Document:

exhibit4_1.htm

    
       

      Exhibit
4.1

     

    
      
        FIRST AMENDMENT TO CREDIT
AGREEMENT

         

        THIS
FIRST AMENDMENT TO CREDIT AGREEMENT (this “Agreement”) is
entered into as of April 17, 2008 (“First Amendment Effective
Date”), by and among the lenders identified on the signature pages hereof
(such lenders, together with their respective successors and permitted assigns,
are referred to hereinafter each individually as a “Lender” and
collectively, as the “Lenders”), WELLS
FARGO FOOTHILL, LLC, a
Delaware limited liability company, as administrative agent for the Lenders (in
such capacity, together with its successors and assigns in such capacity, “Agent”), the
Guarantors signatory hereto, and STORM CAT ENERGY (USA) CORPORATION, a Colorado
corporation (“Borrower”).  All
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Credit Agreement (as hereinafter defined).

         

        W I T N E
S S E T H:

         

        WHEREAS,
Agent, the Lenders, and Borrower, entered into that certain Credit Agreement
dated as of December 27, 2007 (as the same may be from time to time further
amended, extended, restated, supplemented or otherwise modified, the “Credit Agreement”),
pursuant to which the Lenders made available to the Borrower a Revolver
Commitment and Term Loan Commitment (each term as defined in the Credit
Agreement);

         

        WHEREAS,
Borrower intends to acquire certain property as set forth on Exhibit A attached
hereto (the “Acquisition”);
and

         

        WHEREAS,
in connection with the Acquisition, the Borrower, the Lenders and Agent have
agreed to amend the terms of the Credit Agreement, all on the terms and subject
to the conditions set forth herein.

         

        NOW,
THEREFORE, in consideration of the foregoing and for other good and valid
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as
follows:

         

        1. Defined
Terms.  Capitalized terms used but not defined herein shall
have the meanings ascribed to them in the Credit Agreement.

         

        2. Amendment to Credit
Agreement.  Upon satisfaction of the conditions set forth in
Section 4 hereof, the Credit Agreement is hereby amended as
follows:

         

         

        a. Schedule 1.1 of the
Credit Agreement is hereby amended by inserting the following definitions in
appropriate alphabetical order:

         

        “ ‘Existing Term Loan’
has the meaning specified therefor in Section
2.2.”

        

        “ ‘Existing Term Loan
Lender’ shall mean Regiment.”

        

        “ ‘First Amendment’
shall mean that certain First Amendment to Credit Agreement, by and among the
Borrower, Agent and the Lenders, dated as of April 16, 2008.”

         

        “ ‘First Amendment Effective
Date’ has the meaning given to such term by the First
Amendment.”

         

        “ ‘New Term Loan’ has
the meaning specified therefor in Section
2.2.”

        

        “ ‘New Term Loan Lender’
shall mean Ableco Finance LLC, a Delaware limited liability
company.”

        

        “ ‘Participant Register’
has the meaning specified therefor in Section
13.1(j).”

        

        “ ‘Rating Agencies’ has
the meaning specified therefor in Section
2.15.”

        

        “ ‘Register’ has the
meaning specified therefor in Section
13.1(h).”

        

        “ ‘Registered Loan’
means a loan recorded on the Register (or Related Party Register) pursuant to
Section
13.1(h).”

        

        “ ‘Registered Note’ has
the meaning specified therefor in Section
2.16.”

        

        
          
            
            

          

          
            -1-

            
              

            

          

          
            
            

          

        

        “ ‘Related Party
Assignment’ has the meaning specified therefore in Section
13.1(a).”

        

        “ ‘Related Party
Register’ has the meaning specified therefor in Section
13.1(h).”

        

        “ ‘Securitization’ has
the meaning specified therefor in Section
2.15.”

         

        b. Schedule
1.1 of the Credit Agreement is hereby amended by deleting the text “(together
with its Affiliates)” appearing in clause (f) of the definition of “Eligible
Assignee” and replacing it with the text “(together with its Affiliates and
Approved Funds)”.

         

        c. Schedule
1.1 of the Credit Agreement is hereby amended by amending and restating sub
clause (ii) of the definition of “Interest Period” with the following: “(ii) (a)
the Existing Term Loan (I) with respect to the first interest payment date, the
period from and including the Closing Date to and including the last day of the
calendar quarter in which the Closing Date occurs and (II) with respect to any
subsequent interest payment date, the last day of each subsequent calendar
quarter, and (b) the New Term Loan (I) with respect to the first interest
payment date, the period from and including the First Amendment Effective Date
to and including the last day of the calendar quarter in which the First
Amendment Effective Date occurs and (II) with respect to any subsequent interest
payment date, the last day of each subsequent calendar quarter”.

         

        d. Schedule
1.1 of the Credit Agreement is hereby amended by amending and restating the
following definitions in their entirety:

         

        “ ‘Base Rate Margin’
means (i) for purposes of determining the interest rate applicable to the Term
Loan or upon the occurrence of an event described in Section 2.13(d)(ii),
6.75% and (ii) for purposes of determining the interest rate applicable to Base
Rate Loans that are Advances, the applicable Base Rate Margin set forth in the
table below opposite the Borrowing Base Utilization on the date of
determination:

         

        
          	
                  Tier

                	
                  Borrowing
      Base Utilization

                	
                  Base
      Rate Margin for Advances

                
	
                  I

                	
                  <0.33

                	
                  0.75%

                
	
                  II

                	
                  >=0.33
      < 0.66

                	
                  1.00%

                
	
                  III

                	
                  >=0.66

                	
                  1.25%

                

        

         

        “ ‘Lender-Related
Person’ means, with respect to any Lender, such Lender, together with
such Lender’s Affiliates, Approved Funds, officers, directors, employees,
attorneys, and agents.”

         

        “ ‘LIBOR Rate Margin’
means with respect to (a) the Term Loan, 8.00% and (b) any Advances, the
applicable LIBOR Rate Margin set forth in the table below opposite the Borrowing
Base Utilization on the date of determination:

         

        
          	
                  Tier

                	
                  Borrowing
      Base Utilization

                	
                  LIBOR
      Rate Margin for Advances

                
	
                  I

                	
                  <0.33

                	
                  2.00%

                
	
                  II

                	
                  >=0.33
      < 0.66

                	
                  2.25%

                
	
                  III

                	
                  >=0.66

                	
                  2.50%

                

        

        

        “ ‘Loan Documents’ means
the Agreement, the First Amendment, the Bank Product Agreements, the Cash
Management Agreements, the Control Agreements, the Copyright Security Agreement,
the Canadian Pledge Agreement, the Fee Letter, the Guaranty, the Lender
Agreement, the Letters of Credit, the Mortgages, the Patent Security Agreement,
the Security Agreement, the Trademark Security Agreement, any note or notes
executed by Borrower in connection with the Agreement and payable to a member of
the Lender Group, and any other agreement entered into, now or in the future, by
Borrower or any of its Subsidiaries and the Lender Group in connection with the
Agreement.”

        

        “ ‘Term Loan Amount’
means Forty Million Dollars ($40,000,000).”

         

        e. Schedule
C-1 is hereby amended and restated in its entirety and substituted with Exhibit B attached
hereto.

         

        f. Section 2.2 of the
Credit Agreement is hereby amended by amending and restating Section 2.2 in its
entirety with the following:

         

        

        
          
            
            

          

          
            -2-

            
              

            

          

          
            
            

          

        

        “2.2
Term
Loan.

        

        On the
Closing Date, the Existing Term Loan Lender made a term loan to Borrower in the
amount of $30,000,000 (the “Existing Term
Loan”).  Subject to the terms and conditions of this Agreement
and the First Amendment, New Term Loan Lender agrees to make a term loan of
$10,000,000 (the “New
Term Loan” and together with the Existing Term Loan, the “Term
Loan”).  The principal of the Term Loan shall be repaid in
accordance with Section 2.4(c)(iii),
with the outstanding unpaid principal balance and all accrued and unpaid
interest on the Term Loan becoming due and payable on the earliest of (i) the
Maturity Date, (ii) the date of the acceleration of the Term Loan in accordance
with the terms hereof, and (iii) the date of termination of this Agreement
pursuant to Section
8.1(d).  All principal of, interest on, and other amounts
payable in respect of the Term Loan shall constitute Obligations. Term Loan
amounts borrowed and repaid hereunder may not be reborrowed.”

         

        g. Section 2.13(b)(iii)
of the Credit Agreement is hereby amended by amending and restating Section 2.13(b)(iii)
in its entirety with the following:

         

        “ (iii)
Borrower shall have not more than five (5) LIBOR Rate Loans in effect at any
given time, of which no more than one LIBOR Rate Loan may be the Existing Term
Loan and no more than one LIBOR Rate Loan may be the New Term
Loan.  Borrower only may exercise the LIBOR Option for LIBOR Rate
Loans of at least One Million Dollars ($1,000,000) and integral multiples of
Five Hundred Thousand Dollars ($500,000) in excess thereof.”

         

        h. The
Credit Agreement is hereby amended by inserting the following new Sections 2.15 and
2.16
immediately following Section 2.14
thereof:

         

        “2.15  Securitization. The
Loan Parties hereby acknowledge that the Lenders and their Affiliates may sell
or securitize the Obligations in respect of the Term Loan (a "Securitization")
through the pledge of the Obligations as collateral security for loans to the
Lenders or their Affiliates or through the sale of the Obligations or the
issuance of direct or indirect interests in the Obligations, which loans to the
Lenders or their Affiliates or direct or indirect interests will be rated by
Moody's, S&P or one or more other rating agencies (the “Rating Agencies”).
The Loan Parties shall, at the cost and expense of the requesting Lender, take
such actions as the Lenders may reasonably request in connection with the
Securitization including, without limitation, by (a) amending this Agreement and
the other Loan Documents, and executing such additional documents, as reasonably
requested by the Lenders in connection with the Securitization, provided that
(i) any such amendment or additional documentation does not impose additional
costs on the Loan Parties and (ii) any such amendment or additional
documentation does not adversely affect the rights, or increase the obligations,
of the Loan Parties under the Loan Documents or change or affect in a manner
adverse to the Loan Parties the financial terms of the Obligations and (b)
providing such information as may be reasonably requested by the Lenders in
connection with the rating of the Obligations or the
Securitization.

        

        2.16  Registered
Notes.  Agent, acting solely for this purpose as a
non-fiduciary agent on behalf of Borrower (or in the case of an assignment not
recorded in the Register in accordance with Section 13.1(h), the assigning
Lender) agrees to record the Commitments, Advances and the Term Loan on the
Register (or in the case of an assignment not recorded in the Register in
accordance with Section 13.1(h), a Related Party Register). Each Commitment,
Advance and Term Loan recorded on the Register (or Related Party Register) may
not be evidenced by promissory notes other than Registered Notes (as defined
below). Upon the registration of each Commitment and Term Loan, Borrower agrees,
at the request of any Lender, to execute and deliver to such Lender a promissory
note, in conformity with the terms of this Agreement, in registered form to
evidence such Registered Loan, in form and substance reasonably satisfactory to
such Lender, and registered as provided in Section 13.1(i) (a "Registered Note"),
payable to such Lender or its registered assigns and otherwise duly
completed.  Once recorded on the Register (or Related Party Register),
no Commitment, Advance or Term Loan may be removed from the Register (or Related
Party Register) so long as it or they remain outstanding, and a Registered Note
may not be exchanged for a promissory note that is not a Registered
Note.”

         

        i. Section 6.15 of the
Credit Agreement is hereby amended by amending and restating Section 6.15 in its
entirety with the following:

         

        "6.15                      Financial
Covenants.

        
           

                          (a) Minimum
EBITDA.  Fail to achieve EBITDA, calculated on the last day of
the quarterly period indicated below, of at least the required amount set forth
in the following table for the applicable quarterly period set forth opposite
thereto:

        

         

        
           

          
            	
                    Applicable
      Amount

                  	 	
                    Applicable
      Period

                  
	$	
                    5,220,000

                  	 	
                    For
      the quarter ending
      March 31, 2008

                  
	$	
                    9,000,000

                  	 	
                    For
      the quarter ending
      June 30, 2008

                  
	$	
                    13,000,000

                  	 	
                    For
      the quarter ending
      September 30, 2008

                  
	$	
                    17,500,000

                  	 	
                    For
      the quarter ending
      December 31, 2008

                  
	$	
                    25,000,000

                  	 	
                    For
      the quarter ending
      March 31, 2009

                  
	$	
                    32,500,000

                  	 	
                    For
      the quarter ending
      June 30, 2009

                  
	$	
                    37,300,000

                  	 	
                    For
      the quarter ending
      September 30, 2009, and for each quarter ending
  thereafter

                  

          

           

                          (b) Minimum Average Daily Production. Fail to achieve minimum
average daily production for Borrower and its Subsidiaries for any quarterly
period indicated below, of at least the required amount set forth
in the
following table for the applicable quarterly period set forth opposite
thereto:

          
            
              
              

            

            
              -3-

              
                

              

            

            
              
              

            

          

        

         

        
          
            	
                    Applicable
      Amount

                  	 	
                    Applicable
      Period

                  
	 	
                    10,500

                  	 	
                    For
      the quarter ending
      March 31, 2008

                  
	 	
                    16,750

                  	 	
                    For
      the quarter ending
      June 30, 2008

                  
	 	
                    23,000

                  	 	
                    For
      the quarter ending
      September 30, 2008

                  
	 	
                    30,200

                  	 	
                    For
      the quarter ending
      December 31, 2008

                  
	 	
                    33,200

                  	 	
                    For
      the quarter ending
      March 31, 2009

                  
	 	
                    38,500

                  	 	
                    For
      the quarter ending
      June 30, 2009

                  
	 	
                    40,600

                  	 	
                    For
      the quarter ending
      September 30, 2009, and for each quarter ending
  thereafter

                  

          

           

        

        ;
provided that if a Force Majeure Event occurs during any quarterly period
indicated above, for purposes of calculating the Minimum Average Daily
Production, the Borrower shall be entitled to exclude the days during which such
Force Majeure Event was in existence up to an aggregate of forty-five (45) days
per Force Majeure Event.

         

        (c) Minimum Asset Coverage Ratio.  Fail to achieve a
minimum Asset Coverage Ratio, calculated on the last day of each calendar
quarter, of at least 1.60:1.00, based on the Total Reserve Value reflected in
the most recently delivered report by Borrower.

         

        (d) Interest Coverage
Ratio.  Have an Interest Coverage Ratio, calculated on the last
day of the quarterly period indicated below, of not less than the required
amount set forth in the following table for the applicable quarterly period set
forth opposite thereto:

         

        
          
            	
                    Applicable
      Ratio

                  	 	
                    Applicable
      Period

                  
	
                    1.00:1.00

                  	 	
                    For
      the quarter ending
      March 31, 2008

                  
	
                    1.50:1.00

                  	 	
                    For
      the quarter ending
      June 30, 2008

                  
	
                    2.00:1.00

                  	 	
                    For
      the quarter ending
      September 30, 2008

                  
	
                    2.50:1.00

                  	 	
                    For
      the quarter ending
      December 31, 2008

                  
	
                    3.00:1.00

                  	 	
                    For
      the quarter ending
      March 31, 2009

                  
	
                     3.50:1.00

                  	 	
                    For
      the quarter ending
      June 30, 2009, and for each quarter ending
  thereafter

                  

          

           

        

        (e) Leverage
Ratio.  Have a Leverage Ratio, calculated on the last day of
the quarterly period indicated below, greater than the applicable ratio set
forth in the following table for the applicable quarterly period set forth
opposite thereto:

         

        
          
            	
                    Applicable
      Ratio

                  	 	
                    Applicable
      Period

                  
	
                    10.54:1.00

                  	 	
                    For
      the quarter ending
      March 31, 2008

                  
	
                    7.22:1.00

                  	
                     

                  	
                    For
      the quarter ending
      June 30, 2008

                  
	
                    5.00:1.00

                  	 	
                    For
      the quarter ending
      September 30, 2008

                  
	
                    3.71:1.00

                  	 	
                    For
      the quarter ending
      December 31, 2008

                  
	
                    
                      3.60:1.00

                    

                  	 	
                    For
      the quarter ending March
      31, 2009

                  
	
                    2.77:1.00

                  	 	For
      the quarter ending June
      30, 2009
	
                    2.50:1.00

                  	 	
                    For
      the quarter ending September
      30, 2009, and for each quarter ending
thereafter

                  

          

           

        

        j. Section 13.1(a) of
the Credit Agreement is hereby amended by deleting the proviso at the end of the
first sentence thereof and replacing it with the following:

         

        “; provided, however, that
notwithstanding anything contained in this Section 13.1 to the contrary, (1) a
Lender may assign any or all of its rights hereunder to an Affiliate of such
Lender or an Approved Fund of such Lender without (A) providing any notice to
Agent or any other Person or (B) delivering an executed Assignment and
Acceptance to Agent (each a “Related Party Assignment”), (2) Borrower and Agent
may continue to deal solely and directly with the assigning Lender until an
Assignment and Acceptance has been delivered to Agent and the assigning Lender
or Assignee has paid to Agent for Agent’s separate account a processing fee in
the amount of Three Thousand Five Hundred Dollars ($3,500), (3) the failure of
such assigning Lender to deliver an Assignment and Acceptance to Agent or any
other Person shall not affect the legality, validity or binding effect of such
assignment, and (4) an Assignment and Acceptance between an assigning Lender and
its Affiliate or Related Fund shall be effective as of the date specified in
such Assignment and Acceptance and recorded on the Related Party Register (as
defined below).”

         

        k. Section 13.1(a) of
the Credit Agreement is hereby amended by deleting the last sentence thereof and
replacing it with the following:

         

        “So long
as no Event of Default shall have occurred and be continuing, any proposed
assignment pursuant to this Section 13.1, other than to an Eligible Assignee,
shall be subject to the consent of Borrower, which consent shall not be
unreasonably withheld, delayed or conditioned.”

         

        l. Section 13.1(b) of
the Credit Agreement is hereby amended by (i) deleting the word “From” appearing
at the beginning thereof and replacing it with the following text “Except as
otherwise provided in the proviso in Section 13.1(a), from”, and (ii) deleting
the text “if applicable, payment of the required processing fee,” and replacing
it with the text “payment of any required processing fee (if required) and such
assignment is recorded on the Register,”.

        
          
            
            

          

          
            -4-

            
              

            

          

          
            
            

          

        

        m. Section 13.1(d) of
the Credit Agreement is hereby amended and restated in its entirety as
follows:

         

        “(d)  Immediately
upon Agent's receipt of any required processing fee payment (if required) and
the recordation of the fully executed Assignment and Acceptance on the Register
(or, in the case of Related Party Assignment pursuant to Section 13.1(a), upon
recordation on the Related Party Register), this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom.  The Commitment allocated to each Assignee shall reduce
such Commitments of the assigning Lender pro tanto.”

         

        n. Section 13.1(e) of
the Credit Agreement is hereby amended by (i) deleting the first occurrence of
the word “Lender” in sub clause (iv) thereof and replacing it with the text
“Originating Lender”, and (ii) inserting the following text at the end of the
second sentence thereof “; provided, however, that the parties hereto agree that
Participants shall be entitled to the benefits of Section 16 hereof as if such
Participant was a “Lender” hereunder.

         

        o. Section 13.1(g) of
the Credit Agreement is hereby deleted and is replaced with the
following:

         

        “(g) Any
other provision in this Agreement notwithstanding, any Lender may at any time
create a security interest in, or pledge, all or any portion of its rights under
and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR § 203.24 or any other Person, including, without limitation,
as provided in Section 2.17, and such Person may enforce such pledge or security
interest in any manner permitted under applicable law; provided, that no such
pledge or grant of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or secured party (or any
transferee thereof) for such Lender as a party hereto unless such pledgee or
secured party (or transferee) becomes a Lender hereunder.

        

        (h)           Agent
shall, acting solely for this purpose as a non-fiduciary agent of Borrower,
maintain, or cause to be maintained, a register (the "Register") on which it
shall enter the names and addresses of the Lenders and the Commitments of, and
the principal amount of the Advances and the Term Loan (and stated interest
thereon) and Obligations with respect to Letters of Credit owing to, each Lender
from time to time.  Subject to the last sentence of this Section
13.1(h), the entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and Borrower, Agent and Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement.  The Register shall be available for
inspection by Borrower at any reasonable time and from time to time upon
reasonable notice.  In the case of a Related Party Assignment pursuant
to the proviso in Section 13.1(a) as to which an Assignment and Acceptance is
not delivered to Agent, the assigning Lender shall, acting solely for this
purpose as a non-fiduciary agent of Borrower, maintain a register (the "Related
Party Register") comparable to the Register on behalf of
Borrower.  The Related Party Register shall be available for
inspection by Borrower at any reasonable time and from time to time upon
reasonable notice.

         

        (i)           A
Registered Loan (and the Registered Note, if any, evidencing the same) may be
assigned or sold in whole or in part only by registration of such assignment or
sale on the Register or the Related Party Register (and each Registered Note
shall expressly so provide).  Any assignment or sale of all or part of
such Registered Loan (and the Registered Note, if any, evidencing the same) may
be effected only by registration of such assignment or sale on the Register or
the Related Party Register, together with the surrender of the Registered Note,
if any, evidencing the same duly endorsed by (or accompanied by a written
instrument of assignment or sale duly executed by) the holder of such Registered
Note, whereupon, at the request of the designated assignee(s) or transferee(s),
one or more new Registered Notes in the same aggregate principal amount shall be
issued to the designated assignee(s) or transferee(s) and such requestor shall
surrender to Borrower the Registered Note being replaced.  Prior to
the registration of assignment or sale of any Registered Loan (and the
Registered Note, if any evidencing the same), Agent and Borrower shall treat the
Person in whose name such Registered Loan (and the Registered Note, if any,
evidencing the same) is registered as the owner thereof for the purpose of
receiving all payments thereon, notwithstanding notice to the
contrary.

        

        (j)           In
the event that a Lender sells participations in the Registered Loan, such Lender
shall, acting solely for this purpose as a non-fiduciary agent of Borrower,
maintain a register on which it enters the name of all participants in the
Registered Loans held by it and the principal amount (and stated interest
thereon) of the portion of the Registered Loan that is the subject of the
participation (the "Participant Register").  A Registered Loan (and
the Registered Note, if any, evidencing the same) may be participated in whole
or in part only by registration of such participation on the Participant
Register (and each Registered Note shall expressly so provide).  Any
participation of such Registered Loan (and the Registered Note, if any,
evidencing the same) may be effected only by the registration of such
participation on the Participant Register.  The Participant Register
shall be available for inspection by Administrative Borrower at any reasonable
time and from time to time upon reasonable notice.”

         

        p. Section 14.1(k) of
the Credit Agreement is hereby amended and restated in its entirety as
follows:

         

        “(k)
change the definition of “Borrowing Base”, “Maximum Revolver Amount”, or “Term
Loan Amount”, or change Section 2.1(b), Section 2.1(d) or Section 2.1(e)(iii),
or”

         

        q. Section 16(a) of the
Credit Agreement is hereby amended by deleting the following text appearing
therein “; provided, however, that no such Loan Party shall be required to
increase any such amounts if the increase in such amount payable results from
Agent’s or such Lender’s own willful misconduct or gross negligence (as finally
determined by a court of competent jurisdiction)”.

         

        
          
            
            

          

          
            -5-

            
              

            

          

          
            
            

          

        

        r. Sections 16(b), 16(c), 16(d), 16(e) and 16(f) of the Credit
Agreement are amended and restated in their entirety as follows:

         

        “(b) If a
Lender claims an exemption from United States withholding tax, such Lender shall
deliver to Agent (or, in the case of a Related Party Assignment that is made
pursuant to the proviso in Section 13.1(a), the
assigning Lender):

        

        (i)           if
such Lender claims an exemption from United States withholding tax pursuant to
its portfolio interest exception, (A) a statement of the Lender, signed under
penalty of perjury, that it is not a (I) a "bank" as described in Section
881(c)(3)(A) of the IRC, (II) a 10% shareholder of any Borrower (within the
meaning of Section 871(h)(3)(B) of the IRC), or (III) a controlled foreign
corporation related to any Borrower within the meaning of Section 864(d)(4) of
the IRC, and (B) a properly completed and executed IRS Form W-8BEN, before
receiving its first payment under this Agreement and at any other time
reasonably requested by Agent or the assigning Lender, as
applicable;

        

        (ii) if
such Lender claims an exemption from, or a reduction of, withholding tax under a
United States tax treaty, properly completed and executed IRS Form W-8BEN before
receiving its first payment under this Agreement and at any other time
reasonably requested in writing by Agent or the assigning Lender, as
applicable;

        

        (iii) if
such Lender claims that interest paid under this Agreement is exempt from United
States withholding tax because it is effectively connected with a United States
trade or business of such Lender, two properly completed and executed copies of
IRS Form W-8ECI before receiving its first payment under this Agreement and at
any other time reasonably requested in writing by Agent or the assigning Lender,
as applicable; or

        

        (iv) such
other form or forms, including IRS Form W-9, as may be required under the IRC or
other laws of the United States as a condition to exemption from, or reduction
of, United States withholding or backup withholding tax before receiving its
first payment under this Agreement and at any other time reasonably requested in
writing by Agent or the assigning Lender, as applicable.

        

        Notwithstanding
the foregoing, such Lender may provide a form W-8IMY, where applicable, with
appropriate forms attached thereto.

        

        Each
Lender agrees promptly to notify Agent or the assigning Lender, as applicable,
of any change in circumstances which would modify or render invalid any claimed
exemption or reduction.  Notwithstanding any other provision of this
Section 16, no
Lender shall be required to deliver any form that such Lender is not legally
able to deliver.

        

        (c)  If
a Lender claims an exemption from, or reduction of, withholding tax in a
jurisdiction other than the United States, such Lender shall deliver to Agent
(or, in the case of a Related Party Assignment that is made pursuant to the
proviso in Section 13.1(a), the assigning Lender) any such form or forms, as may
be required under the laws of such jurisdiction as a condition to exemption
from, or reduction of, foreign withholding or backup withholding tax before
receiving its first payment under this Agreement and at any other time
reasonably requested in writing by Agent or the assigning Lender, as
applicable.

        

        Each
Lender agrees promptly to notify Agent or the assigning Lender, as applicable,
of any change in circumstances which would modify or render invalid any claimed
exemption or reduction.

        

        (d)  If
any Lender claims exemption from, or reduction of, withholding tax and such
Lender sells, assigns, or otherwise transfers all or part of the Obligations of
Borrower to such Lender (other than in the case of a transfer to an Affiliate or
Approved Fund), such Lender agrees to notify Agent (or, in the case
of  a Related Party Assignment that is made pursuant to the proviso in
Section
13.1(a), the assigning Lender) of the percentage amount in which it is no
longer the beneficial owner of Obligations of Borrower.  To the extent
of such percentage amount, Agent and Borrower will treat such Lender's
documentation provided pursuant to Sections 16(b) or
16(c) as no
longer valid.  With respect to such percentage amount, the Assignee of
such Lender may provide new documentation, pursuant to Sections 16(b) or
16(c), if
applicable.

        

        (e)           If
any Lender is entitled to a reduction in the applicable withholding tax, Agent
may withhold from any interest payment to such Lender an amount equivalent to
the applicable withholding tax after taking into account such
reduction.  If the forms or other documentation required by subsection
(b) or (c) of this Section 16 are not
delivered in accordance with such subsections, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.

        

        (f)           If
the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Agent did not properly withhold tax from
amounts paid to or for the account of any Lender due to a failure on the part of
the Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify the proper Person of a change
in circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective) such Lender shall indemnify and hold Agent harmless for all
amounts paid, directly or indirectly, by Agent, as tax or otherwise, including
penalties and interest, and including any Indemnified Taxes and Other Taxes
imposed by any jurisdiction on the amounts payable to Agent under this Section
16.  The obligation of the Lenders under this subsection shall
survive the payment of all Obligations and the resignation or replacement of
Agent.

         

        3. Amendment
Fee.  Borrower hereby agrees to pay to (i) Agent a fee in the
amount of $15,000 (for the account of the Agent), (ii) the Existing Term Loan
Lender a fee in the amount of $100,000 (for the account of the Existing Term
Loan Lender) and (iii) the Term Loan Lender funding the New Term Loan (the
“New Term Loan
Lender”) a fee in the amount of $100,000 (for the account of the New Term
Loan Lender), each such fee shall be due and payable in full on the First
Amendment Effective Date.

        
          
            
            

          

          
            -6-

            
              

            

          

          
            
            
              4. Conditions.  The
effectiveness of this Agreement is subject to the following
conditions:

        

         

        a. Agent
shall have received counterparts of this Agreement which shall bear the
signatures of Borrower, the Guarantors, Agent and Lenders;

         

        b. Borrower
shall have paid the fees referred to in Section 3 above in the aggregate amount
of $215,000 on the date hereof and shall have reimbursed Agent and Lenders for
all other fees, costs and expenses as of the date hereof;

         

        c. Agent
shall have received a certificate of status with respect to Borrower, dated
within 10 days of the First Amendment Effective Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;

         

        d. Agent
shall have received certificates of status with respect to Borrower, each dated
within 30 days of the First Amendment Effective Date, such certificates to be
issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of such Borrower) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that Borrower is in good standing in such
jurisdictions;

         

        e. To the
extent required to make the representations and warranties given in Section 5(a)
below true and correct in all material respects, Agent shall have received an
updated schedule to the Credit Agreement, which schedule shall replace the
previously distributed versions of such schedule as of the date of this
Agreement;

         

        f. Agent
shall have received an opinion of Hogan & Hartson LLP in form and substance
satisfactory to Agent relating solely to the due execution, performance, and
delivery of the Agreement and the enforceability of the Agreement and the Credit
Agreement as amended hereby;

         

        g. Agent
shall have received a direction letter in form and substance satisfactory to
Agent outlining the sources and uses associated with the funds to be provided in
connection with the New Term Loan, and

         

        h. legal
matters incident to the execution and delivery of this Agreement shall be
satisfactory to the Agent and its counsel.

         

        5. Representations and
Warranties.  Borrower hereby represents and warrants to Agent
and each Lender as follows:

         

        a. assuming
the effectiveness of this Agreement, the representations and warranties made by
Borrower contained in the Loan Documents are true and correct in all material
respects as of the date hereof (except to the extent such representations and
warranties expressly refer to an earlier date, in which case they shall be true
and correct as of such earlier date, and except to the extent such
representations and warranties are qualified by materiality, contain dollar
thresholds or have Material Adverse Change qualifiers, in which case, such
representations and warranties shall be true and correct in all
respects);

        

        b. Borrower
is duly organized and existing and in good standing under the laws of the
jurisdiction of its organization and qualified to do business in any state where
the failure to be so qualified reasonably could be expected to result in a
Material Adverse Change;

        

        c. Borrower
has the power and authority to execute, deliver and perform its obligations
under this Agreement and the Credit Agreement;

         

        d. the
execution, delivery, and performance by Borrower of this Agreement, the Credit
Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary action on the part of Borrower;

         

        e. this
Agreement, the Credit Agreement (as amended hereby) and the other Loan Documents
to which Borrower is a party, and all other documents contemplated hereby and
thereby, when executed and delivered by Borrower will be the legally valid and
binding obligations of Borrower, enforceable against Borrower in accordance with
their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors’ rights generally; and

         

        f. assuming
the effectiveness of this Agreement, no Default or Event of Default
exists.

         

              6. Post
Closing Deliverables.   Borrower hereby agrees to
deliver to Agent, in form and substance satisfactory to Agent, within 30 days
after the First Amendment Effective Date, (i) an opinion  of  local Wyoming  counsel
in form and substance satisfactory to Agent and (ii) a Mortgage on the leasehold
identified on Exhibit A attached hereto which such Mortgage shall provide a
valid and enforceable first priority mortgage Lien on such leasehold free
and clear of all defects and encumbrances except Permitted
Liens.  Borrower hereby agrees that, notwithstanding any provision of
the Credit Agreement or any other Loan Document to the contrary, the failure to
satisfy the requirements of this Section 6 within the period specified herein
shall constitute an Event of Default.

        
          
            
            

          

          
            -7-

            
              

            

          

          
            
            

          

        

         

        7. Agreement in Full Force and
Effect as Amended.  Except as specifically amended and/or
waived hereby, the Credit Agreement and other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed as so
amended.  Except as expressly set forth herein, this Amendment shall
not be deemed to be a waiver, amendment or modification of any provisions of the
Credit Agreement or any other Loan Document or any right, power or remedy of the
Lender, nor constitute a waiver of any provision of the Credit Agreement or any
other Loan Document, or any other document, instrument and/or agreement executed
or delivered in connection therewith or of any Default or Event of Default under
any of the foregoing, in each case, whether arising before or after the date
hereof or as a result of performance hereunder or thereunder.  This
Amendment also shall not preclude the future exercise of any right, remedy,
power, or privilege available to the Lender whether under the Credit Agreement,
the other Loan Documents, at law or otherwise and nothing contained herein shall
constitute a course of conduct or dealing among the parties
hereto.  All references to the Credit Agreement shall be deemed to
mean the Credit Agreement as modified hereby.  This Amendment shall
not constitute a novation or satisfaction and accord of the Credit Agreement
and/or other Loan Documents, but shall constitute an amendment
thereof.  The parties hereto agree to be bound by the terms and
conditions of the Credit Agreement and Loan Documents as amended by this
Amendment, as though such terms and conditions were set forth
herein.  Each reference in the Credit Agreement to “this Agreement,”
“hereunder,” “hereof,” “herein” or words of similar import shall mean and be a
reference to the Credit Agreement as amended by this Amendment, and each
reference herein or in any other Loan Document to the “Loan Agreement” or
“Agreement” shall mean and be a reference to the Credit Agreement as amended and
modified by this Amendment.

         

        8. Counterparts.  This
Agreement may be executed by one or more of the parties to this Agreement and
any number of separate counterparts, each of which when so executed, shall be
deemed an original and all said counterparts when taken together shall be deemed
to constitute but one and the same instrument.

         

        9. Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of Borrower and its successors and assigns and Agent and Lenders and
their successors and assigns.

         

        10. Further
Assurance.  Borrower hereby agrees from time to time, as and
when requested by Agent or any Lender, to execute and deliver or cause to be
executed and delivered, all such documents, instruments and agreements and to
take or cause to be taken such further or other action as Agent or such Lender
may reasonably deem necessary or desirable in order to carry out the intent and
purposes of this Agreement, the Credit Agreement and the Loan
Documents.

         

        11. GOVERNING
LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK.

         

        12. Severability.  Wherever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

         

        13. Reaffirmation.
Borrower and each Guarantor, as debtor, grantor, pledgor, guarantor, assignor,
or in any other similar capacity in which Borrower or such Guarantor, as
applicable, grants liens or security interests in its property or otherwise acts
as accommodation party or guarantor, as the case may be, hereby (i) ratifies and
reaffirms all of its payment and performance obligations, contingent or
otherwise, under each of the Loan Documents to which it is a party (after giving
effect hereto) and (ii) to the extent Borrower or Guarantor granted liens on or
security interests in any of its property pursuant to any such Loan Document as
security for or otherwise guaranteed Borrower’s Obligations under or with
respect to the Loan Documents, ratifies and reaffirms such guarantee and grant
of security interests and liens and confirms and agrees that such security
interests and liens hereafter secure all of the Obligations as amended
hereby.  Borrower and each Guarantor hereby consent to this Agreement
and acknowledge that each of the Loan Documents remains in full force and effect
and is hereby ratified and reaffirmed.  The execution of this
Agreement shall not operate as a waiver of any right, power or remedy of Agent
or Lenders, constitute a waiver of any provision of any of the Loan Documents or
serve to effect a novation of the Obligations.

         

        14. Release. Borrower and
each Guarantor hereby remises, releases, acquits, satisfies and forever
discharges the Lenders and Agent, their agents, employees, officers, directors,
predecessors, attorneys and all others acting or purporting to act on behalf of
or at the direction of the Lenders and Agent (“Releasees”), of and
from any and all manner of known actions, causes of action, suit, debts,
accounts, covenants, contracts, controversies, agreements, variances, damages,
judgments, claims and demands whatsoever, in law or in equity, whether known or
unknown, which any of such parties ever had, now has or, to the extent arising
from or in connection with any act, omission or state of facts taken or existing
on or prior to the date hereof, may have after the date hereof against the
Releasees, for, upon or by reason of any matter, cause or thing whatsoever
through the date hereof arising out of, founded upon, or relating (in any
manner) to the Credit Agreement, the Loan Documents or the transactions
contemplated or otherwise evidenced thereby.  Without limiting the
generality of the foregoing, Borrower waives and affirmatively agrees not to
allege or otherwise pursue, to the extent known, any defenses, affirmative
defenses, counterclaims, claims, causes of action, setoffs or other rights they
do, shall or may have as of the date hereof, including, but not limited to, the
rights to contest any conduct of the Lenders and Agent or other Releasees on or
prior to the date hereof.  As to each and every claim released
hereunder, each Obligor hereby represents that it has received the advice of
legal counsel with regard to the releases contained herein, and having been so
advised, each of them specifically waives the benefit of the provisions of any
applicable federal or state law (including without limitation the laws of the
state of New York), if any, pertaining to general releases which restricts the
effect of any such waiver with respect to causes of action or other claims that
the party does not know or suspect to exist at the time when the release is
executed.

         

        
          [Remainder
of Page Intentionally Left Blank; Signature Page Follows]

        

        
          
            
            

          

          
            -8-

            
              

            

          

          
            
            

          

        

        

        IN WITNESS WHEREOF, each of
the undersigned has executed this Agreement as of the date set forth
above.

         

         

        
           

          
            	 	
                    STORM
      CAT ENERGY (USA) CORPORATION,

                    as
      Borrower

                  
	 	 
	 	 
	 	
                    By:

                  	
                    /s/
      Joseph M. Brooker

                  
	 	
                    Name:

                  	Joseph
      M. Brooker
	 	
                    Title:

                  	President
	 	 
	 	 
	 	
                    STORM
      CAT ENERGY (ALASKA) LLC,

                    as
      a Guarantor

                  
	 	 
	 	
                    By:

                  	
                    /s/
      Joseph M. Brooker

                  
	 	
                    Name:

                  	Joseph
      M. Brooker
	 	
                    Title:

                  	President
	 	 
	 	 

          

          
            	
                  	
                    STORM
      CAT ENERGY (POWDER RIVER) LLC,

                    as
      a Guarantor

                  
	 	 
	 	
                    By:

                  	
                    /s/
      Joseph M. Brooker

                  
	 	
                    Name:

                  	Joseph
      M. Brooker
	 	
                    Title:

                  	President
	 	 

          

          
            	
                  	 
	 	
                    STORM
      CAT ENERGY (FAYETTEVILLE) LLC,

                    as
      a Guarantor

                  
	 	 
	 	
                    By:

                  	
                    /s/
      Joseph M. Brooker

                  
	 	
                    Name:

                  	Joseph
      M. Brooker
	 	
                    Title:

                  	President
	 	 
	 	 

            
              	
                    	
                      TRIPLE
      CROWN GATHERING CORPORATION

                      as
      a Guarantor

                    
	 	 
	 	
                      By:

                    	
                      /s/
      Joseph M. Brooker

                    
	 	
                      Name:

                    	Joseph
      M. Brooker
	 	
                      Title:

                    	President
	 	 

            

          

          
            	
                  	 
	 	
                    STORM
      CAT ENERGY (USA) OPERATING CORPORATION,

                    as
      a Guarantor

                  
	 	 
	 	
                    By:

                  	
                    /s/
      Joseph M. Brooker

                  
	 	
                    Name:

                  	Joseph
      M. Brooker
	 	
                    Title:

                  	President

          

          
            
            

            

              
                
                  
                    

                     

                  

                   

                

                
                  -9-

                  
                    

                  

                

                
                   

                

              

            

             

             

            
              	 	 
	 	
                      STORM
      CAT ENERGY CORPORATION,

                      as
      a Guarantor

                    
	 	 
	 	
                      By:

                    	
                      /s/
      Joseph M. Brooker

                    
	 	
                      Name:

                    	Joseph
      M. Brooker
	 	
                      Title:

                    	Chief
      Executive Officer

            

             

          

        

        
          
            
               

               

            

             

          

          
            -10-

            
              

            

          

          
             

          

        

         

        
          	 	 
	 	
                  REGIMENT
      CAPITAL SPECIAL SITUATIONS FUND III, L.P.,

                  as
      a Lender

                
	 	
                   

                  By:  Regiment
      Capital GP, LLC

                          its
      General Partner

                   

                
	 	
                  By:

                	
                  /s/
      Richard T. Miller

                
	 	
                  Name:

                	Richard
      T. Miller
	 	
                  Title:

                	Authorized
      Signatory

        

                    

        
          
            
              

               

            

             

          

          
            -11-

            
              

            

          

          
             

          

        

         

        
          
            	 	 
	 	
                    ABELCO
      FINANCE LLC,

                    as a Lender

                  
	 	
                    By:

                  	
                    /s/
      Daniel Wolf

                  
	 	
                    Name:

                  	Daniel
      Wolf
	 	
                    Title:

                  	President

          

                      

        

        
          

            
              
                
                  

                   

                

                 

              

              
                -12-

                
                  

                

              

              
                 

              

            

          

          
            	 	 
	 	
                    WELLS FARGO FOOTHILL, LLC,

                    as Agent and as a Lender

                  
	 	
                    By:

                  	
                    /s/
      Gary Forlenza

                  
	 	
                    Name:

                  	Gary
      Forlenza
	 	
                    Title:

                  	Vice-President

          

                      

           

          
 

        

        -13-Aurelio Resource Corporation

Aurelio Resource Corporation

a Nevada Corporation

AMENDED AND RESTATED 2006 STOCK OPTION PLAN

1.Purposes of this Plan. The purposes of this Amended and Restated 2006 Stock Option Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants (as defined herein), and to promote the success of the Company's business. Options granted hereunder may be either "incentive stock options," as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or "nonstatutory stock options," at the discretion of the Board and as reflected in the terms of the individual written stock option agreement.

2.Definitions. As used herein, the following definitions shall apply: 
a."Board" shall mean the Committee, if one has been appointed or the Board of Directors of the Company if no Committee is appointed.

b."Code" shall mean the Internal Revenue Code of 1986, as amended.
c."Common Stock" shall mean the no par value common stock of the Company.

d."Company" shall mean Aurelio Resources Corporation, a Nevada Corporation.

e."Committee" shall mean the Committee appointed by the Board in accordance with paragraph (a) of Section 4 of this Plan, if one is appointed, or the Board if no committee is appointed.

f."Consultant" shall mean any person who is engaged by the Company or by any Parent or Subsidiary to render consulting services and is compensated for such consulting services, but does not include a director of the Company who is compensated for services as a director only with the payment of a director's fee by the Company.

g."Continuous Status as an Employee or Consultant" shall mean the absence of any interruption or termination of service as an Employee or Consultant. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of sick leave, military leave, or any other leave of absence approved by the Board; provided that such leave is for a period of not more than ninety days or reemployment upon the expiration of such leave is guaranteed by contract or statute.

h."Employee" shall mean any person, including officers and directors, employed by the Company or by any Parent or Subsidiary. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company.

i."Incentive Stock Option" shall mean an Option which is intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and which shall be clearly identified as such in the written Stock Option Agreement provided by the Company to each Optionee granted an Incentive Stock Option under this Plan.

j."Non-Employee Director" shall mean a director who: 
(i)Is not currently an officer (as defined in Section 16a-1(f) of the Securities Exchange Act of 1934, as amended) of the Company or of a Parent or Subsidiary or otherwise currently employed by the Company or by a Parent or Subsidiary.

(ii)Does not receive compensation, either directly or indirectly, from the Company or from a Parent or Subsidiary, for services rendered as a Consultant or in any capacity other than as a director, except for an amount that does not exceed the dollar amount for which disclosure would be required pursuant to Item 404(a) of Regulation S-K adopted by the United States Securities and Exchange Commission.

(iii)Does not possess an interest in any other transaction for which disclosure would be required pursuant to Item 404(a) of Regulation S-K adopted by the United States Securities and Exchange Commission.

k. Nonstatutory Stock Option" shall mean an Option granted under this plan which does not qualify as an Incentive Stock Option and which shall be clearly identified as such in the written Stock Option Agreement provided by the Company to each Optionee granted a Nonstatutory Stock Option under this Plan. To the extent that the aggregate fair market value of Optioned Stock to which Incentive Stock Options granted under Options to an or Consultant are exercisable for the first time during any calendar year (under this Plan and all plans of the Company or any Parent or Subsidiary) exceeds one hundred thousand dollar ($100,000), such Options shall be treated as Nonstatutory Stock Options under this Plan. The aggregate fair market value of the Optioned Stock shall be determined as of the date of grant of each Option and the determination of which Incentive Stock Options shall be treated as qualified incentive stock options under Section 422 of the Code and which Incentive Stock Options exercisable for the first time in a particular year in excess of the one hundred thousand dollars ($100,000) limitation shall be treated as Nonstatutory Stock Options shall be determined based on the order in which such Options were granted in accordance with Section 422(d) of the Code.

l. Option" shall mean an Incentive Stock Option, a Nonstatutory Stock Option or both as identified in a written Stock Option Agreement representing such stock option granted pursuant to this Plan.
m."Optioned Stock" shall mean the Common Stock subject to an Option.

n."Optionee" shall mean an Employee or other person who is granted an Option.

o."Parent" shall mean a "parent corporation" of the Company, whether now or hereafter existing, as defined in Section 424(e) of the Code.

p."Plan" shall mean this Amended and Restated 2006 Stock Option Plan.
q."Share" shall mean a share of the Common Stock of the Company, as adjusted in accordance with Section 11 of this Plan.

r."Stock Option Agreement" shall mean the agreement to be entered into between the Company and each Optionee which shall set forth the terms and conditions of each Option granted to each Optionee, including the number of Shares underlying such Option and the exercise price of each Option granted to such Optionee under such agreement.

s."Subsidiary" shall mean a "subsidiary corporation" of the Company, whether now or hereafter existing, as defined in Section 424(f) of the Code.

3.Stock Subject to this Plan. Subject to the provisions of Section 11 of this Plan, the maximum aggregate number of Shares which may be optioned and sold under this Plan is five million (5,000,000) shares of Common Stock. The Shares may be authorized, but unissued or reacquired Common Stock. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless this Plan shall have been terminated, become available for future grant under this Plan.

4.Administration of this Plan. 
a. Procedure. This Plan shall be administered by the Board or a Committee appointed by the Board consisting of two or more Non-Employee Directors to administer this Plan on behalf of the Board, subject to such terms and conditions as the Board may prescribe. Where context allows, references to actions or decisions of the Board shall also include actions or decisions of the Committee, except in section 4c. 
(i)Once appointed, the Committee shall continue to serve until otherwise directed by the Board (which for purposes of this paragraph (a)(i) of this Section 4 shall be the Board of Directors of the Company). From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefore, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer this Plan.

(ii)Members of the Board who are granted, or have been granted, Options may vote on any matters affecting the administration of this Plan or the grant of any Options pursuant to this Plan.

b.Powers of the Board or Committee. Subject to the provisions of this Plan, the Board or a Committee appointed pursuant to section 4 shall have the authority, in its discretion:
(i)To grant Incentive Stock Options, in accordance with Section 422 of the Code, and Nonstatutory Stock Options or both as provided and identified in a separate written Stock Option Agreement to each Optionee granted such Option or Options under this Plan; provided however, that in no event shall an Incentive Stock Option and a Nonstatutory Stock Option granted to any Optionee under a single Stock Option Agreement be subject to a "tandem" exercise arrangement such that the exercise of one such Option affects the Optionee's right to exercise the other Option granted under such Stock Option Agreement;

(ii)To determine, upon review of relevant information and in accordance with Section 8(b) of this Plan, the fair market value of the Common Stock;

(iii)To determine the exercise price per Share of Options to be granted, which exercise price shall be determined in accordance with Section 8(a) of this Plan;

(iv)To determine the Employees or Consultants or other persons to whom, and the time or times at which, Options shall be granted and the number of Shares to be represented by 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) and, with the consent of the holder thereof, modify or amend each Option;

(viii)To accelerate or defer (with the consent of the Optionee) the exercise date of any Option, consistent with the provisions of Section 7 of this Plan;

(ix)To authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option previously granted by the Board; and

(x)To make all other determinations deemed necessary or advisable for the administration of this Plan.

c.Effect of Board's Decision. All decisions, determinations and interpretations of the Board shall be final and binding on all Optionees and any other permissible holders of any Options granted under this Plan.

5.Eligibility. 
a.Persons Eligible. Options may be granted to any person selected by the Board. Incentive Stock Options may be granted only to Employees and Consultants. An Employee or Consultant, who is also a director of the Company, its Parent or a Subsidiary, shall be treated as an Employee for purposes of this Section 5. An Employee or other person who has been granted an Option may, if he or she is otherwise eligible, be granted an additional Option or Options.

b.Vesting. Unless otherwise determined by the Board, the Options granted shall vest on the date of employment or the date of becoming a Non-Employee Director. In the event of a proposed merger, amalgamation, acquisition or other similar event which would result in the shares of the Company being exchanged for shares of another company which are listed on a national public exchange, unless otherwise determined by the Board, the Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his or her Options as to all or any part of the Optioned Stock.

c.No Effect on Relationship. This Plan shall not confer upon any Optionee any right with respect to continuation of employment or other relationship with the Company nor shall it interfere in any way with his right or the Company's right to terminate his employment or other relationship at any time.

6.Term of Plan. This Plan became effective on April 21, 2008. It shall continue in effect until April 20, 2011 unless sooner terminated under Section 13 of this Plan.

7.Term of Option. The term of each Option shall be three (3) years from the date of grant thereof or such shorter term as may be provided in the Stock Option Agreement. 

 

8.Exercise Price and Consideration. 
a.Exercise Price. The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board, but the per Share exercise price under an Incentive Stock Option shall be subject to the following:
(i)If granted to an Employee or Consultant who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall not be less than one hundred ten percent (110%) of the fair market value per Share on the date of grant.

(ii)If granted to any other Employee or Consultant, the per Share exercise price shall not be less than one hundred percent (100%) of the fair market value per Share on the date of grant.

b.Determination of Fair Market Value. The fair market value per Share on the date of grant shall be determined as follows: 
(i)If the Common Stock is listed on a nationally recognized exchange, the American Stock Exchange or such other securities exchange or stock quotation system designated by the Board, the fair market value shall be the closing price of the Common Stock as reported by such exchange or system on the day the fair market value is to be determined, or if no such price is reported for such day, then the determination of such closing price shall be as of the last immediately preceding day on which the closing price is so reported; 

(ii)If the Common Stock is not so listed or admitted to unlisted trading privileges or so quoted, and bid and asked prices are not reported, the fair market value shall be determined in such reasonable manner as may be prescribed by the Board.

c.Consideration and Method of Payment. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Board and may consist entirely of cash, check, other shares of Common Stock having a fair market value on the date of exercise equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, a Note secured by the Shares, or any combination of such methods of payment, or such other consideration and method of payment for the issuance of Shares to the extent permitted under the Nevada General Corporation Law.

 

9.Exercise of Option. 
a.Procedure for Exercise: Rights as a Shareholder. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of this Plan.

In the sole discretion of the Board, at the time of the grant of an Option or subsequent thereto but prior to the exercise of an Option, an Optionee may be provided with the right to exchange, in a cashless transaction, all or part of the Option for Common Stock of the Company on terms and conditions determined by the Board. 

An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Stock Option Agreement by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment, as authorized by the Board, may consist of a consideration and method of payment allowable under Section 8(c) and this Section 9(a) of this Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of the duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 11 of this Plan.

Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of this Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

b.Termination of Status as an Employee or Consultant. In the case of an Incentive Stock Option, if any Employee or Consultant ceases to serve as an Employee or Consultant, he may, but only within such period of time not exceeding thirty (30) days or such other period as is determined by the Board at the time of grant of the Option after the date he ceases to be an Employee or Consultant of the Company, exercise his Option to the extent that he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise the Option at the date of such termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate.

c.Disability of Optionee. In the case of an Incentive Stock Option, notwithstanding the provisions of Section 9(b) above, in the event an Employee or Consultant is unable to continue his employment with the Company as a result of his total and permanent disability (as defined in Section 22(e)(3) of the Code), he may, but only within such period of time not exceeding twelve (12) months as is determined by the Board at the time of grant of the Option from the date of termination, exercise his Option to the extent he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise the Option at the date of termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate.

d.Death of Optionee. In the case of an Incentive Stock Option, in the event of the death of the Optionee:
(i)During the term of the Option if the Optionee was at the time of his death an Employee or Consultant and had been in Continuous Status as an Employee or Consultant since the date of grant of the Option, the Option may be exercised, at any time within twelve (12) months following the date of death, by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent that the right to exercise would have accrued had the Optionee continued living and remained in Continuous Status as an Employee or Consultant twelve (12) months after the date of death; or

(ii)Within such period of time not exceeding three months as is determined by the Board at the time of grant of the Option after the termination of Continuous Status as an Employee or Consultant, the Option may be exercised, at any time within twelve (12) months following the date of death, by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent that the right to exercise had accrued at the date of termination.

10.Nontransferability of Options. Unless permitted by the Code, in the case of an Incentive Stock Option, the Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent and distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.

11.Adjustments Upon Changes in Capitalization or Merger. Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Option, and the number of Shares which have been authorized for issuance under this Plan but as to which no Options have yet been granted or which have been returned to this Plan upon cancellation or expiration of any Option, as well as the price per Share covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option.

In the event of the proposed dissolution or liquidation of the Company, the Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. In the event of the proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another entity in a transaction in which the Company is not the survivor, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, that the Optionee shall have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. If the Board makes an Option fully exercisable in lieu of assumption or substitution in the event of such a merger or sale of assets, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of 30 days from the date of such notice, and the Option will terminate upon the expiration of such period.

12.Time of Granting Options. The date of grant of an Option shall, for all purposes, be the date on which the Board makes the determination granting such Option. Notice of the determination shall be given to each Employee or Consultant or other person to whom an Option is so granted within a reasonable time after the date of such grant. Within a reasonable time after the date of the grant of an Option, the Company shall enter into and deliver to each Employee or Consultant or other person granted such Option a written Stock Option Agreement as provided in Sections 2(r) and 16 hereof, setting forth the terms and conditions of such Option and separately identifying the portion of the Option which is an Incentive Stock Option and/or the portion of such Option which is a Nonstatutory Stock Option.

13.Amendment and Termination of this Plan. 
a.Amendment and Termination. The Board may amend or terminate this Plan from time to time in such respects as the Board may deem advisable:
(i)An increase in the number of Shares subject to this Plan above the shares designated in Section 3, other than in connection with an adjustment under Section 11 of this Plan;

(ii)Any change in the designation of the class of Employees or consultants eligible to be granted Incentive Stock Options; or

(iii)Any material amendment under this Plan that would have to be approved by the shareholders of the Company for the Board to continue to be able to grant Incentive Stock Options under this Plan.

b.Effect of Amendment or Termination. Any such amendment or termination of this Plan shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company.

14.Conditions Upon Issuance of Shares. Shares 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 Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, applicable state securities laws, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of legal counsel for the Company with respect to such compliance.

As a condition to the existence of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares and such other representations and warranties which in the opinion of legal counsel for the Company, are necessary or appropriate to establish an exemption from the registration requirements under applicable federal and state securities laws with respect to the acquisition of such Shares.

15.Reservation of Shares. The Company, during the term of this Plan, will at all time reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of this Plan. Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's legal counsel to be necessary for the lawful issuance and sale of any Share hereunder, shall relieve the Company of any liability relating to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

16.Stock Option Agreement. Each Option granted to an Employee or consultant or other persons shall be evidenced by a written Stock Option Agreement in such form as the Board shall approve.

17.Information to Optionees. The Company shall provide to each Optionee, during the period for which such Optionee has one or more Options outstanding, copies of all annual reports and other information which are provided to all shareholders of the Company. The Company shall not be required to provide such information if the issuance of Options under this Plan is limited to key employees or consultants whose duties in connection with the Company assure their access to equivalent information.

18.Gender. As used herein, the masculine, feminine and neuter genders shall be deemed to include the others in all cases where they would so apply.

19.CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS PLAN AND THE INSTRUMENTS EVIDENCING OPTIONS WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF NEVADA.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan effective as of April 21, 2008.

	
AURELIO RESOURCE CORPORATION

	
By:
	 
	 	
Stephen B. Doppler, President

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