Document:

RANCHER
      ENERGY CORP.

    

    2006
      STOCK INCENTIVE PLAN

    

    This
      2006
      Stock Incentive Plan (the "Plan") is adopted in consideration for services
      rendered and to be rendered to Rancher Energy Corp.

    

    1. Definitions.

    

    The
      terms
      used in this Plan shall, unless otherwise indicated or required by the
      particular context, have the following meanings:

    

    Agreement:
      The
      written agreement (and any amendment or supplement thereto) between the Company
      and an Eligible Person designating the terms and conditions of an
      Award.

    

    Award:
      Any
      Option, Restricted Stock or Restricted Stock Unit, together with any other
      right
      or interest granted to a Participant pursuant to this Plan.

    

    Board:
      The
      Board of Directors of Rancher Energy Corp.

    

    Change
      in Control:
      (i) The
      acquisition, directly or indirectly, by any person or group (within the meaning
      of Section 13(d)(3) of the Securities Exchange Act of 1934) of the beneficial
      ownership of more than fifty percent of the outstanding securities of the
      Company, (ii) a merger or consolidation in which the Company is not the
      surviving entity, except for a transaction the principal purpose of which is
      to
      change the state in which the Company is incorporated, (iii) the sale, transfer
      or other disposition of all or substantially all of the assets of the Company,
      (iv) a complete liquidation or dissolution of the Company, or (v) any reverse
      merger in which the Company is the surviving entity but in which securities
      possessing more than fifty percent of the total combined voting power of the
      Company’s outstanding securities are transferred to a person or persons
      different from the persons holding those securities immediately prior to such
      merger.

    

    Code:
      The
      Internal Revenue Code of 1986, as amended, from time to time, including
      regulations thereunder and successor provisions and regulations
      thereto.

    

    Common
      Stock:
      The
      Common Stock of Rancher Energy Corp.

    

    Company:
      Rancher
      Energy Corp., a corporation incorporated under the laws of Nevada, and any
      successors in interest by merger, operation of law, assignment or purchase
      of
      all or substantially all of the property, assets or business of the
      Company.

    

    Continuous
      Status:
      The
      employment by, or relationship with, the Company or any Related Company is
      not
      interrupted or terminated. The Board, at its sole discretion, may determine
      whether Continuous Status shall be considered interrupted due to personal or
      other mitigating circumstances, including leaves of absence.

    

    Date
      of Grant:
      The
      date on which an Option is granted under the Plan.

    

    Eligible
      Person:
      Officers and Employees and other persons who provide services to the Company
      or
      any Related Company, including directors of the Company or any Related
      Company.

    

    Employee:
      An
      Employee is an employee of the Company or any Related Company.

    

    
      
         

      

      
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    Exchange
      Act:
      The
      Securities Exchange Act of 1934, as amended from time to time, including rules
      thereunder and successor provisions and rules thereto.

    

    Exercise
      Price:
      The
      price per share of Common Stock payable upon exercise of an Option.

    

    Fair
      Market Value:
      Fair
      Market Value of a share of Common Stock shall be the closing price of a share
      on
      the date of calculation (or on the last preceding trading day if shares were
      not
      traded on such date) if the shares are readily tradable on a national securities
      exchange or other market system, and if the shares are not readily tradable,
      Fair Market Value shall be determined, in good faith, by the Option
      Committee.

    

    Incentive
      Stock Options ("ISOs"):
      An
      Option granted with the intention that it qualify as an incentive stock option
      within the meaning of Section 422 of the Code or any successor provision
      thereto.

    

    Non-Incentive
      Stock Options ("Non-ISOs"):
      Options
      which are not intended to qualify as "Incentive Stock Options" under Section
      422
      of the Code or any successor provision thereto.

    

    Option:
      The
      rights granted to an Eligible Person to purchase Common Stock pursuant to the
      terms and conditions of an Agreement.

    

    Option
      Committee:
      The
      Plan shall be administered by the Option Committee which shall consist of the
      Board or a committee of the Board as the Board may time to time designate.
      

    

    Option
      Shares:
      The
      shares of Common Stock underlying an Option granted to an Eligible
      Person.

    

    Optionee:
      An
      Eligible Person who has been granted an Option.

    

    Participant:
      A
      person who has been granted an Option, Restricted Stock or a Restricted Stock
      Unit which remains outstanding, including a person who is no longer an Eligible
      Person.

    

    Related
      Company:
      Any
      subsidiary of the Company and any other business venture in which the Company
      has a significant interest as determined in the discretion of the Option
      Committee. 

    

    Restricted
      Stock:
      An
      Award of shares of Common Stock granted to a Participant pursuant to Section
      15,
      subject to any restrictions and conditions as are established pursuant to such
      Section 15.

    

    Restricted
      Stock Unit:
      A
      right, granted to a Participant pursuant to Section 15, to receive Common Stock,
      cash or a combination thereof at the end of a specified deferral
      period.

    

    Rule
      16b-3:
      Rule
      16b-3, promulgated by the SEC under Section 16 of the Exchange Act, as from
      time
      to time in effect and applicable to this Plan.

    

    Securities
      Act:
      The
      Securities Act of 1933, as amended from time to time, including rules thereunder
      and successor provisions and rules thereto.

    

    2. Purpose
      and Scope.

    

    (a) The
      purpose of this Plan is to advance the interests of the Company and its
      stockholders by affording Eligible Persons an opportunity for investment in
      the
      Company and the incentive advantages inherent in stock ownership in this
      Company.

    

    
      
         

      

      
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    (b) This
      Plan
      authorizes the Option Committee to grant Options to purchase shares of Common
      Stock to Eligible Persons selected by the Option Committee while considering
      criteria such as employment position or other relationship with the Company,
      duties and responsibilities, ability, productivity, length of service or
      association, morale, interest in the Company, recommendations by supervisors,
      and other matters.

    

    3. Administration
      of the Plan.
      The
      Plan shall be administered by the Option Committee. The Option Committee shall
      have the authority granted to it under this section and under each other section
      of the Plan. The Option Committee shall have the authority, in its sole
      discretion, to determine the type or types of Awards to be granted pursuant
      to
      the Plan. Such Awards may be granted either alone, in addition to, or in tandem
      with, any other type of Award.

    

    In
      accordance with and subject to the provisions of the Plan and Rule 16b-3, the
      Option Committee shall select the Eligible Persons to receive Awards, shall
      determine (i) the number of shares of Common Stock, Restricted Stock or
      Restricted Stock Units to be subject to each Award, (ii) the time at which
      each
      Award is to be granted, (iii) the extent to which the transferability of shares
      of Common Stock issued or transferred pursuant to any Award is restricted,
      (iv)
      the Fair Market Value of the Common Stock, (v) whether to accelerate the time
      of
      exercisability of any Award that has been granted, (vi) the period or periods
      and extent of exercisability of the Options, and (vii) the manner in which
      an
      Option becomes exercisable. In addition, the Option Committee shall fix such
      other terms of each Option, Restricted Stock Award and Restricted Stock Units
      as
      the Option Committee may deem necessary or desirable. The Option Committee
      shall
      determine the form, terms and provisions of each Agreement to evidence each
      Award (which need not be identical).

    

    The
      Option Committee from time to time may adopt such rules and regulations for
      carrying out the purposes of the Plan as it may deem proper and in the best
      interests of the Company. The Option Committee shall keep minutes of its
      meetings and those minutes shall be available to every member of the
      Board.

    

    All
      actions taken and all interpretations and determinations made by the Option
      Committee in good faith (including determinations of Fair Market Value) shall
      be
      final and binding upon all Participants, the Company and all other interested
      persons. No member of the Option Committee shall be personally liable for any
      action, determination or interpretation made in good faith with respect to
      the
      Plan, and all members of the Option Committee shall, in addition to rights
      they
      may have if Directors of the Company, be fully protected by the Company with
      respect to any such action, determination or interpretation.

    

    4. The
      Common Stock.
      The
      Board is authorized to appropriate, issue and sell for the purposes of the
      Plan,
      and the Option Committee is authorized to grant Options, Restricted Stock and
      Restricted Stock Units with respect to, a total number, not in excess of
      10,000,000 shares of Common Stock, either treasury or authorized but unissued,
      as adjusted pursuant to Section 16. All or any unsold shares subject to an
      Option, Restricted Stock or Restricted Stock Units that for any reason expires
      or otherwise terminates may again be made subject to Options, Restricted Stock
      or Restricted Stock Units under the Plan. No Eligible Person may be granted
      Options, Restricted Stock and Restricted Stock Units under this Plan covering
      in
      excess of an aggregate of 3,000,000 Option Shares and shares of Restricted Stock
      and Restricted Stock Units in any calendar year, subject to adjustments pursuant
      to Section 16.

    

    5. Eligibility.
      Options
      which are intended to qualify as ISOs will be granted only to Employees.
      Eligible Persons may hold more than one Option under the Plan and may hold
      Options under the Plan and options granted pursuant to other plans or otherwise,
      and may hold Restricted Stock and Restricted Stock Units under the
      Plan.

    

    
      
         

      

      
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    6. Option
      Price.
      The
      Exercise Price for the Option Shares shall be established by the Option
      Committee or shall be determined by a method established by the Option
      Committee; provided that the Exercise Price to be paid by Optionees for the
      Option Shares that are intended to qualify as ISOs, shall not be less than
      100
      percent of the Fair Market Value of the Option Shares on the Date of Grant
      (or,
      in the case of an individual who owns stock possessing more than 10 percent
      of
      the total combined voting power of all classes of stock of the Company, 110
      percent of the Fair Market Value of the Option Shares on the Date of Grant).
      

    

    7. Duration
      and Exercise of Options.

    

    (a) The
      option period shall commence on the Date of Grant and shall be as set by the
      Option Committee, but not to exceed 10 years in length. 

    

    (b) The
      Option Committee may determine whether any Option shall be exercisable in
      installments only; if the Option Committee determines that an Option shall
      be
      exercisable in installments, it shall determine the number of installments
      and
      the percentage of the Option exercisable at each installment date. All such
      installments shall be cumulative.

    

    (c) The
      Option Committee shall establish and set forth in each Agreement that evidences
      an Option whether the Option shall continue to be exercisable, and the terms
      and
      conditions of such exercise, after a termination of Continuous Status, any
      of
      which provisions may be waived or modified by the Option Committee at any time,
      provided that any such waiver or modification shall satisfy the requirements
      for
      exemption under Section 409A of the Code.

    

    (d) Each
      Option shall be exercised in whole or in part by delivering to the Company
      (or
      to a brokerage firm designated or approved by the Company) of written notice
      of
      the number of shares with respect to which the Option is to be exercised and
      by
      paying in full the Exercise Price for the Option Shares purchased as set forth
      in Section 8; provided, that an Option may not be exercised in part unless
      the
      aggregate purchase price for the Option Shares purchased is at least
      $1,000.

    

    (e) No
      Option
      may be granted under this Plan until the Plan is approved by the shareholders
      of
      the Company as provided in Section 17 below.

    

    8. Payment
      for Option Shares.
      If the
      aggregate purchase price of the Option Shares purchased by any Optionee at
      one
      time exceeds $5,000, the Option Committee may permit all or part of the Exercise
      Price for the Option Shares to be paid by delivery to the Company for
      cancellation shares of the Company's Common Stock owned by the Optionee with
      an
      aggregate Fair Market Value as of the date of payment equal to the portion
      of
      the Exercise Price for the Option Shares that the Optionee does not pay in
      cash.
      In the case of all other Option exercises, the Exercise Price shall be paid
      in
      cash or check upon exercise of the Option, except that the Option Committee
      may
      permit an Optionee to elect to pay the Exercise Price upon the exercise of
      an
      Option by authorizing a third party broker-dealer in securities approved by
      the
      Option Committee to sell some or all of the Option Shares acquired upon exercise
      of an Option and remit to the Company a sufficient portion of the sale proceeds
      to pay the entire Exercise Price and any tax withholding resulting from such
      exercise.

    

    9. Relationship
      to Employment or Position.
      Nothing
      contained in the Plan, or in any Option, Restricted Stock Award or Restricted
      Stock Units granted pursuant to the Plan, shall confer upon any Participant
      any
      right with respect to continuance of employment by, or other relationship with,
      the Company, or interfere in any way with the right of the Company to terminate
      the Participant’s employment as an Employee or other position or relationship,
      at any time.

    

    
      
         

      

      
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    10. Nontransferability
      of Option.
      Except
      as otherwise provided by the Option Committee, no Option granted under the
      Plan
      shall be transferable by the Optionee, either voluntarily or involuntarily,
      except by will or the laws of descent and distribution. 

    

    11. Rights
      as a Stockholder.
      No
      person shall have any rights as a shareholder with respect to any share covered
      by an Option until that person shall become the holder of record of such share
      and, except as provided in Section 16, no adjustments shall be made for
      dividends or other distributions or other rights as to which there is an earlier
      record date. 

    

    12. Securities
      Laws Requirements.
      No
      Option Shares shall be issued unless and until, in the opinion of the Company,
      any applicable registration requirements of the Securities Act of 1933, as
      amended, any applicable listing requirements of any securities exchange on
      which
      stock of the same class is then listed, and any other requirements of law or
      of
      any regulatory bodies having jurisdiction over such issuance and delivery,
      have
      been fully complied with. Each Option and each Option Share certificate may
      be
      imprinted with legends reflecting federal and state securities laws,
      restrictions and conditions, and the Company may comply therewith and issue
      "stop transfer" instructions to its transfer agent and registrar in good faith
      without liability.

    

    13. Disposition
      of Shares.
      Each
      Optionee, as a condition of exercise, shall represent, warrant and agree, in
      a
      form of written certificate approved by the Company, as follows: (a) that all
      Option Shares are being acquired solely for his own account and not on behalf
      of
      any other person or entity; (b) that no Option Shares will be sold or otherwise
      distributed in violation of the Securities Act of 1933, as amended, or any
      other
      applicable federal or state securities laws; and (c) that he will report all
      sales of Option Shares to the Company in writing on a form prescribed by the
      Company; and (d) that if he is subject to reporting requirements under Section
      16(a) of the Exchange Act, (i) he will not violate Section 16(b) of the
      Exchange Act, (ii) he will furnish the Company with a copy of each Form 4
      and Form 5 filed by him or her, and (iii) he will timely file all reports
      required under the federal securities laws.

    

    Each
      Optionee shall immediately notify the Company in writing of any sale, transfer,
      assignment or other disposition (or action constituting a disqualifying
      disposition within the meaning of Section 421 of the Code) of any shares of
      Common Stock acquired through exercise of an ISO, within two years after the
      grant of such ISO or within one year after the acquisition of such shares,
      setting forth the date and manner of disposition, the number of shares disposed
      of and the price at which such shares were disposed. The Company shall be
      entitled to withhold from any compensation or other payments then or thereafter
      due to the Optionee such amounts as may be necessary to satisfy any withholding
      requirements of federal or state law or regulation and, further, to collect
      from
      the Optionee any additional amounts which may be required for such purpose.
      The
      Company may, in its discretion, require shares of Common Stock acquired by
      an
      Optionee upon exercise of an ISO to be held in an escrow arrangement for the
      purpose of enabling compliance with the provisions of this section.

    

    14. Incentive
      Stock Options.
      To the
      extent that the aggregate Fair Market Value of Common Stock with respect to
      which ISO’s are exercisable for the first time by a Participant during any
      calendar year exceeds $100,000 or, if different, the maximum limitation in
      effect at the Date of Grant under the Code (the Fair Market Value being
      determined as of the Date of Grant for the Option), such portion in excess
      of
      $100,000 shall be treated as Non-ISO’s. 

    

    15. Restricted
      Stock and Restricted Stock Units.
      

    

    (a) Restricted
      Stock. The Option Committee is authorized to grant Restricted Stock to
      Participants on the following terms and conditions:

    

    
      
         

      

      
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    i. Grant
      and
      Restrictions. Restricted Stock shall be subject to such restrictions on
      transferability, risk of forfeiture and other restrictions, if any, as the
      Option Committee may impose, which restrictions may lapse separately or in
      combination at such times, under such circumstances (including based on
      achievement of performance goals and/or future service requirements), in such
      installments or otherwise, as the Option Committee may determine at the date
      of
      grant or thereafter. During the restricted period applicable to the Restricted
      Stock, the Restricted Stock may not be sold, transferred, pledged, hypothecated,
      margined or otherwise encumbered by the Participant.

    

    ii. Certificates
      for Stock. Restricted Stock granted under this Plan may be evidenced in such
      manner as the Option Committee shall determine. If certificates representing
      Restricted Stock are registered in the name of the Participant, the Option
      Committee may require that such certificates bear an appropriate legend
      referring to the terms, conditions and restrictions of the certificates, and
      that the Participant deliver a stock power to the Company, endorsed in blank,
      relating to the Restricted Stock.

    

    iii. Dividends
      and Splits. As a condition to the grant of an Award of Restricted Stock, the
      Option Committee may require or permit a Participant to elect that any cash
      dividends paid on a share of Restricted Stock be automatically reinvested in
      additional shares of Restricted Stock or applied to the purchase of additional
      Awards under this Plan. Unless otherwise determined by the Option Committee,
      stock distributed in connection with a stock split or stock dividend, and other
      property distributed as a dividend, shall be subject to restrictions and a
      risk
      of forfeiture to the same extent as the Restricted Stock with respect to which
      such stock or other property has been distributed.

    

    (b) Restricted
      Stock Units. The Option Committee is authorized to grant Restricted Stock Units
      to Participants, which are rights to receive Common Stock at the end of a
      specified deferral period, subject to the following terms and
      conditions:

    

    i. Award
      and
      Restrictions. Settlement of an Award of Restricted Stock Units shall occur
      upon
      expiration of the deferral period specified for such Restricted Stock Unit
      by
      the Option Committee (or, if permitted by the Option Committee, as elected
      by
      the Participant). In addition, Restricted Stock Units shall be subject to such
      restrictions (which may include a risk of forfeiture) as the Option Committee
      may impose, if any, which restrictions may lapse at the expiration of the
      deferral period or at earlier specified times (including based on achievement
      of
      performance goals and/or future service requirements), separately or in
      combination, in installments or otherwise, as the Option Committee may
      determine. Restricted Stock Units shall be satisfied by the delivery of cash
      or
      Common Stock in the amount equal to the Fair Market Value for the specified
      number of shares of Common Stock covered by the Restricted Stock Units, or
      a
      combination thereof, as determined by the Option Committee at the date of grant
      or thereafter.

    

    
      
         

      

      
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    ii. Dividend
      Equivalents. Unless otherwise determined by the Option Committee at date of
      grant, Dividend Equivalents on the specified number of shares of Common Stock
      covered by an Award of Restricted Stock Units shall be either (a) paid with
      respect to such Restricted Stock Units on the dividend payment date in cash
      or
      in shares of unrestricted Common Stock having a Fair Market Value equal to
      the
      amount of such dividends, or (b) deferred with respect to such Restricted Stock
      Units and the amount or value thereof automatically deemed reinvested in
      additional Restricted Stock Units, other Awards or other investment vehicles,
      as
      the Option Committee shall determine or permit the Participant to
      elect.

    

    (c) Waiver
      of
      Restrictions. The Option Committee, in its sole discretion, may waive the
      repurchase or forfeiture period and any other terms, conditions, or restrictions
      on any Restricted Stock or Restricted Stock Units under such circumstances
      and
      subject to such terms and conditions as the Option Committee shall deem
      appropriate; provided, however, that the Option Committee may not adjust
      performance goals for any Restricted Stock or Restricted Stock Units intended
      to
      be exempt under Section 162(m) of the Code for the year in which the Restricted
      Stock or Restricted Stock Unit is settled in such a manner as would increase
      the
      amount of compensation otherwise payable to a Participant.

    

    16. Change
      in Stock, Adjustments, Etc.
      In the
      event that each of the outstanding shares of Common Stock (other than shares
      held by dissenting shareholders which are not changed or exchanged) should
      be
      changed into, or exchanged for, a different number or kind of shares of stock
      or
      other securities of the Company, or, if further changes or exchanges of any
      stock or other securities into which the Common Stock shall have been changed,
      or for which it shall have been exchanged, shall be made (whether by reason
      of
      merger, consolidation, reorganization, recapitalization, stock dividends,
      reclassification, split-up, combination of shares or otherwise), then
      appropriate adjustment shall be made by the Option Committee to the aggregate
      number and kind of shares subject to this Plan, and the number and kind of
      shares and the price per share subject to outstanding Options, Restricted Stock
      and Restricted Stock Units as provided in the respective Agreements in order
      to
      preserve, as nearly as practical, but not to increase, the benefits to
      Participants.

    

    17. Effective
      Date of Plan; Termination Date of Plan.
      Subject
      to the approval of the Plan by the affirmative vote of the holders of a majority
      of the Company's securities entitled to vote and represented at a meeting duly
      held in accordance with applicable law, the Plan shall be deemed effective
      October 2, 2006. The Plan shall terminate at midnight on October 2, 2016, except
      as to Options previously granted and outstanding under the Plan at that time.
      No
      Options, Restricted Stock and Restricted Stock Units shall be granted after
      the
      date on which the Plan terminates. The Plan may be abandoned or terminated
      at
      any earlier time by the Board, except with respect to any Options, Restricted
      Stock and Restricted Stock Units then outstanding under the Plan.

    

    18. Withholding
      Taxes.
      The
      Company, or any Related Company, may take such steps as it may deem necessary
      or
      appropriate for the withholding of any taxes which the Company, or any Related
      Company, is required by any law or regulation or any governmental authority,
      whether federal, state or local, domestic or foreign, to withhold in connection
      with any Award including, but not limited to, the withholding of all or any
      portion of any payment or the withholding of issuance of Option Shares or
      Restricted Stock.

    

    
      
         

      

      
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    19. Change
      in Control.
      

    

    In
      the
      event of a Change in Control of the Company, (a) the Option Committee, in its
      discretion, may, at any time an Award is granted, or at any time thereafter,
      accelerate the time period relating to the exercise or realization of any
      Options, Restricted Stock and Restated Stock Units, and (b) with respect to
      Options, Restricted Stock and Restricted Stock Units, the Option Committee
      in
      its sole discretion may, at any time an Award is granted, or at any time
      thereafter, take one or more of the following actions, which may vary among
      individual Participants: (i) provide for the purchase of an Option, Restricted
      Stock and Restricted Stock Units for an amount of cash or other property that
      could have been received upon the exercise of the Option, Restricted Stock
      and
      Restricted Stock Unit had the Option been currently exercisable, (ii) adjust
      the
      terms of the Awards in a manner determined by the Option Committee to reflect
      the Change in Control, (iii) cause the Awards to be assumed, or new rights
      substituted therefor, by another entity, through the continuance of the Plan
      and
      the assumption of outstanding Options, Restricted Stock and Restricted Stock
      Units, or the substitution for such Options, Restricted Stock and Restricted
      Stock Units of comparable value covering shares of a successor corporation,
      with
      appropriate adjustments as to the number and kind of shares and exercise prices,
      in which event the Plan and such Options, Restricted Stock and Restricted Stock
      Units, or the new options and rights substituted therefor, shall continue in
      the
      manner and under the terms so provided, (iv) accelerate the time at which
      Options then outstanding may be exercised so that such Options may be exercised
      for a limited period of time on or before a specified date fixed by the Option
      Committee, after which specified date, all unexercised Options and all rights
      of
      Optionees thereunder shall terminate, or (v) make such other provision as the
      Committee may consider equitable. 

    

    20. Amendment.

    

    (a) The
      Board
      may amend, alter or discontinue the Plan, but no amendment, alteration or
      discontinuation shall be made which would impair the right of a Participant
      under an outstanding Agreement. In addition, no such amendment shall be made
      without the approval of the Company's shareholders to the extent such approval
      is required by law or agreement.

    

    (b) The
      Committee may amend the terms of any Award theretofore granted, prospectively
      or
      retroactively, but no such amendment shall impair the rights of any Participant
      without the Participant's consent.

    

    (c) Subject
      to the above provisions, the Board shall have authority to amend the Plan to
      take into account changes in law and tax and accounting rules as well as other
      developments, and to grant Awards which qualify for beneficial treatment under
      such rules without shareholder approval.

    

    
      
         

      

      
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    21. Other
      Provisions.

    

    (a) The
      use
      of a masculine gender in the Plan shall also include within its meaning the
      feminine, and the singular may include the plural, and the plural may include
      the singular, unless the context clearly indicates to the contrary.

    

    (b) Any
      expenses of administering the Plan shall be borne by the Company.

    

    (c) This
      Plan
      shall be construed to be in addition to any and all other compensation plans
      or
      programs. Neither the adoption of the Plan by the Board nor the submission
      of
      the Plan to the shareholders of the Company for approval shall be construed
      as
      creating any limitations on the power or authority of the Board to adopt such
      other additional incentive or other compensation arrangements as the Board
      may
      deem necessary or desirable.

     

    (d) The
      validity, construction, interpretation, administration and effect of the Plan
      and of its rules and regulations, and the rights of any and all personnel having
      or claiming to have an interest therein or thereunder shall be governed by
      and
      determined exclusively and solely in accordance with the laws of the State
      of
      Nevada.

    

    

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      * * *

     

    
      
         

      

      
        9RANCHER
      ENERGY CORP.

    

    2006
      STOCK INCENTIVE PLAN

    

    FORM
      OF STOCK OPTION AGREEMENT

    

    Rancher
      Energy Corp. (the “Company”), pursuant to its 2006 Stock Incentive Plan (the
“Plan”), hereby grants to Optionee listed below (“Optionee”), an option to
      purchase the number of shares of the Company’s Common Stock set forth below,
      subject to the terms and conditions of the Plan and this Stock Option Agreement.
      Unless otherwise defined herein, the terms defined in the Plan shall have the
      same defined meanings in this Stock Option Agreement. 

    

    
      	
              I.

            	
              NOTICE
                OF STOCK OPTION GRANT

            

    

    
    

     

    
      	
              Optionee:

            	 	
              ___________________________________

            
	
              Date
                of Stock Option Agreement:

            	 	
              ___________________________________

            
	
              Date
                of Grant:

            	 	
              ___________________________________

            
	
              Vesting
                Commencement Date*: 

            	 	
              ___________________________________

            
	
              Exercise
                Price per Share:

            	 	
              ___________________________________

            
	
              Total
                Number of Shares Granted:

            	 	
              ___________________________________

            
	
              Term/Expiration
                Date:

            	 	
              ___________________________________

            

    

    

    *
      This
      Option shall not be exercisable until the shareholders of the Company have
      approved the Plan. If the shareholders fail to approve the Plan by October
      1,
      2007, then this Option shall automatically become a Non-Incentive Stock Option.
      See Section 6 below.

    

    

    
      	Type
              of Option:	
              ⁮
                Incentive Stock Option or ⁮ Non-Incentive Stock
                Option

            

    

     

    

    
      	Vesting
              Schedule:	
              The
                Option Shares subject to this Option shall vest according to the
                following
                schedule:

            

      	 	__________________________________________

      	 	__________________________________________ 

    

    
    

     

    
      	Termination
              Period:	
              This
                Option may be exercised, to the extent vested, for one month after
                Optionee ceases to be an Eligible Person, or such longer period as
                may be
                applicable upon the death or disability of Optionee as provided herein
                (or, if not provided herein, then as provided in the Plan), but in
                no
                event later than the Term/Expiration Date as provided
                above.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              II.

            	
              AGREEMENT

            

    

    

    1. Grant
      of Option.
      The
      Company hereby grants to Optionee an Option to purchase the number of shares
      of
      Common Stock (the “Option Shares”) set forth in the Notice of Grant, at the
      exercise price per share set forth in the Notice of Grant (the “Exercise
      Price”). Notwithstanding anything to the contrary anywhere else in this Option
      Agreement, this grant of an Option is subject to the terms, definitions, and
      provisions of the Plan
      adopted
      by the Company, which is incorporated herein by reference. 

    

    If
      designated in the Notice of Grant as an Incentive Stock Option, this Option
      is
      intended to qualify as an Incentive Stock Option as defined in Section 422
      of the Code; provided,
      however,
      that to
      the extent that the aggregate Fair Market Value of stock with respect to which
      Incentive Stock Options (within the meaning of Code Section 422, but without
      regard to Code Section 422(d)), including the Option, are exercisable for the
      first time by Optionee during any calendar year (under the Plan and all other
      incentive stock option plans of the Company, if any) exceeds $100,000, such
      options shall be treated as not qualifying under Code Section 422, but
      rather shall be treated as Non-Incentive Stock Options to the extent required
      by
      Code Section 422. The rule set forth in the preceding sentence shall be applied
      by taking options into account in the order in which they were granted. For
      purposes of these rules, the Fair Market Value of stock shall be determined
      as
      of the time the option with respect to such stock is granted. 

    

    2. Exercise
      of Option.
      This
      Option is exercisable as follows:

    

    (a) Right
      to Exercise.

    

    (i) This
      Option shall be exercisable cumulatively according to the vesting schedule
      set
      out in the Notice of Grant. For purposes of this Stock Option Agreement, Option
      Shares subject to this Option shall vest based on Optionee’s continued status as
      an Eligible Person.

    

    (ii) This
      Option may not be exercised for a fraction of a Share.

    

    (iii) In
      the
      event of Optionee’s death, disability or other termination of Optionee’s status
      as an Eligible Person, the exercisability of the Option is governed by
      Sections 7, 8 and 9 below.

    

    (iv) In
      no
      event may this Option be exercised after the date of expiration of the term
      of
      this Option as set forth in the Notice of Grant.

    

    (b) Method
      of Exercise.
      This
      Option shall be exercisable by written Notice (in the form attached as
Exhibit
      A).
      The
      Notice must state the number of Option Shares for which the Option is being
      exercised, and such other representations and agreements with respect to such
      Option Shares as may be required by the Company pursuant to the provisions
      of
      the Plan. The Notice must be signed by Optionee and shall be delivered in person
      or by certified mail to the Secretary of the Company. The Notice must be
      accompanied by payment of the Exercise Price plus
      payment
      of any applicable withholding tax. This Option shall be deemed to be exercised
      upon receipt by the Company of such written Notice accompanied by the Exercise
      Price and payment of any applicable withholding tax.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    No
      Option
      Shares shall be issued pursuant to the exercise of an Option unless such
      issuance and such exercise comply with all relevant provisions of law and the
      requirements of any stock exchange upon which the Option Shares may then be
      listed. Assuming such compliance, for income tax purposes the Option Shares
      shall be considered transferred to Optionee on the date on which the Option
      is
      exercised with respect to such Option Shares.

    

    3. Optionee’s
      Representations.
      If the
      Option Shares purchasable pursuant to the exercise of this Option have not
      been
      registered under the Securities Act of 1933, as amended (the “Securities Act”),
      at the time this Option is exercised, Optionee shall, if required by the
      Company, concurrently with the exercise of all or any portion of this Option,
      deliver to the Company his or her Investment Representation Statement in the
      form attached hereto as Exhibit B.

    

    4. Lock-Up
      Period.
      Optionee hereby agrees that if so requested by the Company or any representative
      of the underwriters (the “Managing Underwriter”) in connection with any
      registration of the offering of any securities of the Company under the
      Securities Act, Optionee shall not sell or otherwise transfer any Option
      Shares or other securities of the Company during the 180-day period (or such
      period as may be requested in writing by the Managing Underwriter and agreed
      to
      in writing by the Company) (the “Market Standoff Period”) following the
      effective date of a registration statement of the Company filed under the
      Securities Act. The Company may impose stop-transfer instructions with
      respect to securities subject to the foregoing restrictions until the end of
      such Market Standoff Period and these restrictions shall be binding on any
      transferee of such Option Shares. 

    

    5. Method
      of Payment.
      Payment
      of the Exercise Price shall be by any of the following, or a combination
      thereof:

    

    (a) cash;

    

    (b) check;
      or

    

    (c) with
      the
      consent of the Option Committee, any method of payment, or combination thereof
      that is permitted in the Plan.

    

    6. Restrictions
      on Exercise.
      This
      Option may not be exercised as an Incentive Stock Option until the Plan has
      been
      approved by the shareholders of the Company. If the stockholders fail to approve
      the Plan by October 1, 2007, then this Option shall automatically become a
      Non-Incentive Stock Option. If the issuance of Option Shares upon such exercise
      or if the method of payment for such shares would constitute a violation of
      any
      applicable federal or state securities or other law or regulation, then the
      Option may also not be exercised. The Company may require Optionee to make
      any
      representation and warranty to the Company as may be required by any applicable
      law or regulation before allowing the Option to be exercised. 

    

    7. Termination
      of Relationship.
      If
      Optionee ceases to be an Eligible Person (other than by reason of Optionee’s
      death or the total and permanent disability of Optionee as defined in Code
      Section 22(e)(3)), Optionee may exercise this Option, to the extent the Option
      was vested at the date on which Optionee ceases to be an Eligible Person, but
      only within one month from such date (and in no event later than the expiration
      date of the term of this Option set forth in the Notice of Grant). To the extent
      that the Option is not vested at the date on which Optionee ceases to be an
      Eligible Person, or if Optionee does not exercise this Option within the time
      specified herein, the Option shall terminate.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    8. Disability
      of Optionee.
      If
      Optionee ceases to be an Eligible Person as a result of his or her total and
      permanent disability as defined in Code Section 22(e)(3), Optionee may exercise
      the Option to the extent the Option was vested at the date on which Optionee
      ceases to be an Eligible Person, but only within three months from such date
      (and in no event later than the expiration date of the term of this Option
      as
      set forth in the Notice of Grant). To the extent that the Option is not vested
      at the date on which Optionee ceases to be an Eligible Person, or if Optionee
      does not exercise such Option within the time specified herein, the Option
      shall
      terminate.

    

    9. Death
      of Optionee.
      If
      Optionee ceases to be an Eligible Person as a result of the death of Optionee,
      the vested portion of the Option may be exercised at any time within three
      months following the date of death (and in no event later than the expiration
      date of the term of this Option as set forth in the Notice of Grant) by
      Optionee’s estate or by a person who acquires the right to exercise the Option
      by bequest or inheritance. To the extent that the Option is not vested at the
      date of death, or if the Option is not exercised within the time specified
      herein, the Option shall terminate.

    

    10. Non-Transferability
      of Option.
      This
      Option may not be transferred in any manner except by will or by the laws of
      descent or distribution. It may be exercised during the lifetime of Optionee
      only by Optionee. The terms of this Option shall be binding upon the executors,
      administrators, heirs, successors, and assigns of Optionee.

    

    11. Term
      of Option.
      This
      Option may be exercised only within the term set out in the Notice of Grant.
      

    

    12. Restrictions
      on Option Shares.
      Optionee hereby agrees that Option Shares purchased upon the exercise of the
      Option shall be subject to such terms and conditions as the Option Committee
      shall determine in its sole discretion. Such terms and conditions may, in the
      Option Committee’s sole discretion, be contained in the Exercise Notice with
      respect to the Option or in such other agreement as the Option Committee shall
      determine and which the Optionee hereby agrees to enter into at the request
      of
      the Company.

    

    (Signature
      Page Follows)

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original and all of which shall constitute one document.

    

    
      	 	 	RANCHER ENERGY
              CORP. 	 
	 	 	 	 
	 	 	By:______________	 
	 	 	 	 
	 	 	Name:____________	 
	 	 	 	 
	 	 	Title:_____________	 

    

    

    OPTIONEE
      ACKNOWLEDGES AND AGREES THAT THE VESTING OF OPTION SHARES PURSUANT TO THE OPTION
      HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF
      THE
      COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
      ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
      NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY’S 2006 STOCK INCENTIVE PLAN, WHICH
      IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
      RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
      IT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO
      TERMINATE OPTIONEE’S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
      CAUSE AND WITH OR WITHOUT PRIOR NOTICE, UNLESS THE COMPANY AND THE OPTIONEE
      HAVE
      AGREED OTHERWISE IN WRITING.

    

    Optionee
      acknowledges receipt of a copy of the Plan and represents that he or she is
      familiar with the terms and provisions thereof. Optionee hereby accepts this
      Option subject to all of the terms and provisions hereof. Optionee has reviewed
      the Plan and this Option in their entirety, has had an opportunity to obtain
      the
      advice of counsel prior to executing this Option, and fully understands all
      provisions of the Option. Optionee hereby agrees to accept as binding,
      conclusive, and final all decisions or interpretations of the Option Committee
      upon any questions arising under the Plan or this Option. Optionee further
      agrees to notify the Company upon any change in the residence address indicated
      below.

     

    
      	Dated:____________ 	 	 
	 	 	Name: 	 
	 	 	Address: 	 
	 	 	Address: 	 

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      A

    

    RANCHER
      ENERGY CORP.

    

    2006
      STOCK INCENTIVE PLAN

    

    EXERCISE
      NOTICE

    

    

    Rancher
      Energy Corp.

    Attention:
      Stock Administration

    

    1. Exercise
      of Option.
      Effective as of today, ___________, _____, the undersigned (“Optionee”) hereby
      elects to exercise Optionee’s option to purchase _________ shares of the Common
      Stock (the “Option Shares”) of Rancher Energy Corp. (the “Company”) under and
      pursuant to the Company’s 2006
      Stock Incentive Plan
      (the
“Plan”) and the Stock Option Agreement dated _____________________ (the “Option
      Agreement”). Capitalized terms used herein without definition shall have the
      meanings given in the Option Agreement.

     

    
      	
              Date
                of Grant:

            	 	
              ______________________________

            
	
              Number
                of Option Shares as to which Option is Exercised:

            	 	
              ______________________________ 

            
	
              Exercise
                Price per Share:

            	 	
              $____________

            
	
              Total
                Exercise Price:

            	 	
              $____________

            
	
              Certificate
                to be Issued in Name of:

            	 	
              ______________________________ 

            
	
              Cash
                Payment Delivered Herewith:

            	o 	
              $____________

            

    

    

    
      	Type
              of Option:	
              o
                Incentive Stock Option  oNon-Qualified
                Stock Option

            

    

    

    2. Representations
      of Optionee.
      Optionee acknowledges that Optionee has received, read, and understood the
      Plan
      and the Option Agreement. Optionee agrees to abide by and be bound by their
      terms and conditions. 

    

    3. Rights
      as Shareholder.
      Until
      the stock certificate evidencing such Option Shares is issued (as evidenced
      by
      the appropriate entry on the books of the Company or of a duly authorized
      transfer agent of the Company), no right to vote or receive dividends or any
      other rights as a stockholder shall exist with respect to Option Shares subject
      to the Option, notwithstanding the exercise of the Option. The Company shall
      issue (or cause to be issued) such stock certificate promptly after the Option
      is exercised. No adjustment will be made for a dividend or other right for
      which
      the record date is prior to the date the stock certificate is issued. Optionee
      shall enjoy rights as a shareholder until such time as Optionee disposes of
      the
      Option Shares or the Company. Upon such exercise, Optionee shall have no further
      rights as a holder of the Option Shares.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    4. Tax
      Consultation.
      Optionee understands that Optionee may suffer adverse tax consequences as a
      result of Optionee’s purchase of the Option Shares. Optionee represents that
      Optionee has consulted with any tax consultants Optionee deems advisable in
      connection with the purchase of the Option Shares and that Optionee is not
      relying on the Company for any tax advice.

    

    5. Restrictive
      Legends and Stop-Transfer Orders.

    

    (a) Legends.
      Optionee understands and agrees that the Company shall cause the legends set
      forth below or legends substantially equivalent thereto, to be placed upon
      any
      certificate(s) evidencing ownership of the Option Shares together with any
      other
      legends that may be required by state or federal securities laws:

    

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
      PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE
      OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
      SECURITIES, SUCH OFFER, SALE, TRANSFER, PLEDGE, OR HYPOTHECATION IS IN
      COMPLIANCE THEREWITH.

    

    (b) Stop-Transfer
      Notices.
      Optionee agrees that, in order to ensure compliance with the restrictions
      referred to herein, the Company may issue appropriate “stop transfer”
instructions to its transfer agent, if any, and that, if the Company transfers
      its own securities, it may make appropriate notations to the same effect in
      its own records.

    

    (c) Refusal
      to Transfer.
      The
      Company shall not be required (i) to transfer on its books any Option
      Shares that have been sold or otherwise transferred in violation of any of
      the
      provisions of this Agreement or (ii) to treat as owner of such Option
      Shares or to accord the right to vote or pay dividends to any purchaser or
      other
      transferee to whom such Option Shares shall have been so
      transferred.

    

    6. Successors
      and Assigns.
      The
      Company may assign any of its rights under this Agreement to single or multiple
      assignees, and this Agreement shall inure to the benefit of the successors
      and
      assigns of the Company. Subject to the restrictions on transfer herein set
      forth, this Agreement shall be binding upon Optionee and his or her heirs,
      executors, representatives, administrators, successors, and
      assigns.

    

    7. Interpretation.
      Any
      dispute regarding the interpretation of this Agreement shall be submitted by
      Optionee or by the Company forthwith to the Company’s Board of Directors or
      committee thereof that is responsible for the administration of the Plan (the
      “Option Committee”), which shall review such dispute at its next regular
      meeting. The resolution of such a dispute by the Option Committee shall be
      final
      and binding on the Company and on Optionee.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    8. Governing
      Law; Severability.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Nevada excluding that body of law pertaining to conflicts of law.
      Should any provision of this Agreement be determined by a court of law to be
      illegal or unenforceable, the other provisions shall nevertheless remain
      effective and shall remain enforceable.

    

    9. Notices.
      Any
      notice required or permitted hereunder shall be given in writing and shall
      be
      deemed effectively given upon personal delivery or upon deposit in the United
      States mail by certified mail, with postage and fees prepaid, addressed to
      the
      other party at its address as shown below beneath its signature, or to such
      other address as such party may designate in writing from time to time to the
      other party.

    

    10. Further
      Instruments.
      The
      parties agree to execute such further instruments and to take such further
      action as may be reasonably necessary to carry out the purposes and intent
      of
      this Agreement.

    

    11. Delivery
      of Payment.
      Optionee herewith delivers to the Company the full Exercise Price for the Option
      Shares as set forth above in Section 1, as well as any applicable
      withholding tax.

    

    12. Entire
      Agreement.
      The
      Plan and Option Agreement are incorporated herein by reference. This Agreement,
      the Plan, the Option Agreement, and the Investment Representation Statement
      constitute the entire agreement of the parties and supersede in their entirety
      all prior undertakings and agreements of the Company and Optionee with respect
      to the subject matter hereof.

     

    
      	
              Accepted
                by:

            	
              Submitted
                by:

            
	 	 
	
              RANCHER
                ENERGY CORP.

            	
              OPTIONEE

            
	 	 
	 	 
	
              By:________________________
                

            	_____________________________ 
	
              Name:______________________
                

            	
              Name:_____________________________

            
	
              Its:________________________
                

            	
              Address:___________________________

            
	 	 
	 	 

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      B

    

    INVESTMENT
      REPRESENTATION STATEMENT

    

    

    
      	OPTIONEE 	: 	 	 
	COMPANY 	: 	Rancher Energy Corp. 	 
	SECURITY 	: 	Common Stock 	 
	AMOUNT 	: 	 	 
	DATE 	: 	 	 
	 	: 	 	 

    

      

    In
      connection with the purchase of the above-listed shares of Common Stock (the
      “Securities”) of Rancher Energy Corp. (the “Company”), the undersigned (the
“Optionee”) represents to the Company the following:

    

    

    (a) Optionee
      is aware of the Company’s business affairs and financial condition and has
      acquired sufficient information about the Company to reach an informed and
      knowledgeable decision to acquire the Securities. Optionee is acquiring these
      Securities for investment for Optionee’s own account only and not with a view
      to, or for resale in connection with, any “distribution” thereof within the
      meaning of the Securities Act of 1933, as amended (the “Securities
      Act”).

    

    (b) Optionee
      acknowledges and understands that the Securities constitute “restricted
      securities” under the Securities Act and have not been registered under the
      Securities Act in reliance upon a specific exemption therefrom, which exemption
      depends upon, among other things, the bona fide nature of Optionee’s investment
      intent as expressed herein. Optionee understands that the Securities must be
      held indefinitely unless they are subsequently registered under the Securities
      Act or an exemption from such registration is available. Optionee further
      acknowledges and understands that the Company is under no obligation to register
      the Securities. Optionee understands that the certificate evidencing the
      Securities will be imprinted with a legend that prohibits the transfer of the
      Securities unless they are registered or such registration is not required
      in
      the opinion of counsel satisfactory to the Company and any other legend required
      under applicable state securities laws.

    

    (c) Optionee
      is familiar with the provisions of Rule 144 promulgated under the
      Securities Act, which, in substance, permits limited public resale of
“restricted securities” acquired, directly or indirectly from the issuer
      thereof, in a non-public offering subject to the satisfaction of certain
      conditions. 

    

    Under
      Rule 144, the Securities may be resold in certain limited circumstances subject
      to the provisions of Rule 144, which requires the resale to occur not less
      than one year after the later of the date the Securities were sold by the
      Company or the date the Securities were sold by an affiliate of the Company,
      within the meaning of Rule 144; and, in the case of acquisition of the
      Securities by an affiliate, or by a non-affiliate who subsequently holds the
      Securities less than two (2) years, the satisfaction of the following
      conditions: (1) the resale being made through a broker in an unsolicited
“broker’s transaction” or in transactions directly with a market maker (as
      said term is defined under the Securities Exchange Act of 1934); and, in the
      case of an affiliate; (2) the availability of certain public information
      about the Company; (3) the amount of Securities being sold during any three
      (3)-month period not exceeding the limitations specified in Rule 144(e);
      and (4)  the timely filing of a Form 144, if applicable.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    (d) Optionee
      further understands that in the event all of the applicable requirements of
      Rule
      144 are not satisfied, registration under the Securities Act, compliance with
      Regulation A, or some other registration exemption will be required; and that,
      notwithstanding the fact that Rule 144 is not exclusive, the Staff of the
      Securities and Exchange Commission has expressed its opinion that persons
      proposing to sell private placement securities other than in a registered
      offering and otherwise than pursuant to Rules 144 will have a substantial burden
      of proof in establishing that an exemption from registration is available for
      such offers or sales, and that such persons and their respective brokers who
      participate in such transactions do so at their own risk. Optionee understands
      that no assurances can be given that any such other registration exemption
      will
      be available in such event.

    

    
      	 	Signature of Optionee: 
	 	 
	 	 
	 	 
	 	Optionee 
	 	 
	 	 
	Date: _______________________,
              ____

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