Document:

2006 Stock Plan

    IELEMENT
      CORPORATION

    

    2006
      STOCK PLAN

     

    1.  Purposes
      of the Plan.
      The
      purposes of this 2006 Stock Plan are:

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

     

    b.  to
      provide additional incentive to Employees, Directors and Consultants,
      and

     

    c.  to
      promote the success of the Company’s business

     

    Options
      granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
      Options, as determined by the Administrator at the time of grant. Stock Purchase
      Rights may also be granted under the Plan.

     

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

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

     

    b.  “Applicable
      Laws” means the requirements relating to the administration of stock option
      plans 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 Options or Stock Purchase Rights are, or will be, granted under the
      Plan.

     

    c.  “Board”
      means the Board of Directors of the Company.

     

    d.  “Change
      in Control” means the occurrence of any of the following events:

     

    i.  Any
      “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
      becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act),
      directly or indirectly, of securities of the Company representing fifty percent
      (50%) or more of the total voting power represented by the Company’s then
      outstanding voting securities; or

     

    ii.  The
      consummation of the sale or disposition by the Company of all or substantially
      all of the Company’s assets;

     

    iii.  A
      change
      in the composition of the Board occurring within a two-year period, as a result
      of which fewer than a majority of the directors are Incumbent  
Directors.  “Incumbent
      Directors” means directors who either (A) are Directors as of the effective date
      of the Plan, or (B) are elected, or nominated for election, to the Board with
      the affirmative votes of at least a majority of the Incumbent Directors at
      the
      time of such election or nomination (but will not include an individual whose
      election or nomination is in connection with an actual or threatened proxy
      contest relating to the election of directors to the Company); or

     

    iv.  The
      consummation of a merger or consolidation of the Company with any other
      corporation, other than a merger or consolidation which would result in the
      voting
      securities of the Company outstanding immediately prior thereto continuing
      to
      represent (either by remaining outstanding or by being converted into
voting
      securities of the surviving entity or its parent) at least fifty percent (50%)
      of the total voting power represented by the voting securities of the Company
      or
such
      surviving entity or its parent outstanding immediately after such merger or
      consolidation.

     

    e.  “Code”
      means the Internal Revenue Code of 1986, as amended.

     

    f.  “Committee”
      means a committee of Directors appointed by the Board in accordance with Section
      4 of the Plan.

     

    g.  “Common
      Stock” means the common stock of the Company.

     

    h.  “Company”
      means IElement Corporation, a Nevada corporation.

     

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

     

    j.  “Director”
      means a member of the Board.

     

    k.  “Disability”
      means total and permanent disability as defined in Section 22(e)(3) of the
      Code.

     

    l.  “Employee”
      means any person, including Officers and Directors, employed by the Company
      or
      any Parent or Subsidiary of the Company. A Service Provider shall 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, any Subsidiary, or any successor. For purposes of Incentive Stock
      Options, no such leave may exceed ninety days, 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 three (3) months following the 91st day of such leave any
      Incentive Stock Option held by the Optionee shall cease to be treated as an
      Incentive Stock Option and shall be treated for tax purposes as a
      Non­statutory Stock Option. Neither service as a Director nor payment of a
      director’s fee by the Company shall be sufficient to constitute “employment” by
      the Company.

     

    m.  “Exchange
      Act” means the Securities Exchange Act of 1934, as amended.

     

    n.  “Fair
      Market Value” means, as of any date, the value of Common Stock determined as
      follows:

    

    i.  If
      the
      Common Stock is listed on any established stock exchange or a national market
      system, including without limitation the Over the Counter Bulletin Board, Nasdaq
      National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
      Fair Market Value shall be the closing sales price for such stock (or the
      closing bid, if no sales were reported) as quoted on such exchange or system
      on
      the day of determination, as reported in The Wall Street Journal or such other
      source as the Administrator deems reliable;

     

    ii.  If
      the
      Common Stock is regularly quoted by a recognized securities dealer but selling
      prices are not reported, the Fair Market Value of a Share of Common Stock shall
      be the mean between the high bid and low asked prices for the Common Stock
      on
      the day of deter­mination, as reported in The Wall Street Journal or such
      other source as the Administrator deems reliable; or

     

    iii.  In
      the
      absence of an established market for the Common Stock, the Fair Market Value
      shall be determined in good faith by the Administrator.

     

    o.  “Incentive
      Stock Option” means an Option intended to qualify as an incentive stock option
      within the meaning of Section 422 of the Code and the regulations promulgated
      thereunder.

     

    p.  “Inside
      Director” means a Director who is an Employee.

     

    q.  “Nonstatutory
      Stock Option” means an Option not intended to qualify as an Incentive Stock
      Option.

     

    r.  “Notice
      of Grant” means a written or electronic notice evidencing certain terms and
      conditions of an individual Option or Stock Purchase Right grant. The Notice
      of
      Grant is part of the Option Agreement.

     

    s.  “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.

     

    t.  “Option”
      means a stock option granted pursuant to the Plan.

     

    u.  “Option
      Agreement” means an agreement between the Company and an Optionee evidencing the
      terms and conditions of an individual Option grant. The Option Agreement
      is subject to the terms and conditions of the Plan.

     

    v.  “Option
      Exchange Program” means a program whereby outstanding Options are surrendered in
      exchange for Options with a lower exercise price.

     

    w.  “Optioned
      Stock” means the Common Stock subject to an Option or Stock Purchase
      Right.

     

    x.  “Optionee”
      means the holder of an outstanding Option or Stock Purchase Right granted under
      the Plan.

     

    y.  “Outside
      Director” means a Director who is not an Employee.

     

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

     

    aa.  “Plan”
      means this 2006 Stock Plan.

     

    bb.  “Restricted
      Stock” means shares of Common Stock acquired pursuant to a grant of Stock
      Purchase Rights under Section 11 of the Plan.

     

    cc.  “Restricted
      Stock Purchase Agreement” means a written agreement between the Company and the
      Optionee evidencing the terms and restrictions applying to stock purchased
      under
      a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject
      to
      the terms and conditions of the Plan and the Notice of Grant.

     

    dd.  “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.

     

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

     

    ff.  “Service
      Provider” means an Employee, Director or Consultant.

     

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

     

    hh.  “Stock
      Purchase Right” means the right to purchase Common Stock pursuant to Section 11
      of the Plan, as evidenced by a Notice of Grant.

     

    ii.  “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.
      Subject
      to the provisions of Section 14 of the Plan, the maximum aggregate number of
      Shares that may be optioned and sold under the Plan is 41,000,000 Shares plus
      (a) any Shares which have been reserved but not issued under the Company’s 2001
      Employee Stock Compensation Plan (the “2001 Plan”) as of the date of stockholder
      approval of this Plan, and (b) any Shares returned to the 2001 Plan as a result
      of termination of options or repurchase of Shares issued under the 2001
      Plan.

     

    If
      an
      Option or Stock Purchase Right expires or becomes unexercisable without having
      been exercised in full, or is surrendered pursuant to an Option Exchange
      Program, the unpurchased Shares which were subject thereto shall become
      available for future grant or sale under the Plan (unless the Plan has
      terminated); provided, however, that Shares that have actually been issued
      under
      the Plan, whether upon exercise of an Option or Right, shall not be returned
      to
      the Plan and shall not become available for future distribution under the Plan,
      except that if Shares of Restricted Stock are repurchased by the Company at
      their original purchase price, such Shares shall become available for future
      grant under 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 Options
      granted hereunder as “performance-based compensation” within the meaning of
      Section 162(m) of the Code, the Plan shall be administered by a Committee of
      two
      or more “outside directors” within the meaning of Section 162(m) of the
      Code.

     

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

     

    iv.  Other
      Administration.
      Other
      than as provided above, the Plan shall be administered by (A) the Board or
      (B) a
      Committee, which committee shall 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
      shall have the authority, in its discretion:

     

    i.  to
      determine the Fair Market Value;

     

    ii.  to
      select
      the Service Providers to whom Options and Stock Purchase Rights may be granted
      hereunder;

     

    iii.  to
      determine the number of shares of Common Stock to be covered by each Option
      and
      Stock Purchase Right granted hereunder;

     

    iv.  to
      approve forms of agreement for use under the Plan;

     

    v.  to
      determine the terms and conditions, not inconsistent with the terms of the
      Plan,
      of any Option or Stock Purchase Right granted hereunder. Such terms and
      conditions include, but are not limited to, the exercise price, the time or
      times when Options or Stock Purchase Rights may be exercised (which may be
      based
      on performance criteria), any vesting acceleration or waiver of forfeiture
      restrictions, and any restriction or limitation regarding any Option or Stock
      Purchase Right or the shares of Common Stock relating thereto, based in each
      case on such factors as the Administrator, in its sole discretion, shall
      determine;

     

    vi.  to
      reduce
      the exercise price of any Option or Stock Purchase Right to the then current
      Fair Market Value if the Fair Market Value of the Common Stock covered by such
      Option or Stock Purchase Right shall have declined since the date the Option
      or
      Stock Purchase Right was granted;

     

    vii.  to
      institute an Option Exchange Program;

     

    viii.  to
      construe and interpret the terms of the Plan and awards granted pursuant to
      the
      Plan;

     

    ix.  to
      prescribe, amend and rescind rules and regulations relating to the Plan,
      including rules and regulations relating to subplans established for the purpose
      of satisfying applicable foreign laws;

     

    x.  to
      modify
      or amend each Option or Stock Purchase Right (subject to Section 16(c) of the
      Plan), including the discretionary authority to extend the post-termination
      exercisability period of Options longer than is otherwise provided for in the
      Plan;

     

    xi.  to
      allow
      Optionees to satisfy withholding tax obligations by electing to have the Company
      withhold from the Shares to be issued upon exercise of an Option or Stock
      Purchase Right that number of Shares having a Fair Market Value equal to the
      minimum amount required to be withheld. The Fair Market Value of the Shares
      to
      be withheld shall be determined on the date that the amount of tax to be
      withheld is to be determined. All elections by an Optionee to have Shares
      withheld for this purpose shall be made in such form and under such conditions
      as the Administrator may deem necessary or advisable;

     

    xii.  to
      authorize any person to execute on behalf of the Company any instru­ment
      required to effect the grant of an Option or Stock Purchase Right previously
      granted by the Administrator;

     

    xiii.  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 shall be
      final and binding on all Optionees and any other holders of Options or Stock
      Purchase Rights.

     

    5.  Eligibility.
      Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service
      Providers. Incentive Stock Options may be granted only to
      Employees.

     

    6.  Limitations.

     

    a.  Each
      Option shall be designated in the Option 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 Optionee during any calendar year (under all plans of the
      Company and any Parent or Subsidiary) exceeds $100,000, such Options shall
      be
      treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
      Incentive Stock Options shall be taken into account in the order in which they
      were granted. The Fair Market Value of the Shares shall be determined as of
      the
      time the Option with respect to such Shares is granted.

     

    b.  Neither
      the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee
      any right with respect to continuing the Optionee’s relationship as a Service
      Provider with the Company, nor shall they interfere in any way with the
      Optionee’s right or the Company’s right to terminate such relationship at any
      time, with or without cause.

     

    7.  Term
      of Plan.
      Subject
      to Section 20 of the Plan, the Plan shall become effective upon its adoption
      by
      the Board. It shall continue in effect for a term of ten (10) years unless
      terminated earlier under Section 16 of the Plan.

     

    8.  Term
      of Option.
      The
      term of each Option shall be stated in the Option Agreement. In the case of
      an
      Incentive Stock Option, the term shall be ten (10) years from the date of grant
      or such shorter term as may be provided in the Option Agreement. Moreover,
      in
      the case of an Incentive Stock Option granted to an Optionee who, at the time
      the Incentive Stock Option is granted, owns stock representing more than ten
      percent (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
      shall be five (5) years from the date of grant or such shorter term as may
      be
      provided in the Option Agreement.

     

    9.  Option
      Exercise Price and Consideration.

     

    a.  Exercise
      Price.
      The per
      share exercise price for the Shares to be issued pursuant to exercise of an
      Option shall be determined by the Administrator.

     

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

     

    c.  Form
      of Consideration.
      The
      Administrator shall determine the acceptable form of consideration for
      exercising an Option, including the method of payment. In the case of an
      Incentive Stock Option, the Administrator shall determine the acceptable form
      of
      consideration at the time of grant. Such consideration may consist entirely
      of:

     

    i.  cash;

     

    ii.  check;

     

    iii.  promissory
      note;

     

    iv.  other
      Shares which, in the case of Shares acquired directly or indirectly from the
      Company, (A) have been owned by the Optionee for more than six (6) months on
      the
      date of surrender, and (B) have a Fair Market Value on the date of surrender
      equal to the aggregate exercise price of the Shares as to which said Option
      shall be exercised;

     

    v.  consideration
      received by the Company under a cashless exercise program implemented by the
      Company in connection with the Plan;

     

    vi.  a
      reduction in the amount of any Company liability to the Optionee, including
      any
      liability attributable to the Optionee’s participation in any Company-sponsored
      deferred compensation program or arrangement;

     

    vii.  any
      combination of the foregoing methods of payment; or

     

    viii.  such
      other consideration and method of payment for the issuance of Shares to the
      extent permitted by Applicable Laws.

     

    10.  Exercise
      of Option.

     

    a.  Procedure
      for Exercise; Rights as a Stockholder.
      Any
      Option granted here­under shall 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 Option Agreement. Unless the Administrator
      provides otherwise, vesting of Options granted hereunder shall be suspended
      during any unpaid leave of absence. An Option may not be exercised for a
      fraction of a Share.

     

        An
      Option
      shall be deemed exercised when the Company receives: (i) written or electronic
      notice of exercise (in accordance with the Option Agreement) from the person
      entitled to exercise the Option, and (ii) full payment for the Shares with
      respect to which the Option is exercised. Full payment may consist of any
      consideration and method of payment authorized by the Administrator and
      permitted by the Option Agreement and the Plan. Shares issued upon exercise
      of
      an Option shall be issued in the name of the Optionee or, if requested by the
      Optionee, in the name of the Optionee and his or her spouse. Until the Shares
      are issued (as evidenced by the appropriate entry on the books of the Company
      or
      of a duly authorized transfer agent of the Company), no right to vote or receive
      dividends or any other rights as a stockholder shall exist with respect to
      the
      Optioned Stock, notwithstanding the exercise of the Option. The Company shall
      issue (or cause to be issued) such Shares promptly after the Option is
      exercised. No adjustment will be made for a dividend or other right for which
      the record date is prior to the date the Shares are issued, except as provided
      in Section 14 of the Plan.

     

        Exercising
      an
      Option in any manner shall decrease the number of Shares thereafter available,
      both for purposes of the Plan and for sale under the Option, by the number
      of
      Shares as to which the Option is exercised.

     

    b.  Termination
      of Relationship as a Service Provider.
      If an
      Optionee ceases to be a Service Provider, other than upon the Optionee’s death
      or Disability, the Optionee may exercise his or her Option within such period
      of
      time as is specified in the Option 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 Option Agreement). In the absence
      of
      a specified time in the Option Agreement, the Option shall remain exercisable
      for three (3) months following the Optionee’s termination. If, on the date of
      termination, the Optionee is not vested as to his or her entire Option, the
      Shares covered by the unvested portion of the Option shall revert to the Plan.
      If, after termination, the Optionee does not exercise his or her Option within
      the time specified by the Administrator, the Option shall terminate, and the
      Shares covered by such Option shall revert to the Plan.

     

    c.  Disability
      of Optionee.
      If an
      Optionee ceases to be a Service Provider as a result of the Optionee’s
      Disability, the Optionee may exercise his or her Option within such period
      of
      time as is specified in the Option 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 Option Agreement). In the absence of
      a
      specified time in the Option Agreement, the Option shall remain exercisable
      for
      twelve (12) months following the Optionee’s termination. If, on the date of
      termination, the Optionee is not vested as to his or her entire Option, the
      Shares covered by the unvested portion of the Option shall revert to the Plan.
      If, after termination, the Optionee does not exercise his or her Option within
      the time specified herein, the Option shall terminate, and the Shares covered
      by
      such Option shall revert to the Plan.

     

    d.  Death
      of Optionee.
      If an
      Optionee dies while a Service Provider, the Option may be exercised following
      the Optionee’s death within such period of time as is specified in the Option
      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 Option Agreement), by the Optionee’s designated
      beneficiary, provided such beneficiary has been designated prior to Optionee’s
      death in a form acceptable to the Administrator. If no such beneficiary has
      been
      designated by the Optionee, then such Option may be exercised by the personal
      representative of the Optionee’s estate or by the person(s) to whom the Option
      is transferred pursuant to the Optionee’s will or in accordance with the laws of
      descent and distribution. In the absence of a specified time in the Option
      Agreement, the Option shall remain exercisable for twelve (12) months following
      Optionee’s death. If, at the time of death, Optionee is not vested as to his or
      her entire Option, the Shares covered by the unvested portion of the Option
      shall immediately revert to the Plan. If the Option is not so exercised within
      the time specified herein, the Option shall terminate, and the Shares covered
      by
      such Option shall revert to the Plan.

     

    11.  Stock
      Purchase Rights.

     

    a.  Rights
      to Purchase.
      Stock
      Purchase Rights may be issued either alone, in addition to, or in tandem with
      other awards granted under the Plan and/or cash awards made outside of the
      Plan.
      After the Administrator determines that it will offer Stock Purchase Rights
      under the Plan, it shall advise the offeree in writing or electronically, by
      means of a Notice of Grant, of the terms, conditions and restrictions related
      to
      the offer, including the number of Shares that the offeree shall be entitled
      to
      purchase, the price to be paid, and the time within which the offeree must
      accept such offer. The offer shall be accepted by execution of a Restricted
      Stock Purchase Agreement in the form determined by the
      Administrator.

     

    b.  Repurchase
      Option.
      Unless
      the Administrator determines otherwise, the Restricted Stock Purchase Agreement
      shall grant the Company a repurchase option exercisable upon the voluntary
      or
      involuntary termination of the purchaser’s service with the Company for any
      reason (including death or Disability). The purchase price for Shares
      repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
      original price paid by the purchaser and may be paid by cancellation of any
      indebtedness of the purchaser to the Company. The repurchase option shall lapse
      at a rate determined by the Administrator.

     

    c.  Other
      Provisions.
      The
      Restricted Stock Purchase Agreement shall contain such other terms, provisions
      and conditions not inconsistent with the Plan as may be determined by the
      Administrator in its sole discretion.

     

    d.  Rights
      as a Stockholder.
      Once
      the Stock Purchase Right is exercised, the purchaser shall have the rights
      equivalent to those of a stockholder, and shall be a stockholder when his or
      her
      purchase is entered upon the records of the duly authorized transfer agent
      of
      the Company. No adjustment will be made for a dividend or other right for which
      the record date is prior to the date the Stock Purchase Right is exercised,
      except as provided in Section 14 of the Plan.

     

    12.  Transferability
      of Options and Stock Purchase Rights.
      Unless
      determined otherwise by the Administrator, an Option or Stock Purchase Right
      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 Optionee, only by the Optionee. If the
      Administrator makes an Option or Stock Purchase Right transferable, such Option
      or Stock Purchase Right shall contain such additional terms and conditions
      as
      the Administrator deems appropriate.

     

    13.  Formula
      Option Grants to Outside Directors.
      All
      grants of Options to Outside Directors pursuant to this Section shall be
      automatic and nondiscretionary and shall be made strictly in accordance with
      the
      following provisions:

     

    a.  All
      Options granted pursuant to this Section shall be Nonstatutory Stock Options
      and, except as otherwise provided herein, shall be subject to the other terms
      and conditions of the Plan.

     

    b.  No
      person
      shall have any discretion to select which Outside Directors shall be granted
      Options under this Section or to determine the number of Shares to be covered
      by
      such Options.

     

    c.  Each
      person who first becomes an Outside Director following the effective date of
      this Plan, as determined in accordance with Section 7 hereof, shall be
      automatically granted an Option to purchase an amount of stock as determined
      by
      the Compensation Committee of the Directors from time to time (the “First
      Option”) or the date on which such person first becomes an Outside Director,
      whether through election by the stockholders of the Company or appointment
      by
      the Board to fill a vacancy; provided, however, that an Inside Director who
      ceases to be an Inside Director but who remains a Director shall not receive
      a
      First Option.

     

    d.  Notwithstanding
      the provisions of subsections (c) and (d) hereof, any exercise of an Option
      granted before the Company has obtained stockholder approval of the Plan in
      accordance with Section 20 hereof shall be conditioned upon obtaining such
      stockholder approval of the Plan in accordance with Section 20
      hereof.

     

    e.  The
      terms
      of each Option granted pursuant to this Section shall be as
      follows:

     

    i.  the
      term
      of the Option shall be ten (10) years.

     

    ii.  subject
      to Section 14 hereof, the First Option shall vest and become exercisable
      immediately.

     

    iii.  subject
      to Section 14 hereof, the Subsequent Option shall vest and become exercisable
      immediately.

     

    14.  Adjustments
      Upon Changes in Capitalization, Merger or Change in Control.

     

    a.  Changes
      in Capitalization.
      Subject
      to any required action by the stockholders of the Company, the number of shares
      of Common Stock that have been authorized for issuance under the Plan but as
      to
      which no Options or Stock Purchase Rights have yet been granted or which have
      been returned to the Plan upon cancellation or expiration of an Option or Stock
      Purchase Right, the number of Shares that may be added annually to the Plan
      pursuant to Section 3(i), the number of shares which may be granted pursuant
      to
      the automatic grant provisions of Section 13 and the number of shares of Common
      Stock as well as the price per share of Common Stock covered by each such
      outstanding Option or Stock Purchase Right, shall be proportionately adjusted
      for any increase or decrease in the number of issued shares of Common Stock
      resulting from a stock split, reverse stock split, stock dividend, combination
      or reclassification of the Common Stock, or any other increase or decrease
      in
      the number of issued shares of Common Stock effected without receipt of
      consideration by the Company; provided, however, that conversion of any
      convertible securities of the Company shall not be deemed to have been “effected
      without receipt of consideration.” Such adjustment shall be made by the Board,
      whose determination in that respect shall be final, binding and conclusive.
      Except as expressly provided herein, no issuance by the Company of shares of
      stock of any class, or securities convertible into shares of stock of any class,
      shall affect, and no adjust­ment by reason thereof shall be made with
      respect to, the number or price of shares of Common Stock subject to an Option
      or Stock Purchase Right.

     

    b.  Dissolution
      or Liquidation.
      In the
      event of the proposed dissolution or liquidation of the Company, the
      Administrator shall notify each Optionee as soon as practicable prior to the
      effective date of such proposed transaction. The Administrator in its discretion
      may provide for an Optionee to have the right to exercise his or her Option
      until ten (10) days prior to such transaction as to all of the Optioned Stock
      covered thereby, including Shares as to which the Option would not otherwise
      be
      exercisable. In addition, the Administrator may provide that any Company
      repurchase option applicable to any Shares purchased upon exercise of an Option
      or Stock Purchase Right shall lapse as to all such Shares, provided the proposed
      dissolution or liquidation takes place at the time and in the manner
      contemplated. To the extent it has not been previously exercised, an Option
      or
      Stock Purchase Right will terminate immediately prior to the consummation of
      such proposed action.

     

    c.  Merger
      or Change in Control.
      In the
      event of a merger of the Company with or into another corporation, or a Change
      in Control, each outstanding Option and Stock Purchase Right shall be assumed
      or
      an equivalent option or right substituted by the successor corporation or a
      Parent or Subsidiary of the successor corporation. With respect to Options
      granted to an Outside Director pursuant to Section 13 that are assumed or
      substituted for, if following such assumption or substitution the Optionee’s
      status as a Director or a director of the successor corporation, as applicable,
      is terminated other than upon a voluntary resignation by the Optionee, then
      the
      Optionee shall fully vest in and have the right to exercise the Option as to
      all
      of the Optioned Stock, including Shares as to which it would not otherwise
      be
      vested or exercisable.

     

        In
      the event
      that the successor corporation refuses to assume or substitute for the Option
      or
      Stock Purchase Right, the Optionee shall fully vest in and have the right to
      exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
      including Shares as to which it would not otherwise be vested or exercisable.
      If
      an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
      of assumption or substitution in the event of a merger or sale of assets, the
      Administrator shall notify the Optionee in writing or electronically that the
      Option or Stock Purchase Right shall be fully vested and exercisable for a
      period of fifteen (15) days from the date of such notice, and the Option or
      Stock Purchase Right shall terminate upon the expiration of such
      period.

     

        For
      the
      purposes of this subsection (c), the Option or Stock Purchase Right shall be
      considered assumed if, following the merger or Change in Control, the option
      or
      right confers the right to purchase or receive, for each Share of Optioned
      Stock
      subject to the Option or Stock Purchase Right immediately prior to the merger
      or
      Change in Control, the consideration (whether stock, cash, or other securities
      or property) 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 merger or Change in Control is not solely
      common stock of the successor corporation or its Parent, the Administrator
      may,
      with the consent of the successor corporation, provide for the consideration
      to
      be received upon the exercise of the Option or Stock Purchase Right, for each
      Share of Optioned Stock subject to the Option or Stock Purchase Right, to be
      solely common stock of the successor corporation or its Parent equal in fair
      market value to the per share consideration received by holders of Common Stock
      in the merger or Change in Control.

     

    15.  Date
      of Grant.
      The
      date of grant of an Option or Stock Purchase Right shall be, for all purposes,
      the date on which the Administrator makes the determination granting such Option
      or Stock Purchase Right, or such other later date as is determined by the
      Administrator. Notice of the determination shall be provided to each Optionee
      within a reasonable time after the date of such grant.

     

    16.  Amendment
      and Termination of the Plan.

     

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

     

    b.  Stockholder
      Approval.
      The
      Company shall 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 shall impair the
      rights of any Optionee, unless mutually agreed otherwise between the Optionee
      and the Administrator, which agreement must be in writing and signed by the
      Optionee and the Company. Termination of the Plan shall not affect the
      Administrator’s ability to exercise the powers granted to it hereunder with
      respect to Options granted under the Plan prior to the date of such
      termination.

     

    17.  Conditions
      Upon Issuance of Shares.

     

    a.  Legal
      Compliance.
      Shares
      shall not be issued pursuant to the exercise of an Option or Stock Purchase
      Right unless the exercise of such Option or Stock Purchase Right and the
      issuance and delivery of such Shares shall comply with Applicable Laws and
      shall
      be further subject to the approval of counsel for the Company with respect
      to
      such compliance.

     

    b.  Investment
      Representations.
      As a
      condition to the exercise of an Option or Stock Purchase Right, the Company
      may
      require the person exercising such Option or Stock Purchase Right 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.

     

    18.  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, shall
      relieve the Company of any liability in respect of the failure to issue or
      sell
      such Shares as to which such requisite authority shall not have been
      obtained.

     

    19.  Reservation
      of Shares.
      The
      Company, during the term of this Plan, will at all times reserve and keep
      available such number of Shares as shall be sufficient to satisfy the
      requirements of the Plan.

     

    20.  Stockholder
      Approval.
      The
      Plan shall be subject to approval by the stockholders of the Company within
      twelve (12) months after the date the Plan is adopted. Such stockholder approval
      shall be obtained in the manner and to the degree required under Applicable
      Laws.QuickLinks
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Exhibit 10.49    
    

 
 

FORM OF
  WAIVER AND AGREEMENT    
    

        This Waiver and Agreement, dated as of the    day of            2006 (this "Agreement") is being
entered into by and between ITC HOLDINGS CORP., a corporation incorporated under the laws of the State of Michigan (the "Company") and the person
identified on Schedule A hereto (each such person, the "Employee"). All capitalized terms not otherwise defined herein shall have the meanings
set forth in the Management Stockholder's Agreement entered into by and between the Company and the Employee (the "Stockholder's Agreement"). 

        WHEREAS,
the Company contemplates issuing and selling shares of Common Stock in a public offering pursuant to a Registration Statement (the "Registration
Statement") filed with the Securities and Exchange Commission (the "SEC") in accordance with applicable law (the
"Offering"); and 

        WHEREAS,
it is contemplated that International Transmission Holdings Limited Partnership (the "Partnership") will also sell shares of
Common Stock held by the Partnership in the Offering; and 

        WHEREAS,
pursuant to the Stockholder's Agreement, the Employee is entitled to register a portion of the Employee's shares of Stock pursuant to the Registration Statement and, generally,
in the same pro rata percentage, as the Partnership sells shares of Common Stock in the Offering (such entitlement, the "Piggyback Right"); and 

        WHEREAS,
the Company desires that the Employee waive any rights the Employee may have to exercise the Employee's Piggyback Right with respect to the shares of Stock that the Employee may
register in connection with the Offering, the number of which shall be set forth Schedule A attached hereto (such shares, the "Offering Piggyback
Shares"), in exchange for the Company waiving certain restrictions on transferability that are currently, and would continue to be, imposed on such shares if the Employee did
not exercise the Employee's Piggyback Right with respect to such shares in connection with the Offering. 

        NOW,
THEREFORE, for the mutual promises and consideration set forth herein, the Company and the Employee agree as follows: 

        SECTION
1.1.    Waivers.    

        (a)    Company Waiver.    Upon the closing of the contemplated Offering, the Company hereby waives those certain
restrictions on transferability imposed on the Offering Piggyback Shares pursuant to Section 3 of the Stockholder's Agreement and Section 6 of that certain Restricted Stock Award
Agreement between the Company and the Employee to the following extent: the Employee may sell or otherwise dispose of all or any portion of the Offering Piggyback Shares pursuant to a registration
statement on Form S-8 to be filed with the SEC by the Company concurrently with the contemplated Offering. 

        (b)    Employee Waiver.    Effective upon the closing of the contemplated Offering, Employee hereby waives the
Employee's Piggyback Right with respect to the Offering Piggyback Shares. 

        SECTION
1.2.    Miscellaneous.    

        (a)    Shares Held by Employee.    The Waiver and Agreement relates to shares of Common Stock held by the Employee to
which the Stockholder's Agreement applies and which were granted under the Company's 2003 Stock Purchase and Option Plan for Key Employees (the "2003
Plan"), as amended and restated. On July 29, 2005,(1)            shares of Common Stock previously granted to the Employee under the 2003 Plan (net of
any shares cancelled for tax withholding purposes) became free of transfer restrictions pursuant to a Waiver and Agreement executed between the Employee and the Company in 2005. With respect to those
shares that previously became free of transfer restrictions (net of any 

	(1)
	Date
is January 22, 2006 for executive officers. 

 

shares
cancelled for tax withholding purposes), the Employee hereby represents and warrants that upon the closing of the Offering, he or she owns            of those shares of Common Stock.

        (b)    Construction and Governing Law.    This Agreement shall be construed together with, and as part of, the
Stockholder's Agreement, and shall be deemed an amendment thereto to the extent applicable. This Agreement shall be governed in all respects by the laws of the State of Michigan, as such laws are
applied to agreements to be performed entirely in such jurisdictions, and hereby incorporates by reference the provisions of Section 17 (Binding
Effect), Section 20(b) (Arbitration), Section 20(d) (Legal Fees),
and Section 24 (Notices) of the Stockholder's Agreement. 

        (c)    Termination of Agreement.    This Agreement shall terminate and be of no further force and effect on such date
as the Company reasonably determines that determines that the contemplated Offering will not occur, in which case the Company shall promptly provide the Employee written notice of such determination,
which notice shall contain the date on which this Agreement has terminated. 

        (d)    Amendment.    Subject to Section 1.2 (a) above, this Agreement may only be amended or modified by
written agreement by each of the Company and the Employee. 

        (e)    Counterparts.    This Agreement may be signed in counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same instrument. 

        This
Agreement shall become effective as of the date and year first written above. 

	 	 	ITC HOLDINGS CORP.
	

 	
 	

By:	

 Name:

Title:    
	

 	
 	

EMPLOYEE
	

 	
 	

 [NAME]

2

 
 
 

Schedule A    
    

        Offering Piggyback Shares:            

3

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Exhibit 10.49

FORM OF WAIVER AND AGREEMENT

Schedule A

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