Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - MegaWest Energy Corp. - Exhibit 4.12

 

 

 

MEGAWEST ENERGY CORP. 

STOCK OPTION PLAN 

 

Dated August 24, 2004 

Amended and Restated February 19, 2007 and August 9, 2007

TABLE OF CONTENTS 

	ARTICLE 1 DEFINITIONS AND INTERPRETATION 	1 
	 	1.1 	Definitions 	1 
	 	1.2 	Choice of Law 	3 
	 	1.3 	Headings 	3 
	ARTICLE 2 PURPOSE AND PARTICIPATION 	3 
	 	2.1 	Purpose 	3 
	 	2.2 	Participation 	4 
	 	2.3 	Representation of Employee Status 	4 
	 	2.4 	Notification of Award 	5 
	 	2.5 	Copy of Plan 	5 
	 	2.6 	Limitation 	5 
	ARTICLE 3 TERMS AND CONDITIONS OF OPTIONS 	5 
	 	3.1 	Board to Allot Shares 	5 
	 	3.2 	Number of Shares 	5 
	 	3.3 	Term of Option 	6 
	 	3.4 	Exercise of Option 	7 
	 	3.5 	Exercise Price 	7 
	 	3.6 	Assignment of Options 	7 
	 	3.7 	Adjustments upon Changes in Capitalization 	7 
	 	3.8 	Vesting 	9 
	ARTICLE 4 EXERCISE OF OPTION 	10 
	 	4.1 	Exercise 	10 
	 	4.2 	Payment upon Exercise 	10 
	 	4.3 	Issue of Share Certificates 	10 
	 	4.4 	Condition of Issue 	11 
	ARTICLE 5 ADMINISTRATION 	12 
	 	5.1 	Administration 	12 
	 	5.2 	Interpretation 	12 
	ARTICLE 6 AMENDMENT AND TERMINATION 	13 
	 	6.1 	Prospective Amendment 	13 
	 	6.2 	Retrospective Amendment 	13 
	 	6.3 	Termination 	14 
	 	6.4 	Agreement 	14 

STOCK OPTION PLAN 

ARTICLE 1 
DEFINITIONS AND INTERPRETATION 

1.1                  
Definitions 

As used herein, unless anything in the subject matter or
context is inconsistent therewith, the following terms shall have the meanings
set forth below: 

	 	(a) 	
      "Administrator" means, initially, the secretary of the
      Company and thereafter shall mean such director or other senior officer or
      employee of the Company as may be designated as Administrator by the Board
      from time to time;

	 	 	 	 
	 	(b) 	
      "Affiliate" has the meaning prescribed in the Business
      Corporations Act (British Columbia) as amended from time to
    time;

	 	 	 	 
	 	(c) 	
      "Applicable Laws" means all legal requirements relating
      to the administration of stock option plans and the issuance and
      distribution of shares, if any, under applicable corporate laws,
      applicable securities laws, the Income Tax Act (Canada), the rules
      of any applicable stock exchange or stock quotation system on which the
      Shares may be listed, and the rules of any foreign jurisdiction applicable
      to Options granted to residents therein;

	 	 	 	 
	 	(d) 	
      "Associate" has the meaning prescribed in the
      Securities Act (British Columbia) as amended from time to
    time;

	 	 	 	 
	 	(e) 	
      "Award Date" means the date on which the Board grants and
      announces a particular Option;

	 	 	 	 
	 	(f) 	
      "Board" means the board of directors of the
    Company;

	 	 	 	 
	 	(g) 	
      "Change of Control" means, in respect of the Company, the
      occurrence of any of:

	 	 	 	 
	 		(i) 	
      the purchase or acquisition of Shares and/or securities
      convertible into Shares or carrying the right to acquire Shares
      ("Convertible Securities") as a result of which a person, group of persons
      or persons acting jointly or in concert, or any Affiliates or Associates
      of any such person, group of persons or any of such persons acting jointly
      or in concert (collectively, the "Subject Persons") beneficially own or
      exercise control or direction over Shares and/or Convertible Securities
      such that, after the conversion of the Convertible Securities beneficially
      owned by the Subject Persons, the Subject Persons would have the right to
      cast more than 50% of the votes attached to all Shares; provided that, the
      acquisition of Shares or Convertible Securities pursuant to the issuance
      of securities from treasury which results in a Subject Person, or Subject
      Persons, beneficially owning or exercising control or direction over 50%
      of the votes attached to all Shares (assuming
the

- 2 - 

	 		
      conversion of the Convertible Securities beneficially
      owned by Subject Persons) where the Board continues to be supportive of
      the direction of the Company under the management of the Chief Executive
      Officer, shall not constitute a "Change of Control"; or

	 	 	 	 
	 	(ii) 	
      approval by the shareholders of:

	 	 	 	 
	 		(A) 	
      an amalgamation, arrangement, merger or other
      consolidation or combination of the Company with another entity pursuant
      to which the shareholders of the Company immediately thereafter do not own
      securities of the successor or continuing entity which would entitle them
      to cast more than 50% of the votes attaching to all of the
  Shares;

	 	 	 	 
	 		(B) 	
      a liquidation, dissolution or winding up of the
      Company;

	 	 	 	 
	 		(C) 	
      the sale, lease or other disposition of all or
      substantially all of the assets of the Company;

	 	 	 	 
	 		(D) 	
      the election at a meeting of the Company’s shareholders
      of a number of directors, who were not included in the slate for election
      as directors approved by the prior Board, and who would represent a
      majority of the Board; or

	 	 	 	 
	 		(E) 	
      the appointment of a number of directors which would
      represent a majority of the Board and which were nominated by any holder
      of voting shares of the Company or by any group of holders of voting
      shares of the Company acting jointly or in concert and not approved by the
      Company’s prior Board;

	 	(h) 	
      "Company" means Megawest Energy Corp., formerly Brockton
      Capital Corp., or any "affiliate" (as defined under the Business
      Corporations Act (British Columbia));

	 	 	 
	 	(i) 	
      "Director" means any individual holding the office of
      director or senior officer of the Company;

	 	 	 
	 	(j) 	
      "Employee" means any individual regularly employed on a
      full-time or part-time basis by the Company or other persons who perform
      management or consulting services or investor relations services for the
      Company on an ongoing basis;

	 	 	 
	 	(k) 	
      "Exercise Notice" means the notice respecting the
      exercise of an Option, in the form set out as Schedule B hereto, duly
      executed by the Option Holder;

	 	 	 
	 	(l) 	
      "Exercise Period" means the period during which a
      particular Option may be exercised and is the period from and including
      the Award Date through to and including the Expiry Date;

	 	 	 
	 	(m) 	
      "Exercise Price" means the price at which an Option may
      be exercised as determined in accordance with Section
  3.5;

- 3 - 

	 	(n) 	
      "Expiry Date" means the date determined in accordance
      with Section 3.3 and after which a particular Option cannot be
      exercised;

	 	 	 	 
	 	(o) 	
      "Option" means an option to acquire Shares, awarded to a
      Director or Employee pursuant to the Plan;

	 	 	 	 
	 	(p) 	
      "Option Certificate" means the certificate, substantially
      in the form set out as Schedule A hereto, evidencing an Option;

	 	 	 	 
	 	(q) 	
      "Option Holder" means a Director or Employee or former
      Director or Employee, who holds an unexercised and unexpired Option or,
      where applicable, the Personal Representative of such person;

	 	 	 	 
	 	(r) 	
      "Personal Representative" means:

	 	 	 	 
	 		(i) 	
      in the case of a deceased Option Holder, the executor or
      administrator of the deceased duly appointed by a court or public
      authority having jurisdiction to do so; and

	 	 	 	 
	 		(ii) 	
      in the case of an Option Holder who for any reason is
      unable to manage his or her affairs, the person entitled by law to act on
      behalf of such Option Holder;

	 	 	 	 
	 	(s) 	
      "Plan" means this Megawest Energy Corp. stock option
      plan; and

	 	 	 	 
	 	(t) 	
      "Share" or "Shares" means, as the case may be, one or
      more common shares without par value in the capital of the
  Company;

1.2                  
Choice of Law 

The Plan is established under and the provisions of the Plan
shall be interpreted and construed in accordance with the laws of the Province
of British Columbia and the federal laws applicable therein. 

1.3                  
Headings 

The headings used herein are for convenience only and are not
to affect the interpretation of the Plan. 

ARTICLE 2 
PURPOSE AND PARTICIPATION 

2.1                  
Purpose 

The purpose of the Plan is to provide the Company with a
share-related mechanism to attract, retain and motivate qualified Directors and
Employees who make valuable contributions toward the long term goals of the
Company and to enable and encourage such Directors and Employees to acquire
Shares as long term investments. 

- 4 - 

2.2                  
Participation 

The Board shall, from time to time, in its sole discretion
determine those Directors and Employees, if any, to whom Options are to be
awarded. If the Board elects to award an Option to a Director, the Board shall,
in its sole discretion but subject to Section 3.2, determine the number of
Shares to be acquired on the exercise of such Option. If the Board elects to
award an Option to an Employee, the Board shall, in its sole discretion but
subject to Section 3.2, determine, the number of Shares to be acquired on the
exercise of such Option, and in so doing the Board may take into account the
following criteria: 

	 	(a) 	
      the annual salary of the Employee as at the Award Date in
      relation to the total annual salaries payable by the Company to all of its
      Employees as at the Award Date;

	 	 	 
	 	(b) 	
      the length of time that the Employee has been employed by
      the Company; and

	 	 	 
	 	(c) 	
      the quality of work performed by the
  Employee.

2.3                  
Representation of Employee Status 

In awarding an Option to an Employee, the Board shall
represent, on behalf of the Company that the Employee is either: 

	 	(a) 	
      a bona fide employee of the Company, being:

	 	 	 	 
	 		(i) 	
      an individual who is considered an employee under the
      Income Tax Act (Canada) (i.e., for whom income tax, employment
      insurance and CPP deductions must be made at source);

	 	 	 	 
	 		(ii) 	
      an individual who works full-time for the Company
      providing services normally provided by an employee and who is subject to
      the same control and direction by the Company over the details and methods
      of work as an employee of the Company, but for whom income tax deductions
      are not made at source; or

	 	 	 	 
	 		(iii) 	
      an individual who works for the Company on continuing and
      regular basis providing services normally provided by an employee and who
      is subject the same control and direction by the Company over the details
      and methods of work as an employee of the Company, but for whom income tax
      deductions are not made at source; or

	 	 	 	 
	 	(b) 	
      a bona fide consultant, being in relation to the Company,
      an individual (or a company of which the consultant is an employee or
      shareholder, or a partnership of which the consultant is an employee or
      partner) who:

	 	 	 	 
	 		(i) 	
      provides ongoing consulting services, other than services
      provided in relation to a distribution, to the Company or an Affiliate of
      the Company under a written contract;

- 5 - 

	 	(ii) 	
      possesses technical, business or management expertise of
      value to the Company or an Affiliate of the Company;

	 	 	 
	 	(iii) 	
      spends a significant amount of time and attention on the
      business and affairs of the Company or an Affiliate of the Company;
    and

	 	 	 
	 	(iv) 	
      has a relationship with the Company or an Affiliate of
      the Company that enables the individual to be knowledgeable about the
      business and affairs of the Company.

2.4                  
Notification of Award 

Following the approval by the Board of the awarding of an
Option, the Administrator shall notify the Option Holder in writing of the award
and shall enclose with such notice the Option Certificate representing the
Option so awarded. 

2.5                  
Copy of Plan 

Each Option Holder, concurrently with the delivery of the
notice of the award of the Option made pursuant to Section 2.4, shall be
provided with a copy of this Plan. A copy of any amendment to this Plan shall be
promptly provided by the Administrator to each Option Holder. 

2.6                  
Limitation 

The Plan does not give any Option Holder that is a Director the
right to serve or continue to serve as a Director of the Company nor does it
give any Option Holder that is an Employee the right to be or to continue to be
employed by the Company. 

ARTICLE 3 
TERMS AND CONDITIONS OF OPTIONS 

3.1                  
Board to Allot Shares 

The Shares to be issued to Option Holders upon the exercise of
Options shall be allotted and authorized for issuance by the Board prior to the
exercise thereof. 

3.2                  
Number of Shares 

The total number of Shares that may be issued upon the exercise
of the Options shall not exceed: (a) 20% of the total number of shares issued
and outstanding from time to time; (b) less the total number of Shares that may
be issued upon the exercise of options granted by the Company pursuant to a
supplementary stock option plan dated January 5, 2007 for U.S. based employees;
and (c) less the total number of Shares that may be issued upon the exercise of
options otherwise granted by the Company. The Company may not grant Options to
any one person which will, when exercised, exceed five percent (5%) of the
issued and outstanding Shares of the Company. The Company may not grant Options
to any person and that person’s Associates that will in the aggregate, when
exercised, exceed, in any 12 month period, five percent (5%) of the issued and
outstanding shares of the Company. 

- 6 - 

If any Option expires or otherwise terminates for any reason
without having been exercised in full, the number of Shares in respect of which
Option expired or terminated shall again be available for the purposes of the
Plan. 

3.3                  
Term of Option 

At the time of the grant of an Option, the Board shall
designate the expiration date of an Option (the "Expiry Date"), provided that
the Expiry Date of an Option shall be the earlier of the date so fixed by the
Board at the time the Option is awarded and the date established, if applicable,
in paragraphs (a) to (c) below: 

	 	(a) 	
      Death

	 	 	 	 
	 		
      In the event that the Option Holder should die while he
      or she is still a Director (if he or she holds his or her Option as
      Director) or Employee (if he or she holds his or her Option as Employee),
      the Expiry Date shall be one (1) year from the date of death of the Option
      Holder; or

	 	 	 	 
	 	(b) 	
      Ceasing to Hold Office

	 	 	 	 
	 		
      In the event that the Option Holder holds his or her
      Option as Director of the Company and such Option Holder ceases to be a
      Director of the Company other than by reason of death, the Expiry Date of
      the Option shall be the 30th day following the date the Option Holder
      ceases to be a Director of the Company unless the Option Holder ceases to
      be a Director of the Company but continues to be engaged by the Company as
      an Employee, in which case the Expiry Date shall remain unchanged, or
      unless the Option Holder ceases to be a Director of the Company as a
      result of:

	 	 	 	 
	 		(i) 	
      ceasing to meet the qualifications set forth in section
      124 of the Business Corporations Act (British Columbia) or such
      other qualifications required by the corporate laws in any other
      jurisdiction under which the Company is continued or
amalgamated;

	 	 	 	 
	 		(ii) 	
      a special resolution having been passed by the
      shareholders of the Company pursuant to subsection 128(3) of the
      Business Corporations Act (British Columbia) or an equivalent
      enactment pursuant to the corporate laws in any other jurisdiction under
      which the Company is continued or amalgamated; or

	 	 	 	 
	 		(iii) 	
      by order of the British Columbia Securities Commission or
      any regulatory body having jurisdiction to so order,

	 	 	 	 
	 		
      in which case the Expiry Date shall be the date the
      Option Holder ceases to be a Director of the
Company.

- 7 - 

	 	(c) 	
      Ceasing to be Employed

	 	 	 	 
	 		
      In the event that the Option Holder holds his or her
      Option as an Employee of the Company and such Option Holder ceases to be
      an Employee of the Company other than by reason of death, or if the
      Employee is a party providing investor relations services or management or
      consulting services to the Company and ceases to continue providing such
      services to the Company, the Expiry Date of the Option shall be the 30th
      day following the date the Option Holder ceases to be an Employee of the
      Company or ceases to continue providing such investor relations,
      management and consulting services to the Company unless the Option Holder
      ceases to be an Employee of the Company or ceases to continue providing
      such services to the Company as a result of:

	 	 	 	 
	 		(i) 	
      termination for cause; or

	 	 	 	 
	 		(ii) 	
      by order of the British Columbia Securities Commission or
      any regulatory body having jurisdiction to so order,

	 	 	 	 
	 		 in which case the Expiry Date shall be the
        date the Option Holder ceases to be an Employee of the Company or ceases
        to continue providing such services. Notwithstanding any other provision
        hereof, the Expiry Date of one or more outstanding Options may be extended
        by the Administrator or the Board, in the absence of such, at such times
        as it shall determine in its sole discretion. 

3.4                  
Exercise of Option 

An Option Holder may exercise an Option in whole or in part at
any time or from time to time during the Exercise Period provided that, with
respect to the exercise of part of an Option, the Board may at any time and from
time to time fix a minimum or maximum number of Shares in respect of which an
Option Holder may exercise part of any Option held by such Option Holder. 

3.5                  
Exercise Price 

The Exercise Price shall be that price per share, as determined
by the Board, in its sole discretion, and announced as of the Award Date, at
which an Option Holder may purchase a Share upon the exercise of an Option. 

3.6                  
Assignment of Options 

Options may not be assigned or transferred, provided however
that the Personal Representative of an Option Holder may, to the extent
permitted by Section 4.1, exercise the Option within the Exercise Period. 

3.7                  
Adjustments upon Changes in Capitalization 

	 	(a) 	
      Adjustments

	 	 	 
	 		
      The aggregate number and class of shares for which
      Options may be granted under this Plan, the number and class of shares
      covered by each outstanding Option, and the Exercise Price per share
      thereof (but not the total price), and each such
Option,

- 8 - 

shall all be proportionately adjusted
for any increase or decrease in the number of issued Shares resulting from: 

	 	(i) 	
      a subdivision or consolidation of Shares or any like
      capital adjustment, or

	 	 	 
	 	(ii) 	
      the issuance of any Shares, or securities exchangeable
      for or convertible into Shares, to the holders of all or substantially all
      of the outstanding Shares by way of a stock dividend (other than the issue
      of Shares, or securities exchangeable for or convertible into Shares, to
      holders of Shares pursuant to their exercise of options to receive
      dividends in the form of Shares, or securities convertible into Shares, in
      lieu of dividends paid in the ordinary course on the
  Shares).

	 	(b) 	
      Merger, Liquidation or
Arrangement

	 	 	 
	 		
      Except as provided in Section 3.7(c) hereof, upon a
      merger (other than a merger of the Company in which the holders of Shares
      immediately prior to the merger have the same proportionate ownership of
      common shares in the surviving corporation immediately after the merger),
      consolidation, acquisition of property or stock, separation,
      reorganization (other than a mere re-incorporation or the creation of a
      holding Company) or liquidation of the Company, as a result of which the
      shareholders of the Company, receive cash, shares or other property in
      exchange for or in connection with their Shares, any Option granted
      hereunder shall terminate, but the Option Holder shall have the right to
      exercise such Option Holder's Option immediately prior to any such merger,
      consolidation, acquisition of property or shares, separation,
      reorganization or liquidation, and to be treated as a shareholder of
      record for the purposes thereof, to the extent the vesting requirements
      set forth in the Option agreement have been satisfied (or accelerated
      pursuant to Section 3.8(b) hereof).

	 	 	 
	 	(c) 	
      Receipt of Exchange Shares

	 	 	 
	 		
      If the shareholders of the Company receive shares in the
      capital of another corporation ("Exchange Shares") in exchange for their
      Shares in any transaction involving a merger (other than a merger of the
      Company in which the holders of Shares immediately prior to the merger
      have the same proportionate ownership of Shares in the surviving
      corporation immediately after the merger), consolidation, acquisition of
      property or shares, separation or reorganization (other than a mere
      re-incorporation or the creation of a holding Company), all Options
      granted hereunder shall be converted into options to purchase Exchange
      Shares unless the Company and the corporation issuing the Exchange Shares,
      in their sole discretion, determine that any or all such Options granted
      hereunder shall not be converted into options to purchase Exchange Shares
      but instead shall terminate in accordance with, and subject to the Option
      Holder's right to exercise the Option Holder's Options pursuant to, the
      provisions of Section 3.7(b). The amount and price of converted options
      shall be determined by adjusting the amount and price of the Options
      granted hereunder in the same proportion as used for
  determining

- 9 - 

	 		
      the number of Exchange Shares the holders of the Shares
      receive in such merger, consolidation, acquisition or property or stock,
      separation or reorganization. Unless accelerated by the Board, the vesting
      schedule set forth in the option agreement shall continue to apply to the
      options granted for the Exchange Shares.

	 	 	 
	 	(d) 	
      Fractional Shares

	 	 	 
	 		
      In the event of any adjustment in the number of Shares
      covered by any Option, any fractional shares resulting from such
      adjustment shall be disregarded and each such Option shall cover only the
      number of full shares resulting from such adjustment.

	 	 	 
	 	(e) 	
      Decision of Board

	 	 	 
	 		
      All adjustments pursuant to this Section 3.7 shall be
      made by the Board or its designees or the Administrator, and its
      determination as to what adjustments shall be made, and the extent
      thereof, shall be final, binding and conclusive.

	 	 	 
	 	(f) 	
      Discretion

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

3.8                  
Vesting 

         
(a)         
General 

Options granted pursuant to the Plan may contain conditions
relating to the vesting of the right to exercise an Option granted to any Option
Holder, which shall provide that the right to purchase shares under the Option
may not be exercised any earlier than certain specified times. Subject to
paragraph 3.8(b), such conditions relating to vesting shall be determined by the
Administrator, or in the absence of such, by the Board, on the Award Date. 

The Option Certificate representing any such Option shall
disclose any vesting conditions. 

            
  (b)           Acceleration
  of Vesting

Upon the occurrence of a Change of Control of the Company, all
unexpired and unvested Options shall immediately vest and shall be exercisable
for the acquisition of Shares. Notwithstanding any other provision hereof, the
vesting of one or more outstanding Options may be accelerated by the
Administrator or the Board, in the absence of such, at such times and in such
amounts as it shall determine in its sole discretion. 

- 10 - 

 ARTICLE 4 
EXERCISE OF OPTION 

4.1                  
Exercise 

An Option may be exercised only by the Option Holder or the
Personal Representative of any Option Holder. An Option Holder or the Personal
Representative of any Option Holder may exercise an Option in whole or in part
at any time or from time to time during the Exercise Period up to 5:00 p.m.
local time in Vancouver, British Columbia on the Expiry Date by delivering to
the Administrator an Exercise Notice, the applicable Option Certificate and a
certified cheque or bank draft payable to the Company in an amount equal to the
aggregate Exercise Price of the Shares to be purchased pursuant to the exercise
of the Option. Any Option or part thereof not exercised within the Exercise
Period shall terminate and become null, void and of no effect. 

4.2                  
Payment upon Exercise 

Upon the exercise of any Option, the aggregate Exercise Price
shall be paid to the Company in cash or by certified or cashier's check. In
addition, if pre-approved in writing by the Administrator who may arbitrarily
withhold consent, the Option Holder may pay for all or any portion of the
aggregate Exercise Price by complying with one or more of the following
alternatives: 

	 	(a) 	
      by delivering a properly executed Exercise Notice
      together with irrevocable instructions to a broker promptly to sell or
      margin a sufficient portion of the Shares and deliver directly to the
      Company the amount of sale or margin loan proceeds to pay the Exercise
      Price; or

	 	 	 
	 	(b) 	
      by complying with any other payment mechanism approved by
      the Administrator at the time of exercise.

4.3                  
Issue of Share Certificates 

As soon as practicable following the receipt of the Exercise
Notice, the Administrator shall cause to be delivered to the Option Holder a
certificate for the Shares so purchased. If the number of Shares so purchased is
less than the number of Shares subject to the Option Certificate surrendered,
the Administrator shall forward a new Option Certificate to the Option Holder
concurrently with delivery of the aforesaid share certificate for the balance of
Shares available under the Option. 

- 11 - 

4.4                  
Condition of Issue 

	 	(a) 	
      General

	 	 	 	 
	 		
      The issue of Shares by the Company pursuant to the
      exercise of an Option is subject to the Plan and compliance with the
      Applicable Laws. The Option Holder agrees to comply with all such
      Applicable Laws and agrees to furnish to the Company any information,
      report and/or undertakings required to comply with and to fully cooperate
      with the Company in complying with such Applicable Laws.

	 	 	 	 
	 	(b) 	
      Securities Regulation and Tax
      Withholding

	 	 	 	 
	 		(i) 	
      Shares shall not be issued with respect to an Option
      unless the exercise of such Option and the issuance and delivery of such
      Shares shall comply with all Applicable Laws, and such issuance shall be
      further subject to the approval of counsel for the Company with respect to
      such compliance, including the availability of an exemption from
      prospectus and registration requirements for the issuance and sale of such
      Shares. The inability of the Company to obtain from any regulatory body
      the authority deemed by the Company to be necessary for the lawful
      issuance and sale of any Shares under this Plan, or the unavailability of
      an exemption from prospectus and registration requirements for the
      issuance and sale of any Shares under the Plan, shall relieve the Company
      of any liability with respect to the non- issuance or sale of such
      Shares.

	 	 	 	 
	 		(ii) 	
      As a condition to the exercise of an Option, the
      Administrator may require the Option Holder to represent and warrant in
      writing at the time of such exercise that the Shares are being purchased
      only for investment and without any then-present intention to sell or
      distribute such Shares. If necessary under Applicable Laws, the
      Administrator may cause a stop- transfer order against such Shares to be
      placed on the stock books and records of the Company, and a legend
      indicating that the Shares may not be pledged, sold or otherwise
      transferred unless an opinion of counsel is provided stating that such
      transfer is not in violation of any Applicable Laws, may be stamped on the
      certificates representing such Shares in order to assure an exemption from
      registration. The Administrator also may require such other documentation
      as may from time to time be necessary to comply with applicable securities
      laws. THE COMPANY HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS
      OR THE SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS.

	 	 	 	 
	 		(iii) 	
      The Option Holder shall pay to the Company by certified
      or cashier's check, promptly upon exercise of an Option or, if later, the
      date that the amount of such obligations becomes determinable, all
      applicable federal, provincial, local and foreign withholding taxes that
      the Administrator, in

- 12 - 

its discretion, determines to result
upon exercise of an Option or from a transfer or other disposition of Shares
acquired upon exercise of an Option or otherwise related to an Option or Shares
acquired in connection with an Option. Upon approval of the Administrator, a
Option Holder may satisfy such obligation by complying with one or more of the
following alternatives selected by the Administrator: 

	 	A. 	
      by delivering to the Company Shares previously held by
      such Option Holder or by the Company withholding Shares otherwise
      deliverable pursuant to the exercise of the Option, which Shares received
      or withheld shall have a fair market value at the date of exercise (as
      determined by the Administrator) equal to any withholding tax obligations
      arising as a result of such exercise, transfer or other disposition;
    or

	 	 	 
	 	B. 	
      by complying with any other payment mechanism approved by
      the Administrator from time to time.

	 	(iv) 	
      The issuance, transfer or delivery of certificates
      representing Shares pursuant to the exercise of Options may be delayed, at
      the discretion of the Administrator, until the Administrator is satisfied
      that the applicable requirements of all Applicable Laws and the
      withholding provisions of the Income Tax Act (Canada) have been met
      and that the Option Holder has paid or otherwise satisfied any withholding
      tax obligation as described in Section 4.4(b)(iii)
above.

ARTICLE 5 
ADMINISTRATION 

5.1                  
Administration 

The Plan shall be administered by the Administrator on the
instructions of the Board. The Board may make, amend and repeal at any time and
from time to time such regulations not inconsistent with the Plan as it may deem
necessary or advisable for the proper administration and operation of the Plan
and such regulations shall form part of the Plan. The Board may delegate to the
Administrator or any Director, officer or employee of the Company such
administrative duties and powers as it may see fit. 

5.2                  
Interpretation 

The interpretation by the Board of any of the provisions of the
Plan and any determination by it pursuant thereto shall be final and conclusive
and shall not be subject to any dispute by any Option Holder. No member of the
Board or any person acting pursuant to authority delegated by it hereunder shall
be liable for any action or determination in connection with the Plan made or
taken in good faith and each member of the Board and each such person shall be
entitled to indemnification with respect to any such action or determination in
the manner provided for by the Company. 

- 13 - 

Without limiting the generality of the foregoing and subject to
the provisions of the Plan and any Applicable Laws, and with a view to effecting
the purpose of the Plan, the Board and its designees shall have sole authority,
in their absolute discretion, to: 

	 	(a) 	
      construe and interpret the Plan;

	 	 	 
	 	(b) 	
      define the terms used in the Plan;

	 	 	 
	 	(c) 	
      prescribe, amend and rescind the rules and regulations
      relating to the Plan;

	 	 	 
	 	(d) 	
      correct any defect, supply any omission or reconcile any
      inconsistency in this Plan;

	 	 	 
	 	(e) 	
      grant Options under the Plan;

	 	 	 
	 	(f) 	
      determine the individuals to whom Options shall be
      granted under the Plan;

	 	 	 
	 	(g) 	
      determine the time or times at which Options shall be
      granted under the Plan;

	 	 	 
	 	(h) 	
      determine the number of Shares subject to each Option,
      the Exercise Price of each Option, the duration of each Option and the
      times at which each Option shall become exercisable;

	 	 	 
	 	(i) 	
      determine all other terms and conditions of the Options;
      and

	 	 	 
	 	(j) 	
      make all other determinations and interpretations
      necessary and advisable for the administration of the
  Plan.

ARTICLE 6 
AMENDMENT AND TERMINATION 

6.1                  
Prospective Amendment 

The Board may from time to time amend the Plan, subject to the
approval of the Company’s shareholders, if required by applicable regulatory
policy, and the terms and conditions of any Option thereafter to be granted and,
without limiting the generality of the foregoing, may make such amendment for
the purpose of meeting any changes in any relevant law, rule or regulation
applicable to the Plan, any Option or the Shares or for any other purpose which
may be permitted by all relevant laws, rules and regulations provided always
that any such amendment shall not alter the terms or conditions of any Option or
impair any right of any Option Holder pursuant to any Option awarded prior to
such amendment. 

6.2                  
Retrospective Amendment 

The Board may from time to time retrospectively amend the Plan,
subject to the approval of the Company’s shareholders, if required by applicable
regulatory policy, and with the consent of the affected Option Holders,
retrospectively amend the terms and conditions of any Options which have been
previously granted. 

- 14 - 

6.3                  
Termination 

The Board may terminate the Plan at any time provided that such
termination shall not alter the terms or conditions of any Option or impair any
right of any Option Holder pursuant to any Option awarded prior to the date of
such termination and notwithstanding such termination the Company, such Options,
Option Holders, Directors and Employees and Shares shall continue to be governed
by the provisions of the Plan. 

6.4                  
Agreement 

The Company and every person to whom an Option is awarded
hereunder shall be bound by and subject to the terms and conditions of the Plan.

SCHEDULE A 

MEGAWEST ENERGY CORP. 

STOCK OPTION PLAN 
OPTION
CERTIFICATE 

This Certificate is issued pursuant to the provisions of the
MEGAWEST ENERGY CORP. (the "Company") Stock Option Plan (the "Plan") and
evidences that ____________________
is the holder of an option (the "Option")
to purchase up to ____________________ common shares (the "Shares") in the
capital stock of the Company at a purchase price of $
__________ per Share.
Subject to the provisions of the Plan: 

	 	(a) 	
      the Award Date of this Option is ____________________;
      and

	 	 	 
	 	(b) 	
      the Expiry Date of this Option is
      ____________________.

The right to purchase shares under the Option will vest in the
holder in increments over the term of the Option as follows: 

  	Date 	Cumulative Number of Shares which may be Purchased
      
	 

This Option may be exercised in accordance with its terms at
any time and from time to time from and including the Award Date through to and
including up to 5:00 local time in Vancouver, British Columbia on the Expiry
Date, by delivery to the Administrator of the Plan an Exercise Notice, in the
form provided in the Plan, together with this Certificate and a certified cheque
or bank draft payable to Megawest Energy Corp. in an amount equal to the
aggregate of the Exercise Price of the Shares in respect of which this Option is
being exercised. 

This Certificate and the Option evidenced hereby is not
assignable, transferable or negotiable and is subject to the detailed terms and
conditions contained in the Plan. This Certificate is issued for convenience
only and in the case of any dispute with regard to any matter in respect hereof,
the provisions of the Plan and the records of the Company shall prevail. 

The foregoing Option has been awarded this ______ day of
_______________________. 

MEGAWEST ENERGY CORP. 

 

Per:
_____________________________________________

SCHEDULE B

  EXERCISE NOTICE

	TO: 	The Administrator, Canadian Stock Option Plan
    
	  	MEGAWEST ENERGY CORP. 
	 	Suite 403 – 850 West Hastings Street 
	  	Vancouver, B.C. 
	  	V6C 1E1 
	  	  
	1. 	Exercise of Option 

The undersigned hereby irrevocably gives notice, pursuant to
the Megawest Energy Corp. (the "Company") Stock Option Plan (the "Plan"), of the
exercise of the Option to acquire and hereby subscribes for (cross out
inapplicable item): 

	 	(a) 	
      all of the Shares; or

	 	 	 
	 	(b) 	
      of the Shares which are the subject of the option
      certificate attached hereto. Calculation of total Exercise
  Price:

	 	(i) 	number of Shares to be acquired on exercise:
      shares 	 		 	 	shares	 
	 	 	 	 	 	 	 	 	 
	 	(ii) 	times the Exercise Price per Share: 	$	  	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	  	Total Exercise Price, as enclosed herewith: 	$	  	 	 	 	 

The undersigned tenders herewith a cheque or bank draft (circle
one) in the amount of $____________ , payable to Megawest Energy Corp. in an
amount equal to the total Exercise Price of the Shares, as calculated above, and
directs the Company to issue the share certificate evidencing the Shares in the
name of the undersigned to be mailed to the undersigned at the following
address: 

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

All capitalized terms, unless otherwise defined in this
exercise notice, will have the meaning provided in the Plan. 

DATED the ______ day of _______________________. 

 

	 	 	 
	Witness 	 	Signature of Option Holder 
	 	 	 
	 	 	 
	Name of Witness (Print) 	 	Name of Option Holder (Print)Filed by Automated Filing Services Inc. (604) 609-0244 - MegaWest Energy Corp. - Exhibit 4.13

MEGAWEST ENERGY CORP. 
STOCK
OPTION PLAN 

             
This Stock Option Plan (the "Plan") provides for the grant of options to acquire
common shares (the "Common Shares") in the capital of Megawest Energy Corp., a
corporation formed under the laws of the Province of British Columbia (the
"Corporation"). Stock options granted under this Plan that qualify under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") are referred
to in this Plan as "Incentive Stock Options" and stock options that do not
qualify under Section 422 of the Code are referred to as "Non-Qualified Stock
Options". Incentive Stock Options and Non-Qualified Stock Options granted under
this Plan are collectively referred to as "Options". 

1.             PURPOSE

1.1           
The purpose of this Plan is to retain the services of valued key employees and
consultants of the Corporation and such other persons as the Plan Administrator
(as defined below) shall select in accordance with Section 2 below, and to
encourage such persons to acquire a greater proprietary interest in the
Corporation, thereby strengthening their incentive to achieve the objectives of
the shareholders of the Corporation, and to serve as an aid and inducement in
the hiring of new employees and to provide an equity incentive to consultants
and other persons selected by the Plan Administrator. 

1.2           
This Plan shall at all times be subject to all legal requirements relating to
the administration of stock option plans, if any, under applicable corporate
laws, applicable United States federal and state securities laws, the Code, the
rules of any applicable stock exchange or stock quotation system, and the rules
of any foreign jurisdiction applicable to Options granted to residents therein
(collectively, the "Applicable Laws"). 

2.             
ADMINISTRATION 

2.1           
This Plan shall be administered initially by the Board of Directors of the
Corporation (the "Board"), except that the Board may, in its discretion,
establish a committee composed of two (2) or more members of the Board or two
(2) or more other persons to administer the Plan, which committee (the
"Committee") may be an executive, compensation or other committee, including a
separate committee especially created for this purpose. The Board or, if
applicable, the Committee is referred to herein as the "Plan Administrator".

2.2           
If and so long as the Common Shares are registered under Section 12(b) or 12(g)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and the Corporation wishes to grant Incentive Stock Options, then the Board
shall consider in selecting the Plan Administrator and the membership of any
Committee, with respect to any persons subject or likely to become subject to
Section 16 of the Exchange Act, the provisions regarding (a) "outside directors"
as contemplated by Section 162(m) of the Code, and (b) "Non-Employee Directors"
as contemplated by Rule 16b-3 under the Exchange Act. 

2.3           
The Committee shall have the powers and authority vested in the Board hereunder
(including the power and authority to interpret any provision of the Plan or of
any Option). The 

- 2 - 

members of any such Committee shall serve at the pleasure of
the Board. A majority of the members of the Committee shall constitute a quorum,
and all actions of the Committee shall be taken by a majority of the members
present. Any action may be taken by a written instrument signed by all of the
members of the Committee and any action so taken shall be fully effective as if
it had been taken at a meeting. 

2.4           
Subject to the provisions of this Plan and any Applicable Laws, and with a view
to effecting the purpose of the Plan, the Plan Administrator shall have sole
authority, in its absolute discretion, to: 

(a)           
construe and interpret this Plan; 

(b)           
define the terms used in the Plan; 

(c)           
prescribe, amend and rescind the rules and regulations relating to this Plan;

(d)           
correct any defect, supply any omission or reconcile any inconsistency in this
Plan; 

(e)           
grant Options under this Plan; 

(f)           
determine the individuals to whom Options shall be granted under this Plan and
whether the Option is granted as an Incentive Stock Option or a Non-Qualified
Stock Option; 

(g)           
determine the time or times at which Options shall be granted under this Plan;

(h)           
determine the number of Common Shares subject to each Option, the exercise price
of each Option, the duration of each Option and the times at which each Option
shall become exercisable; 

(i)           
determine all other terms and conditions of the Options; and 

(j)           
make all other determinations and interpretations necessary and advisable for
the administration of the Plan. 

2.5           
All decisions, determinations and interpretations made by the Plan Administrator
shall be binding and conclusive on all participants in the Plan and on their
legal representatives, heirs and beneficiaries. 

3.             
ELIGIBILITY 

3.1           
Incentive Stock Options may be granted to any individual who, at the time the
Option is granted, is an employee of the Corporation or any Related Corporation
(as defined below) ("Employees"). 

3.2           
Non-Qualified Stock Options may be granted to Employees and to such other
persons who are not Employees as the Plan Administrator shall select, subject to
any Applicable Laws. 

3.3           
Options may be granted in substitution for outstanding Options of another
corporation in connection with the merger, consolidation, acquisition of
property or stock or other 

- 3 - 

reorganization between such other corporation and the
Corporation or any subsidiary of the Corporation. Options also may be granted in
exchange for outstanding Options. 

3.4           
Any person to whom an Option is granted under this Plan is referred to as an
"Optionee". Any person who is the owner of an Option is referred to as a
"Holder". 

3.5           
As used in this Plan, the term "Related Corporation" shall mean any corporation
(other than the Corporation) that is a "Parent Corporation" of the Corporation
or "Subsidiary Corporation" of the Corporation, as those terms are defined in
Sections 424(e) and 424(f), respectively, of the Code (or any successor
provisions) and the regulations thereunder (as amended from time to time). 

4.             
STOCK 

4.1           
The Plan Administrator is authorized to grant Options to acquire up to a total
of 20% of the issued and outstanding Common Shares from time to time less the
number of options granted under the 2004 Stock Option Plan. The number of Common
Shares with respect to which Options may be granted hereunder is subject to
adjustment as set forth in Section 5.1(m) hereof. In the event that any
outstanding Option expires or is terminated for any reason, the Common Shares
allocable to the unexercised portion of such Option may again be subject to an
Option granted to the same Optionee or to a different person eligible under
Section 3 of this Plan; provided however, that any cancelled Options will be
counted against the maximum number of shares with respect to which Options may
be granted to any particular person as set forth in Section 5.1(a) hereof. 

5.             
TERMS AND CONDITIONS OF OPTIONS 

5.1           
Each Option granted under this Plan shall be evidenced by a written agreement
approved by the Plan Administrator (each, an "Agreement"). Agreements may
contain such provisions, not inconsistent with this Plan or any Applicable Laws,
as the Plan Administrator in its discretion may deem advisable. All Options also
shall comply with the following requirements: 

(a)           
Number of Shares and Type of Option 

Each Agreement shall state the number of Common Shares to which
it pertains and whether the Option is intended to be an Incentive Stock Option
or a Non-Qualified Stock Option; provided that: 

(i)           
the number of Common Shares that may be reserved pursuant to the exercise of
Options granted to any person shall not exceed 5% of the issued and outstanding
Common Shares of the Corporation; 

(ii)           
in the absence of action to the contrary by the Plan Administrator in connection
with the grant of an Option, all Options shall be Non-Qualified Stock Options;

(iii)           
the aggregate fair market value (determined at the Date of Grant, as defined
below) of the Common Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (granted
under this 

- 4 - 

Plan and all other Incentive Stock
Option plans of the Corporation, a Related Corporation or a predecessor
corporation) shall not exceed U.S.$100,000, or such other limit as may be
prescribed by the Code as it may be amended from time to time (the "Annual
Limit"); and 

(iv)           
any portion of an Option which exceeds the Annual Limit shall not be void but
rather shall be a Non-Qualified Stock Option. 

(b)           
Date of Grant 

Each Agreement shall state the date the Plan Administrator has
deemed to be the effective date of the Option for purposes of this Plan (the
"Date of Grant"). 

(c)           
Option Price 

Each Agreement shall state the price per Common Share at which
it is exercisable. The Plan Administrator shall act in good faith to establish
the exercise price in accordance with Applicable Laws; provided that:

(i)           
the per share exercise price for an Incentive Stock Option or any Option granted
to a "covered employee" as such term is defined for purposes of Section 162(m)
of the Code shall not be less than the fair market value per Common Share at the
Date of Grant as determined by the Plan Administrator in good faith;

(ii)           
with respect to Incentive Stock Options granted to greater-than-ten percent
(>10%) shareholders of the Corporation (as determined with reference to
Section 424(d) of the Code), the exercise price per share shall not be less than
one hundred ten percent (110%) of the fair market value per Common Share at the
Date of Grant as determined by the Plan Administrator in good faith; and 

(iii)           
Options granted in substitution for outstanding options of another corporation
in connection with the merger, consolidation, acquisition of property or stock
or other reorganization involving such other corporation and the Corporation or
any subsidiary of the Corporation may be granted with an exercise price equal to
the exercise price for the substituted option of the other corporation, subject
to any adjustment consistent with the terms of the transaction pursuant to which
the substitution is to occur, and provided that for Incentive Stock Options:

A.           
the excess of the aggregate fair market value of the shares subject to the
option immediately after the substitution over the aggregate exercise price of
such shares is not more than the excess of the aggregate fair market value of
all shares subject to the option immediately before such substitution over the
aggregate exercise price of such shares, and 

B.           
the substituted option does not give the employee additional benefits which he
did not have under the previously held Option; and 

- 5 - 

(iv)           
with respect to Non-Qualified Stock Options, the exercise price per share shall
be the fair market value of the Common Shares as determined by the Plan
Administrator in good faith. 

(d)           
Duration of Options 

At the time of the grant of the Option, the Plan Administrator
shall designate, subject to Section 5.1(g) below, the expiration date of the
Option, which date shall not be later than ten (10) years from the Date of
Grant; provided, that the expiration date of any Incentive Stock Option
granted to a greater-than-ten percent (>10%) shareholder of the Corporation
(as determined with reference to Section 424(d) of the Code) shall not be later
than five (5) years from the Date of Grant. In the absence of action to the
contrary by the Plan Administrator in connection with the grant of a particular
Option, and except in the case of Incentive Stock Options as described above,
all Options granted under this Section 5 shall expire ten (10) years from the
Date of Grant. 

(e)           
Vesting Schedule 

No Option shall be exercisable until it has vested. Subject to
Section 5.1(f) hereof, the vesting schedule for each Option shall be specified
by the Plan Administrator at the time of grant of the Option prior to the
provision of services with respect to which such Option is granted;
provided, that if no vesting schedule is specified at the time of grant,
the Option shall vest according to the following schedule: 

	Number of Years 	 Percentage of Total 
	Following
      Date of Grant 	Option Vested 
	One 	25% 
	Two 	50% 
	Three 	75% 
	Four 	100% 

The Plan Administrator may specify a
vesting schedule for all or any portion of an Option based on the achievement of
performance objectives established in advance of the commencement by the
Optionee of services related to the achievement of the performance objectives.
Performance objectives shall be expressed in terms of objective criteria,
including but not limited to, one or more of the following: return on equity,
return on assets, share price, market share, sales, earnings per share, costs,
net earnings, net worth, inventories, cash and cash equivalents, gross margin or
the Corporation's performance relative to its internal business plan.
Performance objectives may be in respect of the performance of the Corporation
as a whole (whether on a consolidated or unconsolidated basis), a Related
Corporation, or a subdivision, operating unit, product or product line of either
of the foregoing.

- 6 - 

Performance objectives may be absolute
or relative and may be expressed in terms of a progression or a range. An Option
that is exercisable (in full or in part) upon the achievement of one or more
performance objectives may be exercised only following written notice to the
Optionee and the Corporation by the Plan Administrator that the performance
objective has been achieved. 

(f)           
Acceleration of Vesting 

Upon the occurrence of a Change of Control of the Corporation,
all unexpired and unvested Options shall immediately vest and shall be
exercisable for the acquisition of Common Shares. Notwithstanding any other
provision hereof, the vesting of one or more outstanding Options may be
accelerated by the Plan Administrator at such times and in such amounts as it
shall determine in its sole discretion. 

For the purposes hereof the term "Change of Control" shall
mean, in respect of the Corporation, the occurrence of any of: 

(i)           
the purchase or acquisition of Common Shares and/or securities convertible into
Common Shares or carrying the right to acquire Common Shares ("Convertible
Securities") as a result of which a person, group of persons or persons acting
jointly or in concert, or any Affiliates (as such term is defined in the
Business Corporations Act (British Columbia)) or Associates (as such term
is defined in the Securities Act (British Columbia)) of any such person,
group of persons or any of such persons acting jointly or in concert
(collectively, the "Subject Persons") beneficially own or exercise control or
direction over Common Shares and/or Convertible Securities such that, after the
conversion of the Convertible Securities beneficially owned by the Subject
Persons, the Subject Persons would have the right to cast more than 50% of the
votes attached to all Common Shares; provided that, the acquisition of
Common Shares or Convertible Securities pursuant to the issuance of securities
from treasury which results in a Subject Person, or Subject Persons,
beneficially owning or exercising control or direction over 50% of the votes
attached to all Common Shares (assuming the conversion of the Convertible
Securities beneficially owned by Subject Persons) where the Board continues to
be supportive of the direction of the Corporation under the management of the
Chief Executive Officer, shall not constitute a "Change of Control"; or 

(ii)           
approval by the shareholders of:

A.           
an amalgamation, arrangement, merger or other consolidation or combination of
the Corporation with another entity pursuant to which the shareholders of the
Corporation immediately thereafter do not own securities of the successor or
continuing entity which would entitle them to cast more than 50% of the votes
attaching to all of the Common Shares; 

B.           
a liquidation, dissolution or winding up of the Corporation; 

C.           
the sale, lease or other disposition of all or substantially all of the assets
of the Corporation; 

- 7 - 

D.           
the election at a meeting of the Corporation’s shareholders of a number of
directors, who were not included in the slate for election as directors approved
by the prior Board, and who would represent a majority of the Board; or 

E.           
the appointment of a number of directors which would represent a majority of the
Board and which were nominated by any holder of voting shares of the Corporation
or by any group of holders of voting shares of the Corporation acting jointly or
in concert and not approved by the Corporation’s prior Board. 

(g)           
Term of Option 

(i)           
Vested Options shall terminate, to the extent not previously exercised, upon the
occurrence of the first of the following events: 

A.           
the expiration of the Option, as designated by the Plan Administrator in
accordance with Section 5.1(d) above; 

B.           
the date of an Optionee's termination of employment or contractual relationship
with the Corporation or any Related Corporation for cause (as determined by the
Plan Administrator, acting reasonably); 

C.           
the date of an Optionee's resignation or termination of employment or
contractual relationship with the Corporation or any Related Corporation for any
reason whatsoever other than cause, death or Disability (as defined below); or

D.           
the expiration of one year (1) from termination of an Optionee's employment or
contractual relationship by reason of death or Disability (as defined below)
unless, in the case of a Non-Qualified Stock Option, the exercise period is
extended by the Plan Administrator until a date not later than the expiration
date of the Option. 

(ii)           
Notwithstanding Section 5.1(g)(i) above, any vested Options which have been
granted to the Optionee in the Optionee's capacity as a director of the
Corporation or any Related Corporation shall terminate upon the occurrence of
the first of the following events: 

A.           
the event specified in Section 5.1(g)(i)A above; 

B.           
the event specified in Section 5.1(g)(i)D above; and 

C.           
the date the Optionee ceases to serve as a director of the Corporation or
Related Corporation, as the case may be unless, in the case of a Non-Qualified
Stock Option, the exercise period is extended by the Plan Administrator until a
date not later than the expiration date of the Option. 

(iii)           
Upon the death of an Optionee, any vested Options held by the Optionee shall be
exercisable only by the person or persons to whom such Optionee's rights under
such Option shall pass by the Optionee's will or by the laws of descent and
distribution of the 

- 8 - 

Optionee's domicile at the time of
death and only until such Options terminate as provided above. 

(iv)           
For purposes of the Plan, unless otherwise defined in the Agreement,
"Disability" shall mean medically determinable physical or mental impairment
which has lasted or can be expected to last for a continuous period of not less
than twelve (12) months or that can be expected to result in death. The Plan
Administrator shall determine whether an Optionee has incurred a Disability on
the basis of medical evidence acceptable to the Plan Administrator. Upon making
a determination of Disability, the Plan Administrator shall, for purposes of the
Plan, determine the date of an Optionee's termination of employment or
contractual relationship. 

(v)           
Unless accelerated in accordance with Section 5.1(f) above, unvested Options
shall terminate immediately upon termination of employment of the Optionee by
the Corporation for any reason whatsoever, including death or Disability. 

(vi)           
For purposes of this Plan, transfer of employment between or among the
Corporation and/or any Related Corporation shall not be deemed to constitute a
termination of employment with the Corporation or any Related Corporation.
Employment shall be deemed to continue while the Optionee is on military leave,
sick leave or other bona fide leave of absence (as determined by the Plan
Administrator). The foregoing notwithstanding, employment shall not be deemed to
continue beyond the first ninety (90) days of such leave, unless the Optionee's
re-employment rights are guaranteed by statute or by contract. 

(h)           
Exercise of Options 

(i)           
Options shall be exercisable, in full or in part, at any time after vesting,
until termination. If less than all of the Common Shares included in the vested
portion of any Option are purchased, the remainder may be purchased at any
subsequent time prior to the expiration of the Option term. Only whole Common
Shares may be issued pursuant to an Option, and to the extent that an Option
covers less than one (1) share, it is unexercisable. 

(ii)           
Options or portions thereof may be exercised by giving written notice to the
Corporation, which notice shall specify the number of Common Shares to be
purchased, and be accompanied by payment in the amount of the aggregate exercise
price for the Common Shares so purchased, which payment shall be in the form
specified in Section 5.1(i) below. The Corporation shall not be obligated to
issue, transfer or deliver a certificate representing Common Shares to the
Holder of any Option, until provision has been made by the Holder, to the
satisfaction of the Corporation, for the payment of the aggregate exercise price
for all Common Shares for which the Option shall have been exercised and for
satisfaction of any tax withholding obligations associated with such exercise.
During the lifetime of an Optionee, Options are exercisable only by the
Optionee. 

- 9 - 

(i)           
Payment upon Exercise of Option 

Upon the exercise of any Option, the aggregate exercise price
shall be paid to the Corporation in cash or by certified or cashier's check. In
addition, if pre-approved in writing by the Plan Administrator who may
arbitrarily withhold consent, the Holder may pay for all or any portion of the
aggregate exercise price by complying with one or more of the following
alternatives: 

(i)           
by delivering a properly executed exercise notice together with irrevocable
instructions to a broker promptly to sell or margin a sufficient portion of the
Common Shares and deliver directly to the Corporation the amount of sale or
margin loan proceeds to pay the exercise price; or 

(ii)           
by complying with any other payment mechanism approved by the Plan Administrator
at the time of exercise. 

(j)           
No Rights as a Shareholder 

A Holder shall have no rights as a shareholder of the
Corporation with respect to any Common Shares covered by an Option until such
Holder becomes a record holder of such Common Shares, irrespective of whether
such Holder has given notice of exercise. Subject to the provisions of Section
5.1(m) hereof, no rights shall accrue to a Holder and no adjustments shall be
made on account of dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights declared on, or
created in, the Common Shares for which the record date is prior to the date the
Holder becomes a record holder of the Common Shares covered by the Option,
irrespective of whether such Holder has given notice of exercise. 

(k)           
Non-transferability of Options 

(i)           
Options granted under this Plan and the rights and privileges conferred by this
Plan may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by applicable
laws of descent and distribution or, in the case of a Non-Qualified Stock
Option, pursuant to a qualified domestic relations order, and shall not be
subject to execution, attachment or similar process; provided however that,
subject to applicable laws: 

A.           
for Non-Qualified Stock Options, any Agreement may provide or be amended to
provide that a Non-Qualified Stock Option to which it relates is transferable
without payment of consideration to immediate family members of the Optionee or
to trusts or partnerships or limited liability companies established exclusively
for the benefit of the Optionee and the Optionee's immediate family members;

B.                      
for all Options, the Optionee's heirs or administrators may exercise any portion
of the outstanding Options within one year of the Optionee's death. 

(ii) Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of any Option or of any right
or privilege conferred by this Plan contrary to the provisions hereof, or upon
the sale, levy or any attachment or similar process upon the rights and 

- 10 - 

privileges conferred by this Plan, such
Option shall thereupon terminate and become null and void. 

(l)           
Securities Regulation and Tax Withholding 

(i)           
Common Shares shall not be issued with respect to an Option unless the exercise
of such Option and the issuance and delivery of such Common Shares shall comply
with all Applicable Laws, and such issuance shall be further subject to the
approval of counsel for the Corporation with respect to such compliance,
including the availability of an exemption from prospectus and registration
requirements for the issuance and sale of such Common Shares. The inability of
the Corporation to obtain from any regulatory body the authority deemed by the
Corporation to be necessary for the lawful issuance and sale of any Common
Shares under this Plan, or the unavailability of an exemption from prospectus
and registration requirements for the issuance and sale of any Common Shares
under this Plan, shall relieve the Corporation of any liability with respect to
the non-issuance or sale of such Common Shares. 

(ii)           
As a condition to the exercise of an Option, the Plan Administrator may require
the Holder to represent and warrant in writing at the time of such exercise that
the Common Shares are being purchased only for investment and without any
then-present intention to sell or distribute such Common Shares. If necessary
under Applicable Laws, the Plan Administrator may cause a stop-transfer order
against such Common Shares to be placed on the stock books and records of the
Corporation, and a legend indicating that the Common Shares may not be pledged,
sold or otherwise transferred unless an opinion of counsel is provided stating
that such transfer is not in violation of any Applicable Laws, may be stamped on
the certificates representing such Common Shares in order to assure an exemption
from registration. The Plan Administrator also may require such other
documentation as may from time to time be necessary to comply with applicable
securities laws. THE CORPORATION HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF
OPTIONS OR THE COMMON SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS. 

(iii)           
The Holder shall pay to the Corporation by certified or cashier's check,
promptly upon exercise of an Option or, if later, the date that the amount of
such obligations becomes determinable, all applicable federal, state, local and
foreign withholding taxes that the Plan Administrator, in its discretion,
determines to result upon exercise of an Option or from a transfer or other
disposition of Common Shares acquired upon exercise of an Option or otherwise
related to an Option or Common Shares acquired in connection with an Option.
Upon approval of the Plan Administrator, a Holder may satisfy such obligation by
complying with one or more of the following alternatives selected by the Plan
Administrator: 

A.           
by delivering to the Corporation Common Shares previously held by such Holder or
by the Corporation withholding Common Shares otherwise deliverable pursuant to
the exercise of the Option, which Common Shares received or withheld shall have
a fair market value at the date of exercise (as determined by 

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the Plan Administrator) equal to any
withholding tax obligations arising as a result of such exercise, transfer or
other disposition; or 

B.           
by complying with any other payment mechanism approved by the Plan Administrator
from time to time. 

(iv)           
The issuance, transfer or delivery of certificates representing Common Shares
pursuant to the exercise of Options may be delayed, at the discretion of the
Plan Administrator, until the Plan Administrator is satisfied that the
applicable requirements of all Applicable Laws and the withholding provisions of
the Code have been met and that the Holder has paid or otherwise satisfied any
withholding tax obligation as described in Section 5.1(l)(iii) above. 

(m)           
Adjustments Upon Changes In Capitalization 

(i)           
The aggregate number and class of shares for which Options may be granted under
this Plan, the number and class of shares covered by each outstanding Option,
and the exercise price per share thereof (but not the total price), and each
such Option, shall all be proportionately adjusted for any increase or decrease
in the number of issued Common Shares of the Corporation resulting from: 

A.           
a subdivision or consolidation of Common Shares or any like capital adjustment,
or 

B.           
the issuance of any Common Shares, or securities exchangeable for or convertible
into Common Shares, to the holders of all or substantially all of the
outstanding Common Shares by way of a stock dividend (other than the issue of
Common Shares, or securities exchangeable for or convertible into Common Shares,
to holders of Common Shares pursuant to their exercise of options to receive
dividends in the form of Common Shares, or securities convertible into Common
Shares, in lieu of dividends paid in the ordinary course on the Common Shares).

(ii)           
Except as provided in Section 5.1(m)(iii) hereof, upon a merger (other than a
merger of the Corporation in which the holders of Common Shares immediately
prior to the merger have the same proportionate ownership of common shares in
the surviving corporation immediately after the merger), consolidation,
acquisition of property or stock, separation, reorganization (other than a mere
re-incorporation or the creation of a holding Corporation) or liquidation of the
Corporation, as a result of which the shareholders of the Corporation, receive
cash, shares or other property in exchange for or in connection with their
Common Shares, any Option granted hereunder shall terminate, but the Holder
shall have the right to exercise such Holder's Option immediately prior to any
such merger, consolidation, acquisition of property or shares, separation,
reorganization or liquidation, and to be treated as a shareholder of record for
the purposes thereof, to the extent the vesting requirements set forth in the
Option agreement have been satisfied (or accelerated pursuant to Section 5.1(f)
hereof). 

- 12 - 

(iii)           
If the shareholders of the Corporation receive shares in the capital of another
corporation ("Exchange Shares") in exchange for their Common Shares in any
transaction involving a merger (other than a merger of the Corporation in which
the holders of Common Shares immediately prior to the merger have the same
proportionate ownership of Common Shares in the surviving corporation
immediately after the merger), consolidation, acquisition of property or shares,
separation or reorganization (other than a mere re-incorporation or the creation
of a holding Corporation), all Options granted hereunder shall be converted into
options to purchase Exchange Shares unless the Corporation and the corporation
issuing the Exchange Shares, in their sole discretion, determine that any or all
such Options granted hereunder shall not be converted into options to purchase
Exchange Shares but instead shall terminate in accordance with, and subject to
the Holder's right to exercise the Holder's Options pursuant to, the provisions
of Section 5.1(m)(ii) . The amount and price of converted options shall be
determined by adjusting the amount and price of the Options granted hereunder in
the same proportion as used for determining the number of Exchange Shares the
holders of the Common Shares receive in such merger, consolidation, acquisition
or property or stock, separation or reorganization. Unless accelerated by the
Board, the vesting schedule set forth in the option agreement shall continue to
apply to the options granted for the Exchange Shares. 

(iv)           
In the event of any adjustment in the number of Common Shares covered by any
Option, any fractional shares resulting from such adjustment shall be
disregarded and each such Option shall cover only the number of full shares
resulting from such adjustment. 

(v)           
All adjustments pursuant to Section 5.1(m) shall be made by the Plan
Administrator, and its determination as to what adjustments shall be made, and
the extent thereof, shall be final, binding and conclusive. 

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

6.             
EFFECTIVE DATE; AMENDMENT; SHAREHOLDER APPROVAL 

6.1           
Options may be granted by the Plan Administrator from time to time on or after
the date on which this Plan is adopted by the Board (the "Effective Date"). 

6.2           
Unless sooner terminated by the Board, this Plan shall terminate on the tenth
anniversary of the Effective Date. No Option may be granted after such
termination or during any suspension of this Plan. 

6.3           
Any Incentive Stock Options granted by the Plan Administrator prior to the
ratification of this Plan by the shareholders of the Corporation shall be
granted subject to approval of this Plan by the holders of a majority of the
Corporation's outstanding voting shares, voting either in person or by proxy at
a duly held shareholders' meeting within twelve (12) months before or after the
Effective Date. If such shareholder approval is sought and not obtained, all
Incentive 

- 13 - 

Stock Options granted prior thereto and thereafter shall be
considered Non-Qualified Stock Options and any Options granted to Covered
Employees will not be eligible for the exclusion set forth in Section 162(m) of
the Code with respect to the deductibility by the Corporation of certain
compensation. 

7.             
NO OBLIGATIONS TO EXERCISE OPTION 

7.1           
The grant of an Option shall impose no obligation upon the Optionee to exercise
such Option. 

8.             
NO RIGHT TO OPTIONS OR TO EMPLOYMENT 

8.1           
Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person any right to
participate under this Plan. The grant of an Option shall in no way constitute
any form of agreement or understanding binding on the Corporation or any Related
Corporation, express or implied, that the Corporation or any Related Corporation
will employ or contract with an Optionee for any length of time, nor shall it
interfere in any way with the Corporation's or, where applicable, a Related
Corporation's right to terminate Optionee's employment at any time, which right
is hereby reserved. 

9.             
APPLICATION OF FUNDS 

9.1           
The proceeds received by the Corporation from the sale of Common Shares issued
upon the exercise of Options shall be used for general corporate purposes,
unless otherwise directed by the Board. 

10.           
INDEMNIFICATION OF PLAN ADMINISTRATOR 

10.1          In
addition to all other rights of indemnification they may have as members of the
Board, members of the Plan Administrator shall be indemnified by the Corporation
for all reasonable expenses and liabilities of any type or nature, including
attorneys' fees, incurred in connection with any action, suit or proceeding to
which they or any of them are a party by reason of, or in connection with, this
Plan or any Option granted under this Plan, and against all amounts paid by them
in settlement thereof (provided that such settlement is approved by independent
legal counsel selected by the Corporation), except to the extent that such
expenses relate to matters for which it is adjudged that such Plan Administrator
member is liable for willful misconduct; provided, that within fifteen (15) days
after the institution of any such action, suit or proceeding, the Plan
Administrator member involved therein shall, in writing, notify the Corporation
of such action, suit or proceeding, so that the Corporation may have the
opportunity to make appropriate arrangements to prosecute or defend the same.

11.           
AMENDMENT OF PLAN 

11.1          The
Plan Administrator may, at any time, modify, amend or terminate this Plan or
modify or amend Options granted under this Plan, including, without limitation,
such modifications or amendments as are necessary to maintain compliance with
the Applicable Laws. The Plan Administrator may condition the effectiveness of
any such amendment on the receipt of 

- 14 - 

shareholder approval at such time and in such manner as the
Plan Administrator may consider necessary for the Corporation to comply with or
to avail the Corporation and/or the Optionees of the benefits of any securities,
tax, market listing or other administrative or regulatory requirements. 

Effective Date: January 5, 2007

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