribed Plan or Arrangement" means a prescribed plan or arrangement as defined in s.6801(d) of the Canadian Tax Regulation;

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"Remuneration Period" means, as applicable, (a) the period commencing on the Effective Date of this Plan and ending on the last day of the calendar year in which the Effective Date occurs; and (b) thereafter each subsequent calendar year, or where the context requires, any portion of such period; and

"Salary Deferral Arrangement" means a salary deferral arrangement as defined in the Canadian Tax Act.

1.                     Election.  An Eligible Director who desires to defer receipt of all or a portion of his or her Eligible Remuneration in any calendar year shall make such election in writing to the Company specifying:
(a)       the dollar amount or percentage of Eligible Remuneration to be deferred; and

(b)       the deferral period.

                        Otherwise, such election must be made before the first day of the calendar year in which the Eligible Remuneration shall be payable, however a newly appointed Eligible Director shall be eligible to defer payment of future Eligible Remuneration by providing written election to the Company within 30 calendar days of his or her appointment to the Board of Directors.  The elections made pursuant to this Section shall be irrevocable with respect to Eligible Remuneration to which such elections pertain and shall also apply to subsequent Eligible Remuneration payable in future calendar years unless such Eligible Director notifies the Company in writing, before the first day of the applicable calendar year, that he or she desires to change such election.

                        If the Eligible Director does not timely deliver an election in respect of a particular Remuneration Period, the Eligible Director will receive the Eligible Remuneration as provided for in the Award Agreement.  

2.                     Determination Of Deferred Stock Units.  The Company will maintain a separate account for each Eligible Director to which it will quarterly credit Deferred Stock Units at the end of March, June, September and December, or as otherwise determined by the Administrator, the Deferred Stock Units granted to the Eligible Director for the relevant Remuneration Period.  The number of Deferred Stock Units (including fractional Deferred Stock Units, computed to three digits) to be credited to an account for an Eligible Director will be determined on the date approved by the Administrator by dividing the appropriate amount of Eligible Remuneration to be deferred into Deferred Stock Units by the Fair Market Value on that date.

3.                     No Voting Rights.  The holders of Deferred Stock Units shall have no rights as stockholders of the Company.

4.                     Dividend Equivalency.  The Company will, on any date on which a cash or stock dividend is paid on its outstanding Shares, credit to each Eligible Director's account that number of additional Deferred Stock Units (including fractional Deferred Stock Units, computed to three digits) calculated by (i) multiplying the amount of the dividend per Share by the number of Deferred Stock Units in the account as of the record date for payment of the dividend, and (ii) dividing the amount obtained in (i) by the Fair Market Value on the date on which the dividend is paid.  (See Section 13 of the Plan, Dividend Equivalent Right).

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5.                     Eligible Director's Account.  A written confirmation of the balance in each Eligible Directors' Account will be sent by the Company to the Eligible Director upon request of the Eligible Director.

6.                     Creditor's Rights.  A holder of Deferred Stock Units shall have no rights other than those of a general creditor of the Company.  Deferred Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and condition of the applicable Award Agreement.

7.                     Settlement of Deferred Stock Units.  Subject to Section 8, each Deferred Stock Unit shall be paid and settled by the issuance of Restricted or unrestricted Shares in accordance with the Award Agreement and if such settlement is subject to Section 409A of the Code only upon any one or more of the following as provided for in the Award Agreement:
(a)       a specific date or date determinable by a fixed schedule; 

(b)       upon the Eligible Director's termination of Continuous Services to the extent the same constitutes a separation from services for the purposes of Section 409A of the Code except that if an Eligible Director is a "key employee" as defined in Section 409A of the Code for such purposes, then payment or settlement shall occur 6 months following such separation of service;

(c)       as a result of the Eligible Director's death or Disability; or

(d)       in connection with or as a result of a Change in Control in compliance with 409A of the Code.

                        The Company will issue one Share for each whole Deferred Stock Unit credited to the Eligible Director's account (net of any applicable withholding tax as provided for in this Plan).  Such payment shall be made by the Company as soon as reasonably possible following the settlement date.  Fractional Shares shall not be issued, and where the Eligible Director would be entitled to receive a fractional Shares in respect of any fractional Deferred Stock Unit, the Company shall pay to such Eligible Director, in lieu of such fractional Shares, cash equal to the Fair Market Value of such fractional Shares calculated as of the day before such payment is made, net of any applicable withholding tax.

8.                     Canadian Directors.  If a Deferred Stock Unit is granted to an Eligible Director who is a Canadian Director would otherwise constitute a Salary Deferred Arrangement, the Award Agreement pertaining to that Deferred Stock Unit shall contain such other or additional terms as will cause the Deferred Stock Unit to be a Prescribed Plan or Arrangement.

9.                     Issuance of Stock Certificates.  A stock certificate or certificates shall be registered and issued in the name of the holder of Deferred Stock Units and delivered to such holder as soon as practicable after such Deferred Stock Units have become payable or satisfied in accordance with the terms of the Plan

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10.                   Non-Exclusivity.  Nothing in this Subpart A shall prohibit the Administrator from making discretionary Awards to Eligible Directors pursuant to the other provisions of this Plan or outside this Plan, not otherwise inconsistent with these provisions.

11.                   Defined Terms.  Capitalized terms used in this Subpart A and not defined herein have the meaning give in the Plan.

__________EX10-10

EXHIBIT 10.10

__________

 

 

 

 

 

 

EMPLOYMENT SERVICES AGREEMENT

 

 

 

 

 

Between:

GULF STATES ENERGY, INC.

 

And:

Management Solutions International, Inc.

 

 

 

 

Gulf States Energy, Inc.

Suite 320, 1111 West Hastings Street, Vancouver, British Columbia, Canada, V6E 2J3

__________

 

EMPLOYMENT SERVICES AGREEMENT

                        THIS EMPLOYMENT SERVICES AGREEMENT is made and dated for reference effective as at April 1, 2006 (the "Effective Date") as fully executed on this _____ day of April, 2006.

BETWEEN:
GULF STATES ENERGY, INC., a company incorporated under 

the laws of the State of Nevada, U.S.A., and having an executive 

office and an address for notice and delivery located at Suite 320,

1111 West Hastings Street, Vancouver, British Columbia, Canada, 

V6E 2J3

(the "Company");

   OF THE FIRST PART

AND:
Management Solutions International, Inc., a company 

incorporated under the laws of the state of Illinois, having an 

address for notice and delivery located at Attn:  Steven Narrod, 

1139 Bob-O-Link, Highland Park, IL, 60035

(the "Employee");

                    OF THE SECOND PART
(the Company and the Employee being hereinafter singularly also 

referred to as a "Party" and collectively referred to as the "Parties" 

as the context so requires).

WHEREAS:

A.                     The Company is presently a non-reporting company incorporated under the laws of the State of Nevada, U.S.A.;

B.                     The Employee has experience in and specializes in providing non-reporting and reporting companies with valuable management and operational services;

C.                     The Company is involved in the principal business of acquiring, exploring and developing various resource properties of merit (collectively, the "Business"); and, as a consequence thereof, the Company is hereby desirous of retaining the Employee as the Chief Financial Officer and Director of the Company, and the Employee is hereby desirous of accepting such positions, in order to provide such related services to the Company (collectively, the "General Services");

D.                     Since the introduction of the Parties hereto the Parties hereby acknowledge and agree that there have been various discussions, negotiations, understandings and agreements between them relating to the terms and conditions of the General Services and, correspondingly, that it is their intention by the terms and conditions of this agreement (the "Agreement") to hereby replace, in their entirety, all such prior discussions, negotiations, understandings and agreements with respect to the General Services; and

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E.                     The Parties hereto have agreed to enter into this Agreement which replaces, in its entirety, all such prior discussions, negotiations, understandings and agreements, and, furthermore, which necessarily clarifies their respective duties and obligations with respect to the within General Services to be provided hereunder, all in accordance with the terms and conditions of this Agreement;

                        NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the mutual covenants and provisos herein contained, THE PARTIES HERETO AGREE AS FOLLOWS:

Article 1

DEFINITIONS AND INTERPRETATION

1.1                  Definitions.   For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, the following words and phrases shall have the following meanings:
(a)         "Agreement" means this Employment Services Agreement as from time to time supplemented or amended by one or more agreements entered into pursuant to the applicable provisions hereof, together with any Schedules attached hereto;

(b)         "Arbitration Act" means the British Columbia Commercial Arbitration Act, as amended from time to time, as set forth in Article "8" hereinbelow;

(c)         "Benefits" has the meaning ascribed to it in section "4.8" hereinbelow;

(d)         "Board of Directors" means the Board of Directors of the Company as duly constituted from time to time;

(e)         "Bonus" has the meaning ascribed to it in section "4.4" hereinbelow;

(f)         "Bonus Milestone Payment" has the meaning ascribed to it in section "4.3" hereinbelow;

(g)         "Business" has the meaning ascribed to it in recital "C." hereinabove.

(h)         "business day" means any day during which Canadian Chartered Banks are open for business in the City of Vancouver, Province of British Columbia, Canada;

(i)         "Company" means Gulf States Energy, Inc., a company incorporated under the laws of the State of Nevada, U.S.A., or any successor company, however formed, whether as a result of merger, amalgamation or other action;

(j)         "Company's Non-Renewal Notice" has the meaning ascribed to it in section "3.2" hereinbelow;

(k)         "Effective Date" has the meaning ascribed to on the face page of this Agreement;

(l)         "Effective Termination Date" has the meaning ascribed to it in each of sections "3.3", "3.4", "3.5", "3.6" and "5.6" hereinbelow;

(m)         "Employee" means Steve Narrod;

(n)         "Engagement" has the meaning ascribed to it in section "4.7" hereinbelow;

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(o)         "Exchange Act", "Form S-8 Registration Statement", "Registration Statement", "SEC" and "Securities Act" each have the meanings ascribed to them in section "4.7" hereinbelow;

(p)         "Expenses" has the meaning ascribed to it in section "4.5" hereinbelow;

(q)         "Fee" has the meaning ascribed to it in section "4.1" hereinbelow;

(r)         "General Services" has the meaning ascribed to it in section "2.1" hereinbelow;

(s)         "Indemnified Party" has the meaning ascribed to it in section "6.1" hereinbelow;

(t)         "Listing" has the meaning ascribed to it in section "4.7" hereinbelow;

(u)         "Notice of Termination" has the meaning ascribed to it in each of sections "3.3", "3.4", "3.5" and "5.6" hereinbelow;

(v)         "Option" has the meaning ascribed to it in section "4.7" hereinbelow;

(w)         "Option Plan" has the meaning ascribed to it in section "4.7" hereinbelow;

(x)         "Option Shares" has the meaning ascribed to it in section "4.7" hereinbelow;

(y)         "Parties" or "Party" means, individually and collectively, the Company, and/or the Employee hereto, as the context so requires, together with each of their respective successors and permitted assigns as the context so requires;

(z)         "Property" has the meaning ascribed to it in section "5.7" hereinbelow;

(aa)       "Regulatory Approval" means the acceptance for filing, if required, of the transactions contemplated by this Agreement by the Regulatory Authorities;

(ab)       "Regulatory Authorities" and "Regulatory Authority" means, either singularly or collectively as the context so requires, such regulatory agencies who have jurisdiction over the affairs of either of the Company and/or the Employee and including, without limitation, all regulatory authorities from whom any such authorization, approval or other action is required to be obtained or to be made in connection with the transactions contemplated by this Agreement;

(ac)       "Seed Financing" has the meaning ascribed to it in section "4.1" hereinbelow;

(ad)       "subsidiary" means any company or companies of which more than 50% of the outstanding shares carrying votes at all times (provided that the ownership of such shares confers the right at all times to elect at least a majority of the directors of such company or companies) are for the time being owned by or held for that company and/or any other company in like relation to that company and includes any company in like relation to the subsidiary; and

(ae)      "Vacation" has the meaning ascribed to it in section "4.6" hereinbelow.

1.2                  Interpretation.   For the purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:
(a)        the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, section or other subdivision of this Agreement;

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(b)        any reference to an entity shall include and shall be deemed to be a reference to any entity that is a permitted successor to such entity; and

(c)        words in the singular include the plural and words in the masculine gender include the feminine and neuter genders, and vice versa.

Article 2

GENERAL SERVICES AND DUTIES OF THE EMPLOYEE

2.1                  General Services.   During the continuance of this Agreement the Company hereby agrees to retain the Employee as the Chief Financial Officer and Director of the Company, and the Employee hereby agrees to be subject to the direction and supervision of, and to have the authority as is delegated to the Employee by, the Board of Directors consistent with such position, and the Employee also agrees to accept such position in order to provide such related services as the Board of Directors shall, from time to time, reasonably assign to the Employee and as may be necessary for the ongoing maintenance and development of the Company's various Business interests during the continuance of this Agreement (collectively, the "General Services"); it being expressly acknowledged and agreed by the Parties hereto that the Employee shall initially commit and provide to the Companies the General Services on a reasonably full-time basis during the continuance of this Agreement for which the Company, as more particularly set forth hereinbelow, hereby agrees to pay and provide to the order and direction of the Employee each of the proposed compensation amounts as set forth in Articles "4" hereinbelow.

                        In this regard it is hereby acknowledged and agreed that the Employee shall be entitled to communicate with and shall rely upon the immediate advice, direction and instructions of the President of the Company, or upon the advice or instructions of such other director or officer of the Company as the President of the Company shall, from time to time, designate in times of the President's absence, in order to initiate, coordinate and implement the General Services as contemplated herein subject, at all times, to the final direction and supervision of the Board of Directors.

2.2                  Additional duties respecting the General Services.   Without in any manner limiting the generality of the General Services to be provided as set forth in section "2.1" hereinabove, it is hereby also acknowledged and agreed that Employee will, during the continuance of this Agreement, devote substantially all of the Employee's employment time to the General Services of the Employee as may be determined and required by the Board of Directors of the Company for the performance of said General Services faithfully, diligently, to the best of the Employee's abilities and in the best interests of the Company and, furthermore, that the Employee's employment time will be prioritized at all times for the Company in that regard.

2.3                  Adherence to rules and policies of the Company.   The Employee hereby acknowledges and agrees to abide by the reasonable rules, regulations, instructions, personnel practices and policies of the Company and any changes therein which may be adopted from time to time by the same as such rules, regulations, instructions, personnel practices and policies may be reasonably applied to the Employee as the Chief Financial Officer of the Company.

Article 3

EFFECTIVENESS, INITIAL TERM, RENEWAL AND TERMINATION

3.1                  Effectiveness and Initial Term of the Agreement.   This Agreement becomes effective on the Effective Date hereinabove, however, is subject, at all times, to the Company's prior receipt, if required, of Regulatory Approval from each of the Regulatory Authorities to the terms and conditions of and the transactions contemplated by this Agreement.  The initial term of this Agreement is for a period commencing on the Effective Date hereof and ending at the close of business (Vancouver, British Columbia, Canada, time) two years from the Effective Date hereof (the "Initial Term").

- 5 -

3.2                  Renewal by the Company after the Initial Term.   Subject at all times to sections "3.3", "3.4", "3.5" and "5.6" hereinbelow, this Agreement shall renew automatically if not specifically terminated in accordance with the following provisions.  The Company agrees to notify the Employee in writing at least 60 calendar days prior to the end of the Initial Term of its intent not to renew this Agreement (the "Company's Non-Renewal Notice").  Should the Company fail to provide a Company's Non-Renewal Notice this Agreement shall automatically renew on a month-to-month term renewal basis after the Initial Term until otherwise specifically renewed in writing by each of the Parties hereto for the next one-month term of renewal or, otherwise, terminated upon delivery by the Company of a corresponding and follow-up 30 calendar day Company's Non-Renewal Notice in connection with and within 30 calendar days prior to the end of any such one-month term renewal period.  Any such renewal on a one-month basis shall be on the same terms and conditions contained herein unless modified and agreed to in writing by the Parties in advance.

3.3                  Termination without cause by the Employee.   Notwithstanding any other provision of this Agreement, this Agreement may be terminated by the Employee at any time after the Effective Date and during the Initial Term and during the continuance of this Agreement upon the Employee's delivery to the Company of prior written notice of its intention to do so (the "Notice of Termination" herein) at least 30 calendar days prior to the effective date of any such termination (the end of such 30-day period from such Notice of Termination being the "Effective Termination Date" herein).  In any such event the Employee's ongoing obligation to provide the General Services will continue until the Effective Termination Date and, subject to the following, the Company's ongoing obligation to provide and to pay to the Employee all of the amounts otherwise payable to the Employee under Article "4" hereinbelow will continue until the Effective Termination Date.

3.4                  Termination without cause by the Company.   Notwithstanding any other provision of this Agreement, this Agreement may be terminated by the Company at any time after the Effective Date and during the Initial Term and during the continuance of this Agreement upon the Company's delivery to the Employee of prior written notice of its intention to do so (the "Notice of Termination" herein) at least 60 calendar days prior to the effective date of any such termination (the end of such 60-day period from such Notice of Termination being the "Effective Termination Date" herein).  In any such event the Employee's ongoing obligation to provide the General Services will immediately cease upon the date of the Notice of Termination, however, the Company shall continue to be obligated to provide and to pay to the Employee all of the amounts otherwise payable to the Employee under Article "4" hereinbelow until the Effective Termination Date and including, without limitation, the Employee's then right to exercise any vested portion of the Option (as hereinafter determined) outstanding until the Effective Termination Date.

3.5                  Termination for cause by any Party.   Notwithstanding any other provision of this Agreement, this Agreement may be terminated by any of the Parties hereto at any time upon written notice to the other Party of such Party's intention to do so (the "Notice of Termination" herein) at least 10 calendar days prior to the effective date of any such termination (the end of such five-day period from such Notice of Termination being the "Effective Termination Date" herein), and damages sought, if:
(a)        the other Party fails to cure a material breach of any provision of this Agreement within 10 calendar days from its receipt of written notice from said Party (unless such material breach cannot be reasonably cured within said 10 calendar days and the other Party is actively pursuing to cure said material breach);

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(b)        the other Party is willfully non-compliant in the performance of its respective duties under this Agreement within five calendar days from its receipt of written notice from said Party (unless such willful non-compliance cannot be reasonably corrected within said 10 calendar days and the other Party is actively pursuing to cure said willful non-compliance);

(c)        the other Party commits fraud or serious neglect or misconduct in the discharge of its respective duties hereunder or under the law; or

(d)        the other Party becomes adjudged bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy, and where any such involuntary petition is not dismissed within 10 calendar days.

                        In any such event the Employee's ongoing obligation to provide the General Services will continue only until the Effective Termination Date and, subject to the following, the Company's ongoing obligation to provide and to pay to the Employee all of the amounts otherwise payable to the Employee under Article "4" hereinbelow will continue until the Effective Termination Date.

3.6                  Disability or death.    Notwithstanding any other provision of this Agreement, this Agreement may be terminated at any time by any Party within 10 calendar days after the death or disability of the Employee, as a without fault termination (the resulting effective date of any such termination being herein also the "Effective Termination Date").  For the purposes of this Agreement the term "disability" shall mean the Employee shall have been unable to provide the General Services contemplated under this Agreement for a period of 30 calendar days, whether or not consecutive, during any 360 calendar day period, due to a physical or mental disability.   A determination of disability shall be made by a physician satisfactory to both the Employee and the Company; provided that if the Employee and the Company do not agree on a physician, the Employee and the Company shall each select a physician and these two together shall select a third physician whose determination as to disability shall be binding on all Parties.  In the event that the Employee's employment is terminated by death or because of disability pursuant to this Agreement, the Company shall pay to the estate of the Employee or to the Employee, as the case may be, all amounts to which the Employee would otherwise be entitled under Article "4" hereinbelow until the Effective Termination Date.

3.7                  Effect of Termination.   Terms of this Agreement relating to accounting, payments, confidentiality, accountability for damages or claims and all other matters reasonably extending beyond the terms of this Agreement and to the benefit of the Parties hereto or for the protection of the Business interests of the Company shall survive the termination of this Agreement, and any matter of interpretation thereto shall be given a wide latitude in this regard.  In addition, and without limiting the foregoing, each of sections "3.2", "3.3", "3.4", "3.5", "3.6" hereinabove and section "5.6" hereinbelow shall survive the termination of this Agreement.

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Article 4

COMPENSATION OF THE EMPLOYEE

4.1                  Fee.   It is hereby acknowledged and agreed that the Employee shall render the General Services as defined hereinabove during the Initial Term and during the continuance of this Agreement and shall thus be compensated during the continuance of this Agreement to the termination of the same by way of the payment by the Company to the Employee, or to the further order or direction of the Employee as the Employee may determine, in the Employee's sole and absolute discretion, and advise the Company of prior to such payment, of the gross monthly fee of U.S. $8,335.00 (the "Fee") which shall be due and payable by the Company to the Employee in the following manner and to the following extent: the Fee shall only commence and be due and payable by the Company to the Employee at such time as the Company first completes its next round of seed capital equity financing after the Effective Date hereof pursuant to which the Company collectively raises not less than an aggregate of U.S. $300,000 after the Effective Date (collectively, the "Seed Financing" herein); at which time U.S. $5,000.00 of such Fee shall be paid in cash with the balance of U.S. $3,335 of such Fee then accruing per month and being due and payable by the Company to the Employee at such time as the Company completes not less than a further U.S. $700,000 in seed capital equity financing over and above the Seed Financing; with all such Fees being be due and payable by the Company to the Employee, or to the further order or direction of the Employee as the Employee may determine, in the Employee's sole and absolute discretion, and advise the Company of prior to any such Fee payment, bi-monthly and on or about the fifteenth and thirtieth day of each month of the then monthly period of service during the continuance of this Agreement.

4.2                  Increase in the Fee.   It is hereby acknowledged that the proposed Fee payments under this Agreement were negotiated as between the Parties hereto in the context of the stage of development of the Company existing as at the Effective Date of this Agreement.  Correspondingly, it is hereby acknowledged and agreed that the Fee shall be reviewed and renegotiated at the request of either Party on a reasonably consistent basis during the continuance of this Agreement and, in the event that the Parties cannot agree, then the Fee shall be increased on an annual basis by the greater of (i) 10% and (ii) the percentage which is the average percentage of all increases to management salaries and fees within the Company during the previous 12-month period.  Any dispute respecting either the effectiveness or magnitude of the final Fee hereunder shall be determined by arbitration in accordance with Article "8" hereinbelow.

4.3                  Bonus Milestone Payments on financing milestones.   It is hereby also acknowledged and agreed that, as a further inducement to the Employee to enter into and consummate this Agreement, a cash bonus of U.S. $20,000.00 (each a "Bonus Milestone Payment") will be due and payable by the Company to the Employee, or to the further order or direction of the Employee as the Employee may determine, in the Employee's sole and absolute discretion, and advise the Company of prior to such payment, within 10 calendar days of the attainment by the Company of each of the following seed capital equity financing milestones from the Effective Date of this Agreement:
(a)        an initial Bonus Milestone Payment upon the raising by the Company of not less than an aggregate of U.S. $1,000,000 in seed capital equity financing by July 1, 2006;

(b)        a further Bonus Milestone Payment upon the raising by the Company of not less than an aggregate of U.S. $3,000,000 in seed capital equity financing by October 31, 2006; and

(c)        a final Bonus Milestone Payment upon the raising by the Company of not less than an aggregate of U.S. $5,000,000 in seed capital equity financing by January 31, 2007.

4.4                  Bonus payments.   It is hereby also acknowledged that the Board of Directors shall, in good faith, consider the payment of reasonable industry standard annual bonuses (each being a "Bonus") based upon the performance of the Company and upon the achievement by the Employee and/or the Company of reasonable management objectives to be reasonably established by the Board of Directors (after reviewing proposals with respect thereto defined by the Employee in the Employee's capacity as the Chief Financial Officer of the Company, and delivered to the Board of Directors by the Employee at least 30 calendar days before the beginning of the relevant year of the Company (or within 90 calendar days following the commencement of the Company's first calendar year commencing on the Effective Date)).  These management objectives shall consist of both financial and subjective goals and shall be specified in writing by the Board of Directors, and a copy shall be given to the Employee prior to the commencement of the applicable year.  The payment of any such Bonus shall be payable no later than within 90 calendar days of the ensuing year after any calendar year commencing on the Effective Date.  Any dispute respecting either the effectiveness or the magnitude of any Bonus hereunder shall be determined by arbitration in accordance with Article "8" hereinbelow.

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4.5                  Reimbursement of Expenses.   It is hereby acknowledged and agreed that the Employee shall also be reimbursed for all direct, reasonable expenses actually and properly incurred by the Employee for the benefit of the Company (collectively, the "Expenses"); and which Expenses, it is hereby acknowledged and agreed, shall be payable by the Company to the order, direction and account of the Employee as the Employee may designate in writing, from time to time, in the Employee's sole and absolute discretion, as soon as conveniently possible after the prior delivery by the Employee to the Company of written substantiation on account of each such reimbursable Expense.

4.6                  Paid Vacation.   It is hereby also acknowledged and agreed that, during the continuance of this Agreement, the Employee shall be entitled to four weeks paid vacation (collectively, the "Vacation") during each and every year during the continuance of this Agreement.  In this regard it is further understood hereby that the Employee's entitlement to any such paid Vacation during any year (including the initial year) during the continuance of this Agreement will be subject, at all times, to the Employee's entitlement to only a pro rata portion of any such paid Vacation time during any year (including the initial year) and to the effective date upon which this Agreement is terminated prior to the end of any such year for any reason whatsoever.

4.7                  Option.   Subject to the following, and as soon as reasonably practicable after the Effective Date hereof, it is hereby acknowledged and agreed that the Employee will be granted, subject to the rules and policies of the Regulatory Authorities and applicable securities legislation, the terms and conditions of the Company's existing stock option plan (the "Option Plan"); which will, it is hereby acknowledged and agreed, be developed and implemented just prior to or after the Company being listed for trading on a recognized stock exchange or over-the-counter market in North America (the "Listing"); and the final determination of the Board of Directors, acting reasonably, an incentive stock option or options (each being an "Option") within the Company for the collective purchase of an aggregate of not less than 500,000 common shares of the Company (each an "Option Share"), at an exercise price equal to not greater than U.S. $0.25 per Option Share; with such Option vesting as to exercise on the following bases:
(a)        the initial right to acquire up to an initial 100,000 of such Option Shares under the Option will vest and will be immediately exercisable on the date which is three months after the Employee's formal appointment as the Company's Chief Financing Officer (the "Engagement") as a consequence of this Agreement;

(b)        the further right to acquire up to an additional 100,000 of such Option Shares under the Option will vest and will be immediately exercisable on the date which is one year from the date of Engagement;

(c)        the further right to acquire up to an additional 100,000 of such Option Shares under the Option will vest and will be immediately exercisable on the date which is 18 months from the date of Engagement; and

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(d)        the further and final right to acquire up to the final 200,000 of such Option Shares under the Option will vest and will be immediately exercisable on the date which is two years from the date of Engagement.

                        In this regard, and subject also to the following, it is hereby acknowledged and agreed that the exercise of the Option shall be subject, at all times, to such resale provisions as may then be contained in the Company's Option Plan and as may be finally determined by the Board of Directors, acting reasonably.  Notwithstanding the foregoing, however, it is hereby also acknowledged and agreed that, in the event that this Agreement is terminated in accordance with either of sections "3.2", "3.3", "3.4", "3.5", "3.6" or "5.6" herein, such portion of the within and remaining Option which shall have then not been exercised on the determined Effective Termination Date shall, notwithstanding the remaining exercise period of the Option, then be exercisable by the Employee for a period of 90 calendar days following such Effective Termination Date.  In this regard, and in accordance with the terms and conditions of each final form of Option agreement, the Parties hereby also acknowledge and agree that:
(A)        Registration of Option Shares under the Option:   the Company expects to file with the United States Securities and Exchange Commission (the "SEC") a registration statement on Form S-8 (the "Form S-8 Registration Statement") within 120 calendar days of the Company's Listing and covering the issuance of all Option Shares of the Company underlying the then issued Option, and such Form S-8 Registration Statement shall comply with all requirements of the United States Securities Act of 1933, as amended (the "Securities Act").  In this regard the Company shall use its best efforts to ensure that the Form S-8 Registration Statement remains effective as long as such Option is outstanding, and the Employee fully understands and acknowledges that these Option Shares will be issued in reliance upon the exemption afforded under the Form S-8 Registration Statement which is available only if the Employee acquires such Option Shares for investment and not with a view to distribution.  The Employee is familiar with the phrase "acquired for investment and not with a view to distribution" as it relates to the Securities Act and the special meaning given to such term in various releases of the SEC;

(B)        Section 16 compliance:   the Company shall ensure that all grants of the Option are made to ensure compliance with all applicable provisions of the exemption afforded under Rule 16b-3 promulgated under the United States Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Without limiting the foregoing, the Company shall have an independent committee of the Board of Directors approve each grant of the Option to the Employee and, if required, by the applicable Regulatory Authorities and the shareholders of the Company.  The Company shall file, on behalf of the Employee, all reports required to filed with the SEC pursuant to the requirements of Section 16(a) under the Exchange Act and applicable rules and regulations;

(C)        Disposition of any Option Shares:   the Employee further acknowledges and understands that, without in anyway limiting the acknowledgements and understandings as set forth hereinabove, the Employee agrees that the Employee shall in no event make any disposition of all or any portion of the Option Shares which the Employee may acquire hereunder unless and until:
(i)        there is then in effect a "Registration Statement" under the Securities Act covering such proposed disposition and such disposition is made in accordance with said Registration Statement; or

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(ii)       (A) the Employee shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, (B) the Employee shall have furnished the Company with an opinion of the Employee's own counsel to the effect that such disposition will not require registration of any such Option Shares under the Securities Act and (C) such opinion of the Employee's counsel shall have been concurred in by counsel for the Company and the Company shall have advised the Employee of such concurrence; and

(D)        Payment for any Option Shares:   it is hereby further acknowledged and agreed that, during the continuance of this Agreement, the Employee shall be entitled to exercise any portion of the vested Option granted hereunder and pay for the same by way of the prior agreement of the Employee, in the Employee's sole and absolute discretion, and with the prior knowledge of the Company, to settle any indebtedness which may be due and owing by the Company under this Agreement in payment for the exercise price of any Option Shares acquired thereunder.  In this regard, and subject to further discussion as between the Company and the Employee, together with the prior approval of the Board of Directors and the establishment by the Company of an Option Plan predicated upon the same, it is envisioned that, when the Company is in a position to afford the same, the Company may adopt certain additional "cashless exercise" provisions respecting the granting and exercise of incentive stock options during the continuance of this Agreement.

(E)        Earlier Termination of Options.  If the Employee's service agreement is terminated during the Option Period for any reason other than death or for cause, any Options granted to the Employee which have not been exercised shall terminate immediately or shall terminate, at the sole discretion of the Compensation Committee, within 90 calendar days after the effective date of such termination and shall be exercisable during such 90 day period only to the extent they were exercisable on the effective date of termination.  If the Employee's Service Agreement terminates during the Option Period because of death, the Option may be exercised by the Employee's estate in full for one year after such death.  If the Employee's Service Agreement is terminated for cause during the Option Period, any unexercised portion of the Option shall immediately expire.

4.8                  Benefits.   It is hereby acknowledged and agreed that, during the continuance of this Agreement, the Employee shall be entitled to participate fully in each of the Company's respective medical services plans and management and employee benefits program(s) (collectively, the "Benefits").

4.9                  Payment of compensation as a non-taxable consultant.   It is hereby acknowledged and agreed that the Employee will be classified as a non-taxable consultant of the Company for all purposes.  In this regard, and for all matters relating to this Agreement therefore, the Employee will be a consultant of the Company under the meaning or application of any and all applicable federal and state unemployment, insurance and workers' compensation laws, and otherwise.

 

 

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Article 5

ADDITIONAL OBLIGATIONS OF THE EMPLOYEE

5.1                  Reporting.   At such time or times as may be required by the Board of Directors, acting reasonably, the Employee will provide the Board of Directors with such information concerning the results of the Employee's General Services and activities hereunder for the previous month as the Board of Directors reasonably require.

5.2                  No conflict, no competition and non-circumvention.   During the continuance of this Agreement the Employee shall not engage in any business or activity which reasonably may detract from or conflict with the Employee's respective duties and obligations to the Company as set forth in this Agreement without the prior written consent of the Board of Directors.  In addition, during the continuance of this Agreement, and for a period of at least one year following the termination of this Agreement in accordance with either of sections "3.2", "3.3", "3.4", "3.5", "3.6" or "5.6" hereunder, the Employee shall not engage in any business or activity whatsoever which reasonably may be determined by the Board of Directors, in its sole and absolute discretion, to compete with any portion of the Business interests as contemplated hereby without the prior written consent of the Board of Directors.  Furthermore, the Employee hereby acknowledges and agrees, for a period of at least one year following the termination of this Agreement in accordance with either of sections "3.3", "3.4", "3.5", "3.6" or "5.6" hereunder, not to initiate any contact or communication directly with either the Company or any of its respective subsidiaries, as the case may be, together with each of their respective directors, officers, representatives, agents or employees, without the prior written consent of the Board of Directors and, notwithstanding the generality of the foregoing, further acknowledges and agrees, even with the prior written consent of the Board of Directors to such contact or communication, to limit such contact or communication to discussions outside the scope of any confidential information (as hereinafter determined).  For the purposes of the foregoing the Employee hereby recognizes and agrees that a breach by the Employee of any of the covenants herein contained would result in irreparable harm and significant damage to the Company that would not be adequately compensated for by monetary award.  Accordingly, the Employee agrees that, in the event of any such breach, in addition to being entitled as a matter of right to apply to a Court of competent equitable jurisdiction for relief by way of restraining order, injunction, decree or otherwise as may be appropriate to ensure compliance with the provisions hereof, the Employee will also be liable to the Company, as liquidated damages, for an amount equal to the amount received and earned by the Employee as a result of and with respect to any such breach.  The Parties hereby acknowledge and agree that if any of the aforesaid restrictions, activities, obligations or periods are considered by a Court of competent jurisdiction as being unreasonable, the Parties agree that said Court shall have authority to limit such restrictions, activities or periods as the Court deems proper in the circumstances.   In addition, the Parties further acknowledge and agree that all restrictions or obligations in this Agreement are necessary and fundamental to the protection of the Business interests and are reasonable and valid, and all defenses to the strict enforcement thereof by the Employee are hereby waived.

5.3                  Confidentiality.   The Employee will not, except as authorized or required by the Employee's duties hereunder, reveal or divulge to any person or entity any information concerning the organization, business, finances, transactions or other affairs of Company or of any of the Company's respective subsidiaries which may come to the Employee's knowledge during the continuance of this Agreement, and the Employee will keep in complete secrecy all confidential information entrusted to the Employee and will not use or attempt to use any such information in any manner which may injure or cause loss either directly or indirectly to the Company's Business interests.   This restriction will continue to apply after the termination of this Agreement without limit in point of time but will cease to apply to information or knowledge which may come into the public domain.

 

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5.4                  Compliance with applicable laws.   The Employee will comply with all U.S., Canadian and foreign laws, whether federal, provincial or state, applicable to the Employee's duties hereunder and, in addition, hereby represents and warrants that any information which the Employee may provide to any person or company hereunder will, to the best of the Employee's knowledge, information and belief, be accurate and complete in all material respects and not misleading, and will not omit to state any fact or information which would be material to such person or company.

5.5                  Opinions, reports and advice of the Employee.   The Employee acknowledges and agrees that all written and oral opinions, reports, advice and materials provided by the Employee to the Company in connection with the Employee's engagement hereunder are intended solely for the Company's benefit and for the Company's uses only, and that any such written and oral opinions, reports, advice and information are the exclusive property of the Company.  In this regard the Employee covenants and agrees that the Company may utilize any such opinion, report, advice and materials for any other purpose whatsoever and, furthermore, may reproduce, disseminate, quote from and refer to, in whole or in part, at any time and in any manner, any such opinion, report, advice and materials in the Company's sole and absolute discretion.  The Employee further covenants and agrees that no public references to the Employee or disclosure of the Employee's role in respect of the Company may be made by the Employee without the prior written consent of the Board of Directors in each specific instance and, furthermore, that any such written opinions, reports, advice or materials shall, unless otherwise required by the Board of Directors, be provided by the Employee to the Company in a form and with such substance as would be acceptable for filing with and approval by any Regulatory Authority having jurisdiction over the affairs of the Company from time to time.

5.6                  Employee's business conduct.   The Employee warrants that the Employee shall conduct the business and other activities in a manner which is lawful and reputable and which brings good repute to the Company, the Business interests and the Employee.  In particular, and in this regard, the Employee specifically warrants to provide the General Services in a sound and professional manner such that the same meets superior standards of performance quality within the standards of the industry or as set by the specifications of the Company.   In the event that the Company has a reasonable concern that the business as conducted by the Employee is being conducted in a way contrary to law or is reasonably likely to bring disrepute to the Business interests or to the Company's or the Employee's reputation, the Company may require that the Employee make such alterations in the Employee's business conduct or structure, whether of management or Board representation or employee or sub-licensee representation, as the Board of Directors may reasonably require, in its sole and absolute discretion, failing which the Company, in its sole and absolute discretion, may terminate this Agreement upon prior written notice to the Employee to do so (the "Notice of Termination" herein) at least 10 calendar days prior to the effective date of any such termination (the end of such 10-day period from such Notice of Termination being the "Effective Termination Date" herein).  In any such event the Employee's ongoing obligation to provide the General Services will continue only until the Effective Termination Date and, subject to the following, the Company's ongoing obligation to provide and to pay to the Employee all of the amounts otherwise payable to the Employee under Article "4" hereinabove will continue until the Effective Termination Date.  In the event of any debate or dispute as to the reasonableness of the Board of Directors' request or requirements, the judgment of the Board of Directors shall be deemed correct until such time as the matter has been determined by arbitration in accordance with Article "8" hereinbelow.

 

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5.7                  Right of ownership to the Business and related Property.   The Employee hereby acknowledges and agrees that any and all Company Business interests, together with any products or improvements derived therefrom and any trade marks or trade names used in connection with the same (collectively, the "Property"), are wholly owned and controlled by the Company.  Correspondingly, neither this Agreement, nor the operation of the mineral property resource acquisition, exploration and development Business contemplated by this Agreement, confers or shall be deemed to confer upon the Employee any interest whatsoever in and to any of the Property.  In this regard the Employee hereby further covenants and agrees not to, during or after the Initial Term and the continuance of this Agreement, contest the title to any of the Property interests, in any way dispute or impugn the validity of the Property interests or take any action to the detriment of the Company's interests therein.  The Employee acknowledges that, by reason of the unique nature of the Property interests, and by reason of the Employee's knowledge of and association with the Property interests during the Initial Term and during the continuance of this Agreement, the aforesaid covenant, both during the Initial Term of this Agreement and thereafter, is reasonable and commensurate for the protection of the legitimate Business interests of the Company.  As a final note, the Employee hereby further covenants and agrees to immediately notify the Company of any infringement of or challenge to the any of the Property interests as soon as the Employee becomes aware of the infringement or challenge.

                        In addition, and for even greater certainty, the Employee hereby assigns to the Company the entire right, title and interest throughout the world in and to all work performed, writings, formulas, designs, models, drawings, photographs, design inventions, and other inventions, made, conceived, or reduced to practice or authored by the Employee or by the Employee's employees, either solely or jointly with others, during the performance of this Agreement, or which are made, conceived, or reduced to practice, or authored with the use of information or materials of the Company either received or used by the Employee during the performance of this Agreement or any extension or renewal thereof.  The Employee shall promptly disclose to the Company all works, writings, formulas, designs, models, photographs, drawings, design inventions and other inventions made, conceived or reduced to practice, or authored by the Employee or the Employee's employees as set forth above.  The Employee shall sign, execute and acknowledge, or cause to be signed, executed and acknowledged without cost to Company or its nominees, patent, trademark or copyright protection throughout the world upon all such works, writings, formulas, designs, models, drawings, photographs, design inventions and other inventions; title to which the Company acquires in accordance with the provisions of this section.  The Employee has acquired or shall acquire from each of the Employee's employees, if any, the necessary rights to all such works, writings, formulas, designs, models, drawings, photographs, design inventions and other inventions made by such employees within the scope of their employment by the Employee in performing the General Services under this Agreement.  The Employee shall obtain the cooperation of each such employee to secure to the Company's or its nominee's the rights to such works, writings, formulas, designs, models, drawings, photographs, design inventions and other inventions as the Company may acquire in accordance with the provisions of this section.

 

Article 6

INDEMNIFICATION AND LEGAL PROCEEDINGS

6.1                  Indemnification.   The Parties hereto hereby each agree to indemnify and save harmless the other Party hereto and including, where applicable, their respective subsidiaries and affiliates and each of their respective directors, officers, Employees and agents (each such party being an "Indemnified Party") harmless from and against any and all losses, claims, actions, suits, proceedings, damages, liabilities or expenses of whatever nature or kind and including, without limitation, any investigation expenses incurred by any Indemnified Party, to which an Indemnified Party may become subject by reason of the terms and conditions of this Agreement.

6.2                  No indemnification.   This indemnity will not apply in respect of an Indemnified Party in the event and to the extent that a Court of competent jurisdiction in a final judgment shall determine that the Indemnified Party was grossly negligent or guilty of willful misconduct.

 

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6.3                  Claim of indemnification.   The Parties hereto agree to waive any right they might have of first requiring the Indemnified Party to proceed against or enforce any other right, power, remedy, security or claim payment from any other person before claiming this indemnity.

6.4                  Notice of claim.   In case any action is brought against an Indemnified Party in respect of which indemnity may be sought against either of the Parties hereto, the Indemnified Party will give both Parties hereto prompt written notice of any such action of which the Indemnified Party has knowledge and the relevant Party will undertake the investigation and defense thereof on behalf of the Indemnified Party, including the prompt employment of counsel acceptable to the Indemnified Party affected and the relevant Party and the payment of all expenses.  Failure by the Indemnified Party to so notify shall not relieve the relevant Party of such relevant Party's obligation of indemnification hereunder unless (and only to the extent that) such failure results in a forfeiture by the relevant Party of substantive rights or defenses.

6.5                  Settlement.   No admission of liability and no settlement of any action shall be made without the consent of each of the Parties hereto and the consent of the Indemnified Party affected, such consent not to be unreasonable withheld.

6.6                  Legal proceedings.   Notwithstanding that the relevant Party will undertake the investigation and defense of any action, an Indemnified Party will have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless:

(a)        such counsel has been authorized by the relevant Party;

(b)        the relevant Party has not assumed the defense of the action within a reasonable period of time after receiving notice of the action;

(c)        the named parties to any such action include that any Party hereto and the Indemnified Party shall have been advised by counsel that there may be a conflict of interest between any Party hereto and the Indemnified Party; or

(d)        there are one or more legal defenses available to the Indemnified Party which are different from or in addition to those available to any Party hereto.

6.7                  Contribution.   If for any reason other than the gross negligence or bad faith of the Indemnified Party being the primary cause of the loss claim, damage, liability, cost or expense, the foregoing indemnification is unavailable to the Indemnified Party or insufficient to hold them harmless, the relevant Party shall contribute to the amount paid or payable by the Indemnified Party as a result of any and all such losses, claim, damages or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by the relevant Party on the one hand and the Indemnified Party on the other, but also the relative fault of relevant Party and the Indemnified Party and other equitable considerations which may be relevant.  Notwithstanding the foregoing, the relevant Party shall in any event contribute to the amount paid or payable by the Indemnified Party, as a result of the loss, claim, damage, liability, cost or expense (other than a loss, claim, damage, liability, cost or expenses, the primary cause of which is the gross negligence or bad faith of the Indemnified Party), any excess of such amount over the amount of the fees actually received by the Indemnified Party hereunder.

 

 

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Article 7

FORCE MAJEURE

7.1                  Events.   If either Party hereto is at any time either during this Agreement or thereafter prevented or delayed in complying with any provisions of this Agreement by reason of strikes, walk-outs, labour shortages, power shortages, fires, wars, acts of God, earthquakes, storms, floods, explosions, accidents, protests or demonstrations by environmental lobbyists or native rights groups, delays in transportation, breakdown of machinery, inability to obtain necessary materials in the open market, unavailability of equipment, governmental regulations restricting normal operations, shipping delays or any other reason or reasons beyond the control of that Party, then the time limited for the performance by that Party of its respective obligations hereunder shall be extended by a period of time equal in length to the period of each such prevention or delay.

7.2                  Notice.   A Party shall within three calendar days give notice to the other Party of each event of force majeure under section "7.1" hereinabove, and upon cessation of such event shall furnish the other Party with notice of that event together with particulars of the number of days by which the obligations of that Party hereunder have been extended by virtue of such event of force majeure and all preceding events of force majeure.

 

Article 8

ARBITRATION

8.1                  Matters for arbitration.   Except for matters of indemnity or in the case of urgency to prevent material harm to a substantive right or asset, the Parties agree that all questions or matters in dispute with respect to this Agreement shall be submitted to arbitration pursuant to the terms hereof.  This provision shall not prejudice a Party from seeking a Court order or assistance to garnish or secure sums or to seek summary remedy for such matters as counsel may consider amenable to summary proceedings.

8.2                  Notice.   It shall be a condition precedent to the right of any Party to submit any matter to arbitration pursuant to the provisions hereof that any Party intending to refer any matter to arbitration shall have given not less than five business days' prior written notice of its intention to do so to the other Parties together with particulars of the matter in dispute.  On the expiration of such five business days the Party who gave such notice may proceed to refer the dispute to arbitration as provided for in section "8.3" hereinbelow.

8.3                  Appointments.   The Party desiring arbitration shall appoint one arbitrator, and shall notify the other Parties of such appointment, and the other Parties shall, within five business days after receiving such notice, appoint an arbitrator, and the two arbitrators so named, before proceeding to act, shall, within five business days of the appointment of the last appointed arbitrator, unanimously agree on the appointment of a third arbitrator, to act with them and be chairperson of the arbitration herein provided for.  If the other Parties shall fail to appoint an arbitrator within five business days after receiving notice of the appointment of the first arbitrator, and if the two arbitrators appointed by the Parties shall be unable to agree on the appointment of the chairperson, the chairperson shall be appointed in accordance with the Arbitration Act.  Except as specifically otherwise provided in this section, the arbitration herein provided for shall be conducted in accordance with such Arbitration Act.  The chairperson, or in the case where only one arbitrator is appointed, the single arbitrator, shall fix a time and place in Vancouver, British Columbia, Canada, for the purpose of hearing the evidence and representations of the Parties, and the chairperson shall preside over the arbitration and determine all questions of procedure not provided for by the Arbitration Act or this section.  After hearing any evidence and representations that the Parties may submit, the single arbitrator, or the arbitrators, as the case may be, shall make an award and reduce the same to writing, and deliver one copy thereof to each of the Parties.  The expense of the arbitration shall be paid as specified in the award.

 

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8.4                  Award.   The Parties agree that the award of a majority of the arbitrators, or in the case of a single arbitrator, of such arbitrator, shall be final and binding upon each of them.

 

Article 9

GENERAL PROVISIONS

9.1                  Entire agreement.   This Agreement constitutes the entire agreement to date between the Parties hereto and supersedes every previous agreement, expectation, negotiation, representation or understanding, whether oral or written, express or implied, statutory or otherwise, between the Parties with respect to the subject matter of this Agreement.

9.2                  No assignment.   This Agreement may not be assigned by any Party hereto except with the prior written consent of the other Parties.

9.3                  Notice.   Each notice, demand or other communication required or permitted to be given under this Agreement shall be in writing and shall be sent by prepaid registered mail deposited in a recognized post office and addressed to the Party entitled to receive the same, or delivered to such Party, at the address for such Party specified on the front page of this Agreement.  The date of receipt of such notice, demand or other communication shall be the date of delivery thereof if delivered, or, if given by registered mail as aforesaid, shall be deemed conclusively to be the third business day after the same shall have been so mailed, except in the case of interruption of postal services for any reason whatsoever, in which case the date of receipt shall be the date on which the notice, demand or other communication is actually received by the addressee.  Any Party may at any time and from time to time notify the other Parties in writing of a change of address and the new address to which notice shall be given to it thereafter until further change.

9.4                  Time of the essence.   Time will be of the essence of this Agreement.

9.5                  Enurement.   This Agreement will enure to the benefit of and will be binding upon the Parties hereto and their respective heirs, executors, administrators and assigns.

9.6                  Currency.   Unless otherwise stipulated, all payments required to be made pursuant to the provisions of this Agreement and all money amount references contained herein are in lawful currency of the United States.

9.7                  Further assurances.   The Parties will from time to time after the execution of this Agreement make, do, execute or cause or permit to be made, done or executed, all such further and other acts, deeds, things, devices and assurances in law whatsoever as may be required to carry out the true intention and to give full force and effect to this Agreement.

9.8                  Representation and costs.   It is hereby acknowledged by each of the Parties hereto that Lang Michener LLP, Lawyers - Patent & Trade Mark Agents, acts solely for the Company, and, correspondingly, that the Employee has been required by each of Lang Michener LLP and the Company to obtain independent legal advice with respect to its review and execution of this Agreement.   In addition, it is hereby further acknowledged and agreed by the Parties hereto that Lang Michener LLP, and certain or all of its principal owners or associates, from time to time, may have both an economic or shareholding interest in and to Company and/or a fiduciary duty to the same arising from either a directorship, officership or similar relationship arising out of the request of the Company for certain of such persons to act in a similar capacity while acting for the Company as counsel.  Correspondingly, and even where, as a result of this Agreement, the consent of each Party hereto to the role and capacity of Lang Michener LLP, and its principal owners and associates, as the case may be, is deemed to have been received, where any conflict or perceived conflict may arise, or be seen to arise, as a result of any such capacity or representation, each Party hereto acknowledges and agrees to, once more, obtain independent legal advice in respect of any such conflict or perceived conflict and, consequent thereon, Lang Michener LLP, together with any such principal owners or associates, as the case may be, shall be at liberty at any time to resign any such position if it or any Party hereto is in any way affected or uncomfortable with any such capacity or representation.  Each Party to this Agreement will also bear and pay its own costs, legal and otherwise, in connection with its respective preparation, review and execution of this Agreement and, in particular, that the costs involved in the preparation of this Agreement, and all documentation necessarily incidental thereto, by Lang Michener LLP, shall be at the cost of the Company.

 

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9.9                  Applicable law.   The situs of this Agreement is Vancouver, British Columbia, Canada, and for all purposes this Agreement will be governed exclusively by and construed and enforced in accordance with the laws and Courts prevailing in the Province of British Columbia and the federal laws of Canada applicable therein.

9.10                Severability and construction.   Each Article, section, paragraph, term and provision of this Agreement, and any portion thereof, shall be considered severable, and if, for any reason, any portion of this Agreement is determined to be invalid, contrary to or in conflict with any applicable present or future law, rule or regulation in a final unappealable ruling issued by any court, agency or tribunal with valid jurisdiction in a proceeding to which any Party hereto is a party, that ruling shall not impair the operation of, or have any other effect upon, such other portions of this Agreement as may remain otherwise intelligible (all of which shall remain binding on the Parties and continue to be given full force and effect as of the date upon which the ruling becomes final).

9.11                Captions.   The captions, section numbers and Article numbers appearing in this Agreement are inserted for convenience of reference only and shall in no way define, limit, construe or describe the scope or intent of this Agreement nor in any way affect this Agreement.

9.12                Counterparts.   This Agreement may be signed by the Parties hereto in as many counterparts as may be necessary, and via facsimile if necessary, each of which so signed being deemed to be an original and such counterparts together constituting one and the same instrument and, notwithstanding the date of execution, being deemed to bear the Effective Date as set forth on the front page of this Agreement.

9.13                No partnership or agency.   The Parties have not created a partnership and nothing contained in this Agreement shall in any manner whatsoever constitute any Party the partner, agent or legal representative of the other Parties, nor create any fiduciary relationship between them for any purpose whatsoever.

9.14                Consents and waivers.   No consent or waiver expressed or implied by either Party in respect of any breach or default by the other in the performance by such other of its obligations hereunder shall:

(a)        be valid unless it is in writing and stated to be a consent or waiver pursuant to this section;

(b)        be relied upon as a consent to or waiver of any other breach or default of the same or any other obligation;

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(c)        constitute a general waiver under this Agreement; or

(d)        eliminate or modify the need for a specific consent or waiver pursuant to this section in any other or subsequent instance.

 

                        IN WITNESS WHEREOF the Parties hereto have hereunto set their respective hands and seals as at the Effective Date as hereinabove determined.

	
The COMMON SEAL of

GULF STATES ENERGY, INC.,

the Company herein, was hereunto affixed

in the presence of:

"Johnathan Lindsay"                          

Authorized Signatory

	
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(C/S)

	
SIGNED, SEALED and DELIVERED by

STEVE NARROD,

the Employee herein, in the presence of:

___________________________________

Witness Signature

___________________________________

Witness Address

___________________________________

Witness Name and Occupation

	
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"Steve Narrod"

STEVE NARROD

 

__________

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