FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

This First Amendment to Employment Agreement dated April 10, 2007, between Quest
Resource Corporation (the “Company”) and David Lawler (“Employee”) is entered
this 20th day of October, 2008.

WHEREAS, the Company and Employee entered into an employment agreement dated
April 10, 2007 (the “Employment Agreement”) to memorialize the terms and
conditions relating to Employee’s employment with the Company;

WHEREAS, the Company and Employee desire to amend the Employment Agreement to
(i) modify Employee’s title and job description, (ii) provide Employee with an
increase in base annual salary and incentive compensation opportunity
commensurate with Employee’s new position and (iii) amend the Employment
Agreement for certain changes in light of the final Treasury Regulations issued
under Section 409A of the Internal Revenue Code;

NOW THEREFORE, the parties hereby agree to amend the Employment Agreement as
follows:

 

1.

Agree to Employ. Effective as of August 23, 2008, Section 1(a) is amended to
reflect that the Employee shall serve as the President of the Company.

 

2.

Compensation—Base Salary. Effective as of August 23, 2008, Section 2(a) is
amended to increase the Employee’s base annual salary from $290,000 per year to
$400,000 per year.

 

3.

Compensation—2008 Equity Incentive Grant. Simultaneous with the Company’s
approval of this First Amendment (the “Grant Date”), the Company hereby grants
Employee pursuant to the Company’s 2005 Omnibus Stock Award Plan (the “Omnibus
Plan”) a nonqualified stock option to purchase 200,000 shares of the Company’s
common stock at an exercise price equal to the market value of the Company’s
common stock on the Grant Date. 50% of such option shall become immediately
exercisable on the Grant Date hereof and the remaining 50% shall become
exercisable on the first anniversary of the Grant Date. If there is a “Change of
Control” of the Company (as defined in Section 6 of the Employment Agreement) or
there is a material reduction in the Employee’s duties or responsibilities
which, after notice of such reduction is provided to the Board of Directors of
the Company, fails to be reasonably cured, then such option shall immediately
become fully exercisable.

 

4.

Compensation—Supplement Bonus Payments. In lieu of the Employee’s participation
in the Company’s 2008 Supplemental Bonus Plan, the Company shall pay the
Employee on November 15, 2008, $232,000 and, at the time payments are made under
the Company’s Management Incentive Plan (the “MIP”) in 2009 for 2008 Company
performance, the Company shall pay the Employee an amount equal to $164,000
reduced by the amount, if any, the Employee is paid under the MIP in 2009 for
2008 performance.

 

5.

Compensation—Additional Annual MIP-Based Equity. With respect to the 2008 award,
if any, under the MIP and all future years unless specifically modified by the
Company’s

 

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Compensation Committee, if the Company’s overall performance under the MIP
(calculated based on the weighted average of the designated performance criteria
set forth for the applicable years’ performance goals) equals or exceeds 100%,
the Company will grant Employee:

 

a.

A number of Performance Shares under the Omnibus Plan having a value (based on
the value of the Company’s common stock as of December 31 of the most recently
ended calendar year) equal to 50% of the payment Employee would have been paid
under the MIP if the Company’s overall performance under the MIP (calculated as
set forth above) for such year was 100%. Such Performance Shares, if any, shall
be fully vested as of the date of grant; and

 

b.

A number of Restricted Shares under the Omnibus Plan having a value (based on
the value of the Company’s common stock as of December 31 of the most recently
ended calendar year) equal to 50% of the payment Employee would have been paid
under the MIP if the Company’s overall performance under the MIP (calculated as
set forth above) was 100%. Such Restricted Shares, if any, shall be subject to a
one-year Period of Restriction (as defined under the Omnibus Plan) and shall
fully vest on the first anniversary of the date of grant of such Restricted
Shares.

 

6.

Term. Section 3 of the Employment Agreement is deleted in its entirety and
replaced with the following new Section 3.

3.         Term.   Unless earlier terminated by either party as provided in
Section 5 or 6 hereof, this Agreement shall commence on August 23, 2008, and
shall continue for a period of three (3) years thereafter until August 23, 2011
(the “Initial Term”). Upon the expiration of the Initial Term, this Agreement
shall automatically continue in effect for successive one (1) year terms (a
“Renewal Term”) unless terminated by either party by providing written Notice of
Termination (as provided in Section 7) not less than one hundred twenty (120)
days prior to the end of the Initial Term or any Renewal Term.

 

7.

Definition of Disability. Notwithstanding the definitions of disability set
forth in Section 5(c) and 6(c), Employee shall not be deemed to be Disabled for
purposes of the Employment Agreement unless (A) Employee is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, or (B)
Employee is, by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, receiving income replacement
benefits for a period of not less than three months under an accident and health
plan covering employees of the Company.

 

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8.

Disability Benefit. For purposes of Section 5(c) and Section 6(c), If Employee’s
employment is terminated on account of disability, the benefit under Section
5(c) and Section 6(c) shall be increased from $290,000 to $400,000.

In all other respects the Employment Agreement dated April 10, 2007, shall
remain in full force.

 

“Employee”

“Company”

 

 

David Lawler

QUEST RESOURCE CORPORATION

 

 

 

 

By:

/s/ David Lawler

 

By:

/s/ Jon H. Rateau

 

 

 

 

 

Dated:

10/20/08

 

Dated:

10/20/08

 

 

 

 

 

 

 

 

 

 

Title:

Chairman of the Board