Document:

EXECUTION COPY

WAIVER AND AMENDMENT NO. 2

Dated as of April 25, 2007

to

THIRD LIEN TERM LOAN AGREEMENT

Dated as of June 9, 2006

THIS WAIVER AND AMENDMENT NO. 2 (“Waiver and Amendment”) is made as of April __, 2007 by and among Quest Cherokee, LLC (“Quest Cherokee”) and Quest Resource Corporation (“QRC”), as borrowers (the “Borrowers”), the financial institutions from time to time parties thereto (the “Lenders”) and Guggenheim Corporate Funding, LLC, as administrative agent (the “Administrative Agent”) under that certain Third Lien Term Loan Agreement dated as of June 9, 2006 by and among the Borrowers, the Lenders and the Administrative Agent (as amended, restated or otherwise
modified from time to time, the “Credit Agreement”). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Borrowers have notified the Lender that an Event of Default has occurred because Borrowers have failed to comply with the minimum Total Debt to EBITDA ratio for the Fiscal Quarter ended March 31, 2007 contained in Section 9.01(b) of the Credit Agreement (such Event of Default, the “Existing Default”)  and Borrowers have requested that the Lenders waive the Existing Default; 

WHEREAS, the Borrowers, the Lenders party hereto and the Administrative Agent have agreed to waive the Existing Default on the terms and conditions set forth herein;

WHEREAS, the Borrowers, the Lenders party hereto and the Administrative Agent have further agreed to amend Section 9.01(b) of the Credit Agreement on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders party hereto and the Administrative Agent hereby agree as follows.

1.            Waiver. Subject to the terms and conditions set forth herein, the Lenders hereby waive the Existing Default. Neither this Waiver and Amendment, nor any actions taken by any of the Lenders in connection herewith, shall be deemed or construed as a waiver of any other Event of Default or Default, whether now existing or occurring after the date hereof, known or unknown, under the Loan Documents. 

 

 

2.            Amendment to Credit Agreement. Section 9.01(b) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(b)        For purposes of this Section 9.01(b), “EBITDA” shall be calculated using EBITDA for such quarter multiplied by four (4). The Borrowers shall maintain a ratio of Total Debt to EBITDA of not more than the following ratios for the quarters ending on the dates indicated below:

 

	
            Ratio  
 	
            Period
 
	
            4.50 to 1.0
 	
            for the quarter ending March 31, 2007,
 
	
            5.50 to 1.0
 	
            for the quarter ending June 30, 2007,
 
	
            4.75 to 1.0
 	
            for the quarter ending September 30, 2007,
 
	
            4.25 to 1.0
 	
            for the quarter ending December 31, 2007,
 
	
            3.50 to 1.0
 	
            for the quarter ending March 31, 2008,
 
	
            3.25 to 1.0
 	
            for the quarter ending June 30, 2008, and
 
	
            3.0 to 1.0
 	
            for each quarter ending on or after September 30, 2008
 

 

3.            Amendment Fee. In consideration for the Lenders’ consent to this Waiver and Amendment, the Borrowers hereby agree to pay to the Administrative Agent, for the benefit of the Lenders under the Credit Agreement, a fee equal to 1.00% of the aggregate amount of each Lender’s Commitment. 

4.            Conditions of Effectiveness. The effectiveness of this Waiver and Amendment is subject to the satisfaction of the conditions precedent that the Administrative Agent shall have received (i) counterparts of this Waiver and Amendment duly executed by the Borrowers, the Lenders and the Administrative Agent, and (ii) the payment of the fee in accordance with this Waiver and Amendment.

5.            Representations and Warranties of the Borrowers. The Borrowers hereby represent and warrant as follows:

(a)          This Waiver and Amendment and the Credit Agreement as amended hereby, constitute legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

2

 

(b)          As of the date hereof and giving effect to the terms of this Waiver and Amendment, (i) there exists no Default or Event of Default and (ii) the representations and warranties of the Borrowers set forth in the Credit Agreement and each other Loan Document shall be true and correct in all material respects as of the date hereof (except those representations and warranties which are limited to a specific date, which are true and correct in all material respects as of such date and those representations and warranties already qualified with respect to materiality, which shall be true and correct in all respects).

	
             
  	
            6.
 	
            Reference to and Effect on the Credit Agreement.
 

(a)          Upon the effectiveness of this Waiver and Amendment, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby.

(b)          Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

(c)          The execution, delivery and effectiveness of this Waiver and Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor, except as specifically provided herein, constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.

7.            Governing Law. THIS WAIVER AND AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

8.            Headings. Section headings in this Waiver and Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

9.            Counterparts. This Waiver and Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

[Signature Pages Follow]

 

3

 

IN WITNESS WHEREOF, this Waiver and Amendment has been duly executed as of the day and year first above written.

 

	
            BORROWERS:
 	
            QUEST CHEROKEE, LLC
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Jerry D. Cash
 
	
             
 	
             
 	
            Jerry D. Cash,
 
	
             
 	
             
 	
            Chief Executive Officer
 
	
             
 	
             
 
	
             
 	
             
 
	
             
 	
             
 
	
             
 	
            QUEST RESOURCE CORPORATION
 
	
             
 	
             
 
	
             
 	
             
 
	
             
 	
            By:
 	
            /s/ Jerry D. Cash
 
	
             
 	
             
 	
            Jerry D. Cash,
 
	
             
 	
             
 	
            Chief Executive Officer
 

 

 

Signature Page to Amendment No.3 (Senior Credit Agreement)

 

 

 

	
            ADMINISTRATIVE AGENT:
 	
            GUGGENHEIM CORPORATE FUNDING,
 
	
             
 	
            LLC, as Administrative Agent, Syndication Agent,
 
	
             
 	
            Sole Lead Arranger and Sole Bookrunner
 
	
             
 	
             
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Todd Boehly
 
	
             
 	
            Name:
 	
             
 
	
             
 	
            Title:
 	
            Managing Partner
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            MA DEEP EVENT, LTD
 
	
             
 	
             
 
	
             
 	
             
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Jeff Golbus
 
	
             
 	
            Name:
 	
            Jeff Golbus
 
	
             
 	
            Title:
 	
            Assistant Portfolio Manager
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            COPPER RIVER CLO LTD.
 
	
             
 	
             
 
	
             
 	
            By: Guggenheim Investment Management, LLC as Manager
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Stephen D. Sautel
 
	
             
 	
            Name:
 	
            Stephen D. Sautel
 
	
             
 	
            Title:
 	
            Managing Director
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            ORPHEUS HOLDINGS LIMITED
 
	
             
 	
             
 
	
             
 	
            By: Guggenheim Investment Management, LLC as its Manager
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Stephen D. Sautel
 
	
             
 	
            Name:
 	
            Stephen D. Sautel
 
	
             
 	
            Title:
 	
            Managing Director
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            KENNECOTT FUNDING LTD.
 
	
             
 	
             
 
	
             
 	
            By: Guggenheim Investment Management, LLC as Collateral Manager
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Stephen D. Sautel
 
	
             
 	
            Name:
 	
            Stephen D. Sautel
 
	
             
 	
            Title:
 	
            Managing Director
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            SANDS POINT FUNDING LTD.
 
	
             
 	
             
 
	
             
 	
            By: Guggenheim Investment Management, LLC as Collateral Manager
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Stephen D. Sautel
 
	
             
 	
            Name:
 	
            Stephen D. Sautel
 
	
             
 	
            Title:
 	
            Managing Director
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            ORPHEUS FUNDING LLC
 
	
             
 	
             
 
	
             
 	
            By:  Guggenheim Investment Management, LLC as Manager
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Stephen D. Sautel
 
	
             
 	
            Name:
 	
            Stephen D. Sautel
 
	
             
 	
            Title:
 	
            Managing Director
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            DEL MAR MASTER FUND LTD.
 
	
             
 	
             
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Stephen D. Sautel
 
	
             
 	
            Name:
 	
            Stephen D. Sautel
 
	
             
 	
            Title:
 	
            Managing Director
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            GRAND CENTRAL ASSET TRUST, DHV SERIES
 
	
             
 	
             
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Molly Walter
 
	
             
 	
            Name:
 	
            Molly Walter
 
	
             
 	
            Title:
 	
            Attorney-In-Fact
 
	
             
 	
             
 

 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            NZC OPPORTUNITIES LLC
 
	
             
 	
             
 
	
             
 	
            By: Guggenheim Investment Management, LLC as Manager
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Stephen D. Sautel
 
	
             
 	
            Name:
 	
            Stephen D. Sautel
 
	
             
 	
            Title:
 	
            Managing Director
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            GRAND CENTRAL ASSET TRUST, ARL SERIES
 
	
             
 	
             
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Janet Haack
 
	
             
 	
            Name:
 	
            Janet Haack
 
	
             
 	
            Title:
 	
            As Attorney In Fact
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            GREEN LANE CLO LTD.
 
	
             
 	
             
 
	
             
 	
            By: Guggenheim Investment Management, LLC as Manager
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Stephen D. Sautel
 
	
             
 	
            Name:
 	
            Stephen D. Sautel
 
	
             
 	
            Title:
 	
            Managing Director
 
	
             
 	
             
 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement

 

	
            LENDERS:
 	
            STELLAR FUNDING, LTD.
 
	
             
 	
             
 
	
             
 	
            By: Guggenheim Investment Management, LLC as Manager
 
	
             
 	
             
 
	
             
 	
            By: 
 	
            /s/ Stephen D. Sautel
 
	
             
 	
            Name:
 	
            Stephen D. Sautel
 
	
             
 	
            Title:
 	
            Managing Director
 
	
             
 	
             
 

 

 

 

Signature Page to

Amendment No.2 to

3rd Lien Term Loan Agreement<PAGE>

                                                                    Exhibit 10.7

                             2007 STOCK OPTION PLAN
                                       OF
                         REVOLUTIONS MEDICAL CORPORATION

1.       PURPOSES OF THE PLAN

         The Purposes of the 2007 Stock Option Plan (the "Plan") of Revolutions
Medical Corporation, a Nevada corporation (the "Company"), are to:

                  (b) Encourage selected employees, directors and consultants to
                  improve operations and increase profits of the Company;

                  (c) Encourage selected employees, directors and consultants to
                  accept or continue employment or association with the Company
                  or its Affiliates; and

                  (d) Increase the interest of selected employees, directors and
                  consultants in the Company's welfare through participation in
                  the growth in value of the common stock of the Company (the
                  "Common Stock").

         Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"Code"), or "non-qualified options" ("NQOs").

2.       ELIGIBLE PERSONS

         Every Person who at the date of grant of an Option is an employee of
the Company or of any Affiliate (as defined below) of the Company is eligible to
receive NQOs or ISOs under this Plan. Every person who at the date of grant is a
consultant to, or non-employee director of, the Company or any Affiliate (as
defined below) of the Company is eligible to receive NQOs under this Plan. The
term "Affiliate" as used in the Plan means a parent or subsidiary corporation as
defined in the applicable provisions (currently Sections 424(e) and (f),
respectively) of the Code. The term "employee" includes an officer or director
who is an employee of the Company. The term "consultant" includes persons
employed by, or otherwise affiliated with, a consultant.

3.       STOCK SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS

         Subject to the provisions of Section 6.1.1 of the Plan, the total
number of shares of stock which may be issued under Options granted pursuant to
this Plan shall not exceed Twenty Million (20,000,000) shares of Common Stock,
$.001 par value per share. The shares covered by the portion of any grant under
the Plan which expires unexercised shall become available again for grants under
the Plan.

4.       ADMINISTRATION

                                       1
<PAGE>

                  (a) The Plan shall be administered by the Board of Directors
                  on the Company (the "Board") or by a committee (the
                  "Committee") to which administration of the Plan, or of part
                  of the Plan, is delegated by the Board (in either case, the
                  "Administrator"). The Board shall appoint and remove members
                  of the Committee in its discretion in accordance with
                  applicable laws. If necessary in order to comply with Rule
                  16b-3 under the Exchange Act and Section 162 (m) of the Code,
                  the Committee shall, in the Board's discretion, be comprised
                  solely of "non-employee directors" within the meaning of said
                  Rule 16b-3 and "outside directors" within the meaning of
                  Section 162 (m) of the Code. The foregoing notwithstanding,
                  the Administrator may delegate nondiscretionary administrative
                  duties to such employees of the Company as it deems proper and
                  the Board, in its absolute discretion, may at any time and
                  from time to time exercise any and all rights and duties of
                  the Administrator under the Plan.

                  (b) Subject to the other provisions of this Plan, the
                  Administrator shall have the authority, in its discretion: (i)
                  to grant Options; (ii) to determine the fair market value of
                  the Common Stock subject to Options; (iii) to determine the
                  exercise price of Options granted; (iv) to determine the
                  persons to whom, and the time or times at which, Options shall
                  be granted, and the number of shares subject to each option;
                  (v) to interpret this Plan; (vi) to prescribe, amend, and
                  rescind rules and regulations relating to this Plan; (vii) to
                  determine the terms and provisions of each Option granted
                  (which need not be identical), including but not limited to,
                  the time or times at which Options shall be exercisable;
                  (viii) with the consent of the optionee, to modify or amend
                  any Option; (ix) to defer (with the consent of the optionee)
                  the exercise date of any Option; (x) to authorize any person
                  to execute on behalf of the Company any instrument evidencing
                  the grant of an Option; and (xi) to make all other
                  determinations deemed necessary or advisable for the
                  administration of this Plan. The Administrator may delegate
                  nondiscretionary administrative duties to such employees of
                  the Company, as it deems proper.

                  (c) All Questions of interpretation, implementation, and
                  application of this Plan shall be determined by the
                  Administrator. Such determinations shall be final and binding
                  on all persons.

5.       GRANTING OF OPTIONS; OPTION AGREEMENT

                  (a) No Options shall be granted under this Plan after 10 years
                  from the date of adoption of this Plan by the Board.

                  (b) Each Option shall be evidenced by a written stock option
                  agreement, in form satisfactory to the Administrator, executed
                  by the Company and the person to whom such Option is granted.

                  (c) The stock option agreement shall specify whether each
                  Option it evidences is an NQO or an ISO.

                                       2
<PAGE>

                  (d) Subject to Section 6.3.3 with respect to ISOs, the
                  Administrator may approve the grant of Options under this Plan
                  to persons who are expected to become employees, directors or
                  consultants of the Company, but are not employees, directors
                  or consultants at the date of approval, and the date of
                  approval shall be deemed to be the date of the grant unless
                  otherwise specified by the Administrator.

6.       TERMS AND CONDITIONS OF OPTIONS

         Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NQOs shall be also subject to the terms and
conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.

         a.       Terms and Conditions to Which All Options Are Subject. All
                  Options granted under this Plan shall be subject to the
                  following terms and conditions:

                  i.       Changes in Capital Structure. Subject to Section
                           6.1.2, if the stock of the Company is changed by
                           reason of a stock split, reverse stock split, stock
                           dividend, or recapitalization, combination or
                           reclassification, appropriate adjustments shall be
                           made by the Board in (a) the number and class of
                           shares of stock subject to this Plan and each Option
                           outstanding under this Plan, and (b) the exercise
                           price of each outstanding Option; provided, however,
                           that the Company shall not be required to issue
                           fractional shares as a result of any such
                           adjustments. Each such adjustment shall be subject to
                           approval by the Board in its sole discretion.

                  ii.      Corporate Transactions. In the event of the proposed
                           dissolution or liquidation of the Company, the
                           Administrator shall notify each optionee at least 30
                           days prior to such proposed action. To the extent not
                           previously exercised, all Options will terminate
                           immediately prior to the consummation of such
                           proposed action; provided, however, that the
                           Administrator, in the exercise of its sole
                           discretion, may permit exercise of any Options prior
                           to their termination, even if such Options were not
                           otherwise exercisable. In the event of a merger or
                           consolidation of the Company with or into another
                           corporation or entity in which the Company does not
                           survive, or in the event of a sale of all or
                           substantially all of the assets of the Company in
                           which the shareholders of the Company receive
                           securities of the acquiring entity or an affiliate
                           thereof, all Options shall be assumed or equivalent
                           options shall be substituted by the successor
                           corporation (or other entity) or a parent or
                           subsidiary of such successor corporation (or other
                           entity); provided, however, that if such

                                       3
<PAGE>

                           successor does not agree to assume the Options or to
                           substitute equivalent options therefor, the
                           Administrator, in the exercise of its sole
                           discretion, may permit the exercise of any of the
                           Options prior to consummation of such event, even if
                           such Options were not otherwise exercisable.

                  iii.     Time of Option Exercise. Subject to Section 5 and
                           Section 6.3.4, Options granted under this Plan shall
                           be exercisable (a) immediately as of the effective
                           date of the stock option agreement granting the
                           Option, or (b) in accordance with a schedule as may
                           be set by the Administrator (each such date on such
                           schedule, the "Vesting Base Date") and specified in
                           the written stock option agreement relating to such
                           Option. In any case, no Option shall be exercisable
                           until a written stock option agreement in form
                           satisfactory to the Company is executed by the
                           Company and the optionee.

                  iv.      Option Grant Date. The date of grant of an Option
                           under this Plan shall be the date as of which the
                           Administrator approves the grant.

                  v.       Nontransferability of Option Rights. Except with the
                           express written approval of the Administrator which
                           approval the Administrator is authorized to give only
                           with respect to NQOs, no Option granted under this
                           Plan shall be assignable or otherwise transferable by
                           the optionee except by will, by the laws of descent
                           and distribution or pursuant to a qualified domestic
                           relations order. During the life of the optionee, an
                           Option shall be exercisable only by the optionee.

                  vi.      Payment. Except as provided below, payment in full,
                           in cash, shall be made for all stock purchased at the
                           time written notice of exercise of an Option is given
                           to the Company, and proceeds of any payment shall
                           constitute general funds of the Company. The
                           Administrator, in the exercise of its absolute
                           discretion, may authorize any one or more of the
                           following additional methods of payment:

                  (a) Subject to the discretion of the Administrator and the
                  terms of the stock option agreement granting the Option,
                  delivery by the optionee of shares of Common Stock already
                  owned by the optionee for all or part of the Option price,
                  provided the fair market value (determined as set forth in
                  section 6.1.10) of such shares of Common Stock is equal on the
                  date of exercise to the Option price, or such portion thereof
                  as the optionee is authorized to pay by delivery of such
                  stock; and

                                       4
<PAGE>

                  (b) Subject to the discretion of the Administrator, through
                  the surrender of shares of Common Stock then issuable upon
                  exercise of the Option, provided the fair market value
                  (determined as set forth is Section 6.1.10) of such shares of
                  Common Stock is equal on the date of exercise to the Option
                  price, or such portion thereof as the optionee is authorized
                  to pay by surrender of such stock.

                  vii.     Termination of Employment. If for any reason other
                           than death or permanent and total disability, an
                           optionee ceases to be employed by the Company or any
                           of its Affiliates (such event being called a
                           "Termination"), Options held at the date of
                           Termination (to the extent then exercisable) may be
                           exercised in whole or in part at any time within
                           three months of the date of such Termination, or such
                           other period of not less than 30 days after the date
                           of such Termination as is specified in the Option
                           Agreement or by amendment thereof (but in no event
                           after the Expiration Date); provided, however, that
                           if such exercise of the Option would result in
                           liability for the optionee under Section 16(b) of the
                           Exchange Act, then such three-month period
                           automatically shall be extended until the tenth day
                           following the last date upon which optionee has any
                           liability under Section 16(b) (but in no event after
                           the Expiration Date). If an optionee dies or becomes
                           permanently and totally disabled (within the meaning
                           of Section 22(e)(3) of the Code) while employed by
                           the Company or an Affiliate or within the period that
                           the Option remains exercisable after Termination,
                           Options then held (to the extent then exercisable)
                           may be exercised, in whole or in part, by the
                           optionee, by the optionee's personal representative
                           or by the person to whom the Option is transferred by
                           devise or the laws of descent and distribution, at
                           any time within six months after the death or six
                           months after the permanent and total disability of
                           the optionee or any longer period specified in the
                           Option Agreement or by amendment thereof (but in no
                           event after the Expiration Date). For purposes of
                           this Section 6.1.7, "employment" includes service as
                           a director or as a consultant. For purposes of this
                           Section 6.1.7, an optionee's employment shall not be
                           deemed to terminate by reason of sick leave, military
                           leave or other leave of absence approved by the
                           Administrator, if the period of any such leave does
                           not exceed 90 days or, if longer, if the optionee's
                           right to reemployment by the Company or any Affiliate
                           is guaranteed either contractually or by statute.

                                       5
<PAGE>

                  viii.    Withholding and Employment Taxes. At the time of
                           exercise of an Option and as a condition thereto, or
                           at such other time as the amount of such obligations
                           becomes determinable (the "Tax Date"), the optionee
                           shall remit to the Company in cash all applicable
                           federal and state withholding and employment taxes.
                           Such obligation to remit may be satisfied, if
                           authorized by the Administrator in its sole
                           discretion, after considering any tax, accounting and
                           financial consequences, by the optionee's (i)
                           delivery of a promissory note in the required amount
                           on such terms as the Administrator deems appropriate,
                           (ii) tendering to the Company previously owned shares
                           of Stock or other securities of the Company with a
                           fair market value equal to the required amount, or
                           (iii) agreeing to have shares of Common Stock (with a
                           fair market value equal to the required amount) which
                           are acquired upon exercise of the Option withheld by
                           the Company.

                  ix.      Other Provisions. Each Option granted under this Plan
                           may contain such other terms, provisions, and
                           conditions not inconsistent with this Plan as may be
                           determined by the Administrator, and each ISO granted
                           under this Plan shall include such provisions and
                           conditions as are necessary to qualify the Option as
                           an "incentive stock option" within the meaning of
                           Section 422 of the Code.

                  x.       Determination of Value. For purposes of the Plan, the
                           fair market value of Common Stock or other securities
                           of the Company shall be determined as follows:

                  (a) Fair market value shall be the closing price of such stock
                  on the date before the date the value is to be determined on
                  the principal recognized securities exchange or recognized
                  securities market on which such stock is reported, but if
                  selling prices are not reported, its fair market value shall
                  be the mean between the high bid and low asked prices for such
                  stock on the date before the date the value is to be
                  determined (or if there are no quoted prices for such date,
                  then for the last preceding business day on which there were
                  quoted prices).

                  (b) In the absence of an established market for the stock, the
                  fair market value thereof shall be determined in good faith by
                  the Administrator, with reference to the Company's net worth,
                  prospective earning power, dividend-paying capacity, and other
                  relevant factors, including the goodwill of the company, the
                  economic outlook in the Company's industry, the Company's
                  position in the industry, the Company's management, and the
                  values of stock of other corporations in the same or similar
                  line of business.

                                       6
<PAGE>

                  6.1.11   Option Term. Subject to Section 6.3.4, no Option
                           shall be exercisable more than 10 years after the
                           date of grant, or such lesser period of time as is
                           set forth in the stock option agreement (the end of
                           the maximum exercise period stated in the stock
                           option agreement is referred to in this Plan as the
                           "Expiration Date").

         6.2 Terms and Conditions to Which Only NQOs Are Subject. Options
         granted under this Plan which are designated as NQOs shall be subject
         to the following terms and conditions:

                  6.2.1    Exercise Price

                           (a) Except as set forth in Section 6.2.1(b), the
                           exercise price of a NQO shall be not less than 85% of
                           the fair market value (determined in accordance with
                           Section 6.1.10) of the stock subject to the Option on
                           the date of grant.

                           (b) To the extent required by applicable laws, rules
                           and regulations, the exercise price of a NQO granted
                           to any person who owns, directly or by attribution
                           under the Code (currently Section 424(d)), stock
                           possessing more than ten percent of the total
                           combined voting power of all classes of stock of the
                           Company or any Affiliate (a "Ten Percent
                           Shareholder") shall in no event be less than 110% of
                           the fair market value (determined in accordance with
                           Section 6.1.10) of the stock covered by the Option at
                           the time the Option is granted.

         6.3 Terms and Conditions to Which Only ISOs Are Subject. Options
         granted under this Plan which are designated as ISOs shall be subject
         to the following terms and conditions:

                  6.3.1    Exercise Price.

                           (a) Except as set forth in Section 6.3.1(b), the
                           exercise price of an ISO shall be determined in
                           accordance with the applicable provisions of the Code
                           and shall in no event be less than the fair market
                           value (determined in accordance with Section 6.1.10)
                           of the stock covered by the Option at the time the
                           Option is granted.

                           (b) The exercise price of an ISO granted to any Ten
                           Percent Shareholder shall in no event be less than
                           110% of the fair market value (determined in
                           accordance with Section 6.1.10) of the stock covered
                           by the Option at the time the Option is granted.

                                       7
<PAGE>

                  6.3.2    Disqualifying Dispositions. If stock acquired by
                           exercise of an ISO granted pursuant to this Plan is
                           disposed of in a "disqualifying disposition" within
                           the meaning of Section 422 of the Code (a disposition
                           within two years from the date of grant of the Option
                           or within one year after the transfer of such stock
                           on exercise of the Option), the holder of the stock
                           immediately before the disposition shall promptly
                           notify the Company in writing of the date and terms
                           of the disposition and shall provide such other
                           information regarding the Option as the Company may
                           reasonably require.

                  6.3.3    Grant Date. If an ISO is granted in anticipation of
                           employment as provided in Section 5(d), the Option
                           shall be deemed granted, without further approval, on
                           the date the grantee assumes the employment
                           relationship forming the basis for such grant, and,
                           in addition, satisfies all requirements of this Plan
                           for Options granted on that date.

                  6.3.4    Term. Notwithstanding Section 6.1.11, no ISO granted
                           to any Ten Percent Shareholder shall be exercisable
                           more than five years after the date of grant.

7.       Manner of Exercise

                  (a) An optionee wishing to exercise an Option shall give
                  written notice to the Company at its principal executive
                  office, to the attention of the officer of the Company
                  designated by the Administrator, accompanied by payment of the
                  exercise price and withholding taxes as provided in Sections
                  6.1.6 and 6.1.8. The date the Company receives written notice
                  of an exercise hereunder accompanied by payment of the
                  exercise price will be considered as the date such Option was
                  exercised.

                  (b) Promptly after receipt of written notice of exercise of an
                  Option and the payments called for in Section 7(a), the
                  Company shall, without stock issue or transfer taxes to the
                  optionee or other person entitled to exercise the Option,
                  deliver to the optionee or such other person a certificate or
                  certificates for the requisite number of shares of stock. An
                  optionee or permitted transferee of the Option shall not have
                  any privileges as a shareholder with respect to any shares of
                  stock covered by the Option until the date of issuance (as
                  evidenced by the appropriate entry on the books of the Company
                  or a duly authorized transfer agent) of such shares.

8.       EMPLOYMENT OR CONSULTING RELATIONSHIP

         Nothing in this Plan or any Option granted hereunder shall interfere
with or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.

                                       8
<PAGE>

9.       CONDITIONS UPON ISSUANCE OF SHARES

         Shares of Common Stock shall not be issued pursuant to the exercise of
an Option unless the exercise of such Option and the issuance and delivery of
such shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act")

10.      NONEXCLUSIVITY OF THE PLAN

         The adoption of the Plan shall not be construed as creating any
limitations on the power of the Company to adopt such other incentive
arrangements, as it may deem desirable, including, without limitation, the
granting of stock options other than under the Plan.

11.      AMENDMENTS TO PLAN

         The Board may at any time amend, alter, suspend or discontinue this
Plan. Without the consent of an optionee, no amendment, alteration, suspension
or discontinuance may adversely affect outstanding Options except to conform
this Plan and ISOs granted under this Plan to the requirements of federal or
other tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require shareholder approval unless (a)
shareholder approval is required to preserve incentive stock option treatment
for federal income tax purposes or (b) the Board otherwise concludes that
shareholder approval is advisable.

11.      EFFECTIVE DATE OF PLAN; TERMINATION

         This Plan shall become effective upon adoption by the Board; provided,
however, that no Option shall be exercisable unless and until written consent of
the shareholders of the Company, or approval of shareholders of the Company
voting at a validly called shareholder's meeting, is obtained within twelve
months after adoption by the Board. If such shareholder approval is not obtained
within such time, Options granted hereunder shall be of the same force and
effect as if such approval was obtained except that all ISOs granted hereunder
shall be treated as NQOs. Options may be granted and exercised under this Plan
only after there has been compliance with all applicable federal and state
securities laws. This Plan shall terminate within ten years from the date of its
adoption by the Board.

                                       9

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