Document:

MICROMEM
      TECHNOLOGIES INC.

    

    2005
      DIRECTORS, OFFICERS AND EMPLOYEES 

    STOCK
      OPTION PLAN

    

    
      	
              1.

            	
              Purpose
                of the Plan

            

    

    

    
      	
              1.1

            	
              The
                purpose of the Plan is to attract, retain and motivate persons with
                the
                required training, experience and leadership as directors, officers,
                employees and key service providers of the Corporation and its
                Subsidiaries and to advance the interests of the Corporation by providing
                such persons with the opportunity, through share options, to acquire
                an
                increased proprietary interest in the Corporation. This Plan shall
                serve
                to amend and restate the Corporation’s 2001 Stock Option Plan which was
                approved by shareholders on March 14,
                2001.

            

    

    

    
      	
              2.

            	
              Defined
                Terms

            

    

    

    
      	 	
              Where
                used herein, the following terms shall have the following meanings,
                respectively:

            

    

    

    
      	
              2.1

            	
              "Board"
                shall mean the board of directors of the
                Corporation;

            

    

    

    
      	
              2.2

            	
              "Corporation"
                means Micromem Technologies Inc.;

            

    

    

    
      	
              2.3

            	
              "Eligible
                Person"
                means:

            

    

    

    
      	 	
              (i)

            	
              any
                director, officer or employee of the Corporation or any Subsidiary,
                or any
                other Service Provider (an "Eligible
                Individual");
                or

            

    

    

    
      	 	
              (ii)

            	
              a
                corporation of which an Eligible Individual is an employee or shareholder
                (an "Employee
                Corporation");

            

    

    

    
      	
              2.4

            	
              "Insider"
                means any insider, as such term is defined in Subsection 1(1) of
                the
                Securities
                Act
                (Ontario), of the Corporation;

            

    

    

    
      	
              2.5

            	
              "Market
                Price"
                at any date in respect of the Shares means the closing sale price
                of the
                Shares on the OTC Bulletin Board (or other stock exchange on which
                the
                Shares are listed and posted for trading from time to time as may
                be
                selected for such purpose by the Board) on the trading day immediately
                preceding such date. In the event that the Shares did not trade on
                such
                trading day, the Market Price shall be the average of the bid and
                ask
                prices in respect of the Shares at the close of trading on such trading
                day. In the event that the Shares are not listed and posted for trading
                on
                any stock exchange or quotation system, the Market Price shall be
                the fair
                market value of the Shares as determined by the Board in its sole
                discretion;

            

    

    

    
      	
              2.6

            	
              "Option"
                means an option to purchase Shares granted to an Eligible Person
                under the
                Plan;

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              2.7

            	
              "Option
                Price"
                means the price per Share at which Shares may be purchased under
                an
                Option, as the same may be adjusted from time to time in accordance
                with
                Article 8 hereof;

            

    

    

    
      	
              2.8

            	
              "Optioned
                Shares"
                means the Shares issuable pursuant to an exercise of
                Options;

            

    

    

    
      	
              2.9

            	
              "Optionee"
                means an Eligible Person to whom an Option has been granted and who
                continues to hold such Option;

            

    

    2.10
      "Plan"
      means
      this Micromem Technologies Inc. Stock Option Plan, as the same may be further
      amended or varied from time to time;

    

    
      	
              2.11

            	
              "Service
                Provider"
                means:

            

    

    

    
      	 	
              (i)

            	
              an
                employee or Insider of the Corporation or any Subsidiary;
                or

            

    

    

    
      	 	
              (ii)

            	
              any
                other person or company engaged to provide ongoing management or
                consulting services for the Corporation or for any entity controlled
                by
                the Corporation;

            

    

    

    
      	
              2.12

            	
              "Shares"
                means the common shares of the Corporation or, in the event of an
                adjustment contemplated by Article 8 hereof, such other shares or
                securities to which an Optionee may be entitled upon the exercise
                of an
                Option as a result of such adjustment;
                and

            

    

    

    
      	
              2.13

            	
              "Subsidiary"
                means any corporation which is a subsidiary, as such term is defined
                in
                Subsection 1(2) of the
                Business Corporations Act (Ontario),
                of the Corporation.

            

    

    

    
      	
              3.

            	
              Administration
                of the Plan

            

    

    

    
      	
              3.1

            	
              The
                Plan shall be administered by the
                Board.

            

    

    

    
      	
              3.2

            	
              The
                Board shall have the power, where consistent with the general purpose
                and
                intent of the Plan and subject to the specific provisions of the
                Plan:

            

    

    

    
      	 	
              (a)

            	
              to
                establish policies and to adopt rules and regulations for carrying
                out the
                purposes, provisions and administration of the
                Plan;

            

    

    

    
      	 	
              (b)

            	
              to
                interpret and construe the Plan and to determine all questions arising
                out
                of the Plan or any Option, and any such interpretation, construction
                or
                determination made by the Board shall be final, binding and conclusive
                for
                all purposes;

            

    

    

    
      	 	
              (c)

            	
              to
                determine the number of Shares covered by each
                Option;

            

    

    

    
      	 	
              (d)

            	
              to
                determine the Option Price of each
                Option;

            

    

    

    
      	 	
              (e)

            	
              to
                determine the time or times when Options will be granted and
                exercisable;

            

    

    

    
      	 	
              (f)

            	
              to
                determine if the Shares which are issuable on the exercise of an
                Option
                will be subject to any restrictions upon the exercise of such Option;
                and

            

    

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    
      	 	
              (g)

            	
              to
                prescribe the form of the instruments relating to the grant, exercise
                and
                other terms of the Options.

            

    

    

    
      	
              3.3

            	
              The
                Board may, in its discretion, require as conditions to the grant
                or
                exercise of any Option that the Optionee shall
                have:

            

    

    

    
      	 	
              (a)

            	
              represented,
                warranted and agreed in form and substance satisfactory to the Corporation
                that he or she is acquiring and will acquire such Option and the
                Shares to
                be issued upon the exercise thereof or, as the case may be, is acquiring
                such Shares, for his or her own account, for investment and not with
                a
                view to or in connection with any distribution, that he or she has
                had
                access to such information as is necessary to enable him or her to
                evaluate the merits and risks of such investment and that he or she
                is
                able to bear the economic risk of holding such Shares for an indefinite
                period;

            

    

    

    
      	 	
              (b)

            	
              agreed
                to restrictions on transfer in form and substance satisfactory to
                the
                Corporation and to an endorsement on any option agreement or certificate
                representing the Shares making appropriate reference to such restrictions
                (including any notation required by any securities regulatory authority,
                stock exchange or trading facility having jurisdiction);
                and

            

    

    

    
      	 	
              (c)

            	
              agreed
                to indemnify the Corporation in connection with the
                foregoing.

            

    

    

    
      	
              3.4

            	
              Any
                Option granted under the Plan shall be subject to the requirement
                that, if
                at any time counsel to the Corporation shall determine that the listing,
                registration or qualification of the Shares subject to such Option
                upon
                any securities exchange or under any law or regulation of any
                jurisdiction, or the consent or approval of any securities exchange
                or any
                governmental or regulatory body, is necessary as a condition of,
                or in
                connection with, the grant or exercise of such Option or the issuance
                or
                purchase of Shares thereunder, such Option may not be accepted or
                exercised in whole or in part unless such listing, registration,
                qualification, consent or approval shall have been effected or obtained
                on
                conditions acceptable to the Board. Nothing herein shall be deemed
                to
                require the Corporation to apply for or to obtain such listing,
                registration, qualification, consent or
                approval.

            

    

    

    
      	
              3.5

            	
              This
                Plan shall be read and interpreted consistently with all applicable
                laws,
                rules, regulations and policies of any securities regulatory authority,
                stock exchange or trading facility having jurisdiction and, to the
                extent
                of any inconsistency between the terms of this Plan and the provisions
                of
                such laws, rules, regulations and policies, the provisions of such
                laws,
                rules, regulations and policies shall
                prevail.

            

    

    

    
      	
              4.

            	
              Shares
                Subject to the Plan

            

    

    

    
      	 	
              Options
                may be granted in respect of authorized and unissued Shares, provided
                that
                the aggregate number of Shares reserved for issuance upon the exercise
                of
                all Options granted under the Plan, subject to any adjustment of
                such
                number pursuant to the provisions of Article 8 hereof, shall not
                exceed
                12.4 million or such greater number of Shares as may be determined
                by the
                Board and approved, if required, by the shareholders of the Corporation
                and by any relevant stock exchange or other regulatory authority
                (including shares issuable pursuant to options previously granted
                and that
                are outstanding under the 2001 Stock Option Plan). Optioned Shares
                in
                respect of which Options are not exercised shall be available for
                subsequent Options. No fractional Shares may be purchased or issued
                under
                the Plan..

            

    

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    
      	
              5.

            	
              Eligibility;
                Grant; Terms of Options

            

    

    

    
      	
              5.1

            	
              Options
                may be granted to any Eligible Person in accordance with this Article
                5.

            

    

    

    
      	
              5.2

            	
              Options
                may be granted by the Corporation to the extent that they have been
                approved by the Board.

            

    

    

    
      	
              5.3

            	
              Subject
                as herein and otherwise specifically provided in this Article 5,
                the
                number of Shares subject to each Option, the Option Price of each
                Option,
                the expiration date of each Option, the extent to which each Option
                is
                exercisable from time to time during the term of the Option and other
                terms and conditions relating to each such Option shall be determined
                by
                the Board or a director or officer of the Corporation designated
                by the
                Board to make such determination.

            

    

    

    
      	
              5.4

            	
              Each
                Option granted under this Plan shall be exercisable for a maximum
                period
                of ten (10) years from the date the Option is granted to the Optionee.
                Subject to this section 5.4, the Board shall, at the time of granting
                an
                Option, determine the time or times when an Option or a part of an
                Option
                shall be exercisable.

            

    

    

    
      	
              5.5

            	
              Subject
                to any adjustments pursuant to the provisions of Article 8 hereof,
                the
                Option Price of any Option shall in no circumstances be lower than
                the
                Market Price on the date on which the grant of the Option is approved
                by
                the Board unless otherwise permitted under applicable laws, rules
                and
                regulations and the rules of any stock exchange or trading facility
                through which the Shares may be traded from time to time. If, as
                and when
                any Shares have been duly purchased and paid for under the terms
                of an
                Option, such Shares shall be conclusively deemed allotted and issued
                as
                fully paid non-assessable Shares at the price paid
                therefore.

            

    

    

    
      	
              5.6

            	
              An
                Option is personal to the Optionee and non-assignable (whether by
                operation of law or otherwise), except as provided for herein. Upon
                any
                attempt to transfer, assign, pledge, hypothecate or otherwise dispose
                of
                an Option contrary to the provisions of the Plan, or upon the levy
                of any
                attachment or similar process upon an Option, the Option shall, at
                the
                election of the Corporation, cease and terminate and be of no further
                force or effect whatsoever.

            

    

    

    
      	
              6.

            	
              Termination
                of Employment, Death

            

    

    

    
      	
              6.1

            	
              Subject
                to Sections 6.2 and 6.3 hereof and to any express resolution passed
                by the
                Board with respect to an Option, an Option and all rights to purchase
                Shares pursuant thereto shall expire and terminate immediately upon
                the
                Optionee who holds such Option ceasing to be an Eligible
                Person.

            

    

    

    
      	
              6.2

            	
              If,
                before the expiry of an Option in accordance with the terms thereof,
                an
                Optionee shall cease to be an Eligible Person (an "Event of Termination")
                for any reason other than the termination for "cause" of his or her
                employment with the Corporation or any Subsidiary then the Optionee
                may:

            

    

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    
      	 	
              (a)

            	
              exercise
                the Option to the extent that he or she was entitled to do so at
                the time
                of such Event of Termination, at any time up to and including, but
                not
                after, the forty-fifth (45th)
                day after the date of such Event of Termination, or prior to the
                close of
                business on the expiration date of the Option, whichever is earlier;
                and

            

    

    

    
      	 	
              (b)

            	
              with
                the prior written consent of the Board, which consent may be withheld
                arbitrarily in the Corporation's sole discretion, exercise any part
                of the
                Option which was not exercisable at the time of the occurrence of
                the
                Event of Termination at any time up to and including, but not after,
                the
                ninetieth (90th)
                day after the date of such Event of Termination, or prior to the
                close of
                business on the expiration date of the Option, whichever is earlier,
                to
                purchase all or any of the Optioned Shares as the Board may designate
                but
                not exceeding the number of Optioned Shares the Optionee would have
                otherwise been entitled to purchase pursuant to the Option had the
                Optionee's status as an Eligible Person been maintained for the term
                of
                the Option.

            

    

    

    
      	
              6.3

            	
              If
                an Optionee dies before the expiry of an Option in accordance with
                the
                terms thereof, the Optionee's legal representative(s) may, subject
                to the
                terms of the Option and the Plan:

            

    

    

    
      	 	
              (a)

            	
              exercise
                the Option to the extent that the Optionee was entitled to do so
                at the
                date of his or her death at any time up to and including, but not
                after,
                the date which is one year after the date of death of the Optionee,
                or
                prior to the close of business on the expiration date of the Option,
                whichever is earlier; and

            

    

    

    
      	 	
              (b)

            	
              with
                the prior written consent of the Board, exercise at any time up to
                and
                including, but not after, the date which is one year after the date
                of
                death of the Optionee, or prior to the close of business on the expiration
                date of the Option, whichever is earlier, any part of the Option
                which was
                not exercisable at the time of the Optionee's death to purchase all
                or any
                of the Optioned Shares as the Board may designate but not exceeding
                the
                number of Optioned Shares the Optionee would have otherwise been
                entitled
                to purchase had the Optionee
                survived.

            

    

    

    
      	
              6.4

            	
              For
                greater certainty, Options shall not be affected by any change of
                employment of the Optionee or by the Optionee ceasing to be a director
                of
                the Corporation provided that the Optionee continues to be an Eligible
                Person.

            

    

    

    
      	
              6.5

            	
              For
                the purposes of this Article 6, a determination by the Corporation
                that an
                Optionee was discharged for "cause" shall be binding on the Optionee;
                provided, however, that such determination shall not be conclusive
                of the
                Optionee's potential entitlement to damages for the loss of the right
                to
                exercise an Option in the event that a court of competent jurisdiction
                ultimately determines that the discharge was without
                "cause".

            

    

    

    
      	
              6.6

            	
              If
                the Optionee is an Employee Corporation, the references to the Optionee
                in
                this Article 6 shall be deemed to refer to the Eligible Individual
                associated with the Employee
                Corporation.

            

    

    

    
      	
              6.7

            	
              If
                an Optionee has been terminated "for cause" or does not exercise
                his or
                her options in accordance with the provisions of sections 6.2 or
                6.3 as
                the case may be, the number of options not exercised shall be added
                to the
                number of options remaining available to be granted under the
                Plan.

            

    

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    
      	
              7.

            	
              Exercise
                of Options

            

    

    

    
      	
              7.1

            	
              Subject
                to the provisions of the Plan, an Option may be exercised from time
                to
                time by delivery to the Corporation at its registered office of a
                written
                notice of exercise addressed to the Secretary of the Corporation
                specifying the number of Shares with respect to which the Option
                is being
                exercised and accompanied by payment in full, by cash or certified
                cheque,
                of the Option Price of the Shares then being purchased. Certificates
                for
                such Shares shall be issued and delivered to the Optionee within
                a
                reasonable time following the receipt of such notice and
                payment.

            

    

    

    
      	
              7.2

            	
              Notwithstanding
                any of the provisions contained in the Plan or in any Option, the
                Corporation's obligation to issue Shares to an Optionee pursuant
                to the
                exercise of any Option shall be subject
                to:

            

    

    

    
      	 	
              (a)

            	
              completion
                of such registration or other qualification of such Shares or obtaining
                approval of such governmental or regulatory authority as the Corporation
                shall determine to be necessary or advisable in connection with the
                authorization, issuance or sale
                thereof;

            

    

    

    
      	 	
              (b)

            	
              the
                admission of such Shares to listing on any stock exchange on which
                the
                Shares may then be listed;

            

    

    

    
      	 	
              (c)

            	
              the
                receipt from the Optionee of such representations, warranties, agreements
                and undertakings, as the Corporation determines to be necessary or
                advisable in order to safeguard against the violation of the securities
                laws of any jurisdiction; and

            

    

    

    
      	 	
              (d)

            	
              the
                satisfaction of any conditions on exercise prescribed pursuant to
                Section
                3.4 hereof.

            

    

    

    
      	
              7.3

            	
              Options
                shall be evidenced by a share option agreement, instrument or certificate
                in such form not inconsistent with this plan as the Board may from
                time to
                time determine as provided for under Subsection 3.2 (g), provided
                that the
                substance of Article 5 be included
                therein.

            

    

    

    
      	
              8.

            	
              Certain
                Adjustments

            

    

    

    
      	
              8.1

            	
              In
                the event of any subdivision or redivision of the Shares into a greater
                number of Shares at any time after the grant of an Option to any
                Optionee
                and prior to the expiration of the term of such Option, the Corporation
                shall deliver to such Optionee at the time of any subsequent exercise
                of
                his or her Option in accordance with the terms hereof, in lieu of
                the
                number of Shares to which he or she was theretofore entitled upon
                such
                exercise, but for the same aggregate consideration payable therefor,
                such
                number of Shares as such Optionee would have held as a result of
                such
                subdivision or redivision if, on the record date thereof, the Optionee
                had
                been the registered holder of the number of Shares to which he or
                she was
                theretofore entitled upon such
                exercise.

            

    

    

    
      	
              8.2

            	
              In
                the event of any consolidation of the Shares into a lesser number
                of
                Shares at any time after the grant of an Option to any Optionee and
                prior
                to the expiration of the term of such Option, the Corporation shall
                deliver to such Optionee at the time of any subsequent exercise of
                his or
                her Option in accordance with the terms hereof, in lieu of the number
                of
                Shares to which he or she was theretofore entitled upon such exercise,
                but
                for the same aggregate consideration payable therefor, such number
                of
                Shares as such Optionee would have held as a result of such consolidation
                if, on the record date thereof, the Optionee had been the registered
                holder of the number of Shares to which he or she was theretofore
                entitled
                upon such exercise.

            

    

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    
      	
              8.3

            	
              If
                at any time after the grant of an Option to any Optionee and prior
                to the
                expiration of the term of such Option, the Shares shall be reclassified,
                reorganized or otherwise changed, otherwise than as specified in
                Sections
                8.1 and 8.2 or, subject to the provisions of Subsection 9.2(a) hereof,
                the
                Corporation shall consolidate, merge or amalgamate with or into another
                corporation (the corporation resulting or continuing from such
                consolidation, merger or amalgamation being herein called the "Successor
                Corporation"), or the Corporation shall pay a stock dividend (other
                than
                any dividends in the ordinary course), the Optionee shall be entitled
                to
                receive upon the subsequent exercise of his or her Option in accordance
                with the terms hereof and shall accept in lieu of the number of Shares
                to
                which he or she was theretofore entitled upon such exercise but for
                the
                same aggregate consideration payable therefor, the aggregate number
                of
                shares of the appropriate class and/or other securities of the Corporation
                or the Successor Corporation (as the case may be) and/or other
                consideration from the Corporation or the Successor Corporation (as
                the
                case may be) that the Optionee would have been entitled to receive
                as a
                result of such reclassification, reorganization or other change or,
                subject to the provisions of Subsection 9.2(a) hereof, as a result
                of such
                consolidation, merger, amalgamation, or stock dividend, if on the
                record
                date of such reclassification, reorganization, other change or stock
                dividend, or the effective date of such consolidation, merger or
                amalgamation or dividend payment, as the case may be, he or she had
                been
                the registered holder of the number of Shares to which he or she
                was
                theretofore entitled upon such
                exercise.

            

    

    

    
      	
              8.4

            	
              In
                the event the Corporation should declare and pay a special cash dividend
                or other distribution out of the ordinary course, a special dividend
                in
                specie on the Shares, or a stock dividend other than in the ordinary
                course, the Option Price of all Options outstanding on the record
                date of
                such dividend or other distribution shall be reduced by an amount
                equal to
                the cash payment or other distribution or the fair market value of
                the
                dividend in specie or stock dividend or other distribution, as determined
                by the Board in its sole discretion. Any such reduction in the Option
                Price shall be subject to regulatory approval and the Option Price
                shall
                not be less than $0.01 per Share.

            

    

    

    
      	
              9.

            	
              Amendment
                or Discontinuance of the
                Plan

            

    

    

    
      	
              9.1

            	
              The
                Board may amend or discontinue the Plan at any time, provided, however,
                that no such amendment may materially and adversely affect any Option
                previously granted to an Optionee without the consent of the Optionee,
                except to the extent required by law. Any such amendment shall, if
                required, be subject to the prior approval of, or acceptance by,
                any stock
                exchange on which the Shares are listed and posted for trading. For
                greater certainty, the Board may, by resolution duly passed, amend
                this
                Plan to reduce the number of shares in respect of which options have
                not
                been granted at the date of such resolution and that are subject
                to this
                Plan, to meet the requirements of any stock exchange or regulatory
                authority.

            

    

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    
      	
              9.2

            	
              Notwithstanding
                anything contained to the contrary in this Plan or in any resolution
                of
                the Board in implementation
                thereof:

            

    

    

    
      	 	
              (a)

            	
              in
                the event the Corporation proposes to amalgamate, merge or consolidate
                with any other corporation (other than a wholly-owned Subsidiary)
                or to
                liquidate, dissolve or wind-up, or in the event an offer to purchase
                or
                repurchase the Shares of the Corporation or any part thereof shall
                be made
                to all or substantially all holders of Shares of the Corporation,
                the
                Corporation shall have the right, upon written notice thereof to
                each
                Optionee holding Options under the Plan, to permit the exercise of
                all
                such Options within the 20 day period next following the date of
                such
                notice and to determine that upon the expiration of such 20 day period,
                all rights of the Optionees to such Options or to exercise same (to
                the
                extent not theretofore exercised) shall ipso
                facto
                terminate and cease to have further force or effect
                whatsoever;

            

    

    

    
      	 	
              (b)

            	
              in
                the event of the sale by the Corporation of all or substantially
                all of
                the assets of the Corporation as an entirety or substantially as
                an
                entirety so that the Corporation shall cease to operate as an active
                business, any outstanding Option may be exercised as to all or any
                part of
                the Optioned Shares in respect of which the Optionee would have been
                entitled to exercise the Option in accordance with the provisions
                of the
                Plan at the date of completion of any such sale at any time up to
                and
                including, but not after the earlier of: (i) the close of business
                on that
                date which is thirty (30) days following the date of completion of
                such
                sale; and (ii) the close of business on the expiration date of the
                Option;
                but the Optionee shall not be entitled to exercise the Option with
                respect
                to any other Optioned Shares;

            

    

    

    
      	 	
              (c)

            	
              subject
                to the rules of any relevant stock exchange or other regulatory authority,
                the Board may, by resolution, advance the date on which any Option
                may be
                exercised or extend the expiration date of any Option. The Board
                shall
                not, in the event of any such advancement or extension, be under
                any
                obligation to advance or extend the date on or by which Options may
                be
                exercised by any other Optionee;
                and

            

    

    

    
      	 	
              (d)

            	
              the
                Board may, by resolution, but subject to applicable regulatory
                requirements, decide that any of the provisions hereof concerning
                the
                effect of termination of the Optionee's employment shall not apply
                to any
                Optionee for any reason acceptable to the
                Board.

            

    

    

    
      	 	
              Notwithstanding
                the provisions of this Article 9, should changes be required to the
                Plan
                by any securities commission, stock exchange or other governmental
                or
                regulatory body of any jurisdiction to which the Plan or the Corporation
                now is or hereafter becomes subject, such changes shall be made to
                the
                Plan as are necessary to conform with such requirements and, if such
                changes are approved by the Board, the Plan as amended, shall be
                filed
                with the records of the Corporation and shall remain in full force
                and
                effect in its amended form as of and from the date of its adoption
                by the
                Board.

            

    

    

    
      	
              10.

            	
              Miscellaneous
                Provisions

            

    

    

    
      	
              10.1

            	
              An
                Optionee shall not have any rights as a shareholder of the Corporation
                with respect to any of the Shares covered by such Option until the
                date of
                issuance of a certificate for Shares upon the exercise of such Option,
                in
                full or in part, and then only with respect to the Shares represented
                by
                such certificate or certificates. Without in any way limiting the
                generality of the foregoing, no adjustment shall be made for dividends
                or
                other rights for which the record date is prior to the date such
                share
                certificate is issued.

            

    

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    
      	
              10.2

            	
              Nothing
                in the Plan or any Option shall confer upon an Optionee any right
                to
                continue or be re-elected as a director of the Corporation or any
                right to
                continue in the employ of the Corporation or any Subsidiary, or affect
                in
                any way the right of the Corporation or any Subsidiary to terminate
                his or
                her employment at any time; nor shall anything in the Plan or any
                Option
                be deemed or construed to constitute an agreement, or an expression
                of
                intent, on the part of the Corporation or any Subsidiary to extend
                the
                employment of any Optionee beyond the time which he or she would
                normally
                be retired pursuant to the provisions of any present or future retirement
                plan of the Corporation or any Subsidiary, or beyond the time at
                which he
                or she would otherwise be retired pursuant to the provisions of any
                contract of employment with the Corporation or any
                Subsidiary.

            

    

    

    
      	
              10.3

            	
              Notwithstanding
                Section 5.8 hereof, Options may be transferred or assigned between
                an
                Eligible Individual and the related Employee Corporation provided
                the
                assignor delivers notice to the Corporation prior to the
                assignment.

            

    

    

    
      	
              10.4

            	
              The
                Plan and all matters to which reference is made herein shall be governed
                by and interpreted in accordance with the laws of the Province of
                Ontario,
                the laws of Canada and the laws of the United States of America applicable
                therein.

            

    

    

    
      	
              11.

            	
              Shareholder
                and Regulatory Approval

            

    

    

    
      	
              11.1

            	
              The
                Plan shall be subject to ratification by the shareholders of the
                Corporation to be effected by a resolution passed at a meeting of
                the
                shareholders of the Corporation, and to acceptance by any other relevant
                regulatory authority. Any Options granted prior to such ratification
                and
                acceptance shall be conditional upon such ratification and acceptance
                being given and no such Options may be exercised unless and until
                such
                ratification and acceptance are
                given.

            

    

    

    

    DATED
      this 8th
      day of
      April, 2005.

     

    
      
         

      

      
        9EXHIBIT 4.14

                                SEVENTH AMENDMENT
                            Dated as of May 18, 2006

     This  SEVENTH  AMENDMENT  (this  "Amendment")  is entered into among ITRON,
INC., a Washington corporation (the "Borrower"), the Lenders party hereto, BEAR,
STEARNS & CO. INC., as sole lead arranger and sole  bookrunner (in such capacity
the "Lead Arranger"),  BEAR STEARNS CORPORATE LENDING INC., as syndication agent
(in such  capacity  the  "Syndication  Agent") and WELLS  FARGO  BANK,  NATIONAL
ASSOCIATION,  as  administrative  agent (in such  capacity  the  "Administrative
Agent").

                             PRELIMINARY STATEMENTS

     1. Reference is made to the Credit  Agreement dated as of December 17, 2003
among  the  Borrower,   the  Lenders  party  thereto,  the  Lead  Arranger,  the
Syndication  Agent and the  Administrative  Agent (as amended  from time to time
prior to the date hereof,  the "Credit  Agreement").  Capitalized terms used but
not  otherwise  defined  herein are used with the  meanings  given in the Credit
Agreement.

     2. The  Borrower  has  requested  that the Credit  Agreement  be amended as
herein set forth.

     3. The  parties  hereto are  willing to enter into such  amendment,  on the
terms and conditions stated below.

     NOW,  THEREFORE,  in  consideration  of the premises and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto hereby agree as follows:

SECTION 1. Amendment to Credit Agreement.
           ------------------------------

     (a) The definition of "Applicable  Margin"  contained in Section 1.1 of the
Credit  Agreement  is hereby  amended  by  replacing  the number  "0.375%"  with
"0.25%".

     (b) Annex A of the Credit  Agreement  is hereby  amended and restated so it
reads as set forth in Exhibit I.

     (c) Section  8.8(m)(ii) of the Credit  Agreement is amended and restated to
read as follows:

          (ii) for any  acquisition  or  series  of  related  acquisitions  with
respect to which the aggregate amount of cash consideration  exceeds $5,000,000,
the  Borrower has  delivered  to the  Administrative  Agent a  certificate  of a
Responsible Officer demonstrating in reasonable detail pro forma compliance with
the  covenants  set forth in Section  8.1,  based upon the most recent  12-month
period for which  financial  statements are available and after giving effect to
such  acquisition,  the  financing  thereof and all related  transactions  as if
completed on the first date of such period;

<PAGE>

SECTION 2.  Conditions to  Effectiveness.  The amendment  contained in Section 1
shall not be  effective  unless each of the  following  conditions  precedent is
satisfied  (the date on which such  conditions  are  satisfied,  the  "Amendment
Effective Date"):

     (a) The Administrative Agent shall have received,  for distribution to each
Revolving  Lender  executing this  Amendment by no later than 12:00 p.m.  (noon)
(New York City time) on Thursday May 11, 2006,  an amendment  fee equal to 0.10%
of such executing  Revolving Lender's Revolving  Commitments  (whether funded or
unfunded) on the Amendment Effective Date;

     (b) the  Administrative  Agent  shall have  received  counterparts  of this
Amendment executed by the Administrative  Agent and Borrower and counterparts of
the Consent  appended  hereto (the  "Consent")  executed by the  Guarantors,  as
defined in the Guarantee and Collateral Agreement.

     (c) the Administrative  Agent shall have received executed  counterparts of
this Amendment or a signed  authorization to execute this Amendment from each of
the Lenders;

     (d) all fees and expenses  then due and payable to the Lead Arranger or any
Agent or Lender  under the Loan  Documents  or  relating  thereto (to the extent
invoiced at least one day  Business  Day prior)  shall have been paid in full in
immediately available funds; and

     (e) the  Administrative  Agent shall have received such other documents and
instruments as it or the Lead Arranger may reasonably request.

SECTION 3. Representations and Warranties. The Borrower represents and warrants
to the Lead Arranger; Agents and Lenders that:

     (a) Authority. The Borrower has the requisite corporate power and authority
to execute and deliver this Amendment and to perform its  obligations  hereunder
and under the Credit  Agreement  (as amended  hereby).  Each  Guarantor  has the
requisite  power and authority to execute,  deliver and perform its  obligations
under the Consent and the Loan  Documents,  as amended  hereby.  The  execution,
delivery and performance by the Borrower of this Amendment and by the Guarantors
of the Consent and the  performance by the Borrower of the Credit  Agreement (as
amended hereby) have been duly approved by all necessary corporate action of the
Borrower,  and no other corporate proceedings on the part of the Borrower or any
Guarantor are necessary to consummate such transactions.

     (b) Enforceability.  This Amendment has been duly executed and delivered by
the  Borrower  and the  Consent has been duly  executed  and  delivered  by each
Guarantor.  When this Amendment  becomes effective in accordance with its terms,
this  Amendment,  the Credit  Agreement (as amended hereby) and the Consent each
will be the legal, valid and binding obligation of the Borrower,  or in the case
of the Consent, each Guarantor, enforceable against the Borrower, or in the case
of  the  Consent,  each  Guarantor  in  accordance  with  its  terms  except  as
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,   moratorium  or  similar  laws  affecting  the  enforcement  of
creditors'  rights  generally  and  by  general  equitable  principles  (whether
enforcement is sought in proceedings in equity or at law).

<PAGE>

     (c) Representations  and Warranties.  The representations and warranties of
the Borrower in the Credit  Agreement (other than any such  representations  and
warranties that, by their terms,  are specifically  made as of a date other than
the date  hereof) are and will be true and correct on and as of the date of this
Amendment and the Amendment Effective Date as though made on and as of each such
date.

     (d) No Conflicts. Neither the execution and delivery of this Amendment, not
the  execution  and  delivery  of  the  Consent,  nor  the  consummation  of the
transactions  contemplated  hereby  and  thereby,  nor  the  performance  of and
compliance with the terms and provisions  hereof or of the Credit  Agreement (as
amended  hereby) by the  Borrower or any  Guarantors  will,  at the time of such
performance,  (i)  violate or conflict  with any  provision  of its  articles or
certificate  of  incorporation  or bylaws or other  organizational  or governing
documents, (ii) violate,  contravene or materially conflict with any Requirement
of Law (including, without limitation,  Regulation U) or Contractual Obligation,
except for any violation,  contravention  or conflict which could not reasonably
be expected to have a Material  Adverse Effect or (iii) result in or require the
creation of any Lien (other than those  permitted by the Loan Documents) upon or
with respect to its  properties.  No consent or  authorization  of, filing with,
notice to or other act by or in respect of, any  Governmental  Authority  or any
other  Person is  required  in  connection  with the  transactions  contemplated
hereby.

     (e) No Default.  No event has occurred and is continuing that constitutes a
Default or Event of Default.

SECTION 4. Reference to and Effect on Credit Agreement.
           --------------------------------------------

     (a) Upon and after the  effectiveness of this Amendment,  each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like
import referring to the Credit  Agreement,  and each reference in the other Loan
Documents to "the Credit  Agreement",  "thereunder",  "thereof" or words of like
import referring to the Credit  Agreement,  shall mean and be a reference to the
Credit Agreement as amended hereby. This Amendment is a Loan Document.

     (b) Except as  specifically  amended  above,  the Credit  Agreement and the
Guarantee and  Collateral  Agreement and the other Loan  Documents are and shall
continue to be in full force and effect and is hereby in all  respects  ratified
and confirmed.

     (c) The execution,  delivery and effectiveness of this Amendment shall not,
except as expressly provided herein,  operate as a waiver of any right, power or
remedy of any Secured  Party  under any of the Loan  Documents,  nor,  except as
expressly provided herein,  constitute a waiver or amendment of any provision of
the Credit Agreement.

SECTION 5.  Counterparts.  This  Amendment may be executed by one or more of the
parties to this  Amendment  on any number of separate  counterparts,  and all of
said counterparts  taken together shall be deemed to constitute one and the same
instrument.  Delivery  of an  executed  signature  page  of  this  Agreement  by
facsimile  transmission  shall be effective  as delivery of a manually  executed
counterpart  hereof.  A set of the  copies of this  Amendment  signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.

<PAGE>

SECTION 6.  Severability.  Any provision of this Amendment that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

SECTION 7. Governing  Law. This Amendment and the rights and  obligations of the
parties under this Amendment shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.

                            [signature pages follow]

<PAGE>

     IN  WITNESS  WHEREOF,  the party  hereto has caused  this  Amendment  to be
executed by its respective  officers  thereunto duly authorized,  as of the date
first written above.

                                                ITRON, INC.

                                                By:    /s/ Steven M. Helmbrecht
                                                       ------------------------
                                                Name:  Steven M. Helmbrecht
                                                Title: Senior Vice President
                                                       Chief Financial Officer

                     [signatures continued on the next page]

<PAGE>

                               WELLS FARGO BANK, NATIONAL ASSOCIATION,
                               as Administrative Agent

                               By:    /s/ Tom Beil
                                      ------------
                               Name:  Tom Beil
                               Title: Vice President Senior Relationship Manager

<PAGE>

                                     CONSENT

                            Dated as of May 18, 2006

     The undersigned, as Guarantors under the Guarantee and Collateral Agreement
and, as applicable,  as parties to the other Security  Documents  hereby consent
and agree to the foregoing  Seventh  Amendment and hereby confirm and agree that
(i) each of the  Guarantee  and  Collateral  Agreement  and the  other  Security
Documents  is, and shall  continue to be, in full force and effect and is hereby
ratified and confirmed in all respects except that, upon the  effectiveness  of,
and on and after the date of, said Seventh Amendment,  each reference therein to
the  "Credit  Agreement",  "thereunder",  "thereof"  and  words  of like  import
referring to the Credit  Agreement,  shall mean and be a reference to the Credit
Agreement as amended by said Seventh  Amendment  and (ii) each of the  Guarantee
and  Collateral  Agreement and the other  Security  Documents and the Collateral
described   therein  does,  and  shall  continue  to,  secure  the  payment  and
performance of all of the Obligations as defined in the Guarantee and Collateral
Agreement, after giving effect to said Seventh Amendment.

                                           EMD HOLDING, INC.

                                           By: /s/ Steven M. Helmbrecht
                                               ------------------------
                                               Name:  Steven M. Helmbrecht
                                               Title: President and Treasurer

                                           ITRON INTERNATIONAL, INC.

                                           By: /s/ Steven M. Helmbrecht
                                               ------------------------
                                               Name:  Steven M. Helmbrecht
                                               Title: President and Treasurer

                                           ITRON ENGINEERING SERVICES, INC.
                                           (f/k/a Itron Spectrum Holdings, Inc.)

                                           By: /s/ Steven M. Helmbrecht
                                               ------------------------
                                               Name:  Steven M. Helmbrecht
                                               Title: Vice President

<PAGE>

                                                                       EXHIBIT I
                                                                       ---------

                      PRICING GRID FOR REVOLVING LOANS AND
                                 SWINGLINE LOANS

         ================================================================

          Pricing Level      Applicable Margin     Applicable Margin for
                           for Eurodollar Loans        Base Rate Loans
         ----------------------------------------------------------------

                I                  2.00%                   1.50%
         ----------------------------------------------------------------

               II                  1.75%                   1.25%
         ----------------------------------------------------------------

              III                  1.50%                   1.00%
         ----------------------------------------------------------------

               IV                  1.25%                   0.25%
         ----------------------------------------------------------------

                V                  1.00%                   0.00%
         ================================================================

The Applicable Margin for Revolving Loans and Swingline Loans shall be adjusted,
on and after the first  Adjustment  Date (as defined below)  occurring after the
completion of two full fiscal  quarters of the Borrower  after the Closing Date,
based on changes in the  Consolidated  Leverage Ratio,  with such adjustments to
become effective on the date (the "Adjustment Date") that is three Business Days
after the date on which the relevant  financial  statements are delivered to the
Lenders  pursuant  to  Section  7.1 and to  remain  in  effect  until  the  next
adjustment  to  be  effected  pursuant  to  this  paragraph.  If  any  financial
statements referred to above are not delivered within the time periods specified
in Section 7.1, then,  until the date that is three Business Days after the date
on which such financial statements are delivered,  the highest rate set forth in
each  column of the Pricing  Grid shall  apply.  On each  Adjustment  Date,  the
Applicable  Margin for Revolving  Loans and Swingline Loans shall be adjusted to
be equal to the Applicable  Margins and Commitment Fee Rate opposite the Pricing
Level determined to exist on such Adjustment Date from the financial  statements
relating to such Adjustment Date.

     As used  herein,  the  following  rules shall govern the  determination  of
Pricing Levels on each Adjustment Date:

     "Pricing  Level I" shall exist on an  Adjustment  Date if the  Consolidated
Leverage Ratio for the relevant period is greater than or equal to 2.50 to 1.00.

     "Pricing  Level II" shall exist on an Adjustment  Date if the  Consolidated
Leverage  Ratio for the  relevant  period is less than 2.50 to 1.00 but  greater
than or equal to 2.00 to 1.00.

     "Pricing Level III" shall exist on an Adjustment  Date if the  Consolidated
Leverage  Ratio for the  relevant  period is less than 2.00 to 1.00 but  greater
than or equal to 1.50 to 1.00.

<PAGE>

     "Pricing  Level IV" shall exist on an Adjustment  Date if the  Consolidated
Leverage  Ratio for the  relevant  period is less than 1.50 to 1.00 but  greater
than or equal to 1.00 to 1.00.

     "Pricing  Level V" shall exist on an  Adjustment  Date if the  Consolidated
Leverage Ratio for the relevant period is less than 1.00 to 1.00.

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