Document:

EXHIBIT 10

EXHIBIT 10.5

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 30, 2003 (this "Agreement"), is made by and between VALIDIAN CORPORATION, a Nevada corporation, with an office located at 30 Metcalfe Street, Ottawa, Ontario, Canada K1P 5L4 (the “Company”), and each entity named on a signature page hereto (each, an “Initial Investor”) (each agreement with an Initial Investor being deemed a separate and independent agreement between the Company and such Initial Investor, except that each Initial Investor acknowledges and consents to the rights granted to each other Initial Investor under such agreement).

W I T N E S S E T H:

WHEREAS, upon the terms and subject to the conditions of the Securities Purchase Agreement, dated as of January 30, 2004, between the Initial Investor and the Company (the “Securities Purchase Agreement”; capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement), the Company has agreed to issue and sell to the Initial Investors the Debentures; and

WHEREAS, the Debentures are convertible into shares of Common Stock (the “Conversion Shares”; which term, for purposes of this Agreement, shall include shares of Common Stock of the Company issuable in lieu of accrued interest through the Maturity Date of the Debentures, as that term is defined in and as contemplated by the Debentures) upon the terms and subject to the conditions contained in the Debentures; and 

WHEREAS, upon and subject to the terms of the Securities Purchase Agreement, the Company has agreed to issue the Warrants to the Initial Investor and vFinance  in connection with the issuance of the Debentures, and the Warrants may be exercised for the purchase of shares of Common Stock (the “Warrant Shares”) upon the terms and conditions of the Warrants; and

WHEREAS, to induce the Initial Investor to execute and deliver the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), with respect to the Registrable Securities (as defined below); 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Initial Investor hereby agree as follows:

1.

Definitions.

As used in this Agreement, the following terms shall have the following meanings:

(a)

“Closing Date” shall mean January 30, 2004.

(b)

“Effective Date” means the date the SEC declares a Registration Statement covering Registrable Securities and otherwise meeting the conditions contemplated hereby to be effective.

(c)

“Held Shares Value” means, for shares of Common Stock acquired by the Investor upon a conversion of a Debenture within the thirty (30) days preceding the Restricted Sale Date, but not yet sold by the Investor, the principal amount of the Debentures converted into such Conversion Shares; provided, however, that if  the Investor effected more than one such conversion during such thirty (30) day period and sold less than all of such shares, the sold shares shall be deemed to be derived first from the conversions in the sequence of such conversions  (that is, for example, until the number of shares from the first of such conversions have been sold, all shares shall be deemed to be from the first conversion; thereafter, from the second conversion until all such shares are sold).

(d)

“Investor” means the Initial Investor and any permitted transferee or assignee who agrees to become bound by the provisions of this Agreement in accordance with Section 9 hereof and who holds Debentures, Warrants or Registrable Securities.

(e)

“Payment Shares” means shares of Common Stock issued by the Company as provided in Section 2(b) below.

(f)

“Potential Material Event” means any of the following: (i) the possession by the Company of material information not ripe for disclosure in a registration statement, which shall be evidenced by a determination in good faith by the Board of Directors of the Company that disclosure of such information in the registration statement would be detrimental to the business and affairs of the Company or (ii) any material engagement or activity by the Company which would, in the good faith determination of the Board of Directors of the Company, be adversely affected by disclosure in a registration statement at such time; in each case where such determination shall be accompanied by a good faith determination by the Board of Directors of the Company that the registration statement would be materially misleading absent the inclusion of such information.

(g)

“Register,” “Registered,” and “Registration” refer to a registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis (“Rule 415"), and the declaration or ordering of effectiveness of such Registration Statement by the United States Securities and Exchange Commission (the “SEC”).

(h)

"Registrable Securities" means, collectively, the Conversion Shares, the Warrant Shares, the Additional Shares and the Payment Shares.

(i)

“Registration Statement” means a registration statement of the Company under the Securities Act covering Registrable Securities on Form S-3, if the Company is then eligible to file using such form, and if not eligible, on Form S-2 or other appropriate form.

(j)

“Required Effective Date” means the relevant Initial Required Effective Date or Increased Required Effective Date (as those terms are defined below). 

(k)

“Restricted Sale Date” means the first date, other than a date during a Permitted Suspension Period (as defined below), on which the Investor is restricted from making sales of Registrable Securities covered by any previously effective Registration Statement. 

2.

Registration.

(a)

Mandatory Registration.  

(i)

The Company shall prepare and file with the SEC, as soon as practible after the Closing Date but no later than forty-five (45) days after the Closing Date (the “Required Filing Date”), either a Registration Statement or an amendment to an existing Registration Statement, in either event registering for resale by the Investor a sufficient number of shares of Common Stock for the Initial Investors to sell the Registrable Securities, but in no event less than the number of shares equal to one hundred fifty percent (150%) of the aggregate of (x) the number of shares into which the Debentures  and all interest thereon through the Maturity Date would be convertible at the time of filing of such Registration Statement (assuming for such purposes that all Debentures had been issued, had been eligible to be converted, and had been converted, into Conversion Shares in accordance with their terms, whether or not such issuance, eligibility, accrual of interest or conversion had in fact occurred as of such date) and (y) the number of Warrant Shares which would be issuable on exercise of the Warrants (assuming for such purposes that all Warrants had been issued, had been eligible for exercise and had been exercised for Warrant Shares in accordance with their terms, whether or not such issuance, eligibility or exercise had in fact occurred as of such date).  Unless otherwise specifically agreed to in writing in advance by the Initial Investor, the Registration Statement (W) shall include only the Registrable Securities, and (X) shall also state that, in accordance with Rule 416 and 457 under the Securities Act, it also covers such indeterminate number of additional shares of Common Stock as may become issuable upon conversion of the Debentures or exercise of the Warrants to prevent dilution resulting from stock splits, or stock dividends. The Company will use its reasonable best efforts to cause such Registration Statement to be declared effective on a date (the “Initial Required Effective Date”) which is no later than the earlier of (Y) five (5) days after oral or written notice by the SEC that it may be declared effective or (Z) one hundred twenty (120) days after the Closing Date.

(ii)

If at any time (an “Increased Registered Shares Date”), the number of shares of Common Stock represented by the Registrable Shares, issued or to be issued as contemplated by the Transaction Agreements, exceeds seventy percent (70%) of the aggregate number of shares of Common Stock then registered, the Company shall either 

(X) amend the relevant Registration Statement filed by the Company pursuant to the preceding provisions of this Section 2, if such Registration Statement has not been declared effective by the SEC at that time, to register, in the aggregate, at least the number of shares (the “Increased Shares Amount”) equal to (A) the number of shares theretofore issued on conversion of the Debentures (including any interest paid on conversion by the issuance of Conversion Shares) , plus (B) the number of shares theretofore issued on exercise of the Warrants,  plus (C) one hundred fifty percent (150%) of 

(I) the number of shares into which the unconverted Debentures and all interest thereon through the Maturity Date would be convertible at the date of such filing (assuming for such purposes that all such Debentures had been issued, had been eligible to be converted, and had been converted, into Conversion Shares in accordance with their terms, whether or not such issuance eligibility, accrual of interest, or conversion had in fact occurred as of such date), and 

(II) the number of Warrant Shares which would be issuable on exercise of the unexercised Warrants (assuming for such purposes that all such Warrants had been issued, had been eligible for exercise and had been exercised for Warrant Shares in accordance with their terms, whether or not such issuance, eligibility or exercise had in fact occurred as of such date), or 

(Y) if such Registration Statement has been declared effective by the SEC at that time, file with the SEC an additional Registration Statement (an “Additional Registration Statement”) to register the number of shares equal to the excess of the Increased Shares Amount over the aggregate number of shares of Common Stock already registered.  

The Company will use its reasonable best efforts to cause such Registration Statement to be declared effective on a date (each, an “Increased Required Effective Date”) which is no later than (q) with respect to a Registration Statement under clause (X) of this subparagraph (ii), the Initial Required Effective Date and (r) with respect to an Additional Registration Statement, the earlier of (I) five (5) days after notice by the SEC that it may be declared effective or (II) thirty (30) days after the Increased Registered Shares Date.

(iii)     The aggregate number of shares registered for the Investors in each Registration Statement or amendment thereto shall be allocated among the Investors on a pro rata basis among them according to their relative Registrable Shares included in such Registration Statement.

(b)

Payments by the Company.

(i)

If the Registration Statement covering the Registrable Securities is not filed in proper form with the SEC by the Required Filing Date, the Company will make payment to the Initial Investor in such amounts and at such times as shall be determined pursuant to this Section 2(b). 

(ii)

If the Registration Statement covering the Registrable Securities is not effective by the relevant Required Effective Date or if there is a Restricted Sale Date, then the Company will make payments to the Initial Investor in such amounts and at such times as shall be determined pursuant to this Section 2(b).

(iii)

The amount (the “Periodic Amount”) to be paid by the Company to the Initial Investor shall be determined as of each Computation Date (as defined below) and such amount shall be equal to the Periodic Amount Percentage (as defined below) of the Purchase Price for all Debentures for the period from the date following the relevant Required Filing Date or the Required Effective Date or a Restricted Sale Date, as the case may be, to the first relevant Computation Date, and thereafter to each subsequent Computation Date.  The “Periodic Amount Percentage” means (A) one percent (1%) of the Purchase Price of all Debentures for the first Computation Date after the relevant Required Filing Date, Required Effective Date or Restricted Sale Date, as the case may be: and (B) two percent (2%) of the Purchase Price of all Debentures to each Computation Date thereafter.  Anything in the preceding provisions of this paragraph (iii) to the contrary notwithstanding, after the relevant Effective Date the Purchase Price shall be deemed to refer to the sum of (X) the principal amount of all Debentures not yet converted and (Y) the Held Shares Value.  By way of illustration and not in limitation of the foregoing, if the Registration Statement is filed on or before the Required Filing Date, but is not declared effective until two hundred (200) days after the Closing Date, the Periodic Amount will aggregate five percent (5%) of the Purchase Price of the Debentures theretofore issued (1% for days 120-150, plus 2% for days 150-180, plus 2% for days 180-200).

(iv)

Each Periodic Amount will be payable by the Company, except as provided in the other provisions of this subparagraph (iv), in cash or other immediately available funds to the Investor (1) on the day after the Required Filing Date, the Required Effective Date or a Restricted Sale Date, as the case may be, and (2) on the earlier of (A) each thirtieth day thereafter, (B) the third business day after the date the Registration Statement is filed or is declared effective, or (C) the third business day after the Registration Statement has its restrictions removed after the relevant Effective Date, in each case without requiring demand therefor by the Investor. 

(v)

Notwithstanding the provisions of the immediately preceding subparagraph (iv),

(i) at the option of the Company, exercisable in its discretion on the date the Periodic Amount is due; provided, however, that the Company may exercise this discretion if, but only if the Effective Date is within one hundred fifty (150) days after the Closing Date and the Registration Statement covering the Payment Shares is then effective; or

(ii)  at the option of the Investor, exercisable in its sole and absolute discretion by written notice to the Company at any time before the Periodic Amount is paid, 

all or a portion of the Periodic Amount shall be paid by the issuance of additional shares of Common Stock to the Investor (“Payment Shares”) in an amount equal to the Periodic Amount being paid thereby divided by the then applicable Conversion Price; provided, further that the Delivery Date for the Payment Shares shall be three (3) business days after the date the Periodic Amount is due (if the election is made by the Company) or after the Investor gives the notice contemplated by clause (ii) of this subparagraph.

(vi)

The parties acknowledge that the damages which may be incurred by the Investor if the Registration Statement is not filed by the Required Filing Date or the Registration Statement has not been declared effective by a Required Effective Date, including if the right to sell Registrable Securities under a previously effective Registration Statement is suspended or the shares of the Company’s stock are not listed on the Principal Trading Market, may be difficult to ascertain.  The parties agree that the amounts payable pursuant to the foregoing provisions of this Section 2(b) represent a reasonable estimate on the part of the parties, as of the date of this Agreement, of the amount of such damages.

(vii)

Notwithstanding the foregoing, the amounts payable by the Company pursuant to this provision shall not be payable to the extent any delay in the filing or effectiveness of the Registration Statement occurs because of an act of, or a failure to act or to act timely by the Initial Investor or its counsel.

(viii)

"Computation Date" means (A) the date which is the earlier of (1) thirty (30) days after the Required Filing Date, any relevant Required Effective Date or a Restricted Sale Date, as the case may be, or (2) the date after the Required Filing Date, such Required Effective Date or Restricted Sale Date on which the Registration Statement is filed (with respect to payments due as contemplated by Section 2(b) hereof) or is declared effective or has its restrictions removed or the shares of the Company’s stock are listed on the Principal Trading Market (with respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case may be, and (B) each date which is the earlier of (1) thirty (30) days after the previous Computation Date  or (2) the date after the previous Computation Date on which the Registration Statement is filed (with respect to payments due as contemplated by Section 2(b) hereof) or is declared effective or has its restrictions removed or the shares of the Company’s stock are listed on the Principal Trading Market (with respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case may be.

3.

Obligations of the Company.  In connection with the registration of the Registrable Securities, the Company shall do each of the following:

(a)

Prepare promptly, and file with the SEC by the Required Filing Date a Registration Statement with respect to not less than the number of Registrable Securities provided in Section 2(a) above, and thereafter use its reasonable best efforts to cause such Registration Statement relating to Registrable Securities to become effective by the Required Effective Date and keep the Registration Statement effective at all times during the period (the “Registration Period”) continuing until the earlier of (i) the date when the Investors may sell all Registrable Securities under Rule 144 without volume or other restrictions or limits or (ii) the date the Investors no longer own any of the Registrable Securities, which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading;

(b)  Prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during the Registration Period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement;

(c)   Permit a single firm of counsel designated by the Initial Investors (which, until further notice, shall be deemed to be Krieger & Prager llp, Attn: Samuel Krieger, Esq., which firm has requested to receive such notification; each, an “Investor’s Counsel”) to review the Registration Statement and all amendments and supplements thereto a reasonable period of time (but not less than three (3) business days) prior to their filing with the SEC, and not file any document in a form to which such counsel reasonably objects;

(d)   Notify each Investor and the Investor’s Counsel and any managing underwriters immediately (and, in the case of (i)(A) below, not less than three (3) business days prior to such filing) and (if requested by any such person) confirm such notice in writing no later than one (1) business day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) whenever the SEC notifies the Company whether there will be a “review” of such Registration Statement; (C) whenever the Company receives (or a representative of the Company receives on its behalf) any oral or written comments from the SEC in respect of a Registration Statement (copies or, in the case of oral comments, summaries of such comments shall be promptly furnished by the Company to the Investors); and (D) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the SEC or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any proceedings for that purpose; (iv) if at any time any of the representations or warranties of the Company contained in any agreement (including any underwriting agreement) contemplated hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose; and (vi) of the occurrence of any event that to the best knowledge of 

the Company makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  In addition, the Company shall furnish the Investor’s Counsel with copies of all intended written responses to the comments contemplated in clause (C) of this Section 3(d) not later than one (1) business day in advance of the filing of such responses with the SEC so that the Investors shall have the opportunity to comment thereon;

(e)  Furnish to each Investor and to Investor’s Counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one (1) copy of the Registration Statement, each preliminary prospectus and prospectus, and each amendment or supplement thereto, and (ii) such number of copies of a prospectus, and all amendments and supplements thereto and such other documents, as such Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor;

(f)  As promptly as practicable after becoming aware thereof, notify each Investor of the happening of any event of which the Company has knowledge, as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and use its best efforts promptly to prepare a supplement or amendment to the Registration Statement or other appropriate filing with the SEC to correct such untrue statement or omission, and deliver a number of copies of such supplement or amendment to each Investor as such Investor may reasonably request;

(g)  As promptly as practicable after becoming aware thereof, notify each Investor who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance by the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time;

(h) Comply with Regulation FD or any similar rule or regulation regarding the dissemination of information regarding the Company, and in furtherance of the foregoing, and not in limitation thereof, not disclose to the Investor any non-public material information regarding the Company;

(i)  Notwithstanding the foregoing, if at any time or from time to time after the date of effectiveness of the Registration Statement, the Company notifies the Investors in writing that the effectiveness of the Registration Statement is suspended for any reason, whether due to a Potential Material Event or otherwise, the Investors shall not offer or sell any Registrable Securities, or engage in any other transaction involving or relating to the Registrable Securities, from the time of the giving of such notice until such Investor receives written notice from the Company that such the effectiveness of the Registration Statement has been restored, whether because the Potential Material Event has been disclosed to the public or it no longer constitutes a Potential Material Event or otherwise; provided, however, that the Company may not so suspend the right to such holders of Registrable Securities during the periods the Registration Statement is required to be in effect other than during a Permitted Suspension Period (and the applicable provisions of Section 2(b) shall apply with respect to any such suspension other than during a Permitted Suspension Period) .  The term “Permitted Suspension Period” means up to two such suspension periods 

during any consecutive 12-month period, each of which suspension period shall not either (i) be for more than five (5) days or (ii) begin less than ten (10) business days after the last day of the preceding suspension (whether or not such last day was during or after a Permitted Suspension Period);

(j)  Use its  reasonable efforts to secure and maintain the designation of all the Registrable Securities covered by the Registration Statement on the Principal Trading Market within the meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the quotation of the Registrable Securities on the Principal Trading Market;

(k)  Provide a transfer agent (“Transfer Agent”) and registrar, which may be a single entity, for the Registrable Securities not later than the initial Effective Date; 

(l)  Cooperate with the Investors who hold Registrable Securities being offered to facilitate the timely preparation and delivery of certificates for the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities to be in such denominations or amounts as the case may be, as the Investors may reasonably request, and, within five (5) business days after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel selected by the Company to deliver, to the Transfer Agent for the Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) an appropriate instruction and opinion of such counsel, which shall include, without limitation, directions to the Transfer Agent to issue certificates of Registrable Securities(including certificates for Registrable Securities to be issued after the Effective Date and replacement certificates for Registrable Securities previously issued) without legends or other restrictions; and

(m)  Take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of the Registrable Securities pursuant to the Registration Statement.

4.

Obligations of the Investors.  In connection with the registration of the Registrable Securities, the Investors shall have the following obligations:

(a)

Each Investor, by such Investor's acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of the Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor's election to exclude all of such Investor's Registrable Securities from the Registration Statement; and

(b)

Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(f) or 3(g), above, such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Investor's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the Company, such Investor shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in such Investor's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

5.

Expenses of Registration.   All reasonable expenses (other than underwriting discounts and commissions of the Investor) incurred in connection with registrations, filings or qualifications pursuant to Section 3, but including, without limitation, all registration, listing, and qualifications fees, printers and accounting fees, the fees and disbursements of counsel for the Company shall be borne by the Company.  In addition, a fee for a single counsel for the Investors (as a group and not individually) equal to $4,500 for the review of each Registration Statement shall be borne by the Company.

6.

Indemnification.  In the event any Registrable Securities are included in a Registration Statement under this Agreement:

(a)

To the extent permitted by law, the Company will indemnify and hold harmless each Investor who holds such Registrable Securities, the directors, if any, of such Investor, the officers, if any, of such Investor, and each Lender Control Person (each, an “Indemnified Party”), against any losses, claims, damages, liabilities or expenses (joint or several) incurred (collectively, “Claims”) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any of the following statements, omissions or violations in the Registration Statement, or any post-effective amendment thereof, or any prospectus included therein: (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any post-effective amendment thereof or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation under the Securities Act, the Exchange Act or any state securities law (the matters in the foregoing clauses (i) through (iii) being, collectively referred to as “Violations”).  Subject to clause (b) of this Section 6, the Company shall reimburse the Investors, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim.  Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a) shall not (I) apply to any Claim arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of such Indemnified Party expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(b) hereof;  (II) be available to the extent such Claim is based on a failure of the Investor to deliver or cause to be delivered the prospectus made available by the Company or the amendment or supplement thereto made available by the Company; (III) be available to the extent such Claim is based on the delivery of a prospectus by the Investor after receiving notice from the Company under Section 3(f), (g) or (h) hereof (other than a notice regarding the effectiveness of the Registration Statement or any amendment or supplement thereto), or (IV) apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed.  The Investor will indemnify the Company and its officers, directors and agents (each, an “Indemnified Party”) against any claims arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company, by or on behalf of such Investor, expressly for use in connection with the preparation of the Registration Statement or the amendment or supplement thereto, subject to such limitations and conditions as are applicable to the indemnification provided by the Company to this Section 

6. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

(b)

Promptly after receipt by an Indemnified Party under this Section 6 of notice of the commencement of any action (including any governmental action), such Indemnified   Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Party or the Indemnified Party, as the case may be.  In case any such action is brought against any Indemnified   Party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such Indemnified   Party of its election so to assume the defense thereof, the indemnifying party will not be liable to such Indemnified   Party under this Section 6 for any legal or other reasonable out-of-pocket expenses subsequently incurred by such Indemnified   Party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion.  The Indemnified   Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and reasonable out-of-pocket expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the Indemnified   Party provided such counsel is of the opinion that all defenses available to the Indemnified Party can be maintained without prejudicing the rights of the indemnifying party. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified   Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.  The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable.

7.

Contribution.  To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that (a) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6; (b) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of such fraudulent misrepresentation; and (c) except where the seller has committed fraud (other than a fraud by reason of the information included or omitted from the Registration Statement as to which the Company has not given notice as contemplated under Section 3 hereof) or intentional misconduct, contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.

8.      Reports under Securities Act and Exchange Act.  With a view to making available to Investor the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit Investor to sell securities of the Company to the public without Registration (“Rule 144”), the Company agrees to:

(a)

make and keep public information available, as those terms are understood and defined in Rule 144;

(b)

file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(c)

furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) if not available on the SEC’s EDGAR system, a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without Registration; and

(d)

at the request of any Investor holding Registrable Securities (a “Holder”), give its Transfer Agent instructions to the effect that, upon the Transfer Agent’s receipt from such Holder of

(i) a certificate (a “Rule 144 Certificate”) certifying (A) that the Holder’s holding period (as determined in accordance with the provisions of Rule 144) for the shares of Registrable Securities which the Holder proposes to sell (the “Securities Being Sold”) is not less than (1) year and (B) as to such other matters as may be appropriate in accordance with Rule 144 under the Securities Act, and 

(ii) an opinion of counsel acceptable to the Company (for which purposes it is agreed that the initial Investor’s Counsel shall be deemed acceptable if not given by Lowenstein Sandler PC) that, based on the Rule 144 Certificate, Securities Being Sold may be sold pursuant to the provisions of Rule 144, even in the absence of an effective Registration Statement, 

the Transfer Agent is to effect the transfer of the Securities Being Sold and issue to the buyer(s) or transferee(s) thereof one or more stock certificates representing the transferred Securities Being Sold without any restrictive legend and without recording any restrictions on the transferability of such shares on the Transfer Agent’s  books and records (except to the extent any such legend or restriction results from facts other than the identity of the Holder, as the seller or transferor thereof, or the status, including any relevant legends or restrictions, of the shares of the Securities Being Sold while held by the Holder). If the Transfer Agent reasonably requires any additional documentation at the time of the transfer, the Company shall deliver or cause to be delivered all such reasonable additional documentation as may be necessary to effectuate the issuance of an unlegended certificate. 

9.

Assignment of the Registration Rights.  The rights to have the Company register Registrable Securities pursuant to this Agreement shall be automatically assigned by the Investors to any transferee of the Registrable Securities (or all or any portion of any unconverted Debentures) only if the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee and (b) the securities with respect to which such registration rights are being transferred or assigned. 

10.

Amendment of Registration Rights.  Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investors who hold a eighty (80%) percent interest of the Registrable Securities (as calculated by the stated value of the Debentures).  Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company.

11.

Miscellaneous.

(a)

A person or entity is deemed to be a holder of Registrable Securities whenever such person or entity owns of record such Registrable Securities.  If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.

(b)

Notices required or permitted to be given hereunder shall be given in the manner contemplated by the Securities Purchase Agreement, (i) if to the Company or to the Initial Investor, to their respective address contemplated by the Securities Purchase Agreement, and (ii) if to any other Investor, at such address as such Investor shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 11(b).

(c)

Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(d)

This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws.  Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of New York or the state courts of the State of New York sitting in the City of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of any such proceeding in such jurisdictions.

(e)

The Company and the Investor hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect of any matter arising out of or in connection with this Agreement or any of the other Transaction Agreements.

 

(f)

If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.

(g)

Subject to the requirements of Section 9 hereof, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

(h)

All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

(i)

The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning thereof.

(j)

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.  This Agreement, once executed by a party, may be delivered to the other party hereto by telephone line facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

(k)

The Company acknowledges that any failure by the Company to perform its obligations under Section 3(a) hereof, or any delay in such performance could result in loss to the Investors, and the Company agrees that, in addition to any other liability the Company may have by reason of such failure or delay, the Company shall be liable for all direct damages caused by any such failure or delay, unless the same is the result of force majeure.  Neither party shall be liable for consequential damages.

(l)      This Agreement (including to the extent relevant the provisions of other Transaction Agreements) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

COMPANY:

VALIDIAN CORPORATION

By:  /s/ Andre Maisonneuve 

Name: Andre Maisonneuve

Title: President

INITIAL INVESTOR:

                                                                      

             [Print Name of Initial Investor]

By:                                                                    

Name:                                                               

Title:                                                              

Index of Signatories

Name

         $ Debentures

Warrants

Alpha Capital

150,000

105,000

Michael D. Madden

100,000

 

110,000

Thomas A. & Marilynn Slamecka

100,000

  

  70,000

Scott Christie Keogh

100,000

 

110,000

Professional Traders Fund, LLC

100,000

  70,000

WEC Partners, LLC

 

  50,000

 

  35,000

Zenny Trading

100,000

  

  70,000

Parker Consultants Ltd.

350,000

245,000

David Stefansky

  

  70,000

  

178,510

Richard Rosenblum 

  

  30,000

  

150,510

Bonnie Quinn

    

  50,000

  

  55,000

Bradley J. Goldstone 

  

  25,000

 

  27,500

The London Family Trust

300,000

210,000

Robert Prag

100,000

 

230,000

Daniel B. Steinberg

100,000

110,000

Andrew W. & Karen M. Watling

  25,000

  27,500

Marc Weisman

100,000

110,000

Brian Wildes

100,000

  

110,000

PEF Advisors, LTD

  

  50,000

  55,000

Total

          

          2,000,000

          2,079,020Filed by Automated Filing Services Inc. (604) 609-0244 - EYI Industries, Inc. - Exhibit 10.1

 EYI INDUSTRIES, INC.  

 STOCK COMPENSATION PROGRAM 

                 Purpose.
  This Stock Compensation Program (this “Program”) is established by
  EYI Industries, Inc. (the “Company”). The purposes of this Program
  are (a) to ensure the retention of the services of existing executive personnel,
  key employees, and directors of the Company or its affiliates; (b) to attract
  and retain competent new executive personnel, key employees, and directors;
  (c) to provide incentive to all such personnel, employees and directors to devote
  their utmost effort and skill to the advancement and betterment of the Company,
  by permitting them to participate in the ownership of the Company and thereby
  in the success and increased value of the Company; and (d) to allow vendors,
  service providers, consultants, business associates, strategic partners, and
  others, with or that the Board of Directors anticipates will have an important
  business relationship with the Company or its affiliates, the opportunity to
  participate in the ownership of the Company and thereby to have an interest
  in the success and increased value of the Company. 

                 Elements
  of the Program. In order to maintain flexibility in the award of stock
  benefits, the Program constitutes a single “omnibus” plan, but is
  composed of three parts. The first part is the Qualified Incentive Stock Option
  Plan (the “ISO Plan”) (see Exhibit A below) which provides grants
  of qualified incentive stock options (“ISOs”). The second part is
  the Nonqualified Stock Option Plan (“NQSO Plan”) (see Exhibit B below)
  which provides grants of nonqualified stock options (“NQSOs”). The
  third part is the Restricted Shares Plan (“Restricted Shares Plan”)
  (see Exhibit C below) which provides grants of restricted shares of Company
  common stock (“Restricted Shares”). The ISO Plan, the NQSO Plan and
  the Restricted Shares Plan respectively comprise Plan I, Plan II and Plan III
  of the Program. (The grant of ISOs, NQSOs, and Restricted Shares shall herein
  be referred to as “Awards.”) 

                 Applicability
  of General Provisions. Unless any Plan specifically indicates to the
  contrary, all Plans shall be subject to the General Provisions of the Stock
  Compensation Program set forth below, and references to the Program could also
  mean reference to the Plans. 

GENERAL PROVISIONS OF THE STOCK COMPENSATION PROGRAM

                 Article
  1.                
  Administration. The Program shall be administered by a committee (“Committee”)
  consisting of not less than one director of the Company as designated by the
  Board of Directors of the Company (“Board”). The Board may from time
  to time remove members from the Committee, fill all vacancies in the Committee,
  however caused, and may select one of the members of the Committee as its Chairman.
  Any action of the Committee shall be taken by a majority vote or the unanimous
  written consent of the Committee members. The Committee shall hold meetings
  at such times and places as it may determine, shall keep minutes of its meetings,
  and shall adopt, amend, and revoke such rules and procedures as it may deem

 appropriate with respect to the Program. In the event that
  the Board has not appointed a committee than the entire Board of directors will
  act as the committee. 

                 Notwithstanding
  any other provision of the Program (and without limiting the Committee’s
  authority), in connection with any action concerning grants of Awards to or
  transactions by “Insiders,” the Committee may adopt such procedures
  as its deems necessary or desirable to assure the availability of exemptions
  from Section 16 of the Securities Exchange Act of 1934 afforded by Rule 16b-3
  thereunder or any successor rule. Without limiting the foregoing, in connection
  with approval of any transaction by an “Insider” involving a grant,
  award or other acquisition from the Company, or involving the disposition to
  the Company of the Company’s equity securities, the Committee may delegate
  its approval authority to a subcommittee thereof comprised of two or more “Non-Employee
  Directors” (as defined in Rule 16b-3), or take action by the affirmative
  vote of two or more Non-Employee Directors (with all other members of the Committee
  abstaining or recusing themselves from participating in the matter), or refer
  the matter to the full Board of Directors for action. For this purpose, and
  “Insider” shall mean an individual who is, on the relevant date, a
  specifically identified officer, director, or 10% beneficial owner of the Company,
  as defined under Section 16 of the Securities Exchange Act of 1934. 

                 Article
  2.                
  Authority of Committee. Subject to the other provisions of this Program,
  and with a view to effecting its purpose, the Committee shall have the sole
  authority, in its absolute discretion: (a) to construe and interpret the Program;
  (b) to define the terms used herein; (c) to determine, to the extent not provided
  by the Program or the relevant Plan, the terms and conditions of Options and
  Restricted Shares granted pursuant to the terms of the Program; and (d) to make
  all other determinations necessary or advisable for the administration of the
  Program and to do all things necessary or desirable for the administration of
  the Program. All decisions, determinations, and interpretations made by the
  Committee shall be binding and conclusive on all affected individuals having
  an interest in the Program and on their legal representatives, heirs and beneficiaries.

                 Article
  3.                 Maximum
  Number of Shares Subject to the Program. Subject to adjustment from time
  to time as provided in Article 6, the number of shares of common stock available
  for issuance under the Program shall be Twenty Five Million (25,000,000) authorized
  and unissued shares of common stock of the Company, $0.001 par value (the “Common
  Stock”). 

                 The
  shares of Common Stock to be issued upon exercise of an Option or issued as
  Restricted Shares may be authorized but unissued shares or shares reacquired
  by the Company. If any of the Options granted under the Program expire or terminate
  for any reason before they have been exercised in full, the unpurchased shares
  subject to those expired or terminated Options shall cease to reduce the number
  of shares available for purposes of the Program. If the conditions associated
  with the grant of Restricted Shares are not achieved within the period specified
  for satisfaction of the applicable conditions, or if the Restricted Shares grant
  terminates for any reason before the date on which the conditions must be satisfied,
  the shares of Common Stock associated with such Restricted Shares shall cease
  to reduce the number of shares available for purposes of the Program. 

                 The
  proceeds received by the Company from the sale of its Common Stock pursuant
  to the exercise of Options or transfer of Restricted Shares under the Program,
  if in the form of cash, shall be added to the Company’s general funds and
  used for general corporate purposes. 

                 Article
  4.                 Eligibility
  and Participation. Officers, employees, directors (whether employee directors
  or nonemployee directors), and independent contractors or agents of the Company
  or its subsidiaries (“Subsidiaries”) who are responsible for or contribute
  to the management, growth, or profitability of the business of the Company or
  its Subsidiaries shall be eligible to participate in the Program to the extent
  designated by the Committee in its sole and complete discretion (“Participants”).
  However, ISOs may be granted under the ISO Plan only to a person who is an employee
  of the Company or its Subsidiaries. The grant of ISOs and NQSOs to a Participant
  shall be the grant of separate options and each ISO and each NQSO shall be specifically
  designated as such in accordance with applicable provisions of the Treasury
  regulations. A person may be granted multiple Awards under the Program. 

                 For
  purposes of this Program, the term “Subsidiary” shall mean any corporation
  (other than the Company) in an unbroken chain of corporations beginning with
  the Company, if each of the corporations other than the last corporation in
  the unbroken chain owns stock possessing 50% or more of the total combined voting
  power of all classes of stock in one of the other corporations in such chain.
  A corporation that attains the status of a Subsidiary on a date after the adoption
  of the Program shall be considered a Subsidiary commencing as of such date.

                 Article
  5.                
  Effective Date and Term of Program. The Program shall become effective
  upon its adoption by the Board of Directors of the Company. The Program shall
  continue in effect for a term of 10 years unless sooner terminated under Article
  7 of these General Provisions. 

                 Article
  6.                
  Adjustments. If the then outstanding shares of Common Stock are increased,
  decreased, changed or exchanged for a different number or kind or shares or
  securities through merger, consolidation, combination, exchange of shares, other
  reorganization, recapitalization, reclassification, stock dividend, stock split
  or reverse stock split, then an appropriate and proportionate adjustment shall
  be made in the maximum number and kind of shares or securities as to which Options
  and Restricted Shares may be granted under this Program. A corresponding adjustment
  changing the number and kind of shares or securities allocated to unexercised
  Options, Restricted Shares, or portions thereof, which shall have been granted
  prior to any such change, shall likewise be made. Any such adjustment in outstanding
  Options shall be made without change in the aggregate purchase price applicable
  to the unexercised portion of the Option, but with a corresponding adjustment
  in the price for each share or other unit of any security covered by the Option.

                 Article
  7.                
  Termination and Amendment of the Program. The Program shall terminate
  at the end of the term of the Program as described in Article 5. No Options
  or Restricted Shares shall be granted under the Program after the effective
  date of such termination. 

                 Further,
  subject to the limitation contained in Article 8 of these General Provisions,
  the Board of Directors may, at any time and without approval of the Company’s
  stockholders, terminate or suspend the Program or amend or revise its terms,
  including the form and substance of the Option and Restricted Share agreements
  used for the administration of the Program. 

                 Article
  8.                
  Prior Rights and Obligations. No termination, suspension, or amendment
  of the Program shall, without the consent of the Participant who has received
  an Option or Restricted Share, alter or impair any of that person’s rights
  or obligations under the Option or Restricted Shared granted under the Program
  prior to that termination, suspension, or amendment without the written consent
  of the Participant. 

                                 The
  Committee may modify, extend, or renew outstanding Options or Restricted Shares
  and authorize the grant of new Options or Restricted Shares in substitution
  therefore, provided that any action may not, without the written consent of
  a Participant, impair any of such Participant’s rights under any Option
  or Restricted Share. Any outstanding ISO that is modified, extended, renewed,
  or otherwise altered will be treated in accordance with Section 424(h) of the
  Internal Revenue Code of 1986, as amended (the “Code”). 

                 Article
  9.                
  Privileges of Stock Ownership. Notwithstanding the exercise of any Option
  granted pursuant to the terms of this Program or the achievement of any conditions
  specified in any Restricted Share granted pursuant to the terms of this Program,
  no Participant shall have any of the rights or privileges of a stockholder of
  the company with respect to any shares of Common Stock issuable upon the exercise
  of his or her Option or the satisfaction of his or her Restricted Share conditions
  until certificates representing the shares have been issued and delivered. No
  shares shall be required to be issued and delivered upon exercise of any Option
  or satisfaction of any conditions with respect to a Restricted Share unless
  and until all of the requirements of law and of all regulatory agencies having
  jurisdiction over the issuance and delivery of the securities shall have been
  fully complied with. 

                 Article
  10.                
  Reservation of Shares of Common Stock. The Company, during the term of
  this Program, shall at all times reserve and keep available such number of shares
  of its Common Stock as shall be sufficient to satisfy the requirements of the
  Program. In addition, the Company shall from time to time, as is necessary to
  accomplish the purposes of this Program, seek or obtain from any regulatory
  agency having jurisdiction any requisite authority in order to issue and sell
  shares of Common Stock hereunder. The inability of the Company to obtain from
  any regulatory agency the authority deemed by the Company’s counsel to
  be necessary to the lawful issuance and sale of any Common Stock hereunder shall
  relieve the Company of any liability in respect of the failure to issue or sell
  the stock for which the requisite authority was not obtained. 

                 Article
  11.                
  Tax Withholding. The exercise of any Option or delivery of any Restricted
  Share granted under this Program is subject to the condition that if at any
  time the Company shall determine, in its discretion, that the satisfaction of
  withholding tax or other withholding liabilities under any state or federal
  law is necessary or desirable as a condition to, or in connection with, such
  exercise or the delivery or purchase of shares, then in such event, the 

 exercise of the Option or Restricted Share shall not be effective
  unless such withholding shall have been effected or obtained in a manner acceptable
  to the Company. 

                 Article
  12.                
  Compliance with Securities Laws. Shares of Common Stock shall not be
  issued with respected to any Option or Restricted Share under the Program unless
  the issuance and delivery of those shares shall comply will all relevant provisions
  of state and federal law including, without limitation, the Securities Act of
  1933, as amended, the rules and regulations promulgated thereunder, and the
  requirements of any stock exchange upon which the shares may then be listed,
  and shall be further subject to the approval of counsel for the Company with
  respect to such compliance. The Committee may also require an individual to
  furnish evidence satisfactory to the Company, including a written and signed
  representation letter and consent to be bound by any transfer restriction imposed
  by law, legend, condition, or otherwise, that the shares are being purchased
  only for investment and without any present intention to sell or distribute
  the shares in violation of any state or federal law, rule or regulation. Further,
  an individual shall consent to the imposition of a legend on the shares of Common
  Stock relating to his or her Option or Restricted Share restricting their transferability
  as required by law or by this Article 12. 

                 Notwithstanding
  any other provision set forth in the Program, if required by the then current
  Section 16 of the Securities Exchange Act of 1934, any “derivative security”
  or “equity security” offered pursuant to the Program to any Insider
  may not be sold or transferred for at least six months after the date of grant
  of such Award. The terms “equity security” and “derivative security”
  shall have the meaning s ascribed to them in the then current Rule 16(a) under
  the Securities Exchange Act of 1934. 

                 Article
  13.                
  Corporate Transactions. In the event of (a) a dissolution or liquidation
  of the Company, (b) merger or consolidation in which the Company is not the
  surviving corporation (other than a merger or consolidation with a wholly-owned
  subsidiary, a reincorporation of the Company in a different jurisdiction, or
  other transaction in which there is no substantial change in the stockholders
  of the company or their relative stock holdings and the Awards granted under
  this Plan are assumed, converted, or replaced by the successor corporation,
  which assumption is binding on all Participants), (c) merger in which the Company
  is the surviving corporation but after which the stockholders of the Company
  immediately prior to such merger (other than any stockholder that merges, or
  which owns or controls another corporation that merges with the Company in such
  merger) cease to own their shares or other equity interest in the Company, (d)
  the sale of substantially all of the assets of the Company, or (e) the acquisition,
  sale, or transfer of more than 50% of the outstanding shares of the Company
  by tender offer or similar transaction, then any or all outstanding Awards may
  be assumed, converted or replaced by the successor corporation (if any), which
  assumption, conversion, or replacement shall be binding on all Participants.
  In the alternative, the successor corporation may substitute equivalent Awards
  or provide substantially similar consideration to Participants as was provided
  to stockholders (after taking into account the existing provisions of the Awards).
  The successor corporation may also issue, in place of outstanding shares of
  the Company held by the Participant, substantially similar shares or other property
  subject to repurchase restrictions no less favorable to the Participant. 

                 In
  the event such successor corporation (if any) refuses to assume or substitute
  Awards as provided above pursuant to a transaction described in this Article
  13, such Awards shall expire on such transaction at such time and on such conditions
  as the Committee may determine at its sole and complete discretion. In any case,
  notwithstanding anything in this Program to the contrary, the Committee may,
  in its sole and complete discretion, provide that the vesting (that is, full
  exercisability in the case of Options, and full nonforfeitability and elimination
  of all condition to full ownership in the case of Restricted Shares) shall accelerate
  into full vesting upon a transaction described in this Article 13. If the Committee
  exercises such discretion with respect to an Award, such full vesting shall
  occur prior to the consummation of such event at such time and on such conditions
  as the Committee determines. 

                 Without
  limiting the foregoing, if the Company or any Subsidiary is a party to a merger,
  consolidation, reorganization, share exchange, acquisition of stock or assets,
  or similar transaction, the Committee may grant Awards hereunder in connection
  with the assumption, substitution, or conversion by the Company or its subsidiaries
  of similar stock compensation awards that have been issued by another party
  to such transaction, and the Board may amend the Plan, or adopt supplements
  to the Plan, in such manner as it deems appropriate to provide for such assumption,
  substitution, or conversion, all without further action by the Company’s
  shareholders. 

                 Article
  14.                
  Governing Law. The provisions of this Program and the Awards hereunder
  shall be governed by and interpreted in accordance with the laws of the State
  of Nevada, United States of America, without regard to any applicable conflicts
  of law and without regard to the fact that any party is or may become a resident
  of a different state or county. 

PLAN I 

 EYI INDUSRTRIES, INC. 

 INCENTIVE STOCK OPTION PLAN 

                 Section
  1.                
  Purpose. The purpose of this EYI Industries, Inc. Incentive Stock Option
  Plan (“Plan”) is to provide for the grant of options which shall qualify
  as qualified “incentive stock options” within the meaning of Section
  422 of the Internal Revenue Code of 1986, as amended (“Code”). This
  Plan is Part I of the Company’s Stock Compensation Program (“Program”).
  Unless any provision herein indicates to the contrary, this Plan shall be subject
  to the General Provisions of the Program. 

                 Section
  2.                
  Option Terms and Conditions. Each ISO shall be evidenced by an ISO agreement
  between the grantee (“Optionee”) and the Company. The terms and conditions
  of ISOs granted under the Plan shall be determined by the Committee in its sole
  and complete discretion. Each ISO shall be subject to all applicable terms and
  conditions of the Plan and may be subject to other terms and conditions which
  are not inconsistent with the Plan. The terms and conditions may differ as between
  ISOs. 

                 Section
  3.                
  Duration of Options. Each ISO shall expire on the date determined by
  the Committee, but in no event shall any ISO granted under the Plan expire later
  than 10 years from the date on which the ISO is granted. However, notwithstanding
  the above portion of this Section 3, if at the time the ISO is granted the Optionee
  owns or would be considered to own by reason of Code Section 424(d) more than
  10% of the total combined voting power of all classes of stock of the Company
  or its subsidiaries, such ISO shall expire not more than 5 years from the date
  the ISO is granted. In addition, each ISO shall be subject to earlier termination
  as provided in the Plan. The date of grant of an ISO shall be the date on which
  the Committee makes the determination to grant such ISO, unless otherwise specified
  by the Committee. 

                 Section
  4.                
  Exercise Price. The exercise price (“Exercise Price”) for shares
  of Common Stock subject to any ISO, shall not be less than the fair market value
  of the shares at the time of the grant of the ISO. Fair market value (“Fair
  Market Value”) shall be determined by the Committee on the basis of such
  factors as it deems appropriate, including a determination of Fair Market Value
  based on an independent appraisal by a person who customarily makes such appraisals.
  When Common Stock is publicly traded but not listed on an established stock
  exchange, Fair Market Value shall mean the mean between the closing dealer “bid”
  and “ask” prices for the shares as quoted on the OTCBB or such other
  exchange on which the Company’s shares are approved for trading on the
  date of the determination, and if no “bid” and “ask” prices
  are quoted for such date, Fair Market Value shall be determined by reference
  to such prices on the next preceding date on which such prices were quoted.
  When Common Stock is publicly traded and listed on an established stock exchange
  (or exchanges), Fair Market Value shall mean the highest closing price of a
  share on such stock exchange (or exchanges), and if no sale of 

 shares has been made on any stock exchange on that day, Fair
  Market Value shall be determined by reference to such price for the next preceding
  day on which a sale has occurred. 

                 Notwithstanding
  the above portion of this Section 4, if at the time an ISO is granted the Optionee
  owns or would be considered to own by reason of Code Section 424(d) more than
  10% of the total combined voting power of all classes of stock of the Company
  or its subsidiaries, the Exercise Price of the shares covered by such ISO shall
  not be less than 110% of the Fair Market Value shares of Common Stock on the
  date the ISO is granted. 

                 Section
  5.                
  Maximum Amount of Options Exercisable in Any Calendar Year. Notwithstanding
  any other provision of this Plan the aggregate Fair Market Value (determined
  at the time any is granted) of the Common Stock with respect to which ISOs become
  exercisable for the first time by any employee during any calendar year under
  all qualified incentive stock option plans of the Company and its subsidiaries
  shall not exceed $100,000. If the Fair Market Value of the Common Stock with
  respect to which ISOs become exercisable for the first time by any employee
  during any calendar year exceeds $100,000, then the Options for the First $100,000
  worth of shares shall be deemed to be ISOs, and the Options for the amount in
  excess shall be deemed to be NQSOs. In the event that the Code or underlying
  regulations provide for a different limitation on the Fair Market Value permitted
  to be subject to ISO treatment, such different limitation shall automatically
  be incorporated and applied herein. 

                 Section
  6.                
  Exercise of Options. An ISO shall be exercisable at the times or upon
  the events determined by the Committee as set forth in the ISO agreement governing
  such ISO. Each ISO shall be exercisable in one or more installments during its
  term, and the right to exercise may be cumulative as determined by the Committee.
  No ISO may be exercised for a fraction of a share of Common Stock. The person
  exercising an ISO may do so only by written notice of exercise delivered to
  the Committee, in such form as the Committee prescribes or approves from time
  to time, specifying the number of shares to be purchased and accompanied by
  a tender of the Exercise Price for those shares. The Exercise Price of any shares
  purchased shall be paid in full in cash or by certified or cashier’s check
  payable to the order of the Company, or by shares of Common Stock if permitted
  by the Committee, or by a combination of these means, at the time of exercise
  of the ISO. 

                 If
  any portion of the Exercise Price is paid in shares of Common Stock, those shares
  shall be tendered at their then Fair Market Value as determined by the Committee
  in accordance with Section 4 of this Plan. As permitted by the Committee, payment
  in shares of Common Stock shall include the automatic application of shares
  of Common Stock received upon exercise of an ISO to satisfy the Exercise Price
  for the ISO or additional ISOs. 

                 If
  any portion of the Exercise Price is paid with a full-recourse promissory note,
  the Company Stock shall be pledged as security for the payment of the principal
  amount of the promissory note and interest thereon. The interest rate payable
  under the terms of the promissory note shall not be less than the minimum rate
  required to avoid the imputation of additional interest under the Code. Subject
  to the foregoing, the Committee at its sole discretion shall specify the term,
  interest rate, amortization requirements and other provisions of such note.

                 Section
  7.                
  Employment of Optionee. Each Optionee, if requested by the Committee,
  must agree in writing as a condition of receiving his or her ISO, that he or
  she will remain in the employment of the Company or any Subsidiary following
  the date of the granting of that option for a period specified by the Committee.
  Nothing in the Plan nor in any ISO granted hereunder shall confer upon any Optionee
  any right to continued employment by the Company or any Subsidiary or limit
  in any way the right of the Company or any Subsidiary at any time to terminate
  or alter the terms of that employment. 

                 Section
  8.                
  Option Rights Upon Termination of Employment. If an Optionee ceases to
  be employed by the Company or any Subsidiary for any reason other than death
  or disability, his or her ISO shall immediately terminate, provided, however,
  that the Committee may, in its discretion, allow the ISO to be exercised, to
  the extent exercisable on the date of termination of employment, at any time
  within three months after the date of termination of employment, unless either
  the Option or the Plan otherwise provides for earlier termination. 

                 Section
  9.                
  Option Rights Upon Disability. If an Optionee becomes disabled within
  the meaning of Code Section 22(e)(3) while employed by the Company or any Subsidiary,
  his or her ISO shall immediately terminate, provided, however, that the Committee
  may, in its discretion, allow the ISO to be exercised, to the extent exercisable
  on the date of termination of employment due to disability, at any time within
  one year after the date of termination of employment due to disability, unless
  either the ISO or the Plan otherwise provides for earlier termination. 

                 Section
  10.                
  Option Rights Upon Death of Optionee. Except as otherwise limited by
  the Committee at the time of the grant of an ISO, if an Optionee dies while
  employed by the Company or any Subsidiary, his or her ISO shall expire one year
  after the date of death unless by its terms it expires sooner. During this one
  year or shorter period, the ISO may be exercised, to the extent that it remains
  unexercised on the date of death, by the person or persons to whom the Optionee’s
  rights under the ISO shall pass by will or by the laws of descent and distribution.

                 Section
  11.                
  Options Not Transferable. ISOs granted pursuant to the terms of the Plan
  may not be sold, pledged, assigned, or transferred in any manner otherwise than
  by will or the laws of descent or distribution and shall not be subject to execution,
  attachment, or similar process. However, at the Optionee’s election, the
  ISO may be transferred to and held by a grantor trust of which the Optionee
  is both a trustee and beneficiary, in which case such ISO shall continue to
  be subject to all restrictions set forth in the Program and the Plan. ISOs may
  be exercised during the lifetime of an Optionee only by (a) the Optionee, (b)
  at the Optionee’s election, by a grantor trust of which the Optionee is
  both a trustee and beneficiary, (c) on behalf of the Optionee, by a person holding
  the Optionee’s power of attorney for that purpose, or (d) the duly appointed
  guardian of the person and property of an Optionee who is disabled within the
  meaning of Code Section 22(e)(3). 

                 Section
  12.                
  Option Shares May Be Restricted. As the Committee may determine, the
  shares of Common Stock purchased upon exercise of an ISO granted hereunder may
  be deemed to be “Restricted Shares” granted under the Restricted Shares
  Plan for purposes of applying all 

 provisions and terms and conditions of the Restricted Share
  Plan. As such, during the “Restriction Period” (as described in the
  Restricted Share Plan), such shares of Common Stock may be subject to redemption
  and nontransferability, and all restrictions shall lapse upon the occurrence
  of events as may be determined by the Committee. Further, the procedures of
  the Restricted Share Plan relating to the issuance, surrender, and assignment
  of shares and the provisions relating to stockholder rights may apply to the
  shares of Common Stock issued upon exercise of any ISO granted hereunder. 

PLAN II 

 EYI INDUSTRIES, INC. 

 NONQUALIFIED STOCK OPTION PLAN 

                 Section
  1.                
  Purpose. The purpose of this EYI Industries, Inc. Nonqualified Stock
  Option Plan (“Plan”) is to provide for the grant of options which
  shall not constitute qualified “incentive stock options” within the
  meaning of Section 422 of the Internal Revenue Code of 1986, as amended (“Code”).
  This Plan is Part II of the Company’s Stock Compensation Program (“Program”).
  Unless any provision herein indicates to the contrary, this Plan shall be subject
  to the General Provisions of the Program. 

                 Section
  2.                
  Option Terms and Conditions. Each NQSO shall be evidenced by a NQSO agreement
  between the grantee (“Optionee”) and the Company. The terms and conditions
  of NQSOs granted under the Plan shall be determined by the Committee in its
  sole and complete discretion. Each NQSO shall be subject to all applicable terms
  and conditions of the Plan and may be subject to other terms and conditions
  which are not inconsistent with the Plan. The terms and conditions may differ
  as between NQSOs. 

                 Section
  3.                
  Duration of Options. Each NQSO shall expire on the date as determined
  by the Committee. In addition, each NQSO shall be subject to earlier termination
  as otherwise provided under the Plan. The date of grant of a NQSO shall be the
  date on which the Committee makes the determination to grant such NQSO, unless
  otherwise specified by the Committee. 

                 Section
  4.                
  Exercise Price. The exercise price (“Exercise Price”) for shares
  of Common Stock subject to any NQSO shall be determined by the Committee in
  its sole and complete discretion. To the extent that the Exercise Price is designated
  with respect to fair market value (“Fair Market Value”) of the shares
  at the time of the grant of the NQSO, then Fair Market Value shall be determined
  by the Committee on the basis of such factors as they deem appropriate, including
  a determination of Fair Market Value based on an independent appraisal by a
  person who customarily makes such appraisals. However, the Fair Market Value
  on any day shall be deemed to be, if the Common Stock is traded on a national
  securities exchange, the closing price (or, if no reported sale takes place
  on such day, the mean of the reported bid and asked prices) of the Common Stock
  on such day on the principal such exchange. In each case, the Committee’s
  determination of Fair Market Value shall be conclusive. 

                 Section
  5.                
  Exercise of Options. A NQSO shall be exercisable at the times or upon
  the events determined by the Committee as set forth in the NQSO agreement governing
  the NQSO. Each NQSO shall be exercisable in one or more installments during
  its term, and the right to exercise may be cumulative as determined by the Committee.
  No NQSO may be exercised for a fraction of a share of Common Stock. The person
  exercising a NQSO may do only by written notice of exercise delivered to the
  Committee, in such form as the Committee prescribes or approves from time to
  time, specifying the number of shares to be purchased and 

 accompanied by a tender of the Exercise Price for those shares.
  The Exercise Price of any shares purchased shall be paid in full in cash or
  by certified or cashier’s check payable to the order of the Company, or
  by shares of Common Stock, if permitted by the Committee, or by a full recourse
  promissory note if permitted by the Committee, or by a combination these means,
  at the time of exercise of the NQSO. 

                If
  any portion of the Exercise Price is paid in shares of Common Stock, those shares
  shall be tendered at their then Fair Market Value as determined by the Committee
  in accordance with Section 4 of this Plan. As permitted by the Committee, payment
  in shares of Common Stock shall include the automatic application of shares
  of Common Stock received upon exercise of an NQSO to satisfy the Exercise Price
  for the NQSO or additional NQSOs. 

                 Section
  6.                
  Continued Employment or Service. Each Optionee, if requested by the Committee,
  must agree in writing as a condition of the granting of his or her NQSO, to
  remain in the employment of, or service to, the Company or any Subsidiary following
  the date of the granting of that option for a period specified by the Committee.
  Nothing in this Plan nor in any NQSO granted hereunder shall confer upon any
  Optionee any right to continued employment by, or service to, the Company or
  any Subsidiary, or limit in any way the right of the Company or any subsidiary
  at any time to terminate or alter the terms of that employment or service arrangement.

                 Section
  7.                
  Option Rights Upon Termination of Employment or Service. If an Optionee
  under this Plan ceases to be employed by, or provide services to, the Company
  or any Subsidiary for any reason other than death or disability, his or her
  option shall immediately terminate, provided, however, that the Committee may,
  in its discretion, allow the NQSO to be exercised, to the extent exercisable
  on the date of termination of employment or service, at any time within three
  months after the date of termination of employment or service, unless either
  the NQSO or this Plan otherwise provides for earlier termination. 

                 Section
  8.                
  Option Rights Upon Disability. If an Optionee becomes disabled within
  the meaning of Code Section 22(e)(3) while employed by, or providing services
  to, the Company or any Subsidiary, his or her NQSO shall immediately terminate,
  provided, however, that the Committee may, in its discretion, allow the NQSO
  to be exercised, to the extent exercisable on the date of termination of employment
  or service due to disability, at any time within one year after the date of
  termination of employment or service due to disability, unless either the NQSO
  or the Plan otherwise provides for earlier termination. 

                 Section
  9.                
  Option Rights Upon Death of Optionee. Except as otherwise limited by
  the Committee at the time of the grant of a NQSO, if an Optionee dies while
  employed by, or providing services to, the Company or any Subsidiary, his or
  her NQSO shall expire one year after the date of death unless by its terms it
  expires sooner. During this one year or shorter period, the NQSO may be exercised,
  to the extent exercisable on the date of death, by the person or persons to
  whom the Optionee’s rights under the NQSO shall pass by will or by the
  laws of descent and distribution. 

                 Section
  10.               
  Options Not Transferable. NQSOs granted pursuant to the terms of this
  Plan may not be sold, pledged, assigned, or transferred in any manner otherwise
  than by will or the laws of descent or distribution and shall not be subject
  to execution, attachment, or similar process. However, at the Optionee’s
  election, the NQSO may be transferred to and held by a grantor trust of which
  the Optionee is both a trustee and beneficiary, in which case such NQSO shall
  continue to be subject to all restrictions set forth in the Program and this
  Plan. NQSOs may be exercised during the lifetime of an Optionee only by (a)
  the Optionee, (b) at the Optionee’s election, by a grantor trust of which
  the Optionee is both a trustee and beneficiary, (c) on behalf of the Optionee,
  by a person holding the Optionee’s power of attorney for that purpose,
  or (d) the duly appointed guardian of the person and property of an Optionee
  who is disabled within the meaning of Code Section 22(e)(3). 

                 Section
  11.               
  Option Shares May Be Restricted. As the Committee may determine, the
  shares of Common Stock purchased upon exercise of an NQSO granted hereunder
  may be deemed to be “Restricted Shares” granted under the Restricted
  Shares Plan for purposes of applying all provisions and terms and conditions
  of the Restricted Share Plan. As such, during the “Restriction Period”
  (as described in the Restricted Share Plan), such shares of Common Stock may
  be subject to redemption and nontransferability, and all restrictions shall
  lapse upon the occurrence of events as may be determined by the Committee. Further,
  the procedures of the Restricted Share Plan relating to the issuance, surrender,
  and assignment of shares and the provisions relating to stockholder rights may
  apply to the shares of Common Stock issued upon exercise of any NQSO granted
  hereunder. 

PLAN III 

 EYI INDUSTRIES, INC. 

 RESTRICTED SHARE PLAN 

                 Section
  1.                
  Purpose. The purpose of this EYI Industries, Inc. Restricted Share Plan
  (“Plan”) is to provide for the grant of restricted shares which are
  subject to restricted property treatment under Section 83 of the Internal Revenue
  Code of 1986, as amended (“Code”). The Plan is Part III of the Company’s
  Stock Compensation Program (“Program”). Unless any provision herein
  indicates to the contrary, the Plan shall be subject to the General Provisions
  of the Program. 

                 Section
  2.                
  Terms and Conditions. Each Restricted Share shall be evidenced by a Restricted
  Share agreement between the grantee (“Holder”) and the Company. The
  terms and conditions of Restricted Shares granted under the Plan shall be determined
  by the Committee in its sole and complete discretion. Each Restricted Share
  shall be subject to all applicable terms and conditions of the Plan and may
  be subject to other terms and conditions not inconsistent with the Plan. The
  terms and conditions may differ as between Restricted Shares. 

                Each
  Restricted Share grant shall provide to the Holder the transfer of a specified
  number of shares of Common Stock that shall become nonforfeitable upon the achievement
  of specified service or performance conditions within a specified period (“Restriction
  Period”) as determined by the Committee. (The Committee may also determine
  to grant shares without such restrictions.) At the time that the Restricted
  Share is granted, the Committee shall specify the service or performance conditions
  and the period of duration over which the conditions apply. The date of grant
  of a Restricted Share shall be the date on which the Committee makes the determination
  to grant the Restricted Share, unless otherwise specified by the Committee.

                Each
  individual who is awarded Restricted Shares shall be issued a stock certificate
  representing such shares. Such certificate shall be registered in the name of
  the Holder and shall bear an appropriate legend referring to the terms, conditions,
  and restrictions applicable to such award, substantially in the following form:

   THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF
    STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING
    FORFEITURE) OF THE EYI INDUSTRIES, INC. RESTRICTED SHARE PLAN AND RESTRICTED
    SHARE AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND EYI INDUSTRIES,
    INC. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE OFFICES OF EYI INDUSTRIES,
    INC. 

                The
  Committee shall require that the stock certificates evidencing such shares be
  held in the custody of the Company until the restrictions thereon shall have
  lapsed, and that, as a 

 condition of any Restricted Share award, the Holder shall
  have delivered a stock power, endorsed in blank, relating to the stock covered
  by such award. At the expiration of applicable Restriction Period, the Company
  shall deliver to the Holder certificates held by the Company representing the
  shares with respect to which the applicable conditions have been satisfied.

                 Section
  3.                
  Restricted Shares Not Transferable. During the Restriction Period, Restricted
  Shares shall not be sold, pledged, assigned, or transferred in any manner, and
  shall not be subject to execution, attachment, or similar process. However,
  at the Holder’s election, the Restricted Shares may be transferred to and
  held by a grantor trust of which the Holder is both a trustee and beneficiary,
  in which case the Restricted Shares shall continue to be subject to the nontransferability,
  forfeiture, and redemption limitations. 

                 Section
  4.                
  Restricted Share Rights Upon Termination of Employment or Service. If
  a Holder terminates employment or service with the Company prior to the expiration
  of the Restriction Period, any Restricted Shares granted to him or her subject
  to such Restriction Period shall be forfeited by the Holder and shall be transferred
  to the Company. The Committee may, in its sole and complete discretion, accelerate
  the lapsing of or waive such restrictions in whole or in part based upon such
  factors and such circumstances as the Committee may determine, including, but
  not limited to, the Participant’s retirement, death, or disability. 

 Restricted Shares that were purchased by exercise of an Option
  granted under the Incentive Stock Option Plan or the Nonqualified Stock Option
  Plan shall be subject to redemption during the Restriction Period. Specifically,
  if during the Restriction Period, the Holder of such Restricted Shares terminates
  employment or service with the Company or any Subsidiary for any reason as may
  be determined by the Committee, the Holder shall sell to the Company, and the
  Company shall redeem, the Restricted Shares at the price equal to the Exercise
  Price for which the Restricted Shares were purchased. The redemption price shall
  be paid to the Holder in a single payment for the complete redemption of the
  Restricted Shares. 

                 Section
  5.                
  Stockholder Rights. The Holder shall have, with respect to the Restricted
  Shares granted, all of the rights of a stockholder of the Company, including
  the right to vote the shares, and the right to receive any dividends thereon.
  Certificates for shares of unrestricted stock shall be delivered to the grantee
  promptly after, and only after, the Restriction Period shall expire without
  forfeiture of such Restricted Shares. 

                 Section
  6.                
  Continued Employment or Service. Each Holder, if requested by the Committee,
  must agree in writing as a condition of the granting of his or her Restricted
  Shares, to remain in the employment of, or service to, the Company or any Subsidiary
  following the date of the granting of the Restricted Shares for a period specified
  by the Committee. Nothing in this Plan or in any Restricted Share granted hereunder
  shall confer upon any Holder any right to continued employment by, or service
  to, the Company or any Subsidiary, or limit in any way the right of the Company
  or any subsidiary at any time to terminate or alter the terms of that employment
  or service arrangement. 

                 Section
  7.                
  Surrender of Stock Certificate and Assignment of Shares. Upon the occurrence
  of an event triggering the forfeiture or redemption of Restricted Shares, the
  Holder shall immediately take whatever action necessary to transfer the Restricted
  Shares to the Company, including the endorsement of any certificate representing
  the Restricted Shares. From and after occurrence of such an event, the Company
  shall not pay any dividends to the Holder with respect to the Restricted Shares,
  or permit the Holder to exercise any of the privileges or rights of a stockholder
  with respect to such shares, but shall treat the Company or its nominee as the
  owner of the shares. Any assignment of the Restricted Shares pursuant to this
  Section 7 shall be effective as of the date of the event triggering the forfeiture.

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