Document:

EXHIBIT 10.01

                            2006 STOCK INCENTIVE PLAN

                                      FOR:

                              URANIUM ENERGY CORP.

                              URANIUM ENERGY CORP.
        9801 Anderson Mill Road, Suite 230, Austin, Texas, U.S.A., 78750

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                              URANIUM ENERGY CORP.

                            2006 STOCK INCENTIVE PLAN

1.       PURPOSE

1.1      The  purpose  of this Stock  Incentive  Plan of Uranium  Energy  Corp.
(the  "COMPANY")  is to advance  the  interests  of the  Company by  encouraging
Eligible  Participants  (as herein  defined) to acquire  shares of the  Company,
thereby increasing their proprietary  interest in the Company,  encouraging them
to remain associated with the Company and furnish them with additional incentive
in their efforts on behalf of the Company in the conduct of their affairs.

1.2      This Plan is specifically  designed for Eligible Participants of the
Company who are residents of the United States and/or subject to taxation in the
United States, although Awards (as herein defined) under this Plan may be issued
to other Eligible Participants.

2.       DEFINITIONS

2.1      As used herein, the following definitions shall apply:

         (a)   "ADMINISTRATOR"  means a Committee of the Board duly appointed by
               the Board, or otherwise the Board;

         (b)   "AFFILIATE"  and "ASSOCIATE"  have the meanings  ascribed to such
               terms in Rule 12b 2 promulgated under the Exchange Act;

         (c)   "APPLICABLE  LAWS" means the legal  requirements  relating to the
               administration of stock incentive plans, if any, under applicable
               provisions of federal  securities  laws,  state  corporate  laws,
               state or provincial  securities  laws, the Code, the rules of any
               applicable  stock  exchange or national  market  system,  and the
               rules of any foreign jurisdiction applicable to Awards granted to
               residents therein;

         (d)   "AWARD"  means the grant of an  Option,  SAR,  Restricted  Stock,
               unrestricted  Shares,  Restricted Stock Unit, Deferred Stock Unit
               or other right or benefit under this Plan;

         (e)   "AWARD  AGREEMENT"  means the written  agreement  evidencing  the
               grant  of an  Award  executed  by the  Company  and the  Grantee,
               including any amendments thereto;

         (f)   "AWARD RIGHT" means each right to acquire a Share  pursuant to an
               Award;

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

         (h)   "CAUSE" means,  with respect to the termination by the Company or
               a Related Entity of the Grantee's  Continuous Service,  that such
               termination is for `Cause' as such term is expressly defined in a
               then-effective  written  agreement  between  the  Grantee and the

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               Company  or  such  Related  Entity,  or in the  absence  of  such
               then-effective written agreement and definition,  is based on, in
               the determination of the Administrator, the Grantee's:

         (i)   refusal or failure to act in accordance with any specific, lawful
               direction  or order of the  Company  or a  Related  Entity;  (ii)
               unfitness  or   unavailability   for  service  or  unsatisfactory
               performance  (other  than  as  a  result  of  Disability);  (iii)
               performance of any act or failure to perform any act in bad faith
               and to the  detriment  of the Company or a Related  Entity;  (iv)
               dishonesty,  intentional  misconduct  or  material  breach of any
               agreement with the Company or a Related Entity; or (v) commission
               of a crime involving dishonesty,  breach of trust, or physical or
               emotional  harm to any person;  (i)  "CHANGE IN  CONTROL"  means,
               except as provided below, a change in ownership or control of the
               Company effected through any of the following transactions:

               (i)   the direct or indirect acquisition by any person or related
                     group of persons (other than an acquisition  from or by the
                     Company or by a Company-sponsored  employee benefit plan or
                     by a  person  that  directly  or  indirectly  controls,  is
                     controlled  by,  or  is  under  common  control  with,  the
                     Company)  of  beneficial  ownership  (within the meaning of
                     Rule 13d 3 of the Exchange  Act) of  securities  possessing
                     more than 50% of the  total  combined  voting  power of the
                     Company's  outstanding  securities  pursuant to a tender or
                     exchange offer made directly to the Company's  shareholders
                     which a majority of the  Continuing  Directors  who are not
                     Affiliates  or  Associates  of the offeror do not recommend
                     such shareholders accept;

               (ii)  a change in the  composition  of the Board over a period of
                     36 months or less such that a majority of the Board members
                     (rounded up to the next whole number) ceases,  by reason of
                     one or more contested elections for Board membership, to be
                     comprised of individuals who are Continuing Directors;

               (iii) the sale or  exchange by the Company (in one or a series of
                     transactions) of all or substantially  all of its assets to
                     any other person or entity; or

               (iv)  approval  by the  shareholders  of the Company of a plan to
                     dissolve and liquidate the Company.

               Notwithstanding the foregoing,  the following  transactions shall
               not constitute a "CHANGE OF CONTROL":

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               (i)   the  closing  of  any  public  offering  of  the  Company's
                     securities pursuant to an effective  registration statement
                     filed under the United  States  SECURITIES  ACT OF 1933, as
                     amended,

               (ii)  the  closing  of  a  public   offering  of  the   Company's
                     securities through the facilities of any stock exchange; or

               (iii) with respect to an Award that is subject to Section 409A of
                     the Code,  and payment or settlement of such Award is to be
                     accelerated   in  connection   with  an  event  that  would
                     otherwise  constitute  a Change  of  Control,  no event set
                     forth  previously  in this  definition  shall  constitute a
                     Change of Control  for  purposes  of this Plan or any Award
                     Agreement  unless such event also  constitutes a "change in
                     the  ownership",  "change  in  the  effective  control"  or
                     "change in the  ownership of a  substantial  portion of the
                     assets of the corporation" as defined under Section 409A of
                     the Code and Treasury guidance formulated  thereunder which
                     guidance currently provides that:

                           (A)      a "change  in  ownership"  of a  corporation
                                    shall be deemed to have  occurred if any one
                                    person or more than one  person  acting as a
                                    group acquires  stock of a corporation  that
                                    constitutes  more than 50% of the total Fair
                                    Market  Value or total  voting  power of the
                                    stock of the corporation.  Stock acquired by
                                    any  person or group of people  who  already
                                    owns more than 50% of such total Fair Market
                                    Value or total  voting  power of stock shall
                                    not trigger a change in ownership;

                           (B)      a "change  in the  effective  control"  of a
                                    corporation  generally  shall be  deemed  to
                                    have  occurred  if within a 12-month  period
                                    either:

                                    (I)     any  one  person  or more  than  one
                                            person  acting  as a group  acquires
                                            ownership of stock possessing 35% or
                                            more of the  total  voting  power of
                                            the stock of the corporation; or

                                    (II)    a  majority  of the  members  of the
                                            corporation's  board of directors is
                                            replaced    by    directors    whose
                                            appointment   or   election  is  not
                                            endorsed   by  a  majority   of  the
                                            members of the  corporation's  board
                                            of  directors  prior  to the date of
                                            the appointment or election; and

                           (C)      a "change in the  ownership of a substantial
                                    portion   of   the   corporation's   assets"
                                    generally  is  deemed  to occur if  within a
                                    12-month period any person, or more than one
                                    person  acting as a group,  acquires  assets
                                    from the corporation that have a total gross
                                    fair  market  value at least equal to 40% of
                                    the total gross fair market value of all the
                                    corporation's  assets  immediately  prior to

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                                    such  acquisition.  The  gross  fair  market
                                    value of assets is determined without regard
                                    to any liabilities;

         (j)   "CODE" means the United States INTERNAL  REVENUE CODE OF 1986, as
               amended;

         (k)   "COMMITTEE"  means  the  Compensation   Committee  or  any  other
               committee  appointed  by the  Board to  administer  this  Plan in
               accordance with the provisions of this Plan;

         (l)   "COMMON STOCK" means the common stock of the Company;

         (m)   "COMPANY" means Uranium Energy Corp., a Nevada corporation;

         (n)   "CONSULTANT"  means any person  (other than an  Employee)  who is
               engaged by the Company or any Related Entity to render consulting
               or advisory services to the Company or such Related Entity;

         (o)   "CONTINUING  DIRECTORS" means members of the Board who either (i)
               have been Board members  continuously for a period of at least 36
               months,  or (ii) have been Board  members for less than 36 months
               and were  appointed or nominated for election as Board members by
               at least a majority of the Board members  described in clause (i)
               who  were  still  in  office  at the  time  such  appointment  or
               nomination was approved by the Board;

         (p)   "CONTINUOUS  SERVICE" means that the provision of services to the
               Company or a Related Entity in any capacity of Employee, Director
               or Consultant that is not  interrupted or terminated.  Continuous
               Service  shall not be considered  interrupted  in the case of (i)
               any approved leave of absence,  (ii) transfers  between locations
               of the Company or among the Company,  any Related Entity,  or any
               successor,  in any capacity of Employee,  Director or Consultant,
               or (iii) any change in status as long as the  individual  remains
               in the service of the Company or a Related Entity in any capacity
               of Employee, Director or Consultant (except as otherwise provided
               in the Award  Agreement).  An  approved  leave of  absence  shall
               include sick leave, maternity or paternity leave, military leave,
               or any other authorized personal leave. For purposes of incentive
               stock options,  no such leave may exceed 90 calendar days, unless
               reemployment  upon  expiration  of such  leave is  guaranteed  by
               statute or contract;

         (q)   "CORPORATE TRANSACTION" means any of the following transactions:

               (i)   a merger or  consolidation  in which the Company is not the
                     surviving  entity,  except for a transaction  the principal
                     purpose of which is to change the jurisdiction in which the
                     Company is organized;

               (ii)  the  sale,   transfer  or  other   disposition  of  all  or
                     substantially  all of the assets of the Company  (including
                     the capital stock of the Company's subsidiary corporations)
                     in connection with the complete  liquidation or dissolution
                     of the Company; or

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               (iii) any reverse  merger in which the  Company is the  surviving
                     entity but in which securities  possessing more than 50% of
                     the  total   combined   voting   power  of  the   Company's
                     outstanding  securities  are  transferred  to a  person  or
                     persons  different  from  those  who held  such  securities
                     immediately prior to such merger;

         (r)   "COVERED  EMPLOYEE" means an Employee who is a "COVERED EMPLOYEE"
               under Section 162(m)(3) of the Code;

         (s)   "DEFERRED STOCK UNITS" means Awards that are granted to Directors
               and are subject to the additional provisions set out in Subpart A
               which is attached hereto and which forms a material part hereof;

         (t)   "DIRECTOR"  means a member of the Board or the board of directors
               of any Related Entity;

         (u)   "DISABILITY"  or  "DISABLED"  means  that a Grantee  is unable to
               carry out the responsibilities and functions of the position held
               by the Grantee by reason of any medically  determinable  physical
               or mental  impairment.  A Grantee shall not be considered to have
               incurred a Disability  unless he or she  furnishes  proof of such
               impairment   sufficient  to  satisfy  the  Administrator  in  its
               discretion.  Notwithstanding  the above,  (i) with  respect to an
               Incentive  Stock Option,  "Disability"  or "Disabled"  shall mean
               permanent and total  disability as defined in Section 22(e)(3) of
               the Code and (ii) to the  extent an Option is  subject to Section
               409A of the Code,  and payment or  settlement of the Option is to
               be accelerated  solely as a result of the Eligible  Participant's
               Disability,  Disability  shall have the meaning  ascribed thereto
               under  Section  409A  of  the  Code  and  the  Treasury  guidance
               promulgated thereunder;

         (v)   "DISINTERESTED SHAREHOLDER APPROVAL" means approval by a majority
               of the votes  cast by all the  Company's  shareholders  at a duly
               constituted  shareholders'  meeting,  excluding votes attached to
               shares beneficially owned by Insiders;

         (w)   "ELIGIBLE  PARTICIPANT"  means any  person who is an  Officer,  a
               Director, an Employee or a Consultant,  including individuals who
               are  foreign  nationals  or are  employed  or reside  outside the
               United States;

         (x)   "EMPLOYEE"  means any  person  who is a  full-time  or  part-time
               employee of the Company or any Related Entity;

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

         (z)   "FAIR MARKET VALUE" means,  as of any date,  the value of a Share
               determined  in  good  faith  by  the  Administrator.  By  way  of
               illustration,  but  not  limitation,  for  the  purpose  of  this
               definition,  good faith shall be met if the Administrator employs
               the following methods:

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               (i)   LISTED  STOCK.  If  the  Common  Stock  is  traded  on  any
                     established  stock exchange or quoted on a national  market
                     system,  fair market  value shall be (A) the closing  sales
                     price for the Common Stock as quoted on that stock exchange
                     or system for the date the value is to be  determined  (the
                     "Value  Date") as reported in The Wall Street  Journal or a
                     similar publication,  or (B) if the rules of the applicable
                     stock exchange require, the volume-weighted average trading
                     price  for five days  prior to the date the Board  approves
                     the grant of the Award.  If no sales are reported as having
                     occurred on the Value Date, fair market value shall be that
                     closing sales price for the last  preceding  trading day on
                     which sales of Common Stock is reported as having occurred.
                     If no sales are reported as having occurred during the five
                     trading days before the Value Date, fair market value shall
                     be the closing bid for Common  Stock on the Value Date.  If
                     the  Common  Stock  is  listed  on  multiple  exchanges  or
                     systems,  fair market value shall be based on sales or bids
                     on the primary  exchange or system on which Common Stock is
                     traded  or  quoted.  If the rules of any  applicable  stock
                     exchange   or  system   require  a   different   method  of
                     calculating  fair  market  value,  then  such  method as is
                     required by those rules;

               (ii)  STOCK  QUOTED BY  SECURITIES  DEALER.  If  Common  Stock is
                     regularly  quoted by a  recognized  securities  dealer  but
                     selling  prices are not reported on any  established  stock
                     exchange or quoted on a national market system, fair market
                     value shall be the mean  between the high bid and low asked
                     prices on the Value  Date.  If no prices are quoted for the
                     Value Date, fair market value shall be the mean between the
                     high bid and low asked prices on the last preceding trading
                     day on which any bid and asked prices were quoted;

               (iii) NO ESTABLISHED MARKET. If Common Stock is not traded on any
                     established  stock exchange or quoted on a national  market
                     system and is not quoted by a recognized securities dealer,
                     the Administrator  will determine fair market value in good
                     faith.  The  Administrator   will  consider  the  following
                     factors,  and  any  others  it  considers  significant,  in
                     determining fair market value: (A) the price at which other
                     securities  of the Company  have been issued to  purchasers
                     other than Employees,  Directors,  or Consultants;  (B) the
                     Company's   net   worth,    prospective    earning   power,
                     dividend-paying capacity, and non-operating assets, if any;
                     and (C) any other relevant factors,  including the economic
                     outlook  for the Company and the  Company's  industry,  the
                     Company's position in that industry, the Company's goodwill
                     and  other  intellectual   property,   and  the  values  of
                     securities of other businesses in the same industry;

               (iv)  ADDITIONAL  VALUATION.  For publicly traded companies,  any
                     valuation method  permitted under Section  20.2031-2 of the
                     Estate Tax Regulations; or

               (v)   NON-PUBLICLY  TRADED STOCK. For non-publicly  traded stock,
                     the fair market value of the Common Stock at the Grant Date
                     based on an  average of the fair  market  values as of such

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                     date set forth in the  opinions of  completely  independent
                     and well-qualified  experts (the Participant's  status as a
                     majority  or  minority   shareholder   may  be  taken  into
                     consideration).

                  Regardless of whether the Common Stock offered under the Award
                  is publicly traded, a good faith attempt under this definition
                  shall not be met  unless the fair  market  value of the Common
                  Stock on the Grant Date is determined  with regard to nonlapse
                  restrictions (as defined in Section  1.83-3(h) of the Treasury
                  Regulations)  and  without  regard to lapse  restrictions  (as
                  defined in Section 1.83-3(i) of the Treasury Regulations);

         (aa)  "GRANTEE"  means an Eligible  Participant  who  receives an Award
               pursuant to an Award Agreement;

         (bb)  "GRANT DATE" means the date the Administrator approves that grant
               of an Award.  However,  if the  Administrator  specifies  that an
               Award's  Grant  Date  is a  future  date or the  date on  which a
               condition  is  satisfied,  the Grant  Date for such Award is that
               future date or the date that the condition is satisfied;

         (cc)  "INCENTIVE  STOCK  OPTION"  means an Option within the meaning of
               Section 422 of the Code;

         (dd)  "INSIDER" means:

               (i)   a Director or Senior Officer of the Company;

               (ii)  a Director or Senior  Officer of a person that is itself an
                     Insider or Subsidiary of the Company;

               (iii) a person that has

                  (A) direct or indirect beneficial ownership of,

                  (B) control or direction  over,  or

                  (C) a  combination  of direct or indirect beneficial ownership
                      of and control or direction over,

                     securities  of the  Company  carrying  more than 10% of the
                     voting  rights  attached to all the  Company's  outstanding
                     voting  securities,  excluding,  for  the  purpose  of  the
                     calculation of the percentage  held, any securities held by
                     the person as underwriter in the course of a  distribution;
                     or

               (iv)  the  Company  itself,  if it  has  purchased,  redeemed  or
                     otherwise  acquired any securities of its own issue, for so
                     long as it continues to hold those securities;

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                                      -8-

         (ee)  "NAMED  EXECUTIVE  OFFICER"  means,  if  applicable,  an Eligible
               Participant  who, as of the date of vesting  and/or  payout of an
               Award, is one of the group of "Covered Employees," as defined;

         (ff)  "NON-QUALIFIED  STOCK  OPTION"  means an  Option  which is not an
               Incentive Stock Option;

         (gg)  "OFFICER"  means a person who is an  officer,  including a Senior
               Officer, of the Company or a Related Entity within the meaning of
               Section  16 of the  Exchange  Act and the rules  and  regulations
               promulgated thereunder;

         (hh)  "OPTION" means an option to purchase  Shares pursuant to an Award
               Agreement granted under the Plan;

         (ii)  "PARENT" means a "PARENT  CORPORATION",  whether now or hereafter
               existing, as defined in Section 424(e) of the Code;

         (jj)  "PERFORMANCE - BASED COMPENSATION" means compensation  qualifying
               as  "PERFORMANCE-BASED  COMPENSATION" under Section 162(m) of the
               Code;

         (kk)  "PLAN" means this 2006 Stock  Incentive Plan as amended from time
               to time;

         (ll)  "RELATED ENTITY" means any Parent or Subsidiary, and includes any
               business, corporation,  partnership, limited liability company or
               other entity in which the Company, a Parent or a Subsidiary holds
               a greater than 50% ownership interest, directly or indirectly;

         (mm)  "RELATED  ENTITY  DISPOSITION"  means the sale,  distribution  or
               other  disposition by the Company of all or substantially  all of
               the Company's interests in any Related Entity effected by a sale,
               merger  or  consolidation  or other  transaction  involving  that
               Related  Entity  or the sale of all or  substantially  all of the
               assets of that Related Entity;

         (nn)  "RESTRICTED  STOCK"  means  Shares  issued  under the Plan to the
               Grantee  for such  consideration,  if any,  and  subject  to such
               restrictions  on transfer,  rights of first  refusal,  repurchase
               provisions, forfeiture provisions, and other terms and conditions
               as, established by the Administrator and specified in the related
               Award Agreement;

         (oo)  "RESTRICTED  STOCK  UNIT"  means a notional  account  established
               pursuant to an Award  granted to a Grantee,  as described in this
               Plan,  that is (i) valued  solely by  reference  to Shares,  (ii)
               subject to  restrictions  specified in the Award  Agreement,  and
               (iii) payable only in Shares;

         (pp)  "RESTRICTION  PERIOD"  means the period during which the transfer
               of Shares of  Restricted  Stock is  limited in some way (based on
               the passage of time, the  achievement of performance  objectives,
               or  the   occurrence   of  other  events  as  determined  by  the

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                                      -9-

               Administrator, in its sole discretion) or the Restricted Stock is
               not vested;

         (qq)  "SAR" means a stock  appreciation  right entitling the Grantee to
               Shares or cash compensation, as established by the Administrator,
               measured  by  appreciation  in the  value of Common  Stock;

         (rr)  "SENIOR OFFICER" means:

               (i)   the chair or vice  chair of the  Board,  the  president,  a
                     vice-president, the secretary, the treasurer or the general
                     manager of the Company or a Related Entity;

               (ii)  any individual who performs  functions for a person similar
                     to those normally performed by an individual  occupying any
                     office specified in Section 2.1(rr)(i) above; and

               (iii) the five highest paid employees of the Company or a Related
                     Entity,  including  any  individual  referred to in Section
                     2.1(rr)(i)  or  2.1(rr)(ii)  and  excluding a  commissioned
                     salesperson who does not act in a managerial capacity;

         (ss)  "SHARE" means a share of the Common Stock; and

         (tt)  "SUBSIDIARY"  means a  "SUBSIDIARY  CORPORATION",  whether now or
               hereafter existing, as defined in Section 424(f) of the Code.

3.       STOCK SUBJECT TO THE PLAN

         NUMBER OF SHARES AVAILABLE

3.1      (a)   Subject  to the provisions  of Section  18, the maximum aggregate
               number of Shares which may be issued pursuant to all Awards under
               this Plan is  10,000,000  (the  "Maximum  Number").  The  maximum
               aggregate  number of Shares  that may be  granted  in the form of
               Incentive  Stock Options shall be 10,000,000.  See Section 29 for
               Reservation of Shares.

         (b)   Shares that have been issued under the Plan  pursuant to an Award
               shall not be returned to the Plan and shall not become  available
               for future issuance under the Plan except that Shares (i) covered
               by an Award  (or  portion  of an  Award)  which is  forfeited  or
               cancelled,  expires or is settled in cash,  or (ii)  withheld  to
               satisfy a Grantee's minimum tax withholding obligations, shall be
               deemed not to have been issued for  purposes of  determining  the
               Maximum  Number  of Shares  which  may be issued  under the Plan.
               Also,  only the net numbers of Shares that are issued pursuant to
               the  exercise  of an Award  shall be counted  against the Maximum
               Number.

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         (c)   However,  in the event  that prior to the  Award's  cancellation,
               termination,  expiration,  forfeiture or lapse, the holder of the
               Award at any time  received one or more  elements of  "beneficial
               ownership"  pursuant  to such  Award (as  defined  by the  United
               States Securities  Exchange  Commission (the "SEC"),  pursuant to
               any rule or  interpretations  promulgated under Section 16 of the
               Exchange  Act),  the Shares subject to such Award shall not again
               be made available for regrant under the Plan.

               SHARES TO INSIDERS

3.2            Subject to Section 15.1(c) and 15.1(d), no Insider of the Company
is eligible to receive an Award where:

         (a)   the Insider is not a Director or Senior Officer of the Company;

         (b)   any Award,  together with all of the Company's  other  previously
               established or proposed Awards under the Plan could result at any
               time in:

               (i)   the number of Shares  reserved  for  issuance  pursuant  to
                     Options   granted  to   Insiders   exceeding   50%  of  the
                     outstanding issue of Common Stock; or

               (ii)  the  issuance  to  Insiders  pursuant  to the  exercise  of
                     Options,  within a one year  period  of a number  of Shares
                     exceeding 50% of the outstanding issue of the Common Stock;

provided,  however,  that this  restriction  on the  eligibility  of Insiders to
receive  an Award  shall  cease to apply if it is no longer  required  under any
Applicable Laws.

               LIMITATIONS ON AWARD

3.3            Unless and until the Administrator  determines that an Award to a
Grantee  is not  designed  to  qualify as  Performance-Based  Compensation,  the
following  limits  ("Award  Limits") shall apply to grants of Awards to Grantees
subject to the Award Limits by Applicable Laws under this Plan:

         (a)   OPTIONS AND SARS.  Notwithstanding  any  provision in the Plan to
               the contrary  (but subject to  adjustment  as provided in Section
               18),  the maximum  number of Shares  with  respect to one or more
               Options  and/or  Stock  Appreciation  Rights  that may be granted
               during any one  calendar  year under the Plan to any one  Grantee
               shall be  5,000,000;  all of which may be  granted  as  Incentive
               Stock Options); and

         (b)   OTHER AWARDS.  The maximum aggregate grant with respect to Awards
               of Restricted Stock,  unrestricted Shares, Restricted Stock Units
               and  Deferred  Stock  Units  (or  used  to  provide  a  basis  of
               measurement  for or to determine  the value of  Restricted  Stock
               Units and Deferred  Stock Units) in any one calendar  year to any
               one  Grantee  (determined  on the date of payment of  settlement)
               shall be 5,000,000.

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4.             ADMINISTRATION

               AUTHORITY OF PLAN ADMINISTRATOR

4.1            Authority to control and manage the operation  and administration
of this Plan shall be vested in a committee consisting of two or more members of
the Board (the  "Committee").  It is intended  that the  directors  appointed to
serve on the Committee shall be "non-employee  directors" (within the meaning of
Rule 16b-3 promulgated under the Exchange Act) and "outside  directors"  (within
the meaning of Section 162(m) of the Code) to the extent that Rule 16b-3 and, if
necessary for relief from the  limitation  under Section  162(m) of the Code and
such relief sought by the Company, Section 162(m) of the Code, respectively, are
applicable. However, the mere fact that a Committee member shall fail to qualify
under either of the foregoing  requirements  shall not invalidate any Award made
by the Committee which Award is otherwise  validly made under the Plan.  Members
of the Committee  may be appointed  from time to time by, and shall serve at the
pleasure  of, the Board.  As used  herein,  the term  "Administrator"  means the
Committee.

               POWERS OF THE ADMINISTRATOR

4.2            Subject to  Applicable  Laws  and  the  provisions of the Plan or
subplans  hereof   (including  any  other  powers  given  to  the  Administrator
hereunder),  and except as otherwise  provided by the Board,  the  Administrator
shall have the exclusive power and authority, in its discretion:

         (a)   to construe and interpret this Plan and any  agreements  defining
               the rights and obligations of the Company and Grantees under this
               Plan;

         (b)   to select the Eligible Participants to whom Awards may be granted
               from time to time hereunder;

         (c)   to  determine  whether  and to what  extent  Awards  are  granted
               hereunder;

         (d)   to  determine  the  number  of  Shares  or the  amount  of  other
               consideration to be covered by each Award granted hereunder;

         (e)   to  approve  forms of Award  Agreements  for use  under the Plan,
               which need not be identical for each Grantee;

         (f)   to determine the terms and  conditions of any Award granted under
               the Plan,  including,  but not  limited to, the  exercise  price,
               grant price or purchase price, any restrictions or limitations on
               the Award,  any schedule for lapse of forfeiture  restrictions or
               restrictions on the exercisability of the Award, and acceleration
               or waivers thereof,  based in each case on such considerations as
               the  Committee  in its  sole  discretion  determines  that is not
               inconsistent  with  any  rule  or  regulation  under  any  tax or
               securities  laws or includes an  alternative  right that does not
               disqualify   an   Incentive   Stock   Option   under   applicable
               regulations;

<PAGE>

                                      -12-

         (g)   to amend the terms of any  outstanding  Award  granted  under the
               Plan, provided that any amendment that would adversely affect the
               Grantee's  rights  under  an  existing  Award  shall  not be made
               without the Grantee's  consent  unless as a result of a change in
               Applicable Law;

         (h)   to suspend  the right of a holder to  exercise  all or part of an
               Award for any reason that the Administrator considers in the best
               interest of the Company;

         (i)   subject to  regulatory  approval,  amend or suspend the Plan,  or
               revoke or alter any action taken in connection therewith,  except
               that no  general  amendment  or  suspension  of the Plan,  shall,
               without the written consent of all Grantees,  alter or impair any
               Award  granted  under the Plan  unless as a result of a change in
               the Applicable Law;

         (j)   to establish additional terms, conditions, rules or procedures to
               accommodate the rules or laws of applicable foreign jurisdictions
               and to afford  Grantees  favorable  treatment  under  such  laws;
               provided,  however, that no Award shall be granted under any such
               additional terms,  conditions,  rules or procedures with terms or
               conditions  which are  inconsistent  with the  provisions  of the
               Plan;

         (k)   to further define the terms used in this Plan;

         (l)   to correct  any defect or supply any  omission or  reconcile  any
               inconsistency in this Plan or in any Award Agreement;

         (m)   to provide for rights of refusal and/or repurchase rights;

         (n)   to amend outstanding Award Agreements to provide for, among other
               things, any change or modification which the Administrator  could
               have provided for upon the grant of an Award or in furtherance of
               the  powers  provided  for  herein  that does not  disqualify  an
               Incentive Stock Option under  applicable  regulations  unless the
               Grantee so consents;

         (o)   to prescribe, amend and rescind rules and regulations relating to
               the administration of this Plan; and

         (p)   to take such other action, not inconsistent with the terms of the
               Plan, as the Administrator deems appropriate.

               EFFECT OF ADMINISTRATOR'S DECISION

4.3            All   decisions,  determinations  and   interpretations  of   the
Administrator shall be conclusive and binding on all persons.  The Administrator
shall not be liable for any decision,  action or omission  respecting this Plan,
or any Awards  granted or Shares sold under this Plan.  In the event an Award is
granted in a manner  inconsistent  with the  provisions  of this Section 4, such
Award shall be presumptively  valid as of its grant date to the extent permitted
by the Applicable Laws.

<PAGE>

                                      -13-

               ACTION BY COMMITTEE

4.4            Except  as  otherwise  provided  by committee  charter  or  other
similar corporate governance documents,  for purposes of administering the Plan,
the following rules of procedure  shall govern the Committee.  A majority of the
Committee  shall  constitute  a quorum.  The acts of a majority  of the  members
present  at any  meeting  at  which a  quorum  is  present,  and  acts  approved
unanimously  in writing by the  members of the  Committee  in lieu of a meeting,
shall be deemed  the acts of the  Committee.  Each  member of the  Committee  is
entitled  to, in good  faith,  rely or act upon any report or other  information
furnished to that member by any officer or other  employee of the Company or any
Parent or Affiliate, the Company's independent certified public accountants,  or
any  executive  compensation  consultant or other  professional  retained by the
Company to assist in the administration of the Plan.

               LIMITATION ON LIABILITY

4.5      To the extent  permitted by applicable law in effect from time to time,
no member of the  Committee  shall be liable for any action or  omission  of any
other  member of the  Committee  nor for any act or omission on the member's own
part,  excepting  only the member's own wilful  misconduct or gross  negligence,
arising out of or related to this Plan. The Company shall pay expenses  incurred
by, and satisfy a judgment  or fine  rendered  or levied  against,  a present or
former member of the Committee in any action against such person (whether or not
the Company is joined as a party  defendant) to impose liability or a penalty on
such person for an act  alleged to have been  committed  by such person  while a
member of the  Committee  arising  with  respect to this Plan or  administration
thereof or out of membership  on the Committee or by the Company,  or all or any
combination of the preceding,  provided, the Committee member was acting in good
faith, within what such Committee member reasonably believed to have been within
the scope of his or her  employment  or authority  and for a purpose which he or
she  reasonably  believed  to be in the best  interests  of the  Company  or its
stockholders.  Payments  authorized  hereunder include amounts paid and expenses
incurred in settling any such action or  threatened  action.  The  provisions of
this  Section  4.5 shall apply to the estate,  executor,  administrator,  heirs,
legatees or devisees of a  Committee  member,  and the term  "person" as used on
this  Section  4.5 shall  include the estate,  executor,  administrator,  heirs,
legatees, or devisees of such person.

5.             ELIGIBILITY

               Except as otherwise provided, all types of Awards may be  granted
to Eligible Participants.  An Eligible Participant who has been granted an Award
may be, if he or she continues to be eligible, granted additional Awards.

6.             AWARDS

               TYPE OF AWARDS

6.1            The  Administrator is authorized to award any type of arrangement
to an Eligible  Participant that is not inconsistent  with the provisions of the
Plan and that by its terms involves or might involve the issuance of:

<PAGE>

         (a)   Shares, including unrestricted Shares;

         (b)   Options;

         (c)   SARs or similar  rights with a fixed or variable price related to
               the Fair  Market  Value of the  Shares  and with an  exercise  or
               conversion   privilege  related  to  the  passage  of  time,  the
               occurrence  of  one  or  more  events,  or  the  satisfaction  of
               performance criteria or other conditions;

         (d)   any other  security  with the value derived from the value of the
               Shares,  such as Restricted Stock and Restricted Stock Units;

         (e)   Deferred Stock Units;

         (f)   Dividend Equivalent Rights, as defined in Section 13; or

         (g)   any combination of the foregoing.

               DESIGNATION OF AWARD

6.2            Each type of Award shall be designated in the Award Agreement. In
the case of an Option,  the Option  shall be  designated  as either an Incentive
Stock Option or a Non-Qualified  Stock Option.  But see Section 7.3(a) regarding
exceeding the Incentive Stock Option threshold.

7.             GRANT OF OPTIONS; TERMS AND CONDITIONS OF GRANT

               GRANT OF OPTIONS

7.1      (a)   One or more Options may be  granted to any  Eligible Participant.
               Subject to the express provisions of this Plan, the Administrator
               shall determine from the Eligible  Participants those individuals
               to whom  Options  under  this  Plan may be  granted.  The  Shares
               underlying a grant of an Option may be in the form of  Restricted
               Stock or unrestricted Stock.

         (b)   Further,  subject to the  express  provisions  of this Plan,  the
               Administrator  shall specify the Grant Date, the number of Shares
               covered  by the  Option,  the  exercise  price  and the terms and
               conditions  for exercise of the Options.  As soon as  practicable
               after the Grant Date,  the Company shall provide the Grantee with
               a  written   Award   Agreement  in  the  form   approved  by  the
               Administrator,  which  sets out the  Grant  Date,  the  number of
               Shares  covered by the Option,  the exercise  price and the terms
               and conditions for exercise of the Option.

         (c)   The Administrator may, in its absolute discretion,  grant Options
               under  this  Plan at any time and from  time to time  before  the
               expiration of this Plan.

<PAGE>

                                      -15-

               GENERAL TERMS AND CONDITIONS

7.2            Except as otherwise provided herein, the Options shall be subject
to the following  terms and  conditions  and such other terms and conditions not
inconsistent with this Plan as the Administrator may impose:

         (a)   EXERCISE  OF  OPTION.  The  Administrator  may  determine  in its
               discretion whether any Option shall be subject to vesting and the
               terms and  conditions  of any such vesting.  The Award  Agreement
               shall contain any such vesting schedule;

         (b)   OPTION TERM. Each Option and all rights or obligations thereunder
               shall  expire  on  such  date  as  shall  be  determined  by  the
               Administrator,  but not later than ten years after the Grant Date
               (five  years in the case of an  Incentive  Stock  Option when the
               Optionee owns more than 10% of the total combined voting power of
               all classes of stock of the  Company or any Parent or  Subsidiary
               ("Ten  Percent  Stockholder")),  and shall be  subject to earlier
               termination as hereinafter provided;

         (c)   EXERCISE  PRICE.  The  Exercise  Price  of any  Option  shall  be
               determined by the  Administrator  when the Option is granted,  at
               such Exercise Price as may be determined by the  Administrator in
               the  Administrator's  sole  and  absolute  discretion;  provided,
               however, that the Exercise Price may not be less than 100% of the
               Fair Market Value of the Shares on the Grant Date with respect to
               any  Incentive  Stock  Options  which are granted  and,  provided
               further,  that the Exercise  Price of any Incentive  Stock Option
               granted to a Ten Percent  Stockholder shall not be less than 110%
               of the Fair Market Value of the Shares on the Grant Date. Payment
               for the Shares purchased shall be made in accordance with Section
               16 of  this  Plan.  The  Administrator  is  authorized  to  issue
               Options,  whether Incentive Stock Options or Non-qualified  Stock
               Options, at an option price in excess of the Fair Market Value on
               the Grant Date,  to  determine  the terms and  conditions  of any
               Award granted under the Plan, including,  but not limited to, the
               exercise price,  grant price or purchase price,  any restrictions
               or limitations on the Award, any schedule for lapse of forfeiture
               restrictions or restrictions on the  exercisability of the Award,
               and acceleration or waivers  thereof,  based in each case on such
               considerations as the Committee in its sole discretion determines
               that is not  inconsistent  with any rule or regulation  under any
               tax or securities laws or includes an alternative right that does
               not  disqualify  an  Incentive  Stock  Option  under   applicable
               regulations;

         (d)   METHOD OF EXERCISE.  Options may be exercised only by delivery to
               the Company of a stock option  exercise  agreement (the "Exercise
               Agreement") in a form approved by the  Administrator  (which need
               not be the same for each  Grantee),  stating the number of Shares
               being purchased, the restrictions imposed on the Shares purchased
               under such Exercise Agreement,  if any, and such  representations
               and  agreements  regarding  the Grantee's  investment  intent and
               access  to  information  and  other  matters,  if any,  as may be
               required or  desirable  by the Company to comply with  applicable
               securities  laws,  together  with payment in full of the exercise
               price for the number of Shares being purchased;

<PAGE>

                                      -16-

         (e)   EXERCISE  AFTER CERTAIN  EVENTS.

               (i)   TERMINATION OF CONTINUOUS SERVICES.

                     (A) OPTIONS.

                         (I)  TERMINATION OF  CONTINUOUS SERVICES.   If for  any
                              reason other than  Disability or death,  a Grantee
                              terminates Continuous Services with the Company or
                              a Subsidiary,  vested  Options held at the date of
                              such termination may be exercised,  in whole or in
                              part,  at any time within  three  months after the
                              date of such  termination  or such  lesser  period
                              specified in the Award  Agreement (but in no event
                              after the  earlier of (i) the  expiration  date of
                              the  Option as set  forth in the Award  Agreement,
                              and (ii) ten years from the Grant Date (five years
                              for a Ten Percent  Stockholder if the Option is an
                              Incentive Stock Option)).

                         (II) CONTINUATION  OF  SERVICES AS  CONSULTANT/ADVISOR.
                              If a Grantee  granted an  Incentive  Stock  Option
                              terminates   employment   but   continues   as   a
                              Consultant    (no    termination   of   Continuous
                              Services),  Grantee need not exercise an Incentive
                              Stock Option within three months of termination of
                              employment  but  shall  be  entitled  to  exercise
                              within three months of  termination  of Continuous
                              Services  to the  Company or the  Subsidiary  (one
                              year in the event of  Disability or death) or such
                              lesser  period  specified  in the Award  Agreement
                              (but in no  event  after  the  earlier  of (i) the
                              expiration  date of the Option as set forth in the
                              Award Agreement, and (ii) ten years from the Grant
                              Date).  However,  if  Grantee  does  not  exercise
                              within three months of  termination of employment,
                              pursuant  to  Section  422 of the Code the  Option
                              shall not qualify as an Incentive Stock Option.

                     (B)      DISABILITY AND DEATH.If a Grantee becomes Disabled
                              while rendering Continuous Services to the Company
                              or a  Subsidiary,  or dies while  employed  by the
                              Company  or  Subsidiary  or  within  three  months
                              thereafter,   vested  Options  then  held  may  be
                              exercised by the Grantee,  the Grantee's  personal
                              representative,  or by  the  person  to  whom  the
                              Option is  transferred  by the laws of descent and
                              distribution,  in whole  or in  part,  at any time
                              within one year after the  termination  because of
                              the  Disability  or  death  or any  lesser  period
                              specified in the Award  Agreement (but in no event
                              after the  earlier of (i) the  expiration  date of
                              the  Option as set  forth in the Award  Agreement,
                              and (ii) ten years from the Grant Date (five years
                              for a Ten Percent  Stockholder if the Option is an
                              Incentive Stock Option).

<PAGE>

                                      -17-

               LIMITATIONS ON GRANT OF INCENTIVE STOCK OPTIONS

7.3      (a)   THRESHOLD.  The aggregate Fair Market Value (determined as of the
               Grant Date) of the Shares for which  Incentive  Stock Options may
               first become  exercisable by any Grantee during any calendar year
               under  this  Plan,  together  with  that  of  Shares  subject  to
               Incentive  Stock Options first  exercisable by such Grantee under
               any other plan of the Company or any Parent or Subsidiary,  shall
               not exceed  $100,000.  For purposes of this Section  7.3(a),  all
               Options in excess of the $100,000  threshold  shall be treated as
               Non-Qualified  Stock Options  notwithstanding  the designation as
               Incentive Stock Options. For this purpose, Options shall be taken
               into  account  in the order in which they were  granted,  and the
               Fair Market  Value of the Shares  shall be  determined  as of the
               date the Option with respect to such Shares is granted.

         (b)   COMPLIANCE  WITH SECTION 422 OF THE CODE.  There shall be imposed
               in the Award  Agreement  relating to Incentive Stock Options such
               terms and  conditions as are required in order that the Option be
               an  "incentive  stock  option" as that term is defined in Section
               422 of the Code.

         (c)   REQUIREMENT  OF  EMPLOYMENT.  No  Incentive  Stock  Option may be
               granted to any person who is not an  Employee of the Company or a
               Parent or Subsidiary of the Company.

8.             RESTRICTED STOCK AWARDS

               GRANT OF RESTRICTED STOCK AWARDS

8.1            Subject  to  the  terms  and    provisions  of  this  Plan,   the
Administrator  is authorized to make awards of Restricted  Stock to any Eligible
Participant  in such amounts and subject to such terms and  conditions as may be
selected by the  Administrator.  The  restrictions  may lapse  separately  or in
combination  at such  times,  under  such  circumstances,  in such  instalments,
time-based or upon the  satisfaction of performance  goals or otherwise,  as the
Administrator  determines  at the time of the grant of the Award or  thereafter.
(See Performance  Goals,  Section 14.4). All awards of Restricted Stock shall be
evidenced by Award Agreements.

               CONSIDERATION

8.2            Restricted Stock may be issued in connection with:

         (a)   SERVICES.  Services rendered to the Company or an Affiliate (i.e.
               bonus); and/or

         (b)   PURCHASE  PRICE.  A purchase  price,  as  specified  in the Award
               Agreement related to such Restricted Stock.

<PAGE>

                                      -18-

               VOTING AND DIVIDENDS

8.3            Unless  the  Administrator  in its sole and  absolute  discretion
otherwise provides in an Award Agreement, holders of Restricted Stock shall have
the right to vote such  Restricted  Stock and the right to receive any dividends
declared or paid with respect to such Restricted  Stock. The  Administrator  may
provide that any dividends paid on Restricted Stock must be reinvested in shares
of Stock,  which may or may not be subject to the same  vesting  conditions  and
restrictions  applicable to such Restricted  Stock. All  distributions,  if any,
received by a Grantee with respect to Restricted  Stock as a result of any stock
split, stock dividend, combination of shares, or other similar transaction shall
be subject to the restrictions applicable to the original Award.

               FORFEITURE

8.4            In the  case of an event  of  forfeiture  pursuant  to the  Award
Agreement,  including failure to satisfy the restriction period or a performance
objective during the applicable  restriction  period,  any Restricted Stock that
has not vested prior to the event of forfeiture shall automatically  expire, and
all of the  rights,  title  and  interest  of the  Grantee  thereunder  shall be
forfeited in their  entirety  including but not limited to any right to vote and
receive  dividends with respect to the  Restricted  Stock.  Notwithstanding  the
foregoing,   the   Administrator   may  provide  in  any  Award  Agreement  that
restrictions  or forfeiture  conditions  relating to  Restricted  Stock shall be
waived in whole or in part in the event of terminations resulting from specified
causes,  and the  Administrator  may in  other  cases  waive in whole or in part
restrictions or forfeiture  conditions  relating to Restricted  Stock,  provided
such waiver is in accordance with the Applicable Laws.

               CERTIFICATES FOR RESTRICTED STOCK

8.5            Restricted  Stock granted underthis Plan may be evidenced in such
manner as the Administrator  shall determine,  including by way of certificates.
The  Administrator  may  provide  in an  Award  Agreement  that  either  (i) the
Secretary of the Company shall hold such  certificates for the Grantee's benefit
until  such time as the  Restricted  Stock is  forfeited  to the  Company or the
restrictions  lapse,  (see  Escrow;  Pledge of Shares,  Section 23) or (ii) such
certificates  shall be delivered to the Grantee,  provided,  however,  that such
certificates  shall bear a legend or legends  that  comply  with the  applicable
securities  laws  and  regulations  and  make   appropriate   reference  to  the
restrictions imposed under this Plan and the Award Agreement.

9.             UNRESTRICTED STOCK AWARDS

                  The Administrator may, in its sole discretion,  grant (or sell
at Fair Market  Value or such other  higher  purchase  price  determined  by the
Administrator  in the Award  Agreement) an Award of  unrestricted  Shares to any
Grantee  pursuant  to  which  such  Grantee  may  receive  Shares  free  of  any
restrictions under this Plan.

<PAGE>

                                      -19-

10.            RESTRICTED STOCK UNITS

               GRANT OF RESTRICTED STOCK UNITS

10.1           Subject  to  the   terms   and  provisions  of  this  Plan,   the
Administrator  is  authorized  to make awards of  Restricted  Stock Units to any
Eligible Participant in such amounts and subject to such terms and conditions as
may be selected by the Administrator. These restrictions may lapse separately or
in combination at such times,  under such  circumstances,  in such  instalments,
time-based or upon the  satisfaction of performance  goals or otherwise,  as the
Administrator  determines  at the time of the grant of the Award or  thereafter.
(See  Performance  Goals,  Section 14.4).  All awards of Restricted  Stock Units
shall be evidenced by Award Agreements.

               NUMBER OF RESTRICTED STOCK UNITS

10.2           The Award Agreement  shall specify the number of Share equivalent
units granted and such other provisions as the Administrator determines.

               CONSIDERATION

10.3           Restricted Stock Units may be issued in connection with:

         (a)   SERVICES.  Services rendered to the Company or an Affiliate (i.e.
               bonus); and/or

         (b)   PURCHASE  PRICE.  A  purchase  price as  specified  in the  Award
               Agreement related to such Restricted Stock Units.

               NO VOTING RIGHTS

10.4           The holders  of  Restricted Stock  Units  shall have no rights as
stockholders of the Company.

               DIVIDEND EQUIVALENCY

10.5           The  Administrator,  in  its  sole  and  absolute discretion, may
provide in an Award Agreement  evidencing a grant of Restricted Stock Units that
the holder shall be entitled to receive,  upon the  Company's  payment of a cash
dividend on its outstanding  Shares,  a cash payment for each  Restricted  Stock
Unit. (See Section 13, Dividend Equivalent Right). Such Award Agreement may also
provide  that  such  cash  payment  shall be  deemed  reinvested  in  additional
Restricted  Stock Units at a price per unit equal to the Fair Market  Value of a
Share on the date that such dividend is paid.

               CREDITOR'S RIGHTS

10.6           A holder of  Restricted  Stock Units  shall have  no rights other
than  those  of a  general  creditor  of the  Company.  Restricted  Stock  Units
represent an unfunded and unsecured  obligation  of the Company,  subject to the
terms and conditions of the applicable Award Agreement.

<PAGE>
                                      -20-

               SETTLEMENT OF RESTRICTED STOCK UNITS

10.7           Each  Restricted  Stock Unit shall be  paid and  settled  by  the
issuance of Restricted Stock or unrestricted Shares in accordance with the Award
Agreement  and if such  settlement  is subject to Section  409A of the Code only
upon any one or more of the following as provided for in the Award Agreement:

         (a)   a specific date or date determinable by a fixed schedule;

         (b)   upon  the  Eligible   Participant's   termination  of  Continuous
               Services to the extent the same  constitutes  a  separation  from
               services  for purposes of Section 409A of the Code except that if
               an Eligible Participant is a "key employee" as defined in Section
               409A of the Code for such  purposes,  then payment or  settlement
               shall occur 6 months following such separation of service;

         (c)   as a result of the Eligible Participant's death or Disability; or

         (d)   in  connection  with or as a result  of a Change  in  Control  in
               compliance with Section 409A of the Code.

               FORFEITURE

10.8           Upon  failure  to satisfy  any  requirement for settlement as set
forth in the Award  Agreement,  including  failure  to satisfy  any  restriction
period or performance objective,  any Restricted Stock Units held by the Grantee
shall  automatically  expire,  and all of the rights,  title and interest of the
Grantee  thereunder  shall be  forfeited  in their  entirety  including  but not
limited to any right to receive  dividends with respect to the Restricted  Stock
Units.

11.            DIRECTOR SHARES AND DIRECTOR DEFERRED STOCK UNITS

               The grant of Awards of Shares to Directors  and the  election  by
Directors to defer the receipt of the Awards of Shares  ("Deferred Stock Units")
shall be governed by the provisions of Subpart A which is attached  hereto.  The
provisions  of  Subpart  A are  attached  hereto  as part of this  Plan  and are
incorporated herein by reference.

12.            STOCK APPRECIATION RIGHTS

               AWARDS OF SARS

12.1           An SAR is an award to  receive  a  number of  Shares  (which  may
consist of Restricted  Stock), or cash, or Shares and cash, as determined by the
Administrator  in accordance with Section 12.4 below,  for services  rendered to
the Company.  A SAR may be awarded  pursuant to an Award Agreement that shall be
in such form (which need not be the same for each Grantee) as the  Administrator
shall from time to time  approve,  and shall  comply  with and be subject to the
terms and  conditions  of this Plan.  A SAR may vary from Grantee to Grantee and
between groups of Grantees,  and may be based upon  performance  objectives (See
Performance Goals in Section 14.4).

<PAGE>

                                      -21-

               TERM

12.2           The term of a SAR shall be set forth in  the  Award Agreement  as
determined by the Administrator.

               EXERCISE

12.3           A Grantee  desiring  to  exercise a SAR shall give written notice
of such  exercise to the Company,  which notice  shall state the  proportion  of
Shares  and  cash  that the  Grantee  desires  to  receive  pursuant  to the SAR
exercised,  subject to the discretion of the Administrator.  Upon receipt of the
notice from the Grantee,  subject to the Administrator's election to pay cash as
provided in Section 12.4 below, the Company shall deliver to the person entitled
thereto (i) a certificate or certificates for Shares and/or (ii) a cash payment,
in accordance  with Section 12.4 below.  The date the Company  receives  written
notice of such  exercise  hereunder  is  referred  to in this  Section 12 as the
"exercise date".

               NUMBER OF SHARES OR AMOUNT OF CASH

12.4           Subject to the  discretion  of the  Administrator  to  substitute
cash for Shares,  or some  portion of the Shares for cash,  the amount of Shares
that may be issued  pursuant  to the  exercise of a SAR shall be  determined  by
dividing:  (i) the total  number  of  Shares  as to which the SAR is  exercised,
multiplied  by the  amount by which the Fair  Market  Value of the Shares on the
exercise  date  exceeds the Fair Market Value of a Share on the date of grant of
the SAR;  by (ii)  the  Fair  Market  Value  of a Share  on the  exercise  date;
provided,  however,  that  fractional  Shares  shall not be  issued  and in lieu
thereof,  a cash  adjustment  shall be paid. In lieu of issuing  Shares upon the
exercise of a SAR, the Administrator in its sole discretion may elect to pay the
cash  equivalent of the Fair Market Value of the Shares on the exercise date for
any or all of the Shares that would  otherwise be issuable  upon exercise of the
SAR.

               EFFECT OF EXERCISE

12.5           A  partial  exercise  of  a  SAR shall  not  affect  the right to
exercise the remaining  SAR from time to time in  accordance  with this Plan and
the applicable  Award Agreement with respect to the remaining  shares subject to
the SAR.

               FORFEITURE

12.6           In the case of  an  event of  forfeiture  pursuant  to the  Award
Agreement,  including failure to satisfy any restriction period or a performance
objective,  any SAR that has not vested prior to the date of  termination  shall
automatically  expire, and all of the rights,  title and interest of the Grantee
thereunder shall be forfeited in their entirety.

13.            DIVIDEND EQUIVALENT RIGHT

               A   dividend   equivalent  right   is   an  Award  entitling  the
recipient to receive  credits based on cash  distributions  that would have been
paid on the Shares specified in the dividend equivalent right (or other Award to
which it relates) if such Shares had been issued to and held by the recipient (a
"Dividend  Equivalent  Right").  A  Dividend  Equivalent  Right  may be  granted

<PAGE>

                                      -22-

hereunder  to any Grantee as a component of another  Award or as a  freestanding
Award. The terms and conditions of Dividend  Equivalent Right shall be specified
in the  grant.  Dividend  equivalents  credited  to  the  holder  of a  Dividend
Equivalent  Right may be paid  currently  or may be deemed to be  reinvested  in
additional Shares, which may thereafter accrue additional equivalents.  Any such
reinvestment shall be at Fair Market Value on the date of reinvestment. Dividend
Equivalent Rights may be settled in cash or Shares or a combination  thereof, in
a single instalment or instalments, all determined in the sole discretion of the
Administrator.  A Dividend  Equivalent  Right  granted as a component of another
Award may provide  that such  Dividend  Equivalent  Right shall be settled  upon
exercise,  settlement,  or payment of, or lapse of  restrictions  on, such other
Award,  and that such Dividend  Equivalent Right shall expire or be forfeited or
annulled under the same  conditions as such other Award.  A Dividend  Equivalent
Right  granted  as a  component  of  another  Award may also  contain  terms and
conditions different from such other Award.

14.            TERMS AND CONDITIONS OF AWARDS

               IN GENERAL

14.1           Subject to  the  terms  of  the  Plan and  Applicable  Laws,  the
Administrator  shall  determine the  provisions,  terms,  and conditions of each
Award  including,  but not limited to, the Award  vesting  schedule,  repurchase
provisions,  rights of first  refusal,  forfeiture  provisions,  form of payment
(cash,  Shares, or other  consideration)  upon settlement of the Award,  payment
contingencies, and satisfaction of any performance criteria.

               TERM OF AWARD

14.2           The term of each  Award shall  be  the term stated  in  the Award
Agreement.

               TRANSFERABILITY

14.3     (a)   LIMITS ON TRANSFER.  No right or interest of  a  Grantee  in  any
               unexercised  or  restricted  Award may be pledged,  encumbered or
               hypothecated  to or in  favor  of any  party  other  than  to the
               Company or a Related Entity or Affiliate. No Award shall be sold,
               assigned,  transferred  or disposed of by a Grantee other than by
               the  laws of  descent  and  distribution  or,  in the  case of an
               Incentive  Stock Option,  pursuant to a domestic  relations order
               that  would  satisfy  Section  414(p)(1)(A)  of the  Code if such
               Section  applied to an Award under the Plan;  provided,  however,
               that the  Administrator may (but need not) permit other transfers
               where the Administrator  concludes that such  transferability (i)
               does not result in  accelerated  taxation  or other  adverse  tax
               consequences,  (ii) does not cause any Option  intended  to be an
               Incentive  Stock Option to fail to be described in Section 422(b)
               of the Code,  and (iii) is otherwise  appropriate  and desirable,
               taking  into  account  any factors  deemed  relevant,  including,
               without  limitation,  state or  federal  tax or  securities  laws
               applicable to transferable Awards.

         (b)   BENEFICIARIES. Notwithstanding Section 14.3(a), a Grantee may, in
               the  manner   determined  by  the   Administrator,   designate  a
               beneficiary  to exercise the rights of the Grantee and to receive
               any  distribution  with  respect to any Award upon the  Grantee's

<PAGE>

                                      -23-

               death. A beneficiary,  legal guardian,  legal  representative  or
               other person claiming any rights under the Plan is subject to all
               terms  and  conditions  of  the  Plan  and  any  Award  Agreement
               applicable to the Grantee, except to the extent the Plan and such
               Award  Agreement   otherwise  provide,   and  to  any  additional
               restrictions    deemed    necessary   or   appropriate   by   the
               Administrator.  If no beneficiary has been designated or survives
               the  Grantee,  payment  shall  be made to the  Grantee's  estate.
               Subject  to  the  foregoing,  a  beneficiary  designation  may be
               changed or revoked by a Grantee at any time,  provided the change
               or revocation is filed with the Administrator.

               PERFORMANCE GOALS

14.4           In order to preserve the  deductibility of an Award under Section
162(m) of the Code,  the  Administrator  may  determine  that any Award  granted
pursuant  to this Plan to a Grantee  that is or is  expected to become a Covered
Employee shall be determined  solely on the basis of (a) the  achievement by the
Company or Subsidiary of a specified target return,  or target growth in return,
on equity or assets,  (b) the Company's  stock price,  (c) the  Company's  total
shareholder return (stock price appreciation plus reinvested dividends) relative
to a defined comparison group or target over a specific  performance period, (d)
the achievement by the Company or a Parent or Subsidiary,  or a business unit of
any such  entity,  of a  specified  target,  or target  growth in,  net  income,
earnings  per share,  earnings  before  income and taxes,  and  earnings  before
income,  taxes,  depreciation  and  amortization,  or (e) any combination of the
goals set forth in (a) through (d) above. If an Award is made on such basis, the
Administrator  shall  establish  goals prior to the  beginning of the period for
which such  performance  goal  relates  (or such later date as may be  permitted
under Section  162(m) of the Code or the  regulations  thereunder  but not later
than 90  days  after  commencement  of the  period  of  services  to  which  the
performance goal relates), and the Administrator has the right for any reason to
reduce  (but not  increase)  the Award,  notwithstanding  the  achievement  of a
specified goal. Any payment of an Award granted with performance  goals shall be
conditioned on the written  certification of the Administrator in each case that
the performance goals and any other material conditions were satisfied.

               In addition,  to the extent that  Section 409A is  applicable,(i)
performance-based  compensation  shall also be contingent on the satisfaction of
pre-established  organizational or individual performance criteria relating to a
performance  period of at least 12  consecutive  months  in which  the  Eligible
Participant  performs  services and (ii) performance  goals shall be established
not later than 90 calendar days after the beginning of any performance period to
which the performance  goal relates,  provided that the outcome is substantially
uncertain at the time the criteria are established.

               ACCELERATION

14.5           The  Administrator  may, in  its  sole  discretion  (but  subject
to the  limitations of and compliance  with Section 409A of the Code and Section
14.7 in connection therewith), at any time (including, without limitation, prior
to, coincident with or subsequent to a Change of Control) determine that (a) all
or a portion of a Grantee's Awards shall become fully or partially  exercisable,
and/or  (b)  all  or a part  of the  restrictions  on  all or a  portion  of the
outstanding  Awards  shall  lapse,  in  each  case,  as  of  such  date  as  the
Administrator  may,  in its sole  discretion,  declare.  The  Administrator  may

<PAGE>

                                      -24-

discriminate  among Grantees and among Awards granted to a Grantee in exercising
its discretion pursuant to this Section 14.5.

               COMPLIANCE WITH SECTION 162(M) OF THE CODE

14.6           Notwithstanding  any  provision  of  this  Plan to the  contrary,
if the Administrator  determines that compliance with Section 162(m) of the Code
is required or desired,  all Awards  granted under this Plan to Named  Executive
Officers  shall comply with the  requirements  of Section 162(m) of the Code. In
addition,  in the event that  changes are made to Section  162(m) of the Code to
permit greater  flexibility with respect to any Award or Awards under this Plan,
the Administrator may make any adjustments it deems appropriate.

               COMPLIANCE WITH SECTION 409A OF THE CODE

14.7           Notwithstanding  any  provision  of  this  Plan  to the contrary,
if any provision of this Plan or an Award Agreement  contravenes any regulations
or Treasury  guidance  promulgated under Section 409A of the Code or could cause
an Award to be subject to the interest and  penalties  under Section 409A of the
Code,  such provision of this Plan or any Award  Agreement  shall be modified to
maintain,  to  the  maximum  extent  practicable,  the  original  intent  of the
applicable  provision  without  violating the  provisions of Section 409A of the
Code.  In  addition,  in the event that  changes are made to Section 409A of the
Code to permit  greater  flexibility  with respect to any Award under this Plan,
the Administrator may make any adjustments it deems appropriate.

               SECTION 280G OF THE CODE

14.8           Notwithstanding any other provision of this Plan to the contrary,
unless  expressly  provided  otherwise in the Award  Agreement,  if the right to
receive or benefit from an Award under this Plan,  either alone or together with
payments  that a  Grantee  has a  right  to  receive  from  the  Company,  would
constitute a "parachute  payment" (as defined in Section 280G of the Code),  all
such  payments  shall be reduced to the largest  amount that shall  result in no
portion being subject to the excise tax imposed by Section 4999 of the Code.

               EXERCISE OF AWARD FOLLOWING TERMINATION OF CONTINUOUS SERVICE

14.9           An Award may not be exercised after the termination  date of such
Award  set forth in the  Award  Agreement  and may be  exercised  following  the
termination of a Grantee's Continuous Service only to the extent provided in the
Award  Agreement.  Where the Award  Agreement  permits a Grantee to  exercise an
Award  following  the  termination  of the  Grantee's  Continuous  Service for a
specified  period,  the Award shall terminate to the extent not exercised on the
last day of the  specified  period or the last day of the  original  term of the
Award, whichever occurs first.

               CANCELLATION OF AWARDS

14.10          In   the  even t a   Grantee's  Continuous  Services   has   been
terminated for "Cause",  he or she shall  immediately  forfeit all rights to any
and all Awards  outstanding.  The  determination  that termination was for Cause
shall be final and conclusive. In making its determination, the Board shall give

<PAGE>

                                      -25-

the Grantee an  opportunity  to appear and be heard at a hearing before the full
Board and present evidence on the Grantee's behalf. Should any provision to this
Section  14.10.  be held to be invalid or  illegal,  such  illegality  shall not
invalidate  the whole of this  Section  14,  but,  rather,  this  Plan  shall be
construed  as if it did not contain  the illegal  part or narrowed to permit its
enforcement,  and the rights and  obligations  of the parties shall be construed
and enforced accordingly.

15.           ADDITIONAL TERMS IF THE COMPANY BECOMES LISTED ON A STOCK EXCHANGE

15.1           In the event the Shares become listed  on a stock  exchange,  and
to the extent required by the rules of such stock  exchange,  then the following
terms and  conditions  shall apply to an Award in  addition  to those  contained
herein, as applicable:

         (a)   the  exercise  price of an Award  must not be lower than the Fair
               Market  Value  (without  discount)  of the  Shares  on the  stock
               exchange at the time the Award is granted;

         (b)   the exercise  price of an Award  granted to an Insider  cannot be
               reduced,  or the term of the Award  cannot be extended to benefit
               an Insider, unless the Company obtains Disinterested  Shareholder
               Approval;

         (c)   the number of securities issuable to Insiders, at any time, under
               all of the Company's  security  based  compensation  arrangements
               (whether  entered into prior to or subsequent  to such  listing),
               cannot exceed 10% of the Company's  total issued and  outstanding
               Common   Stock,   unless  the   Company   obtains   Disinterested
               Shareholder Approval; and

         (d)   the number of securities issued to Insiders,  within any one year
               period,  under all of the Company's  security based  compensation
               arrangements (whether entered into prior to or subsequent to such
               listing),  cannot exceed 10% of the issued and outstanding Common
               Stock,  unless  the  Company  obtains  Disinterested  Shareholder
               Approval.

16.            PAYMENT FOR SHARE PURCHASES

               PAYMENT

16.1           Payment for Shares purchased pursuant to this Plan may be made:

         (a)   CASH.  By cash,  cashier's  check  or wire  transfer  or,  at the
               discretion  of the  Administrator  expressly  for the Grantee and
               where permitted by law as follows:

         (b)   SURRENDER  OF SHARES.  By  surrender of shares of Common Stock of
               the Company that have been owned by the Grantee for more than six
               months,  or lesser period if the surrender of shares is otherwise
               exempt from Section 16 of the Exchange Act,  (and, if such shares
               were purchased from the Company by use of a promissory note, such
               note has been fully paid with respect to such shares);

<PAGE>

                                      -26-

         (c)   DEEMED NET-STOCK  EXERCISE.  By forfeiture of Shares equal to the
               value of the  exercise  price  pursuant  to a  "deemed  net-stock
               exercise"  by  requiring  the  Grantee to accept  that  number of
               Shares  determined  in  accordance  with the  following  formula,
               rounded down to the nearest whole integer:

                                            A = B x (C - D)
                                                     -----
                                                    (  C  )
                           where:

                           A  =             net Shares to be issued to Grantee;

                           B  =             number of Awards being exercised;

                           C  =             Fair Market Value of a Share; and

                           D  =             Exercise price of the Awards; or

(d)            BROKER-ASSISTED.   By  delivering  a properly  executed  exercise
               notice  to  the  Company  together  with a  copy  of  irrevocable
               instructions  to a broker to deliver  promptly to the Company the
               amount of sale or loan  proceeds  necessary  to pay the  exercise
               price and the  amount of any  required  tax or other  withholding
               obligations.

               COMBINATION OF METHODS

16.2           By any  combination  of  the  foregoing  methods  of  payment  or
any other consideration or method of payment as shall be permitted by applicable
corporate law.

17.            WITHHOLDING TAXES

               WITHHOLDING GENERALLY

17.1           Whenever  Shares  are  to  be  issued in  satisfaction  of Awards
granted under this Plan or Shares are forfeited  pursuant to a "deemed net-stock
exercise," the Company may require the Grantee to remit to the Company an amount
sufficient to satisfy the foreign,  federal, state, provincial,  or local income
and employment tax withholding obligations,  including,  without limitation,  on
exercise of an Award.  When,  under  applicable  tax laws, a Grantee  incurs tax
liability  in  connection  with  the  exercise  or  vesting  of any  Award,  the
disposition  by a Grantee  or other  person  of an Award or an  Option  prior to
satisfaction  of the holding period  requirements of Section 422 of the Code, or
upon the exercise of a  Non-Qualified  Stock Option,  the Company shall have the
right to require  such  Grantee or such  other  person to pay by cash,  or check
payable to the Company,  the amount of any such withholding with respect to such
transactions.  Any such  payment must be made  promptly  when the amount of such
obligation becomes determinable.

<PAGE>

                                      -27-

               STOCK FOR WITHHOLDING

17.2           To the extent permissible under applicable  tax,  securities  and
other laws, the  Administrator  may, in its sole  discretion and upon such terms
and  conditions as it may deem  appropriate,  permit a Grantee to satisfy his or
her obligation to pay any such withholding tax, in whole or in part, with Shares
up to an amount not greater than the  Company's  minimum  statutory  withholding
rate for federal  and state tax  purposes,  including  payroll  taxes,  that are
applicable to such supplemental  taxable income.  The Administrator may exercise
its  discretion,  by (i)  directing  the  Company  to apply  Shares to which the
Grantee is entitled as a result of the exercise of an Award,  or (ii) delivering
to the  Company  Shares  that have been owned by the  Grantee  for more than six
months, unless the delivery of Shares is otherwise exempt from Section 16 of the
Exchange  Act. A Grantee who has made an election  pursuant to this Section 17.2
may  satisfy  his or her  withholding  obligation  only with Shares that are not
subject to any  repurchase,  forfeiture,  unfulfilled  vesting or other  similar
requirements.  The Shares so applied or delivered for the withholding obligation
shall be valued at their Fair Market Value as of the date of  measurement of the
amount of income subject to withholding.

18.            ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

               IN GENERAL

18.1           Subject  to  any  required  action  by  the shareholders  of  the
Company,  the number of Shares covered by each outstanding Award, and the number
of Shares which have been authorized for issuance under the Plan but as to which
no Awards have yet been  granted or which have been  returned  to the Plan,  the
exercise or purchase price of each such outstanding  Award, as well as any other
terms  that  the   Administrator   determines   require   adjustment   shall  be
proportionately  adjusted  for (i) any  increase  or  decrease  in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination  or  reclassification  of the Shares,  or (ii) any other increase or
decrease  in  the  number  of  issued  Shares   effected   without   receipt  of
consideration  by  the  Company;   provided,  however  that  conversion  of  any
convertible  securities of the Company shall not be deemed to have been effected
without receipt of consideration.  The Administrator  shall make the appropriate
adjustments to (i) the maximum number and/or class of securities  issuable under
this Plan; and (ii) the number and/or class of securities and the exercise price
per  Share in  effect  under  each  outstanding  Award in order to  prevent  the
dilution or  enlargement of benefits  thereunder;  provided,  however,  that the
number of Shares  subject to any Award  shall  always be a whole  number and the
Administrator  shall make such  adjustments as are necessary to insure Awards of
whole  Shares.  Such  adjustment  shall  be  made by the  Administrator  and its
determination shall be final, binding and conclusive.

               COMPANY'S RIGHT TO EFFECT CHANGES IN CAPITALIZATION

18.2           The   existence of  outstanding  Awards  shall  not  affect   the
Company's right to effect  adjustments,  recapitalizations,  reorganizations  or
other changes in its or any other  corporation's  capital structure or business,
any merger or  consolidation,  any issuance of bonds,  debentures,  preferred or
prior  preference  stock ahead of or affecting the Shares,  the  dissolution  or
liquidation  of the Company's or any other  corporation's  assets or business or
any other  corporate  act  whether  similar  to the  events  described  above or
otherwise.

<PAGE>

                                      -28-

19.            CORPORATE TRANSACTIONS/CHANGES IN CONTROL/RELATED ENTITY
               DISPOSITIONS

               COMPANY IS NOT THE SURVIVOR

19.1           Subject to Section 19.3 and except as may  otherwise be  provided
in an Award  Agreement,  the  Administrator  shall  have the  authority,  in its
absolute discretion,  exercisable either in advance of any actual or anticipated
Corporate Transaction,  Change in Control or Related Entity Disposition in which
the  Company  is not the  surviving  corporation,  or at the  time of an  actual
Corporate Transaction,  Change in Control or Related Entity Disposition in which
the Company is not the  surviving  corporation  (a) to cancel  each  outstanding
Award upon  payment  in cash to the  Grantee of the amount by which any cash and
the Fair  Market  Value of any other  property  which  the  Grantee  would  have
received as  consideration  for the Shares covered by the Award if the Award had
been exercised before such Corporate  Transaction,  Change in Control or Related
Entity Disposition  exceeds the exercise price of the Award, or (b) to negotiate
to have such Award assumed by the surviving corporation. The determination as to
whether the Company is the  surviving  corporation  is at the sole and  absolute
discretion of the Administrator.

               In addition to the foregoing, in the event  of  a  dissolution or
liquidation  of the  Company,  or a  Corporate  Transaction  or  Related  Entity
Disposition  in  which  the  Company  is  not  the  surviving  corporation,  the
Administrator,  in its absolute discretion, may accelerate the time within which
each outstanding Award may be exercised. Section 19.3 shall control with respect
to any acceleration in vesting in the event of Change of Control.

               The Administrator shall also have the authority:

               (a) to release  the Awards  from  restrictions  on  transfer  and
               repurchase or forfeiture  rights of such Awards on such terms and
               conditions as the Administrator may specify; and

               (b) to condition any such Award's vesting and  exercisability  or
               release from such limitations upon the subsequent  termination of
               the Continuous  Service of the Grantee within a specified  period
               following the effective date of the Corporate Transaction, Change
               in Control or Related Entity Disposition.

               Effective upon  the  consummation  of  a  Corporate  Transaction,
Change in Control or Related Entity  Disposition  governed by this Section 19.1,
all  outstanding  Awards under this Plan not exercised by the Grantee or assumed
by the successor corporation shall terminate.

               COMPANY IS THE SURVIVOR

19.2           In the event of a  Corporate  Transaction, Change  in Control  or
Related Entity  Disposition  in which the Company is the surviving  corporation,
the Administrator  shall determine the appropriate  adjustment of the number and
kind of securities  with respect to which  outstanding  Awards may be exercised,
and the  exercise  price at  which  outstanding  Awards  may be  exercised.  The
Administrator  shall determine,  in its sole and absolute  discretion,  when the
Company  shall be deemed to survive for  purposes  of this Plan.  Subject to any

<PAGE>

                                      -29-

contrary  language in an Award Agreement  evidencing an Award,  any restrictions
applicable to such Award shall apply as well to any replacement  shares received
by the Grantee as a result.

               CHANGE IN CONTROL

19.3           If there is a Change of Control,  all  outstanding  Awards  shall
fully vest immediately upon the Company's public announcement of such a change.

20.            PRIVILEGES OF STOCK OWNERSHIP

               No Grantee  shall  have  any of the rights of a stockholder  with
respect to any Shares until the Shares are issued to the  Grantee.  After Shares
are issued to the Grantee,  the Grantee shall be a stockholder  and have all the
rights of a stockholder with respect to such Shares, including the right to vote
and receive all  dividends or other  distributions  made or paid with respect to
such Shares;  provided,  that if such Shares are Restricted Stock, then any new,
additional or different  securities  the Grantee may become  entitled to receive
with  respect to such Shares by virtue of a stock  dividend,  stock split or any
other  change in the  corporate  or capital  structure  of the Company  shall be
subject to the same  restrictions  as the  Restricted  Stock.  The Company shall
issue (or cause to be issued) such stock  certificate  promptly upon exercise of
the Award.

21.            RESTRICTION ON SHARES

               At the discretion of the Administrator,  the Company  may reserve
to itself and/or its  assignee(s)  in the Award  Agreement  that the Grantee not
dispose  of the Shares for a  specified  period of time,  or that the Shares are
subject to a right of first  refusal or a right to  repurchase by the Company at
the Shares' Fair Market Value at the time of sale.  The terms and  conditions of
any such rights or other  restrictions shall be set forth in the Award Agreement
evidencing the Award.

22.            CERTIFICATES

               All  certificates   for  Shares  or  other  securities  delivered
under this Plan shall be subject to such  stock  transfer  orders,  legends  and
other  restrictions  as the  Administrator  may  deem  necessary  or  advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules,  regulations  and other  requirements of the SEC or any stock
exchange or  automated  quotation  system upon which the Shares may be listed or
quoted.

23.            ESCROW; PLEDGE OF SHARES

               To   enforce   any  restrictions  on   a  Grantee's  Shares,  the
Administrator  may require the Grantee to deposit all certificates  representing
Shares,  together with stock powers or other instruments of transfer approved by
the Administrator, appropriately endorsed in blank, with the Company or an agent
designated by the Company to hold in escrow until such  restrictions have lapsed
or terminated,  and the Administrator may cause a legend or legends  referencing
such restrictions to be placed on the certificates.

<PAGE>

                                      -30-

24.            SECURITIES LAW AND OTHER REGULATORY COMPLIANCE

               COMPLIANCE WITH APPLICABLE LAW

24.1          An Award shall not be effective unless such Award is in compliance
with all applicable  federal and state securities laws, rules and regulations of
any  governmental  body, and the requirements of any stock exchange or automated
quotation system upon which the Shares may then be listed or quoted, as they are
in effect on the Grant Date and also on the date of exercise or other  issuance.
Notwithstanding  any other  provision  in this Plan,  the Company  shall have no
obligation to issue or deliver  certificates for Shares under this Plan prior to
(i)  obtaining  any  approvals  from  governmental  agencies  that  the  Company
determines   are  necessary  or  advisable;   and/or  (ii)   completion  of  any
registration  or other  qualification  of such Shares under any state or federal
laws or rulings  of any  governmental  body that the  Company  determines  to be
necessary or advisable. The Company shall be under no obligation to register the
Shares with the Securities  Exchange Commission or to effect compliance with the
registration,  qualification  or listing  requirements  of any state  securities
laws, stock exchange or automated  quotation system,  and the Company shall have
no liability  for any  inability or failure to do so.  Evidences of ownership of
Shares  acquired  pursuant  to an Award  shall bear any legend  required  by, or
useful for purposes of compliance with, applicable securities laws, this Plan or
the Award Agreement.

               During  any  time  when  the  Company  has  a  class   of  equity
security  registered  under  Section 12 of the Exchange Act, it is the intent of
the Company that Awards pursuant to this Plan and the exercise of Awards granted
hereunder  shall  qualify  for the  exemption  provided  by Rule 16b-3 under the
Exchange  Act.  To the extent that any  provision  of this Plan or action by the
Board or the Administrator  does not comply with the requirements of Rule 16b-3,
it shall  be  deemed  inoperative  to the  extent  permitted  by law and  deemed
advisable by the Board or the  Administrator,  and shall not affect the validity
of this  Plan.  In the  event  that  Rule  16b-3 is  revised  or  replaced,  the
Administrator  may  exercise its  discretion  to modify this Plan in any respect
necessary to satisfy the  requirements  of, or to take advantage of any features
of, the revised exemption or its replacement.

               INVESTMENT REPRESENTATION

24.2     As a condition  to the  exercise  of an Award,  the Company may require
the person  exercising  such Award to  represent  and warrant at the time of any
such  exercise  that the  Shares are being  purchased  only for  investment  and
without  any  present  intention  to sell or  distribute  such Shares if, in the
opinion of counsel for the  Company,  such a  representation  is required by any
Applicable Laws.

25.            NO OBLIGATION TO EMPLOY

               Nothing  in this  Plan  or any  Award  granted  under  this  Plan
shall  confer or be deemed to confer on any Grantee any right to continue in the
employ of, or to continue any other  relationship  with, the Company or to limit
in any way the right of the Company to terminate  such  Grantee's  employment or
other relationship at any time, with or without Cause.

<PAGE>

                                      -31-

26.            EFFECTIVE DATE AND TERM OF PLAN

               This Plan shall become effective upon the earlier to occur of its
adoption by the Board or its approval by the  shareholders  of the  Company.  It
shall continue in effect for a term of ten years unless sooner terminated.

27.            SHAREHOLDER APPROVAL

               This Plan shall be subject to approval by the shareholders of the
Company  within 12 months  from the date the Plan is  adopted  by the  Company's
Board.  Such  shareholder  approval  shall be  obtained in the degree and manner
required under  Applicable Laws. The  Administrator  may grant Awards under this
Plan prior to approval by the shareholders, but until such approval is obtained,
no such Award shall be exercisable.  In the event that  shareholder  approval is
not obtained within the 12 month period provided  above,  all Awards  previously
granted under this Plan shall be cancelled and of no force or effect.

28.            AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN OR AWARDS

               The Board may  amend,  suspend or  terminate  this  Plan  at  any
time and for any reason. To the extent necessary to comply with Applicable Laws,
the Company shall obtain  shareholder  approval of any Plan  amendment in such a
manner and to such a degree as required.  Shareholder approval shall be required
for the following  types of amendments to this Plan: (i) any increase in Maximum
Number of Shares  issuable under the Plan except for a proportional  increase in
the  Maximum  Number as a result of stock split or stock  dividend,  or a change
from a fixed Maximum  Number of Shares to a fixed maximum  percentage;  (ii) any
change to those persons who are entitled to become  participants  under the Plan
which  would  have  the   potential  of   broadening   or   increasing   Insider
participation;  or (iii) the  addition of any form of  financial  assistance  or
amendment  to a  financial  assistance  provision  which is more  favourable  to
Grantees.

               Further, the  Board  may, in  its discretion,  determine that any
amendment should be effective only if approved by the shareholders  even if such
approval  is not  expressly  required  by this  Plan or by law.  No Award may be
granted during any suspension of this Plan or after termination of this Plan.

               Any  amendment,  suspension or  termination  of  this  Plan shall
not affect Awards  already  granted,  and such Awards shall remain in full force
and effect as if this Plan had not been amended, suspended or terminated, unless
mutually  agreed  otherwise  between the Grantee  and the  Administrator,  which
agreement  must be in writing and signed by the Grantee and the Company.  At any
time and from time to time, the  Administrator  may amend,  modify, or terminate
any  outstanding  Award or Award  Agreement  without  approval  of the  Grantee;
provided  however,  that  subject to the  applicable  Award  Agreement,  no such
amendment,  modification or termination  shall,  without the Grantee's  consent,
reduce or diminish the value of such Award  determined  as if the Award had been
exercised,  vested, cashed in or otherwise settled on the date of such amendment
or termination.

<PAGE>

                                      -32-

               Notwithstanding  any  provision  herein  to  the  contrary,   the
Administrator  shall have broad  authority to amend this Plan or any outstanding
Award under this Plan without approval of the Grantee to the extent necessary or
desirable:  (i) to comply with, or take into account changes in,  applicable tax
laws,  securities  laws,  accounting  rules and other applicable laws, rules and
regulations;  or (ii) to ensure  that an Award is not  subject to  interest  and
penalties  under  Section  409A of the Code or the excise tax imposed by Section
4999 of the Code.

               Further,  notwithstanding  any  provision herein to the contrary,
and  subject  to  Applicable  Law,  the  Administrator   may,  in  its  absolute
discretion,  amend or modify this Plan:  (i) to make  amendments  which are of a
"housekeeping" or clerical nature;  (ii) to change the vesting  provisions of an
Award  granted  hereunder,  as  applicable;  (iii)  to  change  the  termination
provision of an Award granted hereunder, as applicable, which does not entail an
extension  beyond the original expiry date of such Award;  and (iv) the addition
of a cashless  exercise feature,  payable in cash or securities,  which provides
for a full  deduction of the number of  underlying  securities  from the Maximum
Number.

29.            RESERVATION OF SHARES

               The Company,  during  the  term  of this Plan, shall at all times
reserve  and keep  available  such  number of Shares as shall be  sufficient  to
satisfy the requirements of this Plan.

               The Shares to be issued  hereunder  upon  exercise  of  an  Award
may be either authorized but unissued; supplied to the Plan through acquisitions
of  Shares  on the  open  market;  Shares  forfeited  back to the  Plan;  Shares
surrendered in payment of the exercise price of an Award; or Shares withheld for
payment of applicable employment taxes and/or withholding  obligations resulting
from the exercise of an Award.

               The  inability  of the  Company  to  obtain  authority  from  any
regulatory body having jurisdiction,  which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell  such  Shares  as to which  such  requisite  authority  shall not have been
obtained.

30.            EXCHANGE AND BUYOUT OF AWARDS

               The  Administrator  may,  at  any  time  or  from  time to  time,
authorize the Company, with the consent of the respective Grantees, to issue new
Awards in exchange for the surrender and  cancellation of any or all outstanding
Awards. The Administrator may at any time buy from a Grantee an Award previously
granted  with  payment in cash,  Shares  (including  Restricted  Stock) or other
consideration,  based on such terms and conditions as the  Administrator and the
Grantee may agree.

31.            APPLICABLE TRADING POLICY

               The  Administrator  and  each  Eligible  Participant  will ensure
that all actions taken and decisions  made by the  Administrator  or an Eligible
Participant,  as the  case  may  be,  pursuant  to this  Plan  comply  with  any
Applicable  Laws and  policies  of the Company  relating  to insider  trading or
"blackout" periods.

<PAGE>

                                      -33-

32.            GOVERNING LAW

               The Plan shall be governed by the laws of  the  State  of Nevada;
provided,  however,  that any Award  Agreement  may provide by its terms that it
shall  be  governed  by the  laws of any  other  jurisdiction  as may be  deemed
appropriate by the parties thereto.

33.            MISCELLANEOUS

               Except  as  specifically  provided  in  a   retirement  or  other
benefit  plan of the  Company or a Related  Entity,  Awards  shall not be deemed
compensation  for  purposes of  computing  benefits or  contributions  under any
retirement  plan of the  Company or a Related  Entity,  and shall not affect any
benefits  under  any  other  benefit  plan  of  any  kind  or any  benefit  plan
subsequently  instituted  under which the  availability or amount of benefits is
related  to  level  of  compensation.  The  Plan is not a  "Retirement  Plan" or
"Welfare  Plan" under the EMPLOYEE  RETIREMENT  INCOME  SECURITY ACT OF 1974, as
amended.

<PAGE>

                                    SUBPART A

              STOCK AND DEFERRED STOCK UNITS FOR ELIGIBLE DIRECTORS

A.             STOCK AWARD. The Administrator shall pay Eligible Remuneration to
each Director pursuant to an Award Agreement.

B.             ELECTION. Further, the Administrator may, in its sole discretion,
permit each  Eligible  Director  to receive  all or any portion of his  Eligible
Remuneration  during the Remuneration Period in the form of Deferred Stock Units
under this Plan (an  "Election").  All  deferrals  pursuant  to such an Election
shall be evidenced by an Award Agreement.

               For purposes of this Subpart A, the  following  definitions shall
apply:

"ANNUAL  RETAINER" for a particular  Director means the retainer  (including any
additional  amounts  payable for serving as lead Director or on any committee of
the Board),  payable to that Director for serving as a Director for the relevant
Remuneration Period, as determined by the Board;

"ATTENDANCE FEE" means amounts payable annually to a Director as a Board meeting
attendance fee or a committee meeting attendance fee, or any portion thereof;

"CANADIAN  DIRECTOR"  means a  Director  who is a  resident  of  Canada  for the
purposes  of the  Canadian  Tax Act,  and whose  income from  employment  by the
Company or Related Entity is subject to Canadian income tax, notwithstanding any
provision of the Canada-United States Income Tax Convention (1980), as amended;

"CANADIAN TAX ACT" and "CANADIAN TAX REGULATIONS"  means respectively the INCOME
TAX  ACT  (Canada),  as  amended  and  the  Income  Tax  Regulation  promulgated
thereunder, as amended;

"DEFERRED  STOCK  UNIT"  means a right  granted by the  Company  to an  Eligible
Director to receive, on a deferred payment basis, Shares under this Plan;

"ELIGIBLE  DIRECTOR" is any Director of this Company or Related  Entity that the
Administrator  determines is eligible to elect to receive  Deferred  Stock Units
under this Plan;

"ELIGIBLE  REMUNERATION"  means all amounts  payable to an Eligible  Director in
Shares,  including all or part of amounts  payable in satisfaction of the Annual
Retainer,  Attendance  Fees or any other fees  relating  to service on the Board
which are  payable  to an  Eligible  Director  or in  satisfaction  of rights or
property surrendered by an Eligible Director to the Company; it being understood
that the amount of Eligible Remuneration payable to any Eligible Director may be
calculated by the Administrator in a different manner than Eligible Remuneration
payable to another Eligible Director in its sole and absolute discretion;

"PRESCRIBED  PLAN OR  ARRANGEMENT"  means a prescribed  plan or  arrangement  as
defined in s.6801(d) of the Canadian Tax Regulation;

<PAGE>
                                      -2-

"REMUNERATION  PERIOD" means,  as applicable,  (a) the period  commencing on the
Effective  Date of this Plan and ending on the last day of the calendar  year in
which the Effective Date occurs;  and (b) thereafter  each  subsequent  calendar
year, or where the context requires, any portion of such period; and

"SALARY DEFERRAL  ARRANGEMENT" means a salary deferral arrangement as defined in
the Canadian Tax Act.

1.             ELECTION.  An Eligible  Director  who  desires to  defer  receipt
of all or a portion of his or her Eligible  Remuneration  in any  calendar  year
shall make such election in writing to the Company specifying:

               (a) the dollar amount or percentage of Eligible  Remuneration  to
               be deferred; and

               (b) the deferral period.

               Otherwise,  such election must be made  before  the  first day of
the calendar year in which the Eligible Remuneration shall be payable, however a
newly appointed  Eligible  Director shall be eligible to defer payment of future
Eligible  Remuneration  by providing  written  election to the Company within 30
calendar days of his or her appointment to the Board of Directors. The elections
made  pursuant to this  Section  shall be  irrevocable  with respect to Eligible
Remuneration to which such elections  pertain and shall also apply to subsequent
Eligible  Remuneration  payable in future  calendar  years unless such  Eligible
Director notifies the Company in writing, before the first day of the applicable
calendar year, that he or she desires to change such election.

               If the Eligible  Director  does  not timely  deliver  an election
in respect of a  particular  Remuneration  Period,  the Eligible  Director  will
receive the Eligible  Remuneration  as provided for in the Award  Agreement.

2.             DETERMINATION OF DEFERRED STOCK UNITS.  The Company will maintain
a separate account for each Eligible  Director to which it will quarterly credit
Deferred Stock Units at the end of March,  June,  September and December,  or as
otherwise  determined by the Administrator,  the Deferred Stock Units granted to
the  Eligible  Director  for the  relevant  Remuneration  Period.  The number of
Deferred Stock Units  (including  fractional  Deferred Stock Units,  computed to
three  digits) to be credited to an account  for an  Eligible  Director  will be
determined on the date approved by the Administrator by dividing the appropriate
amount of Eligible  Remuneration to be deferred into Deferred Stock Units by the
Fair Market Value on that date.

3.             NO VOTING RIGHTS. The holders of Deferred Stock Units shall  have
no rights as stockholders of the Company.

4.             DIVIDEND  EQUIVALENCY.  The Company will, on any date  on which a
cash or  stock  dividend  is  paid on its  outstanding  Shares,  credit  to each
Eligible  Director's  account  that number of  additional  Deferred  Stock Units
(including fractional Deferred Stock Units, computed to three digits) calculated
by (i)  multiplying  the  amount  of the  dividend  per  Share by the  number of
Deferred  Stock  Units in the  account as of the record  date for payment of the
dividend,  and (ii) dividing the amount obtained in (i) by the Fair Market Value
on the date on which the dividend is paid. (See Section 13 of the Plan, Dividend
Equivalent Right).

<PAGE>

                                      -3-

5.             ELIGIBLE DIRECTOR'S ACCOUNT.A written confirmation of the balance
in each Eligible  Directors' Account will be sent by the Company to the Eligible
Director upon request of the Eligible Director.

6.             CREDITOR'S  RIGHTS.  A holder of  Deferred Stock Units shall have
no rights other than those of a general creditor of the Company.  Deferred Stock
Units represent an unfunded and unsecured obligation of the Company,  subject to
the terms and condition of the applicable Award Agreement.

7.             SETTLEMENT OF DEFERRED STOCK UNITS.  Subject to  Section 8,  each
Deferred  Stock Unit shall be paid and settled by the issuance of  Restricted or
unrestricted  Shares  in  accordance  with  the  Award  Agreement  and  if  such
settlement  is subject to Section  409A of the Code only upon any one or more of
the following as provided for in the Award Agreement:

               (a) a specific date or date determinable by a fixed schedule;

               (b)  upon  the  Eligible  Director's  termination  of  Continuous
               Services to the extent the same  constitutes  a  separation  from
               services for the purposes of Section 409A of the Code except that
               if an Eligible Director is a "key employee" as defined in Section
               409A of the Code for such  purposes,  then payment or  settlement
               shall occur 6 months following such separation of service;

               (c) as a result of the Eligible  Director's  death or Disability;
               or

               (d) in  connection  with or as a result of a Change in Control in
               compliance with 409A of the Code.

               The Company will issue one Share for each  whole  Deferred  Stock
Unit  credited  to the  Eligible  Director's  account  (net  of  any  applicable
withholding tax as provided for in this Plan). Such payment shall be made by the
Company as soon as reasonably possible following the settlement date. Fractional
Shares shall not be issued, and where the Eligible Director would be entitled to
receive a fractional  Shares in respect of any  fractional  Deferred Stock Unit,
the Company  shall pay to such  Eligible  Director,  in lieu of such  fractional
Shares, cash equal to the Fair Market Value of such fractional Shares calculated
as of the day before such  payment is made,  net of any  applicable  withholding
tax.

8.             CANADIAN  DIRECTORS.  If a Deferred Stock  Unit is  granted to an
Eligible Director who is a Canadian Director would otherwise constitute a Salary
Deferred Arrangement, the Award Agreement pertaining to that Deferred Stock Unit
shall  contain such other or additional  terms as will cause the Deferred  Stock
Unit to be a Prescribed Plan or Arrangement.

9.             ISSUANCE  OF  STOCK  CERTIFICATES.     A  stock  certificate   or
certificates  shall  be  registered  and  issued  in the name of the  holder  of
Deferred Stock Units and delivered to such holder as soon as  practicable  after
such Deferred  Stock Units have become  payable or satisfied in accordance  with
the terms of the Plan.

<PAGE>

                                       -4-

10.            NON-EXCLUSIVITY.  Nothing  in this Subpart A shall  prohibit  the
Administrator from making discretionary Awards to Eligible Directors pursuant to
the  other  provisions  of  this  Plan  or  outside  this  Plan,  not  otherwise
inconsistent with these provisions.

11.            DEFINED TERMS.  Capitalized terms used in this Subpart A  and not
defined herein have the meaning give in the Plan.Exhibit 9 (10.6) - Securities Purchase Agreement dated October 4, 2006

    
      

      

    

    Exhibit
      10.6

     

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of October 4, 2006, by and among Welund Fund, Inc., a Nevada
      corporation, and all predecessors thereto (the “Company”)
      and the
      investors 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 the Investors agree as
      follows:

     

    ARTICLE
      1.

     

    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, inquiry, 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 or State of
      California are authorized or required by law or other governmental action to
      close.

     

    “Buy-In”
      has
      the
      meaning set forth in Section 4.1(c).

     

    “Closing”
      means
      the closing of the purchase and sale of the Shares pursuant to Article
      II.

     

    “Closing
      Date”
      means
      the Business Day 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 $0.0001 per share, and any securities
      into which such common stock may hereafter be reclassified.

     

    “Common
      Stock Equivalents”
      means
      any securities of the Company or any Subsidiary which entitle the holder thereof
      to acquire Common Stock at any time, including without limitation, any debt,
      preferred stock, rights, options, warrants or other instrument that is at any
      time convertible into or exchangeable for, or otherwise entitles the holder
      thereof to receive, Common Stock or other securities that entitle the holder
      to
      receive, directly or indirectly, Common Stock.

     

    “Company
      Counsel”
      means
      Bullivant Houser Bailey PC.

     

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

     

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

     

    “Effective
      Date”
      means
      the date that the Registration Statement required by Section 2(a) of the
      Registration Rights Agreement is first declared effective by the
      Commission.

     

    “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(p).

     

    “Investment
      Amount”
      means,
      with respect to each Investor, the Investment Amount 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
      November 30, 2006.

     

    “Per
      Share Purchase Price”
      equals
      $1.00.

     

    

     

    

    
      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

     

    “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.

     

    “Registration
      Rights Agreement”
      means
      the Registration Rights Agreement, dated as of the date of this Agreement,
      among
      the Company and the Investors, in the form of Exhibit
      A
      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.

     

    “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
      Act”
      means
      the Securities Act of 1933, as amended.

     

    “Share
      Delivery Date”
      has the
      meaning set forth in Section 4.1(c).

     

    “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 the 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 (other than
      the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading
      Market (other than the OTC Bulletin Board), a day on which the Common Stock
      is
      traded in the over-the-counter market, as reported by the OTC Bulletin Board,
      or
      (iii) 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),
      (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

     

    

    
      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

     

    “Trading
      Market”
      means
      whichever of the New York Stock Exchange, the American Stock Exchange, the
      NASDAQ Global 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 Registration Rights Agreement, and any other documents
      or
      agreements executed in connection with the transactions contemplated
      hereunder.

     

    ARTICLE
      2.

    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 representing
      such Investor’s Investment Amount. The Closing shall take place at the offices
      of Bryan Cave LLP, 1290 Avenue of the Americas, New York, NY 10104 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 a number of Shares equal to such Investor’s Investment
      Amount divided by the Per Share Purchase Price, registered in the name of such
      Investor;

     

    (ii)   the
      legal
      opinion of Company Counsel, in agreed form, addressed to the Investors;
      and

     

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

     

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

     

    (i)    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.

     

    ARTICLE
      3.

    REPRESENTATIONS
      AND WARRANTIES

     

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

     

    

    
      
        
          
          

        

        
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    (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 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 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 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.

     

    

    
      
        
          
          

        

        
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    (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 4.5 and (v) those that have been made or obtained prior
      to the date of this Agreement.

     

    (f)   Issuance
      of the Shares.
      The
      Shares 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. The Company has reserved from its
      duly authorized capital stock the shares of Common Stock issuable pursuant
      to
      this Agreement in order to issue the 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 Shares
      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 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 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.

     

    

    
      
        
          
          

        

        
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    (i)    Press
      Releases.
      The
      Company has not disseminated any press releases during the twelve months
      preceding the date of this Agreement.

     

    (j)    Material
      Changes.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in the SEC Reports and Schedule
      3.1(j),
      (i)
      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 plans. The Company does not have
      pending before the Commission any request for confidential treatment of
      information.

     

    (k)   Litigation.
      There
      is no Action which (i) adversely affects or challenges the legality, validity
      or
      enforceability of any of the Transaction Documents or the Shares 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 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. There
      has
      not been, and to the knowledge of the Company, there is not pending any
      investigation by the Commission involving the Company or any current or former
      director or officer of the Company (in his or her capacity as such). 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.

     

    (l)    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.

     

    

    
      
        
          
          

        

        
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    (m)  
        Compliance.
      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. The Company is in compliance with all effective
      requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
      regulations thereunder, that are applicable to it, except where such
      noncompliance could not have or reasonably be expected to result in a Material
      Adverse Effect.

     

    (n)   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.

     

    (o)   Title
      to Assets.
      The
      Company and the Subsidiaries do not own any real property. The Company and
      Subsidiaries have 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.

     

    (p)   Patents
      and Trademarks.
      The
      Company and its Subsidiaries do not use any patents, patent applications,
      trademarks, trademark applications, service marks, trade names, copyrights,
      licenses and other similar rights in connection with their respective businesses
      as described in the SEC Reports.

     

    (q)   Insurance.
      The
      Company and its Subsidiaries do not have any insurance coverage.

     

    (r)   Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports and on Schedule
      3.1(r),
      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.

     

    

    
      
        
          
          

        

        
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    (s)   Internal
      Accounting Controls.
      The
      Company implemented disclosure controls and procedures (as defined in Exchange
      Act Rules 13a-15(e) and 15d-15(e)) pursuant to which management under the
      supervision and with the participation of the Company’s Chief Executive Officer
      and Chief Financial Officer, carries out a review and evaluation of the
      effectiveness of the Company’s disclosure controls and procedures, particularly
      during the period in which the Company’s Form 10-KSB or 10-QSB, as the case may
      be, is being prepared. The Company’s certifying officers have evaluated the
      effectiveness of the Company’s controls and procedures in accordance with Item
      307 of Regulation S-B under the Exchange Act for the Company’s most recently
      ended fiscal quarter or fiscal year-end (such date, the “Evaluation
      Date”).
      The
      Company presented in its most recently filed Form 10-KSB or Form 10-QSB the
      conclusions of the certifying officers about the effectiveness of the disclosure
      controls and procedures based on their evaluations as of the Evaluation Date.
      Since the Evaluation Date, there have been no significant changes in the
      Company’s internal controls (as such term is defined in Item 308(c) of
      Regulation S-B under the Exchange Act) or, to the Company’s knowledge, in other
      factors that could significantly affect the Company’s internal
      controls.

     

    (t)   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 current cash flow of the Company,
      together with 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).

     

    (u)   Certain
      Fees.
      Except
      as described in Schedule
      3.1(u),
      no
      brokerage or finder’s fees or commissions are or will be payable by the Company
      to any broker, financial advisor or consultant, finder, placement agent,
      investment banker, bank or other Person with respect to the transactions
      contemplated by this Agreement. 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 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.

     

    

    
      
        
          
          

        

        
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    (v)   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 by the Company to the Investors under the
      Transaction Documents. The Company is eligible to register its Common Stock
      for
      resale by the Investors under Form SB-2 promulgated under the Securities Act.
      Except as specified in Schedule
      3.1(v),
      the
      Company has not granted or agreed to grant to any Person any rights (including
      “piggy-back” registration rights) to have any securities of the Company
      registered with the Commission or any other governmental authority that have
      not
      been satisfied.

     

    (w)  
        Proposed
      Merger.
      On
      August 23, 2006, the Company entered into an Agreement and Plan of Merger (the
      “Merger Agreement”) with Solar Power, Inc., a California corporation (“Solar
      Power”), and the Company’s wholly-owned subsidiary, Welund Acquisition, Inc., a
      Nevada corporation (“Merger Sub”), pursuant to which it is contemplated that the
      Merger Sub will be merged with and into Solar Power with Solar Power surviving
      as the Company’s wholly-owned subsidiary (the “Merger”). Additional information
      regarding the Merger and Solar Power is disclosed on Form 8-K filed by the
      Company with the Securities and Exchange Commission on August 29,
      2006.

     

    (x)   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.

     

    (y)   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 Articles 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 Shares and the
      Investors’ ownership of the Shares.

     

    (z)   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.

     

    (aa)     
       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 contemplated
      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.

     

    

    
      
        
          
          

        

        
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    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:

     

    (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 the 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 Shares as principal for its own account for investment
      purposes only and not with a view to or for distributing or reselling such
      Shares 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 Shares
      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 Shares for any period
      of
      time. Such Investor is acquiring the Shares hereunder in the ordinary course
      of
      its business. Such Investor does not have any agreement or understanding,
      directly or indirectly, with any Person to distribute any of the
      Shares.

     

    (c)   Investor
      Status.
      At the
      time such Investor was offered the Shares, it was, and at the date hereof it
      is,
      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. Each Investor represents that, to the extent that he or she is an
      individual, that he or she is a resident of the state set forth opposite his
      or
      her name on the signature page, and, to the extent that the Investor is an
      organizational entity, it has been organized under the laws of the state or
      country set forth opposite its name on the signature page.

     

    (d)   General
      Solicitation.
      Such
      Investor is not purchasing the Shares as a result of any advertisement, article,
      notice or other communication regarding the Shares 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 Shares; (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 rely on the truth,
      accuracy and completeness of the Disclosure Materials and the Company’s
      representations and warranties contained in the Transaction
      Documents.

     

    

    
      
        
          
          

        

        
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    (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 time that such Investor was
      first contacted by the Company or Roth Capital Partners, LLC regarding the
      investment in the Company contemplated by 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
      the
      Shares 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 Roth Capital Partners, LLC or any of its agents, counsel or
      Affiliates 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.

     

    The
      Company acknowledges and agrees that no Investor has made or makes any
      representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in this Section 3.2.

     

    ARTICLE
      4.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1.   (a)   Shares
      may only be disposed of in compliance with state and federal securities laws.
      In
      connection with any transfer of the Shares 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), 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 Shares under the Securities
      Act.

     

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

     

    
      	
              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 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.
                THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
                ACCOUNT SECURED BY SUCH SECURITIES.

            

    

     

    

    
      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

    

    

    The
      Company acknowledges and agrees that an Investor may from time to time pledge,
      and/or grant a security interest in some or all of the Shares pursuant to a
      bona
      fide margin agreement in connection with a bona fide margin account and, if
      required under the terms of such agreement or account, such Investor may
      transfer pledged or secured Shares to the pledgees or secured parties. Such
      a
      pledge or transfer would not be subject to approval or consent of the Company
      and no legal opinion of legal counsel to the pledgee, secured party or pledgor
      shall be required in connection with the pledge, but such legal opinion may
      be
      required in connection with a subsequent transfer following default by the
      Investor transferee of the pledge. No notice shall be required of such pledge.
      At the appropriate Investor’s expense, the Company will execute and deliver such
      reasonable documentation as a pledgee or secured party of Shares may reasonably
      request in connection with a pledge or transfer of the Shares including the
      preparation and filing of any required prospectus supplement under Rule
      424(b)(3) of the Securities Act or other applicable provision of the Securities
      Act to appropriately amend the list of Selling Stockholders thereunder. Except
      as otherwise provided in Section 4.1(c), any Shares subject to a pledge or
      security interest as contemplated by this Section 4.1(b) shall continue to
      bear
      the legend set forth in this Section 4.1(b) and be subject to the restrictions
      on transfer set forth in Section 4.1(a).

     

    (c)   Certificates
      evidencing Shares shall not contain any legend (including the legend set forth
      in Section 4.1(b)): (i) following a sale or transfer of such Shares pursuant
      to
      an effective registration statement (including a Registration Statement), or
      (ii) following a sale or transfer of such Shares pursuant to Rule 144 (assuming
      the transferee is not an Affiliate of the Company), or (iii) while such Shares
      are eligible for sale under Rule 144(k). If an Investor shall make a sale or
      transfer of Shares either (x) pursuant to Rule 144 or (y) pursuant to a
      registration statement and in each case shall have delivered to the Company
      or
      the Company’s transfer agent the certificate representing Shares containing a
      restrictive legend which are the subject of such sale or transfer
      and a representation letter in customary form (the
      date of
      such sale or transfer and Share delivery being the “Share
      Delivery Date”)
      and (1)
      the Company shall fail to deliver or cause to be delivered to such Investor
      a
      certificate representing such Shares that is free from all restrictive or other
      legends by the third Trading Day following the Share Delivery Date and (2)
      following such third Trading Day after the Share Delivery Date and prior to
      the
      time such Shares are received free from restrictive legends, the Investor,
      or
      any third party on behalf of such Investor, purchases (in an open market
      transaction or otherwise) shares of Common Stock to deliver in satisfaction
      of a
      sale by the Investor of such Shares (a "Buy-In"),
      then
      the Company shall pay in cash to the Investor (for costs incurred either
      directly by such Investor or on behalf of a third party) the amount by which
      the
      total purchase price paid for Common Stock as a result of the Buy-In (including
      brokerage commissions, if any) exceed the proceeds received by such Investor
      as
      a result of the sale to which such Buy-In relates. The Investor shall provide
      the Company written notice indicating the amounts payable to the Investor in
      respect of the Buy-In. 

     

    

     

    

    
      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

    

    

    4.2.
        Furnishing
      of Information. As long as any Investor owns the Shares, 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 Shares, 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 under Rule 144. The Company further covenants
      that
      it will take such further action as any holder of Shares may reasonably request,
      all to the extent required from time to time to enable such Person to sell
      the
      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 Shares
      in
      a manner that would require the registration under the Securities Act of the
      sale of the Shares to the Investors, or that would be integrated with the offer
      or sale of the Shares for purposes of the rules and regulations of any Trading
      Market in a manner that would require stockholder approval of the sale of the
      Shares to the Investors.

     

    4.4.   Subsequent
      Registrations. Other than pursuant to the Registration Statement, prior to
      the Effective Date, the Company may not file any registration statement (other
      than on Form S-8) with the Commission with respect to any securities of the
      Company.

     

    4.5.   Securities
      Laws Disclosure; Publicity. Within four Business Days of 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 within four Business Days 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. Notwithstanding the foregoing, the Company shall
      not
      publicly disclose the name of any Investor, or include the name of any Investor
      in any filing with the Commission (other than the Registration Statement and
      any
      exhibits to filings made in respect of this transaction in accordance with
      periodic filing requirements under the Exchange Act) or any regulatory agency
      or
      Trading Market, without the prior written consent of such Investor, except
      to
      the extent such disclosure is required by law or Trading Market
      regulations.

     

    

    
      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

    

    

    

     

    4.6.   Limitation
      on Issuance of Future Priced Securities. During the six months following the
      Closing Date, the Company shall not issue any “Future Priced Securities” as such
      term is described by NASD IM-4350-1.

     

    4.7.   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. Except as otherwise set
      forth herein, the mechanics and procedures with respect to the rights and
      obligations under this Section 4.7 shall be the same as those set forth in
      Section 5 of the Registration Rights Agreement.

     

    4.8.   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 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.

     

    4.9.   Listing
      of Securities. The Company covenants and agrees that the Company shall use
      its reasonable best efforts to cause its Common Stock, including the Shares,
      to
      be quoted on the OTC Bulletin Board.

     

    4.10.  
       Use
      of
      Proceeds. The Company will use the net proceeds from the sale of the Shares
      hereunder for working capital purposes and capital expenditures, and not for
      the
      satisfaction of any portion of the Company’s debt (other than payment of trade
      payables and accrued expenses in the ordinary course of the Company’s business
      and consistent with prior practices), or to redeem any Common Stock or Common
      Stock Equivalents.

     

    4.11.  
       Completion
      of Audit. The Company and Subsidiaries shall use their best efforts to have
      completed their audit and have audited and unaudited financial statements as
      are
      necessary for the Company to meet its reporting obligations under rules and
      regulations promulgated by the SEC, including periodic reports, current report
      and proposed registration statement contemplated to be filed under Form SB-2
      by
      October 30, 2006.

     

    

    
      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

    

     

    ARTICLE
      5.

    CONDITIONS
      PRECEDENT TO CLOSING

     

    5.1.   Conditions
      Precedent to the Obligations of the Investors to Purchase Shares. The
      obligation of each Investor to acquire Shares 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;

     

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

     

    (f)    Chairman
      of the Board.
      Stephen
      Kircher shall have been named the Chairman of the Board of Directors of the
      Company; 

     

    (g)   Minimum
      Offering.
      The
      aggregate Investment Amount of all Investors shall be at least $10,000,000;
      and

     

    (h)   Termination.
      This
      Agreement shall not have been terminated as to such Investor in accordance
      with
      Section 6.5.

     

    5.2.   Conditions
      Precedent to the Obligations of the Company to sell Shares. The obligation
      of the Company to sell Shares 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;

     

    

    
      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

    

     

    (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;

     

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

     

    (e)   Minimum
      Offering.
      The
      aggregate Investment Amount of all Investors shall be at least $10,000,000;
      and

     

    (f)   Termination.
      This
      Agreement shall not have been terminated as to such Investor in accordance
      with
      Section 6.5.

     

    ARTICLE
      6.

    MISCELLANEOUS

     

    6.1.   Fees
      and Expenses. Each party shall pay the fees and expenses of its advisers,
      counsel, 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.

     

    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:

            	
              Welund
                Fund, Inc.

            

    

    1940
      Zinfandel Drive, Suite R

    Rancho
      Cordova, California 95670

    Facsimile:
      (916) 791-0289

    Attn.:
      Steven Strasser, President

    

    
      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

    

    

    

    
      	 	
              With
                a copy to:

            	
              Bullivant
                Houser Bailey PC

            

    

    1415
      L
      Street, Suite 1000

    Sacramento,
      CA 95814

    Facsimile:
      (916) 930-2501

    Attn.:
      David C. Adams, Esq.

     

    
      	 	
              If
                to an Investor:

            	
              To
                the address set forth under such Investor’s name on the signature pages
                hereof;

            

    

    

    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 and
      the
      Investors holding a majority of the Shares. 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.

     

    

    
      
        
          
          

        

        
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    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 the Investors. Any Investor may assign any or all of its
      rights under this Agreement to any Person to whom such Investor assigns or
      transfers any Shares, provided such transferee agrees in writing to be bound,
      with respect to the transferred Shares, 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).

     

    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 exclusively in the New York Courts. Each party
      hereto hereby irrevocably submits to the exclusive 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), and hereby
      irrevocably waives, and agrees not to assert in any Proceeding, any claim that
      it is not personally subject to the jurisdiction of any such New York Court,
      or
      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 Shares.

     

    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.

     

    

    
      
        
          
          

        

        
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    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 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 Shares 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 Shares. If a replacement certificate or instrument evidencing any
      Shares 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.

     

    

    
      
        
          
          

        

        
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    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 Shares 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 making
      its investment hereunder and that no Investor will be acting as agent of such
      Investor in connection with monitoring its investment in the Shares 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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    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.

     

    
      	 	
              WELUND
                FUND, INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Terrell W.
                Smith                           
                

            
	 	 	
              Name:
                Terrell W. Smith

            
	 	 	
              Title:
                Vice
                President

            

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOR INVESTORS FOLLOW]

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

    
      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

    

     

     

    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:

              
	 	 
	 	
                Investment
                  Amount: $ ____________________________________________

              
	 	 
	 	
                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:
                     _________________________________________________________

                

              

      

    

     

    

    
      
        
          
          

        

        
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    DISCLOSURE
      SCHEDULE

     

    SCHEDULE
      3.1(j)

    Material
      Changes

     

     

    1. 
On
      September 5, 2006, the board of directors of the Company approved a loan in
      the
      principal amount of $150,000 from the Company to SPI to be used for working
      capital pursuant to the terms of a demand note bearing an interest rate of
      eight
      percent (8%).

     

    2. 
On
      September 5, 2006, the Company agreed to loan an additional $50,000 to SPI
      to be
      used as working capital.

     

    3. 
On
      September 5, 2006, Steve Kircher was appointed as the director and Chairman
      of
      the Board of Directors of the Company.

     

     

    SCHEDULE
      3.1(r)

    Transactions
      with Affiliates and Employees

     

    1. 
On
      September 5, 2006, the board of directors of the Company approved a loan in
      the
      principal amount of $150,000 from the Company to SPI to be used for working
      capital pursuant to the terms of a demand note bearing an interest rate of
      eight
      percent (8%).

     

    2. 
On
      September 5, 2006, the Company agreed to loan an additional $50,000 to SPI
      to be
      used as working capital. 

     

     

    SCHEDULE
      3.1(v)

    Certain
      Registration Matters

     

    The
      Company granted registration right to the following shareholders: Liberty
      Associates, LLC for 2,240,000 shares; TATS, LLC 237,457 shares; Pamplona, Inc.
      100,000 shares; Howard S. Landa 237,457 shares; Steve Strasser 468,643 shares;
      BTG Investments LLC 247,800 shares; and Steve Kay 468,643 shares. The shares
      reflected are pre-reverse stock split.

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