Document:

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                                                                    EXHIBIT 10.7

THIS WARRANT AND THE SECURITIES PURCHASED ON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (i) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO, OR (ii) THE CORPORATION SHALL HAVE RECEIVED AN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION AND ITS COUNSEL THAT AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION THEREWITH.

Warrant to Purchase                                          Warrant No. 2001-2
982,891 Shares

                        WARRANT TO PURCHASE COMMON STOCK
                                       OF
                           AER ENERGY RESOURCES, INC.

         THIS CERTIFIES that FW AER II, L.P., a Delaware limited partnership
("Holder") or any subsequent holder hereof, has the right to purchase from AER
Energy Resources, Inc., a Georgia corporation (the "Company"), up to 982,891
fully paid and nonassessable shares of the Company's Common Stock, no par value
("Common Stock"), at the Exercise Price (as defined herein), subject to
adjustment as provided below, at any time on or before 5:00 p.m., Atlanta,
Georgia time, on June 12, 2006.

         This Warrant is issued and all rights hereunder shall be held subject
to all of the conditions, limitations and provisions set forth herein.

         1.       Exercise.

                  This Warrant may be exercised as to all or any lesser number
of full shares of Common Stock covered hereby upon surrender of this Warrant,
with the Subscription Form attached hereto duly executed, together with the full
Exercise Price in cash, or by certified or official bank check payable in New
York Clearing House Funds or wire transfer payable in immediately available
federal funds for each share of Common Stock as to which this Warrant is
exercised, at the office of the Company, AER Energy Resources, Inc., 4600
Highlands Parkway, Suite G, Smyrna, GA 30082, or at such other office or agency
as the Company may designate in writing (such surrender and payment hereinafter
called the "Exercise of this Warrant"). The "Date of Exercise" of the Warrant
shall be defined as the date that the original Warrant and Subscription Form are
received by the Company. This Warrant shall be canceled upon its Exercise, and,
as soon as practicable thereafter, the Holder hereof shall be entitled to
receive a certificate or certificates for the number of shares of

<PAGE>   2

Common Stock purchased upon such Exercise and a new Warrant or Warrants
(containing terms identical to this Warrant) representing any unexercised
portion of this Warrant. Each person in whose name any certificate for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such certificate. Nothing in this
Warrant shall be construed as conferring upon the Holder hereof any rights as a
shareholder of the Company.

         2.       Payment of Warrant Exercise Price.

                  Payment of the Exercise Price may be made by any of the
following, or a combination thereof, at the election of Holder:

         (i)      cash, certified check or cashier's check or wire transfer
payable in immediately available federal funds; or

         (ii)     surrender of this Warrant at the principal office of the
Company together with notice of election, in which event the Company shall issue
Holder a number of shares of Common Stock computed using the following formula:

                                    X = Y (A-B)/A

where: X = the number of shares of Common Stock to be issued to Holder (not to
exceed the number of shares set forth on the cover page of this Warrant, as
adjusted pursuant to the provisions of Section 5 of this Warrant).

                  Y = the number of shares of Common Stock for which this
                  Warrant is being exercised.

                  A = the Market Price of one share of Common Stock (for
                  purposes of this Section 2(ii), the "Market Price" shall be
                  defined as the average closing bid price of the Common Stock
                  for the five trading days prior to the Date of Exercise of
                  this Warrant (the "Five-Day Average Closing Bid Price"), as
                  reported on the Nasdaq National Market, or if the Common Stock
                  is not traded on the Nasdaq National Market, the Five-Day
                  Average Closing Bid Price in the over-the-counter market;
                  provided, however, that if the Common Stock is listed on a
                  stock exchange, the Market Price shall be the Five-Day Average
                  Closing Bid Price on such exchange).

                  B = the Exercise Price.

It is intended that the Common stock issuable upon exercise of this Warrant in a
cashless exercise transaction shall be deemed to have been acquired at the time
this Warrant was issued, for purposes of Rule 144(d)(3)(ii).

                                      -2-
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         3.       Exercise Price.

                  The Exercise Price shall initially be $0.4248 per share.
However, if 120% of the average closing bid price of a share of Common Stock (as
reported on any tier of The Nasdaq Stock Market, Inc., including the
Over-the-Counter Bulletin Board automated quotation system or on a national
securities exchange) for 20 consecutive trading days ending on June 12, 2002
(the "20-Day Average Closing Bid Price"), is less than the Exercise Price, then
the Exercise Price shall be adjusted to equal the greater of (i) 120% of the
20-Day Average Closing Bid Price or (ii) $0.2655. Notwithstanding the foregoing,
in the event that the Exercise Price is adjusted pursuant to this Section 3, no
such adjustment shall be made to the number of Shares of Common Stock that may
be received upon the Exercise of this Warrant.

         4.       Transfer and Registration.

                  Subject to the provisions of Section 8 of this Warrant, this
Warrant may be transferred on the books of the Company, wholly or in part, in
person or by attorney, upon surrender of this Warrant properly endorsed, with
signature guaranteed. This Warrant shall be canceled upon such surrender and, as
soon as practicable thereafter, the person to whom such transfer is made shall
be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and the Holder of this Warrant shall be entitled to receive
a new Warrant or Warrants as to the portion hereof retained.

         5.       Anti-Dilution Adjustments.

         (a)      If the Company shall at any time declare a dividend payable in
shares of Common Stock, then the Holder hereof, upon Exercise of this Warrant
after the record date for the determination of Holders of Common Stock entitled
to receive such dividend, shall be entitled to receive upon Exercise of this
Warrant, in addition to the number of shares of Common Stock as to which this
Warrant is Exercised, such additional shares of Common stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date.

         (b)      If the Company shall at any time effect a recapitalization or
reclassification of such character that the shares of Common stock shall be
changed into or become exchangeable for a larger or smaller number of shares,
then upon the effective date thereof, the number of shares of Common Stock which
the Holder hereof shall be entitled to purchase upon Exercise of this Warrant
shall be increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of Common Stock by reason of such
recapitalization or reclassification, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionately decreased and, in
the case of a decrease in the number of shares, proportionally increased.

         (c)      If the Company shall at any time distribute to Holders of
Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions

                                      -3-
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payable out of earned surplus or net profits for the current or preceding year)
then, in any such case, the Holder of this Warrant shall be entitled to receive,
upon Exercise of this Warrant, with respect to each share of Common Stock
issuable upon such Exercise, the amount of cash or evidences of indebtedness or
other securities or assets which such Holder would have been entitled to receive
with respect to each such share of Common stock as a result of the happening of
such event had this Warrant been Exercised immediately prior to the record date
or other date fixing shareholders to be affected by such event (the
"Determination Date") or, in lieu thereof, if the Board of Directors of the
Company should so determine at the time of such distribution, a reduced Exercise
Price determined by multiplying the Exercise Price on the Determination Date by
a fraction, the numerator of which is the result of such Exercise Price reduced
by the value of such distribution applicable to one share of Common stock (such
value to be determined by the Board in its discretion) and the denominator of
which is such Exercise Price.

         (d)      If the Company shall at any time consolidate or merge with any
other corporation or transfer all or substantially all of its assets or
dissolve, then the Company shall deliver written notice to the Holder of such
merger, consolidation or sale of assets or dissolution at least thirty (30) days
prior to the closing of such merger, consolidation or sale of assets or
dissolution, and this Warrant shall terminate and expire immediately prior to
the closing of such merger, consolidation or sale of assets or dissolution.

         (e)      As used in this Warrant, the term "Exercise Price" shall mean
the purchase price per share specified in Section 3 of this Warrant until the
occurrence of an event stated in Section 5(b) or 5(c) and thereafter shall mean
said price as adjusted from time to time in accordance with the provisions of
said sections. No such adjustment pursuant to Section 5(b) or 5(c) shall be made
unless such adjustment would change the Exercise Price at the time by $.01 or
more; provided, however, that all adjustments not so made shall be deferred and
made when the aggregate thereof would change the Exercise Price at the time by
$.01 or more. No adjustment made pursuant to any provision of this Section 5
shall have the effect of increasing the total consideration payable upon
Exercise of this Warrant in respect of all the Common Stock as to which this
Warrant may be exercised.

         (f)      In the event that at any time, as a result of an adjustment
made pursuant to this Section 5, the Holder of this Warrant shall, upon Exercise
of this Warrant, become entitled to receive shares and/or other securities or
assets (other than Common Stock) then, wherever appropriate, all references
herein to shares of Common Stock shall be deemed to refer to and include such
shares and/or other securities or assets; and thereafter the number of such
shares and/or other securities or assets shall be subject to adjustment from
time to time in a manner and upon terms as nearly equivalent as practicable to
the provisions of this Section 5.

         6.       Fractional Interests.

                  No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, the Holder hereof may purchase only a whole number of shares of Common
Stock. The Company shall make a payment in cash in respect

                                      -4-
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of any fractional shares which might otherwise be issuable upon Exercise of this
Warrant, calculated by multiplying the fractional share amount by the market
price of the Company's Common Stock on the Date of Exercise as reported on the
Nasdaq National Market or such other exchange or system on which the Company's
Common Stock is traded.

         7.       Reservation of Shares.

                  The Company shall at all times reserve for issuance such
number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for
Exercise of this Warrant. The Company covenants and agrees that upon Exercise of
this Warrant, all shares of Common Stock issuable upon such Exercise shall be
duly and validly issued, fully paid, nonassessable and not subject to preemptive
rights of any shareholders.

         8.       Restrictions on Transfer.

                  This Warrant and the Common Stock issuable on Exercise hereof
have been or will be acquired by the Holder hereof for investment for its own
account and not with a view to the distribution thereof, have not been
registered under the Securities Act of 1933, as amended (the "Act"), or under
any state securities laws (the "State Acts") and may not be sold, transferred,
pledged, hypothecated or otherwise disposed of in the absence of registration or
the availability of an exemption from registration under the Act and any
applicable State Acts and, in the event a Holder believes an exemption from the
registration requirements of the Act and any applicable State Acts is available,
the Holder must deliver a legal opinion satisfactory in form and substance to
the Company and its counsel, stating that such exemption is available. All
shares of Common Stock issued upon Exercise of this Warrant shall bear an
appropriate legend to such effect. Holder has represented to the Company that it
and any transferee of all or any portion of this Warrant is and will remain at
all times while this Warrant is outstanding an "accredited investor" as defined
in Regulation D promulgated under the Act.

         9.       Benefits of this Warrant.

                  Nothing in this Warrant shall be construed to confer upon any
person other than the Company and the Holder of this Warrant any legal or
equitable right, remedy or claim under this Warrant and this Warrant shall be
for the sole and exclusive benefit of the Company and the Holder of this
Warrant.

         10.      Applicable Law.

                  This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the State of Georgia.
Jurisdiction for any dispute regarding this Warrant lies in Georgia.

                                      -5-
<PAGE>   6
         11.      Loss of Warrant.

                  Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.

         12.      Purchase Agreement.

                  This Warrant is issued and sold pursuant to that certain
Securities Purchase Agreement dated as of June 1, 2001 (the "Purchase
Agreement"). The Holder shall be entitled to all of the rights and benefits and
subject to all of the obligations of a Purchaser under the Purchase Agreement,
including without limitation, rights with respect to registration under the Act.
The terms of the Purchase Agreement are hereby incorporated herein for all
purposes and shall be considered a part of this Warrant as if they had been
fully set forth herein.

         13.      Notice to Company and Holder.

                  Notices or demands pursuant to this Warrant to be given or
made by the Holder of this Warrant to or on the Company shall be sufficiently
given or made if sent by certified or registered mail, return receipt requested,
postage prepaid, and addressed, until another address is designated in writing
by the Company, AER Energy Resources, Inc., 4600 Highlands Parkway, Suite G,
Smyrna, GA 30082, Attention: Chief Executive Officer. Notices or demands
pursuant to this Warrant to be given or made by the Company to or on the Holder
of this Warrant shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed to the
Holder as follows: FW AER II, L.P., 201 Main Street, Suite 3100, Fort Worth,
Texas 76102 Attn: Vice President and Controller, with a copy to David G. Brown,
c/o Arbor Investors, 2775 Sand Hill Road, Suite 220, Menlo Park, California
94025 or another person or address designated in writing by Holder.

                        (signature follows on next page)

                                      -6-
<PAGE>   7

         IN WITNESS WHEREOF, this Warrant is hereby executed effective as of the
date set forth below.

Dated as of June 1, 2001.

                                 AER ENERGY RESOURCES, INC.

                                 By:     /s/    J. T. Moore
                                    --------------------------------------------
                                      J.T. Moore
                                      Vice President and Chief Financial Officer

                                      -7-
<PAGE>   8

                                SUBSCRIPTION FORM

                         TO: AER ENERGY RESOURCES, INC.

         The undersigned hereby irrevocably exercises the right to purchase
_______________ shares of Common Stock of AER Energy Resources, Inc., a Georgia
corporation, evidenced by the attached Warrant, and herewith makes payment of
the Exercise Price with respect to such shares in full, all in accordance with
the conditions and provisions of said Warrant.

         The undersigned represents that it is an "accredited investor" as
defined in Regulation D under the Securities Act of 1933, as amended, agrees not
to offer, sell, transfer or otherwise dispose of any of such Common Stock,
except in accordance with the provisions of Section 8 of the Warrant, and
consents that the following legend may be affixed to the certificates for the
Common Stock hereby subscribed for, if such legend is applicable:

         "The securities represented by this certificate have not been
         registered under the Securities Act of 1933, as amended (the
         "Securities Act"), or any state securities law, and may not be sold,
         transferred, pledged, hypothecated or otherwise disposed of until
         either (i) a registration statement under the Securities Act and
         applicable state securities laws shall have become effective with
         regard thereto, or (ii) the corporation shall have received an opinion
         of counsel acceptable to the corporation and its counsel that an
         exemption from registration under the Securities Act or applicable
         state securities laws is available in connection therewith."

         The undersigned requests that certificates for such shares be issued,
and a warrant representing any unexercised portion thereof be issued, pursuant
to the Warrant in the name of the Registered Holder and delivered to the
undersigned at the address set forth below:

[ ]               The undersigned hereby elects to make payment of the Exercise
                  Price through a cashless exercise pursuant to Section 2(ii) of
                  the Warrant.
(Check Box if
applicable)

Dated:
      ------------------------------

--------------------------------------------------------------------------------
                         Signature of Registered Holder

--------------------------------------------------------------------------------
                        Name of Registered Holder (Print)

--------------------------------------------------------------------------------
                                     Address

--------------------------------------------------------------------------------
The attached Warrant and the securities issuable on exercise thereof have not
been registered under the Securities Act of 1933, as amended, or any state
securities law and may not be sold, transferred, pledged, hypothecated or
otherwise disposed of in the absence of registration or the availability of an
exemption from registration under said Act or any state securities law.

<PAGE>   9

                                   ASSIGNMENT

                    (To be executed by the registered Holder
                        desiring to transfer the Warrant)

FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase ____________ shares of the Common Stock of AER ENERGY RESOURCES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _____________________________ attorney to transfer the said Warrant on
the books of the Company, with full power of substitution in the premises.

Dated:
      -----------------------------------    -----------------------------------
                                                         Signature

Fill in for new Registration of Warrant:     Signature Guarantee:

-----------------------------------------    -----------------------------------
                  Name                                Name of Guarantor

                                             By:
-----------------------------------------       --------------------------------
                                             Name:
-----------------------------------------         ------------------------------
                  Address                    Title:
                                                   -----------------------------

Please print name and address of assignee
(including zip code)

--------------------------------------------------------------------------------
NOTICE

The signature to the foregoing Subscription Form or Assignment must correspond
to the name as written upon the face of the attached Warrant in every
particular, without alteration or enlargement or any change whatsoever.

--------------------------------------------------------------------------------<PAGE>   1
                                                                   EXHIBIT 10.1

                         INTERNET PICTURES CORPORATION

                           2001 EQUITY INCENTIVE PLAN

         The purpose of the Internet Pictures Corporation 2001 Equity Incentive
Plan (the "Plan") is to provide (i) designated employees (including employees
who are also officers or directors) of Internet Pictures Corporation and its
subsidiaries (the "Company"), (ii) certain consultants and advisors to the
Company and (iii) non-employee members of the Board of Directors of the Company
(the "Board") with the opportunity to receive grants of incentive stock options
and nonqualified stock options ("Options") and restricted stock awards
("Restricted Stock Awards") and Stock Appreciation Rights, Performance Shares,
Dividend Equivalent Payments and Other Stock Based Awards ("Options" and
"Restricted Stock Awards" and "Stock Appreciation Rights," "Performance
Shares," "Dividend Equivalent Payments" and "Other Stock Based Awards" are
collectively referred to herein as "Awards").

         The Company believes that the Plan will encourage the participants to
contribute materially to the growth of the Company, thereby benefiting the
Company's stockholders, and will align the economic interests of the
participants with those of the stockholders.

         1.       Administration

         (a)      The Plan will be administered by a compensation committee
(the "Committee") of two or more directors appointed by the Board. If no
compensation committee is appointed, all references in the Plan to the
"Committee" shall be deemed to refer to the Board.

         (b)      The Committee shall have the sole authority to (i) determine
the individuals to whom Awards shall be granted under the Plan, (ii) determine
the type, size and terms of the Awards to be granted to each such individual,
(iii) determine the time when the Awards will be granted and the duration of
any applicable exercise period, including the criteria for exercisability and
the acceleration of exercisability and (iv) deal with any other matters arising
under the Plan.

         (c)      The Committee shall have full power and authority to
administer and interpret the Plan, to make factual determinations and to adopt
or amend such rules, regulations, agreements and instruments for implementing
the Plan and for the conduct of its business as it deems necessary or
advisable, in its sole discretion. The Committee's interpretations of the Plan
and all determinations made by the Committee pursuant to the powers vested in
it hereunder shall be conclusive and binding on all persons having any interest
in the Plan or in any awards granted hereunder. All powers of the Committee
shall be executed in its sole discretion, in the best interest of the Company,
not as a fiduciary, and in keeping with the objectives of the Plan and need not
be uniform as to similarly situated individuals.

<PAGE>   2

         2.       Shares Subject to the Plan

         (a)      Subject to the adjustment specified below, the aggregate
number of shares of common stock of the Company ("Company Stock") that may be
issued under the Plan is 20,000,000 shares plus an annual increase to be added
on the first day of the Company's fiscal year beginning in 2001 equal to 5% of
the outstanding shares on such date or a lesser amount determined by the
Committee. The shares may be authorized but unissued shares of Company Stock or
reacquired shares of Company Stock, including shares purchased by the Company
on the open market for purposes of the Plan. If and to the extent Awards
granted under the Plan terminate, expire, or are canceled, forfeited, exchanged
or surrendered without having been exercised, the shares subject to such Awards
shall again be available for purposes of the Plan.

         (b)      If there is any change in the number or kind of shares of
Company Stock outstanding (i) by reason of a stock dividend, spin off,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spin-off or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Awards, the maximum number of shares of Company Stock for
which any individual participating in the Plan may receive Awards in any year,
the number of shares covered by outstanding Awards, the kind of shares issued
under the Plan, and the price per share of such Awards shall be appropriately
adjusted by the Committee to reflect any increase or decrease in the number of,
or change in the kind or value of, issued shares of Company Stock to preclude,
to the extent practicable, the enlargement or dilution of rights and benefits
under such Awards; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated. Any adjustments determined by the
Committee shall be final, binding and conclusive.

         3.       Eligibility for Participation

         (a)      All employees of the Company ("Employees"), including
Employees who are officers or members of the Board, and members of the Board
who are not Employees ("Non-Employee Directors") shall be eligible to
participate in the Plan. Consultants and advisors who perform services to the
Company ("Key Advisors") shall be eligible to participate in the Plan if the
Key Advisors render bona fide services and such services are not in connection
with the offer or sale of securities in a capital-raising transaction.

         (b)      The Committee shall select the Employees, Non-Employee
Directors and Key Advisors to receive Awards and shall determine the number of
shares of Company Stock subject to a particular grant in such manner as the
Committee determines. The Board must approve the grant and terms of any Awards
granted to Non-Employee Directors and to any other directors who are members of
the Committee. Employees,

                                       2
<PAGE>   3

Key Advisors and Non-Employee Directors who receive Awards under this Plan
shall hereinafter be referred to as "Grantees".

         4.       Options

         (a)      Options granted under the Plan may be incentive stock options
("Incentive Stock Options") or nonqualified stock options ("Nonqualified Stock
Options") as described in Section 4(b). All Awards shall be subject to the
terms and conditions set forth herein and to such other terms and conditions
consistent with the Plan as the Committee deems appropriate and as are
specified in writing by the Committee to the individual in a grant instrument
(the "Grant Instrument") or an amendment to the Grant Instrument. The Committee
shall approve the form and provisions of each Grant Instrument.

         (b)      (i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
Nonqualified Stock Options that are not intended so to qualify, or any
combination of Incentive Stock Options and Nonqualified Stock Options, all in
accordance with the terms and conditions set forth herein. Incentive Stock
Options may be granted only to Employees. Nonqualified Stock Options may be
granted to Employees, Non-Employee Directors and Key Advisors.

                  (ii)     The purchase price (the "Exercise Price") of Company
Stock subject to an Option shall be determined by the Committee and may be
equal to, greater than, or less than the Fair Market Value (as defined below)
of a share of such Stock on the date the Option is granted; provided, however,
that (x) the Exercise Price of an Incentive Stock Option shall be equal to, or
greater than, the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted, (y) an Incentive Stock Option may not be
granted to an Employee who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the Company, unless the Exercise
Price per share is not less than 110% of the Fair Market Value of Company Stock
on the date of grant and (z) in no circumstances will the Exercise Price be
less than 90% of the per share price of a share of Company Stock established in
the stock placement transaction immediately preceding such determination.

                  (iii)    If Company Stock is publicly traded, then the Fair
Market Value per share shall be determined as follows: (x) if the principal
trading market for the Company Stock is a national securities exchange or the
Nasdaq National Market, the last reported sale price thereof on the relevant
date or, if there were no trades on that date, the latest preceding date upon
which a sale was reported, or (y) if the Company Stock is not principally
traded on such exchange or market, the mean between the last reported "bid" and
"asked" prices of Company Stock on the relevant date, as reported on Nasdaq or,
if not so reported, as reported by the National Daily Quotation Bureau, Inc. or
as reported in a customary financial reporting service, as applicable and as
the Committee determines. If the Company Stock is not publicly traded or, if
publicly traded, not subject to reported

                                       3
<PAGE>   4

transactions or "bid" or "asked" quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.

         (c)      A Grantee may exercise an Option that has become exercisable,
in whole or in part, by delivering a notice of exercise to the Company with
payment of the Exercise Price. The Grantee shall pay the Exercise Price for an
Option (i) in cash, (ii) by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or (iii) by such other method as the Committee may approve, including payment
through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board. Shares of Company Stock used to exercise an Option shall
have been held by the Grantee for the requisite period of time to avoid adverse
accounting consequences to the Company with respect to the Option. The Grantee
shall pay the Exercise Price and the amount of any withholding tax due
(pursuant to Section 11) at the time of exercise. Shares of Company Stock shall
not be issued upon exercise of an Option until the Exercise Price is fully paid
and any required withholding is made.

         (d)      Each Incentive Stock Option shall provide that, if the
aggregate Fair Market Value of the stock on the date of the grant with respect
to which Incentive Stock Options are exercisable for the first time by a
Grantee during any calendar year, under the Plan or any other stock option plan
of the Company or a parent or subsidiary, exceeds $100,000, then the option, as
to the excess, shall be treated as a Nonqualified Stock Option. An Incentive
Stock Option shall not be granted to any person who is not an Employee of the
Company or a parent or subsidiary (within the meaning of section 424(f) of the
Code). If and to the extent that an Option designated as an Incentive Stock
Option fails so to qualify under the Code, the Option shall remain outstanding
according to its terms as a Nonqualified Stock Option.

         5.       Restricted Stock Awards

         (a)      The Committee may grant Restricted Stock Awards pursuant to
the Plan. Restricted Stock Awards may be granted to Employees, Non-Employee
Directors and Key Advisors. Such Restricted Stock Awards shall be in any form
the Committee deems appropriate, including but not limited to, stock for
converted options, stock bonuses and stock purchase rights. Each Restricted
Stock Award shall be evidenced by a Grant Instrument.

         (b)      A Grantee's right to retain a Restricted Stock Award shall be
subject to such restrictions, including, but not limited to, his continuous
employment by the Company for a specified period. The Committee may, in its
sole discretion, require different periods of employment and objectives with
respect to different Grantees, different Restricted Stock Awards or designated
portions of a single Restricted Stock Award.

                                       4
<PAGE>   5

         (c)      Company Stock subject to a Restricted Stock Award shall be
issued and delivered at the time of the grant or as otherwise determined by the
Committee, but shall be subject to forfeiture until provided otherwise in the
Grant Instrument or the Plan.

         (d)      A Grantee may exercise a Restricted Stock Award that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company.

         (e)      Grants of Restricted Stock Awards shall be made at such cost
to the Grantee as the Committee shall determine and may be issued in
consideration for past services actually rendered to or for the benefit of the
Company.

         6.       Stock Appreciation Rights

         (a)      The Committee may grant Stock Appreciation Rights under the
Plan. A Stock Appreciation Right is a right to receive a payment equal to the
excess of the (i) Fair Market Value of the shares of Common Stock covered by
such right as of the date of exercise or termination over (ii) such amount as
is determined by the Committee at the time the Stock Appreciation Right is
granted; such grants may be made individually or in tandem with Options. Each
Stock Appreciation Right shall be evidenced by an Agreement and shall be in
such form and shall contain such terms and conditions as the Committee shall
deem appropriate.

         (b)      If Stock Appreciation Rights are granted in tandem with an
Option, the exercise of the Option shall cause a proportional reduction in
Stock Appreciation Rights standing to a Grantee's credit; the payment of Stock
Appreciation Rights shall cause a proportional reduction of the number of
shares of Common Stock exercisable under such Option. If Stock Appreciation
Rights are granted in tandem with an Incentive Stock Option, the Stock
Appreciation Rights shall have such terms and conditions as shall be required
for the Incentive Stock Option to qualify as an Incentive Stock Option.

         (c)      Upon electing to receive payment of a Stock Appreciation
Right, a Grantee shall receive payment in cash, in Common Stock, in any
combination of cash and Common Stock, or in such other form as the Committee
shall determine. Stock Appreciation Rights shall be paid by the Company to a
Grantee, to the extent payment is elected by the Grantee (and is otherwise due
and payable), as soon as practicable after the date on which such election is
made.

         7.       Performance Shares

         (a)      The Committee may Award Performance Share Units pursuant to
the Plan. Each Award of Performance Share Units shall be evidenced by an
Agreement and shall be in such form and shall contain such terms and conditions
as the Committee shall deem appropriate.

         (b)      Performance Shares Units represent the right of a Grantee to
receive Common Stock or the cash equal to the Fair Market Value of such Common
Stock at a future date in accordance with the terms and conditions of the
Award. The terms and

                                       5
<PAGE>   6

conditions shall be determined by the Committee, in its sole discretion, but
are generally expected to be based substantially upon the attainment of
targeted financial performance objectives.

         (c)      When the Committee certifies that the performance goals
required by the Award have been attained or otherwise satisfied, the Committee
shall authorize the payment of cash in lieu of Performance Shares or the
issuance of Performance Shares registered in the name of the Grantee.

         8.       Dividend Equivalent Payments

         The Committee may authorize the payment of dividend equivalents on
some or all of the shares of Common Stock covered by an Award pursuant to the
Plan, in an amount equal to, and commensurate with, dividends declared by the
Committee and paid on Common Stock. Dividend equivalents payable on Awards
under this Section 8 may be paid in cash or in Common Stock at the discretion
of the Committee.

         9.       Other Stock Based Awards and Other Benefits

         (a)      The Committee shall have the right to grant Other Stock Based
Awards which may include, without limitation, the grant of Common Stock based
on certain conditions, the payment of cash based on the market performance of
the Common Stock, and the grant of securities convertible into Common Stock.

         (b)      The Committee shall have the right to provide other types of
Awards under the Plan in addition to those specifically listed, if the
Committee believes that such Awards would further the purposes for which the
Plan has been established.

         10.      Granting of Awards

         (a)      Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each grant of Awards to
Employees, Non-Employee Directors and Key Advisors, subject to approval of the
Board with respect to Awards granted to Non-Employee Directors or members of
the Committee.

         (b)      Award Term. The Committee shall determine the term of each
Award, subject to approval of the Board with respect to Awards granted to
Non-Employee Directors or members of the Committee. The term of any Award shall
not exceed ten years from the date of grant. However, an Incentive Stock Option
that is granted to an Employee who, at the time of grant, owns stock possessing
more than 10 percent of the total combined voting power of all classes of stock
of the Company, or any parent or subsidiary of the Company, may not have a term
that exceeds five years from the date of grant.

         (c)      Exercisability of Awards. Awards shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant

                                       6
<PAGE>   7

Instrument, subject to approval of the Board with respect to Awards granted to
Non-Employee Directors or members of the Committee. The Committee may
accelerate the exercisability of any or all outstanding Awards at any time for
any reason.

         (d)      Termination of Employment, Disability or Death.

                  (i)      Except as provided below, an Award may only be
exercised while the Grantee is employed by, or providing service to, the
Company as an Employee, Key Advisor or member of the Board. In the event that a
Grantee ceases to be employed by, or provide service to, the Company for any
reason other than "disability", death, or "termination for cause", any Award
which is otherwise exercisable by the Grantee shall terminate unless exercised
within 90 days of the date on which the Grantee ceases to be employed by, or
provide service to, the Company (or within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Award term. Unless otherwise specified by the Committee, any
of the Grantee's Awards that are not otherwise exercisable as of the date on
which the Grantee ceases to be employed by the Company shall terminate as of
such date.

                  (ii)     In the event the Grantee ceases to be employed by,
or provide service to, the Company on account of a "termination for cause" by
the Company, any Award held by the Grantee shall terminate as of the date the
Grantee ceases to be employed by, or provide service to, the Company.

                  (iii)    In the event the Grantee ceases to be employed by,
or provide service to, the Company because the Grantee is "disabled", any Award
which is otherwise exercisable by the Grantee shall terminate unless exercised
within one year after the date on which the Grantee ceases to be employed by,
or provide service to, the Company (or within such other period of time as may
be specified by the Committee), but in any event no later than the date of
expiration of the Award term. Any of the Grantee's Awards which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide service to, the Company shall terminate as of such date.

                  (iv)     If the Grantee dies while employed by, or providing
service to, the Company or within 90 days after the date on which the Grantee
ceases to be employed, or provide service, on account of a termination of
employment or service specified in Section 10(d)(i) above (or within such other
period of time as may be specified by the Committee), any Award that is
otherwise exercisable by the Grantee shall terminate unless exercised within
one year after the date on which the Grantee ceases to be employed by, or
provide service to, the Company (or within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Award term. Any of the Grantee's Awards that are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide service to, the Company shall terminate as of such date.

                  (v)      For purposes of this Section 10(d):

                                       7
<PAGE>   8

                           (A)      The term "Company" shall mean the Company
                  and its parent and subsidiary corporations.

                           (B)      "Employed by, or providing service to, the
                  Company" shall mean employment as an Employee or the
                  provision of services to the Company as a Key Advisor or
                  member of the Board (so that, for purposes of exercising
                  Awards, a Grantee shall not be considered to have terminated
                  employment or ceased to provide services until the Grantee
                  ceases to be an Employee, Key Advisor or member of the
                  Board).

                           (C)      "Disability" shall mean a Grantee's
                  becoming disabled within the meaning of section 22(e)(3) of
                  the Code.

                           (D)      "Termination for cause" shall mean a
                  finding by the Committee that the Grantee has breached his or
                  her employment or service contract with the Company, or has
                  been engaged in disloyalty to the Company, including, without
                  limitation, fraud, embezzlement, theft, commission of a
                  felony or proven dishonesty in the course of his or her
                  employment or service, or has disclosed trade secrets or
                  confidential information of the Company to persons not
                  entitled to receive such information. In the event a
                  Grantee's employment or service is terminated for cause, in
                  addition to the immediate termination of all Awards, the
                  Grantee shall automatically forfeit all shares underlying any
                  exercised portion of an Award for which the Company has not
                  yet delivered the share certificates, upon refund by the
                  Company of the Exercise Price paid by the Grantee for such
                  shares.

         11.      Withholding of Taxes

         (a)      Required Withholding. All Awards under the Plan shall be
granted subject to any applicable federal (including FICA), state and local tax
withholding requirements. The Company shall have the right to deduct from wages
paid to the Grantee any federal, state or local taxes required by law to be
withheld with respect to Awards, or the Company may require the Grantee or
other person receiving such shares to pay to the Company the amount of any such
taxes that the Company is required to withhold.

         (b)      Election to Withhold Shares. If the Committee so permits, a
Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Award by having shares withheld up to an amount that does
not exceed the Grantee's maximum marginal tax rate for federal (including
FICA), state and local tax liabilities. The election must be in a form and
manner prescribed by the Committee and shall be subject to the prior approval
of the Committee.

                                       8
<PAGE>   9

         12.      Transferability of Awards.

         (a)      Except as provided below, only the Grantee or his or her
authorized representative may exercise rights under an Award. A Grantee may not
transfer those rights except by will or by the laws of descent and distribution
or, with respect to Nonqualified Options, if permitted in any specific case by
the Committee in its sole discretion, pursuant to a qualified domestic
relations order (as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder).
When a Grantee dies, the representative or other person entitled to succeed to
the rights of the Grantee ("Successor Grantee") may exercise such rights. A
Successor Grantee must furnish proof satisfactory to the Company of his or her
right to receive the Grant under the Grantee's will or under the applicable
laws of descent and distribution.

         (b)      Notwithstanding the foregoing, the Committee may provide, in
a Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to
family members or other persons or entities according to such terms as the
Committee may determine.

         13.      Change of Control of the Company

As used herein, a "Change of Control" shall be deemed to have occurred if:

         (a)      After the effective date of the Plan, any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 35% or more of the
voting power of the then outstanding securities of the Company, except where
the acquisition is approved by the Board; provided, however, that the
acquisition of securities of the Company pursuant to the terms of that certain
Securities Purchase Agreement dated May 14, 2001 between the Company and Image
Investor Portfolio, a separate series of Memphis Angels, LLC shall not be
deemed a Change of Control within the meaning of this Section 13;

         (b)      The stockholders of the Company approve (or, if stockholder
approval is not required, the Board approves) an agreement providing for (i)
the merger or consolidation of the Company with another corporation where the
stockholders of the Company, immediately prior to the merger or consolidation,
will not beneficially own, immediately after the merger or consolidation,
shares entitling such stockholders to a majority of all votes to which all
stockholders of the surviving corporation would be entitled in the election of
directors, or where the members of the Board, immediately prior to the merger
or consolidation, would not, immediately after the merger or consolidation,
constitute a majority of the board of directors of the surviving corporation,
(ii) a sale or other disposition of all or substantially all of the assets of
the Company, or (iii) a liquidation or dissolution of the Company;

         (c)      Any person has commenced a tender offer or exchange offer for
35% or more of the voting power of the then outstanding shares of the Company;
or

                                       9
<PAGE>   10

         (d)      After this Plan is approved by the stockholders of the
Company, directors are elected such that a majority of the members of the Board
shall have been members of the Board for less than two years, unless the
election or nomination for election of each new director who was not a director
at the beginning of such two-year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period.

         14.      Consequences of a Change of Control

         (a)      Upon a Change of Control, unless the Committee determines
otherwise, (i) the Company shall provide each Grantee with outstanding Awards
written notice of such Change of Control and (ii) all outstanding Awards shall
automatically accelerate and become fully exercisable.

         (b)      In addition, upon a Change of Control described in Section
13(b)(i) where the Company is not the surviving corporation (or survives only
as a subsidiary of another corporation), unless the Committee determines
otherwise, all outstanding Awards that are not exercised shall be assumed by,
or replaced with comparable options, restricted stock awards stock appreciation
rights, performance shares, dividend equivalent payments or other stock based
awards by, the surviving corporation. Any replacement options or restricted
stock or stock appreciation rights, performance shares, dividend equivalent
payments or other stock based awards shall entitle the Grantee to receive the
same amount and type of securities as the Grantee would have received as a
result of the Change of Control had the Grantee exercised the Awards
immediately prior to the Change of Control.

         (c)      Notwithstanding the foregoing, in the event of a Change of
Control, the Committee may require that Grantees surrender their outstanding
Awards in exchange for a payment by the Company, in cash or Company Stock as
determined by the Committee, in an amount equal to the amount by which the then
Fair Market Value of the shares of Company Stock subject to the Grantee's
outstanding Awards exceeds the Exercise Price of the Awards.

         (d)      Notwithstanding anything in the Plan to the contrary, in the
event of a Change of Control, the Committee shall not have the right to take
any actions described in the Plan (including without limitation actions
described in Subsection (c) above) that would make the Change of Control
ineligible for pooling of interest accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.

         15.      Amendment and Termination of the Plan

         (a)      Amendment. The Board may amend or terminate the Plan at any
time; provided, however, that any amendment to the Plan that requires
stockholder approval shall be submitted to a vote of stockholders in order to
comply with Section 162(m) of the Code if such Section is applicable to the
Plan.

                                      10
<PAGE>   11

         (b)      Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date unless
terminated earlier by the Board or unless extended by the Board with the
approval of the stockholders.

         (c)      Termination and Amendment of Outstanding Awards. A
termination or amendment of the Plan that occurs after an Award is granted
shall not materially impair the rights of a Grantee unless the Grantee consents
or unless the Committee acts under Section 22(b). The termination of the Plan
shall not impair the power and authority of the Committee with respect to an
outstanding Award. Whether or not the Plan has terminated, an outstanding Award
may be terminated or modified under Sections 14 and 22(b) or may be amended by
agreement of the Company and the Grantee consistent with the Plan.

         (d)      Governing Document. The Plan shall be the controlling
document. No other statements, representations, explanatory materials or
examples, oral or written, may amend the Plan in any manner. The Plan shall be
binding upon and enforceable against the Company and its successors and
assigns.

         16.      Funding of the Plan

         This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Awards under this Plan. In no event shall
interest be paid or accrued on any Awards.

         17.      Rights of Participants

         Nothing in this Plan shall entitle any Employee, Key Advisor or other
person to any claim or right to be granted an Award under this Plan. Neither
this Plan nor any action taken hereunder shall be construed as giving any
individual any rights to be retained by or in the employ of the Company or any
other employment rights.

         18.      No Fractional Shares

         No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.

         19.      Requirements for Issuance of Shares

         No Company Stock shall be issued or transferred in connection with any
Award hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Award granted to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her subsequent disposition
of such shares of Company Stock as the Committee shall deem necessary or
advisable as a result of any applicable law, regulation or official

                                      11
<PAGE>   12

interpretation thereof and certificates representing such shares may be
legended to reflect any such restrictions. Certificates representing shares of
Company Stock issued under the Plan will be subject to such stop-transfer
orders and other restrictions as may be applicable under such laws, regulations
and interpretations, including any requirement that a legend or legends be
placed thereon.

         20.      Headings

         Section headings are for reference only. In the event of a conflict
between a title and the content of a section, the content of the section shall
control.

         21.      Effective Date of the Plan.

         This Plan was adopted by the Board of Directors on June 28, 2001.

         22.      Miscellaneous

         (a)      Awards in Connection with Corporate Transactions and
Otherwise. Nothing contained in this Plan shall be construed to (i) limit the
right of the Committee to grant Awards under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including Awards
granted to employees thereof who become Employees of the Company, or for other
proper corporate purpose, or (ii) limit the right of the Company to grant stock
options or restricted stock awards or to grant stock appreciation rights,
performance shares, dividend equivalent payments or other stock based awards or
make other awards outside of this Plan. Without limiting the foregoing, the
Committee may grant Awards to an employee of another corporation who becomes an
Employee by reason of a corporate merger, consolidation, acquisition of stock
or property, reorganization or liquidation involving the Company in
substitution for a stock option or restricted stock award made by such
corporation. The Committee shall prescribe the provisions of the substitute
Awards.

         (b)      Compliance with Law. The Plan, the grant and exercise of
Awards, and the obligations of the Company to issue or transfer shares of
Company Stock under Awards shall be subject to all applicable laws and to
approvals by any governmental or regulatory agency as may be required. The
Committee may revoke any grant if it is contrary to law or modify a grant to
bring it into compliance with any valid and mandatory government regulation.
The Committee may also adopt rules regarding the withholding of taxes on
payments to Grantees. The Committee may, in its sole discretion, agree to limit
its authority under this section.

         (c)      Ownership of Stock. A Grantee or Successor Grantee shall have
no rights as a stockholder with respect to any shares of Company Stock covered
by an Award until the shares are issued or transferred to the Grantee or
Successor Grantee on the stock transfer records of the Company. Once an Award
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

                                      12
<PAGE>   13

Company. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the Award is exercised, except as provided in
Section 2 of the Plan.

         (d)      Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall
exclusively be governed by and determined in accordance with the laws of the
State of Delaware.

                                      13

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