GATEWAY DISTRIBUTORS, LTD
STOCK OPTION AGREEMENT
THIS AGREEMENT
is made as of February 3, 2006 BETWEEN GATEWAY
DISTRIBUTORS LTD,
a Nevada corporation (the "Company"), and GARY
HEATH
(the
"Optionee").
THE PARTIES AGREE AS FOLLOWS:
1.
OPTION GRANT. The Company hereby
grants to the Optionee an option
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(the "Option")
to purchase the number of shares of
the Company's common stock
(the "Shares"),
for an exercise price
per share (the "Option Price") and based
upon a Grant Date, all as set forth below:
Shares under
option:
3,000,000,000
Option Price
per Share:
$.0001
Grant Date:
February 3,
2006
The Option granted
hereunder will be an incentive stock option within
the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
2.
STOCKHOLDER RIGHTS.
No
rights or privileges
of a stockholder in
-------------------
the Company are conferred by reason of the granting of the Option.
Optionee will
not become
a stockholder in the Company with
respect to the Shares unless and
until the Option has
been properly exercised and the Option Price fully paid as
to the portion of the Option exercised.
3.
EXERCISE PROCEDURE.
Subject to the conditions set forth in this
-------------------
Agreement. this option
shall be exercised by the Optionee's delivery of written
notice of exercise to the Treasurer of the Company,
specifying the number of
shares to be purchased and the purchase price to be paid therefore and
accompanied by payment in full in accordance with Section 4. Such
exercise shall
be effective upon receipt by the Treasurer of the Company of such
written notice
together with
the required payment. The Optionee may purchase less
than the
number of shares covered hereby, provided that no partial exercise of
this
option may
be for any fractional share or for fewer than ten whole
shares.
Notwithstanding
anything herein contained to the contrary, the Optionee and the
Company acknowledge that the Optionee exercised the Option to
acquire all of the
Shares. Optionee
will deliver to the
Company $300,000 dollars, the receipt and
sufficiency of
which is acknowledged
by the Company.
However, the Shares were
not issued
to the Optionee.
Instead, the Optionee
and the Company agreed that
the certificates
for the Shares would be issued at a subsequent date as
determined by the Optionee. However, the parties have agreed
that the number of
the Shares to be issued to the Optionee shall be adjusted to
reflect any reverse
splits in the shares
of the common stock of the Company which have occurred, so
that the number of the Shares to be to be issued to the Optionee will
be
proportionately
increased so
that the number of the Shares shall be
proportionately the
same number of the Shares immediately
following any such
subdivision as
existed before any such subdivision.
RELATIONSHIP WITH
THE COMPANY. Except as
otherwise provided in this Section 3,
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this option
may not be exercised unless the Optionee, at
the time he or she
exercises this option,
is, and has been at all times since the date of grant of
this option,
an employee, officer
or director of, or consultant or advisor to,
the Company
(an "Eligible
1
<PAGE>
Optionee").
5.
TERMINATION OF
RELATIONSHIP
WITH THE COMPANY. If the Optionee
--------------------------------------------------
ceases to be an Eligible Optionee for any
reason, then, except as provided in
paragraphs (a) and (b)
below, the right to exercise this option shall terminate
three (3) years after such cessation (but in no event after the
Expiration
Date), provided
that this option shall be exercisable
only to the extent that
the Optionee was entitled to exercise this option on the date of
such cessation.
Notwithstanding the
foregoing,
if the Optionee, prior
to the Expiration Date,
materially violates
the non-competition or confidentiality provisions of
any
employment contract,
confidentiality
and nondisclosure agreement or other
agreement between
the Optionee and the Company. the right to exercise
this
option shall terminate
immediately upon written notice to the Optionee from the
Company describing
such violation.
(a) Exercise
Period Upon Death or Disability. If the Optionee
dies or becomes disabled (within the meaning of
Section 22(e)(3) of
the Code) prior to the
Expira1ion Date while he or she is an Eligible
Optionee, or
if the Optionee dies within three months after the
Optionee ceases
to be an Eligible
Optionee (other than as the result
of a termination of such relationship by the
Company for "cause" as
specified in
paragraph (f) below),
this option shall be exercisable,
within the
period of three years following the date of death or
disability of the Optionee (whether or not such
