Document:

EXHIBIT
10.11

      

      SECURITY
AGREEMENT

      

      THIS
SECURITY AGREEMENT (“Agreement”) is made and entered into as of the 31st day of
December, 2008, by and among Nevada Gold Holdings, Inc., a
Delaware corporation (the “Company”), Nevada Gold Enterprises, Inc.,
a Nevada corporation (“Subsidiary”), and the Buyers (as defined
below).

      

      RECITALS:

      

      WHEREAS, the Company will
issue and deliver to each party listed as a buyer (the “Buyers”) on the Schedule
of Buyers attached to that certain Securities Purchase Agreement dated of even
date herewith (“Securities Purchase Agreement”) its 10% Secured Convertible
Promissory Note (each, a “Note” and together, the “Notes”) in the aggregate
principal amount of up to One Hundred Fifty Thousand Dollars ($150,000), the
first of which Notes shall be dated as of the date of this Agreement;
and

      

      

      WHEREAS, pursuant to the
Securities Purchase Agreement, the Company has agreed to grant and to cause the
Subsidiary to grant a security interest in and to the Collateral (as defined in
this Agreement) to the Buyers on the terms and conditions set forth in this
Agreement;

      

      

      NOW, THEREFORE, for and in
consideration of the premises and intending to be legally bound, the parties
covenant and agree as follows:

      

      1.           Definitions. In
addition to the words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, unless the context
otherwise clearly requires:

      

      “Accounts”
shall have the meaning given to that term in the Code and shall include without
limitation all rights of the Company or the Subsidiary, whenever acquired, to
payment for goods sold or leased or for services rendered, whether or not earned
by performance.

      

      “Agent”
shall mean ____________________________.

      

      “Chattel
Paper” shall have the meaning given to that term in the Code and shall include
without limitation all writings owned by the Company or the Subsidiary, whenever
acquired, which evidence both a monetary obligation and a security interest in
or a lease of specific goods.

      

      “Code”
shall mean the Uniform Commercial Code as in effect on the date of this
Agreement and as amended from time to time, of the state or states having
jurisdiction with respect to all or any portion of the Collateral from time to
time.

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      “Collateral”
shall mean (i) all tangible and intangible assets of Company and the Subsidiary,
including, without limitation, collectively the Accounts, Chattel Paper, Deposit
Accounts, Documents, Equipment, Fixtures, General Intangibles, Instruments,
Intellectual Property, Inventory, Investment Property, and Proceeds of each of
them.

      

      “Deposit
Accounts” shall have the meaning given to that term in the Code and shall
include a demand, time, savings, passbook or similar account maintained with a
bank, savings bank, savings and loan association, credit union, trust company or
other organization that is engaged in the business of banking.

      

      “Documents”
shall have the meaning given to that term in the Code and shall include without
limitation all warehouse receipts (as defined by the Code) and other documents
of title (as defined by the Code) owned by the Company or the Subsidiary,
whenever acquired.

      

      “Equipment”
shall have the meaning given to that term in the Code and shall include without
limitation all goods owned by the Company or the Subsidiary, whenever acquired
and wherever located, used or brought for use primarily in the business or for
the benefit of the Company or the Subsidiary and not included in Inventory of
the Company or the Subsidiary, together with all attachments, accessories and
parts used or intended to be used with any of those goods or Fixtures, whether
now or in the future installed therein or thereon or affixed thereto, as well as
all substitutes and replacements thereof in whole or in part.

      

      “Event of
Default” shall mean (i) any of the Events of Default described in the Notes or
the Loan Documents, or (ii) any default by the Company or the Subsidiary in the
performance of its obligations under this Agreement.

      

      “Fixtures”
shall have the meaning given to that term in the Code, and shall include without
limitation leasehold improvements.

      

      “General
Intangibles” shall have the meaning given to that term in the Code and shall
include, without limitation, all leases under which the Company or the
Subsidiary now or in the future leases and or obtains a right to occupy or use
real or personal property, or both, all of the other contract rights of the
Company or the Subsidiary, whenever acquired, and customer lists, choses in
action, claims (including claims for indemnification), books, records, patents,
copyrights, trademarks, blueprints, drawings, designs and plans, trade secrets,
methods, processes, contracts, licenses, license agreements, formulae, tax and
any other types of refunds, returned and unearned insurance premiums, rights and
claims under insurance policies, and computer information, software, records and
data, and oil, gas, or other minerals before extraction now owned or acquired
after the date of this Agreement by the Company or the Subsidiary.

      

      
        
           

        

        
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      “Instruments”
shall have the meaning given to that term in the Code and shall include, without
limitation, all negotiable instruments (as defined in the Code), all
certificated securities (as defined in the Code) and all other writings which
evidence a right to the payment of money now or after the date of this Agreement
owned by the Company or the Subsidiary.

      

      “Inventory”
shall have the meaning given to that term in the Code and shall include without
limitation all goods owned by the Company or the Subsidiary, whenever acquired
and wherever located, held for sale or lease or furnished or to be furnished
under contracts of service, and all raw materials, work in process and materials
owned by the Company or the Subsidiary and used or consumed in the Company’s or
the Subsidiary’ business, whenever acquired and wherever located.

      

      “Investment
Property,” “Securities Intermediary” and “Commodities Intermediary” each shall
have the meaning set forth in the Code.

      

      “Know-How”
means all documented and undocumented research, ideas, data, theories,
conclusions, reports, drawings, designs, blueprints, schematics, exhibits,
models, prototypes, source code, object code, flow charts, manuals, processes,
specifications, formulae, product configurations, notes, inventions (whether or
not patentable and whether or not reduced to practice) and any other information
of any kind developed, in development or maintained by the Company or the
Subsidiary or any of their respective employees, agents or representatives
relating to any goods or services sold or licensed or offered for sale or
license by the Company or the Subsidiary  or goods or services which
the Company or the Subsidiary have a present intention to sell or
license.

      

      “Loan
Documents” shall mean collectively, this Agreement, the Notes, the Securities
Purchase Agreement and all other agreements, documents and instruments executed
and delivered in connection therewith, as each may be amended, supplemented or
modified from time to time.

      

      “Permitted
Liens” shall mean all (i) all existing liens on the assets of the Company and
the Subsidiary which have been disclosed to the Buyer by the Company on a
Schedule attached hereto, and (ii) all purchase money security interests
hereinafter incurred by the Company or the Subsidiary in the ordinary course of
business.

      

      “Proceeds”
shall have the meaning given to that term in the Code and shall include without
limitation whatever is received when Collateral or Proceeds are sold, exchanged,
collected or otherwise disposed of, whether cash or non-cash, and includes
without limitation proceeds of insurance payable by reason of loss of or damage
to Collateral.

      

      

      
        
           

        

        
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      “Trade
Secret Rights” means all documentation, Know-How and other materials owned by
the Company or the Subsidiary that is considered to be proprietary to the
Company or the Subsidiary, is maintained on a confidential or secret basis, and
is generally not known to other persons or entities who are not subject to
confidentiality restrictions.

      

      2.           Security
Interest.

      

      (a)           As
security for the full and timely payment of the Notes  in accordance
with the terms of the Securities Purchase Agreement and the performance of the
obligations of the Company under the Notes and the Securities Purchase
Agreement, the Company and the Subsidiary agree that the Buyers shall have, and
the Company and the Subsidiary shall grant and convey to and create in favor of
the Buyers, a security interest under the Code in and to such of the Collateral
as is now owned by the Company or the Subsidiary. The security interest granted
to the Buyers in this Agreement shall be a first priority security interest,
prior and superior to the rights of all third parties existing on or arising
after the date of this Agreement, subject to the Permitted Liens.

      

      (b)           All
of the Equipment, Inventory and Goods owned by Company or the Subsidiary is
located in the states as specified on Schedule I attached
hereto (except to the extent any such Equipment, Inventory or Goods is in
transit or located at a Company or the Subsidiary’s job site in the ordinary
course of business).  Except as disclosed on Schedule I, none of
the Collateral is in the possession of any bailee, warehousemen, processor or
consignee.  Schedule I discloses
such Company and the Subsidiary’s names as of the date hereof as it appears in
official filings in the state or province, as applicable, of its incorporation,
formation or organization, the type of entity of both the Company and the
Subsidiary (including corporation, partnership, limited partnership or limited
liability company), organizational identification number issued by both Company
and the Subsidiary state of incorporation, formation or organization (or a
statement that no such number has been issued), both Company and the Subsidiary
state or province, as applicable, of incorporation, formation or organization
and the chief place of business, chief executive officer and the office where
both Company and the Subsidiary keep their respective books and
records.  Both the Company and the Subsidiary have only one state or
province, as applicable, of incorporation, formation or
organization.  Company and the Subsidiary do not do business and have
not done business during the past five (5) years under any trade name or
fictitious business name except as disclosed on Schedule I attached
hereto.

      

      3.           Provisions Applicable to the
Collateral. The parties agree that the following provisions shall be
applicable to the Collateral:

      

      (a) The
Company and the Subsidiary each covenants and agrees that at all times during
the term of this Agreement it shall keep accurate and complete books and records
concerning the Collateral that is now owned by the Company and the
Subsidiary.

      

      
        
           

        

        
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      (b) The
Buyers or their representatives shall have the right, upon reasonable prior
written notice to the Company and during the regular business hours of the
Company, to examine and inspect the Collateral and to review the books and
records of the Company or the Subsidiary concerning the Collateral that is now
owned or acquired after the date of this Agreement by the Company or the
Subsidiary and to copy the same and make excerpts therefrom; provided, however,
that from and after the occurrence of an Event of Default, the rights of
inspection and entry shall be subject to the requirements of the
Code.

      

      (c) The
Company and the Subsidiary shall at all times during the term of this Agreement
keep the Equipment, Inventory and Fixtures that are now owned by the Company or
the Subsidiary in the states set forth on Schedule I or, upon
written notice to the Buyers, at such other locations for which the Buyers have
filed financing statements, and in no other states without 20 days’ prior
written notice to the Buyers, except that the Company or the Subsidiary shall
have the right until one or more Events of Default shall occur to sell or
otherwise dispose of Inventory and other Collateral in the ordinary course of
business.

      

      (d) The
Company shall not move the location of its principal executive offices without
prior written notification to the Buyers.

      

      (e)
Without the prior written consent of the Buyers, the Company and the Subsidiary
shall not sell, lease or otherwise dispose of any Equipment or Fixtures, except
in the ordinary course of their business.

      

      (f)
Promptly upon request of the Buyers from time to time, the Company or the
Subsidiary shall furnish the Buyers with such information and documents
regarding the Collateral and the Company’s or the Subsidiary’s financial
condition, business, assets or liabilities, at such times and in such form and
detail as the Buyers may reasonably request.

      

      (g)
During the term of this Agreement, the Company or the Subsidiary shall deliver
to the Buyers, upon their reasonable, written request from time to time, without
limitation,

      

      (i) all
invoices and customer statements rendered to account debtors, documents,
contracts, chattel paper, instruments and other writings pertaining to the
Company’s or the Subsidiary’s contracts or the performance of the Company’s or
the Subsidiary’s contracts,

      

      (ii)
evidence of the Company’s or the Subsidiary’s accounts and statements showing
the aging, identification, reconciliation and collection thereof,
and

      

      (iii)
reports as to the Company’s or the Subsidiary’s inventory and sales, shipment,
damage or loss thereof, all of the foregoing to be certified by authorized
officers or other employees of the Company or the Subsidiary, and Company or the
Subsidiary shall take all necessary action during the term of this Agreement to
perfect any and all security interests in favor of Company or the Subsidiary and
to assign to Buyers all such security interests in favor of Company or the
Subsidiary.

      
        
           

        

        
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      (h)
Notwithstanding the security interest in the Collateral granted to and created
in favor of the Buyers under this Agreement, the Company or the Subsidiary shall
have the right until one or more Events of Default shall occur, at their own
cost and expense, to collect the Accounts and the Chattel Paper and to enforce
their contract rights.

      

      (i) After
the occurrence of an Event of Default, the Agent shall have the right, in its
sole discretion, to give notice of the Buyers’ security interest to account
debtors obligated to the Company or the Subsidiary and to take over and direct
collection of the Accounts and the Chattel Paper, to notify such account debtors
to make payment directly to the Buyers and to enforce payment of the Accounts
and the Chattel Paper and to enforce the Company’s or the Subsidiary’s contract
rights. It is understood and agreed by the Company and the Subsidiary that Agent
shall have no liability whatsoever under this subsection (i) except for their
own gross negligence or willful misconduct.

      

      (j) At
all times during the term of this Agreement, Company and the Subsidiary shall
promptly deliver to the Agent, upon their written request, all existing leases,
and all other leases entered into by Company or the Subsidiary from time to
time, covering any Equipment or Inventory (“Leased Inventory”) which is leased
to third parties.

      

      (l)
Company and the Subsidiary shall not change its name, entity status, federal
taxpayer identification number, or provincial organizational or registration
number, or the state under which it is organized without the prior written
consent of the Buyers, which consent shall not be unreasonably
withheld.

      

      (m)
Company and the Subsidiary shall not close any of its Deposit Accounts or open
any new or additional Deposit Accounts without first giving the Buyers at least
fifteen (15) days prior written notice thereof.

      

      (n) The
Company and the Subsidiary shall cooperate with the Buyers, at Company’s
expense, in perfecting Buyers’ security interest in any of the
Collateral.

      

      (o) Agent
may file any necessary financing statements and other documents Agent deems
necessary in order to perfect Buyers’ security interest without Company’s or the
Subsidiary’s signature. Company and the Subsidiary grant to Agent a power of
attorney for the sole purpose of executing any documents on behalf of Company or
the Subsidiary which Agent deems necessary to perfect Buyers’ security interest.
Such power, coupled with an interest, is irrevocable.

      

      4.           Actions with Respect to
Accounts. The Company irrevocably makes, constitutes and appoints Agent
its true and lawful attorney-in-fact with power to sign its name and to take any
of the following actions after the occurrence and prior to the cure of an Event
of Default, at any time without notice to the Company or the Subsidiary and at
the Company’s expense:

      
        
           

        

        
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      (a)
Verify the validity and amount of, or any other matter relating to, the
Collateral by mail, telephone, telegraph or otherwise;

      

      (b)
Notify all account debtors that the Accounts have been assigned to the Buyers
and that the Buyers has a security interest in the Accounts;

      

      (c)
Direct all account debtors to make payment of all Accounts directly to the
Buyers;

      

      (d) Take
control in any reasonable manner of any cash or non-cash items of payment or
proceeds of Accounts;

      

      (e)
Receive, open and dispose of all mail addressed to the Company or the
Subsidiary;

      

      (f) Take
control in any manner of any rejected, returned, stopped in transit or
repossessed goods relating to Accounts;

      

      (g)
Enforce payment of and collect any Accounts, by legal proceedings  or
otherwise, and for such purpose the Buyers may:

      

      (1)
Demand payment of any Accounts or direct any account debtors to make payment of
Accounts directly to the Buyers;

      

      (2)
Receive and collect all monies due or to become due to the Company or the
Subsidiary pursuant to the Accounts;

      

      (3)
Exercise all of the Company’s or the Subsidiary’s rights and remedies with
respect to the collection of Accounts;

      

      (4)  Settle,
adjust, compromise, extend, renew, discharge or release Accounts in a
commercially reasonable manner;

      

      (5) Sell
or assign Accounts on such reasonable terms, for such reasonable amounts and at
such reasonable times as the Buyers reasonably deems advisable;

      

      (6)
Prepare, file and sign the Company’s or the Subsidiary’s name or names on any
Proof of Claim or similar documents in any proceeding filed under federal or
state bankruptcy, insolvency, reorganization or other similar law as to any
account debtor;

      

      
        
           

        

        
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      (7)
Prepare, file and sign the Company’s or the Subsidiary’s name or names on any
notice of lien, claim of mechanic’s lien, assignment or satisfaction of lien or
mechanic’s lien or similar document in connection with the
Collateral;

      

      (8)
Endorse the name of the Company or the Subsidiary upon any chattel papers,
documents, instruments, invoices, freight bills, bills of lading or similar
documents or agreements relating to Accounts or goods pertaining to Accounts or
upon any checks or other media of payment or evidence of a security interest
that may come into the Buyers possession;

      

      (9) Sign
the name or names of the Company or the Subsidiary to verifications of Accounts
and notices of Accounts sent by account debtors to the Company ; or

      

      (10) Take
all other actions that the Buyers reasonably deems to be necessary or desirable
to protect the Company’s or the Subsidiary’s interest in the
Accounts.

      

      (h)
Negotiate and endorse any Document in favor of the Buyers or its designees,
covering Inventory which constitutes Collateral, and related documents for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing in the name(s) of Company or the Subsidiary any instrument which
the Buyers may reasonably deem necessary or advisable to accomplish the purpose
hereof. Without limiting the generality of the foregoing, the Agent shall have
the right and power to receive, endorse and collect checks and other orders for
the payment of money made payable to the Company or the Subsidiary representing
any payment or reimbursement made under, pursuant to or with respect to, the
Collateral or any part thereof and to give full discharge to the same. The
Company and each Subsidiary does hereby ratify and approve all acts of said
attorney and agrees that said attorney shall not be liable for any acts of
commission or omission, nor for any error of judgment or mistake of fact or law,
except for said attorney’s own gross negligence or willful misconduct. This
power, being coupled with an interest, is irrevocable until the Notes are paid
in full (at which time this power shall terminate in full) and the Company and
the Subsidiary shall have performed all of their obligations under this
Agreement. The Company and the Subsidiary each further agrees to use its
reasonable efforts to assist the Agent in the collection and enforcement of the
Accounts and will not hinder, delay or impede the Buyers in any manner in its
collection and enforcement of the Accounts.

      

      5.           Preservation and Protection
of Security Interest. Each of the Company and the Subsidiary represents
and warrants that it has, and covenants and agrees that at all times during the
term of this Agreement, it will have, good and marketable title to the
Collateral now owned by it free and clear of all mortgages, pledges, liens,
security interests, charges or other encumbrances, except for the Permitted
Liens and those junior in right of payment and enforcement to that of the Buyers
or in favor of the Buyers, and shall defend the Collateral against the claims
and demands of all persons, firms and entities whomsoever. Assuming Buyers has
taken all required action to perfect a security

      
        
           

        

        
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      interest
in the Collateral as provided by the Code, each of the Company and the
Subsidiary represents and warrants that as of the date of this Agreement the
Buyers have, and that all times in the future the Buyers will have, a first
priority perfected security interest in the Collateral, prior and superior to
the rights of all third parties in the Collateral existing on the date of this
Agreement or arising after the date of this Agreement, subject to the Permitted
Liens. Except as permitted by this Agreement, each of the Company and the
Subsidiary covenants and agrees that it shall not, without the prior written
consent of the Buyers (i) borrow against the Collateral or any portion of the
Collateral from any other person, firm or entity, except for borrowings which
are subordinate to the rights of the Buyers, (ii) grant or create or permit to
attach or exist any mortgage, pledge, lien, charge or other encumbrance, or
security interest on, of or in any of the Collateral or any portion of the
Collateral except those in favor of the Buyers or the Permitted Liens, (iii)
permit any levy or attachment to be made against the Collateral or any portion
of the Collateral, except those subject to the Permitted Liens, or (iv) permit
any financing statements to be on file with respect to any of the Collateral,
except financing statements in favor of the Buyers or those with respect to the
Permitted Liens. The Company and the Subsidiary shall faithfully preserve and
protect the Buyers’ security interest in the Collateral and shall, at their own
cost and expense, cause, or assist the Buyers to cause that security interest to
be perfected and continue perfected so long as the Notes or any portion of the
Notes are outstanding, unpaid or executory. For purposes of the perfection of
the Buyers’ security interest in the Collateral in accordance with the
requirements of this Agreement, the Company and the Subsidiary shall from time
to time at the request of the Buyers file or record, or cause to be filed or
recorded, such instruments, documents and notices, including assignments,
financing statements and continuation statements, as the Buyers may reasonably
deem necessary or advisable from time to time in order to perfect and continue
perfected such security interest. The Company and the Subsidiary shall do all
such other acts and things and shall execute and deliver all such other
instruments and documents, including further security agreements, pledges,
endorsements, assignments and notices, as the Buyers in their discretion may
reasonably deem necessary or advisable from time to time in order to perfect and
preserve the priority of such security interest as a first lien security
interest in the Collateral prior to the rights of all third persons, firms and
entities, subject to the Permitted Liens and except as may be otherwise provided
in this Agreement. The Company and the Subsidiary agree that a carbon,
photographic or other reproduction of this Agreement or a financing statement is
sufficient as a financing statement and may be filed instead of the
original.

      

      6.           Insurance. Risk of
loss of, damage to or destruction of the Equipment, Inventory and Fixtures is on
the Company and the Subsidiary. The Company and the Subsidiary shall insure the
Equipment, Inventory and Fixtures against such risks and casualties and in such
amounts and with such insurance companies as is ordinarily carried by
corporations or other entities engaged in the same or similar businesses and
similarly situated or as otherwise reasonably required by the Buyers in their
sole discretion. In the event of loss of, damage to or destruction of the
Equipment, Inventory or Fixtures during the term of this Agreement, the Company
and the Subsidiary shall promptly notify Buyers of such loss, damage or
destruction. At the reasonable request of the Buyers, each of the Company’s and
the Subsidiary’s policies of insurance shall contain loss payable clauses in
favor of the Company or the Subsidiary and the Buyers as their respective
interests may appear and shall contain provision for notification of the Buyers
thirty (30) days prior to the termination of such policy. At the request of the
Buyers, copies of all such policies, or certificates evidencing the same, shall
be deposited with the Buyers. If the Company or the Subsidiary fail to effect
and keep in full force and effect such insurance or fail to pay the premiums
when due, the Buyers may (but shall not be obligated to) do so for the account
of the Company or the Subsidiary and add the cost thereof to the Notes. The
Buyers are irrevocably appointed attorney-in-fact of the Company and the
Subsidiary to endorse any draft or check which may be payable to the Company in
order to collect the proceeds of such insurance. Unless an Event of Default has
occurred and is continuing, the Buyers will turn over to the Company or the
Subsidiary the proceeds of any such insurance collected by it on the condition
that the Company or the Subsidiary apply such proceeds either (i) to the repair
of damaged Equipment, Inventory or Fixtures, or (ii) to the replacement of
destroyed Equipment, Inventory or Fixtures with Equipment, Inventory or Fixtures
of the same or similar type and function and of at least equivalent value (in
the sole judgment of the Buyers), provided such replacement Equipment, Fixtures
or Inventory is made subject to the security interest created by this Agreement
and constitutes a first lien security interest in the Equipment, Inventory and
Fixtures subject only to Permitted Liens and other security interests permitted
under this Agreement, and is perfected by the filing of financing statements in
the appropriate public offices and the taking of such other action as may be
necessary or desirable in order to perfect and continue perfected such security
interest. Any balance of insurance proceeds remaining in the possession of the
Buyers after payment in full of the Notes shall be paid over to the Company or
the Subsidiary or their order.

      
        
           

        

        
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      7.           Maintenance and
Repair. The Company and the Subsidiary shall maintain the Equipment,
Inventory and Fixtures, and every portion thereof, in good condition, repair and
working order, reasonable wear and tear alone excepted, and shall pay and
discharge all taxes, levies and other impositions assessed or levied thereon as
well as the cost of repairs to or maintenance of the same. If the Company and
the Subsidiary fail to do so, the Buyers may (but shall not be obligated to) pay
the cost of such repairs or maintenance and such taxes, levies or impositions
for the account of the Company or the Subsidiary and add the amount of such
payments to the Notes.

      

      8.           Preservation of Rights
Against Third Parties; Preservation of Collateral in Buyers’s Possession.
Until such time as the Buyers exercise their right to effect direct collection
of the Accounts and the Chattel Paper and to effect the enforcement of the
Company’s or the Subsidiary’s contract rights, the Company and the Subsidiary
assume full responsibility for taking any and all commercially reasonable steps
to preserve rights in respect of the Accounts and the Chattel Paper and their
contracts against prior parties. The Buyers shall be deemed to have exercised
reasonable care in the custody and preservation of such of the Collateral as may
come into its possession from time to time if the Buyers take such action for
that purpose as the Company or the Subsidiary shall request in writing, provided
that such requested action shall not, in the judgment of the Buyers, impair the
Buyers’ security interest in the Collateral or its right in, or the value of,
the Collateral, and provided further that the Buyers receive such written
request in sufficient time to permit the Buyers to take the requested
action.

      
        
           

        

        
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      9.           Events of Default and
Remedies.

      

      (a) If
any one or more of the Events of Default shall occur or shall exist, the Agent
may then or at any time thereafter, so long as such default shall continue,
foreclose the lien or security interest in the Collateral in any way permitted
by law, or upon fifteen (15) days prior written notice to the Company or the
Subsidiary, sell any or all Collateral at private sale at any time or place in
one or more sales, at such price or prices and upon such terms, either for cash
or on credit, as the Agent, in its sole discretion, may elect, or sell any or
all Collateral at public auction, either for cash or on credit, as the Agent, in
its sole discretion, may elect, and at any such sale, the Agent may bid for and
become the purchaser of any or all such Collateral. Pending any such action the
Agent may liquidate the Collateral.

      

      (b) If
any one or more of the Events of Default shall occur or shall exist, the Agents
may then, or at any time thereafter, so long as such default shall continue,
grant extensions to, or adjust claims of, or make compromises or settlements
with, debtors, guarantors or any other parties with respect to Collateral or any
securities, guarantees or insurance applying thereon, without notice to or the
consent of the Company or the Subsidiary, without affecting the Company’s or the
Subsidiary’s liability under this Agreement or the Notes. Each of the Company
and the Subsidiary waives notice of acceptance, of nonpayment, protest or notice
of protest of any Accounts or Chattel Paper, any of its contract rights or
Collateral and any other notices to which the Company or the Subsidiary may be
entitled.

      

      (c) If
any one or more of the Events of Default shall occur or shall exist and be
continuing, then in any such event, the Agent shall have such additional rights
and remedies in respect of the Collateral or any portion thereof as are provided
by the Code and such other rights and remedies in respect thereof which it may
have at law or in equity or under this Agreement, including without limitation
the right to enter any premises where Equipment, Inventory and/or Fixtures are
located and take possession and control thereof without demand or notice and
without prior judicial hearing or legal proceedings, which the Company and the
Subsidiary expressly waive.

      

      (d) The
Agent shall apply the Proceeds of any sale or liquidation of the Collateral,
and, subject to Section 5, any Proceeds received by the Agent from insurance,
first to the payment of the reasonable costs and expenses incurred by the Agent
in connection with such sale or collection, including without limitation
reasonable attorneys’ fees and legal expenses, second to the payment of the
Notes, pro rata , whether on account of principal or interest or otherwise as
the Agent, in its sole discretion, may elect, and then to pay the balance, if
any, to the Company or the Subsidiary or as otherwise required by law. If such
Proceeds are insufficient to pay the amounts required by law, the Company shall
be liable for any deficiency.

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      

      (e) Upon
the occurrence of any Event of Default, the Company or the Subsidiary shall
promptly upon written demand by the Agent assemble the Equipment, Inventory and
Fixtures and make them available to the Buyers at a place or places to be
designated by the Agent The rights of the Agent under this paragraph to have the
Equipment, Inventory and Fixtures assembled and made available to it is of the
essence of this Agreement and the Agent may, at its election, enforce such right
by an action in equity for injunctive relief or specific performance, without
the requirement of a bond.

      

      10.           Defeasance.
Notwithstanding anything to the contrary contained in this Agreement upon
payment and performance in full of the Notes, this Agreement shall terminate and
be of no further force and effect and the Buyers shall thereupon terminate their
security interest in the Collateral. Until such time, however, this Agreement
shall be binding upon and inure to the benefit of the parties, their successors
and assigns, provided that, without the prior written consent of the Buyers, the
Company and the Subsidiary may not assign this Agreement or any of its rights
under this Agreement or delegate any of its duties or obligations under this
Agreement and any such attempted assignment or delegation shall be null and
void. This Agreement is not intended and shall not be construed to obligate the
Buyers to take any action whatsoever with respect to the Collateral or to incur
expenses or perform or discharge any obligation, duty or disability of the
Company.

      

      11.           Miscellaneous.

      

      (a) The
provisions of this Agreement are intended to be severable. If any provision of
this Agreement shall for any reason be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability of such provision in any other
jurisdiction or any other provision of this Agreement in any
jurisdiction.

      

      (b) No
failure or delay on the part of the Buyers in exercising any right, remedy,
power or privilege under this Agreement and the Notes shall operate as a waiver
thereof or of any other right, remedy, power or privilege of the Buyers under
this Agreement, the Notes or any of the other Loan Documents; nor shall any
single or partial exercise of any such right, remedy, power or privilege
preclude any other right, remedy, power or privilege or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges of the Buyers under this Agreement, the Notes
and the other Loan Documents are cumulative and not exclusive of any rights or
remedies which they may otherwise have.

      

      (c)
Unless otherwise provided herein, all demands, notices, consents, service of
process, requests and other communications hereunder shall be in writing and
shall be delivered in person or by overnight courier service, or mailed by
certified mail, return receipt requested, addressed:

      

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      If to
Company or the Subsidiary:

      

      Nevada Gold Holdings, Inc.

      1640 Terrace Way

      Walnut Creek, CA
94957

      Attention:    David Rector

      Telephone:   (925) 938-0406

      Facsimile:

      

      with a
copy to:

      

      Gottbetter & Partners,
LLP

      488
Madison Avenue, 12th
Floor

      New York,
NY  10022

      Attn:
Adam S. Gottbetter, Esq.

      Facsimile:
(212) 400-6901

      

      If to
Agent:

       

      

      Attn:

      Facsimile:

      

      with a
copy to:

      

      

      

      Attn:

      Facsimile:

      

      Any such
notice shall be effective (a) when delivered, if delivered by hand delivery
or overnight courier service, or (b) five (5) days after deposit in the
United States mail, as applicable.

       

      (d) The
section headings contained in this Agreement are for reference purposes only and
shall not control or affect its construction or interpretation in any
respect.

      

      (e)
Unless the context otherwise requires, all terms used in this Agreement which
are defined by the Code shall have the meanings stated in the Code.

      

      (f) The
Code shall govern the settlement, perfection and the effect of attachment and
perfection of the Buyers’ security interest in the Collateral, and the rights,
duties and obligations of the Buyers, the Company and the Subsidiary with
respect to the Collateral. This Agreement shall be deemed to be a contract under
the laws of the State of New York and the execution and delivery of this
Agreement and, to the extent not inconsistent with the preceding sentence, the
terms and provisions of this Agreement shall be governed by and construed in
accordance with the laws of that State.

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      

      (g) This
Agreement may be executed in several counterparts, each of which shall be deemed
an original but all of which shall constitute one and the same instrument. All
of such counterparts shall be read as though one, and they shall have the same
force and effect as though all the signers had signed a single
page.

      

      [SIGNATURE PAGE
FOLLOWS]

      

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, and intending to be legally bound, the parties have executed
and delivered this Security Agreement as of the day and year set forth at the
beginning of this Security Agreement.

      

      
        	
                 

                BUYER:

                 

                 

                 

                 

                By:______________________

                Name:

                Title:

                 

                BUYER:

                 

                 

                 

                 

                By:______________________

                Name:

                Title:

                 

                BUYER:

                 

                 

                By:______________________

                Name:

                Title:

                 

              	
                 

                COMPANY:

                 

                NEVADA
      GOLD HOLDINGS, INC.

                 

                 

                By:______________________

                Name: David
      Rector

                Title:   Chief
      Executive Officer

                 

                SUBSIDIARY

                 

                NEVADA
      GOLD ENTERPRISES, INC.

                 

                 

                By:______________________

                Name: David
      Mathewson

                Title:   Chief
      Executive Officer

                 

              

      

      Agreed
and Accepted by:

      

      Agent:

      

      

      By:______________________

      Name:

      Title:

      

      

      

      

      [SIGNATURE
PAGE TO SECURITY AGREEMENT]

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Schedule
I

      

      

      
        	
                 
      

              	
                1.

              	
                States
      in which Collateral is located:

              

      

      

      Nevada
Gold Holdings, Inc. - Nevada.

      Nevada
Gold Enterprises, Inc. - Nevada.

      

      
        	
                 
      

              	
                2.

              	
                Company
      and Subsidiary Information:

              

      

      

      
        	
                Company

              	
                Subsidiary

              
	
                 

                Nevada
      Gold Holdings, Inc.

                a
      Delaware corporation

                DE
      ID No.: [_____________]

                Executive
      Offices Address:

                1640
      Terrace Way

                Walnut
      Creek, CA 94957

                 

                Chief
      Executive Officer: David Rector

                 

                Foreign
      Corporation Qualification Numbers:

                 

              	
                 

                Nevada
      Gold Enterprises, Inc.

                a
      Nevada corporation

                NV
      ID No.: [_____________]

                Executive
      Offices Address:

                1265
      Mesa Drive

                Fernley,
      NV  89408

                 

                Chief
      Executive Officer: David Mathewson

                 

                Foreign
      Corporation Qualification Numbers:EXHIBIT
10.12

       

      NEVADA
GOLD HOLDINGS, INC.

       

      2008
EQUITY INCENTIVE PLAN

       

      1.           Purposes of the
Plan.  The purposes of this Plan are:

       

      
        	
                 
      

              	
                ·

              	
                to
      attract and retain the best available personnel for positions of
      substantial responsibility,

              

      

       

      
        	
                 
      

              	
                ·

              	
                to
      provide incentives to individuals who perform services to the Company,
      and

              

      

       

      
        	
                 
      

              	
                ·

              	
                to
      promote the success of the Company’s
business.

              

      

       

      The Plan
permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance
Units, Performance Shares and other stock or cash awards as the Administrator
may determine.

       

      2.           Definitions.  As
used herein, the following definitions will apply:

       

      (a)           “Administrator” means
the Board or any of its Committees as will be administering the Plan, in
accordance with Section 4 of the Plan.

       

      (b)           “Affiliate” means any corporation or any other
entity (including, but not limited to, partnerships and joint ventures)
controlling, controlled by, or under common control with the
Company.

       

      (c)           “Applicable Laws”
means the requirements relating to the administration of equity-based awards
under U.S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is listed
or quoted and the applicable laws of any foreign country or jurisdiction where
Awards are, or will be, granted under the Plan.

       

      (d)           “Award” means, individually or collectively, a
grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock
Units, Performance Units, Performance Shares and other stock or cash awards as
the Administrator may determine.

       

      (e)           “Award
Agreement” means the
written or electronic agreement setting forth the terms and provisions
applicable to each Award granted under the Plan.  The Award Agreement
is subject to the terms and conditions of the Plan.

       

      (f)           “Board” means the
Board of Directors of the Company.

       

      (g)           “Change in Control”
means the occurrence of any of the following events:

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        	
                 
      

              	
                (i)

              	
                A change in the ownership of the
      Company which occurs on the date that any
      one person, or more than one person acting as a group, (“Person”) acquires ownership of the stock
      of the Company that, together with the stock held by such Person,
      constitutes more than 50% of the total voting power of the stock of the
      Company; provided, however, that for purposes of this subsection (i), the
      acquisition of additional stock by any one Person, who is considered to
      own more than 50% of the total voting power of the stock of the Company
      will not be considered a Change in Control;
  or

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                A change in the effective control
      of the Company which occurs on the date that a majority of members of the
      Board is replaced during any twelve (12) month period by Directors whose
      appointment or election is not endorsed by a majority of the members of
      the Board prior to the date of the appointment or election.  For
      purposes of this clause (ii), if any Person is considered to effectively
      control the Company, the acquisition of additional control of the Company
      by the same Person will not be considered a Change in Control;
      or

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                A change in the ownership of a
      substantial portion of the Company’s assets which occurs on the date that
      any Person acquires (or has acquired during the twelve (12) month period
      ending on the date of the most recent acquisition by such person or
      persons) assets from the Company that have a total gross fair market value
      equal to or more than 50% of the total gross fair market value of all of
      the assets of the Company immediately prior to such acquisition or
      acquisitions; provided, however, that for purposes of this subsection
      (iii), the following will not constitute a change in the ownership of a
      substantial portion of the Company’s assets: (A) a transfer to an entity
      that is controlled by the Company’s stockholders immediately after the
      transfer, or (B) a transfer of assets by the Company to: (1) a stockholder
      of the Company (immediately before the asset transfer) in exchange for or
      with respect to the Company’s stock, (2) an entity, 50% or more of the
      total value or voting power of which is owned, directly or indirectly, by
      the Company, (3) a Person, that owns, directly or indirectly, 50% or more
      of the total value or voting power of all the outstanding stock of the
      Company, or (4) an entity, at least 50% of the total value or voting power
      of which is owned, directly or indirectly, by a Person described in this
      subsection (iii)(B)(3).  For purposes of this subsection (iii),
      gross fair market value means the value of the assets of the Company, or
      the value of the assets being disposed of, determined without regard to
      any liabilities associated with such
  assets.

              

      

       

      For
purposes of this Section 2(g), persons will be considered to be acting as a
group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business transaction
with the Company.

       

      (h)           “Code” means the
Internal Revenue Code of 1986, as amended.  Any reference to a section of the Code
herein will be a reference to any successor or amended section of the
Code.

       

      (i)           “Committee” means a committee of Directors or of
other individuals satisfying Applicable Laws appointed by the Board in
accordance with Section 4 hereof.

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

       

      (j)           “Common Stock” means
the common stock of the Company.

       

      (k)           “Company” means Nevada
Gold Holdings, Inc., a Delaware corporation, or any successor
thereto.

       

      (l)           “Consultant” means any
person, including an advisor, engaged by the Company or a Parent, Subsidiary or
Affiliate to render services to such entity.

       

      (m)           “Determination
Date” means the latest
possible date that will not jeopardize the qualification of an Award granted
under the Plan as “performance-based compensation” under Section 162(m) of the
Code.

       

      (n)           “Director” means a
member of the Board.

       

      (o)           “Disability” means
total and permanent disability as defined in Section 22(e)(3) of the
Code, provided that in the case of
Awards other than Incentive Stock Options, the Administrator in its discretion
may determine whether a permanent and total disability exists in accordance with
uniform and non-discriminatory standards adopted by the Administrator from time
to time.

       

      (p)           “Employee” means any
person, including Officers and Directors, employed by the Company or any Parent,
Subsidiary or Affiliate of the Company.  Neither service as a Director
nor payment of a director’s fee by the Company will be sufficient to constitute
“employment” by the Company.

       

      (q)           “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

       

      (r)           “Exchange
Program” means a program
under which (i) outstanding Awards are surrendered or cancelled in exchange for
Awards of the same type (which may have lower exercise prices and different
terms), Awards of a different type, and/or cash, (ii) Participants would have
the opportunity to transfer any outstanding Awards to a financial institution or
other person or entity selected by the Administrator, and/or (iii) the exercise
price of an outstanding Award is reduced.  The Administrator will
determine the terms and conditions of any Exchange Program in its sole
discretion.

       

      (s)           “Fair Market Value”
means, as of any date, the value
of the Common Stock as the Administrator may determine in good faith by
reference to the closing price of such stock on any established stock exchange
or a national market system on the day of determination if the Common Stock is
so listed on any established stock exchange or a national market
system.  If the Common Stock is not listed on any established stock
exchange or a national market system, the value of the Common Stock will be
determined as the Administrator may determine in good faith.

       

      (t)           “Fiscal
Year” means the fiscal year
of the Company.

       

      (u)           “Incentive Stock
Option” means an Option that by its terms qualifies and is otherwise
intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated
thereunder.

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

       

      (v)           “Nonstatutory Stock
Option” means an Option that by its terms does not qualify or is not
intended to qualify as an Incentive Stock Option.

       

      (w)           “Officer” means a
person who is an officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated
thereunder.

       

      (x)           “Option” means a stock
option granted pursuant to Section 6 of the Plan.

       

      (y)           “Parent” means a
“parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.

       

      (z)           “Participant” means the holder of an outstanding
Award.

       

      (aa)           “Performance Goals”
will have the meaning set forth in Section 11 of the Plan.

       

      (bb)           “Performance
Period” means any Fiscal
Year of the Company or such other period as determined by the Administrator in
its sole discretion.

       

      (cc)           “Performance
Share” means an Award
denominated in Shares which may be earned in whole or in part upon attainment of
Performance Goals or other vesting criteria as the Administrator may determine
pursuant to Section 10.

       

      (dd)           “Performance
Unit” means an Award which
may be earned in whole or in part upon attainment of Performance Goals or other
vesting criteria as the Administrator may determine and which may be settled for
cash, Shares or other securities or a combination of the foregoing pursuant to
Section 10.

       

      (ee)           “Period of
Restriction” means the
period during which the transfer of Shares of Restricted Stock are subject to
restrictions and therefore, the Shares are subject to a substantial risk of
forfeiture.  Such restrictions may be based on the passage of time,
the achievement of target levels of performance, or the occurrence of other
events as determined by the Administrator.

       

      (ff)           “Plan” means this 2008
Equity Incentive Plan.

       

      (gg)           “Restricted Stock”
means Shares issued pursuant to an
Award of Restricted Stock under Section 8 of the Plan, or issued pursuant
to the early exercise of an Option.

       

      (hh)           “Restricted
Stock Unit” means a
bookkeeping entry representing an amount equal to the Fair Market Value of one
Share, granted pursuant to Section 9.  Each Restricted Stock Unit
represents an unfunded and unsecured obligation of the
Company.

       

      (ii)           “Rule 16b-3” means
Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when
discretion is being exercised with respect to the Plan.

       

      (jj)           “Section 16(b)”
means Section 16(b) of the Exchange Act.

       

      (kk)           “Service Provider”
means an Employee, Director, or Consultant.

      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

       

      (ll)           “Share” means a share
of the Common Stock, as adjusted in accordance with Section 14 of the
Plan.

       

      (mm)      
“Stock Appreciation
Right” means an Award, granted alone or in connection with an Option,
that pursuant to Section 7 is designated as a Stock Appreciation
Right.

       

      (nn)           “Subsidiary” means a
“subsidiary corporation,” whether now or hereafter existing, as defined in
Section 424(f) of the Code.

       

      3.           Stock Subject to the Plan.

       

      (a)           Subject
to the provisions of Section 14 of the Plan, the maximum aggregate number
of Shares that may be awarded and sold under the Plan is 4,000,000 Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.

       

      (b)           Lapsed
Awards.  If an Award expires or becomes unexercisable without
having been exercised in full, or, with respect to Restricted Stock, Restricted
Stock Units, Performance Shares or Performance Units, is forfeited to or
repurchased by the Company, the unpurchased Shares (or for Awards other than
Options and Stock Appreciation Rights, the forfeited or repurchased Shares)
which were subject thereto will become available for future grant or sale under
the Plan (unless the Plan has terminated).  Upon exercise of a Stock Appreciation
Right settled in Shares, the gross number of Shares covered by the portion of
the Award so exercised will cease to be available under the
Plan.  Shares that have actually been issued under the Plan
under any Award will not be returned to the Plan and will not become available
for future distribution under the Plan; provided, however, that if unvested
Shares of Restricted Stock, Restricted Stock Units, Performance Shares or
Performance Units are repurchased by the Company or are forfeited to the
Company, such Shares will become available for future grant under the
Plan.  Shares used to pay the tax and/or exercise price of an Award
will become available for future grant or sale under the Plan.  To the
extent an Award under the Plan is paid out in cash rather than Shares, such cash
payment will not result in reducing the number of Shares available for issuance
under the Plan.  Notwithstanding the foregoing provisions
of this Section 3(b), subject to adjustment provided in
Section 14, the maximum number of Shares that may be issued upon the
exercise of Incentive Stock Options will equal the aggregate Share number stated
in Section 3(a), plus, to the extent allowable under Section 422 of
the Code, any Shares that become available for issuance under the Plan under
this Section 3(b).

       

      (c)           Share
Reserve.  The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as will be sufficient
to satisfy the requirements of the Plan.

       

      4.           Administration of the
Plan.

       

      (a)           Procedure.

       

      
        	
                 
      

              	
                (i)

              	
                Multiple
      Administrative Bodies.  Different Committees with respect
      to different groups of Service Providers may administer the
      Plan.

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                Section 162(m).  To
      the extent that the Administrator determines it to be desirable to qualify
      Awards granted hereunder as “performance-based compensation” within the
      meaning of Section 162(m) of the Code, the Plan will be administered
      by a Committee of two (2) or more “outside directors” within the meaning
      of Section 162(m) of the
Code.

              

      

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

       

      
        	
                 
      

              	
                (iii)

              	
                Rule
      16b-3.  To the extent desirable to qualify transactions
      hereunder as exempt under Rule 16b-3, the transactions contemplated
      hereunder will be structured to satisfy the requirements for exemption
      under Rule 16b-3.

              

      

       

      
        	
                 
      

              	
                (iv)

              	
                Other
      Administration.  Other than as provided above, the Plan
      will be administered by (A) the Board or (B) a Committee, which
      committee will be constituted to satisfy Applicable
  Laws.

              

      

       

      (b)           Powers of the
Administrator.  Subject to the provisions of the Plan, and in
the case of a Committee, subject to the specific duties delegated by the Board
to such Committee, the Administrator will have the authority, in its
discretion:

       

      
        	
                 
      

              	
                (i)

              	
                to
      determine the Fair Market Value;

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                to
      select the Service Providers to whom Awards may be granted
      hereunder;

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                to
      determine the terms and conditions, not inconsistent with the terms of the
      Plan, of any Award granted
hereunder;

              

      

       

      
        	
                 
      

              	
                (iv)

              	
                to determine the terms and
      conditions of any and to institute an Exchange
    Program;

              

      

       

      
        	
                 
      

              	
                (v)

              	
                to
      construe and interpret the terms of the Plan and Awards granted pursuant
      to the Plan;

              

      

       

      
        	
                 
      

              	
                (vi)

              	
                to
      prescribe, amend and rescind rules and regulations relating to the Plan,
      including rules and regulations relating to sub-plans established for the
      purpose of satisfying applicable foreign
laws;

              

      

       

      
        	
                 
      

              	
                (vii)

              	
                to
      modify or amend each Award (subject to Section 19(c) of the
      Plan);

              

      

       

      
        	
                 
      

              	
                               
      (viii)

              	
                to
      authorize any person to execute on behalf of the Company any instrument
      required to effect the grant of an Award previously granted by the
      Administrator;

              

      

       

      
        	
                 
      

              	
                (ix)

              	
                to
      allow a Participant to defer the receipt of the payment of cash or the
      delivery of Shares that would otherwise be due to such Participant under
      an Award pursuant to such procedures as the Administrator may determine;
      and

              

      

       

      
        	
                 
      

              	
                (x)

              	
                to
      make all other determinations deemed necessary or advisable for
      administering the Plan.

              

      

       

      (c)           Effect of
Administrator’s Decision.  The Administrator’s decisions,
determinations, and interpretations will be final and binding on all
Participants and any other holders of Awards.

      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

       

      5.           Eligibility.  Nonstatutory
Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation
Rights, Performance Units, Performance Shares, and such other cash or stock
awards as the Administrator determines may be granted to Service
Providers.  Incentive Stock Options may be granted only to
Employees.

       

      6.           Stock
Options.

       

      (a)           Limitations.

       

      
        	
                 
      

              	
                (i)

              	
                Each
      Option will be designated in the Award Agreement as either an Incentive
      Stock Option or a Nonstatutory Stock Option.  However,
      notwithstanding such designation, to the extent that the aggregate Fair
      Market Value of the Shares with respect to which Incentive Stock Options
      are exercisable for the first time by the Participant during any calendar
      year (under all plans of the Company and any Parent or Subsidiary) exceeds
      $100,000 (U.S.), such Options will be treated as Nonstatutory Stock
      Options.  For purposes of this Section 6(a), Incentive
      Stock Options will be taken into account in the order in which they were
      granted.  The Fair Market Value of the Shares will be determined
      as of the time the Option with respect to such Shares is
      granted.

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                The
      Administrator will have complete discretion to determine the number of
      Shares subject to an Option granted to any
  Participant.

              

      

       

      (b)           Term of
Option.  The Administrator will determine the term of each
Option in its sole discretion;
provided, however, that the term will be no more than ten (10) years from the
date of grant thereof.  Moreover, in the case of an Incentive
Stock Option granted to a Participant who, at the time the Incentive Stock
Option is granted, owns stock representing more than 10% of the total combined
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Incentive Stock Option will be five (5) years from the date of
grant or such shorter term as may be provided in the Award
Agreement.

       

      (c)           Option Exercise Price and
Consideration.

       

      
        	
                 
      

              	
                (i)

              	
                Exercise
      Price.  The per share exercise price for the Shares to be
      issued pursuant to exercise of an Option will be determined by the
      Administrator, but will be
      no less than 100% of the Fair Market Value per Share on the date of
      grant.  In addition, in the case of an Incentive Stock
      Option granted to an Employee who, at the time the Incentive Stock Option
      is granted, owns stock representing more than 10% of the voting power of
      all classes of stock of the Company or any Parent or Subsidiary, the per
      Share exercise price will be no less than 110% of the Fair Market Value
      per Share on the date of grant.  Notwithstanding the foregoing
      provisions of this Section 6(c), Options may be granted with a per Share
      exercise price of less than 100% of the Fair Market Value per Share on the
      date of grant pursuant to a transaction described in, and in a manner
      consistent with, Section 424(a) of the
  Code.

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                Waiting Period and
      Exercise Dates.  At the time an Option is granted, the
      Administrator will fix the period within which the Option may be exercised
      and will determine any conditions that must be satisfied before the Option
      may be exercised.

              

      

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

       

      
        	
                 
      

              	
                (iii)

              	
                Form of
      Consideration.  The Administrator will determine the
      acceptable form(s) of consideration for exercising an Option, including
      the method of payment, to the extent permitted by Applicable
      Laws.

              

      

       

      (d)           Exercise of
Option.

       

      
        	
                 
      

              	
                (i)

              	
                Procedure for
      Exercise; Rights as a Stockholder.  Any Option granted
      hereunder will be exercisable according to the terms of the Plan and at
      such times and under such conditions as determined by the Administrator
      and set forth in the Award Agreement.  An Option may not be
      exercised for a fraction of a
Share.

              

      

       

      An Option
will be deemed exercised when the Company receives: (i) notice of exercise
(in such form as the Administrator specifies from time to time) from the person
entitled to exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised (together with any applicable
withholding taxes).  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 14 of the Plan.

       

      
        	
                 
      

              	
                (ii)

              	
                Termination of
      Relationship as a Service Provider.  If a Participant
      ceases to be a Service Provider, other than upon the Participant’s
      termination as the result of the Participant’s death or Disability, the
      Participant may exercise his or her Option within thirty (30) days of
      termination, or such longer period of time as is specified in the Award
      Agreement to the extent that the Option is vested on the date of
      termination (but in no event later than the expiration of the term of such
      Option as set forth in the Award Agreement).  In the absence of
      a specified time in the Award Agreement, the Option will remain
      exercisable for three (3) months following the Participant’s
      termination.  Unless otherwise provided by the Administrator, if
      on the date of termination the Participant is not vested as to his or her
      entire Option, the Shares covered by the unvested portion of the Option
      will revert to the Plan.  If after termination the Participant
      does not exercise his or her Option within the time specified by the
      Administrator, the Option will terminate, and the Shares covered by such
      Option will revert to the Plan.

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                Disability of
      Participant.  If a Participant ceases to be a Service
      Provider as a result of the Participant’s Disability, the Participant may
      exercise his or her Option within six (6) months of termination, or such
      longer period of time as is specified in the Award Agreement to the extent
      the Option is vested on the date of termination (but in no event later
      than the expiration of the term of such Option as set forth in the Award
      Agreement).  In the absence of a specified time in the Award
      Agreement, the Option will remain exercisable for twelve (12) months
      following the Participant’s termination.  Unless otherwise
      provided by the Administrator, if on the date of termination the
      Participant is not vested as to his or her entire Option, the Shares
      covered by the unvested portion of the Option will revert to the
      Plan.  If after termination the Participant does not exercise
      his or her Option within the time specified herein, the Option will
      terminate, and the Shares covered by such Option will revert to the
      Plan.

              

      

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

       

      
        	
                 
      

              	
                (iv)

              	
                Death of
      Participant.  If a Participant dies while a Service
      Provider, the Option may be exercised within six (6) months following the
      Participant’s death, or within such longer period of time as is specified
      in the Award Agreement to the extent that the Option is vested on the date
      of death (but in no event may the option be exercised later than the
      expiration of the term of such Option as set forth in the Award
      Agreement), by the Participant’s designated beneficiary, provided such
      beneficiary has been designated prior to Participant’s death in a form
      acceptable to the Administrator.  If no such beneficiary has
      been designated by the Participant, then such Option may be exercised by
      the personal representative of the Participant’s estate or by the
      person(s) to whom the Option is transferred pursuant to the Participant’s
      will or in accordance with the laws of descent and
      distribution.  In the absence of a specified time in the Award
      Agreement, the Option will remain exercisable for twelve (12) months
      following Participant’s death.  Unless otherwise provided by the
      Administrator, if at the time of death Participant is not vested as to his
      or her entire Option, the Shares covered by the unvested portion of the
      Option will immediately revert to the Plan.  If the Option is
      not so exercised within the time specified herein, the Option will
      terminate, and the Shares covered by such Option will revert to the
      Plan.

              

      

       

      7.           Stock Appreciation
Rights.

       

      (a)           Grant of Stock Appreciation
Rights.  Subject to the terms and conditions of the Plan, a
Stock Appreciation Right may be granted to Service Providers at any time and
from time to time as will be determined by the Administrator, in its sole
discretion.

       

      (b)           Number of
Shares.  The Administrator will have complete discretion to
determine the number of Stock Appreciation Rights granted to any
Participant.

       

      (c)           Exercise Price and Other
Terms.  The Administrator, subject to the provisions of the
Plan, will have complete discretion to determine the terms and conditions of
Stock Appreciation Rights granted under the Plan, provided, however, that the exercise price will be not less than
100% of the Fair Market Value of a Share on the date of
grant.

       

      (d)           Stock Appreciation Right
Agreement.  Each Stock Appreciation Right grant will be
evidenced by an Award Agreement that will specify the exercise price, the term
of the Stock Appreciation Right, the conditions of exercise, and such other
terms and conditions as the Administrator, in its sole discretion, will
determine.

       

      (e)           Expiration of Stock
Appreciation Rights.  A Stock Appreciation Right granted under
the Plan will expire upon the date determined by the Administrator, in its sole
discretion, and set forth in the Award Agreement; provided, however, that the term will
be no more than ten (10) years from the date of grant
thereof.  Notwithstanding the foregoing, the rules of
Section 6(d) also will apply to Stock Appreciation Rights.

      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      

       

      (f)           Payment of Stock
Appreciation Right Amount.  Upon exercise of a Stock
Appreciation Right, a Participant will be entitled to receive payment from the
Company in an amount determined by multiplying:

       

      
        	
                 
      

              	
                (i)

              	
                The
      difference between the Fair Market Value of a Share on the date of
      exercise over the exercise price;
times

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                The
      number of Shares with respect to which the Stock Appreciation Right is
      exercised.

              

      

       

      At the
discretion of the Administrator, the payment upon Stock Appreciation Right
exercise may be in cash, in Shares of equivalent value, or in some combination
thereof.

       

      8.           Restricted
Stock.

       

      (a)           Grant of Restricted
Stock.  Subject to the terms and provisions of the Plan, the
Administrator, at any time and from time to time, may grant Shares of Restricted
Stock to Service Providers in such amounts as the Administrator, in its sole
discretion, will determine.

       

      (b)           Restricted Stock
Agreement.  Each Award of Restricted Stock will be evidenced by
an Award Agreement that will specify the Period of Restriction, the number of
Shares granted, and such other terms and conditions as the Administrator, in its
sole discretion, will determine.

       

      (c)           Transferability.  Except
as provided in this Section 8, Shares of Restricted Stock may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction.

       

      (d)           Other
Restrictions.  The Administrator, in its sole discretion, may
impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate.

       

      (e)           Removal of
Restrictions.  Except as otherwise provided in this Section 8,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan will be released from escrow as soon as practicable after the last day of
the Period of Restriction.  The Administrator, in its discretion,
may accelerate the time at which any restrictions will lapse or be
removed.

       

      (f)           Voting
Rights.  During the Period of Restriction, Service Providers
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares, unless the Administrator determines
otherwise.

       

      (g)           Dividends and Other
Distributions.  During the Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement.  If any such dividends or
distributions are paid in Shares, the Shares will be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

       

      (h)           Return of Restricted Stock
to Company.  On the date set forth in the Award Agreement, the
Restricted Stock for which restrictions have not lapsed will revert to the
Company and again will become available for grant under the Plan.

       

      (i)           Section 162(m) Performance
Restrictions.  For purposes of qualifying grants of Restricted
Stock as “performance-based compensation” under Section 162(m) of the Code,
the Administrator, in its discretion, may set restrictions based upon the
achievement of Performance Goals.  The Performance Goals will be set
by the Administrator on or before the Determination Date.  In granting
Restricted Stock which is intended to qualify under Section 162(m) of the
Code, the Administrator will follow any procedures determined by it from time to
time to be necessary or appropriate to ensure qualification of the Award under
Section 162(m) of the Code (e.g., in determining the Performance
Goals).

       

      9.           Restricted Stock
Units.

       

      (a)           Grant.  Restricted Stock Units may
be granted at any time and from time to time as determined by the
Administrator.  Each Restricted Stock Unit grant will be evidenced by
an Award Agreement that will specify such other terms and conditions as the
Administrator, in its sole discretion, will determine, including all terms,
conditions, and restrictions related to the grant, the number of Restricted
Stock Units and the form of payout, which, subject to Section 9(d), may be
left to the discretion of the Administrator.

       

      (b)           Vesting Criteria and Other
Terms.  The Administrator will set vesting criteria in its
discretion, which, depending on the extent to which the criteria are met, will
determine the number of Restricted Stock Units that will be paid out to the
Participant.  After the
grant of Restricted Stock Units, the Administrator, in its sole discretion, may
reduce or waive any restrictions for such Restricted Stock
Units.  Each Award of Restricted Stock Units will be evidenced
by an Award Agreement that will specify the vesting criteria, and such other
terms and conditions as the Administrator, in its sole discretion will
determine.  The
Administrator, in its discretion, may accelerate the time at which any
restrictions will lapse or be removed.

       

      (c)           Earning
Restricted Stock Units.  Upon meeting the applicable
vesting criteria, the Participant will be entitled to receive a payout as
specified in the Award Agreement.

       

      (d)           Form and
Timing of Payment.  Payment of earned
Restricted Stock Units will be made as soon as practicable after the date(s) set
forth in the Award Agreement.  The Administrator, in its sole
discretion, may pay earned Restricted Stock Units in cash, Shares, or a
combination thereof.  Shares represented by Restricted Stock Units
that are fully paid in cash again will be available for grant under the
Plan.

       

      (e)           Cancellation.  On the date set forth in
the Award Agreement, all unearned Restricted Stock Units will be forfeited to
the Company.

       

      (f)           Section 162(m) Performance
Restrictions.  For purposes of qualifying grants of Restricted
Stock Units as “performance-based compensation” under Section 162(m) of the
Code, the Administrator, in its discretion, may set restrictions based upon the
achievement of Performance Goals.  The Performance Goals will be set
by the Administrator on or before the Determination Date.  In granting
Restricted Stock Units which are intended to qualify under Section 162(m)
of the Code, the Administrator will follow any procedures determined by it from
time to time to be necessary or appropriate to ensure qualification of the Award
under Section 162(m) of the Code (e.g., in determining the Performance
Goals).

      
        
           

        

        
          -11-

          
            

          

        

        
           

        

      

       

      10.           Performance Units and
Performance Shares.

       

      (a)           Grant of Performance
Units/Shares.  Performance Units and Performance Shares may be
granted to Service Providers at any time and from time to time, as will be
determined by the Administrator, in its sole discretion.  The
Administrator will have complete discretion in determining the number of
Performance Units/Shares granted to each Participant.

       

      (b)           Value of Performance
Units/Shares.  Each Performance Unit will have an initial value
that is established by the Administrator on or before the date of
grant.  Each Performance Share will have an initial value equal to the
Fair Market Value of a Share on the date of grant.

       

      (c)           Performance Objectives and
Other Terms.  The Administrator will set performance objectives
or other vesting provisions.  The Administrator may set vesting
criteria based upon the achievement of Company-wide, business unit, or
individual goals (including, but not limited to, continued employment), or any
other basis determined by the Administrator in its discretion.  Each
Award of Performance Units/Shares will be evidenced by an Award Agreement that
will specify the Performance Period, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.

       

      (d)           Earning of Performance
Units/Shares.  After the applicable Performance Period has
ended, the holder of Performance Units/Shares will be entitled to receive a
payout of the number of Performance Units/Shares earned by the Participant over
the Performance Period, to be determined as a function of the extent to which
the corresponding performance objectives or other vesting provisions have been
achieved.  After the
grant of a Performance Unit/Share, the Administrator, in its sole discretion,
may reduce or waive any performance objectives or other vesting provisions for
such Performance Unit/Share.

       

      (e)           Form and Timing of Payment
of Performance Units/Shares.  Payment of earned Performance
Units/Shares will be made as soon as practicable after the expiration of the
applicable Performance Period.  The Administrator, in its sole
discretion, may pay earned Performance Units/Shares in the form of cash, in
Shares (which have an aggregate Fair Market Value equal to the value of the
earned Performance Units/Shares at the close of the applicable Performance
Period) or in a combination thereof.

       

      (f)           Cancellation of Performance
Units/Shares.  On the date set forth in the Award Agreement,
all unearned or unvested Performance Units/Shares will be forfeited to the
Company, and again will be available for grant under the Plan.

       

      (g)           Section 162(m) Performance
Restrictions.  For purposes of qualifying grants of Performance
Units/Shares as “performance-based compensation” under Section 162(m) of
the Code, the Administrator, in its discretion, may set restrictions based upon
the achievement of Performance Goals.  The Performance Goals will be
set by the Administrator on or before the Determination Date.  In
granting Performance Units/Shares which are intended to qualify under
Section 162(m) of the Code, the Administrator will follow any procedures
determined by it from time to time to be necessary or appropriate to ensure
qualification of the Award under Section 162(m) of the Code (e.g., in
determining the Performance Goals).

      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

       

      11.           Performance-Based
Compensation Under Code Section 162(m).

       

      (a)           General.  If the Administrator, in
its discretion, decides to grant an Award intended to qualify as
“performance-based compensation” under Code Section 162(m), the provisions of
this Section 11 will control over any contrary provision in the Plan; provided,
however, that the Administrator may in its discretion grant Awards that are not
intended to qualify as “performance-based compensation” under Section 162(m) of
the Code to such Participants that are based on Performance Goals or other
specific criteria or goals but that do not satisfy the requirements of this
Section 11.

       

      (b)           Performance
Goals.  The granting and/or vesting of Awards of Restricted
Stock, Restricted Stock Units, Performance Shares and Performance Units and
other incentives under the Plan may be made subject to the attainment of
performance goals relating to one or more business criteria within the meaning
of Code Section 162(m) and may provide for a targeted level or levels of
achievement (“Performance Goals”)
including (i) earnings per
Share, (ii) operating cash flow, (iii) operating income,
(iv) profit after-tax, (v) profit before-tax, (vi) return on
assets, (vii) return on equity, (viii) return on sales, (ix) revenue,
and (x) total shareholder return.  Any Performance Goals
may be used to measure the performance of the Company as a whole or a business
unit of the Company and may be measured relative to a peer group or
index.  The Performance Goals may differ from Participant to
Participant and from Award to Award.  Prior to the Determination Date,
the Administrator will determine whether any significant element(s) will be
included in or excluded from the calculation of any Performance Goal with
respect to any Participant.

       

      (c)           Procedures.  To the extent necessary to
comply with the performance-based compensation provisions of Code Section
162(m), with respect to any Award granted subject to Performance Goals, within
the first twenty-five percent (25%) of the Performance Period, but in no event
more than ninety (90) days following the commencement of any Performance Period
(or such other time as may be required or permitted by Code Section 162(m)), the
Administrator will, in writing, (i) designate one or more Participants to whom
an Award will be made, (ii) select the Performance Goals applicable to the
Performance Period, (iii) establish the Performance Goals, and amounts of such
Awards, as applicable, which may be earned for such Performance Period, and
(iv) specify the relationship between Performance Goals and the amounts of
such Awards, as applicable, to be earned by each Participant for such
Performance Period.  Following the completion of each Performance
Period, the Administrator will certify in writing whether the applicable
Performance Goals have been achieved for such Performance Period.  In
determining the amounts earned by a Participant, the Administrator will have the
right to reduce or eliminate (but not to increase) the amount payable at a given
level of performance to take into account additional factors that the
Administrator may deem relevant to the assessment of individual or corporate
performance for the Performance Period.  A Participant will be
eligible to receive payment pursuant to an Award for a Performance Period only
if the Performance Goals for such period are achieved.

       

      (d)           Additional
Limitations.  Notwithstanding any other
provision of the Plan, any Award which is granted to a Participant and is
intended to constitute qualified performance based compensation under Code
Section 162(m) will be subject to any additional limitations set forth in the
Code (including any amendment to Section 162(m)) or any regulations and ruling
issued thereunder that are requirements for qualification as qualified
performance-based compensation as described in Section 162(m) of the Code, and
the Plan will be deemed amended to the extent necessary to conform to such
requirements.

      
        
           

        

        
          -13-

          
            

          

        

        
           

        

      

       

      12.           Leaves of
Absence.  Unless
the Administrator provides otherwise, vesting of Awards granted hereunder will
be suspended during any unpaid leave of absence.  A Service Provider
will not cease to be an Employee in the case of (i) any leave of absence
approved by the Company, or (ii) transfers between locations of the Company
or between the Company, its Parent, or any Subsidiary.  For purposes
of Incentive Stock Options, no such leave may exceed three (3) months, unless
reemployment upon expiration of such leave is guaranteed by statute or
contract.  If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, then six (6) months and one day
following the commencement of such leave any Incentive Stock Option held by the
Participant will cease to be treated as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option.

       

      13.           Transferability of
Awards.  Unless determined otherwise by the Administrator, an
Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or by the laws of descent or distribution
and may be exercised, during the lifetime of the Participant, only by the
Participant.  If the Administrator makes an Award transferable, such
Award may only be transferred (i) by will, (ii) by the laws of descent and
distribution, (iii) to a revocable trust, or (iii) as permitted by Rule 701 of
the Securities Act of 1933, as amended.

       

      14.           Adjustments; Dissolution or
Liquidation; Merger or Change in Control.

       

      (a)           Adjustments.  In the event that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the Shares occurs,
the Administrator, in order to prevent diminution or enlargement of the benefits
or potential benefits intended to be made available under the Plan, will adjust
the number and class of Shares that may be delivered under the Plan and/or the
number, class, and price of Shares covered by each outstanding Award, and
the numerical Share limits set forth in Sections 3, 6, 7, 8, 9, and 10.

       

      (b)           Dissolution or
Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as
soon as practicable prior to the effective date of such proposed
transaction.  To the extent it has not been previously exercised, an
Award will terminate immediately prior to the consummation of such proposed
action.

       

      (c)           Change in
Control.  In the
event of a merger or Change in Control, each outstanding Award will be treated
as the Administrator determines, including, without limitation, that each Award
will be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation (the
“Successor
Corporation”).  The Administrator will
not be required to treat all Awards similarly in the
transaction.

      
        
           

        

        
          -14-

          
            

          

        

        
           

        

      

       

      In the event that the Successor
Corporation does not assume or substitute for the Award, the Participant will
fully vest in and have the right to exercise all of his or her outstanding
Options and Stock Appreciation Rights, including Shares as to which such Awards
would not otherwise be vested or exercisable, all restrictions on Restricted
Stock will lapse, and, with respect to Restricted Stock Units, Performance
Shares and Performance Units, all Performance Goals or other vesting criteria
will be deemed achieved at target levels and all other terms and conditions
met.  In addition, if an Option or Stock Appreciation Right is not
assumed or substituted for in the event of a Change in Control, the
Administrator will notify the Participant in writing or electronically that the
Option or Stock Appreciation Right will be fully vested and exercisable for a
period of time determined by the Administrator in its sole discretion, and the
Option or Stock Appreciation Right will terminate upon the expiration of such
period.

       

      For the purposes of this
subsection (c), an Award
will be considered assumed if, following the Change in Control, the Award
confers the right to purchase or receive, for each Share subject to the Award
immediately prior to the Change in Control, the consideration (whether stock,
cash, or other securities or property) or, in the case of a Stock Appreciation
Right upon the exercise of which the Administrator determines to pay cash or a
Performance Share or Performance Unit which the Administrator can determine to
pay in cash, the fair market value of the consideration received in the merger
or Change in Control by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the Change in Control is not solely common stock of the Successor
Corporation, the Administrator may, with the consent of the Successor
Corporation, provide for the consideration to be received upon the exercise of
an Option or Stock Appreciation Right or upon the payout of a Performance Share
or Performance Unit, for each Share subject to such Award (or in the case of
Performance Units, the number of implied shares determined by dividing the value
of the Performance Units by the per share consideration received by holders of
Common Stock in the Change in Control), to be solely common stock of the
Successor Corporation equal in fair market value to the per share consideration
received by holders of Common Stock in the Change in
Control.

       

      Notwithstanding anything in this Section
14(c) to the contrary, an Award that vests, is earned or paid-out upon the
satisfaction of one or more Performance Goals will not be considered assumed if
the Company or its successor modifies any of such Performance Goals without the
Participant’s consent; provided, however, a modification to such Performance
Goals only to reflect the Successor Corporation’s post-Change in Control
corporate structure will not be deemed to invalidate an otherwise valid Award
assumption.

       

      15.           Tax
Withholding

       

      (a)           Withholding
Requirements.  Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company will have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, local, foreign or other
taxes (including the Participant’s FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).

       

      (b)           Withholding
Arrangements.  The Administrator, in its
sole discretion and pursuant to such procedures as it may specify from time to
time, may permit a Participant to satisfy such tax withholding obligation, in
whole or in part by (without limitation) (i) paying cash, (ii) electing to
have the Company withhold otherwise deliverable cash or Shares having a Fair
Market Value equal to the minimum amount required to be withheld, (iii)
delivering to the Company already-owned Shares having a Fair Market Value equal
to the amount required to be withheld, or (iv) selling a sufficient number
of Shares otherwise deliverable to the Participant through such means as the
Administrator may determine in its sole discretion (whether through a broker or
otherwise) equal to the amount required to be withheld.  The amount of
the withholding requirement will be deemed to include any amount which the
Administrator agrees may be withheld at the time the election is made, not to
exceed the amount determined by using the maximum federal, state or local
marginal income tax rates applicable to the Participant with respect to the
Award on the date that the amount of tax to be withheld is to be
determined.  The Fair Market Value of the Shares to be withheld or
delivered will be determined as of the date that the taxes are required to be
withheld.

      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

       

      16.           No Effect on
Employment or Service.  Neither the Plan nor any
Award will confer upon a Participant any right with respect to continuing the
Participant’s relationship as a Service Provider with the Company, nor will they
interfere in any way with the Participant’s right or the Company’s right to
terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.

       

      17.           Date of
Grant.  The date of grant of an Award will be, for all
purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the
Administrator.  Notice of the determination will be provided to each
Participant within a reasonable time after the date of such grant.

       

      18.           Term of
Plan.  Subject to Section 22 of the Plan, the Plan
will become effective upon its adoption by the Board.  It will
continue in effect for a term of ten (10) years unless terminated earlier under
Section 19 of
the Plan

       

      19.           Amendment and Termination of
the Plan.

       

      (a)           Amendment and
Termination.  The Administrator may at any time amend, alter,
suspend or terminate the Plan.

       

      (b)           Stockholder
Approval.  The Company will obtain stockholder approval of any
Plan amendment to the extent necessary and desirable to comply with Applicable
Laws.

       

      (c)           Effect of Amendment or
Termination.  No amendment, alteration, suspension, or
termination of the Plan will impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the
Company.  Termination of the Plan will not affect the Administrator’s
ability to exercise the powers granted to it hereunder with respect to Awards
granted under the Plan prior to the date of such termination.

       

      20.           Conditions Upon Issuance of
Shares.

       

      (a)           Legal
Compliance.  Shares will not be issued pursuant to the exercise
of an Award unless the exercise of such Award and the issuance and delivery of
such Shares will comply with Applicable Laws and will be further subject to the
approval of counsel for the Company with respect to such
compliance.

       

       

      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

       

       

      (b)           Investment
Representations.  As a condition to the exercise of an Award,
the Company may require the person exercising such Award to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.

       

      21.           Inability to Obtain
Authority.  The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, will relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority will not have
been obtained.

       

      22.           Stockholder
Approval.  The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted.  Such stockholder approval will be obtained in the manner and
to the degree required under Applicable Laws.

      
        
           

        

        
          -17-

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