Stock Option Agreement dated December 17, 2008 between Registrant and Phillip Hamilton

The Company desires to promote the long-term interests of the Company by retaining the Executive.  In order to achieve such goal, the Company has determined to provide Executive with compensation opportunities based on the performance of the Company.  To that end, the Company has decided to grant the Executive a right to acquire an option to purchase common shares of the Company (the "Shares") under this Agreement.  Accordingly, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

Section 1.                       Grant of Option.  The Company hereby irrevocably grants to the Executive the right and option (the "Option"), subject to Section 4 below, to purchase all or any part of an aggregate of  68,168,164 Shares on the terms and conditions herein set forth.

Section 3.                       Term of the Option.  The maximum term of the Option shall be for a period of seven (7) years after the date of this Agreement.  The Option, when and if vested, shall expire on the seventh (7th) anniversary of this agreement (the “Expiration Date”).

 

Section 4.                       Vesting.  The Option shall vest and become exercisable upon the satisfaction in full (inclusive of all principal, interest and penalties) of the six million and 00/100 U.S. Dollar ($6,000,000.00) loan made to the Company by Debt Opportunity Fund, LLP (“DOF”), under the terms of that certain Loan and Securities Agreement by and between the Company and DOF, of even date herewith,

 

Section 5.                        Exercise Procedure.

 

5.1                   Manner of Exercise.    Subject to Section 4 above, the Executive shall be entitled to exercise this Option, in whole or in part at any time or times in accordance with the provisions of this Section 5, by delivering written notice of such exercise to the office of the Secretary of the Company or to such other location as may be designated by the Company, specifying therein the number of Shares with respect to which the Option is being exercised, which notice shall be accompanied by payment in full of the purchase price of the Shares being acquired.

 

5.2                    Payment of Exercise Price.  Payment shall be made in cash.  No Shares shall be issued until full payment therefore has been made in the manner set forth above.

 

Section 6.                      Transferability of Option.  The Option shall not be transferable otherwise than by will or by the laws of descent and distribution, and shall be exercised during the lifetime of the Executive only by the Executive or by the Executive’s guardian or legal representative.  Notwithstanding the preceding provisions of this Section, the Executive, at any time prior to his death, may assign all or any portion of an Option granted to him to (i) his spouse or lineal descendant, (ii) the trustee of a trust established for the primary benefit of his spouse or lineal descendant, (iii) a partnership of which his spouse and lineal descendants are the only partners.  In such event, the spouse, lineal descendants, trustee, or partnership will be entitled to all the rights of the Executive with respect to the assigned portion of the Option, and such portion of the Option will continue to be subject to all of the terms, conditions and restrictions applicable to the Option as set forth herein immediately prior to the effective date of the assignment.  Any such assignment will be permitted only if (i) the Executive does not receive any consideration therefore, and (ii) the assignment is expressly approved by the Company.  Any such assignment shall be evidenced by an appropriate written document executed by the Executive and a copy thereof shall be delivered to the Company on or prior to the effective date of the assignment.

 

Section 7                      Stock Certificates.  Upon exercise of the Option and payment of the exercise price, the Company shall deliver a certificate or certificates representing such Shares as soon as practicable after the notice shall be received.  The certificate or certificates for the Shares as to which the Option shall have been so exercised shall be registered in the name of the person so exercising the Option (or, if the Option shall be exercised by the Executive and if the Executive shall so request in the notice exercising the Option, shall be registered in the name of the Executive and another person jointly, with right of survivorship) and shall be delivered upon the written order of the person exercising the Option.  In the event the Option shall be exercised   by any person other than the Executive, such notice shall be accompanied by appropriate proof of the right of such person to exercise the Option.  All shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and no assessable.

 

Section 8.                      No Additional Rights.  The Executive shall have no right to be employed by the Company  under the terms of this Agreement or interfere in any way with the right of the Company to terminate any employment of the Executive at any time.  Neither the Executive nor any other person entitled to exercise the Option under the terms hereof shall be, or have any of the rights or privileges of, a shareholder of the Company with respect to any of the shares of common stock issuable upon exercise of the Option, unless and until the purchase price for such shares shall have been paid in full.  Nothing in this Agreement shall be construed to limit the authority of the Company to exercise its corporate rights and powers, including, by way of illustration and not by way of limitation, the right to grant options for proper corporate purposes otherwise than under this Agreement to any employee or any other person, firm, corporation, association or other entity, or to grant options to, or assume options of, any person in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of all or any part of the business and assets of any person, firm, corporation, association or other entity.