Document:

CFS Bancorp Inc Form 8-K Exhibit 10_9

    
      Exhibit
        10.9

       
EMPLOYMENT
      AGREEMENT

    

    

    AGREEMENT
      dated this 1st day of July 2006 between CFS Bancorp, Inc. (the "Corporation"),
      an Indiana corporation, and Thomas L. Darovic (the "Executive").

    

    

    WITNESSETH

    

    WHEREAS,
      the Executive is presently an officer of the Corporation and Citizens Financial
      Bank (the "Bank") (together, the "Employers");

    

    WHEREAS,
      the Employers desire to be ensured of the Executive's continued active
      participation in the business of the Employers;

    

    WHEREAS,
      the Corporation and the Bank desire to enter into separate agreements with
      the
      Executive with respect to his employment by each of the Employers;
      and

    

    WHEREAS,
      in order to induce the Executive to remain in the employ of the Employers and
      in
      consideration of the Executive's agreeing to remain in the employ of the
      Employers, the parties desire to specify the severance benefits which shall
      be
      due the Executive by the Corporation in the event that his employment with
      the
      Corporation is terminated under specified circumstances;

    

    NOW
      THEREFORE, in consideration of the mutual agreements herein contained, and
      upon
      the other terms and conditions hereinafter provided, the parties hereby agree
      as
      follows:

    

    
      	1)  	
              Definitions.  

            

    

    

    The
      following words and terms shall have the meanings set forth below for the
      purposes of this Agreement:

    

    
      	a)  	
              Average
                Annual Compensation.
                The Executive's "Average Annual Compensation" for purposes of this
                Agreement shall be deemed to mean the average Base Salary, cash bonuses
                and amounts allocated to the Executive under any qualified employee
                benefit plans of the Employers for the preceding three
                years.

            

    

    

    
      	b)  	
              Base
                Salary.
                "Base Salary" shall have the meaning set forth in Section 4(a)
                hereof.

            

    

    

    
      	c)  	
              Cause.
                Termination of the Executive's employment for "Cause" shall mean
                termination because of personal dishonesty, incompetence, willful
                misconduct, breach of fiduciary duty involving personal profit,
                intentional failure to perform stated duties, willful violation of
                any
                law, rule or regulation (other than traffic violations or similar
                offenses) or final cease-and-desist order or material breach of any
                provision of this Agreement.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	d)  	
              Change
                in Control.
                “Change
                in Control” means the occurrence of any of the following: (i) an event
                that would be required to be reported in response to Item 5.01 of
                Form 8-K
                or Item 6(e) of Schedule 14A of Regulation 14A pursuant to the Securities
                and Exchange Act of 1934 Act, as amended (1934 Act), or any successor
                thereto, whether or not any class of securities of the Corporation
                is
                registered under the 1934 Act; (ii) any “person” is or becomes the
                “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly
                or indirectly, of securities of the Corporation representing 20%
                or more
                of the combined voting power of the Corporation’s then outstanding
                securities; or (iii) during any period of thirty-six consecutive
                months,
                individuals who at the beginning of such period constitute the Board
                of
                Directors of the Corporation cease for any reason to constitute at
                least a
                majority thereof unless the election, or the nomination for election
                by
                stockholders, of each new director was approved by a vote of at least
                two-thirds of the directors then still in office who were directors
                at the
                beginning of the period. 

            

    

    

    
      	i)  	
              For
                purposes of the definition of “Change in Control,” a Person or group of
                Persons does not include the CFS Bancorp, Inc. Employee Stock Ownership
                Plan Trust which forms a part of the CFS Bancorp, Inc. Employee Stock
                Ownership Plan (the “ESOP”), or any other employee benefit plan,
                subsidiary or affiliate of the Corporation, and the outstanding shares
                of
                common stock of the Corporation, on a fully diluted basis, include
                all
                shares owned by the ESOP, whether allocated or unallocated to the
                accounts
                of participants, thereunder.

            

    

    

    
      	ii)  	
              For
                purposes of the definition of “Change in Control,” the term “Person” means
                any natural person, proprietorship, partnership, corporation, limited
                liability company, organization, firm, business, joint venture,
                association, trust or other entity and any government agency, body
                or
                authority.

            

    

    

    
      	e)  	
              Code.
                "Code"
                shall mean the Internal Revenue Code of 1986, as
                amended.

            

    

    

    
      	f)  	
              Date
                of Termination.
                "Date of Termination" shall mean (i) if the Executive's employment
                is
                terminated for Cause or for Disability, the date specified in the
                Notice
                of Termination, and (ii) if the Executive's employment is terminated
                for
                any other reason, the date on which a Notice of Termination is given
                or as
                specified in such Notice.

            

    

    

    
      	g)  	
              Disability.
                Termination by the Corporation of the Executive's employment based
                on
                "Disability" shall mean termination because of any physical or mental
                impairment which qualifies the Executive for disability benefits
                under the
                applicable long-term disability plan maintained by the Employers
                or any
                subsidiary or, if no such plan applies, which would qualify the Executive
                for disability benefits under the Federal Social Security
                System.

            

    

    

    
      	h)  	
              Good
                Reason.
                Termination by the Executive of the Executive's employment for "Good
                Reason" shall mean termination by the Executive within twelve months
                following a Change in Control of the Corporation based
                on:

            

    

     

    
      
        
        

      

      
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      	(i)  	
              Without
                the Executive's express written consent, the failure to elect or
                to
                re-elect or to appoint or to re-appoint the Executive to the offices
                of
                Executive Vice President of Retail Banking for the Bank or a material
                adverse change made by the Employers in the Executive's functions,
                duties
                or responsibilities as an Executive Vice President of the Bank;

            

    

    

    
      	(ii)  	
              Without
                the Executive's express written consent, a reduction by either of
                the
                Employers in the Executive's Base Salary as the same may be increased
                from
                time to time or, except to the extent permitted by Section 4(b) hereof,
                a
                reduction in the package of fringe benefits provided to the Executive,
                taken as a whole;

            

    

    

    
      	(iii)  	
              The
                principal executive office of either of the Employers is relocated
                more
                than ten miles from Munster, Indiana or, without the Executive's
                express
                written consent, either of the Employers require the Executive to
                be based
                anywhere other than an area in which the Employers' principal executive
                office is located, except for required travel on business of the
                Employers
                to an extent substantially consistent with the Executive's present
                business travel obligations;

            

    

    

    
      	(iv)  	
              Any
                purported termination of the Executive's employment for Disability
                or
                Retirement which is not effected pursuant to a Notice of Termination
                satisfying the requirements of paragraph (k) below;
                or

            

    

    

    
      	(v)  	
              The
                failure by the Corporation to obtain the assumption of and agreement
                to
                perform this Agreement by any
                successor.

            

    

    

    
      	i)  	
              IRS.
                "IRS"
                shall mean the Internal Revenue
                Service.

            

    

    

    
      	j)  	
              Key
                Employee.
                "Key
                Employee"
                means an employee who is:

            

    

    

    i) An
      officer of the Corporation having annual compensation greater than
      $140,000;

    ii) A
      five-percent owner of the Corporation; or

    iii)
      A
      one-percent owner of the Corporation having an annual compensation greater
      than
      $150,000.

    

    For
      purposes of determining who is an officer for purposes of Section 1(j)(i),
      no
      more than 50 employees (or, if lesser, the greater of three or 10 percent of
      the
      employees) shall be treated as officers, and those categories of employees
      listed in Code Section 414(q)(5) shall be excluded. The
      $140,000 amount shall be adjusted at the same time and in the same manner as
      under Code Section 415(d), except that the base period shall be the calendar
      quarter beginning July 1, 2001, and any increase under this sentence which
      is
      not a multiple of $5,000 shall be rounded to the next lower multiple of
      $5,000.

    

    
      
        
        

      

      
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      	k)  	
              Notice
                of Termination.
                Any purported termination of the Executive's employment by the Corporation
                for any reason, including without limitation for Cause, Disability
                or
                Retirement, or by the Executive for any reason, including without
                limitation for Good Reason, shall be communicated by written "Notice
                of
                Termination" to the other party hereto. For purposes of this Agreement,
                a
                "Notice of Termination" shall mean a dated notice which (i) indicates
                the
                specific termination provision in this Agreement relied upon, (ii)
                sets
                forth in reasonable detail the facts and circumstances claimed to
                provide
                a basis for termination of the Executive's employment under the provision
                so indicated, (iii) specifies a Date of Termination, which shall
                be not
                less than 30 nor more than 90 days after such Notice of Termination
                is
                given, except in the case of the Corporation's termination of the
                Executive's employment for Cause, which shall be effective immediately;
                and (iv) is given in the manner specified in Section 11
                hereof.

            

    

    

    
      	l)  	
              Retirement.
                "Retirement" shall mean voluntary termination by the Executive after
                the
                Executive attains the age 55, with at least five years of active
                service.

            

    

    

    
      	m)  	
              Separation
                from Service.
                "Separation
                from Service"
                means the date on which the Executive dies, retires or otherwise
                experiences a Termination of Employment with the Corporation. Provided,
                however, a Separation from Service does not occur if the Executive
                is on
                military leave, sick leave, or other bona fide leave of absence (such
                as
                temporary employment by the government) if the period of such leave
                does
                not exceed six months, or if the leave is for a longer period, so
                long as
                the individual’s right to reemployment with the Corporation is provided
                either by statute or by contract. If the period of leave exceeds
                six
                months and the Executive’s right to reemployment is not provided either by
                statute or contract, there shall be a Separation from Service on
                the first
                date immediately following such six-month period. Executive shall
                incur a
                "Termination
                of Employment"
                when a termination of employment is incurred under Proposed Treasury
                Regulation 1.409A-1(h)(ii) or any final version of such Proposed
                Regulation.

            

    

    

    
      	n)  	
              Specified
                Employee.
                “Specified Employee” means an employee who is a “Key Employee” if the
                Corporation’s stock is publicly traded on an established securities
                market. An employee shall be a Specified Employee for the twelve-month
                period beginning on the April 1st
                following any calendar year in which the employee is a Key
                Employee.

            

    

    

    
      	2)  	
              Term
                of Employment.

            

    

    

    
      	a)  	
              The
                Corporation hereby employs the Executive as a Vice President, and
                the
                Executive hereby accepts said employment and agrees to render such
                services to the Corporation on the terms and conditions set forth
                in this
                Agreement. The term of this Agreement shall be a period of twelve
                months
                commencing as of the date hereof (the "Commencement Date"), subject
                to
                earlier termination as provided herein. Beginning on the day following
                the
                Commencement Date, and on each day thereafter, the term of this Agreement
                shall be extended for a period of one day in addition to the
                then-remaining term, provided that the Corporation has not given
                notice to
                the Executive in writing at least 60 days prior to such
                

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      	  	
              day
                that the term of this Agreement shall not be extended further. Reference
                herein to the term of this Agreement shall refer to both such initial
                term
                and such extended terms. The Board of Directors of the Corporation
                shall
                review on a periodic basis (and no less frequently than annually)
                whether
                to permit further extensions of the term of this Agreement. As part
                of
                such review, the Board of Directors shall consider all relevant factors,
                including the Executive's performance hereunder, and shall either
                expressly approve further extensions of the time of this Agreement
                or
                decide to provide notice to the
                contrary.

            

    

     

    
      	b)  	
              During
                the term of this Agreement, the Executive shall perform such executive
                services for the Corporation as may be consistent with his titles
                and from
                time to time assigned to him by the Corporation's Board of
                Directors.
                The Executive further agrees to serve without additional compensation
                as
                an officer and director of any of the Corporation's subsidiaries
                and
                agrees that any amounts received from such corporation may be offset
                against the amounts due hereunder. In addition, it is agreed that
                the
                Corporation may assign the Executive to one of its subsidiaries for
                payroll purposes.

            

    

    

    
      	3)  	
               Loyalty,
                Confidentiality and
                Non-Competition

            

    

    

    
      	a)  	
              The
                Executive shall devote his or her full time and best efforts to the
                performance of his employment under this Agreement. During the term
                of
                this Agreement, the Executive shall not, at any time or place, either
                directly or indirectly engage in any business or activity in competition
                with the business affairs or interests of the Corporation or be a
                director, officer or consultant to any bank, savings and loan association,
                credit union, thrift, savings bank, or similar institution in the
                Chicago
                CMSA.

            

    

    

    
      	b)  	
              For
                a period of one year from the date of voluntary termination, or
                termination for Cause, the Executive shall not, at any time or place,
                either directly or indirectly engage in any business or activity
                in
                competition with the business affairs or interests of the Corporation
                or
                be a director, officer or consultant to any bank, savings and loan
                association, credit union, thrift, savings bank, or similar institution
                in
                the Chicago CMSA.

            

    

    

    
      	c)  	
              For
                purposes of this Agreement, directly or indirectly engaging in any
                business activity in competition with the business or affairs of
                the
                Corporation includes, but is not limited to, serving or acting as
                an
                owner, partner, agent, beneficiary, or employee of any person, firm
                or
                corporate entity so engaged; except that nothing herein contained
                shall be
                deemed to prevent or limit the right of Executive to invest any of
                his
                surplus funds in the capital stock or other securities of any corporation
                whose stock or securities are publicly owned or are regularly traded
                on
                any public exchange, nor shall anything herein contained be deemed
                to
                prevent Executive from investing or limit Executive's right to invest
                his
                surplus funds in real estate.

            

    

    

    
      	d)  	
              All
                information relating to business of the Employers including, but
                not
                limited to, that business obtained or serviced by Executive and all
                customer listings, contact lists, 

            

    

     

    
      
        
        

      

      
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              expiration
                cards, asset reports, instruments, documents, papers and other material
                used in connection with such business, shall be the exclusive property
                of
                the Employers. Executive shall keep all such information and material
                confidential; none of it shall be copied, reproduced or duplicated
                without
                the express written permission of the Employers, and Executive shall
                return all material containing such information to the Employers
                upon
                their request or upon termination of employment. Executive also agrees
                that he or she shall not utilize the confidential information or
                trade
                secrets of the Employers, either directly or indirectly, for any
                purposes
                except performance of the Executive's responsibilities and in furtherance
                of the Employers’ business, unless otherwise expressly authorized by the
                Employers in writing in advance.

            

    
      	e)  	
              Executive
                agrees that, during his employment, and for a period of one year
                following
                the date of his involuntary termination of employment for Cause,
                or his
                voluntary termination without Good Reason, the
                Executive:

            

    

    

    
      	i)  	
              shall
                not solicit any of the Employers’ past or current customers or clients for
                the benefit of anyone other than the Employers or their
                affiliates;

            

    

    
      	ii)  	
              shall
                not divulge the names of any of the Employers’ past or then current
                customers to any other person, corporation or
                entity;

            

    

    
      	iii)  	
              shall
                not divulge to anyone, except the Employers or their representatives,
                any
                information regarding their management strategies, marketing information
                or goals, policies and/or other information regarding the affairs
                of the
                Employer, all of which Executive is hereby obligated to keep secret,
                however and whenever such information comes to his or her attention;
                and

            

    

    
      	iv)  	
              shall
                not, either directly or indirectly, induce or solicit any person
                to leave
                the employ of the Employers.

            

    

    

    
      	4)  	
              Compensation
                and Benefits.

            

    

    

    
      	a)  	
              The
                Employers shall compensate and pay the Executive for his services
                during
                the term of this Agreement at a minimum base salary of $171,000
                per year ("Base
                Salary"), which may be increased from time to time in such amounts
                as may
                be determined by the Boards of Directors of the Employers and may
                not be
                decreased without the Executive's express written consent. In addition
                to
                his Base Salary, the Executive shall be entitled to receive during
                the
                term of this Agreement such bonus payments as may be determined by
                the
                Boards of Directors of the
                Employers.

            

    

    

    
      	b)  	
              During
                the term of this Agreement, the Executive shall be entitled to participate
                in and receive the benefits of any pension or other retirement benefit
                plan, profit sharing, stock option, employee stock ownership, or
                other
                plans, benefits and privileges given to employees and executives
                of the
                Employers, to the extent commensurate with his then duties and
                responsibilities, as fixed by the Boards of Directors of the Employers.
                The Corporation shall not make any changes in such plans, benefits
                or
                privileges which would adversely affect the Executive's rights or
                benefits
                thereunder, unless such change occurs

            

    

     

    
      
        
        

      

      
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              pursuant
                to a program applicable to all executive officers of the Corporation
                and
                does not result in a proportionately greater adverse change in the
                rights
                of or benefits to the Executive as compared with any other executive
                officer of the Corporation. Nothing paid to the Executive under any
                plan
                or arrangement presently in effect or made available in the future
                shall
                be deemed to be in lieu of the salary payable to the Executive pursuant
                to
                Section 4(a) hereof.

            

    
      	c)  	
              During
                the term of this Agreement, the Executive shall be entitled to paid
                annual
                vacation in accordance with the policies as established from time
                to time
                by the Boards of Directors of the Employers. The Executive shall
                not be
                entitled to receive any additional compensation from the Employers
                for
                failure to take a vacation, nor shall the Executive be able to accumulate
                unused vacation time from one year to the next, except to the extent
                authorized by the Boards of Directors of the
                Employers.

            

    

    

    
      	d)  	
              In
                the event the Executive's employment is terminated due to Disability
                or
                Retirement, and
                provided the Employee is not otherwise employed in a position providing
                substantially similar benefits, the Employer will continue, at its
                cost
                and for the remaining term of this Agreement, life and medical insurance
                coverage for the Executive and his spouse at substantially similar
                levels
                of coverage and benefits as the Employers provide at such time for
                its
                then existing senior executives. 

            

    

    

    
      	e)  	
              The
                Executive's compensation, benefits and expenses shall be paid by
                the
                Corporation and the Bank in the same proportion as the time and services
                actually expended by the Executive on behalf of each respective
                Employer. 

            

    

    

    
      	f)  	
              During
                the term of the Agreement, the Employers shall provide suitable office
                space, desk,
                chairs, filing cabinets, telephones and other usual and customary
                office
                furniture, fixtures and equipment adequate for the efficient performance
                of the duties assigned to the
                Executive.

            

    

    

    
      	g)  	
              During
                the term of this Agreement, the Employers shall provide to the Executive,
                at the Employer's cost, all perquisites which other senior executives
                of
                the Company are otherwise generally entitled to
                receive.

            

    

    

    
      	h)  	
              During
                the term of this Agreement, the Bank
                shall provide to Executive the use of an automobile with an average
                annual
                lease cost not to exceed $10,000 per year. The Bank agrees to replace
                the
                automobile with a new one at Executive's request no more often than
                once
                every three years. The Bank shall pay all automobile operating expenses
                incurred by Executive in the performance of Executive's duties. The
                Bank
                shall procure and maintain in force an automobile liability policy
                for the
                automobile with coverage, including Executive, in the minimum amount
                of
                $1,000,000 combined single limit on bodily injury and property
                damage.

            

    

     

    
      
        
        

      

      
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      	5)  	
              Expenses.
                The Employers shall reimburse the Executive or otherwise provide
                for or
                pay for all reasonable expenses incurred by the Executive in furtherance
                of or in connection with the business of the Employers, including,
                but not
                by way of limitation, automobile expenses and other traveling expenses,
                and all reasonable entertainment expenses (whether incurred at the
                Executive's residence, while traveling or otherwise), subject to
                such
                reasonable documentation and other limitations as may be established
                by
                the Boards of Directors of the Employers. If such expenses are paid
                in the
                first instance by the Executive, the Employers shall reimburse the
                Executive therefor.

            

    

    

    
      	6)  	
              Termination.

            

    

    

    
      	a)  	
              The
                Corporation shall have the right, at any time upon prior Notice of
                Termination, to terminate the Executive's employment hereunder for
                any
                reason, including without limitation termination for Cause, Disability
                or
                Retirement, and the Executive shall have the right, upon prior Notice
                of
                Termination, to terminate his employment hereunder for any
                reason.

            

    

    

    
      	b)  	
              In
                the event that (i) the Executive's employment is terminated by the
                Corporation for Cause or (ii) the Executive terminates his employment
                hereunder other than for Disability, Retirement, death or Good Reason,
                the
                Executive shall have no right pursuant to this Agreement to compensation
                or other benefits for any period after the applicable Date of
                Termination.

            

    

    

    
      	c)  	
              In
                the event that the Executive's employment is terminated as a result
                of
                Disability, Retirement or the Executive's death during the term of
                this
                Agreement, the Executive shall have no right pursuant to this Agreement
                to
                compensation or other benefits for any period after the applicable
                Date of
                Termination, except as provided for in Section 4(d)
                hereof.

            

    

    

    
      	d)  	
              In
                the event that (i) the Executive's employment is terminated by the
                Corporation for other than Cause, Disability, Retirement or the
                Executive's death or (ii) such employment is terminated by the Executive
                (a) due to a material breach of this Agreement by the Corporation,
                which
                breach has not been cured within fifteen days after a written notice
                of
                non-compliance has been given by the Executive to the Employers,
                or (b)
                for Good Reason, then the Corporation
                shall:

            

    

    

    
      	i)  	
              pay
                to the Executive, a cash severance amount equal to the Executive’s Average
                Annual Compensation paid by the Corporation, in two equal
                installments, with the first installment to be paid on the first
                business
                day of the month following the Executive’s Date of Termination and the
                second installment to be paid no later than January 15th
                of
                the calendar year following the year in which the first installment
                was
                paid; and

            

    

     

    
      
        
        

      

      
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      	ii)  	
              maintain
                and provide for a period ending at the earlier of (i) the expiration
                of
                the remaining term of employment pursuant hereto prior to the Notice
                of
                Termination or (ii) the date of the Executive's full-time employment
                by
                another employer (provided that the Executive is entitled under the
                terms
                of such employment to benefits substantially similar to those described
                in
                this subparagraph, at no cost to the Executive, the Executive's continued
                participation in all group insurance, life insurance, health and
                accident
                insurance, disability insurance and other employee benefit plans,
                programs
                and arrangements offered by the Corporation in which the Executive
                was
                entitled to participate immediately prior to the Date of Termination
                (excluding (x) stock option and restricted stock plans of the
                Employers, (y) bonuses and other items of cash compensation included
                in Average Annual Compensation, and (z) other benefits, or portions
                thereof, included in Average Annual Compensation), provided that
                in the
                event that the Executive's participation in any plan, program or
                arrangement as provided in this subparagraph is barred, or during
                such
                period any such plan, program or arrangement is discontinued or the
                benefits thereunder are materially reduced, the Corporation shall
                arrange
                to provide the Executive with benefits substantially similar to those
                which the Executive was entitled to receive under such plans, programs
                and
                arrangements immediately prior to the Date of
                Termination.

            

    

     

    
      	e)  	
              If
                at the time of the Executive’s Separation from Service, for any reason
                other than death, the Executive meets the definition of a Specified
                Employee, payment of all amounts under subsections 6(d)(i), 6(d)(ii)
                and
                7(a) shall be suspended for six months following the Executive’s
                Separation from Service. In such event, the first installment shall
                be
                paid on the first day following the end of the six-month suspension
                period. The second installment shall be paid no later than January
                15th
                of
                the calendar year following the year in which the first installment
                was
                paid. If the Executive incurs a Separation from Service due to death,
                regardless of whether the Executive meets the definition of a Specified
                Employee, payment of his benefit shall not be suspended. Provided,
                however, that the six-month suspension period shall not apply to
                the
                provision of any group insurance, life insurance, health and accident
                insurance or disability insurance under subsection
                6(d)(ii).

            

    

     

    
      	7)  	
              Payment
                of Additional Benefits under Certain
                Circumstances.

            

    

    

    
      	a)  	
              If
                the payments and benefits pursuant to Section 6 hereof, either alone
                or
                together with other payments and benefits which the Executive has
                the
                right to receive from the Employers (including, without limitation,
                the
                payments and benefits which the Executive would have the right to
                receive
                from the Bank pursuant to Section 6 of the Agreement between the Bank
                and the Executive dated this even date ("Bank Agreement"), before
                giving
                effect to any reduction in such amounts pursuant to Section 7 of the
                Bank Agreement), would constitute a "parachute payment" as defined
                in
                Section 280G(b)(2) of the Code (the "Initial Parachute Payment,"
                which
                includes the amounts paid pursuant to clause (i) below), then the
                Corporation shall pay to the Executive, a cash amount in two equal
                installments, with the first installment to be paid on the first
                business
                day of the month following the Date
                of 

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	 	
              Termination
                and the second installment to be paid no later than January 15th
                of
                the calendar year following the year in which the first installment
                was
                paid. The cash amount shall be equal to the sum of the
                following:

            

    

    
    

     

    
      	i)  	
              the
                amount by which the payments and benefits that would have otherwise
                been
                paid by the Bank to the Executive pursuant to Section 6 of the Bank
                Agreement are reduced by the provisions of Section 7 of the Bank
                Agreement;

            

    

    

    
      	ii)  	
              twenty
                percent (or such other percentage equal to the tax rate imposed by
                Section 4999 of the Code) of the amount by which the Initial
                Parachute Payment exceeds the Executive's "base amount" from the
                Employers, as defined in Section 280G(b)(3) of the Code, with the
                difference between the Initial Parachute Payment and the Executive's
                base
                amount being hereinafter referred to as the "Initial Excess Parachute
                Payment";

            

    

    

    
      	iii)  	
              such
                additional amount (tax allowance) as may be necessary to compensate
                the
                Executive for the payment by the Executive of state and federal income
                and
                excise taxes on the payment provided under clause (ii) above and
                on any
                payments under this clause (iii). In computing such tax allowance,
                the
                payment to be made under clause (ii) above shall be multiplied by
                the
                "gross up percentage" ("GUP"). The GUP shall be determined as
                follows:

            

    

    

    GUP
      = Tax
      Rate / 1 - Tax Rate

     

    
      	iv)  	
              Tax
                Rate

            

    

    

    The
      Tax
      Rate for purposes of computing the GUP shall be the highest marginal federal
      and
      state income and employment-related tax rate, including any applicable excise
      tax rate, applicable to the Executive in the year in which the payment under
      clause (ii) above is made.

    

    
      	v)  	
              Notwithstanding
                the foregoing, if it shall subsequently be determined in a final
                judicial
                determination or a final administrative settlement to which the Executive
                is a party that the actual excess parachute payment as defined in
                Section
                280G(b)(1) of the Code is different from the Initial Excess Parachute
                Payment (such different amount being hereafter referred to as the
                "Determinative Excess Parachute Payment"), then the Corporation's
                independent tax counsel or accountants shall determine the amount
                (the
                "Adjustment Amount") which either the Executive must pay to the
                Corporation or the Corporation must pay to the Executive in order
                to put
                the Executive (or the Corporation, as the case may be) in the same
                position the Executive (or the Corporation, as the case may be) would
                have
                been if the Initial Excess Parachute Payment had been equal to the
                Determinative Excess Parachute Payment. In determining the Adjustment
                Amount, the independent tax counsel or accountants shall take into
                account
                any and all taxes (including any penalties and interest) paid by
                or for
                the Executive or refunded to the Executive or for the Executive's
                benefit.
                As soon as practicable after the Adjustment

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	 	
              Amount
                has been so determined, the Corporation shall pay the Adjustment
                Amount to
                the Executive or the Executive shall repay the Adjustment Amount
                to the
                Corporation, as the case may be.

            

    

    
    

     

    
      	b)  	
              In
                each calendar year that the Executive receives payments of benefits
                under
                this Section 7, the Executive shall report on his state and federal
                income tax returns such information as is consistent with the
                determination made by the independent tax counsel or accountants
                of the
                Corporation as described above. The Corporation shall indemnify and
                hold
                the Executive harmless from any and all losses, costs and expenses
                (including without limitation, reasonable attorneys' fees, interest,
                fines
                and penalties) which the Executive incurs as a result of so reporting
                such
                information. The Executive shall promptly notify the Company in writing
                whenever the Executive receives notice of the institution of a judicial
                or
                administrative proceeding, formal or informal, in which the federal
                tax
                treatment under Section 4999 of the Code of any amount paid or payable
                under this Section 7 is being reviewed or is in dispute. The
                Corporation shall assume control, at its expense, over all legal
                and
                accounting matters pertaining to such federal tax treatment (except
                to the
                extent necessary or appropriate for the Executive to resolve any
                such
                proceeding with respect to any matter unrelated to amounts paid or
                payable
                pursuant to this Section) and the Executive shall cooperate fully
                with the
                Corporation in any such proceeding. The Executive shall not enter
                into any
                compromise or settlement or otherwise prejudice any rights the Corporation
                may have in connection therewith without the prior consent of the
                Corporation.

            

    

    

    
      	8)  	
              Mitigation;
                Exclusivity of Benefits.

            

    

    

    
      	a)  	
              The
                Executive shall not be required to mitigate the amount of any benefits
                hereunder by seeking other employment or otherwise, nor shall the
                amount
                of any such benefits be reduced by any compensation earned by the
                Executive as a result of employment by another employer after the
                Date of
                Termination or otherwise.

            

    

    

    
      	b)  	
              The
                specific arrangements referred to herein are not intended to exclude
                any
                other benefits which may be available to the Executive upon a termination
                of employment with the Employers pursuant to employee benefit plans
                of the
                Employers or otherwise.

            

    

    

    
      	9)  	
              Withholding.
                All payments required to be made by the Corporation hereunder to
                the
                Executive shall be subject to the withholding of such amounts, if
                any,
                relating to tax and other payroll deductions as the Corporation may
                reasonably determine should be withheld pursuant to any applicable
                law or
                regulation.

            

    

    

    
      	10)  	
              Assignability.
                The Corporation may assign this Agreement and its rights and obligations
                hereunder in whole, but not in part, to any corporation, bank or
                other
                entity with or into which the Corporation may hereafter merge or
                consolidate or to which the Corporation may transfer all or substantially
                all of its assets, if in any such case said corporation, bank or
                other
                entity shall by operation of law or expressly in writing assume all
                obligations of the Corporation hereunder as fully as if it had been
                originally made a party hereto, but may not otherwise assign this
                

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	  	
              Agreement
                or its rights and obligations hereunder. The Executive may not assign
                or
                transfer this Agreement or any rights or obligations
                hereunder.

            

    

     

    
      	11)  	
              Notice.
                For the purposes of this Agreement, notices and all other communications
                provided for in this Agreement shall be in writing and shall be deemed
                to
                have been duly given when delivered or mailed by certified or registered
                mail, return receipt requested, postage prepaid, addressed to the
                respective addresses set forth
                below:

            

    

    

    
      	a)  	
              To
                the Corporation:    Corporate
                Secretary

            

    

                         
CFS
      Bancorp,
      Inc.

                         
707
      Ridge
      Road

                         
Munster,
      Indiana 46321

    

    
      	b)  	
              To
                the Bank:        Corporate Secretary

            

    

                         
Citizens
      Financial Bank

                         
707
      Ridge
      Road

                        
 Munster,
      Indiana 46321

     

    
      	b)  	
              To
                the Executive:       
                Thomas L. Darovic

            

    

                         
[Address
      Redacted]

     

    

    
      	12)  	
              Amendment;
                Waiver.
                No
                provisions of this Agreement may be modified, waived or discharged
                unless
                such waiver, modification or discharge is agreed to in writing and
                signed
                by the Executive and such officer or officers as may be specifically
                designated by the Board of Directors of the Corporation to sign on
                its
                behalf. No waiver by any party hereto at any time of any breach by
                any
                other party hereto of, or compliance with, any condition or provision
                of
                this Agreement to be performed by such other party shall be deemed
                a
                waiver of similar or dissimilar provisions or conditions at the same
                or at
                any prior or subsequent time.

            

    

    

    
      	13)  	
              Governing
                Law.
                The validity, interpretation, construction and performance of this
                Agreement shall be governed by the laws of the United States where
                applicable and otherwise by the substantive laws of the State of
                Indiana.

            

    

    

    
      	14)  	
              Nature
                of Obligations.
                Nothing contained herein shall create or require the Corporation
                to create
                a trust of any kind to fund any benefits which may be payable hereunder,
                and to the extent that the Executive acquires a right to receive
                benefits
                from the Corporation hereunder, such right shall be no greater than
                the
                right of any unsecured general creditor of the
                Corporation.

            

    

    

    
      	15)  	
              Headings.
                The section headings contained in this Agreement are for reference
                purposes only and shall not affect in any way the meaning or
                interpretation of this Agreement.

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
    

     

    
      	16)  	
              Validity.
                The invalidity or unenforceability of any provision of this Agreement
                shall not affect the validity or enforceability of any other provisions
                of
                this Agreement, which shall remain in full force and
                effect.

            

    

    

    
      	17)  	
              Counterparts.
                This Agreement may be executed in one or more counterparts, each
                of which
                shall be deemed to be an original but all of which together shall
                constitute one and the same
                instrument.

            

    

    

    
      	18)  	
              Regulatory
                Prohibition.
                Notwithstanding any other provision of this Agreement to the contrary,
                any
                payments made to the Executive pursuant to this Agreement, or otherwise,
                are subject to and conditioned upon their compliance with Section
                18(k) of
                the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and the regulations
                promulgated thereunder, including 12 C.F.R. Part 359. In the event of
                the Executive's termination of employment with the Bank for Cause,
                all
                employment relationships and managerial duties with the Bank shall
                immediately cease regardless of whether the Executive remains in
                the
                employ of the Corporation following such termination. Furthermore,
                following such termination for Cause, the Executive shall not, directly
                or
                indirectly, influence or participate in the affairs or the operations
                of
                the Bank.

            

    

    

    
      	19)  	
              Payment
                of Costs and Legal Fees and Reinstatement of
                Benefits.
                In
                the event any dispute or controversy arising under or in connection
                with
                the Executive's termination is resolved in favor of the Executive,
                whether
                by judgment, arbitration or settlement, the Executive shall be entitled
                to
                the payment of (a) all legal fees incurred by the Executive in
                resolving such dispute or controversy, and (b) any back-pay,
                including Base Salary, bonuses and any other cash compensation, fringe
                benefits and any compensation and benefits due to the Executive under
                this
                Agreement.

            

    

    

    
      	20)  	
              Indemnification.
                The Corporation shall provide the Executive (including his heirs,
                executors and administrators) with coverage under a standard directors'
                and officers' liability insurance policy at its expense, or in lieu
                thereof, shall indemnify the Executive (and his heirs, executors
                and
                administrators) to the fullest extent permitted under Indiana law
                against
                all expenses and liabilities reasonably incurred by him in connection
                with
                or arising out of any action, suit or proceeding in which he may
                be
                involved by reason of his having been a director or officer of the
                Corporation (whether or not he continues to be a director or officer
                at
                the time of incurring such expenses or liabilities). Such expenses
                and
                liabilities shall include, but shall not be limited to, judgments,
                court
                costs and attorneys' fees and the cost of reasonable
                settlements.

            

    

    

    
      	21)  	
              Entire
                Agreement.
                This Agreement embodies the entire agreement between the Corporation
                and
                the Executive with respect to the matters agreed to herein. All prior
                agreements between the Corporation and the Executive with respect
                to the
                matters agreed to herein are hereby superseded and shall have no
                force or
                effect. Notwithstanding the foregoing, nothing contained in this
                Agreement
                shall affect the agreement of even date being entered into between
                the
                Bank and the Executive.

            

    

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, this Agreement has been executed as of the date first above
      written.

    

    

    
 

    
      
        Attest:                         CFS
          BANCORP, INC.

         

         

        /s/
          Monica F. Sullivan               By:
          /s/
          Brian L.Goins      

         

         

                                   EXECUTIVE

        

        

        

                              /s/
          Thomas L.
          Darovic    

                                    Thomas
          L.
          Darovic

      

      

      

      

      
        
          
          

        

        
          14Filed by Automated Filing Services Inc. (604) 609-0244 - Tatmar Ventures Inc. - Exhibit 4.1

MINERAL PROPERTY OPTION AGREEMENT

THIS AGREEMENT is dated the 15th day of
October, 2004. 

	BETWEEN: 	
      TATMAR VENTURES INC., a company duly incorporated
      in the Province of British Columbia, having an office at 2300 – 1060 West
      Hastings Street, Vancouver, British Columbia 

	  	
       

	  	
      ("Tatmar") 

	  	
       

	AND: 	
      PAUL S. REYNOLDS, businessman, of 1901 – 1177 West
      Hastings Street, Vancouver, British Columbia 

	  	
       

	  	
      ("Reynolds") 

WHEREAS Reynolds owns certain mineral property interests
in British Columbia, and has agreed to grant to Tatmar the exclusive option to
acquire all of his interest in the Property on the terms and conditions set
forth herein, 

NOW THEREFORE THIS AGREEMENT WITNESSES that in
consideration of the payments by Tatmar to Reynolds as contemplated herein, and
of the mutual covenants and agreements herein contained (the receipt and
sufficiency of which is hereby expressly acknowledged by Reynolds), the parties
agree as follows: 

1.            
 DEFINITIONS 

1.1         
 In this Agreement and in the Schedules and the recitals hereto, unless the
context otherwise requires, the following expressions will have the following
meanings: 

“Execution Date” means the date the parties hereto have
executed this Agreement. 

"expenditures" means all expenses, obligations and
liabilities of whatever kind or nature spent or incurred directly or indirectly
by Tatmar from the date hereof in connection with the exploration and
development of the Property; including moneys expended in maintaining the
property in good standing and in applying for and securing all necessary leases
or permits; moneys expended toward all taxes, fees and rentals; monies expended
in doing and filing assessment work; expenses paid for or incurred in connection
with any program of surface or underground prospecting, exploring, geophysical,
geochemical and geological surveying, drilling and drifting, raising and other
underground work, assaying and metallurgical testing and engineering,
environmental studies, data preparation and analysis; costs of acquiring
research materials, reports and data; costs of paying the fees, wages, salaries,
travelling expenses, and fringe benefits (whether or not required by law) of all
persons engaged directly in work with respect to and for the benefit of the
Property, in paying for the food, lodging and other reasonable needs of such
persons; and including a charge in lieu of overhead, management and other
unallocable costs equal to ten (10%) percent of all such expenditures for
contracts of less than $100,000, and five (5%) percent for contracts of $100,000
or more. 

"Property" means those certain mineral claims covering a
total of approximately ---- hectares, all as more particularly described in
Schedule "A" hereto, together with all prospecting, research, exploration,
exploitation, operating and mining permits, licences and leases associated
therewith, mineral, surface, water and ancillary or appurtenant rights attached
or accruing thereto, and any mining licence or other form of substitute or
successor mineral title or interest granted, obtained or issued in connection
with or in place of or in substitution for any such Property (including, without
limitation, any Property issued to cover any internal gaps or fractions in
respect of such ground). 

2

“Shares” mean common shares in the capital of Tatmar.

2.             
OPTION 

2.1            Reynolds
hereby grants to Tatmar the sole and exclusive right and option (the "Option")
to acquire from Reynolds an undivided 100% percent right, title and interest in
and to the Property (subject to the Royalty reserved to Reynolds) in accordance
with the terms of this Agreement. 

2.2            To
exercise the Option, Tatmar must: 

	(a) 	
      deliver to Reynolds a total of 650,000 Shares as
      follows:

	 	 	 
		(i) 	
      250,000 Shares upon the Execution Date; and

		(ii) 	
      an additional 100,000 Shares on or before each of the
      four immediately following anniversary dates of the Execution
  Date,

	 	 	 
	(b) 	
      pay to Reynolds an aggregate of C$200,000 as
    follows:

	 	 	 
		(i) 	
      $5,000 upon the Execution Date;

		(ii) 	
      an additional $25,000 on or before the first anniversary
      date of the Execution Date;

		(iii) 	
      an additional $45,000 on or before the second anniversary
      date of the Execution Date;

		(iv) 	
      an additional $55,000 on or before the third anniversary
      date of the Execution Date; and

		(v) 	
      an additional $70,000 on or before the fourth anniversary
      date of the Execution Date,

	 	 	 
	(c) 	
      incur at least C$1,500,000 of expenditures on the
      Property as follows:

	 	 	 
		(i) 	
      $100,000 on or before the first anniversary date of the
      Execution Date;

		(ii) 	
      an additional $200,000 on or before the second
      anniversary date of the Execution Date;

		(iii) 	
      an additional $400,000 on or before the third anniversary
      date of the Execution Date; and

		(iv) 	
      an additional $800,000 on or before the fourth
      anniversary date of the Execution Date.

The Shares, cash payments and expenditures are herein
collectively referred to as the “Option Price”. 

2.3            Any
payment incurred toward the Option Price that is over and above that required to
be made during a particular time period in paragraph 2.2 shall be carried
forward and applied against the required payment in the subsequent period(s).

2.4            This
Agreement is an option agreement only, and all payments comprising the Option
Price are and shall remain optional to Tatmar, such that Tatmar need not pay any
of the same. Upon the failure of Tatmar to deliver the consideration comprising
the Option Price within the time periods set forth herein, Tatmar will have a
period of 30 days following receipt of notice of such default to rectify the
same, otherwise the Option and this Agreement will automatically terminate
without further notice from Reynolds. 

2.5            In
addition to the Option Price payable above, Tatmar agrees to pay to Reynolds a
2% net smelter return royalty (“NSR Royalty”) calculated in accordance with
Schedule “B” hereto which will become effective upon exercise of the Option. At
any time, Tatmar may purchase up to three-quarters (1.5% NSR) of the NSR Royalty
on the basis of C$500,000 for each one-half percent of the NSR Royalty (0.5%
NSR) acquired. 

2.6            Prior
to the exercise of the Option, Tatmar shall pay all taxes, rentals and
maintenance fees on the Property as may be necessary to keep the Property in
good standing, and shall perform all other actions which may be necessary in
that regard, including without limitation, keeping the Property free and clear
of all liens, 

3

charges and encumbrances of any kind whatsoever which were the
result of any actions taken or not taken by Tatmar.

2.7            Until
the exercise of the Option, title to the Property will remain in the name of
Reynolds, however Reynolds agrees to register, or to allow Tatmar to register,
this Agreement or such other notice as acceptable to the applicable mining
authorities. Upon the exercise of the Option, Reynolds will take the necessary
actions to transfer to Tatmar a 100% interest in and to the Property (subject to
the NSR Royalty) in accordance with the provisions of applicable legislation.

2.8           
Once Tatmar has paid the Option Price in full, Tatmar will have exercised the
Option and have acquired an undivided 100% right, title and interest in and to
the Property, subject to the rights reserved to Reynolds in section 2.5 above,
and will give notice to Reynolds to that effect. 

2.9           
Reynolds acknowledges that the Shares to be delivered to it pursuant to
paragraph 2.2 will be subject to resale restrictions such that the same may not
be traded for a period expiring four months from the date of each issuance.

3.             
REPRESENTATIONS AND WARRANTIES 

3.1           
Tatmar represents and warrants to Reynolds that: 

	(a) 	
      it is a company duly incorporated, organized and validly
      subsisting under the laws of British Columbia, and is qualified to acquire
      and dispose of interests in, and to explore, develop and exploit, mineral
      properties in British Columbia;

	 	 
	(b) 	
      it has full power, capacity and authority to carry on its
      business and to enter into and perform its obligations under this
      Agreement and any agreement or instrument referred to or contemplated by
      this Agreement;

	 	 
	(c) 	
      all necessary corporate and shareholder approvals have
      been obtained and are in effect with respect to the transactions
      contemplated hereby, and no further action on the part of the directors or
      shareholders is necessary or desirable to make this Agreement valid and
      binding on it;

	 	 
	(d) 	
      neither the execution and delivery of this Agreement nor
      any of the agreements referred to herein or contemplated hereby, nor the
      consummation of the transactions hereby contemplated conflict with, result
      in the breach of or accelerate the performance required by its constating
      documents or any agreement to which it is a party;

	 	 
	(e) 	
      Tatmar is a private company which intends to make (but
      has not as of the date hereof made) application to list and post its
      Shares for trading on the TSX Venture Exchange.

	 	 
	3.2 	
      Reynolds hereby represents and warrants to Tatmar that:

	 	 
	(a) 	
      it has full power, capacity and authority to enter into
      and perform its obligations under this Agreement and any agreement or
      instrument referred to or contemplated herein;

	 	 
	(b) 	
      neither the execution and delivery of this Agreement nor
      any of the agreements referred to herein or contemplated hereby, nor the
      consummation of the transactions hereby contemplated conflict with, result
      in the breach of or accelerate the performance required by, any agreement
      to which it is a party;

	 	 
	(c) 	
      each of the mineral claims comprising the Property has
      been duly and validly granted to or staked by Reynolds, and are properly
      recorded with the appropriate mining authorities pursuant to all
      applicable

4

		
      laws and regulations; the Property is accurately
      described in Schedule "A" hereto, and the mineral claims held by Reynolds
      comprising the Property are free and clear of all liens, charges,
      royalties and encumbrances;

	 	 
	(d) 	
      Reynolds has the exclusive right to enter into this
      Agreement and has all necessary authority to dispose of his interests in
      and to the Property in accordance with the terms of this
  Agreement;

	 	 
	(e) 	
      there are no outstanding or pending rights or options for
      any third party to earn or acquire any interest in the Property;
  and

	 	 
	(f) 	
      there are no pending or threatened actions, suits, claims
      or proceedings regarding the Property or any portion thereof of which
      Reynolds is aware.

3.3            The
representations and warranties hereinbefore set out are conditions on which the
parties have relied in entering into this Agreement and will survive the
acquisition of any interest in the Property by Tatmar and each of the parties
will indemnify and save the other harmless from all loss, damage, costs, actions
and suits arising out of or in connection with any breach of any representation,
warranty, covenant, agreement or condition made by it and contained in this
Agreement. 

4.             
COVENANTS OF REYNOLDS 

4.1            While
the Option remains outstanding, Reynolds covenants and agrees with Tatmar to:

	(a) 	
      for so long as Tatmar is not in default hereunder, not do
      any act or thing which would in any way adversely affect the rights of
      Tatmar hereunder;

	 	 
	(b) 	
      make available to Tatmar and its representatives all
      records and files in its possession relating to the Property and permit
      Tatmar and its representatives at their own risk and expense to take
      abstracts therefrom and make copies thereof;

	 	 
	(c) 	
      co-operate as reasonably necessary with Tatmar in
      obtaining any access, surface and other rights on or related to the
      Property as Tatmar deems desirable; and

	 	 
	(d) 	
      promptly provide Tatmar with any and all notices and
      correspondence received by Reynolds from the any relevant government
      agencies in respect of the Property.

5.             
PRE-EXERCISE ACTIVITIES 

5.1            Prior
to exercise of the Option, Tatmar will have full right, power and authority to
do everything necessary or desirable in accordance with good mining practice in
connection with the exploration and development of the Property, including
without limiting the generality of the foregoing, the exclusive right to: 

	a) 	
      enter the Property and have exclusive and quiet
      possession of the Property, to regulate access to the Property, as well as
      the use and enjoyment thereof without interruption by or disturbance from
      the Reynolds, or any person claiming by, through or under the
    Reynolds;

	 	 
	b) 	
      do such prospecting, exploration, development,
      exploitation and other mining work thereon and thereunder as Tatmar may in
      its sole discretion consider advisable or desirable subject to the
      approval of all applicable laws and regulations;

	 	 
	c) 	
      bring and erect upon the Property such equipment and
      facilities as Tatmar may in its sole discretion consider advisable or
      desirable;

5

	d) 	
      remove materials from the Property for the purposes of
      assaying and testing, bulk sampling or otherwise as Tatmar may in its sole
      discretion consider advisable or desirable, and dispose of such materials
      by way of sale or otherwise as Tatmar may in its sole discretion consider
      advisable or desirable; and

	 	 
	e) 	
      participate with the Reynolds in negotiating such
      agreements as may be necessary or in Tatmar=s best interests with the
      owners of and other persons having interests in the Property concerning
      surface or access rights affecting the Property, provided that if and to
      the extent that the Reynolds has any such rights affecting the Property,
      such rights are hereby included in the Property and are subject to the
      Option hereunder.

5.2            Prior
to exercise of the Option, Tatmar will have the following duties and
obligations: 

	(a) 	
      to manage, direct and control all exploration,
      development and production operations in, on and under the Property in a
      prudent and workmanlike manner, and in compliance with all applicable
      laws, rules, orders and regulations;

	 	 
	(b) 	
      subject to the terms and conditions of this Agreement, to
      keep the Property in good standing and free and clear of liens, charges
      and encumbrances of every character arising from operations hereunder
      (except liens for taxes not yet due, and other claims and liens contested
      in good faith by Tatmar) and to proceed with all diligence to contest or
      discharge any lien that is filed. Tatmar agrees to apply the maximum value
      of assessment credits available to the Property each year;

	 	 
	(c) 	
      to obtain and maintain, or cause any contractor engaged
      to obtain and maintain, adequate insurance coverage with respect to
      activities on or with respect to the Property;

	 	 
	(d) 	
      to perform its duties and obligations in a manner
      consistent with good exploration and mining practices;

	 	 
	(e) 	
      defend, indemnify and save Reynolds and its directors,
      officers and employees harmless from any and all losses, damages,
      expenses, claims, suits, actions or demands of any kind or nature
      whatsoever in any way referable to or arising out of any work done by
      Tatmar on or with respect to the Property; and

	 	 
	(f) 	
      prior to commencing any operations or activities on the
      Property, obtain all necessary operating and environmental permits and
      post any required reclamation or other bonds or safekeeping agreements
      required by any governmental agency.

5.3            In
the event Tatmar intends to engage any third party to undertake any work on the
Property, Tatmar agrees to first offer such opportunity to Reynolds. Should
Reynolds be contracted to do work on the Property, the provisions of sections
5.2 (d) (e) and (f) shall apply equally to Reynolds. 

6.             
TERMINATION OF OPTION 

6.1            This
Agreement, except for the provisions of section 7, and the Option will (unless
otherwise agreed by Reynolds in writing) terminate: 

	(a) 	
      upon the failure of Tatmar to pay any portion of the
      Option Price pursuant to subsection 2.2 within the time periods specified
      therein; or

	 	 
	(b) 	
      if Tatmar gives notice in accordance with subsection
      6.2.

6

6.2           
At any time prior to the exercise of the Option Tatmar will have the right to
terminate this Agreement and the Option by giving not less than thirty days'
notice to that effect to Reynolds. 

7.             
OBLIGATIONS AFTER TERMINATION OF OPTION 

7.1           
If this Agreement is terminated for any reason whatsoever prior to the exercise
of the Option, this Agreement, including the Option, but excluding this section
7 (which will continue in full force and effect for so long as is required to
give full effect to the same) will be of no further force and effect except that
Tatmar will: 

	(a) 	
      leave the Property:

	 	 	 
		(i) 	
      in good standing and in accordance with the applicable
      laws and regulations, with a minimum of 12 months of assessment credits
      filed against the same;

	 	 	 
		(ii) 	
      free and clear of all liens, charges and encumbrances
      arising from this Agreement or its operations hereunder,

	 	 	 
		(iii) 	
      in a safe and orderly condition, and

	 	 	 
		(iv) 	
      in a condition which is in compliance with all applicable
      rules and orders of governmental authorities with respect to reclamation
      and restoration of the surface to the Property;

	 	 	 
	(b) 	
      deliver to Reynolds, within ninety days of termination, a
      report on all work carried out by Tatmar on the Property together with
      copies of all maps, drillhole logs, assay results, reports and other
      information compiled or prepared by or on behalf of Tatmar with respect to
      work on or with respect to the Property, and make available to Reynolds
      (at the place of storage) all core, samples and sample pulps and
      rejects;

	 	 	 
	(c) 	
      unless otherwise agreed by Reynolds, remove from the
      Property within six months of the effective date of termination all
      materials, equipment and facilities erected, installed or brought upon the
      Property by or at the instance of Tatmar; and

	 	 	 
	(d) 	
      deliver to Reynolds a duly executed quitclaim of all
      right, title and interest of Tatmar in and to the Property in favour of
      Reynolds.

8.            SHARING
OF AND CONFIDENTIAL NATURE OF INFORMATION 

8.1           
Each party agrees that all information obtained hereunder will be the exclusive
property of the parties and not publicly disclosed or used other than for the
activities contemplated hereunder except as required by law or by the rules and
regulations of any regulatory authority or stock exchange having jurisdiction or
with the written consent of the other party, such consent not to be unreasonably
withheld. 

7

9.            
 ASSIGNMENT 

9.1           
Either party may at any time assign or transfer any or all of its interest
herein, provided such assignee agrees to abide by and be bound by the terms of
this Agreement in the same manner and to the same effect as if an original
signatory hereto.

10.           
NOTICES 

10.1          Any
notice, direction or other instrument required or permitted to be given under
this Agreement will be in writing and may be given by the delivery of the same
or by mailing the same by prepaid registered or certified mail or by sending the
same by facsimile, e-mail or other similar form of communication, in each case
addressed to the address first listed above or the following facsimile numbers
or e-mail addresses: 

	(a) 	
      If to Reynolds at facsimile no.: 604 683-8923;
    email:

	 	 
	(b) 	
      If to Tatmar at facsimile no.: 604 ---- ;
  email:

10.2          Any
notice, direction or other instrument will: 

	(a) 	
      if delivered, be deemed to have been given and received
      on the day it was delivered;

	 	 
	(b) 	
      if mailed, be deemed to have been given and received on
      the third business day following the day of mailing, except in the event
      of disruption of the postal service in which event notice will be deemed
      to be received only when actually received; and

	 	 
	(c) 	
      if sent by facsimile, email or other similar form of
      communication, be deemed to have been received by each party by that party
      acknowledging in writing receipt of the same.

10.3          Any
party may at any time give to the others notice in writing of any change of
address of the party giving such notice and from and after the giving of such
notice the address or addresses therein specified will be deemed to be the
address of such party for the purposes of giving notice hereunder. 

11.            FORCE
MAJEURE 

11.1          Tatmar
shall not be deemed to be in default hereunder for failure or delay to perform
any of its covenants pursuant to this Agreement including payments toward the
Option Price, if prior to the requirement to perform such covenant any event of
force majeure arises which precludes Tatmar from undertaking work on the
Property, or a material dispute arises as to the ownership or title to any part
of the Property or to the minerals therein, including land claims by indigenous
people (a "Title Dispute"). 

11.2          Should
Tatmar seek to rely on the provisions of subsection 11.1 it will promptly give
written notice to Reynolds of the particulars thereof and all time limits
imposed by this Agreement will be extended from the date of delivery of such
notice by a period equivalent to the period of delay resulting from such event
of force majeure or Title Dispute. 

12.            
ARBITRATION 

12.1          
If any question, difference or dispute shall arise between the parties or any of
them in respect of any matter arising under this Agreement or in relation to the
construction hereof, the same shall be referred to a mutually acceptable
mediator. If an agreement is not settled within 30 days of the referral, the
dispute shall be determined by the award of one arbitrator. The decision of the
arbitrator shall be made within 30 days after the selection. The expense of the
arbitration shall be borne equally by the parties to the dispute. The
arbitration 

8

shall be conducted in accordance with the provisions of the
Commercial Arbitration Act (British Columbia), as amended, and the
decision of the arbitrator shall be conclusive and binding upon the parties. The
rules and procedures for the arbitration shall be procedures established by the
B.C. Arbitrators Institute. The place of arbitration shall be Vancouver, British
Columbia, Canada. 

13.                       GENERAL

13.1                      The
parties will execute such further and other documents and do such further and
other things as may be necessary or convenient to carry out and give effect to
the intent of this Agreement. 

13.2                      All
references to moneys hereunder will be in Canadian funds unless otherwise
specified. All payments to be made to any party hereunder may be made by cheque
or bank draft mailed or delivered to such party at its address for notice
purposes as provided herein, or deposited for the account of such party at such
bank or banks in Canada as such party may designate from time to time by notice
to the paying party.

13.3                      This
Agreement will enure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. 

13.4                     This
Agreement shall constitute the entire agreement between the parties and, except
as hereafter set out, replaces and supersedes all prior agreements, memoranda,
correspondence, communications, negotiations and representations, whether oral
or written, express or implied, statutory or otherwise between the parties with
respect to the subject matter herein.

13.5                    
This Agreement will be governed by and construed according to the laws of
British Columbia and the laws of Canada applicable therein. All actions arising
from this Agreement will be commenced and maintained in the Supreme Court of
British Columbia. 

IN WITNESS WHEREOF the parties hereto have executed
these presents as of the day and year first above written. 

TATMAR VENTURES INC. 
by its authorized signatory:

_______________________________________

 

PAUL REYNOLDS

_______________________________________

9

SCHEDULE "A" 

PROPERTY 

[Is the Property all 293 units (65.4 square
kilometers) which comprise the Tam Property?]

10

SCHEDULE "B" 

NET SMELTER RETURN ROYALTY

	1. 	
      Pursuant to the Mineral Property Option Agreement to
      which this Schedule is attached, Reynolds (the “Recipient”) may receive a
      Net Smelter Return royalty (the “NSR Royalty”) based on proceeds received
      by Tatmar (the “Producer”) from production from the Property as described
      in Schedule “A” of the Agreement, free and clear of all costs of
      development and operations.

	 	 
	2. 	
      “Net Smelter Return” shall mean the actual proceeds
      received by the Producer from any mint, smelter, or other purchaser for
      the sale of ores, metals or concentrated products (“Product”) from the
      Property derived from commercial production (and not from bulk sampling,
      pilot plant operations or preliminary production) and sold after deducting
      from such proceeds the following charges to the extent that they were not
      deducted from such proceeds by the purchaser in computing payment:
      smelting and refining charges; penalties; cost of transportation of ores,
      metals or concentrates from the Property to any mint, smelter or other
      purchaser; marketing costs; insurance on all such ores, metals or
      concentrates; and any export and import taxes on said ores, metals or
      concentrates levied by the country into which such ore, metals or
      concentrates are imported, if such charges or costs are deducted from the
      proceeds received.

	 	 
	3. 	
      Payment of the NSR Royalty shall be made quarterly within
      30 days after the end of each fiscal quarter of the Producer, on actual
      proceeds received by the Producer from the sale of Product from the
      Property, and shall be accompanied by unaudited calculations and
      statements pertaining to the operations carried out on the Property.
      Within 90 days after the end of each fiscal year of the Producer in which
      the NSR Royalty is payable, the records relating to the calculation of Net
      Smelter Return for such year shall be audited and any resulting
      adjustments in the payment of the NSR Royalty payable shall be made
      forthwith. A copy of the said audit shall be delivered to the Recipient
      within 30 days of the end of such 90-day period.

	 	 
	4. 	
      Each annual audit shall be final and not subject to
      adjustment unless the Recipient delivers to the Producer written
      exceptions in reasonable detail within three months after the Recipient
      receives the report. The Recipient, or its representative duly authorized
      in writing, shall at its expense have the right to audit the books and
      records of the Producer related to the Net Smelter Return to determine the
      accuracy of the report, but shall not have access to any other books and
      records of the Producer. The audit shall be conducted by a chartered or
      certified public accountant of recognized standing (the “Auditor”). The
      Producer shall have the right to restrict access to its books and records
      until execution of a written agreement by the Auditor that all information
      will be held in confidence and used solely for purposes of audit and
      resolution of any disputes related to the report. A copy of the Auditor’s
      report shall be delivered to the Producer and the amount which should have
      been paid according to the Auditor’s report shall be paid forthwith, one
      party to the other. In the event that the said discrepancy is to the
      detriment of the Recipient and exceeds 5.0% of the amount actually paid by
      the Producer, then the Producer shall pay the entire cost of the
    audit.

	 	 
	5. 	
      In the event smelting or refining are carried out in
      facilities owned or controlled, in whole or in part, by the Producer,
      charges, costs and penalties with respect to such operations, excluding
      transportation, shall mean reasonable charges, costs and penalties for
      such operations but not in excess of the amounts that the Producer would
      have incurred if such operations were carried out at facilities not owned
      or controlled by the Producer then offering comparable custom
    services.

	 	 
	6. 	
      The Recipient shall at its election have the right to
      take its NSR Royalty in kind as it may pertain to precious metals defined
      as gold and platinum group elements, in whole or in
part.

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