Document:

EXHIBIT 4.2

                            PALOMAR ENTERPRISES, INC.
           NON-EMPLOYEE DIRECTORS AND CONSULTANTS RETAINER STOCK PLAN
                             FOR THE YEAR 2004 NO. 3

     1.     Introduction.  This Plan shall be known as the "Palomar Enterprises,
            ------------
Inc.  Non-Employee  Directors  and  Consultants Retainer Stock Plan for the Year
2004 No. 3," and is hereinafter referred to as the "Plan."  The purposes of this
Plan  are  to  enable  Palomar  Enterprises,  Inc.,  a  Nevada  corporation (the
"Company"),  to  promote  the  interests  of the Company and its stockholders by
attracting  and  retaining  non-employee  Directors  and  Consultants capable of
furthering  the  future  success  of  the Company and by aligning their economic
interests more closely with those of the Company's stockholders, by paying their
retainer  or fees in the form of shares of the Company's common stock, par value
$0.001  per  share  (the  "Common  Stock").

     2.     Definitions.  The  following terms shall have the meanings set forth
            -----------
below:

     "Board" means the Board of Directors of the Company.

     "Change of Control" has the meaning set forth in Paragraph 12(d) hereof.

     "Code"  means  the Internal Revenue Code of 1986, as amended, and the rules
and  regulations  thereunder. References to any provision of the Code or rule or
regulation  thereunder  shall  be  deemed  to  include  any amended or successor
provision,  rule  or  regulation.

     "Committee"  means  the committee that administers this Plan, as more fully
defined  in  Paragraph  13  hereof.

     "Common Stock" has the meaning set forth in Paragraph 1 hereof.

     "Company" has the meaning set forth in Paragraph 1 hereof.

     "Consultants"  means  the  Company's  consultants and advisors only if: (i)
they  are  natural persons; (ii) they provide bona fide services to the Company;
and  (iii)  the  services  are  not  in  connection  with  the  offer or sale of
securities  in  a capital-raising transaction, and do not directly or indirectly
promote  or  maintain  a  market  for  the  Company's  securities.

     "Deferral Election" has the meaning set forth in Paragraph 6 hereof.

     "Deferred  Stock  Account"  means  a  bookkeeping account maintained by the
Company  for a Participant representing the Participant's interest in the shares
credited  to  such  Deferred  Stock  Account  pursuant  to  Paragraph  7 hereof.

     "Delivery Date" has the meaning set forth in Paragraph 6 hereof.

     "Director" means an individual who is a member of the Board of Directors of
the  Company.

     "Dividend  Equivalent"  for  a given dividend or other distribution means a
number  of  shares  of  the  Common  Stock having a Fair Market Value, as of the
record date for such dividend or distribution, equal to the amount of cash, plus
the  Fair  Market  Value  on  the  date of distribution of any property, that is
distributed  with  respect  to  one  share  of the Common Stock pursuant to such
dividend  or  distribution;  such  Fair  Market  Value  to  be determined by the
Committee  in  good  faith.

     "Effective Date" has the meaning set forth in Paragraph 3 hereof.

     "Exchange Act" has the meaning set forth in Paragraph 12(d) hereof.

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     "Fair  Market Value" means the mean between the highest and lowest reported
sales  prices  of the Common Stock on the New York Stock Exchange Composite Tape
or, if not listed on such exchange, on any other national securities exchange on
which  the  Common  Stock is listed or on The Nasdaq Stock Market, or, if not so
listed  on  any  other  national securities exchange or The Nasdaq Stock Market,
then  the  average  of  the  bid  price of the Common Stock during the last five
trading  days  on  the OTC Bulletin Board immediately preceding the last trading
day  prior  to  the  date  with  respect to which the Fair Market Value is to be
determined.  If  the  Common  Stock  is  not then publicly traded, then the Fair
Market  Value  of  the  Common  Stock shall be the book value of the Company per
share  as  determined  on the last day of March, June, September, or December in
any  year  closest  to  the  date when the determination is to be made.  For the
purpose  of  determining book value hereunder, book value shall be determined by
adding  as  of  the  applicable date called for herein the capital, surplus, and
undivided  profits  of  the  Company,  and  after  having  deducted any reserves
theretofore  established;  the sum of these items shall be divided by the number
of shares of the Common Stock outstanding as of said date, and the quotient thus
obtained shall represent the book value of each share of the Common Stock of the
Company.

     "Participant" has the meaning set forth in Paragraph 4 hereof.

     "Payment  Time"  means  the  time  when  a  Stock  Retainer is payable to a
Participant  pursuant to Paragraph 5 hereof (without regard to the effect of any
Deferral  Election).

     "Stock Retainer" has the meaning set forth in Paragraph 5 hereof.

     "Third Anniversary" has the meaning set forth in Paragraph 6 hereof.

     3.     Effective  Date  of  the  Plan.  This  Plan was adopted by the Board
            ------------------------------
effective September 8, 2004 (the "Effective Date").

     4.     Eligibility.  Each individual who is a Director or Consultant on the
            -----------
Effective  Date  and  each  individual  who  becomes  a  Director  or Consultant
thereafter  during  the  term  of  this  Plan,  shall  be  a  participant  (the
"Participant")  in this Plan, in each case during such period as such individual
remains a Director or Consultant and is not an employee of the Company or any of
its  subsidiaries.  Each  credit  of shares of the Common Stock pursuant to this
Plan shall be evidenced by a written agreement duly executed and delivered by or
on  behalf of the Company and a Participant, if such an agreement is required by
the  Company  to  assure  compliance  with  all applicable laws and regulations.

     5.     Grants  of  Shares.  Commencing on the Effective Date, the amount of
            ------------------
compensation  for service to directors or consultants shall be payable in shares
of  the  Common  Stock (the "Stock Retainer") pursuant to this Plan.  The deemed
issuance  price  of  shares  of  the Common Stock subject to each Stock Retainer
shall  not  be less than 85 percent of the Fair Market Value of the Common Stock
on  the  date  of  the  grant.  In  the  case  of any person who owns securities
possessing  more than ten percent of the combined voting power of all classes of
securities  of the issuer or its parent or subsidiaries possessing voting power,
the  deemed  issuance  price of shares of the Common Stock subject to each Stock
Retainer  shall  be  at least 100 percent of the Fair Market Value of the Common
Stock  on  the  date  of  the  grant.

     6.     Deferral  Option.  From  and after the Effective Date, a Participant
            ----------------
may  make  an  election  (a  "Deferral  Election")  on  an annual basis to defer
delivery  of  the  Stock Retainer specifying which one of the following ways the
Stock Retainer is to be delivered (a) on the date which is three years after the
Effective  Date  for  which it was originally payable (the "Third Anniversary"),
(b) on the date upon which the Participant ceases to be a Director or Consultant
for  any  reason (the "Departure Date") or (c) in five equal annual installments
commencing  on  the Departure Date (the "Third Anniversary" and "Departure Date"
each  being  referred  to  herein as a "Delivery Date").  Such Deferral Election
shall  remain  in effect for each Subsequent Year unless changed, provided that,
any  Deferral Election with respect to a particular Year may not be changed less
than six months prior to the beginning of such Year, and provided, further, that
no  more  than  one Deferral Election or change thereof may be made in any Year.

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     Any Deferral Election and any change or revocation thereof shall be made by
delivering  written  notice  thereof  to  the Committee no later than six months
prior to the beginning of the Year in which it is to be effected; provided that,
with  respect to the Year beginning on the Effective Date, any Deferral Election
or  revocation  thereof must be delivered no later than the close of business on
the  30th  day  after  the  Effective  Date.

     7.     Deferred  Stock  Accounts.  The  Company  shall  maintain a Deferred
            -------------------------
Stock  Account for each Participant who makes a Deferral Election to which shall
be  credited,  as  of  the  applicable Payment Time, the number of shares of the
Common  Stock  payable  pursuant  to  the  Stock  Retainer to which the Deferral
Election  relates.  So  long  as any amounts in such Deferred Stock Account have
not  been  delivered  to the Participant under Paragraph 8 hereof, each Deferred
Stock  Account shall be credited as of the payment date for any dividend paid or
other  distribution  made  with  respect  to  the Common Stock, with a number of
shares of the Common Stock equal to (a) the number of shares of the Common Stock
shown  in  such  Deferred  Stock Account on the record date for such dividend or
distribution  multiplied  by  (b)  the  Dividend Equivalent for such dividend or
distribution.

     8.     Delivery  of  Shares.
            --------------------

     (a)     The  shares  of  the Common Stock in a Participant's Deferred Stock
Account  with  respect  to  any Stock Retainer for which a Deferral Election has
been  made (together with dividends attributable to such shares credited to such
Deferred  Stock  Account) shall be delivered in accordance with this Paragraph 8
as  soon as practicable after the applicable Delivery Date.  Except with respect
to  a  Deferral  Election  pursuant  to  Paragraph  6 hereof, or other agreement
between  the parties, such shares shall be delivered at one time; provided that,
if  the  number  of shares so delivered includes a fractional share, such number
shall  be rounded to the nearest whole number of shares.  If the Participant has
in  effect  a Deferral Election pursuant to Paragraph 6 hereof, then such shares
shall  be  delivered  in five equal annual installments (together with dividends
attributable  to  such shares credited to such Deferred Stock Account), with the
first  such installment being delivered on the first anniversary of the Delivery
Date;  provided  that,  if  in  order  to equalize such installments, fractional
shares  would  have  to  be  delivered,  such  installments shall be adjusted by
rounding  to  the  nearest  whole share.  If any such shares are to be delivered
after  the  Participant  has  died  or become legally incompetent, they shall be
delivered  to the Participant's estate or legal guardian, as the case may be, in
accordance  with  the  foregoing;  provided that, if the Participant dies with a
Deferral  Election pursuant to Paragraph 6 hereof in effect, the Committee shall
deliver  all  remaining  undelivered  shares  to  the  Participant's  estate
immediately.  References  to a Participant in this Plan shall be deemed to refer
to  the  Participant's  estate  or  legal  guardian,  where  appropriate.

     (b)     The  Company  may,  but  shall not be required to, create a grantor
trust  or  utilize an existing grantor trust (in either case, "Trust") to assist
it  in  accumulating  the  shares  of  the  Common  Stock  needed to fulfill its
obligations  under  this  Paragraph  8.  However,  Participants  shall  have  no
beneficial  or  other  interest  in  the Trust and the assets thereof, and their
rights  under this Plan shall be as general creditors of the Company, unaffected
by  the  existence or nonexistence of the Trust, except that deliveries of Stock
Retainers  to  Participants  from  the  Trust  shall,  to the extent thereof, be
treated as satisfying the Company's obligations under this Paragraph 8.

     9.     Share  Certificates;  Voting and Other Rights.  The certificates for
            ---------------------------------------------
shares  delivered to a Participant pursuant to Paragraph 8 above shall be issued
in the name of the Participant, and from and after the date of such issuance the
Participant shall be entitled to all rights of a stockholder with respect to the
Common Stock for all such shares issued in his name, including the right to vote
the  shares,  and  the  Participant  shall  receive  all  dividends  and  other
distributions  paid  or  made  with  respect  thereto.

     10.     General  Restrictions.
             ---------------------

          (a)     Notwithstanding any other provision of this Plan or agreements
made pursuant thereto, the Company shall not be required to issue or deliver any
certificate or certificates for shares of the Common Stock under this Plan prior
to fulfillment of all of the following conditions:

               (i)     Listing  or  approval for listing upon official notice of
issuance  of  such  shares  on  the New York Stock Exchange, Inc., or such other
securities exchange as may at the time be a market for the Common Stock;

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               (ii)     Any  registration  or other qualification of such shares
under  any  state  or federal law or regulation, or the maintaining in effect of
any such registration or other qualification which the Committee shall, upon the
advice of counsel, deem necessary or advisable; and

               (iii)     Obtaining  any  other consent, approval, or permit from
any  state  or  federal  governmental  agency  which  the Committee shall, after
receiving the advice of counsel, determine to be necessary or advisable.

          (b)     Nothing  contained in this Plan shall prevent the Company from
adopting other or additional compensation arrangements for the Participants.

     11.     Shares  Available.  Subject  to  Paragraph  12  below,  the maximum
             -----------------
number of shares of the Common Stock which may in the aggregate be paid as Stock
Retainers  pursuant  to  this  Plan  is 245,000,000.  Shares of the Common Stock
issuable  under  this  Plan  may be taken from treasury shares of the Company or
purchased  on the open market.  In the event that any outstanding Stock Retainer
under  this  Plan  for any reason expires or is terminated, the shares of Common
Stock  allocable  to  the  unexercised  portion  of  the Stock Retainer shall be
available  for  issuance  under  the  Palomar Enterprises, Inc.'s Employee Stock
Incentive  Plan for the Year 2004 No. 3.  The Compensation Committee may, in its
discretion,  increase  the  number  of  shares available for issuance under this
Plan,  while  correspondingly  decreasing  the  number  of  shares available for
issuance under Palomar Enterprises, Inc.'s Employee Stock Incentive Plan for the
Year  2004  No.  3.

     12.     Adjustments;  Change  of  Control.
             ---------------------------------

          (a)     In the event that there is, at any time after the Board adopts
this  Plan,  any  change  in  corporate  capitalization,  such as a stock split,
combination  of  shares,  exchange  of  shares,  warrants  or rights offering to
purchase  the  Common  Stock  at  a  price  below  its  Fair  Market  Value,
reclassification,  or  recapitalization, or a corporate transaction, such as any
merger,  consolidation,  separation,  including  a  spin-off, stock dividend, or
other  extraordinary  distribution  of  stock  or  property  of the Company, any
reorganization  (whether  or not such reorganization comes within the definition
of  such term in Section 368 of the Code) or any partial or complete liquidation
of  the Company (each of the foregoing a "Transaction"), in each case other than
any  such  Transaction which constitutes a Change of Control (as defined below),
(i)  the  Deferred  Stock Accounts shall be credited with the amount and kind of
shares  or  other  property  which  would  have been received by a holder of the
number  of  shares  of  the Common Stock held in such Deferred Stock Account had
such  shares of the Common Stock been outstanding as of the effectiveness of any
such  Transaction,  (ii) the number and kind of shares or other property subject
to  this  Plan  shall  likewise  be  proportionately  adjusted  to  reflect  the
effectiveness  of  any  such  Transaction,  and  (iii)  the  Committee  shall
appropriately  adjust  any  other  relevant provisions of this Plan and any such
modification  by  the  Committee shall be binding and conclusive on all persons.

          (b)     If  the  shares  of  the Common Stock credited to the Deferred
Stock  Accounts  are  converted pursuant to Paragraph 12(a) into another form of
property,  references  in  this  Plan to the Common Stock shall be deemed, where
appropriate,  to  refer  to  such  other  form  of  property,  with  such  other
modifications as may be required for this Plan to operate in accordance with its
purposes.  Without  limiting  the  generality  of  the  foregoing, references to
delivery of certificates for shares of the Common Stock shall be deemed to refer
to delivery of cash and the incidents of ownership of any other property held in
the  Deferred  Stock  Accounts.

          (c)     In  lieu of the adjustment contemplated by Paragraph 12(a), in
the  event  of a Change of Control, the following shall occur on the date of the
Change  of Control (i) the shares of the Common Stock held in each Participant's
Deferred  Stock  Account  shall be deemed to be issued and outstanding as of the
Change  of Control; (ii) the Company shall forthwith deliver to each Participant
who  has  a  Deferred Stock Account all of the shares of the Common Stock or any
other property held in such Participant's Deferred Stock Account; and (iii) this
Plan  shall  be  terminated.

          (d)     For purposes of this Plan, Change of Control shall mean any of
the  following  events:

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               (i)     The  acquisition  by  any  individual,  entity  or  group
(within  the  meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act  of  1934,  as  amended  (the  "Exchange  Act"))  (a "Person") of beneficial
ownership  (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of  80  percent  or more of either (1) the then outstanding shares of the Common
Stock  of  the  Company  (the  "Outstanding  Company  Common Stock"), or (2) the
combined  voting  power  of  then  outstanding  voting securities of the Company
entitled  to  vote  generally  in  the  election  of directors (the "Outstanding
Company  Voting Securities"); provided, however, that the following acquisitions
shall  not  constitute a Change of Control (A) any acquisition directly from the
Company  (excluding  an  acquisition  by  virtue of the exercise of a conversion
privilege  unless  the  security being so converted was itself acquired directly
from  the  Company),  (B) any acquisition by the Company, (C) any acquisition by
any  employee  benefit  plan  (or  related trust) sponsored or maintained by the
Company  or  any corporation controlled by the Company or (D) any acquisition by
any  corporation  pursuant  to  a  reorganization,  merger or consolidation, if,
following such reorganization, merger or consolidation, the conditions described
in  clauses  (A),  (B)  and  (C)  of paragraph (iii) of this Paragraph 12(d) are
satisfied;  or

               (ii)     Individuals  who,  as of the date hereof, constitute the
Board  of  the  Company (as of the date hereof, "Incumbent Board") cease for any
reason  to  constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's stockholders, was approved by a vote
of  at  least  a  majority  of the directors then comprising the Incumbent Board
shall  be  considered  as  though such individual were a member of the Incumbent
Board,  but  excluding,  for  this  purpose,  any  such individual whose initial
assumption  of  office  occurs  as  a  result  of either an actual or threatened
election  contest  (as  such  terms  are  used  in Rule 14a-11 of Regulation 14A
promulgated  under  the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board; or

               (iii)     Approval  by  the  stockholders  of  the  Company  of a
reorganization,  merger,  binding  share  exchange  or  consolidation,  unless,
following  such  reorganization, merger, binding share exchange or consolidation
(A)  more  than  60  percent of, respectively, then outstanding shares of common
stock  of  the  corporation  resulting from such reorganization, merger, binding
share  exchange  or  consolidation  and  the  combined  voting  power  of  then
outstanding  voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners,  respectively,  of  the Outstanding Company Common Stock and Outstanding
Company  Voting  Securities  immediately  prior  to such reorganization, merger,
binding share exchange or consolidation in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger, binding share
exchange  or  consolidation,  of  the  Outstanding  Company  Common  Stock  and
Outstanding  Company  Voting  Securities,  as  the  case  may  be, (B) no Person
(excluding  the  Company,  any  employee  benefit plan (or related trust) of the
Company  or such corporation resulting from such reorganization, merger, binding
share  exchange or consolidation and any Person beneficially owning, immediately
prior  to  such reorganization, merger, binding share exchange or consolidation,
directly  or  indirectly,  20  percent or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case may be) beneficially
owns,  directly  or  indirectly,  20  percent  or  more  of,  respectively, then
outstanding  shares  of  common  stock  of  the  corporation resulting from such
reorganization,  merger, binding share exchange or consolidation or the combined
voting  power of then outstanding voting securities of such corporation entitled
to  vote  generally in the election of directors, and (C) at least a majority of
the  members  of  the  board of directors of the corporation resulting from such
reorganization,  merger, binding share exchange or consolidation were members of
the  Incumbent  Board  at  the  time  of  the execution of the initial agreement
providing  for  such  reorganization,  merger,  binding  share  exchange  or
consolidation;  or

               (iv)     Approval  by  the  stockholders  of the Company of (1) a
complete  liquidation  or  dissolution  of the Company, or (2) the sale or other
disposition of all or substantially all of the assets of the Company, other than
to  a  corporation,  with  respect  to  which  following  such  sale  or  other
disposition,  (A) more than 60 percent of, respectively, then outstanding shares
of  common  stock  of  such  corporation  and  the combined voting power of then
outstanding  voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners,  respectively,  of  the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially  the same proportion as their ownership, immediately prior to such
sale  or  other  disposition,  of  the  Outstanding  Company  Common  Stock  and
Outstanding  Company  Voting  Securities,  as  the  case  may  be, (B) no Person
(excluding  the  Company and any employee benefit

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plan  (or  related  trust)  of  the  Company  or such corporation and any Person
beneficially  owning,  immediately  prior  to  such  sale  or other disposition,
directly  or  indirectly,  20  percent or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case may be) beneficially
owns,  directly  or  indirectly,  20  percent  or  more  of,  respectively, then
outstanding  shares  of common stock of such corporation and the combined voting
power of then outstanding voting securities of such corporation entitled to vote
generally  in  the  election  of  directors,  and (C) at least a majority of the
members  of  the  board  of  directors  of  such corporation were members of the
Incumbent  Board at the time of the execution of the initial agreement or action
of  the  Board  providing  for  such  sale or other disposition of assets of the
Company.

     13.     Administration;  Amendment  and  Termination.
             --------------------------------------------

          (a)     This  Plan  shall be administered by a committee consisting of
two  members  who  shall  be  the  current  directors  of  the Company or senior
executive  officers  or  other  directors  who  are  not  Participants as may be
designated  by  the  Chief Executive Officer (the "Committee"), which shall have
full  authority  to  construe  and  interpret this Plan, to establish, amend and
rescind  rules  and  regulations  relating  to  this  Plan, and to take all such
actions  and make all such determinations in connection with this Plan as it may
deem  necessary  or  desirable.

          (b)     The  Board  may from time to time make such amendments to this
Plan,  including  to  preserve or come within any exemption from liability under
Section  16(b)  of  the  Exchange  Act,  as  it  may deem proper and in the best
interest  of the Company without further approval of the Company's stockholders,
provided  that,  to  the  extent  required  under  Nevada  law  or  to  qualify
transactions  under  this  Plan for exemption under Rule 16b-3 promulgated under
the  Exchange  Act,  no  amendment to this Plan shall be adopted without further
approval  of  the  Company's stockholders and, provided, further, that if and to
the  extent  required  for this Plan to comply with Rule 16b-3 promulgated under
the  Exchange Act, no amendment to this Plan shall be made more than once in any
six  month period that would change the amount, price or timing of the grants of
the  Common  Stock hereunder other than to comport with changes in the Code, the
Employee  Retirement Income Security Act of 1974, as amended, or the regulations
thereunder.  The  Board  may  terminate  this  Plan  at  any time by a vote of a
majority  of  the  members  thereof.

     14.     Restrictions  on  Transfer.  Each  Stock  Option granted under this
             --------------------------
Plan shall be transferable only by will or the laws of descent and distribution.
No  interest  of  any  Employee  under this Plan shall be subject to attachment,
execution, garnishment, sequestration, the laws of bankruptcy or any other legal
or  equitable  process.  Each  Stock  Option  granted  under  this Plan shall be
exercisable  during  an  Employee's  lifetime  only  by  the  Employee or by the
Employee's  legal  representative.

     15.     Term  of  Plan.  No  shares  of  the  Common Stock shall be issued,
             --------------
unless  and  until  the Directors of the Company have approved this Plan and all
other  legal  requirements  have  been  met.  This Plan was adopted by the Board
effective September 8, 2004 and shall expire on September 8, 2014.

     16.     Approval.  This  Plan  must  be  approved  by  a  majority  of  the
             --------
outstanding  securities  entitled  to vote within 12 months before or after this
Plan  is  adopted  or  the  date  the agreement is entered into.  Any securities
purchased  before  security  holder  approval  is  obtained must be rescinded if
security  holder  approval is not obtained within 12 months before or after this
Plan  is adopted or the agreement is entered into.  Such securities shall not be
counted  in  determining  whether  such  approval  is  obtained.

     17.     Governing Law.  This Plan and all actions taken thereunder shall be
             -------------
governed  by, and construed in accordance with, the laws of the State of Nevada.

     18.     Information  to Shareholders.  The Company shall furnish to each of
             ----------------------------
its stockholders financial statements of the Company at least annually.

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<PAGE>
     19.     Miscellaneous.

          (a)     Nothing  in this Plan shall be deemed to create any obligation
on  the  part  of  the  Board  to  nominate  any  Director for reelection by the
Company's  stockholders or to limit the rights of the stockholders to remove any
Director.

          (b)     The  Company  shall  have  the  right to require, prior to the
issuance  or  delivery  of any shares of the Common Stock pursuant to this Plan,
that  a  Participant  make  arrangements  satisfactory  to the Committee for the
withholding  of  any  taxes  required  by law to be withheld with respect to the
issuance  or  delivery  of  such  shares,  including, without limitation, by the
withholding  of  shares  that  would  otherwise  be  so  issued or delivered, by
withholding  from any other payment due to the Participant, or by a cash payment
to  the  Company  by  the  Participant.

     IN  WITNESS  WHEREOF, this Plan has been executed effective as of September
8,  2004.

                                       PALOMAR ENTERPRISES, INC.

                                       By  /s/  Steven Bonenberger
                                         -------------------------------------
                                         Steven Bonenberger, President

                                        7
<PAGE>exv10w1

 

EXHIBIT 10.1

EXECUTIVE CONFIDENTIALITY AND NON-COMPETITION AGREEMENT

     This Executive Confidentiality and Non-Competition Agreement (the
“Agreement”) is made this
        day of
               , 200    (the “Effective Date”), by
and between StarTek, Inc. (the “Company”) and                      (the
“Employee”).

RECITALS

	1.	 	The Company is a Colorado corporation with its principal place of
business at 100 Garfield Street, Denver, CO, 80206. StarTek, Inc., is an
international Business Process Outsource organization, with significant
interests in the call center and supply chain management businesses. In
the course of its business, the Company has developed significant
confidential and proprietary information and trade secrets from which it
derives independent economic advantage as a result of that information and
those trade secrets being not generally known.
	 
	2.	 	Employee acknowledges that Employee’s position is an executive or
management level position. Due to the special training, experience, and
knowledge that Employee will acquire regarding the Company’s business as a
result of Employee’s employment with the Company, Employee acknowledges
that this Agreement is intended to protect the Company from competition by
Employee for the period of time and in the location(s) stated in Paragraph
4.
	 
	3.	 	Employee recognizes and acknowledges that the Company has developed
significant confidential and proprietary information and trade secrets
from which it derives independent economic advantage as a result of that
information and those trade secrets being not generally known. Employee
further recognizes and acknowledges that Employee’s position with the
Company is one of trust and confidence by reason of Employee’s access to,
development of, or contact with the Company’s confidential information and
proprietary information and trade secrets.
	 
	4.	 	Employee acknowledges that StarTek Inc. will guarantee payment to
Employee of 25% of the targeted Incentive Compensation (Bonus) payment for
the current Fiscal Year to which Employee was not otherwise entitled as
consideration for Employee’s execution of this Agreement and agreement to
comply in good faith with the spirit and terms of this Agreement.

     NOW, THEREFORE, in consideration of these premises, the mutual promises
and covenants contained herein, the consideration recited above, the
compensation and benefits to be paid by the Company, the services to be
rendered by Employee, and intending to be legally and equitably bound hereby,
the parties hereto agree as follows:

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	1.	 	Confidentiality.

	 	(a)	 	Employee shall, during and after Employee’s term of
employment with the Company: (i) keep confidential all Confidential
Information (as defined in paragraph 1(b) below) at any time known
to Employee concerning the Company and/or any of its clients, (ii)
not disclose or use any Confidential Information for non-business
reasons or for Employee’s benefit, (iii) not disclose any
Confidential Information to third parties without the Company’s
prior written permission, (iv) exercise reasonable care to prevent
dissemination of Confidential Information to third persons, (v) not
make copies of documents, including, without limitation, drawings,
notebooks, reports, and video and audio recordings, computer records
or files (in whatever medium they exist), which embody any
Confidential Information, unless necessary for the performance of
Employee’s duties as assigned by the Company, (vi) return to the
Company any documents, including without limitation, drawings,
notebooks, reports, video or audio recordings, that contain
Confidential Information and are in Employee’s possession whenever
Employee may leave the Company’s employment, and (vii) not disclose
or use Confidential Information in any way that might injure or
jeopardize the operations of the Company or any of its clients.
	 
	 	(b)	 	“Confidential Information” shall include any information
regarding the operations of the Company or any of its clients, which
information is of a special, unique, or nonpublic nature, including,
but not limited to any information relating to the business or
affairs of the Company and/or the Business, as defined in Paragraph
4. Such information shall include, but is not limited to,
information relating to financial statements, customer identities,
potential customers, employees, suppliers, servicing methods,
equipment, programs, strategies and information, analyses, profit
margins, marketing plans, operating policies and procedures, pricing
information, and other business and financial information, client
lists, and contracts or other proprietary information used by the
Company in connection with the business; provided, however, that
Confidential Information shall not include any information which is
in the public domain or becomes known in the industry through no
wrongful act on the part of the Employee.

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	2.	 	Proprietary Property. Employee discloses and assigns to Company
Employee’s interest in any and all inventions, designs, trade secrets,
processes, discoveries, concepts, copyrightable works, or improvements
(hereinafter collectively called “Developments”), including all rights to
obtain, register, perfect or enforce the Company’s proprietary interest in
such Developments, that Employee has to date, or may in the future,
discover, conceive, and/or develop, either individually or jointly with
others during the course of Employee’s employment with the Company
(including any and all Developments based wholly or in part upon ideas
conceived during Employee’s employment with the Company), or while using
the Company’s data, facilities and/or materials, provided the subject
matter is one within the Company’s field of interest. “Subject matter
within the Company’s field of interest” includes any subject which the
Company considers relevant to any past, current, or future projects or
operations. Employee’s obligations under this paragraph apply without
regard to whether any idea for a Development occurs to Employee on or off
the job. Employee further agrees that all Developments as described
herein are the Company’s proprietary property in which the Company has the
exclusive legal right, whether or not patent applications are filed
thereon.
	 
	3.	 	Ownership of Ideas and Documents. All ideas, inventions, and other
Developments or improvements conceived or reduced to practice by Employee,
alone or with others, whether or not during working hours, that are within
the scope of the Company’s business operations or that relate to any of
the Company’s work or projects, shall be the exclusive property of the
Company. Employee agrees to assist employer, at its expense, to obtain
patents on any such patentable ideas, inventions, and other developments,
and agrees to execute all documents necessary to obtain such patents in
the name of the Company. Employee shall assist the Company in the
preparation of patents, including the execution and delivery of any
disclosures, patent applications or papers related to any development
within the Company’s field of interest as described in paragraph 2 above.
If such assistance takes place when Employee is no longer employed with
the Company, the Company will compensate Employee at a reasonable rate for
Employee’s assistance.
	 
	4.	 	Covenant Not to Compete. The Company has spent a significant amount of
time, effort, and money developing the products, methods, systems,
techniques, and procedures used by the Company and the processes for
identifying and marketing to the Company’s customers and potential
customers and handling the needs of the Company’s customers. This unique
compilation of information, referred to herein as the “Business”, has
resulted in unique products and forms, management and control systems, and
generally a style, system, technique and method of business operation
which gives the Company an advantage over competitors who do not know of
or utilize such information. The Company provides its clients with
business process management, multi-lingual customer care / technical
support and packaging and distribution services in the teleservices,
utility and retail industries. As a result, such information is
proprietary to the Company, confidential, and constitutes trade secrets.
Accordingly:

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	 	A.	 	Employee’s Acknowledgment. Employee agrees and acknowledges
that in order to assure the Company that it will retain its value
and that of the Business as a going concern, it is necessary that
Employee undertake not to use Employee’s special knowledge of the
Business and Employee’s relationships with customers and suppliers
to compete with the Company. Employee further acknowledges that:

	 	(1)	 	The Company is and will be engaged in the
Business;
	 
	 	(2)	 	Employee occupies an executive and management
position within the Company;
	 
	 	(3)	 	During Employee’s employment under this
Agreement, Employee will occupy a position of trust and
confidence with the Company and Employee has, and/or will,
become familiar with the Company’s trade secrets and with
other proprietary and confidential information concerning the
Company and the Business;
	 
	 	(4)	 	The agreements and covenants contained in this
Paragraph 4 are essential to protect the Company and the
goodwill of the business;
	 
	 	(5)	 	Employee’s employment with the Company has
special, unique and extraordinary value to the Company and the
Company would be irreparably damaged if Employee were to
provide services to any person or entity in violation of the
provisions of this Agreement;
	 
	 	(6)	 	Employee has means to support Employee and
Employee’s dependents other than by engaging in the Business,
or a business similar to the Business, and the provisions of
this Paragraph will not impair such ability; and
	 
	 	(7)	 	The term of this Covenant Not to Compete is the
minimum period of time, that the conduct prohibited is
reasonably limited, and that the Territory defined in
Paragraph 4(B), below, is reasonable and necessary to protect
the Company, consistent with the provisions of Colo. Rev.
Stat. § 8-2-113 and Colorado’s Uniform Trade Secrets Act,
Colo. Rev. Stat. §§ 7-74-101 to 110

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	 	B.	 	Non-Compete. Employee hereby agrees that during Employee’s
employment with the Company and for a period of one (1) year
following the termination of Employee’s employment with the Company
for any reason (the “Restricted Period”), Employee will not,
directly or indirectly, as employee, agent, consultant, stockholder,
director, co-partner or in any other individual or representative
capacity, own, operate, manage, control, engage in, invest in or
participate in any manner in, act as a consultant or advisor to,
render services for (alone or in association with any person, firm,
corporation or entity), or otherwise assist any person or entity
(other than the Company) that engages in or owns, invests in,
operates, manages or controls any venture or enterprise that
directly or indirectly engages or proposes to engage in the Business
within the United States of America in the states of Colorado,
Illinois, , Louisiana, Oklahoma, Tennessee, Texas, Virginia,
Wyoming, and within Canada in the Provinces of Ontario and
Saskatchewan. With respect to the Territory, Employee specifically
acknowledges that the Company has conducted the Business throughout
the Territory and the Company intends to continue to expand the
Business throughout Territory. During the Restricted Period, the
Company will pay the Employee severance in an amount equal to a
minimum of           (   ) months pay at Employee’s final rate of pay.
After the expiration of
          (   ) months from the Employee’s
termination, the Company shall pay the Employee an amount equal to
the Employee’s final rate of pay for the remaining
          (   )
months of the Restricted Period up to a maximum of one (1) year, or
until the Employee finds employment in a non-competing business,
whichever comes first. The Company reserves the right to pay this
“Termination Pay” either in full as a lump sum, or on a payroll
continuation basis. In the event of termination of the Employee for
“Good Cause”, no payment will be due or owing from this agreement.
In the event that Employee accepts employment with a competitor
during the Restricted Period and the Company elects not to enforce
the Non-Compete, the Company shall not pay Employee the Termination
Pay. The term “Good Cause” as used in this Agreement shall require
a reasonable good faith determination by the Company that Employee
has committed: (1) an act or acts constituting a felony; (2) an act
or acts constituting dishonesty or disloyalty with respect to the
Company; (3) an act or acts constituting fraud; and / or (4) an act
or acts that materially adversely affect the Company’s business or
reputation.

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	 	C.	 	Non-Solicitation. Without limiting the generality of the
provisions of Section 4(B) above, Employee hereby agrees that during
the Restricted Period Employee will not (except on behalf of the
Company), directly or indirectly, solicit (or participate as
employee, agent, consultant, stockholder, director, partner or in
any other individual or representative capacity in any business
which solicits), business from any person, firm, corporation or
other entity which is or was a customer, supplier, vendor, or title
abstractor of the Company during the four (4) year period preceding
the date of the solicitation or proposed solicitation, or from any
successor in interest to any such person, firm, corporation to other
entity for the purpose of securing business or contracts related to
the company.
	 
	 	D.	 	For the period commencing on the date of the Employee’s
termination and ending two (2) years later, the Employee shall not,
directly or indirectly, hire or solicit any employee of the Company
or encourage any employee to leave such employment for any business
whether or not a competitor of the Company.

	5.	 	Employee Representations. Employee hereby represents to the Company and
covenants that the execution and delivery of this Agreement by Employee
and the Company and the performance by Employee of Employee’s duties
hereunder for the Company shall not constitute a breach of, or otherwise
contravene, the terms of any employment agreement or other agreement or
policy to which Employee is a party or otherwise bound and/or otherwise
infringe or violate the rights of any former employer or other third
party. Employee further represents that Employee has not and will not in
the future use any confidential materials or trade secrets of Employee’s
prior employers at any location of the Company or on Employee’s home
computer.
	 
	6.	 	Employment at Will. This Agreement shall not be construed as creating an
employment term for a definite time, and in no way impairs the right of
either the Employee or the Company to terminate the Employee’s employment
for any reason, or no reason, at any time, with or without notice.

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	7.	 	Remedies. Employee acknowledges and agrees that the covenants set forth
in Paragraphs 1-5 of this Agreement (collectively, the “Restrictive
Covenants”) are reasonable and necessary for the protection of the
Company’s business interests, that the Company will be irreparably injured
if Employee breaches any of the terms of the Restrictive Covenants, and
that in the event of an actual or threatened breach of any such
Restrictive Covenants, the Company will have no adequate remedy at law.
Employee accordingly agrees that in the event a court of competent
jurisdiction finds any actual or threatened breach by Employee of any of
the Restrictive Covenants, the Company shall be entitled to immediate
temporary injunctive and other equitable relief, without the necessity of
showing actual monetary damages and without the need to post a bond or any
other type of security, subject to hearing as soon thereafter as possible.
Nothing contained herein shall be construed as prohibiting the Company
from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of any damages which it is able
to prove.

	8.	 	Severability. Should any of the provisions of this Agreement to any
extent be held to be invalid or unenforceable, the remainder of the
Agreement shall continue in full force and effect. In the event a court
of competent jurisdiction finds any portion of any Restrictive Covenant to
be unenforceable, the court shall modify the relevant Restrictive Covenant
to reflect the maximum restriction allowed by law and shall then enforce
the Restrictive Covenant as so modified.
	 
	9.	 	Applicable Law. This Agreement has been made and executed in, and shall
be construed and enforced according to, the laws of the State of Colorado.
	 
	10.	 	Waiver. No provision of this Agreement may be waived, except by an
agreement in writing signed by all of the parties hereto. A waiver of any
term or provision shall not be construed as a waiver of any other term or
provision.
	 
	11.	 	Headings. The subject headings used in this Agreement are included for
purposes of reference only, and shall not affect the construction or
interpretation of any of its provisions.
	 
	12.	 	Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all parties had signed the same
document. All counterparts shall be construed together and shall
constitute one agreement.

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	13.	 	Entire Agreement. This Agreement embodies the entire understanding and
agreement among the Company and Employee regarding the matters contained
herein, and supersedes all prior negotiations, understandings or
agreements concerning such matters, whether written or oral.

     IN WITNESS WHEREOF, the parties have executed this Agreement intending
it to be effective as of the Effective Date, notwithstanding actual
signature at a different date.

	 	 	 	 	 
	 	

StarTek, Inc.

 	 
	 	By:  	 	 
	 	 	_________________________________________ 	 
	 	 	[Print Name, Title]

_________________________________________
Signature 	 
	 

	 	 	 	 	 
	 	“EMPLOYEE”

 	 
	 	

 	 
	 	_________________________________________ 	 
	 	[Print Name]

_________________________________________
Signature 	 
	 

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