Document:

EXHIBIT 10.1
                                                                    ------------

                                                               EXECUTION VERSION

                                WAIVER AGREEMENT

                          DATED AS OF DECEMBER 8, 2004

     This WAIVER AGREEMENT (this "WAIVER AGREEMENT") is among IONICS,
INCORPORATED, a Massachusetts corporation (the "BORROWER"), UBS AG, STAMFORD
BRANCH, in its capacity as administrative agent for the Lenders (in such
capacity, the "ADMINISTRATIVE AGENT") and as collateral agent for the Secured
Parties (in such capacity, the "COLLATERAL AGENT") and the Lenders signatory
hereto, and is made pursuant to that certain Credit Agreement dated as February
13, 2004, as amended by that certain First Amendment to Credit Agreement dated
as of March 15, 2004 and that certain Second Amendment and Waiver to Credit
Agreement dated as of July 9, 2004 (as further amended, modified, restated or
supplemented from time to time, the "CREDIT AGREEMENT"), among the Borrower, the
Subsidiary Guarantors, the Lenders, the Administrative Agent, the Collateral
Agent, UBS SECURITIES LLC, as lead arranger (in such capacity, the "ARRANGER"),
sole bookmanager and documentation agent (in such capacity, the "DOCUMENTATION
AGENT"), FLEET SECURITIES, INC. and BANK OF AMERICA, N.A., as syndication agents
(in such capacity, the "SYNDICATION AGENTS"), WACHOVIA BANK, N.A. and GENERAL
ELECTRIC CAPITAL CORPORATION, as co-documentation agents (in such capacity, the
"CO-DOCUMENTATION AGENTS"), UBS LOAN FINANCE LLC, as swingline lender (in such
capacity, "SWINGLINE LENDER"), and HSBC BANK USA, as issuing bank (in such
capacity, the "ISSUING BANK").

     Terms used but not otherwise defined in this Waiver Agreement shall have
the meaning ascribed to such terms in the Credit Agreement.

                             PRELIMINARY STATEMENTS:

     1. The Borrower has entered into that certain Agreement and Plan of Merger,
dated as of November 24, 2004, among General Electric Company, a New York
corporation (the "PARENT"), Triton Acquisition Corp., a Massachusetts
corporation and wholly owned subsidiary of the Parent, and the Borrower, a copy
of which is attached hereto as Exhibit A (the "MERGER AGREEMENT").

     2. As a result of entering into the Merger Agreement, the Borrower has
breached its obligations under Sections 6.05 and 6.06 of the Credit Agreement
and, as such, an Event of Default has arisen under clause (d) of Article VIII of
the Credit Agreement (the "GE MERGER DEFAULT").

     3. The Borrower has requested that the Required Lenders agree to waive the
GE Merger Default for the period specified herein and, subject to the terms and
conditions set forth below, the Required Lenders, the Administrative Agent, and
the Collateral Agent are willing to so agree.

<PAGE>

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

     1. Waiver. Subject to the terms and conditions of this Waiver Agreement
(including Section 2 hereof), the Required Lenders hereby waive: (i) the GE
Merger Default for all periods from November 24, 2004 through the earliest to
occur of (x) the date on which the merger has been consummated as contemplated
under Article I of the Merger Agreement, (y) the date on which the Merger
Agreement shall have been terminated or otherwise ceased to be in full force and
effect and (z) August 1, 2005 (such period, the "WAIVER PERIOD") and (ii) at all
times during the Waiver Period, the requirement that the Borrower grant a
security interest in and Mortgage on each Real Property listed on Schedule
6.06(c) to the Credit Agreement as required under Section 5.11(d) of the Credit
Agreement. The waivers set forth in this Section 1 shall be effective only
during the Waiver Period and only as to the matters set forth specifically
herein relating to the Merger Agreement and Section 5.11(d) of the Credit
Agreement and shall not entitle the Borrower to any other waiver or agreement
with respect to any other matter (including, without limitation, any Default or
Event of Default arising as a result of the Borrower entering into any other
merger or consolidation transaction).

     2. Conditions to Effectiveness. The effectiveness of this Waiver Agreement
is conditioned upon the satisfaction of each of the following conditions
precedent on or before December 15, 2004; provided that once such conditions
precedent have been satisfied this Waiver Agreement shall be deemed to be
effective as of November 24, 2004 (such date, the "Waiver Effective Date"):

          a. the Administrative Agent shall have received counterparts of this
Waiver Agreement signed by the Borrower, the Subsidiary Guarantors, the Required
Lenders, the Administrative Agent and the Collateral Agent;

          b. each of the representations and warranties in Section 3 below shall
be true and correct in all material respects as of the Waiver Effective Date and
as of the date hereof;

          c. after giving effect to the waiver set forth in Section 1 hereof, no
Default or Event of Default shall have occurred and be continuing under the
Credit Agreement or any other Loan Document;

          d. the Administrative Agent shall have received payment in immediately
available funds of all expenses incurred by the Administrative Agent (including,
without limitation, legal fees) for which invoices have been presented, on or
before the date hereof; and

          e. the Administrative Agent shall have received satisfactory evidence
that the execution, delivery and performance of this Waiver Agreement have been
duly approved by all necessary corporate action of each Loan Party.

     3. Representations and Warranties. The Borrower and each of the other Loan
Parties represents and warrants to the Administrative Agent, the Collateral
Agent and each Lender as of the date hereof and as of the Waiver Effective Date
as follows:

                                        2
<PAGE>

          a. Authority. Each of the Loan Parties has the requisite corporate
power and authority to execute and deliver this Waiver Agreement and to perform
its obligations hereunder and under the Credit Agreement. The execution,
delivery and performance by the Borrower and each other Loan Party of this
Waiver Agreement, the Credit Agreement (as modified hereby) and the transactions
contemplated hereby and thereby have been duly approved by all necessary
corporate action of such person and no other corporate proceedings on the part
of each such person are necessary to consummate such transactions (except as
expressly contemplated hereby and thereby).

          b. Due Execution; Enforceability. This Waiver Agreement has been duly
executed and delivered by the Borrower and each other Loan Party. Each of this
Waiver Agreement and, after giving effect to this Waiver Agreement, the Credit
Agreement and the other Loan Documents is the legal, valid and binding
obligation of each Loan Party hereto and thereto, enforceable against such Loan
Party in accordance with its terms, and is in full force and effect. Neither the
execution, delivery or performance of this Waiver Agreement or the performance
of the Credit Agreement (as modified hereby), nor the performance of the
transactions contemplated hereby or thereby, will adversely affect the validity,
perfection or priority of the Collateral Agent's Lien, for the benefit of the
Secured Parties, on any of the Collateral.

          c. Representations and Warranties. After giving effect to this Waiver
Agreement, the representations and warranties contained in the Credit Agreement
and the other Loan Documents (other than any such representations and warranties
that, by their terms, are specifically made as of a date other than the date
hereof) are true and correct on and as of the date hereof as though made on and
as of the date hereof.

          d. No Conflicts. Neither the execution and delivery of this Waiver
Agreement, nor the consummation of the transactions contemplated hereby, nor
performance of and compliance with the terms and provisions hereof by the
Borrower or any Loan Party will, at the time of such performance, (a) violate or
conflict with any provision of its articles or certificate of incorporation or
bylaws or other organizational or governing documents of such Person, (b)
violate, contravene or materially conflict with any Requirement of Law or any
other law, regulation (including, without limitation, Regulation U or Regulation
X), order, writ, judgment, injunction, decree or permit applicable to it, except
for any violation, contravention or conflict which could not reasonably be
expected to have a Material Adverse Effect, (c) violate, contravene or conflict
with contractual provisions of, or cause an event of default under, any
indenture, loan agreement, mortgage, deed of trust, contract or other agreement
or instrument to which it is a party or by which it may be bound, or (d) result
in or require the creation of any Lien (other than those contemplated in or
created in connection with the Loan Documents) upon or with respect to its
properties.

          e. No Default. After giving effect to the waiver set forth in Section
1 hereof, no Default or Event of Default has occurred and is continuing under
the Credit Agreement or any other Loan Document.

     4. Reference to and Effect on Credit Agreement.

                                        3
<PAGE>

          a. Upon and after the effectiveness of this Waiver Agreement, each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as modified hereby.

          b. Except as specifically modified above, the Credit Agreement and the
other Loan Documents are and shall continue to be in full force and effect and
are hereby in all respects ratified and confirmed. Without limiting the
generality of the foregoing, the Security Documents and all of the Collateral
described therein do and shall continue to secure the payment of all Obligations
under and as defined therein, in each case as modified hereby.

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

     5. Counterparts. This Waiver Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same agreement. Delivery of
an executed counterpart of a signature page to this Waiver Agreement by
facsimile shall be effective as delivery of a manually executed counterpart of
this Waiver Agreement.

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

     7. Governing Law. This Waiver Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.

                            [Signature Pages Follow]

                                        4
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Waiver Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.

                                IONICS, INCORPORATED

                                By: /s/ Daniel M. Kuzmak
                                    -------------------------------
                                    Name:  Daniel M. Kuzmak
                                    Title: CFO

                                SUBSIDIARY GUARANTORS:

                                AQUA DESIGN, INC.
                                FIDELITY PUREWATER, INC.
                                FIDELITY WATER SYSTEMS, INC.
                                IONICS KOREA, INC.
                                IONICS LIFE SCIENCES, INC.

                                IONICS ULTRAPURE WATER CORPORATION
                                RESOURCES CONSERVATION CO. INTERNATIONAL
                                SEPARATION TECHNOLOGY, INC.
                                SIEVERS INSTRUMENTS, INC.
                                ECOLOCHEM, INC.
                                ECOLOCHEM HOLDINGS, INC.
                                ECOLOCHEM JV HOLDINGS, INC.

                                By: /s/ Stephen Korn
                                    -------------------------------
                                    Name:  Stephen Korn
                                    Title: Secretary

                                ECOLOCHEM SERVICES - MEXICO, LLC
                                MOSON HOLDINGS, LLC

                                By:  Ionics, Incorporated as Managing Member

                                     By:  /s/ Stephen Korn
                                          -------------------------------
                                          Name:  Stephen Korn
                                          Title: Vice President and Secretary

<PAGE>

                                UBS AG, STAMFORD BRANCH, as Administrative
                                Agent and Collateral Agent

                                By:  /s/ Wilfred V. Saint
                                     --------------------------------
                                     Name:  Wilfred V. Saint
                                     Title: Director
                                            Banking Products
                                            Services, US

                                By:  /s/ Winslowe Ogbourne
                                     --------------------------------
                                     Name:  Winslowe Ogbourne
                                     Title: Associate Director
                                            Banking Products
                                            Services, US

<PAGE>

                                LENDERS:

                                UBS LOAN FINANCE LLC, AS A LENDER

                                By:  /s/ Wilfred V. Saint
                                     --------------------------------
                                     Name:  Wilfred V. Saint
                                     Title: Director
                                            Banking Products
                                            Services, US

                                By:  /s/ Winslowe Ogbourne
                                     --------------------------------
                                     Name:  Winslowe Ogbourne
                                     Title: Associate Director
                                            Banking Products
                                            Services, US

<PAGE>

                                NORTHWOODS CAPITAL II, LIMITED
                                BY:  ANGELO, GORDON & CO., L.P.,
                                       AS COLLATERAL MANAGER

                                By:  /s/ John W. Fraser
                                     --------------------------------
                                     Name:  John W. Fraser
                                     Title: Managing Director

<PAGE>

                                NORTHWOODS CAPITAL III, LIMITED
                                BY:  ANGELO, GORDON & CO., L.P.,
                                      AS COLLATERAL MANAGER

                                By:  /s/ John W. Fraser
                                     --------------------------------
                                     Name:  John W. Fraser
                                     Title: Managing Director

<PAGE>

                                NORTHWOODS CAPITAL IV, LIMITED
                                BY:  ANGELO, GORDON & CO., L.P.,
                                     AS COLLATERAL MANAGER

                                By:  /s/ John W. Fraser
                                     --------------------------------
                                     Name:  John W. Fraser
                                     Title: Managing Director

<PAGE>

                                BANK OF AMERICA, NA, AS A LENDER

                                By:  /s/ John F. Lynch
                                     --------------------------------
                                     Name:  John F. Lynch
                                     Title: SVP

<PAGE>

                                BANK OF TOKYO-MITSUBISHI TRUST COMPANY, AS A
                                LENDER

                                By:  /s/ Karen A. Brinkman
                                     --------------------------------
                                     Name:  Karen A. Brinkman
                                     Title: Vice President

<PAGE>

                                SENIOR DEBT PORTFOLIO, AS A LENDER
                                BY:  BOSTON MANAGEMENT AND RESEARCH
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                EATON VANCE SENIOR INCOME TRUST, AS A LENDER
                                BY:  EATON VANCE MANAGEMENT
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                EATON VANCE INSTITUTIONAL SENIOR LOAN FUND, AS A
                                LENDER
                                BY:  EATON VANCE MANAGEMENT
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                COSTANTINES EATON VANCE CDO V, LTD., AS A LENDER
                                BY:  EATON VANCE MANAGEMENT
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                EATON VANCE CDO VI LTD., AS A LENDER
                                BY:  EATON VANCE MANAGEMENT
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                GRAYSON & CO, AS A LENDER
                                BY:  BOSTON MANAGEMENT AND RESEARCH
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                BIG SKY SENIOR LOAN FUND, LTD., AS A LENDER
                                BY:  EATON VANCE MANAGEMENT
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                EATON VANCE
                                VT FLOATING-RATE INCOME FUND, AS A LENDER
                                BY:  EATON VANCE MANAGEMENT
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                EATON VANCE
                                LIMITED DURATION INCOME FUND, AS A LENDER
                                BY:  EATON VANCE MANAGEMENT
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                TOLLI & CO., AS A LENDER
                                BY:  EATON VANCE MANAGEMENT
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                EATON VANCE SENIOR
                                FLOATING-RATE TRUST, AS A LENDER
                                BY:  EATON VANCE MANAGEMENT
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                EATON VANCE FLOATING-RATE INCOME TRUST, AS A
                                LENDER
                                BY:  EATON VANCE MANAGEMENT
                                      AS INVESTMENT ADVISOR

                                By:  /s/ Michael B. Botthof
                                     --------------------------------
                                     Name:  Michael B. Botthof
                                     Title: Vice President

<PAGE>

                                FLAGSHIP CLO 2001-1, AS A LENDER
                                By:  Flagship Capital Management.com

                                By:  /s/ Colleen Cunniffe
                                     --------------------------------
                                     Name:  Colleen Cunniffe
                                     Title: Director

                                FLAGSHIP CLO II, AS A LENDER
                                By:  Flagship Capital Management.com

                                By:  /s/ Colleen Cunniffe
                                     --------------------------------
                                     Name:  Colleen Cunniffe
                                     Title: Director

<PAGE>

                                FLEET NATIONAL BANK, AS A LENDER

                                By:  /s/ John F. Lynch
                                     --------------------------------
                                     Name:  John F. Lynch
                                     Title: SVP

<PAGE>

                                FRANKLIN FLOATING RATE TRUST, AS A LENDER

                                By:  /s/ Madeline Lam
                                     --------------------------------
                                     Name:  Madeline Lam
                                     Title: Vice President

<PAGE>

                                FRANKLIN FLOATING RATE DAILY ACCESS FUND, AS A
                                LENDER

                                By:  /s/ Madeline Lam
                                     --------------------------------
                                     Name:  Madeline Lam
                                     Title: Vice President

<PAGE>

                                FRANKLIN FLOATING RATE MASTER SERIES, AS A
                                LENDER

                                By:  /s/ Madeline Lam
                                     --------------------------------
                                     Name:  Madeline Lam
                                     Title: Vice President

<PAGE>

                                GENERAL ELECTRIC CAPITAL CORPORATION,
                                AS A LENDER

                                By:  /s/ Eric Herr
                                     --------------------------------
                                     Name:  Eric Herr
                                     Title: Duly Authorized Signatory

<PAGE>

                                HSBC BANK USA, N.A., AS A LENDER

                                By:  /s/ Kenneth V. McGraime
                                     --------------------------------
                                     Name:  Kenneth V. McGraime
                                     Title: Senior Vice President

<PAGE>

                                LIGHTPOINT CLO 2004-1, LTD, AS A LENDER

                                By:  /s/ Timothy S. Van Kirk
                                     --------------------------------
                                     Name:  Timothy S. Van Kirk
                                     Title: Managing Director

<PAGE>

                                LONGHORN CDO II, LTD, AS A LENDER
                                BY:  MERRILL LYNCH INVESTMENT MANAGERS, L.P.
                                        AS INVESTMENT ADVISOR

                                By:  /s/ Anthony Heyman
                                     --------------------------------
                                     Name:  Anthony Heyman
                                     Title: Authorized Signatory

                                LONGHORN CDO III, LTD, AS A LENDER
                                BY:  MERRILL LYNCH INVESTMENT MANAGERS, L.P.
                                        AS INVESTMENT ADVISOR

                                By:  /s/ Anthony Heyman
                                     --------------------------------
                                     Name:  Anthony Heyman
                                     Title: Authorized Signatory

                                LONGHORN CDO (CAYMAN) LTD, AS A LENDER
                                BY:  MERRILL LYNCH INVESTMENT MANAGERS, L.P.
                                        AS INVESTMENT ADVISOR

                                By:  /s/ Anthony Heyman
                                     --------------------------------
                                     Name:  Anthony Heyman
                                     Title: Authorized Signatory

<PAGE>

                                CLYDESDALE CLO 2001-1, LTD., AS A LENDER
                                NOMURA CORPORATE RESEARCH
                                AND ASSET MANAGEMENT INC.
                                AS COLLATERAL MANAGER

                                By:  /s/ Richard W. Stewart
                                     --------------------------------
                                     Name:  Richard W. Stewart
                                     Title: Managing Director

<PAGE>

                                CLYDESDALE CLO 2003 LTD., AS A LENDER
                                NOMURA CORPORATE RESEARCH
                                AND ASSET MANAGEMENT INC.
                                AS COLLATERAL MANAGER

                                By:  /s/ Richard W. Stewart
                                     --------------------------------
                                     Name:  Richard W. Stewart
                                     Title: Managing Director

<PAGE>

                                SOVEREIGN BANK, AS A LENDER

                                By:  /s/ Daniel M. Grondin
                                     --------------------------------
                                     Name:  Daniel M. Grondin
                                     Title: Senior Vice President

<PAGE>

                                WACHOVIA BANK, N.A., AS A LENDER

                                By:  /s/ Dean Gorton*
                                     --------------------------------
                                     Name:  Dean Gorton
                                     Title: Vice President
                                     *GE Merger Default Waiver

<PAGE>

                                      EXHIBIT A

                                   MERGER AGREEMENT

                                    [SEE ATTACHED]Exhibit 4.1

                      SHANNON INTERNATIONAL RESOURCES INC.
                   CONSULTANT AND ADVISORS STOCK OPTION PLAN.

                                    ARTICLE I
                                   DEFINITIONS

As used herein, terms have the meaning hereinafter set forth unless the context
should clearly indicate the contrary:

     (a) "Board" shall mean the Board of Directors of the Company;

     (b) "Days" shall mean for calculation purposes the days of the week in
which the NASDAQ System conducts and is open for regular trading activity;

     (c) "Company" shall mean SHANNON INTERNATIONAL RESOURCES INC., a Nevada
corporation;

     (d) "Fair Market Value" shall mean the average closing low bid price for
the Company's common stock for the previous five (5) trading days ending on the
date of grant;

     (e) "Grant" means the issuance of an Option hereunder to an Optionee
entitling such Optionee to acquire Stock on the terms and conditions set forth
in a Stock Option Agreement to be entered into with the Optionee or the direct
issuance of shares for compensatory purposes;

     (f) "Option" shall mean the right granted to an Optionee to acquire Stock
of the Company pursuant to the Plan;

     (g) "Optionee" shall mean a Plan Participant to whom a Grant hereunder has
been made;

     (h) "Plan" shall mean the SHANNON INTERNATIONAL RESOURCES INC. Consultant
and Advisors Stock Option Plan., the terms of which are herein set forth;

     (i) "Plan Participant" shall mean any Employee, Consultant or Advisor which
has been confirmed by the Board as eligible to participate under this Plan.

     (j) "Stock" shall mean the common stock of the Company or, in the event
the outstanding shares of stock are hereafter changed into or exchanged for
shares of different stock or securities of the Company or some other
corporation, such other stock or securities;

     (k) "Stock Option Agreement" shall mean the agreement between the Company
and an Optionee under which an Optionee may acquire Stock pursuant to the Plan.

                                   ARTICLE II
                                    THE PLAN

     2.1 NAME. The plan shall be known as the "SHANNON INTERNATIONAL RESOURCES
INC. Consultant and Advisors Stock Option Plan."

<PAGE>
     2.2  PURPOSE. The purpose of the Plan is to advance the business and
development of the Company and its shareholders by affording to the Plan
Participants the opportunity to acquire a propriety interest in the Company by
the grant of Options or Stock to such persons under the terms herein set forth.
By doing so, the Company seeks to motivate, retain and attract highly competent,
highly motivated Plan Participants to assist the Company in its evolution and
ensure the success of the Company. The Options or Stock to be granted hereunder
are non-statutory Options made available to Plan Participants.

     2.3 EFFECTIVE DATE. The Plan shall become effective upon its adoption by
the Board of the Company, being May 18, 2004.

     2.4  TERMINATION DATE. The Plan shall terminate ten (10) years from the
date the Plan is adopted by the Board of the Company and at such time any
Options granted hereunder shall be void and of no further force or effect.

                                   ARTICLE III
                                  PARTICIPANTS

     Only Plan Participants shall be eligible to be granted an Option under the
Plan. The Board may grant Options to any Plan Participant in accordance with
such determinations as the Board may, from time to time, in its sole discretion
make.

                                   ARTICLE IV
                                 ADMINISTRATION

     4.1 The Plan shall be administered by the Board of Directors. Subject to
the express provisions of the Plan, the Board of Directors shall have the sole
discretion and authority to determine from among eligible persons those to whom
and the time or times at which Options or Stock may be granted and the number of
shares of Stock to be subject to each Option. Subject to the express provisions
of the Plan, the Board of Directors shall also have complete authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
related to it and to determine the details and provisions of each Stock Option
Agreement and to make all other determinations necessary or advisable in the
administration of the Plan. The Board of Directors shall also have the authority
to modify outstanding Options and the provisions therein subject to the
agreement of the Optionee.

     4.2 RECORDS OF PROCEEDINGS. The Board of Directors shall maintain written
minutes of its actions which shall be maintained among the records of the
Company.

     4.3  COMPANY ASSISTANCE. The Company shall supply full and timely
information to the Board in all matters relating to eligible Optionees, their
status, death, retirement, disability and such other pertinent facts as the
Board may require. The Company shall furnish the Administrative Committee with
such clerical and other assistance as is necessary in the performance of its
duties.

<PAGE>

                                    ARTICLE V
                       SHARES OF STOCK SUBJECT TO THE PLAN

     5.1 LIMITATION. The number of shares of Stock which may be issued and sold
hereunder shall not exceed 3,000,000 shares.

     5.2 OPTIONS GRANTED UNDER THE PLAN. Shares of stock with respect to which
an Option is granted hereunder, but which lapses prior to exercise, shall be
considered available for grant hereunder. Therefore, if Options granted
hereunder shall terminate for any reason without being wholly exercised, new
Options may be granted hereunder covering the number of shares to which such
terminated Options related.

     5.3 ANTI-DILUTION. In the event the Stock subject to this Plan is changed
into or exchanged for a different number or kind of stock or other securities of
the Company or of another organization by reason of merger, consolidation or
reorganization, recapitalization, reclassification, combination of shares, stock
split or stock dividend;

          (a) The aggregate number and kind of shares of Stock subject to the
Plan shall be adjusted appropriately;

          (b) The Option price of any outstanding Option issued pursuant to the
Plan shall be adjusted appropriately;

          (c) Where dissolution or liquidation of the Company or any merger of
consolidation in which the Company is not a surviving corporation is involved,
the Optionee holding any Option issued pursuant to the Plan shall have the right
immediately prior to such dissolution, liquidation, merger or combination to
exercise the Option, in whole or in part, to the extent that it shall not have
been exercised without regard to any installment exercise provision.

                                   ARTICLE VI
                                OPTION PROVISIONS

     6.1 OPTIONS. Each Option granted hereunder shall be evidenced by minutes of
a meeting of or the written consent of the Administrative Committee and by a
written Stock Option Agreement dated as of the date of grant and executed by the
Company and the Optionee, which agreement shall set forth such terms and
conditions as may be determined by the Board consistent with the Plan.

     6.2  LIMITATIONS.

          (a) The maximum number of shares for which an Option or Options may be
granted under the Plan to any one Plan Participant shall be 300,000 in any
twelve month period.

          (b) The Options granted hereunder are non-statutory Options which do
not satisfy the requisites of Section 422 of the Internal Revenue Code, as
amended.

     6.3 OPTION PRICE. The per share Option price for the stock subject to each
Option shall not be less than the fair market value per share on the effective
date of grant or such other price as the Board of Directors may determine.

     6.4  OPTION PERIOD. Each Option granted hereunder must be granted within
five (5) years from the effective date of the Plan. The period for the exercise
of each Option shall be determined by the Board of Directors, but in no instance
shall such period exceed five (5) years from the date of grant of the Option.

<PAGE>

     6.5  OPTION EXERCISE.

          (a) Options granted hereunder may not be exercised until and unless
the Optionee shall meet the conditions precedent established by the
Administrative Committee for the Plan Participant.

          (b) Options may be exercised by the Plan Participant in whole or in
part. Optionees may exercise their Option at any time by giving written notice
to the Company with respect to the specified option, delivered to the Company at
its principal office together with payment in full to the Company of the amount
of the Option price for the number of shares with respect to which the Option(s)
are then being exercised. In the alternative, provided that at the time of
exercise the Company's common stock is publicly traded with an average daily
trading volume of 5,000 shares and closing prices quoted daily for at least the
past thirty trading days, (a "Net Exercise"), payment of the exercise price per
share may be made by delivery of this Option with a Net Exercise Notice in the
form of which is attached hereto as Exhibit B. In the event of a Net Exercise,
the Optionee shall exchange the Option for such number of shares underlying the
Option determined by multiplying such number of shares by a fraction, the
numerator of which shall be the difference between the average closing sale
price per share for the five trading days prior to the date of the Net Exercise
Notice and the exercise price per share, and the denominator of which shall be
the average closing sale price per share for the five trading days prior to the
date of the Net Exercise Notice.

     6.6 NON-TRANSFERABILITY OF OPTION. No Option or any right relative thereto
shall be transferred by an Optionee otherwise than as permitted under the
instructions to by will or by the laws of descent and distribution. During the
lifetime of an Optionee, the Option shall be exercisable only by him or her.

     6.7  EFFECT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT OR DIRECTORSHIP.

          (a) If the Plan Participant's relationship with the Company shall be
terminated, with or without cause, or by the act of the Plan Participant, the
Optionee's right to exercise such Options shall terminate and all rights
thereunder shall cease three (3) days after the date on which such person's
association is terminated, unless this provision is modified by the Option
Agreement for the Options. Provided however, that if the Optionee shall die or
become permanently and totally disabled while employed by or serving as a Plan
Participant, as solely determined by the Board in accordance with its policies,
then either his or her personal representatives or a transferee under the
Optionee's will or pursuant to the laws of descent and distribution, or the
disabled Optionee may exercise the Option in full six (6) months from the date
of such death or disability unless this provision is modified by the Option
Agreement for the Options. In the case of an Optionee's retirement in accordance
with the Company's established retirement policy, such Option shall remain
exercisable by the Optionee for three (3) days from the date of such retirement
unless this provision is modified by the Option Agreement for the Options.

<PAGE>

          (b) No transfer of an Option by the Optionee by will or the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with a written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee may
deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions of such Option.

     6.8  RIGHTS AS A SHAREHOLDER.

          (a) An Optionee or a transferee of an Option shall have no rights as a
shareholder of the Company with respect to any shares subject to any unexercised
Options.

          (b) Unless this provision is modified by the Option Agreement for the
Options, ownership rights shall vest with the Plan Participant upon exercise.

     6.9 REQUIRED FILINGS. An Optionee to whom an Option is granted under the
terms of the Plan is required to file appropriate reports with the Internal
Revenue Service. As a condition of the receipt of an Option hereunder, Optionees
shall agree to make necessary filings with the Internal Revenue Service. The
Company shall assist and cooperate with Optionees by providing the necessary
information required for compliance of this condition.

                                   ARTICLE VII
                               STOCK CERTIFICATES

     7.1 ISSUANCE. The Company shall issue and deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder.

     7.2  TRANSFER RESTRICTIONS. Unless a registration statement covering the
shares underlying the Options is in effect at the time of execution of an Option
Agreement, the Board shall instruct the Secretary of the Corporation to impose
restrictions of the subsequent transferability of Stock issued pursuant to
Options to be granted hereunder. The Stock of the Company to be issued pursuant
to the exercise of an Option shall have such restrictions prominently displayed
as a legend on such certificate.

                                  ARTICLE VIII
               TERMINATION, AMENDMENT, OR MODIFICATION OF THE PLAN

     The Board may at any time terminate the plan, and may at any time and from
time to time and in any respect amend or modify the Plan. Provided, however, if
the Plan has been submitted to and approved by the shareholders of the Company
no such action by the Board may be taken without approval of the majority of the
shareholders of the Company which: (a) increases the total number of shares of
Stock subject to the Plan, except as contemplated in Section 5.1 hereof; (b)
changes the manner of determining the Option price; or (c) withdraws the
administration of the Plan from the Administrative Committee.

<PAGE>

                                   ARTICLE IX
                                   EMPLOYMENT

     9.1 EMPLOYMENT. Nothing in the Plan or any Option granted hereunder or in
any Stock Option Agreement shall confer upon a Plan Participant receiving such
Option or Stock Option Agreement the status as an employee of the Company.
Further, nothing in the Plan or any Option granted hereunder shall in any manner
create in any Optionee the right to continue their relationship with the Company
or create any vested interest in such relationship, including employment.

    9.2  OTHER COMPENSATION PLANS. The adoption of the Plan shall not effect
any other stock option, incentive, or other compensation plan in effect for the
Company or any of its subsidiaries, nor shall the Plan preclude the Company or
any subsidiary thereof from establishing any other forms of incentive or other
compensation for employees or non-employee Directors of the Company, or any
subsidiary thereof.

     9.3 PLAN EFFECT. The Plan shall be binding upon the successors and assigns
of the Company.

     9.4  TENSE. When used herein nouns in the singular shall include the
plural.

     9.5 HEADINGS OF SECTIONS ARE NOT PART OF THE PLAN. Headings of articles and
sections hereof are inserted for convenience and reference and constitute no
part of the Plan.

SHANNON INTERNATIONAL RESOURCES INC.

By:  /s/ BLAIR COADY
     --------------------
     Blair Coady, President
     May 18, 2004

By:  /s/ DENNIS BROVARONE
     -------------------
     Dennis Brovarone, Secretary
     May 18, 2004

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