Document:

EXHIBIT 10.3

                             2006 STOCK OPTION PLAN

                                      FOR:

                      NATURALLY ADVANCED TECHNOLOGIES INC.

                      NATURALLY ADVANCED TECHNOLOGIES INC.
       1307 Venables Street, Vancouver, British Columbia, Canada, V5L 2G1

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                      NATURALLY ADVANCED TECHNOLOGIES INC.

                             2006 STOCK OPTION PLAN

                                    ARTICLE 1
                                    THE PLAN

1.1      TITLE

         This plan is titled  the "2006  Stock  Option  Plan"  (the  "PLAN")  of
Naturally  Advanced  Technologies  Inc.,  a British  Columbia  corporation  (the
"COMPANY").

1.2      PURPOSE

         The purpose of the Plan is to enhance the long-term  stockholder  value
of the Company by offering opportunities to directors,  officers,  employees and
eligible  consultants of the Company and any Related Company,  as defined below,
to acquire and  maintain  stock  ownership in the Company in order to give these
persons the opportunity to participate in the Company's growth and success,  and
to encourage them to remain in the service of the Company or a Related Company.

                                    ARTICLE 2
                                   DEFINITIONS

         The following terms will have the following meanings in the Plan:

         (a)      "BOARD" means the Board of Directors of the Company;

         (b)      "CAUSE", unless otherwise defined in the instrument evidencing
                  the award or in an  employment or services  agreement  between
                  the Company or a Related  Company and a  Participant,  means a
                  material  breach  of the  employment  or  services  agreement,
                  dishonesty, fraud, misconduct,  unauthorized use or disclosure
                  of confidential information or trade secrets, or conviction or
                  confession  of  a  crime   punishable  by  law  (except  minor
                  violations),   in  each  case  as   determined   by  the  Plan
                  Administrator,  and its determination  shall be conclusive and
                  binding;

         (c)      "CODE" means the United States INTERNAL  REVENUE CODE OF 1986,
                  as amended from time to time;

         (d)      "COMMON  SHARES" and "SHARES" means the common shares,  no par
                  value, of the Company;

         (e)      "CONSULTANT PARTICIPANT" means a Participant who is defined as
                  a Consultant Participant in Article 5 hereinbelow;

         (f)      "CORPORATE  TRANSACTION",  unless  otherwise  defined  in  the
                  instrument evidencing the Option or in a written employment or
                  services  agreement  between the Company or a Related  Company
                  and a Participant, means consummation of either:

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                  (i)      a merger or consolidation of the Company with or into
                           any other corporation, entity or person; or

                  (ii)     a sale,  lease,  exchange  or other  transfer  in one
                           transaction  or a series of related  transactions  of
                           all or  substantially  all the Company's  outstanding
                           securities or all or substantially  all the Company's
                           assets;   provided,   however,   that   a   Corporate
                           Transaction   shall  not  include  a  Related   Party
                           Transaction;

         (g)      "DISABILITY",   unless   otherwise   defined   by   the   Plan
                  Administrator,  means a mental or physical  impairment  of the
                  Participant  that is  expected  to result in death or that has
                  lasted or is  expected to last for a  continuous  period of 12
                  months or more and that causes the  Participant  to be unable,
                  in the  opinion of the  Company,  to perform his or her duties
                  for the Company or a Related  Company and to be engaged in any
                  substantial gainful activity;

         (h)      "EMPLOYMENT   TERMINATION  DATE"  means,  with  respect  to  a
                  Participant,  the first  day upon  which  the  Participant  no
                  longer  has an  employment  or service  relationship  with the
                  Company or any Related Company;

         (i)      "EXCHANGE ACT" means the United States SECURITIES EXCHANGE ACT
                  OF 1934, as amended;

         (j)      "FAIR  MARKET  VALUE"  means the per share value of the Common
                  Shares determined as follows:

                  (i)      if the Common  Shares  are  listed on an  established
                           stock  exchange or exchanges  or the NASDAQ  National
                           Market,  the  closing  price  per  share  on the last
                           trading day  immediately  preceding  such date on the
                           principal  exchange  on  which  it  is  traded  or as
                           reported by NASDAQ; or

                  (ii)     if the  Common  Shares  are  not  then  listed  on an
                           exchange or the NASDAQ National Market, but is quoted
                           on the NASDAQ Small Cap Market, the NASDAQ electronic
                           bulletin board or the National  Quotation Bureau pink
                           sheets,  the  average  of the  closing  bid and asked
                           prices per share for the  Common  Shares as quoted by
                           NASDAQ or the National  Quotation Bureau, as the case
                           may be, on the last trading day immediately preceding
                           such date; or

                  (iii)    if there is no such  reported  market  for the Common
                           Shares  for the  date  in  question,  then an  amount
                           determined in good faith by the Plan Administrator;

         (k)      "GRANT  DATE"  means the date on which the Plan  Administrator
                  completes  the  corporate  action  relating to the grant of an
                  Option or such later date specified by the Plan Administrator,
                  and on which all  conditions  precedent to the grant have been
                  satisfied,  provided that conditions to the  exercisability or
                  vesting of Options shall not defer the Grant Date;

         (l)      "INCENTIVE  STOCK  OPTION"  means an Option  granted  with the
                  intention,  as  reflected  in the  instrument  evidencing  the
                  Option, that it qualify as an "incentive stock option" as that
                  term is defined in Section 422 of the Code;

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         (m)      "NONQUALIFIED  STOCK  OPTION"  means an Option  other  than an
                  Incentive Stock Option;

         (n)      "OPTION"  means the right to purchase  Common  Shares  granted
                  under Article 7 hereinbelow;

         (o)      "OPTION  EXPIRATION DATE" has the meaning set forth in Article
                  7.6 hereinbelow;

         (p)      "OPTION  TERM"  has the  meaning  set  forth  in  Article  7.3
                  hereinbelow;

         (q)      "PARTICIPANT"  means the  person to whom an Option is  granted
                  and who meets the eligibility  requirements imposed by Article
                  5 hereinbelow, including Consultant Participants as defined in
                  Article 5;

         (r)      "PARTICIPANT"  means the  person to whom an Option is  granted
                  and who meets the eligibility  requirements imposed by Article
                  5 hereinbelow, including Consultant Participants as defined in
                  Article 5;

         (s)      "PLAN  ADMINISTRATOR" has the meaning set forth in Article 3.1
                  hereinbelow;

         (t)      "RELATED   COMPANY"   means  any  entity  that,   directly  or
                  indirectly, is in control of or is controlled by the Company;

         (u)      "RELATED PARTY TRANSACTION" means:

                  (i)      a merger or consolidation of the Company in which the
                           holders  of Common  Shares  immediately  prior to the
                           merger hold at least a majority of the Common  Shares
                           in the Successor  Corporation  immediately  after the
                           merger;

                  (ii)     a sale,  lease,  exchange or other transaction in one
                           transaction  or a series of related  transactions  of
                           all or  substantially  all the Company's  assets to a
                           wholly-owned subsidiary corporation;

                  (iii)    a mere reincorporation of the Company; or

                  (iv)     a  transaction  undertaken  for the sole  purpose  of
                           creating  a  holding  company  that  will be owned in
                           substantially  the same proportion by the persons who
                           held the Company's securities immediately before such
                           transaction;

         (v)      "RETIREMENT",   unless   otherwise   defined   by   the   Plan
                  Administrator  from  time to time for  purposes  of the  Plan,
                  means   retirement  on  or  after  the   individual's   normal
                  retirement  date  under  the  Company's  401(k)  plan or other
                  similar successor plan applicable to salaried employees;

         (w)      "SECURITIES  ACT" means the United  States  SECURITIES  ACT OF
                  1933, as amended;

         (x)      "SUCCESSOR  CORPORATION"  has the meaning set forth in Article
                  11.3.1 hereinbelow; and

         (y)      "VESTING COMMENCEMENT DATE" means the Grant Date or such other
                  date selected by the Plan Administrator as the date from which
                  the  Option  begins  to  vest  for  purposes  of  Article  7.4
                  hereinbelow.

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                                      -4-

                                    ARTICLE 3
                                 ADMINISTRATION

3.1      PLAN ADMINISTRATOR

         The Plan shall be  administered  by the Board or a committee  appointed
by,  and   consisting   of  two  or  more  members  of,  the  Board  (the  "PLAN
ADMINISTRATOR").  If and so long  as the  Common  Shares  are  registered  under
Section  12(b) or  12(g) of the  Exchange  Act,  the  Board  shall  consider  in
selecting  the  members  of any  committee  acting as Plan  Administrator,  with
respect to any persons  subject or likely to become subject to Section 16 of the
Exchange Act, the provisions regarding: (a) "OUTSIDE DIRECTORS", as contemplated
by Section 162(m) of the Code and (b) "NONEMPLOYEE  DIRECTORS",  as contemplated
by Rule 16b-3 under the Exchange  Act.  Committee  members  shall serve for such
term as the Board may determine, subject to removal by the Board at any time. At
any time when no committee has been appointed to administer  the Plan,  then the
Board will be the Plan Administrator.

3.2      ADMINISTRATION AND INTERPRETATION BY PLAN ADMINISTRATOR

         Except for the terms and  conditions  explicitly set forth in the Plan,
the Plan Administrator  shall have exclusive  authority,  in its discretion,  to
determine  all  matters  relating  to  Options  under  the Plan,  including  the
selection of individuals to be granted Options,  the type of Options, the number
of Common Shares subject to an Option, all terms,  conditions,  restrictions and
limitations, if any, of an Option and the terms of any instrument that evidences
the  Option.  The Plan  Administrator  shall also have  exclusive  authority  to
interpret the Plan and the terms of any instrument evidencing the Option and may
from time to time adopt and change rules and regulations of general  application
for the Plan's  administration.  The Plan Administrator's  interpretation of the
Plan and its rules and  regulations,  and all actions  taken and  determinations
made by the Plan  Administrator  pursuant to the Plan,  shall be conclusive  and
binding on all parties involved or affected. The Plan Administrator may delegate
administrative duties to such of the Company's officers as it so determines.

                                    ARTICLE 4
                            STOCK SUBJECT TO THE PLAN

4.1      AUTHORIZED NUMBER OF COMMON SHARES

         Subject to  adjustment  from time to time as provided  in Article  11.1
hereinbelow,  the number of Common Shares  available for issuance under the Plan
shall be 10,000,000 Common Shares.

4.2      REUSE OF COMMON SHARES

         Any Common  Shares that have been made  subject to an Option that cease
to be subject to the Option  (other than by reason of exercise or  settlement of
the Option to the extent it is exercised for or settled in Common  Shares) shall
again be available  for  issuance in  connection  with future  grants of Options
under the Plan. In the event Common Shares issued under the Plan are  reacquired
by the Company pursuant to any forfeiture provision or right of repurchase, such
Common Shares shall again be available  for the purposes of the Plan;  provided,
however,  that the maximum  number of Common  Shares that may be issued upon the
exercise of Incentive  Stock  Options shall equal the Common Share number stated
in Article 4.1 hereinabove,  subject to adjustment from time to time as provided
in Article 11.1 hereinbelow; and provided, further, that for purposes of Article
4.3 hereinbelow,  any such Common Shares shall be counted in accordance with the
requirements of Section 162(m) of the Code.

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4.3      LIMITATIONS

         Subject to  adjustment  from time to time as provided  in Article  11.1
hereinbelow,  not more than an aggregate of  10,000,000  Common  Shares shall be
available for issuance pursuant to grants of Stock Options under the Plan.

                                    ARTICLE 5
                                   ELIGIBILITY

         An Option may be granted to any  officer,  director  or employee of the
Company  or a  Related  Company  that the Plan  Administrator  from time to time
selects.  An Option  may also be granted to any  consultant,  agent,  advisor or
independent  contractor  who  provides  services  to the  Company or any Related
Company (a "CONSULTANT  PARTICIPANT"),  so long as such Consultant  Participant:
(a) is a natural person or an alter ego entity of the natural  person  providing
the services; (b) renders BONA FIDE services that are not in connection with the
offer and sale of the Company's securities in a capital-raising transaction; and
(c) does not  directly  or  indirectly  promote  or  maintain  a market  for the
Company's securities.

                                    ARTICLE 6
                                     OPTIONS

6.1      FORM AND GRANT OF OPTIONS

         The  Plan  Administrator   shall  have  the  authority,   in  its  sole
discretion,  to determine  the type or types of Options to be granted  under the
Plan. Options may be granted singly or in combination.

6.2      SETTLEMENT OF OPTIONS

         The Company may settle  Options  through the delivery of Common Shares,
the  granting  of  replacement  Options or any  combination  thereof as the Plan
Administrator  shall  determine.   Any  Option  settlement,   including  payment
deferrals  or payments  deemed  made by way of the  settlement  of  pre-existing
indebtedness from the Company,  may be subject to such conditions,  restrictions
and  contingencies  as  the  Plan  Administrator   shall  determine.   The  Plan
Administrator may permit or require the deferral of any Option payment,  subject
to such rules and procedures as it may establish,  which may include  provisions
for the payment or  crediting of interest,  or dividend  equivalents,  including
converting such credits into deferred stock equivalents.

                                    ARTICLE 7
                                GRANTS OF OPTIONS

7.1      GRANT OF OPTIONS

         The  Plan  Administrator   shall  have  the  authority,   in  its  sole
discretion, to grant Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.

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                                      -6-

7.2      OPTION EXERCISE PRICE

         The exercise price for Common Shares purchased under an Option shall be
as determined by the Plan Administrator.

7.3      TERM OF OPTIONS

         Subject to earlier termination in accordance with the terms of the Plan
and the  instrument  evidencing  the Option,  the maximum term of an Option (the
"OPTION TERM") shall be as established for that Option by the Plan Administrator
or, if not so established, shall be ten years from the Grant Date.

7.4      EXERCISE OF OPTIONS

         The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which, or the  installments  in which,  the
Option shall vest and become exercisable,  any of which provisions may be waived
or modified by the Plan Administrator at any time.

         The Plan Administrator,  in its sole discretion, may adjust the vesting
schedule of an Option held by a Participant  who works less than  "FULL-TIME" as
that term is defined by the Plan  Administrator or who takes a  Company-approved
leave of absence.

         To the extent an Option has vested and become  exercisable,  the Option
may be  exercised  in  whole  or from  time to time in part by  delivery  to the
Company of a written stock option exercise agreement or notice, in a form and in
accordance with procedures established by the Plan Administrator,  setting forth
the number of Common Shares with respect to which the Option is being exercised,
the  restrictions  imposed on the Common  Shares  purchased  under such exercise
agreement, if any, and such representations and agreements as may be required by
the Plan  Administrator,  accompanied by payment in full as described in Article
7.5 hereinbelow. An Option may be exercised only for whole Common Shares and may
not be exercised  for less than a reasonable  number of Common Shares at any one
time, as determined by the Plan Administrator.

7.5      PAYMENT OF EXERCISE PRICE

         The exercise price for Common Shares purchased under an Option shall be
paid in full to the Company by delivery of consideration equal to the product of
the  Option  exercise  price and the  number of Common  Shares  purchased.  Such
consideration  must be in  accordance  with  the  requirements  of the  BUSINESS
CORPORATIONS ACT (British Columbia) and the Articles of Incorporation and Bylaws
of the  Company,  must be paid before the Company  will issue the Common  Shares
being  purchased and must be in a form or a combination  of forms  acceptable to
the  Plan  Administrator  for  that  purchase.  As  set  forth  in  Article  6.2
hereinabove,  any Option  settlement,  including  payment  deferrals or payments
deemed  made by way of the  settlement  of  pre-existing  indebtedness  from the
Company,  may be subject to such conditions,  restrictions and  contingencies as
the Plan Administrator shall determine.

7.6      POST-TERMINATION EXERCISES

         The Plan Administrator shall establish and set forth in each instrument
that evidences an Option  whether the Option shall  continue to be  exercisable,
and the terms and conditions of such exercise,  if the Participant  ceases to be
employed by, or to provide services to, the Company or a Related Company,  which
provisions may be waived or modified by the Plan  Administrator  at any time. If
not so established in the instrument  evidencing the Option, the Option shall be
exercisable according to the following terms and conditions, which may be waived
or modified by the Plan Administrator at any time:

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                                      -7-

         (a)      except as otherwise set forth in this Article 7.6 hereinbelow,
                  any portion of an Option that is not vested and exercisable on
                  the Employment Termination Date shall expire on such date;

         (b)      any portion of an Option that is vested and exercisable on the
                  Employment  Termination  Date shall  expire on the earliest to
                  occur of:

                  (i)      if  the  Participant's  Employment  Termination  Date
                           occurs  for  reasons  other than  Cause,  Retirement,
                           Disability  or death,  the day which is three  months
                           after such Employment Termination Date;

                  (ii)     if  the  Participant's  Employment  Termination  Date
                           occurs by reason of Retirement,  Disability or death,
                           the   one-year   anniversary   of   such   Employment
                           Termination Date; and

                  (iii)    the  last  day  of  the  Option  Term  (the   "OPTION
                           EXPIRATION DATE").

                  Notwithstanding  the foregoing,  if the Participant dies after
                  his or her Employment  Termination Date but while an Option is
                  otherwise  exercisable,  the  portion  of the  Option  that is
                  vested and  exercisable on such  Employment  Termination  Date
                  shall  expire  upon the  earlier  to  occur of (c) the  Option
                  Expiration  Date and (d) the one-year  anniversary of the date
                  of death, unless the Plan Administrator determines otherwise.

                  Also notwithstanding the foregoing,  in case of termination of
                  the  Participant's  employment  or  service  relationship  for
                  Cause,   all  Options  granted  to  that   Participant   shall
                  automatically   expire   upon   first   notification   to  the
                  Participant of such termination, unless the Plan Administrator
                  determines otherwise. If a Participant's employment or service
                  relationship   with  the  Company  is  suspended   pending  an
                  investigation  of whether the Participant  shall be terminated
                  for Cause, all the Participant's rights under any Option shall
                  likewise be suspended during the period of  investigation.  If
                  any facts  that  would  constitute  termination  for Cause are
                  discovered  after  the  Participant's  relationship  with  the
                  Company or a Related  Company has ended,  any Option then held
                  by the Participant  may be immediately  terminated by the Plan
                  Administrator, in its sole discretion.

         (c)      A Participant's transfer of employment or service relationship
                  between or among the  Company and any  Related  Company,  or a
                  change in status  from an  employee  to a  consultant,  agent,
                  advisor or independent contractor or a change in status from a
                  consultant,  agent,  advisor or  independent  contractor to an
                  employee,  shall not be considered a termination of employment
                  or service relationship for purposes of this Article 7. Unless
                  the Plan Administrator  determines otherwise, a termination of
                  employment or service relationship shall be deemed to occur if
                  a Participant's  employment or service relationship is with an
                  entity that has ceased to be a Related Company.

         (d)      The  effect  of a  Company-approved  leave of  absence  on the
                  application  of this Article 7 shall be determined by the Plan
                  Administrator, in its sole discretion.

         (e)      If a Participant's employment or service relationship with the
                  Company  or  a  Related   Company   terminates  by  reason  of
                  Disability or death,  the Option shall become fully vested and

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                                      -8-

                  exercisable  for all the Common Shares  subject to the Option.
                  Such Option shall remain  exercisable  for the time period set
                  forth in this Article 7.6.

                                    ARTICLE 8
                       INCENTIVE STOCK OPTION LIMITATIONS

         Notwithstanding  any other  provisions  of the Plan,  and to the extent
required by Section 422 of the Code, Incentive Stock Options shall be subject to
the following additional terms and conditions:

8.1      DOLLAR LIMITATION

         To the extent the  aggregate  Fair Market Value  (determined  as of the
Grant Date) of Common Shares with respect to which  Incentive  Stock Options are
exercisable  for the first time during any calendar year (under the Plan and all
other 2006 Stock Option Plans of the Company) exceeds $100,000,  such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event
the Participant  holds two or more such Options that become  exercisable for the
first time in the same calendar year,  such  limitation  shall be applied on the
basis of the order in which such Options are granted.

8.2      ELIGIBLE EMPLOYEES

         Individuals  who are not  employees of the Company or one of its parent
corporations  or  subsidiary  corporations  may not be granted  Incentive  Stock
Options.

8.3      EXERCISE PRICE

         The exercise price of an Incentive  Stock Option shall be at least 100%
of the Fair Market Value of the Common Shares on the Grant Date, and in the case
of an Incentive  Stock Option granted to a Participant who owns more than 10% of
the total combined voting power of all classes of the stock of the Company or of
its parent or subsidiary  corporations (a "TEN PERCENT STOCKHOLDER"),  shall not
be less than 110% of the Fair  Market  Value of the  Common  Shares on the Grant
Date. The  determination  of more than 10% ownership shall be made in accordance
with Section 422 of the Code.

8.4      EXERCISABILITY

         An Option  designated  as an  Incentive  Stock  Option  shall  cease to
qualify for favorable  tax treatment as an Incentive  Stock Option to the extent
it is exercised (if permitted by the terms of the Option):

         (a)      more than three months after the Employment  Termination  Date
                  if termination was for reasons other than death or disability;

         (b)      more than one year after the  Employment  Termination  Date if
                  termination was by reason of disability; or

         (c)      after the  Participant  has been on leave of absence  for more
                  than  three  months,  unless  the  Participant's  reemployment
                  rights are guaranteed by statute or contract.

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                                      -9-

8.5      TAXATION OF INCENTIVE STOCK OPTIONS

         In order to obtain  certain tax benefits  afforded to  Incentive  Stock
Options  under  Section 422 of the Code,  the  Participant  must hold the Common
Shares  acquired  upon the exercise of an  Incentive  Stock Option for two years
after the Grant Date and one year after the date of exercise.

         A Participant may be subject to the alternative minimum tax at the time
of exercise of an Incentive Stock Option. The Participant shall give the Company
prompt notice of any disposition of Common Shares acquired on the exercise of an
Incentive Stock Option prior to the expiration of such holding periods.

8.6      CODE DEFINITIONS

         For the purposes of this Article 8, "PARENT  CORPORATION",  "SUBSIDIARY
CORPORATION" and "DISABILITY" shall have the meanings  attributed to those terms
for purposes of Section 422 of the Code.

                                    ARTICLE 9
                                  WITHHOLDING

9.1      GENERAL

         The  Company  may  require  the  Participant  to pay to the Company the
amount of any taxes that the Company is required by applicable  federal,  state,
local or foreign law to withhold with respect to the grant,  vesting or exercise
of an Option. The Company shall not be required to issue any Common Shares under
the Plan until such obligations are satisfied.

9.2      PAYMENT OF WITHHOLDING OBLIGATIONS IN CASH OR COMMON SHARES

         The Plan  Administrator  may permit or require a Participant to satisfy
all or part of his or her tax withholding obligations by:

         (a)      paying cash to the Company;

         (b)      having the Company  withhold  from any cash amounts  otherwise
                  due or to become due from the Company to the Participant;

         (c)      having the  Company  withhold  a portion of any Common  Shares
                  that would  otherwise  be issued to the  Participant  having a
                  value  equal  to the tax  withholding  obligations  (up to the
                  employer's minimum required tax withholding rate); or

         (d)      surrendering any Common Shares that the Participant previously
                  acquired   having  a  value  equal  to  the  tax   withholding
                  obligations  (up  to  the  employer's   minimum  required  tax
                  withholding  rate to the extent the  Participant  has held the
                  surrendered Common Shares for less than six months).

                                   ARTICLE 10
                                  ASSIGNABILITY

         Neither an Option nor any interest therein may be assigned,  pledged or
transferred  by the  Participant  or  made  subject  to  attachment  or  similar

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proceedings  other  than by  will  or by the  applicable  laws  of  descent  and
distribution,  and,  during the  Participant's  lifetime,  such  Options  may be
exercised only by the  Participant.  Notwithstanding  the foregoing,  and to the
extent permitted by Section 422 of the Code, the Plan Administrator, in its sole
discretion,  may permit a  Participant  to assign or  transfer  an Option or may
permit a Participant  to designate a beneficiary  who may exercise the Option or
receive  payment  under the  Option  after the  Participant's  death;  provided,
however,  that any Option so assigned or transferred shall be subject to all the
terms  and  conditions  of the  Plan  and  those  contained  in  the  instrument
evidencing the Option.

                                   ARTICLE 11
                                   ADJUSTMENTS

11.1     ADJUSTMENT OF COMMON SHARES

         In the event, at any time or from time to time, a stock dividend, stock
split, spin-off,  combination or exchange of shares,  recapitalization,  merger,
consolidation,  distribution to stockholders  other than a normal cash dividend,
or other  change in the  Company's  corporate or capital  structure,  including,
without limitation, a Related Party Transaction,  results in (a) the outstanding
Common Shares, or any securities  exchanged therefor or received in their place,
being  exchanged for a different  number or kind of securities of the Company or
of any other corporation or (b) new,  different or additional  securities of the
Company or of any other  corporation  being  received  by the  holders of Common
Shares of the  Company,  then the Plan  Administrator  shall  make  proportional
adjustments in (i) the maximum number and kind of securities subject to the Plan
and issuable as Incentive  Stock  Options as set forth in Article 4  hereinabove
and the  maximum  number  and kind of  securities  that may be made  subject  to
Options  and  to  Options  to  any  individual  as  set  forth  in  Article  4.3
hereinbelow,  and (ii) the number and kind of securities that are subject to any
outstanding  award and the per Common Shares price of such  securities,  without
any change in the aggregate price to be paid therefor.  The determination by the
Plan Administrator as to the terms of any of the foregoing  adjustments shall be
conclusive  and  binding.   Notwithstanding  the  foregoing,  a  dissolution  or
liquidation of the Company or a Corporate  Transaction  shall not be governed by
this Article 11.1 but shall be governed by Articles 11.2 and 11.3, respectively,
hereinbelow.

11.2     DISSOLUTION OR LIQUIDATION

         To the extent not previously exercised or settled, and unless otherwise
determined  by the Plan  Administrator  in its sole  discretion,  Options  shall
terminate immediately prior to the dissolution or liquidation of the Company. To
the extent a forfeiture  provision or repurchase  right  applicable to an Option
has not been waived by the Plan  Administrator,  the Option  shall be  forfeited
immediately prior to the consummation of the dissolution or liquidation.

11.3     CORPORATE TRANSACTION

         (a)      In the event of a Corporate  Transaction,  except as otherwise
                  provided  in the  instrument  evidencing  an  Option  (or in a
                  written employment or services agreement between a Participant
                  and the Company or Related  Company) and except as provided in
                  subsection (b) hereinbelow,  each outstanding  Option shall be
                  assumed or an equivalent  option or right  substituted  by the
                  surviving corporation, the successor corporation or its parent
                  corporation, as applicable (the "SUCCESSOR CORPORATION").

         (b)      If, in connection with a Corporate Transaction,  the Successor
                  Corporation  refuses  to assume or  substitute  for an Option,

<PAGE>

                                      -11-

                  then each such  outstanding  Option  shall become fully vested
                  and exercisable  with respect to 100% of the unvested  portion
                  of the  Option.  In such case,  the Plan  Administrator  shall
                  notify the Participant in writing or  electronically  that the
                  unvested  portion of the Option specified above shall be fully
                  vested and  exercisable  for a specified  time period.  At the
                  expiration  of the time period,  the Option  shall  terminate,
                  provided that the Corporate Transaction has occurred.

         (c)      For the  purposes of this  Article  11.3,  the Option shall be
                  considered   assumed  or  substituted  for  if  following  the
                  Corporate Transaction the option or right confers the right to
                  purchase or  receive,  for each  Common  Share  subject to the
                  Option  immediately  prior to the Corporate  Transaction,  the
                  consideration  (whether  stock,  cash, or other  securities or
                  property) received in the Corporate  Transaction by holders of
                  Common Shares for each Common Share held on the effective date
                  of the  transaction  (and if holders  were offered a choice of
                  consideration, the type of consideration chosen by the holders
                  of a majority of the outstanding shares);  provided,  however,
                  that  if  such   consideration   received  in  the   Corporate
                  Transaction is not solely shares of the Successor Corporation,
                  the Plan  Administrator may, with the consent of the Successor
                  Corporation, provide for the consideration to be received upon
                  the  exercise of the Option,  for each  Common  Share  subject
                  thereto,  to be  solely  shares of the  Successor  Corporation
                  substantially  equal in fair  market  value  to the per  share
                  consideration  received by holders of shares in the  Corporate
                  Transaction. The determination of such substantial equality of
                  value of consideration shall be made by the Plan Administrator
                  and its determination shall be conclusive and binding.

         (d)      All Options shall  terminate  and cease to remain  outstanding
                  immediately following the Corporate Transaction, except to the
                  extent assumed by the Successor Corporation.

11.4     FURTHER ADJUSTMENT OF OPTIONS

         Subject to Articles 11.2 and 11.3 hereinabove,  the Plan  Administrator
shall  have  the  discretion,  exercisable  at any time  before a sale,  merger,
consolidation,  reorganization, liquidation or change of control of the Company,
as  defined  by the  Plan  Administrator,  to take  such  further  action  as it
determines  to be  necessary  or  advisable,  and  fair  and  equitable  to  the
Participants,  with respect to Options.  Such authorized action may include (but
shall not be limited to)  establishing,  amending  or waiving  the type,  terms,
conditions  or duration  of, or  restrictions  on,  Options so as to provide for
earlier,  later, extended or additional time for exercise,  lifting restrictions
and other  modifications,  and the Plan Administrator may take such actions with
respect to all  Participants,  to certain  categories of Participants or only to
individual  Participants.  The Plan Administrator may take such action before or
after  granting  Options  to which the  action  relates  and before or after any
public   announcement  with  respect  to  such  sale,   merger,   consolidation,
reorganization,  liquidation  or change of  control  that is the reason for such
action.

11.5     LIMITATIONS

         The grant of  Options  shall in no way affect  the  Company's  right to
adjust,  reclassify,  reorganize  or  otherwise  change its  capital or business
structure or to merge, consolidate,  dissolve, liquidate or sell or transfer all
or any part of its business or assets.

<PAGE>

                                      -12-

11.6     FRACTIONAL COMMON SHARES

         In the event of any  adjustment in the number of Common Shares  covered
by any  Option,  each such  Option  shall  cover only the number of full  Common
Shares resulting from such adjustment.

                                   ARTICLE 12
                            AMENDMENT AND TERMINATION

12.1     AMENDMENT OR TERMINATION OF PLAN

         The Board may suspend,  amend or  terminate  the Plan or any portion of
the Plan at any time and in such respects as it shall deem advisable;  provided,
however, and only if applicable, that to the extent required for compliance with
Section 422 of the Code or any  applicable law or regulation  only,  stockholder
approval shall be required for any amendment that would:

         (a)      increase  the total  number of shares  available  for issuance
                  under the Plan;

         (b)      modify the class of employees eligible to receive Options; or

         (c)      otherwise  require  stockholder  approval under any applicable
                  law or regulation.

         Any amendment made to the Plan that would  constitute a  "MODIFICATION"
to Incentive Stock Options  outstanding on the date of such amendment shall not,
without  the  consent of the  Participant,  be  applicable  to such  outstanding
Incentive Stock Options but shall have prospective effect only.

12.2     TERM OF PLAN

         Unless sooner  terminated as provided herein,  the Plan shall terminate
ten years after the earlier of the Plan's  adoption by the Board and approval by
the stockholders.

12.3     CONSENT OF PARTICIPANT

         The  suspension,  amendment  or  termination  of the Plan or a  portion
thereof  or the  amendment  of an  outstanding  Option  shall not,  without  the
Participant's  consent,  materially adversely affect any rights under any Option
theretofore  granted to the Participant under the Plan. Any change or adjustment
to an outstanding  Incentive Stock Option shall not,  without the consent of the
Participant, be made in a manner so as to constitute a "MODIFICATION" that would
cause such Incentive Stock Option to fail to continue to qualify as an Incentive
Stock Option.  Notwithstanding  the foregoing,  any adjustments made pursuant to
this Article 12 shall not be subject to these restrictions.

                                   ARTICLE 13
                                     GENERAL

13.1     EVIDENCE OF OPTIONS

         Options  granted  under  the  Plan  shall  be  evidenced  by a  written
instrument   that  shall  contain  such  terms,   conditions,   limitations  and
restrictions  as the Plan  Administrator  shall deem  advisable and that are not
inconsistent with the Plan.

<PAGE>

                                      -13-

13.2     NO INDIVIDUAL RIGHTS

         Nothing  in the Plan or any  Option  granted  under  the Plan  shall be
deemed to constitute an employment  contract or confer or be deemed to confer on
any Participant any right to continue in the employ of, or to continue any other
relationship  with,  the Company or any Related  Company or limit in any way the
right of the  Company  or any  Related  Company  to  terminate  a  Participant's
employment or other relationship at any time, with or without Cause.

13.3     ISSUANCE OF COMMON SHARES

         Notwithstanding any other provision of the Plan, the Company shall have
no  obligation  to issue or deliver any Common Shares under the Plan or make any
other  distribution  of benefits  under the Plan  unless,  in the opinion of the
Company's counsel, such issuance, delivery or distribution would comply with all
applicable  laws  (including,   without  limitation,  the  requirements  of  the
Securities Act), and the applicable  requirements of any securities  exchange or
similar entity.

         The Company shall be under no obligation to any Participant to register
for offering or resale or to qualify for exemption  under the Securities Act, or
to register or qualify under state securities laws, any Common Shares,  security
or interest in a security paid or issued  under,  or created by, the Plan, or to
continue in effect any such registrations or qualifications if made. The Company
may  issue  certificates  for  shares  with such  legends  and  subject  to such
restrictions  on  transfer  and  stop-transfer  instructions  as counsel for the
Company deems  necessary or desirable for compliance by the Company with federal
and state securities laws.

         To the extent the Plan or any instrument  evidencing an Option provides
for issuance of stock certificates to reflect the issuance of Common Shares, the
issuance  may  be  effected  on a  noncertificated  basis,  to  the  extent  not
prohibited by applicable law or the applicable rules of any stock exchange.

13.4     NO RIGHTS AS A STOCKHOLDER

         No  Option or Stock  Option  denominated  in units  shall  entitle  the
Participant to any cash dividend,  voting or other right of a stockholder unless
and until the date of issuance under the Plan of the shares that are the subject
of such Option.

13.5     COMPLIANCE WITH LAWS AND REGULATIONS

         Notwithstanding  anything  in  the  Plan  to  the  contrary,  the  Plan
Administrator, in its sole discretion, may bifurcate the Plan so as to restrict,
limit or condition the use of any provision of the Plan to Participants  who are
officers  or  directors  subject to Section 16 of the  Exchange  Act  without so
restricting,   limiting  or   conditioning   the  Plan  with  respect  to  other
Participants.  Additionally,  in interpreting and applying the provisions of the
Plan,  any Option  granted as an  Incentive  Stock  Option  pursuant to the Plan
shall,  to the extent  permitted  by law, be construed  as an  "INCENTIVE  STOCK
OPTION" within the meaning of Section 422 of the Code.

13.6     PARTICIPANTS IN OTHER COUNTRIES

         The  Plan  Administrator   shall  have  the  authority  to  adopt  such
modifications,  procedures  and  subplans as may be  necessary  or  desirable to
comply with  provisions  of the laws of other  countries in which the Company or
any Related  Company may operate to assure the  viability of the  benefits  from
Options  granted to  Participants  employed  in such  countries  and to meet the
objectives of the Plan.

<PAGE>

                                      -14-

13.7              NO TRUST OR FUND

         The  Plan  is  intended  to  constitute  an  "UNFUNDED"  plan.  Nothing
contained  herein  shall  require the Company to  segregate  any monies or other
property,  or Common  Shares,  or to create any  trusts,  or to make any special
deposits for any immediate or deferred amounts payable to any  Participant,  and
no  Participant  shall have any rights that are greater  than those of a general
unsecured creditor of the Company.

13.8     SEVERABILITY

         If any provision of the Plan or any Option is determined to be invalid,
illegal or  unenforceable  in any  jurisdiction,  or as to any person,  or would
disqualify  the Plan or any Option under any law deemed  applicable  by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without,  in
the Plan  Administrator's  determination,  materially altering the intent of the
Plan or the Option,  such provision  shall be stricken as to such  jurisdiction,
person or Option, and the remainder of the Plan and any such Option shall remain
in full force and effect.

13.9     CHOICE OF LAW

         The Plan and all determinations  made and actions taken pursuant hereto
shall be  governed  by the laws of the  Province  of British  Columbia,  Canada,
without giving effect to principles of conflicts of law.

                                   ARTICLE 14
                                 EFFECTIVE DATE

         The  effective  date is September 4, 2006,  being the date on which the
Plan was adopted by the Board. If the stockholders of the Company do not approve
the Plan within 12 months after the Board's  adoption of the Plan, any Incentive
Stock  Options  granted  under the Plan will be  treated as  Nonqualified  Stock
Options.

         This Plan is dated  and made  effective  on this 4th day of  September,
2006.

                      BY ORDER OF THE BOARD OF DIRECTORS OF
                      NATURALLY ADVANCED TECHNOLOGIES INC.
                                      Per:
                                  "KEN BARKER"
                                   KEN BARKER
                               CEO and a directorExhibit 10.10.1_BOD Resolution regarding FMV for stock option grants

    EXHIBIT
      10.10.1

     

    

     

    

     

    

     

    As
      of
      January 1, 2007, the Board of Directors adopted the policy that the fair market
      value of the Company’s common stock for the purposes of granting stock options
      under the Company’s 1997 Stock Option and Purchase Plan and the 2004 Equity
      Incentive Plan shall be the closing price of the Company’s common stock as
      quoted on the NASDAQ Stock Market on the day of such grant.

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