Document:

EXHIBIT 10.1

                                ITS Networks Inc.
                   2004 Stock Option, SAR and Stock Bonus Plan

                                    ARTICLE 1

                               General Provisions

1.1   Purpose.  The purpose of the ITS Networks Inc. 2004 Stock Option,  SAR and
Stock  Bonus  Plan  (the  "Plan")  shall  be to  attract,  retain  and  motivate
directors,  officers, employees and independent consultants (the "Participants")
of ITS Networks Inc. (the  "Company")  and its  subsidiaries,  if any, by way of
granting (i) non-qualified  stock options ("Stock Options"),  (ii) non-qualified
stock options with stock  appreciation  rights  attached  ("Stock Option SARs"),
(iii)  incentive  stock  options  ("ISO  Options"),  (iv) ISO Options with stock
appreciation rights attached ("ISO Option SARs"), and (v) stock bonuses. For the
purpose of this  Plan,  Stock  Option  SARs and ISO  Option  SARs are  sometimes
collectively  herein  called  "SARs;"  and Stock  Options  and ISO  Options  are
sometimes  collectively  herein called  "Options." The ISO Options to be granted
under the Plan are  intended  to be  qualified  pursuant  to Section  422 of the
Internal Revenue Code of 1986, as amended (the "Code"); and the Stock Options to
be granted are  intended to be  "non-qualified  stock  options" as  described in
Sections 83 and 421 of the Code. Furthermore, under the Plan, the terms "parent"
and "subsidiary" shall have the same meaning as set forth in Subsections (e) and
(f) of Section 425 of the Code unless the context  herein  clearly  indicates to
the contrary.

1.2   General. The terms and provisions of this Article I shall be applicable to
Stock Options,  SARs and ISO Options unless the context herein clearly indicates
to the contrary.

1.3   Administration  of the Plan. The Plan shall be  administered  by the Stock
Plan  Committee  (the  "Committee")  appointed  by the Board of  Directors  (the
"Board")  of the  Company  and  consisting  of at least one (1) member  from the
Board.  The initial members of the Stock Option Committee shall be Gustavo Gomez
and Herman de Haas.  The member(s) of the Committee  shall serve at the pleasure
of the Board.  The  Committee  shall have the power  where  consistent  with the
general  purpose  and intent of the Plan to (i) modify the  requirements  of the
Plan to conform with the law or to meet special circumstances not anticipated or
covered in the Plan,  (ii)  suspend or  discontinue  the Plan,  (iii)  establish
policies and (iv) adopt rules and  regulations  and prescribe forms for carrying
out the purposes and  provisions  of the Plan  including  the form of any "stock
option agreements" ("Stock Option Agreements"). Unless otherwise provided in the
Plan, the Committee shall have the authority to interpret and construe the Plan,
and  determine  all  questions  arising  under the Plan and any  agreement  made
pursuant to the Plan. Any interpretation,  decision or determination made by the
Committee shall be final,  binding and  conclusive.  A majority of the Committee
shall constitute a quorum,  and an act of the majority of the members present at
any meeting at which a quorum is present shall be the act of the Committee.

1.4   Shares  Subject to the Plan.  Shares of stock  ("Stock")  covered by Stock
Options,  SARs, ISO Options and stock bonuses shall consist of 15,000,000 shares
of the Common Stock,  $.001 par value,  of the Company.  Either  authorized  and
unissued shares or treasury shares may be delivered pursuant to the Plan. If any
Option for shares of Stock,  granted to a  Participant  lapses,  or is otherwise
terminated,  the Committee may grant Stock Options,  SARs, ISO Options and stock
bonuses for such shares of Stock to other Participants.  However,  neither Stock
Options,  SARs nor ISO Options  shall be granted again for shares of Stock which
have been subject to SARs which are  surrendered  in exchange for cash or shares
of Stock  issued  pursuant  to the  exercise  of SARs as  provided in Article II
hereof.

1.5   Participation in the Plan. The Committee shall determine from time to time
those  Participants  who are to be granted Stock Options,  SARs, ISO Options and
stock bonuses and the number of shares of Stock covered  thereby.  Directors who
are not  employees  of the Company or of a  subsidiary  shall not be eligible to
participate in the in ISO Options or ISO in Option SARs.  During any period that
the  Committee  is  comprised  of less than  three  Directors  each of whom is a
Disinterested  Director,  the  maximum  number  of  shares  of Stock  for  which
employee-Directors  may be

<PAGE>

granted  options in any calendar  year shall not exceed 10 percent  (10%) of the
aggregate number of shares of Stock with respect to which Options may be granted
under the Plan.

1.6   Determination  of Fair Market  Value.  As used in the Plan,  "fair  market
value" shall mean on any  particular  day (i) if the Stock is listed or admitted
for trading on any national securities exchange or the National Market System of
the National Association of Securities Dealers, Inc. Automated Quotation System,
the last sale price,  or if no sale occurred,  the mean between the closing high
bid and low  asked  quotations,  for  such  day of the  Stock  on the  principal
securities  exchange on which  shares of Stock are listed,  (ii) if Stock is not
traded  on any  national  securities  exchange  but is  quoted  on the  National
Association of Securities  Dealers,  Inc.,  Automated  Quotation  System, or any
similar system of automated  dissemination of quotations or securities prices in
common use, the mean between the closing high bid and low asked  quotations  for
such day of the Stock on such  system,  (iii) if neither  clause (i) nor (ii) is
applicable, the mean between the high bid and low asked quotations for the Stock
as reported  by the  National  Quotation  Bureau,  Incorporated  if at least two
securities dealers have inserted both bid and asked quotations for shares of the
Stock on at least five (5) of the ten (10) preceding  days,  (iv) in lieu of the
above,  if  actual  transactions  in the  shares  of  Stock  are  reported  on a
consolidated  transaction reporting system, the last sale price of the shares of
Stock on such system or, (v) if none of the  conditions  set forth above is met,
the fair market value of shares of Stock as determined  by the Board.  Provided,
for  purposes of  determining  "fair  market  value" of the Common  Stock of the
Company,  such value shall be determined without regard to any restriction other
than a restriction which will never lapse.

1.7   Adjustments Upon Changes in Capitalization. The aggregate number of shares
of Stock under Stock Options and ISO Options  granted under the Plan, the Option
Price and the ISO Price  and the  total  number of shares of Stock  which may be
purchased by a Participant on exercise of a Stock Option and an ISO Option shall
be  approximately  adjusted by the  Committee  to reflect any  recapitalization,
stock split, merger, consolidation,  reorganization,  combination,  liquidation,
stock  dividend  or similar  transaction  involving  the  Company  except that a
dissolution or liquidation of the Company or a merger or  consolidation in which
the Company is not the surviving or the resulting  corporation,  shall cause the
Plan and any Stock Option,  SAR or ISO Option granted  thereunder,  to terminate
upon  the  effective   date  of  such   dissolution,   liquidation,   merger  or
consolidation.  Provided,  that for the  purposes  of this  Section  1.7, if any
merger,  consolidation  or  combination  occurs in which the  Company is not the
surviving  corporation and is the result of a mere change in the identity,  form
or place of organization of the Company  accomplished in accordance with Section
368(a)(1)(F)  of the  Code,  then,  such  event  will not  cause a  termination.
Appropriate  adjustment  may also be made by the Committee in the terms of a SAR
to reflect any of the foregoing changes.

1.8   Amendment  and  Termination  of the  Plan.  The Plan  shall  terminate  at
midnight,  July 28, 2007, but prior thereto may be altered,  changed,  modified,
amended or terminated by written amendment approved by the Board. Provided, that
no action of the Board may, without the approval of the  shareholders,  increase
the  aggregate  number of shares of Stock  which may be  purchased  under  Stock
Options,  SARs or ISO Options or stock bonuses granted under the Plan;  withdraw
the  administration  of the Plan from the  Committee;  amend or alter the Option
Price or ISO Price,  as  applicable;  change the manner of computing  the spread
upon the  exercise of a SAR or amend the Plan in any manner  which would  impair
the  applicability  of Rule 16b-3 under the Securities  Exchange Act of 1934, as
amended,  to the Plan.  Except as  provided  in this  Article  I, no  amendment,
modification or termination of the Plan shall in any manner adversely affect any
Stock Option, SAR or ISO Option  theretofore  granted under the Plan without the
consent of the affected Participant.

1.9   Effective  Date.  The Plan shall be effective  July 29,  2004,  subject to
approval  by the  holders  of a  majority  of the  Common  Stock of the  Company
entitled to vote at a meeting  called for such purpose.  The Plan will terminate
at midnight on July 28, 2007.

1.10  Securities  Law  Requirements.  The Company  shall have no  obligation  or
liability to issue any Stock hereunder  unless the issuance of such shares would
comply  with any  applicable  federal  or  state  securities  laws or any  other
applicable  law or  regulations  thereunder,  including  but not  limited to the
effectiveness of a Form S-8 registration statement filed with the U.S Securities
Exchange Commission.

1.11  Separate Certificates. Separate certificates representing the Common Stock
of the Company to be delivered to a  Participant  upon the exercise of any Stock
Option, SAR, or ISO Option will be issued to such Participant.

<PAGE>

1.12  Payment for Stock; Receipt of Stock or Cash in Lieu of Payment.

      (a) Payment for Stock.  Payment for shares of Stock  purchased  under this
Plan  shall be made in full and in cash or check made  payable  to the  Company.
Provided, payment for shares of Stock purchased under this Plan may also be made
in Common Stock of the Company or a combination  of cash and Common Stock of the
Company in the event that the  purchase of shares is pursuant to the exercise of
rights under an SAR attached to the Option and which is  exercisable on the date
of  exercise of the  Option.  In the event that  Common  Stock of the Company is
utilized in consideration for the purchase of Stock upon the exercise of a Stock
Option or an ISO Option,  then,  such Common  Stock shall be valued at the "fair
market value" as defined in Section 1.6 of the Plan.

      (b) In the alternative,  the Committee is authorized to agree to accept an
assignment  of the proceeds  from the sale of the Common Stock to be issued to a
Participant  for the  payment  of the  option  price,  if  daily  executed  by a
Participant  so notarized in sub form deemed  necessary and  appropriate  by The
Company in its sole discription and acknowledged by the  broker-dealer  retained
by the Participant for a resale of The Common Stock of The Company.

      (c)  Receipt  of  Stock  or  Cash  in  Lieu  of  Payment.  Furthermore,  a
Participant  may exercise an Option  without  payment of the Option Price or ISO
Price in the event that the exercise is pursuant to rights under an SAR attached
to the Option and which is exercisable on the date of exercise of the Option. In
the event an Option with an SAR  attached is  exercised  without  payment of the
Option Price or ISO Price,  the Participant  shall be entitled to receive either
(i) a cash payment from the Company equal to the excess of the total fair market
value of the shares of Stock on such date as  determined  with  respect to which
the Option is being  exercised  over the total cash Option Price or ISO Price of
such  shares  of Stock as set forth in the  Option or (ii) that  number of whole
shares of Stock as is  determined  by dividing  (A) an amount  equal to the fair
market value per share of Stock on the date of exercise into (B) an amount equal
to the excess of the total fair market value of the shares of Stock on such date
with respect to which the Option is being  exercised  over the total cash Option
Price or ISO  Price of such  shares  of Stock as set  forth in the  Option,  and
fractional  shares will be rounded to the next lowest number and the Participant
will receive cash in lieu thereof.

1.13  Incurrence of Disability and Retirement.  A Participant shall be deemed to
have   terminated   employment   or   consulting   and   incurred  a  disability
("Disability") if such Participant suffers a physical or mental condition which,
in the judgment of the Committee, totally and permanently prevents a Participant
from engaging in any  substantial  gainful  employment  or  consulting  with the
Company  or a  subsidiary.  A  Participant  shall be deemed  to have  terminated
employment as an employee or a consultant  due to retirement  ("Retirement")  if
such Participant  ceases to be an employee or a consultant of the Company or its
subsidiary, without cause, after attaining the age of 65.

1.14  Stock Options and ISO Options Granted  Separately.  Since the Committee is
authorized to grant Stock  Options,  SARs and ISO Options to  Participants,  the
grant  thereof  and  Stock  Option  Agreements  relating  thereto  will  be made
separately and totally  independent  of each other.  Except as it relates to the
total number of shares of Stock which may be issued under the Plan, the grant or
exercise  of a Stock  Option  or SARs  shall in no manner  affect  the grant and
exercise of any ISO Options. Similarly, the grant and exercise of any ISO Option
shall in no manner affect the grant and exercise of any Stock Option or SARs.

1.15  Grants of Options  and Stock  Option  Agreement.  Each Stock  Option,  ISO
Option and/or SAR granted under this Plan shall be evidenced by the minutes of a
meeting of the  Committee or by the written  consent of the  Committee  and by a
written  Stock Option  Agreement  effective on the date of grant and executed by
the Company and the  Participant.  Each Option granted  hereunder  shall contain
such terms,  restrictions  and conditions as the Committee may determine,  which
terms, restrictions and conditions may or may not be the same in each case.

1.16  Use of  Proceeds.  The  proceeds  received by the Company from the sale of
Stock pursuant to the exercise of Options  granted under the Plan shall be added
to the Company's general funds and used for general corporate purposes.

1.17  Non-Transferability  of Options.  Except as otherwise herein provided, any
Option or SAR granted shall not be  transferable  otherwise  than by will or the
laws of descent and  distribution,  and the Option may be exercised,  during the
lifetime of the Participant,  only by him or her. More particularly (but without
limiting the  generality  of the  foregoing),  the Option  and/or SAR may not be
assigned, transferred (except as provided above), pledged or hypothecated in any
way,  shall not be  assignable  by  operation of law and shall not be subject to
execution,  attachment, or similar process. Any attempted assignment,  transfer,
pledge, hypothecation, or other disposition of the Option and/or SAR contrary to
the provisions hereof shall be null and void and without effect.

<PAGE>

1.18  Additional  Documents  on Death of  Participant.  No transfer of an Option
and/or SAR by the  Participant  by will or the laws of descent and  distribution
shall be  effective  to bind the  Company  unless  the  Company  shall have been
furnished  with written  notice and an  unauthenticated  copy of the will and/or
such other  evidence  as the  Committee  may deem  necessary  to  establish  the
validity of the  transfer  and the  acceptance  by the  successor  to the Option
and/or SAR of the terms and conditions of such Option and/or SAR.

1.19  Changes in Employment.  So long as the Participant shall continue to be an
employee or consultant of the Company or any one of its subsidiaries, any Option
granted  to him  shall not be  affected  by any  change  of duties or  position.
Nothing in the Plan or in any Stock Option  Agreement  which relates to the Plan
shall  confer  upon any  Participant  any right to  continue in the employ as an
employee  or  consultant  of the  Company  or of any  of  its  subsidiaries,  or
interfere in any way with the right of the Company or any of its subsidiaries to
terminate his employment or consulting arrangement at any time.

1.20  Shareholder  Rights.  No  Participant  shall have a right as a shareholder
with  respect to any shares of Stock  subject to an Option prior to the purchase
of such shares of Stock by exercise of the Option.

1.21  Right to Exercise  Upon Company  Ceasing to Exist.  Where  dissolution  or
liquidation of the Company or any merger  consolidation  or combination in which
the Company is not the surviving  corporation occurs, the Participant shall have
the  right  immediately  prior  to  such   dissolution,   liquidation,   merger,
consolidation  or combination,  as the case may be, to exercise,  in whole or in
part, his then remaining Options whether or not then exercisable, but limited to
that number of shares that can be acquired  without  causing the  Participant to
have an "excess parachute  payment" as determined under Section 280G of the Code
determined  by taking into  account all of  Participant's  "parachute  payments"
determined   under   Section  280G  of  the  Code.   Provided,   the   foregoing
notwithstanding,  after the  Participant  has been afforded the  opportunity  to
exercise his then remaining Options as provided in this Section 1.21, and to the
extent such Options are not timely  exercised as provided in this Section  1.21,
then, the terms and provisions of this Plan and any Stock Option  Agreement will
thereafter  continue in effect, and the Participant will be entitled to exercise
any such  remaining and  unexercised  Options in  accordance  with the terms and
provisions  of this  Plan  and  such  Stock  Option  Agreement  as such  Options
thereafter become exercisable.  Provided further,  that for the purposes of this
Section 1.21, if any merger,  consolidation  or combination  occurs in which the
Company is not the surviving  corporation  and is the result of a mere change in
the identity,  form, or place of  organization  of the Company  accomplished  in
accordance  with Section  368(a)(1)(F)  of the Code,  then, such event shall not
cause  an  acceleration  of the  exercisability  of  any  such  Options  granted
hereunder.

1.22  Assumption of Outstanding Options and SARs. To the extent permitted by the
then applicable  provisions of the Code, any successor to the Company succeeding
to, or assigned the  business of, the Company as the result of or in  connection
with  a  corporate  merger,   consolidation,   combination,   reorganization  or
liquidation transaction shall assume Options and SARs outstanding under the Plan
or issue new Options  and/or SARs in place of  outstanding  Options  and/or SARs
under the Plan.

                                   ARTICLE II

                       Terms of Stock Options and Exercise

2.1   General Terms.

      (a) Grant and Terms for Stock  Options.  Stock Options shall be granted by
the Committee on the following  terms and  conditions:  No Stock Option shall be
exercisable  within three months from the date of grant (except as  specifically
provided in Subsection 2.l(c) hereof,  with regard to the death or Disability of
a  Participant),  nor more than five years  after the date of grant.  Subject to
such limitation,  the Committee shall have the discretion to fix the period (the
"Option  Period") during which any Stock Option may be exercised.  Stock Options
granted shall not be  transferable  except by will or by the laws of descent and
distribution,  Stock Options shall be exercisable only by the Participant  while
actively employed as an employee or a consultant by the Company or a subsidiary,
except  that  (i)  any  such  Stock  Option   granted  and  which  is  otherwise
exercisable,  may be  exercised  by the  personal  representative  of a deceased
Participant within 12 months after the death of such Participant (but not beyond
the Option Period of such Stock  Option),  (ii) if a Participant  terminates his
employment  as an employee or a consultant  with the Company or a subsidiary  on
account of Retirement,  such  Participant may exercise any Stock Option which is
otherwise  exercisable  at  any  time  within  three  months  of  such  date  of
termination and (iii) if a Participant  terminates

<PAGE>

his  employment as an employee or a consultant  with the Company or a subsidiary
on account of incurring a Disability,  such  Participant  may exercise any Stock
Option which is otherwise  exercisable at any time within 12 months of such date
of termination. If a Participant should die during the applicable three-month or
12-month  period  following  the  date  of  such  Participant's   Retirement  or
termination on account of Disability,  the rights of the personal representative
of such deceased Participant as such relate to any Stock Options granted to such
deceased  Participant shall be governed in accordance with Subsection  2.1(a)(i)
of this Article II.

      (b) Option Price.  The option price  ("Option  Price") for shares of Stock
subject to a Stock Option shall be determined by the Committee,  but in no event
shall the Option Price of an ISO be less than 100% of the "fair market value" of
the Stock on the date of grant and in no event  shall the Option  Price of Stock
Options be less than 85% of the "fair market  value" of the Stock on the date of
grant.

      (c)  Acceleration of Otherwise  Unexercisable  Stock Option on Retirement,
Death,  Disability or Other Special  Circumstances.  The Committee,  in its sole
discretion,  may  permit  (i) a  Participant  who  terminates  employment  as an
employee or a consultant  due to Retirement,  (ii) a Participant  who terminates
employment  as an  employee  or a  consultant  due to a  Disability,  (iii)  the
personal representative of a deceased Participant, or (iv) any other Participant
who terminates  employment as an employee or a consultant upon the occurrence of
special  circumstances (as determined by the Committee) to exercise and purchase
(within  three months of such date of  termination  of  employment or consulting
arrangement, or 12 months in the case of a deceased or disabled Participant; all
or  any  part  of the  shares  subject  to  Stock  Option  on  the  date  of the
Participant's  Retirement,  Disability,  death, or as the Committee otherwise so
determines,  notwithstanding that all installments, if any, with respect to such
Stock  Option,  had not  accrued  on such  date.  Provided,  such  discretionary
authority  of the  Committee  shall not be  exercised  with respect to any Stock
Option (or  portion  thereof) if the  applicable  six-month  waiting  period for
exercise had not expired  except in the event of the death or  disability of the
Participant when the personal  representative of the deceased Participant or the
disabled Participant may, with the consent of the Committee, exercise such Stock
Option notwithstanding the fact that the applicable six-month waiting period had
not yet expired.

      (d) Number of Stock Options Granted. Participants may be granted more than
one Stock Option. In making any such  determination,  the Committee shall obtain
the advice and  recommendation  of the  officers of the Company or a  subsidiary
which have supervisory authority over such Participants. The granting of a Stock
Option under the Plan shall not affect any outstanding  Stock Option  previously
granted to a Participant under the Plan.

      (e) Notice of Exercise of Stock Option. Upon exercise of a stock option, a
Participant shall give written notice to the Secretary of the Company,  or other
officer  designated by the Committee,  at the Company's main office in Spain. No
Stock shall be issued to any Participant until the Company receives full payment
for the Stock  purchased,  if  applicable,  and any  required  state and federal
withholding taxes.

                                   ARTICLE III

                                      SARs

3.1   General Terms.

      (a) Grant and Terms of SARs.  The  Committee,  when  comprised of three or
more  Directors  all of whom are  Disinterested  Directors,  may  grant  SARs to
Participants  in connection  with Stock Options or ISO Options granted under the
Plan.  SARs  shall not be  exercisable  (i) at such time that the  Committee  is
comprised of less than three Disinterested  Directors or is not comprised solely
of Disinterested Directors,  (ii) earlier than six months from the date of grant
except as specifically  provided in Subsection  3.l(b) hereof in the case of the
death or Disability of a Participant,  and (iii) shall terminate at such time as
the  Committee  determines  and shall be  exercised  only upon  surrender of the
related Stock Option or ISO Option and only to the extent that the related Stock
Option or ISO Option (or the portion thereof as to which the SAR is exercisable)
is  exercised.  SARs may be exercised  only by the  Participant  while  actively
employed as an employee or a consultant  by the Company or a  subsidiary  except
that (i) any SARs  previously  granted  to a  Participant  which  are  otherwise
exercisable  may be  exercised,  with

<PAGE>

the  approval of the  Committee,  by the personal  representative  of a deceased
Participant,  even if such death  should  occur within six months of the date of
grant  (but  not  beyond  the  expiration  date  of  such  SAR),  and  (ii) if a
Participant  terminates his  employment as an employee or a consultant  with the
Company  or a  subsidiary,  as the case may be,  on  account  of  Retirement  or
incurring  a  Disability,  such  Participant  may  exercise  any SARs  which are
otherwise exercisable,  with the approval of the Committee, anytime within three
months  of the date of the  termination  by  Retirement  or  within 12 months of
termination  by  Disability.  If a Participant  should die during the applicable
three-month period following the date of such Participant's Retirement or during
the  applicable 12 month period  following the date of termination on account of
Disability,   the  rights  of  the  personal  representative  of  such  deceased
Participant  as such  relate to any SARs  granted to such  deceased  Participant
shall  be  governed  in  accordance  with  (i) of the  second  sentence  of this
Subsection  3.l(a) of this Article III. The  applicable  SAR shall (i) terminate
upon the termination of the underlying  Stock Option or ISO Option,  as the case
may be, (ii) only be transferable at the same time and under the same conditions
as the  underlying  Stock  Option or ISO Option is  transferable,  (iii) only be
exercised when the underlying Stock Option or ISO Option is exercised,  and (iv)
may be exercised only if there is a positive  spread between the Option Price or
ISO Price,  as applicable and the "fair market value" of the Stock for which the
SAR is exercised.

      (b)  Acceleration of Otherwise  Unexercisable  SARs on Retirement,  Death,
Disability  or  Other  Special  Circumstances.   The  Committee,   in  its  sole
discretion,  may  permit  (i) a  Participant  who  terminates  employment  as an
employee or a  consultant  with the Company or a subsidiary  due to  Retirement,
(ii) a Participant who terminates employment as an employee or a consultant with
the  Company  or  a  subsidiary   due  to  a  Disability,   (iii)  the  personal
representative of such deceased  Participant,  or (iv) any other Participant who
terminates  employment  as an  employee  or a  consultant  with the Company or a
subsidiary  upon the occurrence of special  circumstances  (as determined by the
Committee) to exercise  (within three months of such date of termination of such
employment or 12 months in the case of a disabled or deceased  Participant)  all
or any part of any such SARs  previously  granted to such  Participant as of the
date of such Participant's  Retirement,  Disability,  death, or as the Committee
otherwise so  determines,  notwithstanding  that all  installments,  if any with
respect to such SARs, had not accrued on such date. Provided, such discretionary
authority  of the  Committee  may not be  exercised  with respect to any SAR (or
portion thereof if the applicable  six-month waiting period for exercise had not
expired  as of such  date,  except  (i) in the  event of the  Disability  of the
Participant or (ii) the death of the Participant, when such disabled Participant
or the  personal  representative  of such  deceased  Participant  may,  with the
consent of the Committee,  exercise such SARs  notwithstanding the fact that the
applicable six-month waiting period had not yet expired.

      (c) Form of Payment of SARs.  The  Participant  may request the method and
combination  of payment upon the exercise of a SAR;  however,  the Committee has
the final  authority to determine  whether the value of the SAR shall be paid in
cash or shares of Stock or both.  Upon exercise of a SAR, the holder is entitled
to receive the excess  amount of the "fair market value" of the Stock (as of the
date of exercise)  for which the SAR is  exercised  over the Option Price or ISO
Price, as applicable,  under the related Stock Option or ISO Option, as the case
may be. All applicable  federal and state  withholding taxes will be paid by the
Participant  to the Company upon the  exercise of a SAR since the excess  amount
described  above  will be  required  to be  included  within  taxable  income in
accordance with Sections 61 and 83 of the Code.

      (d) Disinterested  Directors.  As used in this Article III, "Disinterested
Directors"  shall have the same meaning as the term  "disinterested  person" set
forth in Rule 16b-3(d)  under the  Securities  Exchange Act of 1934, as amended,
and shall  mean a Director  who is not at the time he  exercises  discretion  in
administering  the Plan eligible,  and has not at any time within one year prior
thereto been  eligible for  selection as a person to whom stock may be allocated
or to whom stock options or stock appreciation rights may be granted pursuant to
the Plan or any  other  plan of the  Company  or its  affiliates  entitling  the
participants  therein  to acquire  stock,  stock  options or stock  appreciation
rights of the Company or any of its affiliates;  provided,  however, that in the
event that the definition of  "disinterested  person" contained in Rule 16b-3 is
amended,  the  term  "Disinterested  Person"  as  it  is  defined  herein  shall
automatically  be  deemed  amended  so as to the have the  same  meaning  as the
amended term "disinterested person" under Rule 16b-3.

                                   ARTICLE IV

                             Granting of ISO Options

4.1   General.  With  respect to ISO Options  granted on or after the  effective
date of the Plan the following  provisions in this Article IV shall apply to the
exclusion of any inconsistent  provision in any other Article in this Plan since
the ISO  Options  to be  granted  under  the Plan are  intended  to  qualify  as
"incentive stock options" as defined in Section 422 of the Code.

4.2   Grant  and  Terms of ISO  Options.  ISO  Options  may be  granted  only to
employees of the Company and any of its  subsidiaries.  No ISO Options  shall be
granted to any person who is not eligible to receive  "incentive  stock

<PAGE>

options" as provided in Section 422 of the Code. No ISO Options shall be granted
to any management  employee if,  immediately  before the grant of an ISO Option,
such  employee  owns  more than 10% of the total  combined  voting  power of all
classes of stock of the Company or its subsidiaries (as determined in accordance
with the stock  attribution  rules  contained  in  Section  425(d) of the Code).
Provided,  the preceding sentence shall not apply if, at the time the ISO Option
is  granted,  the ISO Price is at least 110% of the "fair  market  value" of the
Stock  subject  to the ISO  Option,  and such  ISO  Option  by its  terms is not
exercisable  after the expiration of five years from the date such ISO Option is
granted.

      (a) ISO Option  Price.  The option price for shares of Stock subject to an
ISO Option ("ISO Price") shall be determined by the  Committee,  but in no event
shall such ISO Price be less than the fair market value of the Stock on the date
of grant.

      (b)  Annual ISO Option  Limitation.  The  aggregate  "fair  market  value"
(determined  as of the time the ISO Option is granted) of the Stock with respect
to which ISO  Options  are  exercisable  for the first  time by any  Participant
during in any calendar year (under all "incentive  stock option" plans qualified
under  Section  422 of the Code  sponsored  by the  Company  and its  subsidiary
corporations) shall not exceed $100,000.

      (c) Terms of ISO Options.  ISO Options  shall be granted on the  following
terms and conditions:  No ISO Option shall be exercisable within six months from
the date of grant (except as specifically  provided in Subsection  4.2(d) hereof
with regard to the Disability or death of a Participant), nor more than 10 years
after the date of grant.  The  Committee  shall have the  discretion  to fix the
period (the "ISO  Period")  during  which any ISO Option may be  exercised.  ISO
Options  granted  shall  not be  transferable  except  by will or by the laws of
descent  and  distribution.  ISO  Options  shall  be  exercisable  only  by  the
Participant while actively employed by the Company or a subsidiary,  except that
(i) any such ISO  Option  granted  and which is  otherwise  exercisable,  may be
exercised by the personal  representative  of a deceased  Participant  within 12
months after the death of such  Participant  (but not beyond the expiration date
of such ISO Option),  (ii) if a  Participant  terminates  his  employment  as an
employee  with the  Company  or a  subsidiary  on account  of  Retirement,  such
Participant  may exercise any ISO Option which is otherwise  exercisable  at any
time within three months of such date of termination  and (iii) if a Participant
terminates  his  employment  with the  Company  or a  subsidiary  on  account of
incurring a Disability,  such  Participant  may exercise any ISO Option which is
otherwise  exercisable at any time within 12 months of such date of termination.
If a Participant should die during the applicable three-month or 12 month period
following the date of such Participant's Retirement or Disability,  then in such
event, the rights of the personal representative of such deceased Participant as
such relate to any ISO Options  granted to such  deceased  Participant  shall be
governed in accordance with Subsection 4.1(c) of this Article IV.

      (d)  Acceleration  of Otherwise  Unexercisable  ISO Option on  Retirement,
Death,  Disability or Other Special  Circumstances.  The Committee,  in its sole
discretion,  may  permit  (i) a  Participant  who  terminates  employment  as an
employee with the Company or a subsidiary due to Retirement,  (ii) a Participant
who terminates employment as an employee with the Company or a subsidiary due to
a Disability,  (iii) the personal  representative of a deceased Participant,  or
(iv) any other  Participant  who  terminates  employment as an employee with the
Company  or a  subsidiary  upon the  occurrence  of  special  circumstances  (as
determined by the  Committee)  to exercise and purchase  (within three months of
such date of  termination  of employment as an employee or 12 months in the case
of a disabled  or deceased  Participant)  all or any part of the shares of Stock
subject to ISO Option on the date of the Participant's  Retirement,  Disability,
death,  or as the Committee  otherwise so determines,  notwithstanding  that all
installments, if any, had not accrued on such date. Provided, such discretionary
authority of the Committee  may not be exercised  with respect to any ISO Option
(or portion thereof if the applicable  six-month waiting period for exercise had
not  expired  as of such  date  except  in the  event of the  Disability  of the
Participant or death of the  Participant,  when the disabled  Participant or the
personal  representative of such deceased Participant,  may, with the consent of
the  Committee,  exercise  such ISO  Option  notwithstanding  the fact  that the
applicable six-month waiting period had not yet expired.

      (e) Number of ISO Options Granted.  Subject to the applicable  limitations
contained in the Plan with respect to ISO Options,  Participants  may be granted
more than one ISO Option. In making any such determination,  the Committee shall
obtain  the  advice  and  recommendation  of the  officers  of the  Company or a
subsidiary which have supervisory authority over such Participants. The granting
of an ISO Option  under the Plan shall not  affect  any  outstanding  ISO Option
previously granted to a Participant under the Plan.

      (f) Notice to Exercise  ISO  Option.  Upon  exercise  of an ISO Option,  a
Participant shall give written

<PAGE>

notice to the  Secretary  of the Company,  or other  officer  designated  by the
Committee, at the Company's principal executive offices.

                                    ARTICLE V

                            Options Not Qualifying as
                             Incentive Stock Options

5.1   Non-Qualifying  Options.  With respect to all or any portion of any option
granted  under the Plan not  qualifying  as an  "incentive  stock  option" under
Section  422 of the Code,  such option  shall be  considered  as a Stock  Option
granted under this Plan for all purposes.

                                             ITS Networks Inc.

                                         By: /s/ Gustavo Gomez
                                             -----------------------------------
                                             Gustavo Gomez, President

                                             Date Plan adopted and approved by
                                             the Board of Directors:
                                             July 29, 2004.

                                             Date Plan adopted and approved by
                                             the Stockholders: July 29, 2004.EX-4.A

 

Exhibit 4A

(TRANSLATION)

JAPAN FINANCE CORPORATION FOR

MUNICIPAL ENTERPRISES LAW

(Law No. 83 of April 27, 1957)

CONTENTS

	 	 	 
	CHAPTER I
	 	GENERAL PROVISIONS (Articles 1-8)

	 
	CHAPTER II
	 	OFFICERS AND EMPLOYEES (Articles 9-18)

	 
	CHAPTER III
	 	BUSINESS (Articles 19-22)

	 
	CHAPTER IV
	 	JAPAN FINANCE CORPORATION FOR MUNICIPAL ENTERPRISES BONDS, ETC. (Articles
23-27)

	 
	CHAPTER V
	 	ACCOUNTS (Articles 28-34)

	 
	CHAPTER VI
	 	SUPERVISION (Articles 35-37)

	 
	CHAPTER VII
	 	AUXILIARY PROVISIONS (Articles 38, 39)

	 
	CHAPTER VIII
	 	PENAL PROVISIONS (Articles 40, 41)

AMENDMENTS

	 	 	 	 	 	 	 
	April 1, 1958

	 	Law No. 49
	 	July 20, 1973
	 	Law No. 59
	 
	March 17, 1959

	 	Law No. 19
	 	May 15, 1976
	 	Law No. 20
	 
	March 31,1960

	 	Law No. 45
	 	May 1, 1978
	 	Law No. 38
	 
	June 30, 1960

	 	Law No. 113
	 	May 31, 1985
	 	Law No. 44
	 
	March 30, 1961

	 	Law No. 17
	 	June 28, 1989
	 	Law No. 48
	 
	March 28, 1962

	 	Law No. 34
	 	June 14, 1993
	 	Law No. 63
	 
	May 16, 1962

	 	Law No. 140
	 	June 12, 1998
	 	Law No. 101
	 
	March 28, 1964

	 	Law No. 16
	 	July 16, 1999
	 	Law No. 87
	 
	March 31, 1965

	 	Law No. 20
	 	December 22, 1999
	 	Law No. 160
	 
	June 30, 1967

	 	Law No. 45
	 	May 31, 2000
	 	Law No. 99
	 
	April 30, 1970

	 	Law No. 34
	 	March 30, 2001
	 	Law No. 9
	 
	June 15, 1972

	 	Law No. 65
	 	May 31, 2002
	 	Law No. 56
	 
	June 15, 1972

	 	Law No. 66
	 	June 2, 2004
	 	Law No. 76

-1-

 

CHAPTER I     GENERAL PROVISIONS

Article 1   (Objects)

1.   The object of Japan Finance Corporation for Municipal Enterprises shall be, for contributing to
the sound operation of Municipal Enterprises, to finance local governments requiring stable funds
of particularly low interest for Local Loans for their Municipal Enterprises, in order to thereby
develop Municipal Enterprises of local governments and to contribute to the improvement of the
welfare of local residents.

2.   The object of Japan Finance Corporation for Municipal Enterprises shall be, in addition to the
provisions of the preceding paragraph, supplementing the financing provided by ordinary financial
institutions, to finance local toll-road public corporations requiring long-term funds, for the
purpose of promoting the construction of local principal roads implemented by local toll-road
public corporations.

3.   The object of Japan Finance Corporation for Municipal Enterprises shall be, in addition to the
provisions of the preceding two paragraphs, supplementing the financing provided by ordinary
financial institutions, to finance local land-development public corporations requiring long-term
funds, for the purpose of promoting the acquisition of land implemented by local land-development
public corporations.

Article 2   (Definition of Terms)

     The following terms as used in this Law shall have the following meanings:

	  	(1)  	“Municipal Enterprises” shall mean, among the activities of local governments,
those for which expenses are covered mainly by earnings derived from their operations
and which are provided for in the Cabinet Order.

	  	(2)  	“Local Loans” shall mean local loans for Municipal Enterprises, which have been
consented to at the consultation provided for in Article 5-3, Paragraph 1 of the Local
Finance Law (Law No. 109 of 1948) or approved in accordance with the provisions of
Article 5-4, Paragraph 1 or 3 of the same Law and for which Government funds are not
provided.

Article 3   (Legal Personality)

     Japan Finance Corporation for Municipal Enterprises (hereinafter referred to as the
“Corporation”) shall be a juridical person.

Article 4   (Business Office)

     The Corporation shall have its office in Tokyo.

-2-

 

Article 5   (Capital)

1.   The capital of the Corporation shall be 2.4 billion (2,400,000,000) yen, all of which shall be
provided by the Government from the Industrial Investment Special Account.

2.   The Government may, when deemed necessary, make an additional capital contribution to the
Corporation within the limit of the amount appropriated in the budget.

3.   When a capital contribution specified in the immediately preceding paragraph is made by the
Government, the Corporation shall increase its capital by the amount of this contribution.

Article 6   (Registration)

1.   The Corporation shall register as provided for in the Cabinet Order.

2.   The particulars to be registered in accordance with the provisions of the immediately preceding
paragraph cannot be claimed against a third party before registration.

Article 7   (Limitation on Use of Name)

     No one other than the Corporation may use the name “Japan Finance Corporation for Municipal
Enterprises” or any other similar name.

Article 8   (Application of the Civil Code)

     The provisions of Articles 44 (Juridical Person’s Capacity for Torts) and 50 (Domicile of
Juridical Person) of the Civil Code (Law No. 89 of 1896) shall apply mutatis mutandis to the
Corporation.

CHAPTER II     OFFICERS AND EMPLOYEES

Article 9   (Officers)

     The Corporation shall have as its officers a Governor, up to four (4) Executive Directors and
an Auditor.

Article 10   (Functions and Powers of Officers)

1.   The Governor shall represent the Corporation and preside over its business.

2.   The Executive Directors shall represent the Corporation as provided for by the Governor, assist
the Governor in managing the business of the Corporation, act on behalf of the Governor in case the
Governor is prevented from discharging his/her functions and perform the functions of the Governor
in case his/her position is vacant.

-3-

 

3.   The Auditor shall audit the business of the Corporation.

4.   The Auditor may, when deemed necessary, submit his/her opinions, based on the result of audit,
to the Governor or the competent ministers.

Article 11   (Appointment of Officers)

1.   The Governor and Auditor shall be appointed by the competent ministers.

2.   The Executive Directors shall be appointed by the Governor with the approval of the competent
ministers.

Article 12   (Term of Office of Officers)

1.   The term of office of the officers shall be four (4) years.

2.   The officers may be reappointed.

3.   In case the position of an officer has become vacant, an officer shall be appointed without
delay to fill the vacancy. The term of office of the officer appointed to fill the vacancy shall
be the remainder of that of his/her predecessor.

Article 13   (Ineligibility of Officers)

     No one who is an employee (excluding a part-time employee) of the Government or a local
government may be an officer.

Article 14   (Prohibition of Officers’ Holding Concurrent Offices)

     No officer may be an officer of an association whose object it is to carry on an economic
enterprise or him/herself engage in an economic enterprise.

Article 15   (Limitation on Power of Representation)

     The Governor or Executive Directors shall have no power of representation in respect of
matters in which the interest of the Corporation and their own interest conflict with each other.
In such cases, the Auditor shall represent the Corporation.

Article 16   (Appointment of Employees)

     The employees of the Corporation shall be appointed by the Governor.

-4-

 

Article 17   (Character of Officers and Employees as Public Service Personnel)

     The officers and employees of the Corporation shall be, in respect of the application of the
provisions of the Penal Code (Law No. 45 of 1907) or any other penal provisions, regarded as
personnel engaged in public service in accordance with laws and orders.

Article 18   (Standards for Retirement Allowances)

     The Corporation shall obtain the approval of the competent ministers prior to preparing the
standards for retirement allowances for its officers and employees. The same shall apply to the
alteration thereof.

CHAPTER III     BUSINESS

Article 19   (Scope of Business)

1.   In order to attain the object specified in Article 1, Paragraph 1 hereof, the Corporation shall
conduct the following business:

	  	(1)  	To provide funds for Local Loans or to subscribe for bonds issued as Local Loans;
	 
	  	(2)  	To provide funds for short-term loans of Municipal Enterprises; or
	 
	  	(3)  	Business incidental to the business specified in the preceding two items.

2.   The Corporation may, in the case specified in Item (1) of the immediately preceding paragraph,
provide funds prior to the consent specified in Article 5-3, Paragraph 1 of the Local Finance Law
or the approval specified in Article 5-4, Paragraph 1 or 3 of the same Law only when there is a
special need and when the consent or approval is considered certain within the limit of the amount
of the Local Loans subject to the consent or approval.

3.   In order to attain the object specified in Article 1, Paragraph 2 hereof, the Corporation shall
provide funds required for the construction of local principal roads implemented by local toll-road
public corporations, and conduct other business incidental thereto.

4.   In order to attain the object specified in Article 1, Paragraph 3 hereof, the Corporation shall
provide funds required for the projects which, though implemented by local land-development public
corporations, are equal in substance to Municipal Enterprises and which are provided for in the
Cabinet Order, and conduct other business incidental thereto.

Article 20   (Statement of Business Procedures)

1.   The Corporation shall, upon the commencement of its business, prepare a Statement of Business
Procedures and obtain the approval for the Statement from the competent ministers. The same shall
apply to the alteration thereof.

-5-

 

2.   The particulars to be stated in the Statement of Business Procedures specified in the
immediately preceding paragraph shall be provided for in the Cabinet Order.

Article 21   (Entrustment of Business)

1.   The Corporation may, in case of a special need, entrust local governments with a part of its
investigation business on loans.

2.   The Corporation may, with the approval of the competent ministers, entrust financial
institutions with the business of making loans or collecting principal and interest payments or any
other business concerning loans and collection, except, however, the decision to make loans.

Article 22   (Business Plan and Financial Program)

     The Corporation shall prepare a business plan and a financial program on a quarterly basis and
set the maximum amount for the short-term borrowing as provided for in Article 30, Paragraph 1
hereof during the relevant quarter, and obtain the approval therefor from the competent ministers.
The same shall apply to the alteration thereof.

CHAPTER IV     JAPAN FINANCE CORPORATION FOR

MUNICIPAL ENTERPRISES BONDS, ETC.

Article 23   (Issuance of Bonds)

1.   The Corporation may issue Japan Finance Corporation for Municipal Enterprises Bonds (hereinafter
referred to in this chapter and Article 30 as the “JFM Bonds”) upon the approval of the competent
ministers.

2.   Except for those provided for in the immediately preceding paragraph, the Corporation may issue
the JFM Bonds pursuant to the Cabinet Order if it is necessary in order to deliver to those who
have lost the JFM Bonds.

Article 24   (General Mortgage)

1.   A holder of the JFM Bonds (except those JFM Bonds, the claims of which are secured by the loan
credit entrusted pursuant to Article 26, Paragraph 2 hereof) shall have the right to receive
repayment of his/her claim with respect to the property of the Corporation in preference to other
creditors.

2.   The preferential right specified in the immediately preceding paragraph shall rank next to after
the general preferential rights under the Civil Code.

-6-

 

Article 25   (Entrustment of Issuance Business)

1.   The Corporation may, entrust Japanese or foreign banks, trust companies or securities firms with
the whole or a part of the business concerning the issuance of the JFM Bonds.

2.   The provisions of Articles 309 to 311 (Rights and Duties of Bond Management Companies) of the
Commercial Code (Law No. 48 of 1899) shall apply mutatis mutandis to the banks, trust companies or
securities firms entrusted with the business concerning the issuance of the JFM Bonds in accordance
with the provision of the immediately preceding paragraph.

Article 26   (Government Guarantee)

1.   Notwithstanding the provisions of Article 3 of the Law Concerning Restriction on Government
Financial Aid to Juridical Persons (Law No. 24 of 1946), the Government may guarantee the
obligations under the JFM Bonds issued pursuant to the provision of Article 23, Paragraph 1 hereof
(except for the obligations on which the Government may enter into a guarantee agreement pursuant
to the provision of Article 2 of the Law Concerning Special Measures with respect to Acceptance of
Foreign Capital from International Bank for Reconstruction and Development, etc. (Law No. 51 of
1953; in the following paragraph referred to us “Law Concerning Acceptance of Foreign Capital”);
the same shall apply to Paragraph 3 hereof.) within the limit of the amount appropriated with the
budget.

2.   Of the amount appropriated with the budget provided for in the immediately preceding paragraph,
the amount with respect to the obligations under the JFM Bonds denominated in Japanese currency and
issued in a foreign country may be appropriated as added up with the amount appropriated with the
budget provided for in Article 2, paragraph 2 of the Law Concerning Acceptance of Foreign Capital,
when it is difficult to separate those amounts from one another.

3.   In addition to the provision of Paragraph 1 hereof the Government may guarantee the obligations
under the JFM Bonds issued by the Corporation pursuant to Article 23, Paragraph 2 hereof.

Article 26-2   (Trust of Loan Credit to Secure the JFM Bonds)

     For the purpose of securing the obligations under the JFM Bonds (except for those guaranteed
by the Government pursuant to the immediately preceding Article), the Corporation may, upon an
approval of the competent ministers, entrust a part of its loan credit to a trust company or any
other financial institution approved under Article 1, Paragraph 1 of the Law Concerning Finance
Institutions’ Concurrent Management of Trust Business, etc. (Law No. 43 of 1943) (in Paragraph 1,
Item 1 of the immediately following article referred to as the “Trust Companies, etc.”).

-7-

 

Article 26-3   (Trust, etc. of the Loan Credit for Fund Procurement)

1.   In order to apply to resources of the fund necessary for its businesses, the Corporation may,
with the approval of the competent ministers:

	  	(1)  	entrust a part of its loan credit to its Trust Companies, etc. and assign all or
a part or all of the beneficiary interest therein;

	  	(2)  	assign a part of its loan credit to a special purpose company provided for in
Article 2, Paragraph 3 of the Law Concerning Securitization of Assets (Law No. 105 of
1998), and/or
	 
	  	(3)  	conduct actions pertaining to the actions specified in the above two Items.

2.   Unless the aggregate amount of the fund procured by the assignment of the beneficiary interest
provided for in Item 1 of the immediately preceding paragraph and the loan credit provided for in
Item 2 of the immediately preceding paragraph is within the limit of the amount appropriated by the
Diet every business year, the Corporation may not assign such beneficiary interest or such loan
credit pursuant to the provisions of Items 1 and 2 of the immediately preceding Paragraph.

Article 26-4   (Delegation, etc. of Business from the Trustee for the Trust)

1.   If the Corporation trusts or assigns its loan credit in accordance with the provisions of the
immediately preceding two articles, it shall be delegated all of the collection of the principal
and the interest of such loan credit and other business pertaining thereto from the trustee or the
assignee.

2.   The Corporation may entrust a part of the business that the Corporation has been delegated
pursuant to the immediately preceding article to a financial institution approved by the competent
ministers as provided for in Article 21, Paragraph 2 hereof.

Article 27   (Mandate to Cabinet Order)

     In addition to the matters provided for in Article 23 thorough the immediately preceding
article, matters that are necessary for application of those articles shall be provided for in the
Cabinet Order.

CHAPTER V      ACCOUNTS

Article 28   (Budget and Settlement of Accounts)

     The Law Concerning the Budget and Settlement of Accounts of Public Corporations (Law No. 99 of
1951) shall apply to the budget and settlement of accounts of the Corporation.

-8-

 

Article 28-2   (Fund)

1.   The Corporation shall have a Fund for the Improvement of Operations of Municipal Enterprises
(hereinafter referred to as the “Fund”) in order to contribute to the reduction of interest on
Local Loans (which shall mean interest on funds provided in accordance with the provisions of
Article 19, Paragraph 1, Item (1) hereof or Paragraph 2 of the same article; the same shall apply
to Article 28-4).

2.   The Corporation shall, when it receives the Contributions specified in Article 32-2 of the Local
Finance Law, add them to the Fund.

Article 28-3   (Separation of Accounts)

     Accounts of the Fund shall be kept separate from the general accounts as provided for in the
Cabinet Order.

Article 28-4   (Administration of the Fund)

1.   The monies in the Fund shall be used for loans to local governments.

2.   Earnings from the loans specified in the immediately preceding paragraph or any other employment
of the Fund shall be, as provided for in the Cabinet Order, used as compensation for the costs
caused by the reduction of interest on Local Loans. If there remains a surplus after the reduction
of the amount used as compensation for the costs caused by the reduction of interest on Local Loans
from the earnings, such surplus shall be added to the Fund.

3.   The Fund shall not be disbursed. However, this shall not apply to the case where, if the
earning amount specified in the immediately preceding paragraph is short of the necessary amount
for compensation for the costs caused by the reduction of interest on Local Loans, the Fund is used
to cover such shortage within the limit of the total of the amount added in accordance with the
provisions of the immediately preceding paragraph and the amount contributed in the same business
year as the shortage is incurred.

Article 29   (Payment into National Treasury)

1.   The Corporation shall pay any profits which remain after the settlement of profits and loss in
each business year to the National Treasury by May 31 of the following business year.

2.   The payment into the National Treasury specified in the immediately preceding paragraph shall be
the revenue of the Government in the preceding fiscal year in which the date specified in the
immediately preceding paragraph falls.

3.   The methods of computation of profits specified in Paragraph 1 hereof, the procedures of the
payment into the National Treasury specified in the same paragraph and the accounts to which the
payment belongs shall be provided for in the Cabinet Order.

-9-

 

Article 30   (Short-term Borrowing)

1.   The Corporation may make a short-term borrowing form financial institutions specified by the
Ordinances of competent ministries, within the limit of the amount equivalent to the limit amount
designated in the budget for issuance of the JFM Bonds, less the aggregate amount of the JFM Bonds
already issued (if such amount exceeds the maximum amount of the short-term borrowing provided for
in Article 22 hereof, such maximum amount), if such short-term borrowings are necessary for
management of fund-raising.

2.   The short-term borrowings specified in the immediately preceding paragraph shall be repaid
within the business year in which such short-term borrowing is made.

3.   The Corporation shall not borrow funds except in the case specified in Paragraph 1 above.

Article 31   (Investment of Surplus Funds)

1.   The Corporation shall not invest any surplus funds incurred from its business operations except
by way of:

	  	(1)  	Purchase of government bonds, local government bonds, government-guaranteed bonds
(which shall mean the bonds of which the redemption of principal and interest payment is
guaranteed by the Government) or bonds issued by banks, the Norinchukin Bank, the
Shokochukin Bank or the Federation of Credit Associations which covers all Japan;
	 
	  	(2)  	Deposit with the Trust Fund Bureau;
	 
	  	(3)  	Deposit with Banks; or
	 
	  	(4)  	Methods provided for in Ordinances of competent ministries as such shall
correspond to the preceding three items.

2.   Investment of surplus funds by the methods provided for in the immediately preceding paragraph
shall be done safely and efficiently.

Article 32   (Delivery of Funds)

     The Corporation may, when deemed necessary for its business, deliver the necessary funds in
respect of loans to the financial institutions entrusted with business in accordance with the
provisions of Article 21, Paragraph 2 hereof (hereinafter referred to as the “Trustee”).

Article 33   (Accounts Books)

     The Corporation shall, as provided for by the competent ministers, keep the necessary books to
present properly the nature and content of the business and the condition of the business
operations and accounts.

-10-

 

Article 34   (Audit by the Board of Audit)

     The Board of Audit may, when deemed necessary, audit the accounts of the Trustee in relation
to the business entrusted.

CHAPTER VI     SUPERVISION

Article 35   (Supervision)

1.   The competent ministers shall supervise the Corporation.

2.   The competent ministers may, when deemed necessary for the enforcement of this Law,

give the Corporation such orders concerning its business as are necessary for supervision.

Article 36   (Removal of Officers)

1.   The competent ministers shall remove any officer of the Corporation who comes under one of the
items of Article 13 hereof.

2.   The competent ministers may remove any officer of the Corporation who comes under any of the
following items.

	  	(1)  	Any officer of the Corporation who has violated this Law or orders issued in
accordance with the provisions of this Law;
	 
	  	(2)  	Any officer of the Corporation who has been convicted in a criminal case;
	 
	  	(3)  	Any officer of the Corporation who has been adjudged to be subject to the
commencement of bankruptcy procedure; or
	 
	  	(4)  	Any officer of the Corporation who is mentally or physically incompetent to
perform his/her duties.

Article 37   (Report and Inspection)

1.   The competent ministers may, when deemed necessary for the enforcement of this Law, have the
Corporation or the Trustee submit a report or have their officials enter the office of the
Corporation or that of the Trustee and inspect its condition of business or its registers,
documents or other necessary materials, limited, however, in case of the Trustee, to the scope of
its entrusted business.

2.   The official who makes the on-the-spot inspection in accordance with the provisions of the
immediately preceding paragraph shall carry a certificate of identification and present the same to
the party concerned.

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3.   The on-the-spot inspection specified in Paragraph 1 above shall not be interpreted to be made
for the purpose of a criminal investigation.

Article 37-2.   (Delegation of Authority)

1.   The competent ministers may, as may be provided for by the Cabinet Order, delegate a part of the
authority to make on-the-spot inspections provided for in Paragraph 1 of the immediately preceding
article to the Prime Minister.

2.   When the Prime Minister has made an on-the-spot inspection in accordance with the provision of
Paragraph 1 of the immediately preceding article based on the delegation provided for in the
immediately preceding paragraph, the Prime Minister shall promptly report to the competent
ministers on the result thereof.

3.   The Prime Minister shall delegate the authority delegated to him/her in accordance with the
provision of Paragraph 1 above and the authority under the provision of the immediately preceding
paragraph to the Commissioner of the Financial Services Agency.

4.   The Commissioner of the Financial Services Agency may, as may be provided for by the Cabinet
Order, delegate all or a part of the authority delegated to him/her in accordance with the
provision of the immediately preceding paragraph to the Director General of a local finance bureau
or a local finance branch bureau.

CHAPTER VII     AUXILIARY PROVISIONS

Article 38   (Competent Ministers, etc.)

     The competent ministers as used in this Law shall be the Minister of Public Management, Home
Affairs, Posts and Telecommunications and the Minister of Finance, and the Ordinances of competent
ministries shall be those of the Ministry of Public Management, Home Affairs, Posts and
Telecommunications Ordinances and those of Ministry of Finance Ordinances.

Article 39   (Pension)

1.   In the event that a public servant specified in Article 19 of the Pension Law (Law No. 48 of
1923) (hereinafter referred to in this article as a “public servant”) or a person who is regarded
as a public servant specified in the same article of the same Law (hereinafter referred to in this
article as a “person regarded as a public servant”) successively takes office as an employee of the
Corporation, the phrase “who is successively in office as a public servant or a person regarded as
a public servant” in Article 10, Paragraph 1 of the Supplementary Provisions of the Law for the
Partial Amendment of the Pension Law (Law No. 77 of 1947; hereinafter referred to as “Law No. 77”)
shall be, in applying the provisions of Article 10 of the Supplementary Provisions of Law No. 77,
read as “who is successively in office as a public servant or a person regarded as a public servant
or an employee of the Corporation”.

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2.   In the event that the provisions of Article 10 of the Supplementary Provisions of Law No. 77 are
applied mutatis mutandis to the provisions of any other laws, the provisions of Paragraph 1 of the
said article read as provided for in the immediately preceding paragraph shall apply mutatis
mutandis.

3.   In the event that a person who is actually in office as a public servant or a person regarded as
a public servant at the establishment of the Corporation, successively takes office as an employee
of the Corporation and further successively becomes a public servant or a person regarded as a
public servant (including the case where one who is actually in office as a public servant or a
person regarded as a public servant at the establishment of the Corporation is successively in
office as a public servant or a person regarded as a public servant and further successively takes
office as an employee of the Corporation and furthermore successively becomes a public servant or a
person regarded as a public servant), the term of his/her office as an employee of the Corporation
shall be, in computing the ordinary pension to be paid to such a public servant or a person
regarded as a public servant, added to the term of his/her office as a public servant or a person
regarded as a public servant.

4.   The provisions of Paragraph 1 above (including the cases where the provisions of Article 10,
Paragraph 1 of the Supplementary Provisions of Law No. 77 read as provided for in Paragraph 1 above
apply mutatis mutandis in accordance with the provisions of other laws) and the immediately
preceding paragraph shall not apply to the person whose term of office as a public servant or a
person regarded as a public servant before his/her taking office as an employee of the Corporation
reaches the shortest necessary term for the ordinary pension.

5.   In applying or applying mutatis mutandis of the provisions of Article 64-2 of the Pension Law to
a person to whom the provisions of Paragraph 3 above apply, his/her being employed as an employee
of the Corporation shall be regarded as his/her rehiring.

6.   The Corporation shall, as provided for in the Cabinet Order, pay into the National Treasury or
local governments the amount to be paid as a pension to the person who was an employee of the
Corporation to whom the provisions of Paragraph 1 above (including the cases where the provisions
of Article 10, Paragraph 1 of the Supplementary Provisions of Law No. 77 read as provided for in
Paragraph 1 above apply mutatis mutandis in accordance with the provisions of other laws) and
Paragraph 3 above should apply, or his/her bereaved family.

CHAPTER XIII     PENAL PROVISIONS

Article 40   (Penal Provisions)

     An officer of the Corporation who comes under one of the following items shall be liable to a
non-penal fine not exceeding 30,000 yen:

	  	(1)	When he/she has failed to obtain the approval of the competent ministers as
required by this Law;

	  	(2)  	When he/she has neglected to register in violation of the Cabinet Order specified
in Article 6, Paragraph 1 hereof;

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	  	(3)  	When he/she has conducted any business other than those specified in Article 19
hereof and Paragraph 9 of the Supplementary Provisions below;

	  	(4)  	When he/she has employed surplus funds in violation of the provisions of Article
31 hereof; or

	  	(5)  	When he/she has disobeyed the orders of the competent ministers specified in
Article 35, Paragraph 2 hereof.

Article 41

     Anyone who uses the name “Japan Finance Corporation for Municipal Enterprises” or any other
similar name in violation of the provisions of Article 7 hereof shall be liable to a non-penal fine
not exceeding 10,000 yen.

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