Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Terax Energy, Inc. - Exhibit 4.3

	2006 INCENTIVE STOCK PLAN 
	 

                THIS
TERAX ENERGY, INC. 2006 INCENTIVE STOCK PLAN (the "Plan") is
designed to retain directors, executives and selected employees and consultants
and reward them for making major contributions to the success of the Company.
These objectives are accomplished by making long-term incentive awards under the
Plan thereby providing Participants with a proprietary interest in the growth
and performance of the Company.

                1.
Definitions.

	 	(a) 	
      "Board" - The Board of Directors of the
      Company.

	 	 	 	 
	 	(b) 	
      "Change in Control" - Means, and shall be deemed
      to have occurred upon the occurrence of, any one of the following
      events:

	 	 	 	 
	 		(i) 	
      The acquisition in one or more transactions by any
      individual, entity or group (within the meaning of Section 13(d)(3) or
      14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within
      the meaning of Rule l3d-3 promulgated under the Exchange Act) of shares or
      other securities (as defined in Section 3(a)(10) of the Exchange Act)
      representing 40% or more of outstanding Stock; provided, however, that a
      Change in Control as defined in this clause (1) shall not be deemed to
      occur in connection with any acquisition by the Company, an employee
      benefit plan of the Company or any Person who immediately prior to the
      effective date of this Plan is a holder of Stock (a "Current Stockholder")
      so long as such acquisition does not result in any Person other than the
      Company, such employee benefit plan or such Current Stockholder
      beneficially owning shares or securities representing 40% or more of the
      outstanding Stock; or

	 	 	 	 
	 		(ii) 	
      Any election has occurred of persons as directors of the
      Company that causes two-thirds or more of the Board to consist of persons
      other than (i) persons who, were members of the Board on the effective
      date of this Plan and (ii) persons who were nominated by the Board for
      election as members of the Board at a time when at least two-thirds of the
      Board consisted of persons who were members of the Board on the effective
      date of this Plan; provided, however, that any person nominated for
      election by the Board when at least two-thirds of the members of the Board
      are persons described in subclause (i) or (ii) and persons who were
      themselves previously nominated in accordance with this clause (2) shall,
      for this purpose, be

	 		  
	deemed to have been nominated by a Board composed of persons described
      in subclause (ii); or
	 	 	 	 
	 		(iii) 	 Approval by the stockholders of the Company of a reorganization,
        merger, consolidation or similar transaction (a "Reorganization Transaction"),
        in each case, unless, immediately following such Reorganization Transaction,
        more than 50% of, respectively, the outstanding shares of common stock
        (or similar equity security) of the corporation or other entity resulting
        from or surviving such Reorganization Transaction and the combined voting
        power of the securities of such corporation or other entity entitled to
        vote generally in the election of directors, is then beneficially owned,
        directly or indirectly, by the individuals and entities who were the respective
        beneficial owners of the outstanding Stock immediately prior to such Reorganization
        Transaction in substantially the same proportions as their ownership of
        the outstanding Stock immediately prior to such Reorganization Transaction;
        or

	 	 	 	 
	 		(iv) 	 Approval by the stockholders of the Company of (i) a
        complete liquidation or dissolution of the Company or (ii) the sale or
        other disposition of all or substantially all of the assets of the Company
        to a corporation or other entity, unless, with respect to such corporation
        or other entity, immediately following such sale or other disposition
        more than 50% of, respectively, the outstanding shares of common stock
        (or similar equity security) of such corporation or other entity and the
        combined voting power of the securities of such corporation or other entity
        entitled to vote generally in the election of directors, is then beneficially
        owned, directly or indirectly, by the individuals and entities who were
        the respective beneficial owners of the outstanding Stock immediately
        prior to such sale or disposition in substantially the same proportions
        as their ownership of the outstanding Stock immediately prior to such
        sale or disposition.

	 	 	 	 
	 	(c) 	 "Code" - The Internal Revenue Code
        of 1986, as amended from time to time.

	 	 	 	 
	 	(d) 	 "Committee" - The Compensation Committee
        of the Company's Board, or such other committee of the Board that is designated
        by the Board to administer the Plan, composed of not less than two members
        of the Board whom are disinterested persons, as contemplated by Rule 16b-3
        ("Rule 16b-3") promulgated under the Securities Exchange Act of
        1934, as amended (the "Exchange Act").

	 	 	 	 
	 	(e) 	 "Company" – TERAX ENERGY, INC.
        and its subsidiaries including subsidiaries of subsidiaries.

	 	 	 	 
	 	(f) 	 "Exchange Act" - The Securities Exchange
        Act of 1934, as amended from time to time.

	 	 	 	 
	 	(g) 	 "Fair Market Value" - The fair market
        value of the Company's issued and outstanding Stock as determined in good
        faith by the Board or Committee.

	 	 	 	 
	 	(h) 	 "Grant" - The grant of any form of
        stock option, stock award, or stock purchase offer, whether granted singly,
        in combination or in tandem, to a Participant pursuant to such terms,

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      conditions and limitations as the Committee may establish
      in order to fulfill the objectives of the Plan.

	 	 	 
		(i) 	
      "Grant Agreement" - An agreement between the
      Company and a Participant that sets forth the terms, conditions and
      limitations applicable to a Grant.

	 	 	 
		(j) 	
      "Option" - Either an Incentive Stock Option, in
      accordance with Section 422 of Code, or a Nonstatutory Option, to purchase
      the Company's Stock that may be awarded to a Participant under the Plan. A
      Participant who receives an award of an Option shall be referred to as an
      "Optionee."

	 	 	 
		(k) 	
      "Participant" - A director, officer, employee or
      consultant of the Company to whom an Award has been made under the
      Plan.

	 	 	 
		(l) 	
      "Restricted Stock Purchase Offer" - A Grant of the
      right to purchase a specified number of shares of Stock pursuant to a
      written agreement issued under the Plan.

	 	 	 
			
      (m)"Securities Act" - The Securities Act of 1933,
      as amended from time to time.

	 	 	 
		(n) 	
      "Stock" - Authorized and issued or unissued shares
      of common stock of the Company.

	 	 	 
		(o) 	
      "Stock Award" - A Grant made under the Plan in
      stock or denominated in units of stock for which the Participant is not
      obligated to pay additional consideration.

	 	 	 
	2. 	
      Administration. The Plan shall be administered by the
      Board, provided however, that the Board may delegate such administration
      to the Committee. Subject to the provisions of the Plan, the Board and/or
      the Committee shall have authority to (a) grant, in its discretion,
      Incentive Stock Options in accordance with Section 422 of the Code, or
      Nonstatutory Options, Stock Awards or Restricted Stock Purchase Offers;
      (b) determine in good faith the fair market value of the Stock covered by
      any Grant; (c) determine which eligible persons shall receive Grants and
      the number of shares, restrictions, terms and conditions to be included in
      such Grants; (d) construe and interpret the Plan; (e) promulgate, amend
      and rescind rules and regulations relating to its administration, and
      correct defects, omissions and inconsistencies in the Plan or any Grant;
      (f) consistent with the Plan and with the consent of the Participant, as
      appropriate, amend any outstanding Grant or amend the exercise date or
      dates thereof; (g) determine the duration and purpose of leaves of absence
      which may be granted to Participants without constituting termination of
      their employment for the purpose of the Plan or any Grant; and (h) make
      all other determinations necessary or advisable for the Plan's
      administration. The interpretation and construction by the Board of any
      provisions of the Plan or selection of Participants shall be conclusive
      and final. No member of the Board or the Committee shall be liable for any
      action or determination made in good faith with respect to the Plan or any
      Grant made thereunder.

	 	 	 
	3. 	
      Eligibility.

	 	 	 
		(a) 	
      General: The persons who shall be eligible to
      receive Grants shall be directors, officers, employees or consultants to
      the Company. The term consultant shall mean any person, other than an
      employee, who is engaged by the Company to render services and is
      compensated

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      for such services. An Optionee may hold more than one
      Option. Any issuance of a Grant to an officer or director of the Company
      subsequent to the first registration of any of the securities of the
      Company under the Exchange Act shall comply with the requirements of Rule
      16b-3.

	 	 	 
		(b) 	
      Incentive Stock Options: Incentive Stock Options
      may only be issued to employees of the Company. Incentive Stock Options
      may be granted to officers or directors, provided they are also employees
      of the Company. Payment of a director's fee shall not be sufficient to
      constitute employment by the Company.

	 	 	 
			
      The Company shall not grant an Incentive Stock Option
      under the Plan to any employee if such Grant would result in such employee
      holding the right to exercise for the first time in any one calendar year,
      under all Incentive Stock Options granted under the Plan or any other plan
      maintained by the Company, with respect to shares of Stock having an
      aggregate fair market value, determined as of the date of the Option is
      granted, in excess of $100,000. Should it be determined that an Incentive
      Stock Option granted under the Plan exceeds such maximum for any reason
      other than a failure in good faith to value the Stock subject to such
      option, the excess portion of such option shall be considered a
      Nonstatutory Option. To the extent the employee holds two (2) or more such
      Options which become exercisable for the first time in the same calendar
      year, the foregoing limitation on the exercisability of such Option as
      Incentive Stock Options under the Federal tax laws shall be applied on the
      basis of the order in which such Options are granted. If, for any reason,
      an entire Option does not qualify as an Incentive Stock Option by reason
      of exceeding such maximum, such Option shall be considered a Nonstatutory
      Option.

	 	 	 
		(c) 	
      Nonstatutory Option: The provisions of the
      foregoing Section 3(b) shall not apply to any Option designated as a
      "Nonstatutory Option" or which sets forth the intention of the
      parties that the Option be a Nonstatutory Option.

	 	 	 
		(d) 	
      Stock Awards and Restricted Stock Purchase Offers:
      The provisions of this Section 3 shall not apply to any Stock Award or
      Restricted Stock Purchase Offer under the Plan.

	 	 	 
	4. 	
      Stock.

	 	 	 
		(a) 	
      Authorized Stock: Stock subject to Grants may be
      either unissued or reacquired Stock.

	 	 	 
		(b) 	
      Number of Shares: Subject to adjustment as
      provided in Section 5(i) of the Plan, the total number of shares of Stock
      which may be purchased or granted directly by Options, Stock Awards or
      Restricted Stock Purchase Offers, or purchased indirectly through exercise
      of Options granted under the Plan shall not exceed Three Million Two
      Hundred Thousand (3,200,000). If any Grant shall for any reason terminate
      or expire, any shares allocated thereto but remaining unpurchased upon
      such expiration or termination shall again be available for Grants with
      respect thereto under the Plan as though no Grant had previously occurred
      with respect to such shares. Any shares of Stock issued pursuant to a
      Grant and repurchased pursuant to the terms thereof shall be available for
      future Grants as though not previously covered by a
  Grant.

- 4 -

		(c) 	
      Reservation of Shares: The Company shall reserve
      and keep available at all times during the term of the Plan such number of
      shares as shall be sufficient to satisfy the requirements of the Plan. If,
      after reasonable efforts, which efforts shall not include the registration
      of the Plan or Grants under the Securities Act, the Company is unable to
      obtain authority from any applicable regulatory body, which authorization
      is deemed necessary by legal counsel for the Company for the lawful
      issuance of shares hereunder, the Company shall be relieved of any
      liability with respect to its failure to issue and sell the shares for
      which such requisite authority was so deemed necessary unless and until
      such authority is obtained.

	 	 	 	 
		(d) 	
      Application of Funds: The proceeds received by the
      Company from the sale of Stock pursuant to the exercise of Options or
      rights under Stock Purchase Agreements will be used for general corporate
      purposes.

	 	 	 	 
		(e) 	
      No Obligation to Exercise: The issuance of a Grant
      shall impose no obligation upon the Participant to exercise any rights
      under such Grant.

	 	 	 	 
	5. 	
      Terms and Conditions of Options. Options granted
      hereunder shall be evidenced by agreements between the Company and the
      respective Optionees, in such form and substance as the Board or Committee
      shall from time to time approve. The form of Incentive Stock Option
      Agreement attached hereto as Exhibit A and the three forms of a
      Nonstatutory Stock Option Agreement for employees, for directors and for
      consultants, attached hereto as Exhibit B-1, Exhibit B-2 and
      Exhibit B-3, respectively, shall be deemed to be approved by the
      Board. Option agreements need not be identical, and in each case may
      include such provisions as the Board or Committee may determine, but all
      such agreements shall be subject to and limited by the following terms and
      conditions:

	 	 	 	 
		(a) 	
      Number of Shares: Each Option shall state the
      number of shares to which it pertains.

	 	 	 	 
		(b) 	
      Exercise Price: Each Option shall state the
      exercise price, which shall be determined as follows:

	 	 	 	 
			(i) 	
      Any Incentive Stock Option granted to a person who at the
      time the Option is granted owns (or is deemed to own pursuant to Section
      424(d) of the Code) stock possessing more than ten percent (10%) of the
      total combined voting power or value of all classes of stock of the
      Company ("Ten Percent Holder") shall have an exercise price of no less
      than 110% of the Fair Market Value of the Stock as of the date of grant;
      and

	 	 	 	 
			(ii) 	
      Incentive Stock Options granted to a person who at the
      time the Option is granted is not a Ten Percent Holder shall have an
      exercise price of no less than 100% of the Fair Market Value of the Stock
      as of the date of grant.

	 	 	 	 
			
                    
      For the purposes of this Section 5(b), the Fair Market Value shall be as
      determined by the Board in good faith, which determination shall be
      conclusive and binding; provided however, that if there is a public market
      for such Stock, the Fair Market Value per share shall be the average of
      the bid and asked prices (or the closing price if such stock is listed on
      the NASDAQ National Market System or Small Cap Issue Market) on the date
      of grant of

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      the Option, or if listed on a stock exchange, the closing
      price on such exchange on such date of grant.

	 	 	 	 
	 	(c) 	
      Medium and Time of Payment: The exercise price
      shall become immediately due upon exercise of the Option and shall be paid
      in cash or check made payable to the Company.

	 	 	 	 
	 		
      Should the Company's outstanding Stock be registered
      under Section 12(g) of the Exchange Act at the time the Option is
      exercised, then the exercise price may also be paid as follows:

	 	 	 	 
	 		(i) 	
      in shares of Stock held by the Optionee for the requisite
      period necessary to avoid a charge to the Company's earnings for financial
      reporting purposes and valued at Fair Market Value on the exercise date,
      or

	 	 	 	 
	 		(ii) 	
      through a special sale and remittance procedure pursuant
      to which the Optionee shall concurrently provide irrevocable written
      instructions (a) to a Company designated brokerage firm to effect the
      immediate sale of the purchased shares and remit to the Company, out of
      the sale proceeds available on the settlement date, sufficient funds to
      cover the aggregate exercise price payable for the purchased shares plus
      all applicable Federal, state and local income and employment taxes
      required to be withheld by the Company by reason of such purchase and (b)
      to the Company to deliver the certificates for the purchased shares
      directly to such brokerage firm in order to complete the sale
      transaction.

	 	 	 	 
	 		
                    
      At the discretion of the Board, exercisable either at the time of Option
      grant or of Option exercise, the exercise price may also be paid (i) by
      Optionee's delivery of a promissory note in form and substance
      satisfactory to the Company and permissible under applicable securities
      rules and bearing interest at a rate determined by the Board in its sole
      discretion, but in no event less than the minimum rate of interest
      required to avoid the imputation of compensation income to the Optionee
      under the Federal tax laws, or (ii) in such other form of consideration
      permitted by the Nevada corporations law as may be acceptable to the
      Board.

	 	 	 	 
	 	(d) 	
      Term and Exercise of Options: Any Option granted
      to an employee of the Company shall become exercisable over a period of no
      longer than five (5) years. In no event shall any Option be exercisable
      after the expiration of ten (10) years from the date it is granted, and no
      Incentive Stock Option granted to a Ten Percent Holder shall, by its
      terms, be exercisable after the expiration of five (5) years from the date
      of the Option. Unless otherwise specified by the Board or the Committee in
      the resolution authorizing such Option, the date of grant of an Option
      shall be deemed to be the date upon which the Board or the Committee
      authorizes the granting of such Option.

	 	 	 	 
	 		
      Each Option shall be exercisable to the nearest whole
      share, in installments or otherwise, as the respective Option agreements
      may provide. During the lifetime of an Optionee, the Option shall be
      exercisable only by the Optionee and shall not be assignable or
      transferable by the Optionee, and no other person shall acquire any rights
      therein. To the extent not exercised, installments (if more than one)
      shall accumulate, but shall be exercisable, in whole or in part, only
      during the period for exercise as stated in the Option agreement, whether
      or not other installments are then exercisable.

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	 	(e) 	
      Termination of Status as Employee, Consultant or
      Director: If Optionee's status as an employee shall terminate for any
      reason other than Optionee's disability or death, then Optionee (or if the
      Optionee shall die after such termination, but prior to exercise,
      Optionee's personal representative or the person entitled to succeed to
      the Option) shall have the right to exercise the portions of any of
      Optionee's Incentive Stock Options which were exercisable as of the date
      of such termination, in whole or in part, within 30 days after such
      termination (or, in the event of "termination for good cause" as
      that term is defined in Nevada case law related thereto, or by the terms
      of the Plan or the Option Agreement or an employment agreement, the Option
      shall automatically terminate as of the termination of employment as to
      all shares covered by the Option).

	 	 	 	 
			
                      With
      respect to Nonstatutory Options granted to employees, directors or
      consultants, the Board may specify such period for exercise, not less than
      30 days (except that in the case of "termination for cause" or
      removal of a director), the Option shall automatically terminate as of the
      termination of employment or services as to shares covered by the Option,
      following termination of employment or services as the Board deems
      reasonable and appropriate. The Option may be exercised only with respect
      to installments that the Optionee could have exercised at the date of
      termination of employment or services. Nothing contained herein or in any
      Option granted pursuant hereto shall be construed to affect or restrict in
      any way the right of the Company to terminate the employment or services
      of an Optionee with or without cause.

	 	 	 	 
	 	(f) 	
      Disability of Optionee: If an Optionee is disabled
      (within the meaning of Section 22(e)(3) of the Code) at the time of
      termination, the three (3) month period set forth in Section 5(e) shall be
      a period, as determined by the Board and set forth in the Option, of not
      less than six months nor more than one year after such
  termination.

	 	 	 	 
	 	(g) 	
      Death of Optionee: If an Optionee dies while
      employed by, engaged as a consultant to, or serving as a Director of the
      Company, the portion of such Optionee's Option which was exercisable at
      the date of death may be exercised, in whole or in part, by the estate of
      the decedent or by a person succeeding to the right to exercise such
      Option at any time within (i) a  period, as determined by the Board
      and set forth in the Option, of not less than six (6) months nor more than
      one (1) year after Optionee's death, which period shall not be more, in
      the case of a Nonstatutory Option, than the period for exercise following
      termination of employment or services, or (ii) during the remaining term
      of the Option, whichever is the lesser. The Option may be so exercised
      only with respect to installments exercisable at the time of Optionee's
      death and not previously exercised by the Optionee.

	 	 	 	 
	 	(h) 	
      Nontransferability of Option: No Option shall be
      transferable by the Optionee, except by will or by the laws of descent and
      distribution.

	 	 	 	 
	 	(i) 	
      Recapitalization: Subject to any required action
      of shareholders, the number of shares of Stock covered by each outstanding
      Option, and the exercise price per share thereof set forth in each such
      Option, shall be proportionately adjusted for any increase or decrease in
      the number of issued shares of Stock of the Company resulting from a stock
      split, stock dividend, combination, subdivision or reclassification of
      shares, or the payment of a stock

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	 	 	dividend, or any other increase or decrease in the number
        of such shares affected without receipt of consideration by the Company;
        provided, however, the conversion of any convertible securities of the
        Company shall not be deemed to have been "effected without receipt
        of consideration" by the Company.

                      In
        the event of a proposed dissolution or liquidation of the Company, a merger
        or consolidation in which the Company is not the surviving entity, or
        a sale of all or substantially all of the assets or capital stock of the
        Company (collectively, a "Reorganization"), unless otherwise provided
        by the Board, this Option shall terminate immediately prior to such date
        as is determined by the Board, which date shall be no later than the consummation
        of such Reorganization. In such event, if the entity which shall be the
        surviving entity does not tender to Optionee an offer, for which it has
        no obligation to do so, to substitute for any unexercised Option a stock
        option or capital stock of such surviving of such surviving entity, as
        applicable, which on an equitable basis shall provide the Optionee with
        substantially the same economic benefit as such unexercised Option, then
        the Board may grant to such Optionee, in its sole and absolute discretion
        and without obligation, the right for a period commencing thirty (30)
        days prior to and ending immediately prior to the date determined by the
        Board pursuant hereto for termination of the Option or during the remaining
        term of the Option, whichever is the lesser, to exercise any unexpired
        Option or Options without regard to the installment provisions of Paragraph
        6(d) of the Plan; provided, that any such right granted shall be granted
        to all Optionees not receiving an offer to receive substitute options
        on a consistent basis, and provided further, that any such exercise shall
        be subject to the consummation of such Reorganization.

                      Subject
        to any required action of shareholders, if the Company shall be the surviving
        entity in any merger or consolidation, each outstanding Option thereafter
        shall pertain to and apply to the securities to which a holder of shares
        of Stock equal to the shares subject to the Option would have been entitled
        by reason of such merger or consolidation.

                      In
        the event of a change in the Stock of the Company as presently constituted,
        which is limited to a change of all of its authorized shares without par
        value into the same number of shares with a par value, the shares resulting
        from any such change shall be deemed to be the Stock within the meaning
        of the Plan.

                      To
        the extent that the foregoing adjustments relate to stock or securities
        of the Company, such adjustments shall be made by the Board, whose determination
        in that respect shall be final, binding and conclusive. Except as expressly
        provided in this Section 5(i), the Optionee shall have no rights by reason
        of any subdivision or consolidation of shares of stock of any class or
        the payment of any stock dividend or any other increase or decrease in
        the number of shares of stock of any class, and the number or price of
        shares of Stock subject to any Option shall not be affected by, and no
        adjustment shall be made by reason of, any dissolution, liquidation, merger,
        consolidation or sale of assets or capital stock, or any issue by the
        Company of shares of stock of any class or securities convertible into
        shares of stock of any class.

                      The
        Grant of an Option pursuant to the Plan shall not affect in any way the
        right or power of the Company to make any adjustments, reclassifications,
        reorganizations or 

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      changes in its capital or business structure or to merge,
      consolidate, dissolve, or liquidate or to sell or transfer all or any part
      of its business or assets. 

	 	  	
       

	 	(j) 	
      Rights as a Shareholder: An Optionee shall have no
      rights as a shareholder with respect to any shares covered by an Option
      until the effective date of the issuance of the shares following exercise
      of such Option by Optionee. No adjustment shall be made for dividends
      (ordinary or extraordinary, whether in cash, securities or other property)
      or distributions or other rights for which the record date is prior to the
      date such stock certificate is issued, except as expressly provided in
      Section 5(i) hereof. 

	 	  	
       

	 	(k) 	
      Modification, Acceleration, Extension, and Renewal of
      Options: Subject to the terms and conditions and within the
      limitations of the Plan, the Board may modify an Option, or, once an
      Option is exercisable, accelerate the rate at which it may be exercised,
      and may extend or renew outstanding Options granted under the Plan or
      accept the surrender of outstanding Options (to the extent not theretofore
      exercised) and authorize the granting of new Options in substitution for
      such Options, provided such action is permissible under Section 422 of the
      Code and applicable state securities laws. Notwithstanding the provisions
      of this Section 5(k), however, no modification of an Option shall, without
      the consent of the Optionee, alter to the Optionee's detriment or impair
      any rights or obligations under any Option theretofore granted under the
      Plan. 

	 	  	
       

	 	(l) 	
      Exercise Before Exercise Date: At the discretion
      of the Board, the Option may, but need not, include a provision whereby
      the Optionee may elect to exercise all or any portion of the Option prior
      to the stated exercise date of the Option or any installment thereof. Any
      shares so purchased prior to the stated exercise date shall be subject to
      repurchase by the Company upon termination of Optionee's employment as
      contemplated by Section 5(n) hereof prior to the exercise date stated in
      the Option and such other restrictions and conditions as the Board or
      Committee may deem advisable. 

	 	  	
       

	 	(m) 	
      Other Provisions: The Option agreements authorized
      under the Plan shall contain such other provisions, including, without
      limitation, restrictions upon the exercise of the Options, as the Board or
      the Committee shall deem advisable. Shares shall not be issued pursuant to
      the exercise of an Option, if the exercise of such Option or the issuance
      of shares thereunder would violate, in the opinion of legal counsel for
      the Company, the provisions of any applicable law or the rules or
      regulations of any applicable governmental or administrative agency or
      body, such as the Code, the Securities Act, the Exchange Act, applicable
      state securities laws, Nevada corporation law, and the rules promulgated
      under the foregoing or the rules and regulations of any exchange upon
      which the shares of the Company are listed. Without limiting the
      generality of the foregoing, the exercise of each Option shall be subject
      to the condition that if at any time the Company shall determine that (i)
      the satisfaction of withholding tax or other similar liabilities, or (ii)
      the listing, registration or qualification of any shares covered by such
      exercise upon any securities exchange or under any state or federal law,
      or (iii) the consent or approval of any regulatory body, or (iv) the
      perfection of any exemption from any such withholding, listing,
      registration, qualification, consent or approval is necessary or desirable
      in connection with such exercise or the issuance of shares thereunder,
      then in any such event, such exercise shall not be effective unless such
      

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      withholding, listing registration, qualification,
      consent, approval or exemption shall have been effected, obtained or
      perfected free of any conditions not acceptable to the Company.

	 	 	 	 
		(n) 	
      Repurchase Agreement: The Board may, in its
      discretion, require as a condition to the Grant of an Option hereunder,
      that an Optionee execute an agreement with the Company, in form and
      substance satisfactory to the Board in its discretion ("Repurchase
      Agreement"), (i) restricting the Optionee's right to transfer shares
      purchased under such Option without first offering such shares to the
      Company or another shareholder of the Company upon the same terms and
      conditions as provided therein; and (ii) providing that upon termination
      of Optionee's employment with the Company, for any reason, the Company (or
      another shareholder of the Company, as provided in the Repurchase
      Agreement) shall have the right at its discretion (or the discretion of
      such other shareholders) to purchase and/or redeem all such shares owned
      by the Optionee on the date of termination of his or her employment at a
      price equal to: (A) the fair value of such shares as of such date of
      termination; or (B) if such repurchase right lapses at 20% of the number
      of shares per year, the original purchase price of such shares, and upon
      terms of payment permissible under the applicable state securities laws;
      provided that in the case of Options or Stock Awards granted to officers,
      directors, consultants or affiliates of the Company, such repurchase
      provisions may be subject to additional or greater restrictions as
      determined by the Board or Committee.

	 	 	 	 
	6. 	
      Stock Awards and Restricted Stock Purchase
  Offers.

	 	 	 	 
		(a) 	
      Types of Grants.

	 	 	 	 
			(i) 	
      Stock Award. All or part of any Stock Award under
      the Plan may be subject to conditions established by the Board or the
      Committee, and set forth in the Stock Award Agreement, which may include,
      but are not limited to, continuous service with the Company, achievement
      of specific business objectives, increases in specified indices, attaining
      growth rates and other comparable measurements of Company performance.
      Such Awards may be based on Fair Market Value or other specified
      valuation. All Stock Awards will be made pursuant to the execution of a
      Stock Award Agreement substantially in the form attached hereto as
      Exhibit C.

	 	 	 	 
			(ii) 	
      Restricted Stock Purchase Offer. A Grant of a
      Restricted Stock Purchase Offer under the Plan shall be subject to such
      (i) vesting contingencies related to the Participant's continued
      association with the Company for a specified time and (ii) other specified
      conditions as the Board or Committee shall determine, in their sole
      discretion, consistent with the provisions of the Plan. All Restricted
      Stock Purchase Offers shall be made pursuant to a Restricted Stock
      Purchase Offer substantially in the form attached hereto as Exhibit
      D.

	 	 	 	 
		(b) 	
      Conditions and Restrictions. Shares of Stock which
      Participants may receive as a Stock Award under a Stock Award Agreement or
      Restricted Stock Purchase Offer under a Restricted Stock Purchase Offer
      may include such restrictions as the Board or Committee, as applicable,
      shall determine, including restrictions on transfer, repurchase rights,
      right of first refusal, and forfeiture provisions. When transfer of Stock
      is so restricted or subject to forfeiture provisions it is referred to as
      "Restricted Stock". Further, with Board or

- 10 -

	 		
      Committee approval, Stock Awards or Restricted Stock
      Purchase Offers may be deferred, either in the form of installments or a
      future lump sum distribution. The Board or Committee may permit selected
      Participants to elect to defer distributions of Stock Awards or Restricted
      Stock Purchase Offers in accordance with procedures established by the
      Board or Committee to assure that such deferrals comply with applicable
      requirements of the Code including, at the choice of Participants, the
      capability to make further deferrals for distribution after retirement.
      Any deferred distribution, whether elected by the Participant or specified
      by the Stock Award Agreement, Restricted Stock Purchase Offers or by the
      Board or Committee, may require the payment be forfeited in accordance
      with the provisions of Section 6(c). Dividends or dividend equivalent
      rights may be extended to and made part of any Stock Award or Restricted
      Stock Purchase Offers denominated in Stock or units of Stock, subject to
      such terms, conditions and restrictions as the Board or Committee may
      establish.

	 	 	 	 
	 	(c) 	
      Cancellation and Rescission of Grants. Unless the
      Stock Award Agreement or Restricted Stock Purchase Offer specifies
      otherwise, the Board or Committee, as applicable, may cancel any
      unexpired, unpaid, or deferred Grants at any time if the Participant is
      not in compliance with all other applicable provisions of the Stock Award
      Agreement or Restricted Stock Purchase Offer, the Plan and with the
      following conditions:

	 	 	 	 
	 		(i) 	
      A Participant shall not render services for any
      organization or engage directly or indirectly in any business which, in
      the judgment of the chief executive officer of the Company or other senior
      officer designated by the Board or Committee, is or becomes competitive
      with the Company, or which organization or business, or the rendering of
      services to such organization or business, is or becomes otherwise
      prejudicial to or in conflict with the interests of the Company. For
      Participants whose employment has terminated, the judgment of the chief
      executive officer shall be based on the Participant's position and
      responsibilities while employed by the Company, the Participant's
      post-employment responsibilities and position with the other organization
      or business, the extent of past, current and potential competition or
      conflict between the Company and the other organization or business, the
      effect on the Company's customers, suppliers and competitors and such
      other considerations as are deemed relevant given the applicable facts and
      circumstances. A Participant who has retired shall be free, however, to
      purchase as an investment or otherwise, stock or other securities of such
      organization or business so long as they are listed upon a recognized
      securities exchange or traded over-the-counter, and such investment does
      not represent a substantial investment to the Participant or a greater
      than ten percent (10%) equity interest in the organization or
    business.

	 	 	 	 
	 		(ii) 	
      A Participant shall not, without prior written
      authorization from the Company, disclose to anyone outside the Company, or
      use in other than the Company's business, any confidential information or
      material, as defined in the Company's Proprietary Information and
      Invention Agreement or similar agreement regarding confidential
      information and intellectual property, relating to the business of the
      Company, acquired by the Participant either during or after employment
      with the Company.

- 11 -

	 		(iii) 	
      A Participant, pursuant to the Company's Proprietary
      Information and Invention Agreement, shall disclose promptly and assign to
      the Company all right, title and interest in any invention or idea,
      patentable or not, made or conceived by the Participant during employment
      by the Company, relating in any manner to the actual or anticipated
      business, research or development work of the Company and shall do
      anything reasonably necessary to enable the Company to secure a patent
      where appropriate in the United States and in foreign countries.

	 	 	 	 
	 		(iv) 	
      Upon exercise, payment or delivery pursuant to a Grant,
      the Participant shall certify on a form acceptable to the Committee that
      he or she is in compliance with the terms and conditions of the Plan.
      Failure to comply with all of the provisions of this Section 6(c) prior
      to, or during the six months after, any exercise, payment or delivery
      pursuant to a Grant shall cause such exercise, payment or delivery to be
      rescinded. The Company shall notify the Participant in writing of any such
      rescission within two years after such exercise, payment or delivery.
      Within ten days after receiving such a notice from the Company, the
      Participant shall pay to the Company the amount of any gain realized or
      payment received as a result of the rescinded exercise, payment or
      delivery pursuant to a Grant. Such payment shall be made either in cash or
      by returning to the Company the number of shares of Stock that the
      Participant received in connection with the rescinded exercise, payment or
      delivery.

	 	 	 	 
	 	(d) 	
      Nonassignability.

	 	 	 	 
	 		(i) 	
      Except pursuant to Section 6(e)(iii) and except as set
      forth in Section 6(d)(ii), no Grant or any other benefit under the Plan
      shall be assignable or transferable, or payable to or exercisable by,
      anyone other than the Participant to whom it was granted.

	 	 	 	 
	 		(ii) 	
      Where a Participant terminates employment and retains a
      Grant pursuant to Section 6(e)(ii) in order to assume a position with a
      governmental, charitable or educational institution, the Board or
      Committee, in its discretion and to the extent permitted by law, may
      authorize a third party (including but not limited to the trustee of a
      "blind" trust), acceptable to the applicable governmental or institutional
      authorities, the Participant and the Board or Committee, to act on behalf
      of the Participant with regard to such Awards.

	 	 	 	 
	 	(e) 	
      Termination of Employment. If the employment or
      service to the Company of a Participant terminates, other than pursuant to
      any of the following provisions under this Section 6(e), all unexercised,
      deferred and unpaid Stock Awards or Restricted Stock Purchase Offers shall
      be cancelled immediately, unless the Stock Award Agreement or Restricted
      Stock Purchase Offer provides otherwise:

	 	 	 	 
	 		(i) 	
      Retirement Under a Company Retirement Plan. When a
      Participant's employment terminates as a result of retirement in
      accordance with the terms of a Company retirement plan, the Board or
      Committee may permit Stock Awards or Restricted Stock Purchase Offers to
      continue in effect beyond the date of retirement
in

- 12 -

		
       
	
      accordance with the applicable Grant Agreement and the
      exercisability and vesting of any such Grants may be
accelerated.

	 	 	 	 
		(ii) 	
      Rights in the Best Interests of the Company. When
      a Participant resigns from the Company and, in the judgment of the Board
      or Committee, the acceleration and/or continuation of outstanding Stock
      Awards or Restricted Stock Purchase Offers would be in the best interests
      of the Company, the Board or Committee may (i) authorize, where
      appropriate, the acceleration and/or continuation of all or any part of
      Grants issued prior to such termination and (ii) permit the exercise,
      vesting and payment of such Grants for such period as may be set forth in
      the applicable Grant Agreement, subject to earlier cancellation pursuant
      to Section 9 or at such time as the Board or Committee shall deem the
      continuation of all or any part of the Participant's Grants are not in the
      Company's best interest.

	 	 	 	 
		(iii) 	
      Death or Disability of a Participant.

	 	 	 	 
			(1) 	
      In the event of a Participant's death, the Participant's
      estate or beneficiaries shall have a period up to the expiration date
      specified in the Grant Agreement within which to receive or exercise any
      outstanding Grant held by the Participant under such terms as may be
      specified in the applicable Grant Agreement. Rights to any such
      outstanding Grants shall pass by will or the laws of descent and
      distribution in the following order: (a) to beneficiaries so designated by
      the Participant; if none, then (b) to a legal representative of the
      Participant; if none, then (c) to the persons entitled thereto as
      determined by a court of competent jurisdiction. Grants so passing shall
      be made at such times and in such manner as if the Participant were
      living.

	 	 	 	 
			(2) 	
      In the event a Participant is deemed by the Board or
      Committee to be unable to perform his or her usual duties by reason of
      mental disorder or medical condition which does not result from facts
      which would be grounds for termination for cause, Grants and rights to any
      such Grants may be paid to or exercised by the Participant, if legally
      competent, or a committee or other legally designated guardian or
      representative if the Participant is legally incompetent by virtue of such
      disability.

	 	 	 	 
			(3) 	
      After the death or disability of a Participant, the Board
      or Committee may in its sole discretion at any time (1) terminate
      restrictions in Grant Agreements; (2) accelerate any or all installments
      and rights; and (3) instruct the Company to pay the total of any
      accelerated payments in a lump sum to the Participant, the Participant's
      estate, beneficiaries or representative; notwithstanding that, in the
      absence of such termination of restrictions or acceleration of payments,
      any or all of the payments due under the Grant might ultimately have
      become payable to other beneficiaries.

	 	 	 	 
			(4) 	
      In the event of uncertainty as to interpretation of or
      controversies concerning this Section 6, the determinations of the Board
      or Committee, as applicable, shall be binding and conclusive.

	 	 	 	 
	7. 	
      Change in Control. Unless otherwise
      provided in the applicable award agreement, in the event of a Change in
      Control, all vesting restrictions applicable to the Grant shall terminate
      fully and

- 13 -

		
      the Participant shall immediately have the right to the
      delivery of share certificates or exercise of Options.

	 	 	 
	8. 	
      Investment Intent. All Grants under the Plan are intended
      to be exempt from registration under the Securities Act provided by Rule
      701 thereunder. Unless and until the granting of Options or sale and
      issuance of Stock subject to the Plan are registered under the Securities
      Act or shall be exempt pursuant to the rules promulgated thereunder, each
      Grant under the Plan shall provide that the purchases or other
      acquisitions of Stock thereunder shall be for investment purposes and not
      with a view to, or for resale in connection with, any distribution
      thereof. Further, unless the issuance and sale of the Stock have been
      registered under the Securities Act, each Grant shall provide that no
      shares shall be purchased upon the exercise of the rights under such Grant
      unless and until (i) all then applicable requirements of state and federal
      laws and regulatory agencies shall have been fully complied with to the
      satisfaction of the Company and its counsel, and (ii) if requested to do
      so by the Company, the person exercising the rights under the Grant shall
      (i) give written assurances as to knowledge and experience of such person
      (or a representative employed by such person) in financial and business
      matters and the ability of such person (or representative) to evaluate the
      merits and risks of exercising the Option, and (ii) execute and deliver to
      the Company a letter of investment intent and/or such other form related
      to applicable exemptions from registration, all in such form and substance
      as the Company may require. If shares are issued upon exercise of any
      rights under a Grant without registration under the Securities Act,
      subsequent registration of such shares shall relieve the purchaser thereof
      of any investment restrictions or representations made upon the exercise
      of such rights.

	 	 	 
	9. 	
      Amendment, Modification, Suspension or Discontinuance of
      the Plan. The Board may, insofar as permitted by law, from time to time,
      with respect to any shares at the time not subject to outstanding Grants,
      suspend or terminate the Plan or revise or amend it in any respect
      whatsoever, except that without the approval of the shareholders of the
      Company, no such revision or amendment shall (i) increase the number of
      shares subject to the Plan, (ii) decrease the price at which Grants may be
      granted, (iii) materially increase the benefits to Participants, or (iv)
      change the class of persons eligible to receive Grants under the Plan;
      provided, however, no such action shall alter or impair the rights and
      obligations under any Option, or Stock Award, or Restricted Stock Purchase
      Offer outstanding as of the date thereof without the written consent of
      the Participant thereunder. No Grant may be issued while the Plan is
      suspended or after it is terminated, but the rights and obligations under
      any Grant issued while the Plan is in effect shall not be impaired by
      suspension or termination of the Plan.

	 	 	 
		
                    
      In the event of any change in the outstanding Stock by reason of a stock
      split, stock dividend, combination or reclassification of shares,
      recapitalization, merger, or similar event, the Board or the Committee may
      adjust proportionally (a) the number of shares of Stock (i) reserved under
      the Plan, (ii) available for Incentive Stock Options and Nonstatutory
      Options and (iii) covered by outstanding Stock Awards or Restricted Stock
      Purchase Offers; (b) the Stock prices related to outstanding Grants; and
      (c) the appropriate Fair Market Value and other price determinations for
      such Grants. In the event of any other change affecting the Stock or any
      distribution (other than normal cash dividends) to holders of Stock, such
      adjustments as may be deemed equitable by the Board or the Committee,
      including adjustments to avoid fractional shares, shall be made to give
      proper effect to such event. In the event of a corporate merger,
      consolidation, acquisition of property or stock, separation,
      reorganization or liquidation, the

- 14 -

		
      Board or the Committee shall be authorized to issue or
      assume stock options, whether or not in a transaction to which Section
      424(a) of the Code applies, and other Grants by means of substitution of
      new Grant Agreements for previously issued Grants or an assumption of
      previously issued Grants.

	 	 
	10. 	
      Tax Withholding. The Company shall have the right to
      deduct applicable taxes from any Grant payment and withhold, at the time
      of delivery or exercise of Options, Stock Awards or Restricted Stock
      Purchase Offers or vesting of shares under such Grants, an appropriate
      number of shares for payment of taxes required by law or to take such
      other action as may be necessary in the opinion of the Company to satisfy
      all obligations for withholding of such taxes. If Stock is used to satisfy
      tax withholding, such stock shall be valued based on the Fair Market Value
      when the tax withholding is required to be made.

	 	 
	11. 	
      Availability of Information. During the term of the Plan
      and any additional period during which a Grant granted pursuant to the
      Plan shall be exercisable, the Company shall make available, not later
      than one hundred and twenty (120) days following the close of each of its
      fiscal years, such financial and other information regarding the Company
      as is required by the bylaws of the Company and applicable law to be
      furnished in an annual report to the shareholders of the
Company.

	 	 
	12. 	
      Notice. Any written notice to the Company required by any
      of the provisions of the Plan shall be addressed to the chief personnel
      officer or to the chief executive officer of the Company, and shall become
      effective when it is received by the office of the chief personnel officer
      or the chief executive officer.

	 	 
	13. 	
      Indemnification of Board. In addition to such other
      rights or indemnifications as they may have as directors or otherwise, and
      to the extent allowed by applicable law, the members of the Board and the
      Committee shall be indemnified by the Company against the reasonable
      expenses, including attorneys' fees, actually and necessarily incurred in
      connection with the defense of any claim, action, suit or proceeding, or
      in connection with any appeal thereof, to which they or any of them may be
      a party by reason of any action taken, or failure to act, under or in
      connection with the Plan or any Grant granted thereunder, and against all
      amounts paid by them in settlement thereof (provided such settlement is
      approved by independent legal counsel selected by the Company) or paid by
      them in satisfaction of a judgment in any such claim, action, suit or
      proceeding, except in any case in relation to matters as to which it shall
      be adjudged in such claim, action, suit or proceeding that such Board or
      Committee member is liable for negligence or misconduct in the performance
      of his or her duties; provided that within sixty (60) days after
      institution of any such action, suit or Board proceeding the member
      involved shall offer the Company, in writing, the opportunity, at its own
      expense, to handle and defend the same.

	 	 
	14. 	
      Governing Law. The Plan and all determinations made and
      actions taken pursuant hereto, to the extent not otherwise governed by the
      Code or the securities laws of the United States, shall be governed by the
      law of the State of Nevada and construed accordingly.

	 	 
	15. 	
      Effective and Termination Dates. The Plan shall become
      effective on the date it is approved by the holders of a majority of the
      shares of Stock then outstanding. The Plan shall terminate ten years
      later, subject to earlier termination by the Board pursuant to Section
      9.

- 15 -

 

	 	          The foregoing
      2006 Incentive Stock Plan (consisting of 16 pages, including this page)
      was duly adopted and approved by the Board of Directors on February 27 ,
      2006.

	 	TERAX ENERGY, INC. 
	 	a Nevada corporation 
	 	  	  
	 	By: 	/s/
      Lawrence J. Finn
	 	 	Lawrence Finn 
	 	Its: 	Chief Executive Officer 

- 16 -

EXHIBIT A

	INCENTIVE STOCK OPTION AGREEMENT 
	 

               THIS
  INCENTIVE STOCK OPTION AGREEMENT
  ("Agreement") is made and entered into as of the date set forth below,
  by and between Terax Energy, Inc., a Nevada corporation (the "Company"),
  and the employee of the Company named in Section 1(b). ("Optionee"):

               In
  consideration of the covenants herein set forth, the parties hereto agree as
  follows:

               1.
  Option Information.

	 	(a) 	Date of Option:                 
    	_______________________________
	 	 	 	 
	 	(b) 	Optionee: 	_______________________________
	 	 	 	 
	 	(c) 	Number of Shares: 	_______________________________
	 	 	 	 
	 	(d) 	Exercise Price: 	_______________________________

               2.
  Acknowledgements.

             (a)                Optionee
  is an employee of the Company.

             (b)                The
  Board of Directors (the "Board" which term shall include an authorized
  committee of the Board of Directors) and shareholders of the Company have heretofore
  adopted a 2006 Incentive Stock Plan (the "Plan"), pursuant to which this
  Option is being granted.

             (c)                The
  Board has authorized the granting to Optionee of an incentive stock option ("Option")
  as defined in Section 422 of the Internal Revenue Code of 1986, as amended,
  (the "Code") to purchase shares of common stock of the Company ("Stock")
  upon the terms and conditions hereinafter stated and pursuant to an exemption
  from registration under the Securities Act of 1933, as amended (the "Securities
  Act") provided by Section 4(2) thereunder.

               3.
  Shares; Price. The Company hereby grants to Optionee the right to purchase,
  upon and subject to the terms and conditions herein stated, the number of shares
  of Stock set forth in Section 1(c) above (the "Shares") for cash (or
  other consideration as is authorized under the Plan and acceptable to the Board,
  in their sole and absolute discretion) at the price per Share set forth in 

Section 1(d) above (the "Exercise Price"), such price
  being not less than the fair market value per share of the Shares covered by
  this Option as of the date hereof (unless Optionee is the owner of Stock possessing
  ten percent or more of the total voting power or value of all outstanding Stock
  of the Company, in which case the Exercise Price shall be no less than 110%
  of the fair market value of such Stock).

               4.
  Term of Option; Continuation of Employment. This Option shall expire,
  and all rights hereunder to purchase the Shares shall terminate five (5) years
  from the date hereof. This Option shall earlier terminate subject to Sections
  7 and 8 hereof upon, and as of the date of, the termination of Optionee's employment
  if such termination occurs prior to the end of such five (5) year period. Nothing
  contained herein shall confer upon Optionee the right to the continuation of
  his or her employment by the Company or to interfere with the right of the Company
  to terminate such employment or to increase or decrease the compensation of
  Optionee from the rate in existence at the date hereof.

               5.
  Vesting of Option. Subject to the provisions of Sections 7 and 8 hereof,
  this Option shall become exercisable during the term of Optionee's employment
  in [four (4) equal annual installments of twenty-five percent (25%) of the Shares
  covered by this Option, the first installment to be exercisable on the twelve
  (12) month anniversary of the date of this Option (the "Initial Vesting Date"),
  with an additional twenty-five percent (25%) of such Shares becoming exercisable
  on each of the three (3) successive twelve (12) month periods following the
  Initial Vesting Date.] The installments shall be cumulative (i.e., this option
  may be exercised, as to any or all Shares covered by an installment, at any
  time or times after an installment becomes exercisable and until expiration
  or termination of this option).

               6.
  Exercise. This Option shall be exercised by delivery to the Company of
  (a) written notice of exercise stating the number of Shares being purchased
  (in whole shares only) and such other information set forth on the form of Notice
  of Exercise attached hereto as Appendix A, (b) a check or cash in the amount
  of the Exercise Price of the Shares covered by the notice (or such other consideration
  as has been approved by the Board of Directors consistent with the Plan) and
  (c) a written investment representation as provided for in Section 13 hereof.
  This Option shall not be assignable or transferable, except by will or by the
  laws of descent and distribution, and shall be exercisable only by Optionee
  during his or her lifetime, except as provided in Section 8 hereof.

               7.
  Termination of Employment. If Optionee shall cease to be employed by
  the Company for any reason, whether voluntarily or involuntarily, other than
  by his or her death, Optionee (or if the Optionee shall die after such termination,
  but prior to such exercise date, Optionee's personal representative or the person
  entitled to succeed to the Option) shall have the right at any time within one
  year following such termination of employment or the remaining term of this
  Option, whichever is the lesser, to exercise in whole or in part this Option
  to the extent, but only to the extent, that this Option was exercisable as of
  the date of termination of employment and had not previously been exercised;
  provided, however: (i) if Optionee is permanently disabled (within the meaning
  of Section 22(e)(3) of the Code) at the time of termination, the foregoing one
  year period shall be extended in the discretion of the Board of Directors to
  up to one (1) year and six (6) months; or (ii) if Optionee is terminated "for
  cause" as that term is defined under Nevada Law and case law related thereto,
  or by the terms of the Plan or this Option Agreement or by any employment agreement
  between the Optionee and the Company, this Option shall automatically 

- 2 -

terminate as to all Shares covered by this Option not exercised
  prior to termination. Unless earlier terminated, all rights under this Option
  shall terminate in any event on the expiration date of this Option as defined
  in Section 4 hereof.

               8.
  Death of Optionee. If the Optionee shall die while in the employ of the
  Company, Optionee's personal representative or the person entitled to Optionee's
  rights hereunder may at any time within six (6) months after the date of Optionee's
  death, or during the remaining term of this Option, whichever is the lesser,
  exercise this Option and purchase Shares to the extent, but only to the extent,
  that Optionee could have exercised this Option as of the date of Optionee's
  death, as such may be accelerated by the Board of Directors; provided, in any
  case, that this Option may be so exercised only to the extent that this Option
  has not previously been exercised by Optionee.

               9.
  No Rights as Shareholder. Optionee shall have no rights as a shareholder
  with respect to the Shares covered by any installment of this Option until the
  effective date of issuance of Shares following exercise of this Option, and
  no adjustment will be made for dividends or other rights for which the record
  date is prior to the date such stock certificate or certificates are issued
  except as provided in Section 10 hereof.

               10.
  Recapitalization. Subject to any required action by the shareholders
  of the Company, the number of Shares covered by this Option, and the Exercise
  Price thereof, shall be proportionately adjusted for any increase or decrease
  in the number of issued shares resulting from a subdivision or consolidation
  of shares or the payment of a stock dividend, or any other increase or decrease
  in the number of such shares effected without receipt of consideration by the
  Company; provided however that the conversion of any convertible securities
  of the Company shall not be deemed having been "effected without receipt
  of consideration by the Company".

               In
  the event of a proposed dissolution or liquidation of the Company, a merger
  or consolidation in which the Company is not the surviving entity, or a sale
  of all or substantially all of the assets or capital stock of the Company (collectively,
  a "Reorganization"), unless otherwise provided by the Board, this Option
  shall terminate immediately prior to such date as is determined by the Board,
  which date shall be no later than the consummation of such Reorganization. In
  such event, if the entity which shall be the surviving entity does not tender
  to Optionee an offer, for which it has no obligation to do so, to substitute
  for any unexercised Option a stock option or capital stock of such surviving
  of such surviving entity, as applicable, which on an equitable basis shall provide
  the Optionee with substantially the same economic benefit as such unexercised
  Option, then the Board may grant to such Optionee, in its sole and absolute
  discretion and without obligation, the right for a period commencing thirty
  (30) days prior to and ending immediately prior to the date determined by the
  Board pursuant hereto for termination of the Option or during the remaining
  term of the Option, whichever is the lesser, to exercise any unexpired Option
  or Options without regard to the installment provisions of Section 5; provided,
  however, that such exercise shall be subject to the consummation of such Reorganization.

               Subject
  to any required action by the shareholders of the Company, if the Company shall
  be the surviving entity in any merger or consolidation, this Option thereafter
  shall pertain to and apply to the securities to which a holder of Shares equal
  to the Shares subject to this Option would have been entitled by reason of such
  merger or consolidation, and the installment provisions of Section 5 shall continue
  to apply.

- 3 -

               In
  the event of a change in the shares of the Company as presently constituted,
  which is limited to a change of all of its authorized Stock without par value
  into the same number of shares of Stock with a par value, the shares resulting
  from any such change shall be deemed to be the Shares within the meaning of
  this Option.

               To
  the extent that the foregoing adjustments relate to shares or securities of
  the Company, such adjustments shall be made by the Board, whose determination
  in that respect shall be final, binding and conclusive. Except as hereinbefore
  expressly provided, Optionee shall have no rights by reason of any subdivision
  or consolidation of shares of Stock of any class or the payment of any stock
  dividend or any other increase or decrease in the number of shares of stock
  of any class, and the number and price of Shares subject to this Option shall
  not be affected by, and no adjustments shall be made by reason of, any dissolution,
  liquidation, merger, consolidation or sale of assets or capital stock, or any
  issue by the Company of shares of stock of any class or securities convertible
  into shares of stock of any class.

               The
  grant of this Option shall not affect in any way the right or power of the Company
  to make adjustments, reclassifications, reorganizations or changes in its capital
  or business structure or to merge, consolidate, dissolve or liquidate or to
  sell or transfer all or any part of its business or assets.

               11.
  Additional Consideration. Should the Internal Revenue Service determine
  that the Exercise Price established by the Board as the fair market value per
  Share is less than the fair market value per Share as of the date of Option
  grant, Optionee hereby agrees to tender such additional consideration, or agrees
  to tender upon exercise of all or a portion of this Option, such fair market
  value per Share as is determined by the Internal Revenue Service.

               12.
  Modifications, Extension and Renewal of Options. The Board or Committee,
  as described in the Plan, may modify, extend or renew this Option or accept
  the surrender thereof (to the extent not theretofore exercised) and authorize
  the granting of a new option in substitution therefore (to the extent not theretofore
  exercised), subject at all times to the Plan, and Section 422 of the Code. 

               13.
  Investment Intent; Restrictions on Transfer.

               (a)
  Optionee represents and agrees that if Optionee exercises this Option in whole
  or in part, Optionee will in each case acquire the Shares upon such exercise
  for the purpose of investment and not with a view to, or for resale in connection
  with, any distribution thereof; and that upon such exercise of this Option in
  whole or in part, Optionee (or any person or persons entitled to exercise this
  Option under the provisions of Sections 7 and 8 hereof) shall furnish to the
  Company a written statement to such effect, satisfactory to the Company in form
  and substance. If the Shares represented by this Option are registered under
  the Securities Act, either before or after the exercise of this Option in whole
  or in part, the Optionee shall be relieved of the foregoing investment representation
  and agreement and shall not be required to furnish the Company with the foregoing
  written statement.

- 4 -

               (b)
  Optionee further represents that Optionee has had the opportunity to ask questions
  of the Company concerning its business, operations and financial condition,
  and to obtain additional information reasonably necessary to verify the accuracy
  of such information.

               (c)
  Unless and until the Shares represented by this Option are registered under
  the Securities Act, all certificates representing the Shares and any certificates
  subsequently issued in substitution therefor and any certificate for any securities
  issued pursuant to any stock split, share reclassification, stock dividend or
  other similar capital event shall bear legends in substantially the following
  form:

	 	THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE
        QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER
        THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES
        NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
        DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR
        ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS
        THEREFROM.

      THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
        ISSUED PURSUANT TO THAT CERTAIN INCENTIVE STOCK OPTION AGREEMENT DATED
        ____________ BETWEEN THE COMPANY AND THE ISSUEE WHICH RESTRICTS THE TRANSFER
        OF THESE SHARES WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN
        CONDITIONS.
	 

such other legend or legends as the Company and its counsel
  deem necessary or appropriate. Appropriate stop transfer instructions with respect
  to the Shares have been placed with the Company's transfer agent.

               14.
  Effects of Early Disposition. Optionee understands that if an Optionee
  disposes of shares acquired hereunder within two (2) years after the date of
  this Option or within one (1) year after the date of issuance of such shares
  to Optionee, such Optionee will be treated for income tax purposes as having
  received ordinary income at the time of such disposition of an amount generally
  measured by the difference between the purchase price and the fair market value
  of such stock on the date of exercise, subject to adjustment for any tax previously
  paid, in addition to any tax on the difference between the sales price and Optionee's
  adjusted cost basis in such shares. The foregoing amount may be measured differently
  if Optionee is an officer, director or ten percent holder of the Company. Optionee
  agrees to notify the Company within ten (10) working days of any such disposition.

               15.
  Stand-off Agreement. Optionee agrees that in connection with any registration
  of the Company's securities under the Securities Act, and upon the request of
  the Company or any underwriter managing an underwritten offering of the Company's
  securities, Optionee shall not sell, short any sale of, loan, grant an option
  for, or otherwise dispose of any of the Shares (other than Shares included in
  the offering) without the prior written consent of the Company or such managing

- 5 -

underwriter, as applicable, for a period of at least one year
  following the effective date of registration of such offering.

               16.
  Restriction Upon Transfer. The Shares may not be sold, transferred or
  otherwise disposed of and shall not be pledged or otherwise hypothecated by
  the Optionee except as hereinafter provided.

               (a)
  Repurchase Right on Termination Other Than for Cause. For the purposes
  of this Section, a "Repurchase Event" shall mean an occurrence of one
  of (i) termination of Optionee's employment by the Company, voluntary or involuntary
  and without cause; (ii) retirement or death of Optionee; (iii) bankruptcy of
  Optionee, which shall be deemed to have occurred as of the date on which a voluntary
  or involuntary petition in bankruptcy is filed with a court of competent jurisdiction;
  (iv) dissolution of the marriage of Optionee, to the extent that any of the
  Shares are allocated as the sole and separate property of Optionee's spouse
  pursuant thereto (in which case this Section shall only apply to the Shares
  so affected); or (v) any attempted transfer by the Optionee of Shares, or any
  interest therein, in violation of this Agreement. Upon the occurrence of a Repurchase
  Event, the Company shall have the right (but not an obligation) to repurchase
  all or any portion of the Shares of Optionee at a price equal to the fair value
  of the Shares as of the date of the Repurchase Event.

               (b)
  Repurchase Right on Termination for Cause. In the event Optionee's employment
  is terminated by the Company "for cause", then the Company shall have
  the right (but not an obligation) to repurchase Shares of Optionee at a price
  equal to the Exercise Price. Such right of the Company to repurchase Shares
  shall apply to 100% of the Shares for one (1) year from the date of this Agreement;
  and shall thereafter lapse at the rate of twenty percent (20%) of the Shares
  on each anniversary of the date of this Agreement. In addition, the Company
  shall have the right, in the sole discretion of the Board and without obligation,
  to repurchase upon termination for cause all or any portion of the Shares of
  Optionee, at a price equal to the fair value of the Shares as of the date of
  termination, which right is not subject to the foregoing lapsing of rights.
  In the event the Company elects to repurchase the Shares, the stock certificates
  representing the same shall forthwith be returned to the Company for cancellation.

               (c)
  Exercise of Repurchase Right. Any Repurchase Right under Paragraphs 16(a)
  or 16(b) shall be exercised by giving notice of exercise as provided herein
  to Optionee or the estate of Optionee, as applicable. Such right shall be exercised,
  and the repurchase price thereunder shall be paid, by the Company within a ninety
  (90) day period beginning on the date of notice to the Company of the occurrence
  of such Repurchase Event (except in the case of termination of employment or
  retirement, where such option period shall begin upon the occurrence of the
  Repurchase Event). Such repurchase price shall be payable only in the form of
  cash (including a check drafted on immediately available funds) or cancellation
  of purchase money indebtedness of the Optionee for the Shares. If the Company
  can not purchase all such Shares because it is unable to meet the financial
  tests set forth in Nevada corporation law, the Company shall have the right
  to purchase as many Shares as it is permitted to purchase under such sections.
  Any Shares not purchased by the Company hereunder shall no longer be subject
  to the provisions of this Section 16.

- 6 -

               (d)
  Right of First Refusal. In the event Optionee desires to transfer any
  Shares during his or her lifetime, Optionee shall first offer to sell such Shares
  to the Company. Optionee shall deliver to the Company written notice of the
  intended sale, such notice to specify the number of Shares to be sold, the proposed
  purchase price and terms of payment, and grant the Company an option for a period
  of thirty days following receipt of such notice to purchase the offered Shares
  upon the same terms and conditions. To exercise such option, the Company shall
  give notice of that fact to Optionee within the thirty (30) day notice period
  and agree to pay the purchase price in the manner provided in the notice. If
  the Company does not purchase all of the Shares so offered during foregoing
  option period, Optionee shall be under no obligation to sell any of the offered
  Shares to the Company, but may dispose of such Shares in any lawful manner during
  a period of one hundred and eighty (180) days following the end of such notice
  period, except that Optionee shall not sell any such Shares to any other person
  at a lower price or upon more favorable terms than those offered to the Company.

               (e)
  Acceptance of Restrictions. Acceptance of the Shares shall constitute
  the Optionee's agreement to such restrictions and the legending of his certificates
  with respect thereto. Notwithstanding such restrictions, however, so long as
  the Optionee is the holder of the Shares, or any portion thereof, he shall be
  entitled to receive all dividends declared on and to vote the Shares and to
  all other rights of a shareholder with respect thereto.

               (f)
  Permitted Transfers. Notwithstanding any provisions in this Section 16
  to the contrary, the Optionee may transfer Shares subject to this Agreement
  to his or her parents, spouse, children, or grandchildren, or a trust for the
  benefit of the Optionee or any such transferee(s); provided, that such permitted
  transferee(s) shall hold the Shares subject to all the provisions of this Agreement
  (all references to the Optionee herein shall in such cases refer mutatis mutandis
  to the permitted transferee, except in the case of clause (iv) of Section 16(a)
  wherein the permitted transfer shall be deemed to be rescinded); and provided
  further, that notwithstanding any other provisions in this Agreement, a permitted
  transferee may not, in turn, make permitted transfers without the written consent
  of the Optionee and the Company.

               (g)
  Release of Restrictions on Shares. All other restrictions under this
  Section 16 shall terminate five (5) years following the date of this Agreement,
  or when the Company's securities are publicly traded, whichever occurs earlier.

               17.
  Notices. Any notice required to be given pursuant to this Option or the
  Plan shall be in writing and shall be deemed to be delivered upon receipt or,
  in the case of notices by the Company, five (5) days after deposit in the U.S.
  mail, postage prepaid, addressed to Optionee at the address last provided to
  the Company by Optionee for his or her employee records.

               18.
  Agreement Subject to Plan; Applicable Law. This Option is made pursuant
  to the Plan and shall be interpreted to comply therewith. A copy of such Plan
  is available to Optionee, at no charge, at the principal office of the Company.
  Any provision of this Option inconsistent with the Plan shall be considered
  void and replaced with the applicable provision of the Plan. This Option has
  been granted, executed and delivered in the State of Nevada, and the interpretation
  and 

- 7 -

enforcement shall be governed by the laws thereof and subject
  to the exclusive jurisdiction of the courts therein.

                IN
  WITNESS WHEREOF, the parties hereto have executed this Option as of
  the date first above written.

	 	COMPANY: 	TERAX ENERGY, INC., 
	 	  	a Nevada corporation 
	 	  	  
	 	  	  
	 	  	By: ______________________________________
	 	  	Name: ____________________________________
	 	  	Title: _____________________________________

	 	OPTIONEE: 	 	 
	 		By: 	 
	 		 	(signature) 
	 		Name: 	 

(one of the following, as appropriate, shall be signed)

	 I certify that as of the date hereof
        I am unmarried 
		 By his or her signature,
        the spouse of Optionee hereby agrees to be bound by the provisions of
        the foregoing INCENTIVE STOCK OPTION AGREEMENT 

	  	 	  
	  	 	  
	Optionee 	 	Spouse of Optionee 

- 8 -

Appendix A

NOTICE OF EXERCISE

Terax Energy, Inc.

                Re:
  Incentive Stock Option

                Notice
  is hereby given pursuant to Section 6 of my Incentive Stock Option Agreement
  that I elect to purchase the number of shares set forth below at the exercise
  price set forth in my option agreement:

                Incentive
  Stock Option Agreement dated: ____________

                Number
  of shares being purchased: ____________

                Exercise
  Price: $____________

                A
  check in the amount of the aggregate price of the shares being purchased is
  attached.

                I
  hereby confirm that such shares are being acquired by me for my own account
  for investment purposes, and not with a view to, or for resale in connection
  with, any distribution thereof. I will not sell or dispose of my Shares in violation
  of the Securities Act of 1933, as amended, or any applicable federal or state
  securities laws. Further, I understand that the exemption from taxable income
  at the time of exercise is dependent upon my holding such stock for a period
  of at least one year from the date of exercise and two years from the date of
  grant of the Option.

                I
  understand that the certificate representing the Option Shares will bear a restrictive
  legend within the contemplation of the Securities Act and as required by such
  other state or federal law or regulation applicable to the issuance or delivery
  of the Option Shares.

                I
  agree to provide to the Company such additional documents or information as
  may be required pursuant to the Company's 2006 Incentive Stock Plan.

  	 	By: 	 
	 	 	(signature) 
	 	Name: 	 

Appendix A

EXHIBIT B-1

 

	EMPLOYEE NONSTATUTORY STOCK OPTION AGREEMENT 
	 

                THIS
  EMPLOYEE NONSTATUTORY STOCK OPTION AGREEMENT ("Agreement") is
  made and entered into as of the date set forth below, by and between Terax Energy,
  Inc., a Nevada corporation (the "Company"), and the following employee
  of the Company ("Optionee"):

                In
  consideration of the covenants herein set forth, the parties hereto agree as
  follows:

	 	1. 	  Option Information.
	 	 
	 	 	 	 	 	 
	 		(a) 	 Date of Option:
	 	 
	 		(b) 	 Optionee:
	 	 
	 		(c) 	 Number of Shares:
	 	 
	 		(d) 	 Exercise Price:
	 	 
	 	 	 	 	 	 
	 	2. 	 Acknowledgements.
	 	 

                (a)
  Optionee is an employee of the Company.

                (b)
  The Board of Directors (the "Board" which term shall include an authorized
  committee of the Board of Directors) and shareholders of the Company have heretofore
  adopted a 2006 Incentive Stock Plan (the "Plan"), pursuant to which this
  Option is being granted; and

                (c)
  The Board has authorized the granting to Optionee of a nonstatutory stock option
  ("Option") to purchase shares of common stock of the Company ("Stock")
  upon the terms and conditions hereinafter stated and pursuant to an exemption
  from registration under the Securities Act of 1933, as amended (the "Securities
  Act") provided by Section 4(2) thereunder.

                3.
  Shares; Price. Company hereby grants to Optionee the right to purchase,
  upon and subject to the terms and conditions herein stated, the number of shares
  of Stock set forth in Section 1(c) above (the "Shares") for cash (or
  other consideration as is authorized under the Plan and acceptable to the Board
  of Directors of the Company, in their sole and absolute discretion) at the price
  per Share set forth in Section 1(d) above (the "Exercise Price"), such
  price being not less than eighty-five percent (85%) of the fair market value
  per share of the Shares covered by this Option as of the date hereof.

1

                4.
  Term of Option; Continuation of Service. This Option shall expire, and
  all rights hereunder to purchase the Shares shall terminate, five (5) years
  from the date hereof. This Option shall earlier terminate subject to Sections
  7 and 8 hereof upon, and as of the date of, the termination of Optionee's employment
  if such termination occurs prior to the end of such five (5) year period. Nothing
  contained herein shall confer upon Optionee the right to the continuation of
  his or her employment by the Company or to interfere with the right of the Company
  to terminate such employment or to increase or decrease the compensation of
  Optionee from the rate in existence at the date hereof.

                5.
  Vesting of Option. Subject to the provisions of Sections 7 and 8 hereof,
  this Option shall become exercisable during the term of Optionee's employment
  in five (5) equal annual installments of twenty percent (20%) of the Shares
  covered by this Option, the first installment to be exercisable on the first
  anniversary of the date of this Option, with an additional twenty percent (20%)
  of such Shares becoming exercisable on each of the four (4) successive anniversary
  dates. The installments shall be cumulative (i.e., this option may be exercised,
  as to any or all shares covered by an installment, at any time or times after
  an installment becomes exercisable and until expiration or termination of this
  option).

                6.
  Exercise. This Option shall be exercised by delivery to the Company of
  (a) written notice of exercise stating the number of Shares being purchased
  (in whole shares only) and such other information set forth on the form of Notice
  of Exercise attached hereto as Appendix A, (b) a check or cash in the
  amount of the Exercise Price of the Shares covered by the notice (or such other
  consideration as has been approved by the Board of Directors consistent with
  the Plan) and (c) a written investment representation as provided for in Section
  13 hereof. This Option shall not be assignable or transferable, except by will
  or by the laws of descent and distribution, and shall be exercisable only by
  Optionee during his or her lifetime, except as provided in Section 8 hereof.

                7.
  Termination of Employment. If Optionee shall cease to be employed by
  the Company for any reason, whether voluntarily or involuntarily, other than
  by his or her death, Optionee (or if the Optionee shall die after such termination,
  but prior to such exercise date, Optionee's personal representative or the person
  entitled to succeed to the Option) shall have the right at any time within one
  year following such termination of employment or the remaining term of this
  Option, whichever is the lesser, to exercise in whole or in part this Option
  to the extent, but only to the extent, that this Option was exercisable as of
  the date of termination of employment and had not previously been exercised;
  provided, however: (i) if Optionee is permanently disabled (within the meaning
  of Section 22(e)(3) of the Code) at the time of termination, the foregoing one
  year period shall be extended up to one (1) year and six (6) months In the discretion
  of the Board of Directors; or (ii) if Optionee is terminated "for cause"
  as that term is defined under Nevada Law and case law related thereto, or by
  the terms of the Plan or this Option Agreement or by any employment agreement
  between the Optionee and the Company, this Option shall automatically terminate
  as to all Shares covered by this Option not exercised prior to termination.
  Unless earlier terminated, all rights under this Option shall terminate in any
  event on the expiration date of this Option as defined in Section 4 hereof.

2

                Unless
  earlier terminated, all rights under this Option shall terminate in any event
  on the expiration date of this Option as defined in Section 4 hereof.

                8.
  Death of Optionee. If the Optionee shall die while in the employ of the
  Company, Optionee's personal representative or the person entitled to Optionee's
  rights hereunder may at any time within six (6) months after the date of Optionee's
  death, or during the remaining term of this Option, whichever is the lesser,
  exercise this Option and purchase Shares to the extent, but only to the extent,
  that Optionee could have exercised this Option as of the date of Optionee's
  death, as such may be accelerated by the Board of Directors; provided, in any
  case, that this Option may be so exercised only to the extent that this Option
  has not previously been exercised by Optionee.

                9.
  No Rights as Shareholder. Optionee shall have no rights as a shareholder
  with respect to the Shares covered by any installment of this Option until the
  effective date of issuance of the Shares following exercise of this Option,
  and no adjustment will be made for dividends or other rights for which the record
  date is prior to the date such stock certificate or certificates are issued
  except as provided in Section 10 hereof.

                10.
  Recapitalization. Subject to any required action by the shareholders
  of the Company, the number of Shares covered by this Option, and the Exercise
  Price thereof, shall be proportionately adjusted for any increase or decrease
  in the number of issued shares resulting from a subdivision or consolidation
  of shares or the payment of a stock dividend, or any other increase or decrease
  in the number of such shares effected without receipt of consideration by the
  Company; provided however that the conversion of any convertible securities
  of the Company shall not be deemed having been "effected without receipt of
  consideration by the Company".

                In
  the event of a proposed dissolution or liquidation of the Company, a merger
  or consolidation in which the Company is not the surviving entity, or a sale
  of all or substantially all of the assets or capital stock of the Company (collectively,
  a "Reorganization"), unless otherwise provided by the Board, this Option
  shall terminate immediately prior to such date as is determined by the Board,
  which date shall be no later than the consummation of such Reorganization. In
  such event, if the entity which shall be the surviving entity does not tender
  to Optionee an offer, for which it has no obligation to do so, to substitute
  for any unexercised Option a stock option or capital stock of such surviving
  of such surviving entity, as applicable, which on an equitable basis shall provide
  the Optionee with substantially the same economic benefit as such unexercised
  Option, then the Board may grant to such Optionee, in its sole and absolute
  discretion and without obligation, the right for a period commencing thirty
  (30) days prior to and ending immediately prior to the date determined by the
  Board pursuant hereto for termination of the Option or during the remaining
  term of the Option, whichever is the lesser, to exercise any unexpired Option
  or Options without regard to the installment provisions of Section 5; provided,
  however, that such exercise shall be subject to the consummation of such Reorganization.

                Subject
  to any required action by the shareholders of the Company, if the Company shall
  be the surviving entity in any merger or consolidation, this Option thereafter
  shall pertain to and apply to the securities to which a holder of Shares equal
  to the Shares subject 

3

to this Option would have been entitled by reason of such merger
  or consolidation, and the installment provisions of Section 5 shall continue
  to apply.

                In
  the event of a change in the shares of the Company as presently constituted,
  which is limited to a change of all of its authorized Stock without par value
  into the same number of shares of Stock with a par value, the shares resulting
  from any such change shall be deemed to be the Shares within the meaning of
  this Option.

                To
  the extent that the foregoing adjustments relate to shares or securities of
  the Company, such adjustments shall be made by the Board, whose determination
  in that respect shall be final, binding and conclusive. Except as hereinbefore
  expressly provided, Optionee shall have no rights by reason of any subdivision
  or consolidation of shares of Stock of any class or the payment of any stock
  dividend or any other increase or decrease in the number of shares of stock
  of any class, and the number and price of Shares subject to this Option shall
  not be affected by, and no adjustments shall be made by reason of, any dissolution,
  liquidation, merger, consolidation or sale of assets or capital stock, or any
  issue by the Company of shares of stock of any class or securities convertible
  into shares of stock of any class.

                The
  grant of this Option shall not affect in any way the right or power of the Company
  to make adjustments, reclassifications, reorganizations or changes in its capital
  or business structure or to merge, consolidate, dissolve or liquidate or to
  sell or transfer all or any part of its business or assets.

                11.
  Taxation upon Exercise of Option. Optionee understands that, upon exercise
  of this Option, Optionee will recognize income, for Federal and state income
  tax purposes, in an amount equal to the amount by which the fair market value
  of the Shares, determined as of the date of exercise, exceeds the Exercise Price.
  The acceptance of the Shares by Optionee shall constitute an agreement by Optionee
  to report such income in accordance with then applicable law and to cooperate
  with Company in establishing the amount of such income and corresponding deduction
  to the Company for its income tax purposes. Withholding for federal or state
  income and employment tax purposes will be made, if and as required by law,
  from Optionee's then current compensation, or, if such current compensation
  is insufficient to satisfy withholding tax liability, the Company may require
  Optionee to make a cash payment to cover such liability as a condition of the
  exercise of this Option.

                12.
  Modification, Extension and Renewal of Options. The Board or Committee,
  as described in the Plan, may modify, extend or renew this Option or accept
  the surrender thereof (to the extent not theretofore exercised) and authorize
  the granting of a new option in substitution therefore (to the extent not theretofore
  exercised), subject at all times to the Plan, the Code and the Nevada Law. Notwithstanding
  the foregoing provisions of this Section 12, no modification shall, without
  the consent of the Optionee, alter to the Optionee's detriment or impair any
  rights of Optionee hereunder.

4

                13.
  Investment Intent; Restrictions on Transfer.

                (a)
  Optionee represents and agrees that if Optionee exercises this Option in whole
  or in part, Optionee will in each case acquire the Shares upon such exercise
  for the purpose of investment and not with a view to, or for resale in connection
  with, any distribution thereof; and that upon such exercise of this Option in
  whole or in part, Optionee (or any person or persons entitled to exercise this
  Option under the provisions of Sections 7 and 8 hereof) shall furnish to the
  Company a written statement to such effect, satisfactory to the Company in form
  and substance. If the Shares represented by this Option are registered under
  the Securities Act, either before or after the exercise of this Option in whole
  or in part, the Optionee shall be relieved of the foregoing investment representation
  and agreement and shall not be required to furnish the Company with the foregoing
  written statement.

                (b)
  Optionee further represents that Optionee has had the opportunity to ask questions
  of the Company concerning its business, operations and financial condition,
  and to obtain additional information reasonably necessary to verify the accuracy
  of such information

                (c)
  Unless and until the Shares represented by this Option are registered under
  the Securities Act, all certificates representing the Shares and any certificates
  subsequently issued in substitution therefor and any certificate for any securities
  issued pursuant to any stock split, share reclassification, stock dividend or
  other similar capital event shall bear legends in substantially the following
  form:

	 	THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE
        QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER
        THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES
        NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
        DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR
        ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS
        THEREFROM.

      THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
        ISSUED PURSUANT TO THAT CERTAIN NONSTATUTORY STOCK OPTION AGREEMENT DATED
        ____________ BETWEEN THE COMPANY AND THE ISSUEE WHICH RESTRICTS THE TRANSFER
        OF THESE SHARES WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN
        CONDITIONS.
	 

and/or such other legend or legends as the Company and its
  counsel deem necessary or appropriate. Appropriate stop transfer instructions
  with respect to the Shares have been placed with the Company's transfer agent.

5

                14.
  Stand-off Agreement. Optionee agrees that, in connection with any registration
  of the Company's securities under the Securities Act, and upon the request of
  the Company or any underwriter managing an underwritten offering of the Company's
  securities, Optionee shall not sell, short any sale of, loan, grant an option
  for, or otherwise dispose of any of the Shares (other than Shares included in
  the offering) without the prior written consent of the Company or such managing
  underwriter, as applicable, for a period of at least one year following the
  effective date of registration of such offering.

                15.
  Restriction Upon Transfer. The Shares may not be sold, transferred or
  otherwise disposed of and shall not be pledged or otherwise hypothecated by
  the Optionee except as hereinafter provided.

                (a)
  Repurchase Right on Termination Other Than for Cause. For the purposes of this
  Section, a "Repurchase Event" shall mean an occurrence of one of (i)
  termination of Optionee's employment by the Company, voluntary or involuntary
  and without cause; (ii) retirement or death of Optionee; (iii) bankruptcy of
  Optionee, which shall be deemed to have occurred as of the date on which a voluntary
  or involuntary petition in bankruptcy is filed with a court of competent jurisdiction;
  (iv) dissolution of the marriage of Optionee, to the extent that any of the
  Shares are allocated as the sole and separate property of Optionee's spouse
  pursuant thereto (in which case, this Section shall only apply to the Shares
  so affected); or (v) any attempted transfer by the Optionee of Shares, or any
  interest therein, in violation of this Agreement. Upon the occurrence of a Repurchase
  Event, the Company shall have the right (but not an obligation) to repurchase
  all or any portion of the Shares of Optionee at a price equal to the fair value
  of the Shares as of the date of the Repurchase Event.

                (b)
  Repurchase Right on Termination for Cause. In the event Optionee's employment
  is terminated by the Company "for cause", then the Company shall have the right
  (but not an obligation) to repurchase Shares of Optionee at a price equal to
  the Exercise Price. Such right of the Company to repurchase Shares shall apply
  to 100% of the Shares for one (1) year from the date of this Agreement; and
  shall thereafter lapse at the rate of twenty percent (20%) of the Shares on
  each anniversary of the date of this Agreement. In addition, the Company shall
  have the right, in the sole discretion of the Board and without obligation,
  to repurchase upon termination for cause all or any portion of the Shares of
  Optionee, at a price equal to the fair value of the Shares as of the date of
  termination, which right is not subject to the foregoing lapsing of rights.
  In the event the Company elects to repurchase the Shares, the stock certificates
  representing the same shall forthwith be returned to the Company for cancellation.

                (c)
  Exercise of Repurchase Right. Any Repurchase Right under Paragraphs 15(a) or
  15(b) shall be exercised by giving notice of exercise as provided herein to
  Optionee or the estate of Optionee, as applicable. Such right shall be exercised,
  and the repurchase price thereunder shall be paid, by the Company within a ninety
  (90) day period beginning on the date of notice to the Company of the occurrence
  of such Repurchase Event (except in the case of termination of employment or
  retirement, 

6

where such option period shall begin
  upon the occurrence of the Repurchase Event). Such repurchase price shall be
  payable only in the form of cash (including a check drafted on immediately available
  funds) or cancellation of purchase money indebtedness of the Optionee for the
  Shares. If the Company can not purchase all such Shares because it is unable
  to meet the financial tests set forth in the Nevada corporation law, the Company
  shall have the right to purchase as many Shares as it is permitted to purchase
  under such sections. Any Shares not purchased by the Company hereunder shall
  no longer be subject to the provisions of this Section 15.

                (d)
  Right of First Refusal. In the event Optionee desires to transfer any Shares
  during his or her lifetime, Optionee shall first offer to sell such Shares to
  the Company. Optionee shall deliver to the Company written notice of the intended
  sale, such notice to specify the number of Shares to be sold, the proposed purchase
  price and terms of payment, and grant the Company an option for a period of
  thirty days following receipt of such notice to purchase the offered Shares
  upon the same terms and conditions. To exercise such option, the Company shall
  give notice of that fact to Optionee within the thirty (30) day notice period
  and agree to pay the purchase price in the manner provided in the notice. If
  the Company does not purchase all of the Shares so offered during foregoing
  option period, Optionee shall be under no obligation to sell any of the offered
  Shares to the Company, but may dispose of such Shares in any lawful manner during
  a period of one hundred and eighty (180) days following the end of such notice
  period, except that Optionee shall not sell any such Shares to any other person
  at a lower price or upon more favorable terms than those offered to the Company.

                (e)
  Acceptance of Restrictions. Acceptance of the Shares shall constitute the Optionee's
  agreement to such restrictions and the legending of his certificates with respect
  thereto. Notwithstanding such restrictions, however, so long as the Optionee
  is the holder of the Shares, or any portion thereof, he shall be entitled to
  receive all dividends declared on and to vote the Shares and to all other rights
  of a shareholder with respect thereto.

                (f)
  Permitted Transfers. Notwithstanding any provisions in this Section 15 to the
  contrary, the Optionee may transfer Shares subject to this Agreement to his
  or her parents, spouse, children, or grandchildren, or a trust for the benefit
  of the Optionee or any such transferee(s); provided, that such permitted transferee(s)
  shall hold the Shares subject to all the provisions of this Agreement (all references
  to the Optionee herein shall in such cases refer mutatis mutandis to the permitted
  transferee, except in the case of clause (iv) of Section 15(a) wherein the permitted
  transfer shall be deemed to be rescinded); and provided further, that notwithstanding
  any other provisions in this Agreement, a permitted transferee may not, in turn,
  make permitted transfers without the written consent of the Optionee and the
  Company.

                (g)
  Release of Restrictions on Shares. All other restrictions under this Section
  15 shall terminate five (5) years following the date of this Agreement, or when
  the Company's securities are publicly traded, whichever occurs earlier.

7

                16.
  Notices. Any notice required to be given pursuant to this Option or the
  Plan shall be in writing and shall be deemed to be delivered upon receipt or,
  in the case of notices by the Company, five (5) days after deposit in the U.S.
  mail, postage prepaid, addressed to Optionee at the address last provided by
  Optionee for his or her employee records.

                17.
  Agreement Subject to Plan; Applicable Law. This Option is made pursuant
  to the Plan and shall be interpreted to comply therewith. A copy of such Plan
  is available to Optionee, at no charge, at the principal office of the Company.
  Any provision of this Option inconsistent with the Plan shall be considered
  void and replaced with the applicable provision of the Plan. This Option has
  been granted, executed and delivered in the State of Nevada, and the interpretation
  and enforcement shall be governed by the laws thereof and subject to the exclusive
  jurisdiction of the courts therein.

                IN
  WITNESS WHEREOF, the parties hereto have executed
  this Option as of the date first above written.

	 	COMPANY: 	TERAX ENERGY, INC., 
	 	  	a Nevada corporation 
	 	  	  
	 	  	  
	 	  	By: ______________________________________
	 	  	Name: ____________________________________
	 	  	Title: _____________________________________

	 	OPTIONEE: 	 	 
	 		By: 	 
	 		 	(signature) 
	 		Name: 	 

(one of the following, as appropriate, shall be signed)

  	 I certify that as of the date
          hereof I am unmarried 
		 By his or her signature,
          the spouse of Optionee hereby agrees to be bound by the provisions of
          the foregoing INCENTIVE STOCK OPTION AGREEMENT 

	  	  	  
	  	  	  
	Optionee 	  	Spouse of Optionee 

 

  8

  

Appendix A

NOTICE OF EXERCISE

Terax Energy, Inc.

                Re:
  Nonstatutory Stock Option

                Notice
  is hereby given pursuant to Section 6 of my Nonstatutory Stock Option Agreement
  that I elect to purchase the number of shares set forth below at the exercise
  price set forth in my option agreement:

                Nonstatutory
  Stock Option Agreement dated: ____________

                Number
  of shares being purchased: ____________

                Exercise
  Price: $____________

                A
  check in the amount of the aggregate price of the shares being purchased is
  attached.

                I
  hereby confirm that such shares are being acquired by me for my own account
  for investment purposes, and not with a view to, or for resale in connection
  with, any distribution thereof. I will not sell or dispose of my Shares in violation
  of the Securities Act of 1933, as amended, or any applicable federal or state
  securities laws. Further, I understand that the exemption from taxable income
  at the time of exercise is dependent upon my holding such stock for a period
  of at least one year from the date of exercise and two years from the date of
  grant of the Option.

                I
  understand that the certificate representing the Option Shares will bear a restrictive
  legend within the contemplation of the Securities Act and as required by such
  other state or federal law or regulation applicable to the issuance or delivery
  of the Option Shares.

                I
  agree to provide to the Company such additional documents or information as
  may be required pursuant to the Company's 2006 Incentive Stock Plan.

  	 	By: 	 
	 	 	(signature) 
	 	Name: 	 

Appendix A

EXHIBIT B-2

 

	NONSTATUTORY STOCK OPTION AGREEMENT 
	 

                THIS
  NONSTATUTORY STOCK OPTION AGREEMENT ("Agreement") is made and
  entered into as of the date set forth below, by and between TERAX ENERGY, INC.,
  a Nevada corporation (the "Company"), and the following Director of the
  Company ("Optionee"):

                In
  consideration of the covenants herein set forth, the parties hereto agree as
  follows:

	 	1. 	  Option Information.
	 	 
	 	 	 	 	 	 
	 		(a) 	 Date of Option:
	 	 
	 		(b) 	 Optionee:
	 	 
	 		(c) 	 Number of Shares:
	 	 
	 		(d) 	 Exercise Price:
	 	 
	 	 	 	 	 	 
	 	2. 	 Acknowledgements.
	 	 

                (a)
  Optionee is a member of the Board of Directors of the Company.

                (b)
  The Board of Directors (the "Board" which term shall include an authorized
  committee of the Board of Directors) and shareholders of the Company have heretofore
  adopted a 2006 Incentive Stock Plan (the "Plan"), pursuant to which this
  Option is being granted; and

                (c)
  The Board has authorized the granting to Optionee of a nonstatutory stock option
  ("Option") to purchase shares of common stock of the Company ("Stock")
  upon the terms and conditions hereinafter stated and pursuant to an exemption
  from registration under the Securities Act of 1933, as amended (the "Securities
  Act") provided by Section 4(2) thereunder.

                3.
  Shares; Price. Company hereby grants to Optionee the right to purchase,
  upon and subject to the terms and conditions herein stated, the number of shares
  of Stock set forth in Section 1(c) above (the "Shares") for cash (or
  other consideration as is authorized under the Plan and acceptable to the Board
  of Directors of the Company, in their sole and absolute discretion) at the price
  per Share set forth in Section 1(d) above (the "Exercise Price"), such
  price being not less than eighty-five percent (85%) of the fair market value
  per share of the Shares covered by this Option as of the date hereof.

                4.
  Term of Option; Continuation of Service. This Option shall expire, and
  all rights hereunder to purchase the Shares shall terminate, ten (10) years
  from the date hereof. This Option shall earlier terminate subject to Sections
  7 and 8 hereof upon, and as of the date of, the termination of Optionee's employment
  if such termination occurs prior to the end of such ten (10) year period. Nothing
  contained herein shall confer upon Optionee the right to the continuation of
  his or her employment by the Company or to interfere with the right of the Company
  to terminate such employment or to increase or decrease the compensation of
  Optionee from the rate in existence at the date hereof.

                5.
  Vesting of Option. Subject to the provisions of Sections 7 and 8 hereof,
  this Option shall become exercisable during the term that Optionee serves as
  a Director of the Company in three (3) equal annual installments of thirty-three
  and one-third percent (33 1/3%) of the Shares covered by this Option, the first
  installment to be exercisable on the first anniversary of the date of this Option,
  with an additional thirty-three and one-third percent (33 1/3%) of such Shares
  becoming exercisable on each of the two (2) successive anniversary dates. The
  installments shall be cumulative (i.e., this option may be exercised, as to
  any or all shares covered by an installment, at any time or times after an installment
  becomes exercisable and until expiration or termination of this Option).

                6.
  Exercise. This Option shall be exercised by delivery to the Company of
  (a) written notice of exercise stating the number of Shares being purchased
  (in whole shares only) and such other information set forth on the form of Notice
  of Exercise attached hereto as Appendix A, (b) a check or cash in the
  amount of the Exercise Price of the Shares covered by the notice (or such other
  consideration as has been approved by the Board of Directors consistent with
  the Plan) and (c) a written investment representation as provided for in Section
  13 hereof. This Option shall not be assignable or transferable, except by will
  or by the laws of descent and distribution, and shall be exercisable only by
  Optionee during his or her lifetime, except as provided in Section 8 hereof.

                7.
  Termination of Service. If Optionee shall cease to serve as a Director
  of the Company for any reason, no further installments shall vest pursuant to
  Section 5, and the maximum number of Shares that Optionee may purchase pursuant
  hereto shall be limited to the number of Shares that were vested as of the date
  Optionee ceases to be a Director (to the nearest whole Share). Thereupon, Optionee
  shall have the right to exercise this Option, at any time during the remaining
  term hereof, to the extent, but only to the extent, that this Option was exercisable
  as of the date Optionee ceases to be a Director as such may be accelerated by
  the Board of Directors; provided, however, if Optionee is removed as a Director
  pursuant to the Nevada corporation law, the foregoing right to exercise shall
  automatically terminate on the date Optionee ceases to be a Director as to all
  Shares covered by this Option not exercised prior to termination. Unless earlier
  terminated, all rights under this Option shall terminate in any event on the
  expiration date of this Option as defined in Section 4 hereof.

                8.
  Death of Optionee. If the Optionee shall die while in the employ of the
  Company, Optionee's personal representative or the person entitled to Optionee's
  rights hereunder may at any time within twelve (12) months after the date of
  Optionee's death, or during the remaining term of this Option, whichever is
  the lesser, exercise this Option and

2

purchase Shares to the extent, but only to the extent, that Optionee
  could have exercised this Option as of the date of Optionee's death, as such
  may be accelerated by the Board of Directors; provided, in any case, that this
  Option may be so exercised only to the extent that this Option has not previously
  been exercised by Optionee.

                9.
  No Rights as Shareholder. Optionee shall have no rights as a shareholder
  with respect to the Shares covered by any installment of this Option until the
  effective date of issuance of the Shares following exercise of this Option,
  and no adjustment will be made for dividends or other rights for which the record
  date is prior to the date such stock certificate or certificates are issued
  except as provided in Section 10 hereof.

                10.
  Recapitalization. Subject to any required action by the shareholders
  of the Company, the number of Shares covered by this Option, and the Exercise
  Price thereof, shall be proportionately adjusted for any increase or decrease
  in the number of issued shares resulting from a subdivision or consolidation
  of shares or the payment of a stock dividend, or any other increase or decrease
  in the number of such shares effected without receipt of consideration by the
  Company; provided however that the conversion of any convertible securities
  of the Company shall not be deemed having been "effected without receipt of
  consideration by the Company".

                In
  the event of a proposed dissolution or liquidation of the Company, a merger
  or consolidation in which the Company is not the surviving entity, or a sale
  of all or substantially all of the assets or capital stock of the Company (collectively,
  a "Reorganization"), unless otherwise provided by the Board, this Option
  shall terminate immediately prior to such date as is determined by the Board,
  which date shall be no later than the consummation of such Reorganization. In
  such event, if the entity which shall be the surviving entity does not tender
  to Optionee an offer, for which it has no obligation to do so, to substitute
  for any unexercised Option a stock option or capital stock of such surviving
  of such surviving entity, as applicable, which on an equitable basis shall provide
  the Optionee with substantially the same economic benefit as such unexercised
  Option, then the Board may grant to such Optionee, in its sole and absolute
  discretion and without obligation, the right for a period commencing thirty
  (30) days prior to and ending immediately prior to the date determined by the
  Board pursuant hereto for termination of the Option or during the remaining
  term of the Option, whichever is the lesser, to exercise any unexpired Option
  or Options without regard to the installment provisions of Section 5; provided,
  however, that such exercise shall be subject to the consummation of such Reorganization.

                Subject
  to any required action by the shareholders of the Company, if the Company shall
  be the surviving entity in any merger or consolidation, this Option thereafter
  shall pertain to and apply to the securities to which a holder of Shares equal
  to the Shares subject to this Option would have been entitled by reason of such
  merger or consolidation, and the installment provisions of Section 5 shall continue
  to apply.

                In
  the event of a change in the shares of the Company as presently constituted,
  which is limited to a change of all of its authorized Stock without par value
  into the same number of shares of Stock with a par value, the shares resulting
  from any such change shall be deemed to be the Shares within the meaning of
  this Option.

3

                To
  the extent that the foregoing adjustments relate to shares or securities of
  the Company, such adjustments shall be made by the Board, whose determination
  in that respect shall be final, binding and conclusive. Except as hereinbefore
  expressly provided, Optionee shall have no rights by reason of any subdivision
  or consolidation of shares of Stock of any class or the payment of any stock
  dividend or any other increase or decrease in the number of shares of stock
  of any class, and the number and price of Shares subject to this Option shall
  not be affected by, and no adjustments shall be made by reason of, any dissolution,
  liquidation, merger, consolidation or sale of assets or capital stock, or any
  issue by the Company of shares of stock of any class or securities convertible
  into shares of stock of any class.

                The
  grant of this Option shall not affect in any way the right or power of the Company
  to make adjustments, reclassifications, reorganizations or changes in its capital
  or business structure or to merge, consolidate, dissolve or liquidate or to
  sell or transfer all or any part of its business or assets.

                11.
  Taxation upon Exercise of Option. Optionee understands that, upon exercise
  of this Option, Optionee will recognize income, for Federal and state income
  tax purposes, in an amount equal to the amount by which the fair market value
  of the Shares, determined as of the date of exercise, exceeds the Exercise Price.
  The acceptance of the Shares by Optionee shall constitute an agreement by Optionee
  to report such income in accordance with then applicable law and to cooperate
  with Company in establishing the amount of such income and corresponding deduction
  to the Company for its income tax purposes. Withholding for federal or state
  income and employment tax purposes will be made, if and as required by law,
  from Optionee's then current compensation, or, if such current compensation
  is insufficient to satisfy withholding tax liability, the Company may require
  Optionee to make a cash payment to cover such liability as a condition of the
  exercise of this Option.

                12.
  Modification, Extension and Renewal of Options. The Board or Committee,
  as described in the Plan, may modify, extend or renew this Option or accept
  the surrender thereof (to the extent not theretofore exercised) and authorize
  the granting of a new option in substitution therefore (to the extent not theretofore
  exercised), subject at all times to the Plan, the Code and the Nevada Law. Notwithstanding
  the foregoing provisions of this Section 12, no modification shall, without
  the consent of the Optionee, alter to the Optionee's detriment or impair any
  rights of Optionee hereunder.

                13.
  Investment Intent; Restrictions on Transfer.

                (a)
  Optionee represents and agrees that if Optionee exercises this Option in whole
  or in part, Optionee will in each case acquire the Shares upon such exercise
  for the purpose of investment and not with a view to, or for resale in connection
  with, any distribution thereof; and that upon such exercise of this Option in
  whole or in part, Optionee (or any person or persons entitled to exercise this
  Option under the provisions of Sections 7 and 8 hereof) shall furnish to the
  Company a written statement to such effect, satisfactory to the Company in form
  and substance. If the 

4

Shares represented by this Option are
  registered under the Securities Act, either before or after the exercise of
  this Option in whole or in part, the Optionee shall be relieved of the foregoing
  investment representation and agreement and shall not be required to furnish
  the Company with the foregoing written statement.

                (b)
  Optionee further represents that Optionee has had access to the financial statements
  or books and records of the Company, has had the opportunity to ask questions
  of the Company concerning its business, operations and financial condition,
  and to obtain additional information reasonably necessary to verify the accuracy
  of such information

                (c)
  Unless and until the Shares represented by this Option are registered under
  the Securities Act, all certificates representing the Shares and any certificates
  subsequently issued in substitution therefor and any certificate for any securities
  issued pursuant to any stock split, share reclassification, stock dividend or
  other similar capital event shall bear legends in substantially the following
  form:

	 	THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE
        QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER
        THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES
        NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
        DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR
        ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS
        THEREFROM.

      THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
        ISSUED PURSUANT TO THAT CERTAIN NONSTATUTORY STOCK OPTION AGREEMENT DATED
        ____________ BETWEEN THE COMPANY AND THE ISSUEE WHICH RESTRICTS THE TRANSFER
        OF THESE SHARES WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN
        CONDITIONS.
	 

and/or such other legend or legends as the Company and its
  counsel deem necessary or appropriate. Appropriate stop transfer instructions
  with respect to the Shares have been placed with the Company's transfer agent.

                14.
  Stand-off Agreement. Optionee agrees that, in connection with any registration
  of the Company's securities under the Securities Act, and upon the request of
  the Company or any underwriter managing an underwritten offering of the Company's
  securities, Optionee shall not sell, short any sale of, loan, grant an option
  for, or otherwise dispose of any of the Shares (other than Shares included in
  the offering) without the prior written consent of the Company or such managing
  underwriter, as applicable, for a period of at least one year following the
  effective date of registration of such offering.

5

                15.
  Restriction Upon Transfer. The Shares may not be sold, transferred or
  otherwise disposed of and shall not be pledged or otherwise hypothecated by
  the Optionee except as hereinafter provided.

                (a)
  Repurchase Right on Termination Other Than by Removal. For the purposes
  of this Section, a "Repurchase Event" shall mean an occurrence of one
  of (i) termination of Optionee's service as a director; (ii) death of Optionee;
  (iii) bankruptcy of Optionee, which shall be deemed to have occurred as of the
  date on which a voluntary or involuntary petition in bankruptcy is filed with
  a court of competent jurisdiction; (iv) dissolution of the marriage of Optionee,
  to the extent that any of the Shares are allocated as the sole and separate
  property of Optionee's spouse pursuant thereto (in which case, this Section
  shall only apply to the Shares so affected); or (v) any attempted transfer by
  the Optionee of Shares, or any interest therein, in violation of this Agreement.
  Upon the occurrence of a Repurchase Event, and upon mutual agreement of the
  Company and Optionee, the Company may repurchase all or any portion of the Shares
  of Optionee at a price equal to the fair value of the Shares as of the date
  of the Repurchase Event.

                (b)
  Repurchase Right on Removal. In the event Optionee is removed as a director
  pursuant to Nevada Law, or Optionee voluntarily resigns as a director prior
  to the date upon which the last installment of Shares becomes exercisable pursuant
  to Section 5, then the Company shall have the right (but not an obligation)
  to repurchase Shares of Optionee at a price equal to the Exercise Price. Such
  right of the Company to repurchase Shares shall apply to 100% of the Shares
  for one (1) year from the date of this Agreement; and shall thereafter lapse
  ratably in equal annual increments on each anniversary of the date of this Agreement
  over the term of this Option specified in Section 4. In addition, the Company
  shall have the right, in the sole discretion of the Board and without obligation,
  to repurchase upon removal or resignation all or any portion of the Shares of
  Optionee, at a price equal to the fair value of the Shares as of the date of
  such removal or resignation, which right is not subject to the foregoing lapsing
  of rights. In the event the Company elects to repurchase the Shares, the stock
  certificates representing the same shall forthwith be returned to the Company
  for cancellation.

                (c)
  Exercise of Repurchase Right. Any Repurchase Right under Paragraphs 15(a)
  or 15(b) shall be exercised by giving notice of exercise as provided herein
  to Optionee or the estate of Optionee, as applicable. Such right shall be exercised,
  and the repurchase price thereunder shall be paid, by the Company within a ninety
  (90) day period beginning on the date of notice to the Company of the occurrence
  of such Repurchase Event (except in the case of termination or cessation of
  services as director, where such option period shall begin upon the occurrence
  of the Repurchase Event). Such repurchase price shall be payable only in the
  form of cash (including a check drafted on immediately available funds) or cancellation
  of purchase money indebtedness of the Optionee for the Shares. If the Company
  can not purchase all such Shares because it is unable to meet the financial
  tests set forth in the Nevada corporation law, the Company shall have the right
  to purchase as many Shares as it is permitted to purchase under such sections.
  Any Shares not 

6

purchased by the Company hereunder shall
  no longer be subject to the provisions of this Section 15.

                (d)
  Right of First Refusal. In the event Optionee desires to transfer any Shares
  during his or her lifetime, Optionee shall first offer to sell such Shares to
  the Company. Optionee shall deliver to the Company written notice of the intended
  sale, such notice to specify the number of Shares to be sold, the proposed purchase
  price and terms of payment, and grant the Company an option for a period of
  thirty days following receipt of such notice to purchase the offered Shares
  upon the same terms and conditions. To exercise such option, the Company shall
  give notice of that fact to Optionee within the thirty (30) day notice period
  and agree to pay the purchase price in the manner provided in the notice. If
  the Company does not purchase all of the Shares so offered during foregoing
  option period, Optionee shall be under no obligation to sell any of the offered
  Shares to the Company, but may dispose of such Shares in any lawful manner during
  a period of one hundred and eighty (180) days following the end of such notice
  period, except that Optionee shall not sell any such Shares to any other person
  at a lower price or upon more favorable terms than those offered to the Company.

                (e)
  Acceptance of Restrictions. Acceptance of the Shares shall constitute the Optionee's
  agreement to such restrictions and the legending of his certificates with respect
  thereto. Notwithstanding such restrictions, however, so long as the Optionee
  is the holder of the Shares, or any portion thereof, he shall be entitled to
  receive all dividends declared on and to vote the Shares and to all other rights
  of a shareholder with respect thereto.

                (f)
  Permitted Transfers. Notwithstanding any provisions in this Section 15 to the
  contrary, the Optionee may transfer Shares subject to this Agreement to his
  or her parents, spouse, children, or grandchildren, or a trust for the benefit
  of the Optionee or any such transferee(s); provided, that such permitted transferee(s)
  shall hold the Shares subject to all the provisions of this Agreement (all references
  to the Optionee herein shall in such cases refer mutatis mutandis to the permitted
  transferee, except in the case of clause (iv) of Section 15(a) wherein the permitted
  transfer shall be deemed to be rescinded); and provided further, that notwithstanding
  any other provisions in this Agreement, a permitted transferee may not, in turn,
  make permitted transfers without the written consent of the Optionee and the
  Company.

                (g)
  Release of Restrictions on Shares. All other restrictions under this Section
  15 shall terminate five (5) years following the date of this Agreement, or when
  the Company's securities are publicly traded, whichever occurs earlier.

                16.
  Notices. Any notice required to be given pursuant to this Option or the
  Plan shall be in writing and shall be deemed to be delivered upon receipt or,
  in the case of notices by the Company, five (5) days after deposit in the U.S.
  mail, postage prepaid, addressed to Optionee at the address last provided by
  Optionee for use in Company records related to Optionee.

7

                17.
  Agreement Subject to Plan; Applicable Law. This Option is made pursuant
  to the Plan and shall be interpreted to comply therewith. A copy of such Plan
  is available to Optionee, at no charge, at the principal office of the Company.
  Any provision of this Option inconsistent with the Plan shall be considered
  void and replaced with the applicable provision of the Plan. This Option has
  been granted, executed and delivered in the State of Nevada, and the interpretation
  and enforcement shall be governed by the laws thereof and subject to the exclusive
  jurisdiction of the courts therein.

                IN
  WITNESS WHEREOF, the parties hereto have executed this Option as of the date
  first above written.

	 	COMPANY: 	TERAX ENERGY, INC., 
	 	  	a Nevada corporation 
	 	  	  
	 	  	  
	 	  	By: ______________________________________
	 	  	Name: ____________________________________
	 	  	Title: _____________________________________

	 	OPTIONEE: 	 	 
	 		By: 	 
	 		 	(signature) 
	 		Name: 	 

(one of the following, as appropriate, shall be signed)

  	 I certify that as of the date
          hereof I am unmarried 
		 By his or her signature,
          the spouse of Optionee hereby agrees to be bound by the provisions of
          the foregoing INCENTIVE STOCK OPTION AGREEMENT 

	  	  	  
	  	  	  
	Optionee 	  	Spouse of Optionee 

8

Appendix A

NOTICE OF EXERCISE

Terax Energy, Inc.

Re: Nonstatutory Stock Option

                Notice
  is hereby given pursuant to Section 6 of my Nonstatutory Stock Option Agreement
  that I elect to purchase the number of shares set forth below at the exercise
  price set forth in my option agreement:

                Nonstatutory
  Stock Option Agreement dated: ____________

                Number
  of shares being purchased: ____________

                Exercise
  Price: $____________

                A
  check in the amount of the aggregate price of the shares being purchased is
  attached.

                I
  hereby confirm that such shares are being acquired by me for my own account
  for investment purposes, and not with a view to, or for resale in connection
  with, any distribution thereof. I will not sell or dispose of my Shares in violation
  of the Securities Act of 1933, as amended, or any applicable federal or state
  securities laws. Further, I understand that the exemption from taxable income
  at the time of exercise is dependent upon my holding such stock for a period
  of at least one year from the date of exercise and two years from the date of
  grant of the Option.

                I
  understand that the certificate representing the Option Shares will bear a restrictive
  legend within the contemplation of the Securities Act and as required by such
  other state or federal law or regulation applicable to the issuance or delivery
  of the Option Shares.

                I
  agree to provide to the Company such additional documents or information as
  may be required pursuant to the Company's 2006 Incentive Stock Plan.

  	 	By: 	 
	 	 	(signature) 
	 	Name: 	 

Appendix A

EXHIBIT B-3

 

	CONSULTANT NONSTATUTORY STOCK OPTION AGREEMENT 
	 

                THIS
  CONSULTANT NONSTATUTORY STOCK OPTION AGREEMENT ("Agreement")
  is made and entered into as of the date set forth below, by and between Terax
  Energy, Inc., a Nevada corporation (the "Company"), and the following
  consultant to the Company (herein, the "Optionee"):

                In
  consideration of the covenants herein set forth, the parties hereto agree as
  follows:

	 	1. 	  Option Information.
	 	 
	 	 	 	 	 	 
	 		(a) 	 Date of Option:
	 	 
	 		(b) 	 Optionee:
	 	 
	 		(c) 	 Number of Shares:
	 	 
	 		(d) 	 Exercise Price:
	 	 
	 	 	 	 	 	 
	 	2. 	 Acknowledgements.
	 	 

               (a)
  Optionee is an independent consultant to the Company, not an employee;

                (b)
  The Board of Directors (the "Board" which term shall include an authorized
  committee of the Board of Directors) and shareholders of the Company have heretofore
  adopted a 2006 Incentive Stock Plan (the "Plan"), pursuant to which this
  Option is being granted; and

                (c)
  The Board has authorized the granting to Optionee of a nonstatutory stock option
  ("Option") to purchase shares of common stock of the Company ("Stock")
  upon the terms and conditions hereinafter stated and pursuant to an exemption
  from registration under the Securities Act of 1933, as amended (the "Securities
  Act") provided by Section 4(2) thereunder.

                3.
  Shares; Price. The Company hereby grants to Optionee the right to purchase,
  upon and subject to the terms and conditions herein stated, the number of shares
  of Stock set forth in Section 1(c) above (the "Shares") for cash (or
  other consideration as is authorized under the Plan and acceptable to the Board,
  in their sole and absolute discretion) at the price per Share set forth in Section
  1(d) above (the "Exercise Price"), such price being not less than eighty-five
  85% of the fair market value per share of the Shares covered by this Option
  as of the date hereof.

                4.
  Term of Option. This Option shall expire, and all rights hereunder to
  purchase the Shares, shall terminate ten (10) years from the date hereof. Nothing
  contained herein shall be construed to interfere in any way with the right of
  the Company to terminate Optionee as a consultant to the Company, or to increase
  or decrease the compensation paid to Optionee from the rate in effect as of
  the date hereof.

                5.
  Vesting of Option. Subject to the provisions of Sections 7 and 8 hereof,
  this Option shall become exercisable during the period that Optionee serves
  as a consultant of the Company in equal annual installments, each installment
  covering a fraction of the Shares, the numerator of which is one (1) and the
  denominator of which is the number of years in the term of this Option (not
  to exceed 5). The first installment shall become exercisable on the first anniversary
  of the date of this Option, and an additional installment shall become exercisable
  on each successive anniversary date during the term of this Option, except the
  last such anniversary date. The final installment shall become exercisable ninety
  days prior to the expiration of the term of this Option. The installments shall
  be cumulative (i.e., this option may be exercised, as to any or all shares covered
  by an installment, at any time or times after an installment becomes exercisable
  and until expiration or termination of this option).

                6.
  Exercise. This Option shall be exercised by delivery to the Company of
  (a) written notice of exercise stating the number of Shares being purchased
  (in whole shares only) and such other information set forth on the form of Notice
  of Exercise attached hereto as Appendix A, (b) a check or cash in the
  amount of the Exercise Price of the Shares covered by the notice (or such other
  consideration as has been approved by the Board of Directors consistent with
  the Plan) and (c) a written investment representation as provided for in Section
  13 hereof. This Option shall not be assignable or transferable, except by will
  or by the laws of descent and distribution, and shall be exercisable only by
  Optionee during his or her lifetime.

                7.
  Termination of Service. If Optionee's service as a consultant to the
  Company terminates for any reason, no further installments shall vest pursuant
  to Section 5, and Optionee shall have the right at any time within thirty (30)
  days following such termination of services or the remaining term of this Option,
  whichever is the lesser, to exercise in whole or in part this Option to the
  extent, but only to the extent, that this Option was exercisable as of the date
  Optionee ceased to be a consultant to the Company, as such may be accelerated
  by the Board of Directors; provided, however, if Optionee is terminated for
  reasons that would justify a termination of employment "for cause" as
  contemplated by Nevada state law and case law related thereto, the foregoing
  right to exercise shall automatically terminate on the date Optionee ceases
  to be a consultant to the Company as to all Shares covered by this Option not
  exercised prior to termination. Unless earlier terminated, all rights under
  this Option shall terminate in any event on the expiration date of this Option
  as defined in Section 4 hereof.

                8.
  Death of Optionee. If the Optionee shall die while serving as a consultant
  to the Company, Optionee's personal representative or the person entitled to
  Optionee's rights hereunder may at any time within ninety (90) days after the
  date of Optionee's death, or 

2

during the remaining term of this Option, whichever is the lesser,
  exercise this Option and purchase Shares to the extent, but only to the extent,
  that Optionee could have exercised this Option as of the date of Optionee's
  death, as such may be accelerated by the Board of Directors; provided, in any
  case, that this Option may be so exercised only to the extent that this Option
  has not previously been exercised by Optionee.

                9.
  No Rights as Shareholder. Optionee shall have no rights as a shareholder
  with respect to the Shares covered by any installment of this Option until the
  effective date of the issuance of shares following exercise of this to Option,
  and no adjustment will be made for dividends or other rights for which the record
  date is prior to the date such stock certificate or certificates are issued
  except as provided in Section 10 hereof.

                10.
  Recapitalization. Subject to any required action by the shareholders
  of the Company, the number of Shares covered by this Option, and the Exercise
  Price thereof, shall be proportionately adjusted for any increase or decrease
  in the number of issued shares resulting from a subdivision or consolidation
  of shares or the payment of a stock dividend, or any other increase or decrease
  in the number of such shares effected without receipt of consideration by the
  Company; provided however that the conversion of any convertible securities
  of the Company shall not be deemed having been "effected without receipt of
  consideration by the Company."

                In
  the event of a proposed dissolution or liquidation of the Company, a merger
  or consolidation in which the Company is not the surviving entity, or a sale
  of all or substantially all of the assets or capital stock of the Company (collectively,
  a "Reorganization"), this Option shall terminate immediately prior to
  the consummation of such proposed action, unless otherwise provided by the Board;
  provided, however, if Optionee shall be a consultant at the time such Reorganization
  is approved by the stockholders, Optionee shall have the right to exercise this
  Option as to all or any part of the Shares, without regard to the installment
  provisions of Section 5, for a period beginning 30 days prior to the consummation
  of such Reorganization and ending as of the Reorganization or the expiration
  of this Option, whichever is earlier, subject to the consummation of the Reorganization.
  In any event, the Company shall notify Optionee, at least 30 days prior to the
  consummation of such Reorganization, of his exercise rights, if any, and that
  the Option shall terminate upon the consummation of the Reorganization.

                Subject
  to any required action by the shareholders of the Company, if the Company shall
  be the surviving entity in any merger or consolidation, this Option thereafter
  shall pertain to and apply to the securities to which a holder of Shares equal
  to the Shares subject to this Option would have been entitled by reason of such
  merger or consolidation, and the installment provisions of Section 5 shall continue
  to apply.

                In
  the event of a change in the shares of the Company as presently constituted,
  which is limited to a change of all of its authorized Stock without par value
  into the same number of shares of Stock with a par value, the shares resulting
  from any such change shall be deemed to be the Shares within the meaning of
  this Option.

                To
  the extent that the foregoing adjustments relate to shares or securities of
  the 

3

Company, such adjustments shall be made by the Board, whose determination
  in that respect shall be final, binding and conclusive. Except as hereinbefore
  expressly provided, Optionee shall have no rights by reason of any subdivision
  or consolidation of shares of Stock of any class or the payment of any stock
  dividend or any other increase or decrease in the number of shares of stock
  of any class, and the number and price of Shares subject to this Option shall
  not be affected by, and no adjustments shall be made by reason of, any dissolution,
  liquidation, merger, consolidation or sale of assets or capital stock, or any
  issue by the Company of shares of stock of any class or securities convertible
  into shares of stock of any class.

                The
  grant of this Option shall not affect in any way the right or power of the Company
  to make adjustments, reclassifications, reorganizations or changes in its capital
  or business structure or to merge, consolidate, dissolve or liquidate or to
  sell or transfer all or any part of its business or assets.

                11.
  Taxation upon Exercise of Option. Optionee understands that, upon exercise
  of this Option, Optionee will recognize income, for Federal and state income
  tax purposes, in an amount equal to the amount by which the fair market value
  of the Shares, determined as of the date of exercise, exceeds the Exercise Price.
  The acceptance of the Shares by Optionee shall constitute an agreement by Optionee
  to report such income in accordance with then applicable law and to cooperate
  with Company in establishing the amount of such income and corresponding deduction
  to the Company for its income tax purposes. Withholding for federal or state
  income and employment tax purposes will be made, if and as required by law,
  from Optionee's then current compensation, or, if such current compensation
  is insufficient to satisfy withholding tax liability, the Company may require
  Optionee to make a cash payment to cover such liability as a condition of the
  exercise of this Option.

                12.
  Modification, Extension and Renewal of Options. The Board or Committee,
  as described in the Plan, may modify, extend or renew this Option or accept
  the surrender thereof (to the extent not theretofore exercised) and authorize
  the granting of a new option in substitution therefore (to the extent not theretofore
  exercised), subject at all times to the Plan, the Code. Notwithstanding the
  foregoing provisions of this Section 12, no modification shall, without the
  consent of the Optionee, alter to the Optionee's detriment or impair any rights
  of Optionee hereunder.

                13.
  Investment Intent; Restrictions on Transfer.

                (a)
  Optionee represents and agrees that if Optionee exercises this Option in whole
  or in part, Optionee will in each case acquire the Shares upon such exercise
  for the purpose of investment and not with a view to, or for resale in connection
  with, any distribution thereof; and that upon such exercise of this Option in
  whole or in part, Optionee (or any person or persons entitled to exercise this
  Option under the provisions of Sections 7 and 8 hereof) shall furnish to the
  Company a written statement to such effect, satisfactory to the Company in form
  and substance. If the Shares represented by this Option are registered under
  the Securities Act, either before or after the exercise of this Option in whole
  or in part, the Optionee shall be 

4

relieved of the foregoing investment
  representation and agreement and shall not be required to furnish the Company
  with the foregoing written statement.

                (b)
  Optionee further represents that Optionee has had access to the financial statements
  or books and records of the Company, has had the opportunity to ask questions
  of the Company concerning its business, operations and financial condition,
  and to obtain additional information reasonably necessary to verify the accuracy
  of such information.

                (c)
  Unless and until the Shares represented by this Option are registered under
  the Securities Act, all certificates representing the Shares and any certificates
  subsequently issued in substitution therefor and any certificate for any securities
  issued pursuant to any stock split, share reclassification, stock dividend or
  other similar capital event shall bear legends in substantially the following
  form:

  
    THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE
      QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER
      THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES
      NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
      DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY
      APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.

    THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
      PURSUANT TO THAT CERTAIN NONSTATUTORY STOCK OPTION AGREEMENT DATED ___________
      BETWEEN THE COMPANY AND THE ISSUEE WHICH RESTRICTS THE TRANSFER OF THESE
      SHARES WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.

  

and/or such other legend or legends as the Company and its counsel
  deem necessary or appropriate. Appropriate stop transfer instructions with respect
  to the Shares have been placed with the Company's transfer agent.

                14.
  Stand-off Agreement. Optionee agrees that, in connection with any registration
  of the Company's securities under the Securities Act, and upon the request of
  the Company or any underwriter managing an underwritten offering of the Company's
  securities, Optionee shall not sell, short any sale of, loan, grant an option
  for, or otherwise dispose of any of the Shares (other than Shares included in
  the offering) without the prior written consent of the Company or such managing
  underwriter, as applicable, for a period of up to one year following the effective
  date of registration of such offering.

                15.
  Restriction Upon Transfer. The Shares may not be sold, transferred or
  otherwise disposed of and shall not be pledged or otherwise hypothecated by
  the Optionee except as hereinafter provided.

5

                (a)
  Repurchase Right on Termination Other Than for Cause. For the purposes
  of this Section, a "Repurchase Event" shall mean an occurrence of one
  of (i) termination of Optionee's service as a consultant, voluntary or involuntary
  and without cause; (ii) retirement or death of Optionee; (iii) bankruptcy of
  Optionee, which shall be deemed to have occurred as of the date on which a voluntary
  or involuntary petition in bankruptcy is filed with a court of competent jurisdiction;
  (iv) dissolution of the marriage of Optionee, to the extent that any of the
  Shares are allocated as the sole and separate property of Optionee's spouse
  pursuant thereto (in which case, this Section shall only apply to the Shares
  so affected); or (v) any attempted transfer by the Optionee of Shares, or any
  interest therein, in violation of this Agreement. Upon the occurrence of a Repurchase
  Event, the Company shall have the right (but not an obligation) to repurchase
  all or any portion of the Shares of Optionee at a price equal to the fair value
  of the Shares as of the date of the Repurchase Event.

                (b)
  Repurchase Right on Termination for Cause. In the event Optionee's service
  as a consultant is terminated by the Company "for cause" (as contemplated by
  Section 7), then the Company shall have the right (but not an obligation) to
  repurchase Shares of Optionee at a price equal to the Exercise Price. Such right
  of the Company to repurchase Shares shall apply to 100% of the Shares for one
  (1) year from the date of this Agreement; and shall thereafter lapse ratably
  in equal annual increments on each anniversary of the date of this Agreement
  over the term of this Option specified in Section 4. In addition, the Company
  shall have the right, in the sole discretion of the Board and without obligation,
  to repurchase upon any such termination of service for cause all or any portion
  of the Shares of Optionee, at a price equal to the fair value of the Shares
  as of the date of termination, which right is not subject to the foregoing lapsing
  of rights. In the event the Company elects to repurchase the Shares, the stock
  certificates representing the same shall forthwith be returned to the Company
  for cancellation.

                (c)
  Exercise of Repurchase Right. Any repurchase right under Paragraphs 15(a)
  or 15(b) shall be exercised by giving notice of exercise as provided herein
  to Optionee or the estate of Optionee, as applicable. Such right shall be exercised,
  and the repurchase price thereunder shall be paid, by the Company within a ninety
  (90) day period beginning on the date of notice to the Company of the occurrence
  of such Repurchase Event (except in the case of termination of employment or
  retirement, where such option period shall begin upon the occurrence of the
  Repurchase Event). Such repurchase price shall be payable only in the form of
  cash (including a check drafted on immediately available funds) or cancellation
  of purchase money indebtedness of the Optionee for the Shares. If the Company
  can not purchase all such Shares because it is unable to meet the financial
  tests set forth in the Nevada corporation law, the Company shall have the right
  to purchase as many Shares as it is permitted to purchase under such sections.
  Any Shares not purchased by the Company hereunder shall no longer be subject
  to the provisions of this Section 15.

                (d)
  Right of First Refusal. In the event Optionee desires to transfer any

6

Shares during his or her lifetime, Optionee shall first
  offer to sell such Shares to the Company. Optionee shall deliver to the Company
  written notice of the intended sale, such notice to specify the number of Shares
  to be sold, the proposed purchase price and terms of payment, and grant the
  Company an option for a period of thirty days following receipt of such notice
  to purchase the offered Shares upon the same terms and conditions. To exercise
  such option, the Company shall give notice of that fact to Optionee within the
  thirty (30) day notice period and agree to pay the purchase price in the manner
  provided in the notice. If the Company does not purchase all of the Shares so
  offered during foregoing option period, Optionee shall be under no obligation
  to sell any of the offered Shares to the Company, but may dispose of such Shares
  in any lawful manner during a period of one hundred and eighty (180) days following
  the end of such notice period, except that Optionee shall not sell any such
  Shares to any other person at a lower price or upon more favorable terms than
  those offered to the Company.

                (e)
  Acceptance of Restrictions. Acceptance of the Shares shall constitute
  the Optionee's agreement to such restrictions and the legending of his certificates
  with respect thereto. Notwithstanding such restrictions, however, so long as
  the Optionee is the holder of the Shares, or any portion thereof, he shall be
  entitled to receive all dividends declared on and to vote the Shares and to
  all other rights of a shareholder with respect thereto.

                (f)
  Permitted Transfers. Notwithstanding any provisions in this Section 15
  to the contrary, the Optionee may transfer Shares subject to this Agreement
  to his or her parents, spouse, children, or grandchildren, or a trust for the
  benefit of the Optionee or any such transferee(s); provided, that such permitted
  transferee(s) shall hold the Shares subject to all the provisions of this Agreement
  (all references to the Optionee herein shall in such cases refer mutatis mutandis
  to the permitted transferee, except in the case of clause (iv) of Section 15(a)
  wherein the permitted transfer shall be deemed to be rescinded); and provided
  further, that notwithstanding any other provisions in this Agreement, a permitted
  transferee may not, in turn, make permitted transfers without the written consent
  of the Optionee and the Company.

                (g)
  Release of Restrictions on Shares. All rights and restrictions under
  this Section 15 shall terminate five (5) years following the date of this Agreement,
  or when the Company's securities are publicly traded, whichever occurs earlier.

                16.
  Notices. Any notice required to be given pursuant to this Option or the
  Plan shall be in writing and shall be deemed to be delivered upon receipt or,
  in the case of notices by the Company, five (5) days after deposit in the U.S.
  mail, postage prepaid, addressed to Optionee at the address last provided by
  Optionee for use in Company records related to Optionee.

                17.
  Agreement Subject to Plan; Applicable Law. This Option is made pursuant
  to the Plan and shall be interpreted to comply therewith. A copy of such Plan
  is available to Optionee, at no charge, at the principal office of the Company.
  Any provision of this Option 

7

inconsistent with the Plan shall be considered void and replaced
  with the applicable provision of the Plan. This Option has been granted, executed
  and delivered in the State of Nevada, and the interpretation and enforcement
  shall be governed by the laws thereof and subject to the exclusive jurisdiction
  of the courts therein.

                IN
  WITNESS WHEREOF, the parties hereto have executed
  this Option as of the date first above written.

	 	COMPANY: 	TERAX ENERGY, INC., 
	 	  	a Nevada corporation 
	 	  	  
	 	  	  
	 	  	By: ______________________________________
	 	  	Name: ____________________________________
	 	  	Title: _____________________________________

	 	OPTIONEE: 	 	 
	 		By: 	 
	 		 	(signature) 
	 		Name: 	 

(one of the following, as appropriate, shall be signed)

  	 I certify that as of the date
          hereof I am unmarried 
		 By his or her signature,
          the spouse of Optionee hereby agrees to be bound by the provisions of
          the foregoing INCENTIVE STOCK OPTION AGREEMENT 

	  	  	  
	  	  	  
	Optionee 	  	Spouse of Optionee 

8

Appendix A

NOTICE OF EXERCISE

Terax Energy, Inc.

                Re:
  Nonstatutory Stock Option

                 Notice
  is hereby given pursuant to Section 6 of my Nonstatutory Stock Option Agreement
  that I elect to purchase the number of shares set forth below at the exercise
  price set forth in my option agreement:

                Nonstatutory
  Stock Option Agreement dated: ____________

                Number
  of shares being purchased: ____________

                  Exercise
  Price: $____________

                A
  check in the amount of the aggregate price of the shares being purchased is
  attached.

                I
  hereby confirm that such shares are being acquired by me for my own account
  for investment purposes, and not with a view to, or for resale in connection
  with, any distribution thereof. I will not sell or dispose of my Shares in violation
  of the Securities Act of 1933, as amended, or any applicable federal or state
  securities laws. Further, I understand that the exemption from taxable income
  at the time of exercise is dependent upon my holding such stock for a period
  of at least one year from the date of exercise and two years from the date of
  grant of the Option.

                I
  understand that the certificate representing the Option Shares will bear a restrictive
  legend within the contemplation of the Securities Act and as required by such
  other state or federal law or regulation applicable to the issuance or delivery
  of the Option Shares.

                I
  agree to provide to the Company such additional documents or information as
  may be required pursuant to the Company's 2006 Incentive Stock Plan.

  	 	By: 	 
	 	 	(signature) 
	 	Name: 	 

Appendix A

EXHIBIT C

 

	STOCK AWARD AGREEMENT 
	 

                THIS
  STOCK AWARD AGREEMENT ("Agreement")
  is made and entered into as of the date set forth below, by and between Terax
  Energy, Inc., a Nevada corporation (the "Company"), and the employee,
  director or consultant of the Company named in Section 1(b). ("Grantee"):

                In
  consideration of the covenants herein set forth, the parties hereto agree as
  follows:

	 	1. 	 Stock Award Information.
	 	 
	 	 	 	 	 	 
	 		(a) 	 Date of Award:
	 	 
	 		(b) 	 Grantee:
	 	 
	 		(c) 	 Number of Shares:
	 	 
	 		(d) 	 Original Value:
	 	 
	 	 	 	 	 	 
	 	2. 	 Acknowledgements.
	 	 

                (a)
  Grantee is a [employee/director/consultant] of the Company.

                (b)
  The Company has adopted a 2006 Incentive Stock Plan (the "Plan") under
  which the Company's common stock ("Stock") may be offered to directors,
  officers, employees and consultants pursuant to an exemption from registration
  under the Securities Act of 1933, as amended (the "Securities Act") provided
  by Section 4(2) thereunder.

                3.
  Shares; Value. The Company hereby grants to Grantee, upon and subject
  to the terms and conditions herein stated, the number of shares of Stock set
  forth in Section 1(c) (the "Shares"), which Shares have a fair value
  per share ("Original Value") equal to the amount set forth in Section
  1(d). For the purpose of this Agreement, the terms "Share" or "Shares"
  shall include the original Shares plus any shares derived therefrom, regardless
  of the fact that the number, attributes or par value of such Shares may have
  been altered by reason of any recapitalization, subdivision, consolidation,
  stock dividend or amendment of the corporate charter of the Company. The number
  of Shares covered by this Agreement and the Original Value thereof shall be
  proportionately adjusted for any increase or decrease in the number of issued
  shares resulting from a recapitalization, subdivision or consolidation of shares
  or the payment of a stock dividend, or any other increase or decrease in the
  number of such shares effected without receipt of consideration by the Company.

                4.
  Investment Intent. Grantee represents and agrees that Grantee is accepting
  the Shares for the purpose of investment and not with a view to, or for resale
  in connection with, any distribution thereof; and that, if requested, Grantee
  shall furnish to the Company a written statement to such effect, satisfactory
  to the Company in form and substance. If the Shares are registered under the
  Securities Act, Grantee shall be relieved of the foregoing investment representation
  and agreement and shall not be required to furnish the Company with the foregoing
  written statement.

                5.
  Restriction Upon Transfer. The Shares may not be sold, transferred or
  otherwise disposed of and shall not be pledged or otherwise hypothecated by
  the Grantee except as hereinafter provided.

                (a)
  Repurchase Right on Termination Other Than for Cause. For the purposes
  of this Section, a "Repurchase Event" shall mean an occurrence of one
  of (i) termination of Grantee's employment [or service as a director/consultant]
  by the Company, voluntary or involuntary and without cause; (ii) retirement
  or death of Grantee; (iii) bankruptcy of Grantee, which shall be deemed to have
  occurred as of the date on which a voluntary or involuntary petition in bankruptcy
  is filed with a court of competent jurisdiction; (iv) dissolution of the marriage
  of Grantee, to the extent that any of the Shares are allocated as the sole and
  separate property of Grantee's spouse pursuant thereto (in which case, this
  Section shall only apply to the Shares so affected); or (v) any attempted transfer
  by the Grantee of Shares, or any interest therein, in violation of this Agreement.
  Upon the occurrence of a Repurchase Event, the Company shall have the right
  (but not an obligation) to purchase all or any portion of the Shares
  of Grantee, at a price equal to the fair value of the Shares as of the date
  of the Repurchase Event.

                (b)
  Repurchase Right on Termination for Cause. In the event Grantee's employment
  [or service as a director/consultant] is terminated by the Company "for
  cause" (as defined below), then the Company shall have the right (but not
  an obligation) to purchase Shares of Grantee at a price equal to the Original
  Value. Such right of the Company to purchase Shares shall apply to 100% of the
  Shares for one (1) year from the date of this Agreement; and shall thereafter
  lapse at the rate of twenty percent (20%) of the Shares on each anniversary
  of the date of this Agreement. In addition, the Company shall have the right,
  in the sole discretion of the Board and without obligation, to repurchase upon
  termination for cause all or any portion of the Shares of Grantee, at a price
  equal to the fair value of the Shares as of the date of termination, which right
  is not subject to the foregoing lapsing of rights. Termination of employment
  [or service as a director/consultant] "for cause" means (i) as
  to employees or consultants, termination for cause as contemplated by Nevada
  state law and case law related thereto, or as defined in the Plan, this Agreement
  or in any employment [or consulting] agreement between the Company and
  Grantee, or (ii) as to directors, removal pursuant to the Nevada corporation
  law. In the event the Company elects to purchase the Shares, the stock certificates
  representing the same shall forthwith be returned to the Company for cancellation.

                (c)
  Exercise of Repurchase Right. Any Repurchase Right under Paragraphs 4(a)
  or 4(b) shall be exercised by giving notice of exercise as provided herein to
  Grantee or the estate of Grantee, as applicable. Such right shall be exercised,
  and the repurchase price thereunder shall be paid, by the Company within a ninety
  (90) day period beginning on the 

- 2 -

date of notice to the Company of the
  occurrence of such Repurchase Event (except in the case of termination or cessation
  of services as director, where such option period shall begin upon the occurrence
  of the Repurchase Event). Such repurchase price shall be payable only in the
  form of cash (including a check drafted on immediately available funds) or cancellation
  of purchase money indebtedness of the Grantee for the Shares. If the Company
  can not purchase all such Shares because it is unable to meet the financial
  tests set forth in the Nevada corporation law, the Company shall have the right
  to purchase as many Shares as it is permitted to purchase under such sections.
  Any Shares not purchased by the Company hereunder shall no longer be subject
  to the provisions of this Section 5.

                (d)
  Right of First Refusal. In the event Grantee desires to transfer any
  Shares during his or her lifetime, Grantee shall first offer to sell such Shares
  to the Company. Grantee shall deliver to the Company written notice of the intended
  sale, such notice to specify the number of Shares to be sold, the proposed purchase
  price and terms of payment, and grant the Company an option for a period of
  thirty days following receipt of such notice to purchase the offered Shares
  upon the same terms and conditions. To exercise such option, the Company shall
  give notice of that fact to Grantee within the thirty (30) day notice period
  and agree to pay the purchase price in the manner provided in the notice. If
  the Company does not purchase all of the Shares so offered during foregoing
  option period, Grantee shall be under no obligation to sell any of the offered
  Shares to the Company, but may dispose of such Shares in any lawful manner during
  a period of one hundred and eighty (180) days following the end of such notice
  period, except that Grantee shall not sell any such Shares to any other person
  at a lower price or upon more favorable terms than those offered to the Company.

                (e)
  Acceptance of Restrictions. Acceptance of the Shares shall constitute
  the Grantee's agreement to such restrictions and the legending of his certificates
  with respect thereto. Notwithstanding such restrictions, however, so long as
  the Grantee is the holder of the Shares, or any portion thereof, he shall be
  entitled to receive all dividends declared on and to vote the Shares and to
  all other rights of a shareholder with respect thereto.

                (f)
  Permitted Transfers. Notwithstanding any provisions in this Section 5
  to the contrary, the Grantee may transfer Shares subject to this Agreement to
  his or her parents, spouse, children, or grandchildren, or a trust for the benefit
  of the Grantee or any such transferee(s); provided, that such permitted transferee(s)
  shall hold the Shares subject to all the provisions of this Agreement (all references
  to the Grantee herein shall in such cases refer mutatis mutandis to the permitted
  transferee, except in the case of clause (iv) of Section 5(a) wherein the permitted
  transfer shall be deemed to be rescinded); and provided further, that notwithstanding
  any other provisions in this Agreement, a permitted transferee may not, in turn,
  make permitted transfers without the written consent of the Grantee and the
  Company.

                (g)
  Release of Restrictions on Shares. All rights and restrictions under
  this Section 5 shall terminate five (5) years following the date of this Agreement,
  or when the Company's securities are publicly traded, whichever occurs earlier.

- 3 -

                6.
  Representations and Warranties of the Grantee. This Agreement and the
  issuance and grant of the Shares hereunder is made by the Company in reliance
  upon the express representations and warranties of the Grantee, which by acceptance
  hereof the Grantee confirms that:

                (a)
  The Shares granted to him pursuant to this Agreement are being acquired by him
  for his own account, for investment purposes, and not with a view to, or for
  sale in connection with, any distribution of the Shares. It is understood that
  the Shares have not been registered under the Act by reason of a specific exemption
  from the registration provisions of the Act which depends, among other things,
  upon the bona fide nature of his representations as expressed herein;

                (b)
  The Shares must be held by him indefinitely unless they are subsequently registered
  under the Act and any applicable state securities laws, or an exemption from
  such registration is available. The Company is under no obligation to register
  the Shares or to make available any such exemption; and

                (c)
  Grantee further represents that Grantee has had the opportunity to ask questions
  of the Company concerning its business, operations and financial condition and
  to obtain additional information reasonably necessary to verify the accuracy
  of such information,

                (d)
  Unless and until the Shares represented by this Grant are registered under the
  Securities Act, all certificates representing the Shares and any certificates
  subsequently issued in substitution therefor and any certificate for any securities
  issued pursuant to any stock split, share reclassification, stock dividend or
  other similar capital event shall bear legends in substantially the following
  form:

	 	THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE
        QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER
        THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES
        NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
        DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR
        ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS
        THEREFROM.

      THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
        ISSUED PURSUANT TO THAT CERTAIN STOCK AWARD AGREEMENT DATED ____________
        BETWEEN THE COMPANY AND THE ISSUEE WHICH RESTRICTS THE TRANSFER OF THESE
        SHARES WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.
	 

and/or such other legend or legends as the Company and
  its counsel deem necessary or appropriate. Appropriate stop transfer instructions
  with respect to the Shares have been placed with the Company's transfer agent.

                (e)
  Grantee understands that he or she will recognize income, for Federal and state
  income tax purposes, in an amount equal to the amount by which the fair market
  value of 

- 4 -

the Shares, as of the date of grant, exceeds the price
  paid by Grantee, if any. The acceptance of the Shares by Grantee shall constitute
  an agreement by Grantee to report such income in accordance with then applicable
  law. Withholding for federal or state income and employment tax purposes will
  be made, if and as required by law, from Grantee's then current compensation,
  or, if such current compensation is insufficient to satisfy withholding tax
  liability, the Company may require Grantee to make a cash payment to cover such
  liability.

                7.
  Stand-off Agreement. Grantee agrees that, in connection with any registration
  of the Company's securities under the Securities Act, and upon the request of
  the Company or any underwriter managing an underwritten offering of the Company's
  securities, Grantee shall not sell, short any sale of, loan, grant an option
  for, or otherwise dispose of any of the Shares (other than Shares included in
  the offering) without the prior written consent of the Company or such managing
  underwriter, as applicable, for a period of at least one year following the
  effective date of registration of such offering. This Section 8 shall survive
  any termination of this Agreement.

                8.
  Termination of Agreement. This Agreement shall terminate on the occurrence
  of any one of the following events: (a) written agreement of all parties to
  that effect; (b) a proposed dissolution or liquidation of the Company, a merger
  or consolidation in which the Company is not the surviving entity, or a sale
  of all or substantially all of the assets of the Company; (c) the closing of
  any public offering of common stock of the Company pursuant to an effective
  registration statement under the Securities Act; or (d) dissolution, bankruptcy,
  or insolvency of the Company.

                9.
  Agreement Subject to Plan; Applicable Law. This Grant is made pursuant
  to the Plan and shall be interpreted to comply therewith. A copy of such Plan
  is available to Grantee, at no charge, at the principal office of the Company.
  Any provision of this Agreement inconsistent with the Plan shall be considered
  void and replaced with the applicable provision of the Plan. This Grant shall
  be governed by the laws of the State of Nevada and subject to the exclusive
  jurisdiction of the courts therein.

                10.
  Miscellaneous.

                (a)
  Notices. Any notice required to be given pursuant to this Agreement or
  the Plan shall be in writing and shall be deemed to have been duly delivered
  upon receipt or, in the case of notices by the Company, five (5) days after
  deposit in the U.S. mail, postage prepaid, addressed to Grantee at the last
  address provided by Grantee for use in the Company's records.

                (b)
  Entire Agreement. This instrument constitutes the sole agreement of the
  parties hereto with respect to the Shares. Any prior agreements, promises or
  representations concerning the Shares not included or reference herein shall
  be of no force or effect. This Agreement shall be binding on, and shall inure
  to the benefit of, the Parties hereto and their respective transferees, heirs,
  legal representatives, successors, and assigns.

                (c)
  Enforcement. This Agreement shall be construed in accordance with, and
  governed by, the laws of the State of Nevada and subject to the exclusive jurisdiction
  of the courts located in Nevada, Nevada. If Grantee attempts to transfer any
  of the Shares subject 

- 5 -

to this Agreement, or any interest in
  them in violation of the terms of this Agreement, the Company may apply to any
  court for an injunctive order prohibiting such proposed transaction, and the
  Company may institute and maintain proceedings against Grantee to compel specific
  performance of this Agreement without the necessity of proving the existence
  or extent of any damages to the Company. Any such attempted transaction shares
  in violation of this Agreement shall be null and void.

                (d)
  Validity of Agreement. The provisions of this Agreement may be waived,
  altered, amended, or repealed, in whole or in part, only on the written consent
  of all parties hereto. It is intended that each Section of this Agreement shall
  be viewed as separate and divisible, and in the event that any Section shall
  be held to be invalid, the remaining Sections shall continue to be in full force
  and effect.

                IN
  WITNESS WHEREOF, the parties have executed this Agreement as of the
  date first above written.

	 	COMPANY: 	TERAX ENERGY, INC., 
	 	  	a Nevada corporation 
	 	  	  
	 	  	  
	 	  	By: ______________________________________
	 	  	Name: ____________________________________
	 	  	Title: _____________________________________

	 	GRANTEE: 	 	 
	 		By: 	 
	 		 	(signature) 
	 		Name: 	 

(one of the following, as appropriate, shall be signed)

	 I certify that as of the date hereof
        I am unmarried 
		 By his or her signature,
        the spouse of Grantee hereby agrees to be bound by the provisions of the
        foregoing STOCK AWARD AGREEMENT 

	  	 	  
	  	 	  
	Grantee 	 	Spouse of Grantee 

- 6 -

EXHIBIT D

 

	RESTRICTED STOCK PURCHASE AGREEMENT 
	 

                THIS
  RESTRICTED STOCK PURCHASE AGREEMENT ("Agreement") is made and
  entered into as of the date set forth below, by and between Terax Energy, Inc.,
  a Nevada corporation (the "Company"), and the employee, director or consultant
  of the Company named in Section 1(b). ("Grantee"):

                In
  consideration of the covenants herein set forth, the parties hereto agree as
  follows:

                1.
  Stock Purchase Information.

	 	(a) 	 Date of Agreement:
	 	 
	 	(b) 	 Grantee:
	 	 
	 	(c) 	 Number of Shares:
	 	 
	 	(d) 	 Purchase Price:
	 	 

                2.
  Acknowledgements.

                (a)
  Grantee is a [employee/director/consultant] of the Company.

                (b)
  The Company has adopted a 2006 Incentive Stock Plan (the "Plan") under
  which the Company's common stock ("Stock") may be offered to officers,
  employees, directors and consultants pursuant to an exemption from registration
  under the Securities Act of 1933, as amended (the "Securities Act") provided
  by Section 4(2) thereunder.

                (c)
  The Grantee desires to purchase shares of the Company's common stock on the
  terms and conditions set forth herein.

                3.
  Purchase of Shares. The Company hereby agrees to sell and Grantee hereby
  agrees to purchase, upon and subject to the terms and conditions herein stated,
  the number of shares of Stock set forth in Section 1(c) (the "Shares"),
  at the price per Share set forth in Section 1(d) (the "Price"). For the
  purpose of this Agreement, the terms "Share" or "Shares" shall
  include the original Shares plus any shares derived therefrom, regardless of
  the fact that the number, attributes or par value of such Shares may have been
  altered by reason of any recapitalization, subdivision, consolidation, stock
  dividend or amendment of the corporate charter of the Company. The number of
  Shares covered by this Agreement shall be proportionately adjusted for any increase
  or decrease in the number of issued shares resulting from a recapitalization,
  subdivision or consolidation of shares or 

the payment of a stock dividend, or any other increase or decrease
  in the number of such shares effected without receipt of consideration by the
  Company.

                4.
  Investment Intent. Grantee represents and agrees that Grantee is accepting
  the Shares for the purpose of investment and not with a view to, or for resale
  in connection with, any distribution thereof; and that, if requested, Grantee
  shall furnish to the Company a written statement to such effect, satisfactory
  to the Company in form and substance. If the Shares are registered under the
  Securities Act, Grantee shall be relieved of the foregoing investment representation
  and agreement and shall not be required to furnish the Company with the foregoing
  written statement.

                5.
  Restriction Upon Transfer. The Shares may not be sold, transferred or
  otherwise disposed of and shall not be pledged or otherwise hypothecated by
  the Grantee except as hereinafter provided.

                (a)
  Repurchase Right on Termination Other Than for Cause. For the purposes of this
  Section, a "Repurchase Event" shall mean an occurrence of one of (i)
  termination of Grantee's employment [or service as a director/consultant]
  by the Company, voluntary or involuntary and without cause; (ii) retirement
  or death of Grantee; (iii) bankruptcy of Grantee, which shall be deemed to have
  occurred as of the date on which a voluntary or involuntary petition in bankruptcy
  is filed with a court of competent jurisdiction; (iv) dissolution of the marriage
  of Grantee, to the extent that any of the Shares are allocated as the sole and
  separate property of Grantee's spouse pursuant thereto (in which case, this
  Section shall only apply to the Shares so affected); or (v) any attempted transfer
  by the Grantee of Shares, or any interest therein, in violation of this Agreement.
  Upon the occurrence of a Repurchase Event, the Company shall have the right
  (but not an obligation) to repurchase all or any portion of the Shares of Grantee
  at a price equal to the fair value of the Shares as of the date of the Repurchase
  Event.

                (b)
  Repurchase Right on Termination for Cause. In the event Grantee's employment
  [or service as a director/consultant] is terminated by the Company "for
  cause" (as defined below), then the Company shall have the right (but not
  an obligation) to repurchase Shares of Grantee at a price equal to the Price.
  Such right of the Company to repurchase Shares shall apply to 100% of the Shares
  for one (1) year from the date of this Agreement; and shall thereafter lapse
  at the rate of twenty percent (20%) of the Shares on each anniversary of the
  date of this Agreement. In addition, the Company shall have the right, in the
  sole discretion of the Board and without obligation, to repurchase upon termination
  for cause all or any portion of the Shares of Grantee, at a price equal to the
  fair value of the Shares as of the date of termination, which right is not subject
  to the foregoing lapsing of rights. Termination of employment [or service
  as a director/consultant] "for cause" means (i) as to employees and
  consultants, termination for cause as contemplated by Nevada state law and case
  law related thereto, or as defined in the Plan, this Agreement or in any employment
  [or consulting] agreement between the Company and Grantee, or (ii) as
  to directors, removal pursuant to the Nevada corporation law. In the event the
  Company elects to repurchase the Shares, the stock certificates representing
  the same shall forthwith be returned to the Company for cancellation.

- 2 -

                (c)
  Exercise of Repurchase Right. Any Repurchase Right under Paragraphs 4(a)
  or 4(b) shall be exercised by giving notice of exercise as provided herein to
  Grantee or the estate of Grantee, as applicable. Such right shall be exercised,
  and the repurchase price thereunder shall be paid, by the Company within a ninety
  (90) day period beginning on the date of notice to the Company of the occurrence
  of such Repurchase Event (except in the case of termination of employment or
  retirement, where such option period shall begin upon the occurrence of the
  Repurchase Event). Such repurchase price shall be payable only in the form of
  cash (including a check drafted on immediately available funds) or cancellation
  of purchase money indebtedness of the Grantee for the Shares. If the Company
  can not purchase all such Shares because it is unable to meet the financial
  tests set forth in the Nevada corporation law, the Company shall have the right
  to purchase as many Shares as it is permitted to purchase under such sections.
  Any Shares not purchased by the Company hereunder shall no longer be subject
  to the provisions of this Section 5.

                (d)
  Right of First Refusal. In the event Grantee desires to transfer any
  Shares during his or her lifetime, Grantee shall first offer to sell such Shares
  to the Company. Grantee shall deliver to the Company written notice of the intended
  sale, such notice to specify the number of Shares to be sold, the proposed purchase
  price and terms of payment, and grant the Company an option for a period of
  thirty days following receipt of such notice to purchase the offered Shares
  upon the same terms and conditions. To exercise such option, the Company shall
  give notice of that fact to Grantee within the thirty (30) day notice period
  and agree to pay the purchase price in the manner provided in the notice. If
  the Company does not purchase all of the Shares so offered during foregoing
  option period, Grantee shall be under no obligation to sell any of the offered
  Shares to the Company, but may dispose of such Shares in any lawful manner during
  a period of one hundred and eighty (180) days following the end of such notice
  period, except that Grantee shall not sell any such Shares to any other person
  at a lower price or upon more favorable terms than those offered to the Company.

                (e)
  Acceptance of Restrictions. Acceptance of the Shares shall constitute
  the Grantee's agreement to such restrictions and the legending of his certificates
  with respect thereto. Notwithstanding such restrictions, however, so long as
  the Grantee is the holder of the Shares, or any portion thereof, he shall be
  entitled to receive all dividends declared on and to vote the Shares and to
  all other rights of a shareholder with respect thereto.

                (f)
  Permitted Transfers. Notwithstanding any provisions in this Section 5
  to the contrary, the Grantee may transfer Shares subject to this Agreement to
  his or her parents, spouse, children, or grandchildren, or a trust for the benefit
  of the Grantee or any such transferee(s); provided, that such permitted transferee(s)
  shall hold the Shares subject to all the provisions of this Agreement (all references
  to the Grantee herein shall in such cases refer mutatis mutandis to the permitted
  transferee, except in the case of clause (iv) of Section 5(a) wherein the permitted
  transfer shall be deemed to be rescinded); and provided further, that notwithstanding
  any other provisions in this Agreement, a permitted transferee may not, in turn,
  make permitted transfers without the written consent of the Grantee and the
  Company.

- 3 -

                (g)
  Release of Restrictions on Shares. All rights and restrictions under
  this Section 5 shall terminate five (5) years following the date upon which
  the Company receives the full Price as set forth in Section 3, or when the Company's
  securities are publicly traded, whichever occurs earlier.

                5.
  Representations and Warranties of the Grantee. This Agreement and the
  issuance and grant of the Shares hereunder is made by the Company in reliance
  upon the express representations and warranties of the Grantee, which by acceptance
  hereof the Grantee confirms that:

                (a)
  The Shares granted to him pursuant to this Agreement are being acquired by him
  for his own account, for investment purposes, and not with a view to, or for
  sale in connection with, any distribution of the Shares. It is understood that
  the Shares have not been registered under the Act by reason of a specific exemption
  from the registration provisions of the Act which depends, among other things,
  upon the bona fide nature of his representations as expressed herein;

                (b)
  The Shares must be held by him indefinitely unless they are subsequently registered
  under the Act and any applicable state securities laws, or an exemption from
  such registration is available. The Company is under no obligation to register
  the Shares or to make available any such exemption; and

                (c)
  Grantee further represents that Grantee has had access to the financial statements
  or books and records of the Company, has had the opportunity to ask questions
  of the Company concerning its business, operations and financial condition and
  to obtain additional information reasonably necessary to verify the accuracy
  of such information;

                (d)
  Unless and until the Shares represented by this Grant are registered under the
  Securities Act, all certificates representing the Shares and any certificates
  subsequently issued in substitution therefor and any certificate for any securities
  issued pursuant to any stock split, share reclassification, stock dividend or
  other similar capital event shall bear legends in substantially the following
  form:

	 	THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE
        QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER
        THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES
        NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
        DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR
        ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS
        THEREFROM.

      THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
        ISSUED PURSUANT TO THAT CERTAIN RESTRICTED STOCK PURCHASE AGREEMENT DATED
        ____________ BETWEEN THE COMPANY AND THE ISSUEE WHICH RESTRICTS THE TRANSFER
        OF THESE SHARES WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN
        CONDITIONS.
	 

- 4 -

and/or such other legend or legends as
  the Company and its counsel deem necessary or appropriate. Appropriate stop
  transfer instructions with respect to the Shares have been placed with the Company's
  transfer agent.

                (e)
  Grantee understands that he or she will recognize income, for Federal and state
  income tax purposes, in an amount equal to the amount by which the fair market
  value of the Shares, as of the date of Grant, exceeds the price paid by Grantee.
  The acceptance of the Shares by Grantee shall constitute an agreement by Grantee
  to report such income in accordance with then applicable law. Withholding for
  federal or state income and employment tax purposes will be made, if and as
  required by law, from Grantee's then current compensation, or, if such current
  compensation is insufficient to satisfy withholding tax liability, the Company
  may require Grantee to make a cash payment to cover such liability.

                7.
  Stand-off Agreement. Grantee agrees that, in connection with any registration
  of the Company's securities under the Securities Act, and upon the request of
  the Company or any underwriter managing an underwritten offering of the Company's
  securities, Grantee shall not sell, short any sale of, loan, grant an option
  for, or otherwise dispose of any of the Shares (other than Shares included in
  the offering) without the prior written consent of the Company or such managing
  underwriter, as applicable, for a period of at least one year following the
  effective date of registration of such offering. This Section 8 shall survive
  any termination of this Agreement.

                8.
  Termination of Agreement. This Agreement shall terminate on the occurrence
  of any one of the following events: (a) written agreement of all parties to
  that effect; (b) a proposed dissolution or liquidation of the Company, a merger
  or consolidation in which the Company is not the surviving entity, or a sale
  of all or substantially all of the assets of the Company; (c) the closing of
  any public offering of common stock of the Company pursuant to an effective
  registration statement under the Act; or (d) dissolution, bankruptcy, or insolvency
  of the Company.

                9.
  Agreement Subject to Plan; Applicable Law. This Grant is made pursuant
  to the Plan and shall be interpreted to comply therewith. A copy of such Plan
  is available to Grantee, at no charge, at the principal office of the Company.
  Any provision of this Agreement inconsistent with the Plan shall be considered
  void and replaced with the applicable provision of the Plan. This Grant shall
  be governed by the laws of the State of Nevada and subject to the exclusive
  jurisdiction of the courts therein.

                10.
  Miscellaneous.

                (a)
  Notices. Any notice required to be given pursuant to this Agreement or
  the Plan shall be in writing and shall be deemed to have been duly delivered
  upon receipt or, in the case of notices by the Company, five (5) days after
  deposit in the U.S. mail, postage prepaid, addressed to Grantee at the last
  address provided by Grantee for use in the Company's records.

                (b)
  Entire Agreement. This instrument constitutes the sole agreement of the
  parties hereto with respect to the Shares. Any prior agreements, promises or
  representations 

- 5 -

concerning the Shares not included or
  reference herein shall be of no force or effect. This Agreement shall be binding
  on, and shall inure to the benefit of, the Parties hereto and their respective
  transferees, heirs, legal representatives, successors, and assigns.

                (c)
  Enforcement. This Agreement shall be construed in accordance with, and
  governed by, the laws of the State of Nevada and subject to the exclusive jurisdiction
  of the courts located in Nevada, Nevada. If Grantee attempts to transfer any
  of the Shares subject to this Agreement, or any interest in them in violation
  of the terms of this Agreement, the Company may apply to any court for an injunctive
  order prohibiting such proposed transaction, and the Company may institute and
  maintain proceedings against Grantee to compel specific performance of this
  Agreement without the necessity of proving the existence or extent of any damages
  to the Company. Any such attempted transaction shares in violation of this Agreement
  shall be null and void.

                (d)
  Validity of Agreement. The provisions of this Agreement may be waived,
  altered, amended, or repealed, in whole or in part, only on the written consent
  of all parties hereto. It is intended that each Section of this Agreement shall
  be viewed as separate and divisible, and in the event that any Section shall
  be held to be invalid, the remaining Sections shall continue to be in full force
  and effect.

                IN
  WITNESS WHEREOF, the parties have executed
  this Agreement as of the date first above written.

	 	COMPANY: 	TERAX ENERGY, INC., 
	 	  	a Nevada corporation 
	 	  	  
	 	  	  
	 	  	By: ______________________________________
	 	  	Name: ____________________________________
	 	  	Title: _____________________________________

	 	GRANTEE: 	 	 
	 		By: 	 
	 		 	(signature) 
	 		Name: 	 

- 6 -Filed by Automated Filing Services Inc. (604) 609-0244 - Terax Energy, Inc. - Exhibit 10.7

EXHIBIT 10.7

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase
Agreement (this "Agreement") is dated as of February 7, 2006, among
Terax Energy, Inc., a Nevada corporation (the "Company"), and each
investor identified on the signature pages hereto (each, an "Investor"
and collectively, the "Investors").

     WHEREAS, subject to the terms and
conditions set forth in this Agreement and pursuant to Section 4(2) of the
Securities Act (as defined below) and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Investor, and each Investor, severally
and not jointly, desires to purchase from the Company certain securities of the
Company, as more fully described in this Agreement.

     NOW, THEREFORE, IN CONSIDERATION
of the mutual covenants contained in this Agreement, and for other good and
valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and each Investor agree as follows:

ARTICLE I.
DEFINITIONS

     1.1 Definitions. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms shall have the meanings indicated in this
Section 1.1:

     "Action" means any action,
suit, notice of violation, proceeding (including any partial proceeding such as
a deposition) or investigation pending or threatened in writing against or
affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency,
regulatory authority (federal, state, county, local or foreign), stock market,
stock exchange or trading facility.

     "Affiliate" means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 144.

     "Business Day" means any
day except Saturday, Sunday and any day which is a federal legal holiday or a
day on which banking institutions in the State of New York , State of
Connecticut or Commonwealth of Massachusetts are authorized or required by law
or other governmental action to close.

     "Closing" means the
closing of the purchase and sale of the Securities pursuant to Article II.

     "Closing Date" means the
Business Day immediately following the date on which all of the conditions set
forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the
parties may agree.

     "Commission"
means the Securities and Exchange Commission.

     "Common Stock" means the
common stock of the Company, par value $0.001 per share, and any securities into
which such common stock may hereafter be reclassified. 

     "Company
Counsel" means Sichenzia Ross Friedman Ference
LLP.

     “Company Deliverables” has the
meaning set forth in Section 2.2(a)
..

     “Disclosure Materials” has the
meaning set forth in Section 3.1(h)
..

     "Exchange Act" means the
Securities Exchange Act of 1934, as amended.

     “GAAP” means U.S.
generally accepted accounting principles.

     “Intellectual Property
Rights” has the meaning set forth in Section 3.1(o) .

     "Investment Amount" means,
with respect to each Investor, the product of the Per Unit Purchase Price
multiplied by the number of Units being purchased by such Investor (as indicated
on such Investor’s signature page to this Agreement).

     “Investor
Deliverables” has the meaning set forth in Section 2.2(b) .

     “Investor Party”
has the meaning set forth in Section 4.7.

     "Lien" means any lien,
charge, encumbrance, security interest, right of first refusal or other
restrictions of any kind.

     “Material Adverse Effect”
means any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) an adverse impairment to the Company's ability to perform on a timely
basis its obligations under any Transaction Document.

     “New York Courts” means
the state and federal courts sitting in the City of New York, Borough of
Manhattan.

     "Outside Date"
means February 6, 2006.

     "Per Unit Purchase
Price" equals $1.25.

     "Person" means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

     "Proceeding" means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.

2

     "Registration Rights
Agreement" means the Registration Rights Agreement, dated as of the date of
this Agreement, among the Company and each Investor, in the form of Exhibit
B hereto.

     "Registration Statement"
means a registration statement meeting the requirements set forth in the
Registration Rights Agreement and covering the resale by the Investors of the
Shares and the Warrant Shares.

     "Rule 144" means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.

     “SEC Reports”
has the meaning set forth in Section
3.1(h) 

      “Securities” means the
Shares, the Warrants and the Warrant
Shares.

     "Securities Act"
means the Securities Act of 1933, as amended.

     "Shares" means the shares
of Common Stock issued or issuable to the Investors pursuant to this
Agreement.

     "Short Sales" include,
without limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers.

     "Subsidiary" means any
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X
promulgated by the Commission under the Exchange Act.

     "Trading Day" means (i) a
day on which the Common Stock is traded on a Trading Market, or (ii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the Pink Sheets,
LLC (or any similar organization or agency succeeding to its functions of
reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall
mean a Business Day.

     "Trading Market" means
whichever of the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market, the Nasdaq Capital Market or OTC Bulletin Board on which
the Common Stock is listed or quoted for trading on the date in question.

     "Transaction Documents"
means this Agreement, the Warrants, the Registration Rights Agreement and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.

3

     "Warrants" means the
Common Stock purchase warrants in the form of Exhibit A, which are
issuable to the Investors at the Closing.

     "Warrant Shares" means the
shares of Common Stock issuable upon exercise of the Warrants.

ARTICLE II.
PURCHASE AND SALE

     2.1 Closing. Subject to
the terms and conditions set forth in this Agreement, at the Closing the Company
shall issue and sell to each Investor, and each Investor shall, severally and
not jointly, purchase from the Company, the Shares and the Warrants representing
such Investor’s Investment Amount. The Closing shall take place at the offices
of Sichenzia Ross Friedman Ference LLP, 1065 Avenue of the Americas, New York,
New York 10018 on the Closing Date or at such other location or time as the
parties may agree.

     2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered to each
Investor the following (the "Company Deliverables"):

                    (i)
a certificate evidencing the number of Shares indicated on such Investor’s
signature page to this Agreement, registered in the name of such Investor;

                    (ii)
a Warrant, registered in the name of such Investor, pursuant to which such
Investor shall have the right to acquire the number of shares of Common Stock
equal to such Investors Investment Amount, divided by $1.25;

                    (iii)
the Registration Rights Agreement, duly executed by the Company; and

                    (iv)
a legal opinion from counsel to the Company in form and substance reasonably
acceptable to the Investors. 

          (b)
At the Closing, each Investor shall deliver or cause to be delivered to the
Company the following (the "Investor Deliverables"):

                    (i)
Immediately upon receipt of the certificate evidencing the shares and the
warrant, its Investment Amount, in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing by the
Company for such purpose; and

                    (ii)
the Registration Rights Agreement, duly executed by such Investor.

4

ARTICLE III.

  REPRESENTATIONS AND WARRANTIES

     3.1 Representations and
Warranties of the Company. The Company hereby makes the following
representations and warranties to each
Investor:

          (a)
Subsidiaries. The Company has no direct or indirect Subsidiaries other
than as specified in the SEC Reports. The Company owns, directly or indirectly,
all of the capital stock of each Subsidiary free and clear of any and all Liens,
and all the issued and outstanding shares of capital stock of each Subsidiary
are validly issued and are fully paid, non-assessable and free of preemptive and
similar rights.

          (b)
Organization and Qualification. The Company and each Subsidiary are duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company and each Subsidiary are duly
qualified to conduct its respective businesses and are in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.

          (c)
Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company and
no further action is required by the Company in connection therewith. Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application. 

          (d)
No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights 

5

of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.

          (e)
Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filing with the Commission of one or more Registration Statements in
accordance with the requirements of the Registration Rights Agreement, (ii)
filings required by state securities laws, (iii) the filing of a Notice of Sale
of Securities on Form D with the Commission under Regulation D of the Securities
Act, (iv) the filings required in accordance with Section 4.4 and (v) those that
have been made or obtained prior to the date of this Agreement.

          (f)
Issuance of the Securities. The Securities have been duly authorized and,
when issued and paid for in accordance with the Transaction Documents, will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens. As of the Closing, the Company will have reserved from its duly
authorized capital stock the shares of Common Stock issuable pursuant to this
Agreement and the Warrants in order to issue the Shares and the Warrant
Shares.

          (g)
Capitalization. The number of shares and type of all authorized, issued
and outstanding capital stock of the Company, and all shares of Common Stock
reserved for issuance under the Company’s various option and incentive plans, is
specified in the SEC Reports. Except as specified in the SEC Reports, no
securities of the Company are entitled to preemptive or similar rights, and no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as specified in the SEC Reports, there are no
outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities will not, immediately or with the passage
of time, obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Investors) and will not result in a

6

right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities.

          (h)
SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC Reports" and, together with the Schedules to this
Agreement (if any), the "Disclosure Materials") on a timely basis or has
timely filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.

          (i)
Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables, accrued expenses and other liabilities incurred
in the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company's financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option or
restricted stock plans. The Company does not have pending before the Commission
any request for confidential treatment of information.

          (j)
Litigation. There is no Action which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) except as specifically disclosed in the SEC Reports,
could, if there were an unfavorable decision, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof (in 

7

his or her capacity as such), is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty, except as specifically
disclosed in the SEC Reports. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by
the Company or any Subsidiary under the Exchange Act or the Securities Act.

          (k)
Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the
Company.

          (l)
Compliance. Except as disclosed in the SEC Reports, neither the Company
nor any Subsidiary (i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect. 

          (m)
Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such permits.

          (n)
Title to Assets. Except as disclosed in the SEC Reports, the Company and
the Subsidiaries have good and marketable title in fee simple to all real
property owned by them that is material to their respective businesses and good
and marketable title in all personal property owned by them that is material to
their respective businesses, in each case free and clear of all Liens, except
for Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance, except as could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.

          (o)
Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in 

8

connection with their respective businesses as described in the
SEC Reports and which the failure to so have could, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). Neither the Company
nor any Subsidiary has received a written notice that the Intellectual Property
Rights used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. Except as set forth in the SEC Reports, to the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.

          (p)
Transactions With Affiliates and Employees. Except as set forth in the
SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.

          (q)
Internal Accounting Controls. Except as disclosed in the SEC Reports, the
Company and the Subsidiaries maintain a system of internal accounting controls
consistent with similarly situated companies which is sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. 

          (r)
Solvency. Based on the financial condition of the Company as of the
Closing Date (and assuming that the Closing shall have occurred), (i) the
Company's fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the proceeds the
Company would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all amounts
on or in respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable on
or in respect of its debt).

          (s)
Certain Fees. The Investors shall have no obligation with respect to any
fees or with respect to any claims (other than such fees or commissions owed by
an Investor 

9

pursuant to written agreements executed by such Investor which
fees or commissions shall be the sole responsibility of such Investor) made by
or on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated by this
Agreement.

          (t)
Certain Registration Matters. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2(b) -(e), no registration
under the Securities Act is required for the offer and sale of the Shares and
Warrant Shares by the Company to the Investors under the Transaction Documents.
The Company is eligible to register the resale of its Common Stock for resale by
the Investors under Form SB-2 promulgated under the Securities Act.

          (u)
Investment Company. The Company is not, and is not an Affiliate of, and
immediately following the Closing will not have become, an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.

          (v)
Application of Takeover Protections. The Company has taken all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the Investors' ownership
of the Securities.

          (w)
No Additional Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction
Documents.

          (x)
Disclosure. The Company confirms that neither it nor any Person acting on
its behalf has provided any Investor or its respective agents or counsel with
any information that the Company believes constitutes material, non-public
information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information. The Company understands
and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Investors regarding the Company, its business and the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Company’s representations and warranties set forth in this
Agreement) are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.

          (y)
  Patriot Act. The Company, its Subsidiaries and/or their affiliates have
  not engaged in transactions involving funds derived from illegal activity including
  money laundering, and are not under investigation for and have not been previously
  charged with violating any laws prohibiting money laundering, including but
  not limited to: (a) the Bank 

10

Secrecy Act, as amended by the USA PATRIOT ACT of 2001 (the
"PATRIOT Act”), and its implementing regulations, and all other
applicable U.S. and non-U.S. anti-money laundering laws and regulations and (b)
the Executive Orders and Sanctions Programs administered by the U.S. Department
of the Treasury's Office Foreign Assets Control (“OFAC”), including but
not limited to Executive Order No. 13224 of September 23, 2001 entitled,
"Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism," and all regulations contained in 31
C.F.R., Subtitle B, Chapter V (collectively, the “Anti-Money Laundering and
Anti-Terrorism Laws/OFAC laws”); and (c) the laws and regulations of the
jurisdictions in which the Company and its Subsidiaries operate.

     None of the Company, its
Subsidiaries or their affiliates are, to the best of their knowledge after
reasonable due diligence, acting, directly or indirectly, on behalf of
terrorists, terrorist organizations or narcotics traffickers, including those
persons or entities that appear on the Specially Designated Nationals and
Blocked Persons List ("SDN List") administered by OFAC (see
http://www.treas.gov/offices/enforcement/ofac/) and any individual or entity
included on any list of terrorists or terrorist organizations maintained by the
United Nations, the European Union and\or the countries in which the Company and
its Subsidiaries operate.

     None of the Company, its
Subsidiaries or their affiliates or, to the best of their knowledge, any of
their brokers or other agents: (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any person included on the SDN List; (ii) deals in, or otherwise engages in any
transaction relating to, any property or interests in property blocked pursuant
to the Sanctions Programs administered by OFAC; or (iii) engages in or conspires
to engage in any transaction that evades or avoids, or has the purpose of
evading or avoiding, or attempts to violate, any of the prohibitions set forth
in any anti-money laundering and anti-terrorism laws to which they are
subject.

     None of the Company or its Subsidiaries
  or any officer or director of the Company or its Subsidiaries: (a) appears on
  the SDN List or (b) is a politically exposed person (as defined in guidance
  issued by the Financial Action Task Force (see http://www.fatf-gafi.org/)
  or a senior foreign political figure1 or a family member or close associate
  of such a figure (see http://www.treas.gov/press/releases/docs/guidance.htm).

	1 	A "senior foreign political figure" is defined as a current or former
      senior official in the executive, legislative, administrative,  military
      or judicial branches of a non-U.S. government (whether elected or not),
      a current or former senior official of a major non-U.S. political party,
      or a current or former senior executive of a non-U.S. government owned corporation.
      In addition, a "senior foreign political figure" includes any corporation,
      business or other entity that has been formed by, or for the benefit of,
      a senior foreign political figure. "Immediate family" of a senior foreign
      political figure typically includes the figure's parents, siblings, spouse,
      children and in-laws. A "close associate" of a senior foreign political
      figure is a person who is widely and publicly known to maintain an unusually
      close relationship with the senior foreign political figure, 

11

          (z)
Foreign Corrupt Practices Act. Neither the Company or any of its
Subsidiaries, nor any director, officer, agent or employee of the Company or any
of its Subsidiaries has made, directly or indirectly, any payment or promise to
pay, or gift or promise to give or authorized such a promise or gift, of any
money or anything of value, directly or indirectly, to: (a) any foreign official
(as such term is defined in the Foreign Corrupt Practices Act (the
“FCPA”) for the purpose of influencing any official act or decision of
such official or inducing him or her to use his or her influence to affect any
act or decision of a governmental authority or (b) any foreign political party
or official thereof or candidate for foreign political office for the purpose of
influencing any official act or decision of such party, official or candidate or
inducing such party, official or candidate to use his, her or its influence to
affect any act or decision of a foreign governmental authority, in the case of
both (a) and (b) above in order to assist the Company or any of its Subsidiaries
to obtain or retain business for, or direct business to the Company or any of
its Subsidiaries, as applicable, and under circumstances which would subject the
Company or any of its Subsidiaries to liability under the FCPA or any
corresponding foreign laws. Neither the Company nor any of its Subsidiaries has
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment of funds or received or retained any funds in violation of any law, rule
or regulation.

                    (aa)
  Use of Proceeds. No part of the proceeds of the sale of the Shares and
  Warrants will be used, directly or indirectly, for any payments to: (a) any
  individual or entity listed on the SDN List and/or any other similar lists administered
  by OFAC pursuant to any authorizing statute, Executive Order or regulation;
  (b) the government of any country subject to an OFAC Sanctions Program; (c)
  any individual or entity included on any list of terrorists or terrorist organizations
  maintained by the United Nations, the European Union and/or the countries in
  which the Company and its Subsidiaries operate; or (d) any governmental official
  or employee, political party, official of a political party, candidate for political
  office, anyone else acting in an official capacity, or any agent of any such
  individual or entity, in order to obtain, retain or direct business or obtain
  any improper advantage, in violation of the FCPA.

                    (bb)
  Sarbanes-Oxley Compliance. The Company and each of its Subsidiaries are
  in compliance in all material respects with all applicable requirements of the
  Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated
  by the Commission thereunder.

                    (cc)
  No Manipulation of Stock. Neither the Company nor any of its Subsidiaries
  has taken, in violation of applicable law, any action designed to or that might
  reasonably be expected to cause or result in stabilization or manipulation of
  the price of the Common Stock to facilitate the transactions contemplated hereby
  or the sale or resale of the Shares or the Warrant Shares.

     3.2 Representations and
Warranties of the Investors. Each Investor hereby, for itself and for no
other Investor, represents and warrants to the Company as follows:

	 	and includes a person who is in a position to conduct substantial U.S.
      and non-U.S. financial transactions on behalf of the senior foreign political
      figure.

12

          (a)
Organization; Authority. Such Investor is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such Investor.
Each of this Agreement and the Registration Rights Agreement has been duly
executed by such Investor, and when delivered by such Investor in accordance
with terms hereof, will constitute the valid and legally binding obligation of
such Investor, enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

          (b)
Investment Intent. Such Investor is acquiring the Securities as principal
for its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor's right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Subject to the immediately preceding
sentence, nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Securities for any period of time. Such Investor
does not have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.

          (c)
Investor Status. At the time such Investor was offered the Securities, it
was, and at the date hereof it is, and on each date on which it exercises
Warrants it will be, an "accredited investor" as defined in Rule 501(a) under
the Securities Act. Such Investor is not a registered broker-dealer under
Section 15 of the Exchange Act.

          (d)
General Solicitation. Such Investor is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

          (e)
Access to Information. Such Investor acknowledges that it has reviewed
the Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Securities;
(ii) access to information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor's right to 

13

rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company's representations and warranties contained in the
Transaction Documents.

          (f)
Certain Trading Activities. Such Investor has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with
such Investor, engaged in any transactions in the securities of the Company
(including, without limitations, any Short Sales involving the Company’s
securities) since the earlier to occur of (1) the time that such Investor was
first contacted by the Company or others regarding an investment in the Company
and (2) the 30th calendar day prior to the date of this Agreement.
Such Investor covenants that neither it nor any Person acting on its behalf or
pursuant to any understanding with it will engage in any transactions in the
securities of the Company (including Short Sales) prior to the time that the
transactions contemplated by this Agreement are publicly disclosed.

          (g)
Independent Investment Decision. Such Investor has independently
evaluated the merits of its decision to purchase Securities pursuant to the
Transaction Documents, and such Investor confirms that it has not relied on the
advice of any other Investor’s business and/or legal counsel in making such
decision. Such Investor has not relied on the business or legal advice of any
other person in making its investment decision hereunder, and confirms that none
of such Persons has made any representations or warranties to such Investor in
connection with the transactions contemplated by the Transaction Documents.

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

	    4.1 (a) Securities may
      only be disposed of in compliance with state and federal securities laws.
      In connection with any transfer of the Securities other than pursuant to
      an effective registration statement, to the Company, to an Affiliate of
      an Investor or in connection with a pledge as contemplated in Section 4.1(b),
      if reasonably necessary, the Company may require the transferor thereof
      to provide to the Company an opinion of counsel selected by the transferor,
      the form and substance of which opinion shall be reasonably satisfactory
      to the Company, to the effect that such transfer does not require registration
      of such transferred Securities under the Securities Act. 

	  	  	  
	          (b)
      Certificates evidencing the Securities will contain the following legend,
      until such time as they are not required under Section 4.1(c): 

	  	  	  

[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE
  OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED]
  WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
  ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
  ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
  OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE 

  14 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

       (c) The legend set
  forth in Section 4.1(b) shall be removed and the Company shall issue a certificate
  without such legend or any other legend to the holder of the applicable Securities
  upon which it is stamped, if (i) such Securities are registered for resale under
  the 1933 Act, (ii) in connection with a sale, assignment or other transfer,
  such holder provides the Company with an opinion of counsel, in a generally
  acceptable form, to the effect that such sale, assignment or transfer of such
  Securities may be made without registration under the applicable requirements
  of the 1933 Act, or (iii) such holder provides the Company with reasonable assurance
  that such Securities can be sold, assigned or transferred pursuant to Rule 144.
  The Company shall cause its counsel to issue a legal opinion to the Company’s
  transfer agent promptly after the Effective Date if required by the Company’s
  transfer agent to effect the removal of the legend hereunder. If all or any
  portion of the Warrant is exercised at a time when there is an effective registration
  statement to cover the resale of the Warrant Shares, such Warrant Shares shall
  be issued free of the legend set forth in Section 4.1(b) . Following the Effective
  Date or at such earlier time as a legend is no longer required for certain Securities,
  the Company will no later than three Business Days following the delivery by
  an Investor to the Company or the Company’s transfer agent of a legended
  certificate representing such Securities, deliver or cause to be delivered to
  such Investor a certificate representing such Securities that is free from all
  restrictive and other legends. Following the Effective Date and upon the delivery
  to any Investor of any certificate representing Securities that is free from
  all restrictive and other legends, such Investor agrees that any sale of such
  Securities shall be made pursuant to the Registration Statement and in accordance
  with the plan of distribution described therein or pursuant to an available
  exemption from the registration requirements of the 1933 Act. The Company may
  not make any notation on its records or give instructions to any transfer agent
  of the Company that enlarge the restrictions on transfer set forth in Section
  4.1. The Company shall bear all costs and expenses of the Transfer Agent in
  connection with the delivery of the certificates, whether by electronic transfer
  or otherwise, and the removal of any restrictive legends required hereby.

       4.2 Furnishing of
  Information. As long as any Investor owns the Securities, the Company covenants
  to timely file (or obtain extensions in respect thereof and file within the
  applicable grace period) all reports required to be filed by the Company after
  the date hereof pursuant to the Exchange Act. As long as any Investor owns Securities,
  if the Company is not required to file reports pursuant to such laws, it will
  prepare and furnish to the Investors and make publicly available in accordance
  with Rule 144(c) such information as is required for the Investors to sell the
  Shares and Warrant Shares under Rule 144. The Company further covenants that
  it will take such further action as any holder of Securities may reasonably
  request, 

15

all to the extent required from time to time to enable such
Person to sell the Shares and Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

     4.3 Integration. The
Company shall not, and shall use its best efforts to ensure that no Affiliate of
the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the sale
of the Securities to the Investors, or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market in a manner that would require stockholder approval of the sale
of the securities to the Investors.

     4.4 Securities Laws
Disclosure; Publicity. As soon as reasonably practicable, and in no event
later than by 9:00 a.m. (New York time) on the Trading Day following the
execution of this Agreement, and by 9:00 a.m. (New York time) on the Trading Day
following the Closing Date, the Company shall issue press releases disclosing
the transactions contemplated hereby and the Closing. Each Investor shall have
the opportunity to review and approve such press releases prior to their public
release. In no event may the Company use the name of any Investor or of
Wellington Management Company, LLP (“WMC”) in such press releases without the
express consent of such Investor or WMC. On the Trading Day following the
execution of this Agreement the Company will file a Current Report on Form 8-K
disclosing the material terms of the Transaction Documents (and attach as
exhibits thereto the Transaction Documents), and on the Trading Day following
the Closing Date the Company will file an additional Current Report on Form 8-K
to disclose the Closing. In addition, the Company will make such other filings
and notices in the manner and time required by the Commission and the Trading
Market on which the Common Stock is listed.

     4.5 Indemnification of
Investors. In addition to the indemnity provided in the Registration Rights
Agreement, the Company will indemnify and hold the Investors and their
directors, officers, shareholders, partners, employees and agents (each, an
"Investor Party") harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys'
fees and costs of investigation (collectively, "Losses") that any such
Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred. 

     4.6 Non-Public
Information. The Company covenants and agrees that neither it nor any other
Person acting on its behalf will provide any Investor or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto such Investor shall have executed a written
agreement regarding the confidentiality and 

16

use of such information. The Company understands and confirms
that each Investor shall be relying on the foregoing representations in
effecting transactions in securities of the Company.

     4.7 Listing of Securities.
The Company agrees, (i) if the Company applies to have the Common Stock traded
on any other Trading Market, it will include in such application the Shares and
Warrant Shares, and will take such other action as is necessary or desirable to
cause the Shares and Warrant Shares to be listed on such other Trading Market as
promptly as possible, and (ii) it will take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and
will comply in all material respects with the Company’s reporting, filing and
other obligations under the bylaws or rules of the Trading Market.

     4.8 J.P. Turner & Company,
L.L.C. Release. Investor has performed its own due diligence investigation
and had the opportunity to ask questions of the Company and its management team
and analyze their responses. Investor has not relied on any representations not
made by the Company and that are not expressly set forth in the purchase
agreement. The Company has performed its own due diligence investigation and had
the opportunity to ask questions of the Investor and its management team and
analyze their responses. The Company has not relied on any representations not
made by the Investor and that are not expressly set forth in the purchase
agreement. Both parties to the purchase agreement shall release and hold
harmless J.P. Turner & Company, L.L.C. from and against any losses, claims,
damages or liabilities related to the Offering. Furthermore, both parties
recognize that the Agent only act as a finder and other than introducing them,
the Agent had and will have no further role.

ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING

     5.1 Conditions Precedent to
the Obligations of the Investors to Purchase Securities. The obligation of
each Investor to acquire Securities at the Closing is subject to the
satisfaction or waiver by such Investor, at or before the Closing, of each of
the following conditions:

          (a)
Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing as though made on and as of such
date;

          (b)
Performance. The Company shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by it at
or prior to the Closing;

          (c)
No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents;

17

          (d)
Adverse Changes. Since the date of execution of this Agreement, no event
or series of events shall have occurred that reasonably could have or result in
a Material Adverse Effect; 

          (e)
No Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than one Trading Day solely
to permit dissemination of material information regarding the Company) at any
time since the date of execution of this Agreement, and the Common Stock shall
have been at all times since such date listed for trading on a Trading Market;
and

          (f)
Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a) .

     5.2 Conditions Precedent to
the Obligations of the Company to sell Securities. The obligation of the
Company to sell Securities at the Closing is subject to the satisfaction or
waiver by the Company, at or before the Closing, of each of the following
conditions:

          (a)
Representations and Warranties. The representations and warranties of
each Investor contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made on
and as of such date;

          (b)
Performance. Each Investor shall have performed, satisfied and complied
in all material respects with all covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by such
Investor at or prior to the Closing;

          (c)
No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents; and

          (d)
Investors Deliverables. Each Investor shall have delivered its Investors
Deliverables in accordance with Section 2.2(b) .

ARTICLE VI. 
MISCELLANEOUS

     6.1 Fees and Expenses.
Each party shall pay the fees and expenses of its advisers, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of the
Transaction Documents. The Company shall pay all stamp and other taxes and
duties levied in connection with the sale of the Shares.

18

     6.2 Entire Agreement. The
Transaction Documents, together with the Exhibits and Schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements, understandings, discussions and
representations, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.

     6.3 Notices. Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile (provided the sender receives a machine-generated
confirmation of successful transmission) at the facsimile number specified in
this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the
next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section on
a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on
any Trading Day, (c) the Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (d) upon actual receipt
by the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:

	    If to the Company: 	Terax Energy, Inc. 
	  	8150 N. Central Expy., Suite 1800 
	 	Dallas, TX
75206  
	  	Facsimile: (214) 691-2501 
	  	Attention: Lawrence Finn, CEO 
	  	  
	         With a copy to: 	Sichenzia Ross Friedman Ference LLP 
	  	1065 Avenue of the Americas 
	  	New York, NY 10018 
	  	Facsimile: (212) 930-9725 
	  	Attn.: Thomas A. Rose, Esq. 
	  	  
	         If to an Investor: 	To the address set forth under such Investor's
      name 
	  	on the signature pages hereof; 
	  	  
	         With a copy to: 	[ }
	 	 
	  	 
	  	 
	  	 

or such other address as may be designated in writing
hereafter, in the same manner, by such Person.

     6.4 Amendments; Waivers; No
Additional Consideration. No provision of this Agreement may be waived or
amended except in a written instrument signed by the Company 

19

and each Investor. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right. No consideration shall be offered or paid
to any Investor to amend or consent to a waiver or modification of any provision
of any Transaction Document unless the same consideration is also offered to all
Investors who then hold Shares.

     6.5 Termination. This
Agreement may be terminated prior to Closing:

          (a)
by written agreement of the Investors and the Company; and

          (b)
by the Company or an Investor (as to itself but no other Investor) upon written
notice to the other, if the Closing shall not have taken place by 6:30 p.m.
Eastern time on the Outside Date; provided, that the right to terminate
this Agreement under this Section 6.5(b) shall not be available to any Person
whose failure to comply with its obligations under this Agreement has been the
cause of or resulted in the failure of the Closing to occur on or before such
time.

     In the event of a termination
pursuant to this Section, the Company shall promptly notify all non-terminating
Investors. Upon a termination in accordance with this Section 6.5, the Company
and the terminating Investor(s) shall not have any further obligation or
liability (including as arising from such termination) to the other and no
Investor will have any liability to any other Investor under the Transaction
Documents as a result therefrom.

     6.6 Construction. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction Documents.

     6.7 Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of each Investor. Any Investor may assign any or all of its
rights under this Agreement to any Person to whom such Investor assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Investors."

     6.8 No Third-Party
Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person,
except as otherwise set forth in Section 4.7 (as to each Investor Party).

20

     6.9 Governing Law. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced in the New York Courts. Each party hereto hereby
irrevocably submits to jurisdiction of the New York Courts for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of the any of the Transaction Documents), that such Proceeding has
been commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.

     6.10 Survival. The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Securities.

     6.11 Execution. This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.

     6.12 Severability. If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

     6.13 Rescission and Withdrawal
Right. Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) the Transaction Documents, whenever any
Investor exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within
the periods 

21

therein provided, then such Investor may rescind or withdraw,
in its sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.

     6.14 Replacement of
Securities. If any certificate or instrument evidencing any Securities is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in
lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable indemnity, if requested. The
applicants for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs associated with the issuance of such
replacement Securities. If a replacement certificate or instrument evidencing
any Securities is requested due to a mutilation thereof, the Company may require
delivery of such mutilated certificate or instrument as a condition precedent to
any issuance of a replacement.

     6.15 Remedies. In addition
to being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, each of the Investors and the Company will be
entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.

     6.16 Payment Set Aside. To
the extent that the Company makes a payment or payments to any Investor pursuant
to any Transaction Document or an Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

     6.17 Independent Nature of
Investors' Obligations and Rights. The obligations of each Investor under
any Transaction Document are several and not joint with the obligations of any
other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under any Transaction
Document. The decision of each Investor to purchase Securities pursuant to the
Transaction Documents has been made by such Investor independently of any other
Investor. Nothing contained herein or in any Transaction Document, and no action
taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Investor acknowledges that no
other Investor has acted as agent for such Investor in connection with 

22

making its investment hereunder and that no Investor will be
acting as agent of such Investor in connection with monitoring its investment in
the Securities or enforcing its rights under the Transaction Documents. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.
The Company acknowledges that each of the Investors has been provided with the
same Transaction Documents for the purpose of closing a transaction with
multiple Investors and not because it was required or requested to do so by any
Investor.

     6.18 Limitation of
Liability. Notwithstanding anything herein to the contrary, the Company
acknowledges and agrees that the liability of an Investor arising directly or
indirectly, under any Transaction Document of any and every nature whatsoever
shall be satisfied solely out of the assets of such Investor, and that no
trustee, officer, other investment vehicle or any other Affiliate of such
Investor or any investor, shareholder or holder of shares of beneficial interest
of such a Investor shall be personally liable for any liabilities of such
Investor.

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SIGNATURE PAGES
FOLLOW]

23

     IN WITNESS WHEREOF, the parties
hereto have caused this Securities Purchase Agreement to be duly executed by
their respective authorized signatories as of the date first indicated
above.

	  	TERAX ENERGY, INC.
	  	 
	 	By: _______________________________________

          Lawrence
      Finn,
    Chief Executive Officer 
	         
	         

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SIGNATURE PAGES
FOR INVESTORS FOLLOW] 

24

     IN WITNESS WHEREOF, the parties
hereto have caused this Securities Purchase Agreement to be duly executed by
their respective authorized signatories as of the date first indicated
above.

	 	NAME OF INVESTOR 
	 	  
	 	_______________________________________  
	 	 
	 	By:
      ____________________________________                  
    
	 	         Name:
	 	         Title:
	 	 
	 	Number of Shares being purchased:
    ____________
	 	 
	 	Tax ID No.: 
	 	 
	 	ADDRESS FOR NOTICE 
	 	 
	 	c/o: ____________________________________
	 	 
	 	Street:
__________________________________
	 	 
	 	City/State/Zip:
  ____________________________
	 	 
	 	Attention:
_______________________________
	 	 
	 	Tel: ____________________________________
	 	 
	 	Fax: ____________________________________
	 	 
	 	DELIVERY INSTRUCTIONS 
	 	(if different from above) 
	 	 
	 	c/o: ____________________________________
	 	 
	 	Street: __________________________________
	 	 
	 	City/State/Zip:
  ____________________________
	 	 
	 	Attention:
_______________________________
	 	 
	 	Tel:
  ____________________________________

25

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