Document:

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                                                                    Exhibit 10.1

November 7, 2007

John Donovan
Vice President of Finance and Administration
Emrise Corporation
945 Haven Avenue, Suite 100
Rancho Cucamonga, CA  91730

Re:      Commitment Letter concerning certain loan financing in the amount of
         $23,000,000 by and between GVEC Resource IV Inc. and The Borrowers
         (each as described herein)

Dear John:

1. Background. Reference is made to the fact that EMRISE CORPORATION and certain
of its subsidiaries (collectively the "Borrowers") each intends to obtain a
revolving credit facility and term loans (i) to finance recapitalization of
current outstanding debt, (ii) the consumption of acquisitions, and (iii) to
provide general working capital for its business.

In connection with the above, the Borrowers intend to obtain the following:

a)       a revolving credit facility not to exceed seven million dollars
         ($7,000,000) (the "Revolving Loan");

b)       a term loan in an outstanding principal amount of six million dollars
         ($6,000,000) (the "Term Loan A") which will be fully funded at the
         close; and

c)       an acquisition facility in the amount of ten million dollars
         ($10,000,000) (the "Term Loan B"), and collectively with the Revolving
         Loan and Term Loan A (the "Financing").

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In connection with the foregoing, the Borrowers intend to obtain the Financing
from GVEC Resource IV Inc., a business company, organized under the laws of the
British Virgin Islands (the "Lender") (which is a company doing business with
Private Equity Management Group, Inc. ("PEM Group")). The Financing will be
secured by a first priority broad lien on a security interest in, all the assets
of the Borrowers and their subsidiaries and the Financing will be subject to the
terms and conditions as set forth in Exhibit A, attached hereto (the "Summary of
Terms").

The transactions terms, conditions, and restrictions described above are
collectively referred to herein as the "Transaction."

2. Commitment. PEM Group is pleased to confirm that, subject to the provisions,
terms, and conditions set forth herein, unless otherwise stated, PEM Group
hereby commits to the Lender to provide the Financing to the Borrowers, upon the
terms specified herein and in the attached Summary of Terms.

3. Information Provided. The Borrowers represent and warrant that: (i) no
written information that has been or is hereafter furnished by the Borrowers or
on behalf of the Borrowers in connection with the transactions contemplated
hereby; and (ii) no other information given at information meetings with the
Borrowers and supplied or approved by the Borrowers (such written information
and other information being referred to herein collectively as the
"Information") contains (or, in the case of Information furnished after the date
hereof, will contain), any untrue statement or omission of material fact
necessary to make the statements therein not misleading, in the light of the
circumstances under which they were (or hereafter are) made; provided that, with
respect to Information consisting of statements, estimates and projections
regarding the future performance of the Borrowers and/or their respective
affiliates (collectively, the "Projections"), no representation or warranty is
made other than that the Projections have been (and, in the case of Projections
furnished after the date hereof, will be) prepared in good faith based on
assumptions believed to be reasonable at the time of preparation thereof (it
being understood that the Projections are subject to significant uncertainties
and contingencies, and that no assurance can be given that such Projections will
not change from time to time in the future. The Borrowers will promptly provide
to the

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Lender any material changes to any financial information previously provided to
the Lender.

4. Conditions Precedent. The Lender's commitments and agreements hereunder are
expressly made subject to the Conditions Precedent set forth in the Summary of
Terms attached hereto.

5. Fees. As consideration for the commitments and agreements of the Lender
hereunder, the Borrowers agree to cause to be paid the fees described, earned
and committed to be paid in accordance with the Summary of Terms. Without in any
manner limiting the foregoing, and to further induce the Lender to issue this
letter (together with the Summary of Terms, this "Commitment Letter") and to
proceed with the documentation of the proposed Financing, the Borrowers hereby
agree to reimburse PEM Group, the Lender and their affiliates on demand
therefore all out-of-pocket costs and expense (including, without limitation,
legal fees and expenses of counsel to PEM Group and the Lender, appraisal,
consulting and audit fees, and printing, reproduction, document delivery,
travel, communication and publicity costs) incurred in connection with the
negotiation, and finalization of the Financing, and the preparation, review,
negotiation, execution and/or delivery of the Summary of Terms, this Commitment
Letter, the Financing Documents, and the administration, amendment, modification
or waiver thereof (or any proposed amendment, modification or waiver), whether
or not the closing occurs or any financing documentation related to the
Financing is executed and delivered or any extensions of credit are made under
the Financing. The Borrowers further agree to indemnify and hold harmless PEM
Group and the Lender, and each other agent or co-agent (if any) with respect to
the Financing, and their respective affiliates and each director, officer,
employee, representative and agent thereof (each, an "indemnified person") from
and any or such indemnified person as a result of or arising out of or in any
way related to or resulting from the Summary of Terms, this Commitment Letter
and, upon demand, to pay and reimburse each indemnified person for any legal or
other out-of-pocket expense paid or incurred in connection with investigating,
defending or preparing to defend any such action, suit, proceeding (including
any inquiry or investigation) or claim (whether or not such indemnified person
is a party to any action or

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proceeding out of which any expenses arise). Neither PEM Group nor the Lender
nor any other indemnified person shall be responsible or liable to any person or
entity for (x) any determination made by it pursuant to this Commitment Letter,
(y) any damages arising from the use by others of information transmission
systems, or (z) any indirect, special, incidental, punitive or consequential
damages (including, without limitation, any loss of profits, business or
anticipated savings) which may be alleged as a result of this Commitment Letter
or the financing contemplated hereby.

6. Affiliated Parties. PEM Group and the Lender reserve the right to employ the
services of their respective affiliates in providing services contemplated by
this Commitment Letter and to allocate, in whole or in part, to their affiliates
certain fees payable hereunder in such manner as PEM Group and the Lender and
their affiliates may agree in their sole discretion. The Borrowers consent to
and agree that the PEM Group or the Lender may at any time and from time to time
assign all or any portion of its commitments hereunder to one or more of their
affiliates. The Borrowers further consent to and agree that (i) PEM Group and
the Lender may each share with any of their affiliates any information related
to the Transaction, the Borrowers (and their respective affiliates and
subsidiaries), or any of the matters contemplated hereby, and (ii) PEM Group and
the Lender or their affiliates may be providing debt financing, equity capital
or other services (including financial advisory services) to other companies in
respect of which the Borrowers (and their respective affiliates) may have
conflicting interests regarding the transactions described herein and otherwise.

7. Tax Consequences. The Borrowers hereby represent and acknowledge that none of
PEM Group, the Lender or any employees or agents of, or other persons affiliated
with PEM Group or the Lender have directly or indirectly made or provided any
statement (oral or written) to the Borrowers or to any of employees or agents of
the Borrowers, or other persons affiliated with or related to the Borrowers (or,
so far as the Borrowers are aware, to any other person), as to the potential tax
consequences of the Transaction.

8. Survival. The reimbursement, indemnification, jurisdiction and
confidentiality provisions contained herein shall survive any termination of
this Commitment Letter.

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9. Verification. In order to comply with the USA PATRIOT Act, PEM Group and the
Lender must each obtain, verify, and record information that sufficiently
identifies each entity (or individual) that enters into a business relationship
with PEM Group or the Lender. As a result, in addition to the various corporate
names and addresses of the Borrowers, PEM Group and the Lender will each be
entitled to obtain corporate tax identification numbers and certain other
information regarding the Borrowers. PEM Group and the Lender may also request
relevant corporate resolutions and other identifying documents.

10. No Assignment; Termination. This Commitment Letter (and any rights and
obligations hereunder of the Borrowers) shall not be assignable by the Borrowers
to any person or entity without the prior written consent of PEM Group and the
Lender (and any purported assignment without such consent shall be null and
void). This Commitment Letter is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person or entity other than the parties hereto (and
indemnified persons) and may not be relied upon by any other person or entity.
This Commitment Letter is not intended to create a fiduciary relationship among
the parties hereto. Each of PEM Group's and the Lender's willingness, and
commitments, with respect to the Financing as set forth above will terminate on
December 7, 2007. (the "Commitment Termination Date") (other than with respect
to ongoing indemnities, confidentiality provisions and other provisions intended
to survive the termination hereof).

11. Miscellaneous. The following provisions shall be applicable to this
Commitment Letter:

                  (a) Reliance on Information. In undertaking this commitment,
PEM Group and the Lender are relying and will continue to rely, without
independent verification, thereof, on the accuracy of the information furnished
to it by the Borrowers, and the representations and warranties referenced
herein. PEM Group and the Lender may also rely on any publicly available
information issued or authorized to be issued by the Borrowers or any of its
subsidiaries or affiliates. PEM Group and the Lender have no obligation to
investigate, and have not undertaken any independent investigation of, any

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information or materials, public or otherwise, made available by the Borrowers
or any of their respective affiliates.

                  (b) Complete Agreement; Waivers and Other Changes to be in
Writing. This Commitment Letter supersedes all previous negotiations, agreements
and other understandings relating to the Financing. Please note, however, that
the terms and conditions to be set forth in the loan documents that will
evidence and govern the Financing are not limited to those set forth herein.
Those matters that are not covered or made clear herein are subject to the final
approval of PEM Group and the Lender. No alteration, waiver, amendment or
supplement of or to this Commitment Letter shall be binding or effective unless
the same is set forth in writing signed by a duly authorized representative of
each party hereto or thereto.

                  (c) Power, Authority and Binding Effect. Each of the parties
hereto represents and warrants to the other parties hereto that (i) it has all
requisite power and authority to enter into this Commitment Letter, and (ii)
this Commitment Letter has been duly and validly authorized by all necessary
corporate action on the part of such party, has been duly executed and delivered
by such party and constitutes a legally valid and binding agreement of such
party, enforceable against it in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally.

                  (d) Time. Time shall be of the essence whenever and wherever a
date or period of time is prescribed or referred to in this Commitment Letter.

                  (e) Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial. This Commitment Letter shall be governed by and construed in accordance
with the laws of the State of California.

THE BORROWER IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS COMMITMENT OR THE
TRANSACTIONS OR THE MATTERS CONTEMPLATED BY THIS COMMITMENT. EACH PARTY HEREBY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND CALIFORNIA

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COURTS LOCATED IN THE CITY OF LOS ANGELES IN CONNECTION WITH ANY DISPUTE RELATED
TO THIS COMMITMENT, THE TRANSACTIONS CONTEMPLATED BY THIS COMMITMENT OR ANY
MATTERS RELATED TO THIS COMMITMENT. IN THE EVENT OF LITIGATION, THIS LETTER MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

                  (f) No Rights or Liability. This Commitment Letter shall not
create, nor shall it be construed as creating, any rights enforceable by a
person or entity not a party hereto, except as provided in the indemnification
provisions.
                  (g) No Liability for Special or Punitive Damages. To the
fullest extent that a claim for punitive damages may lawfully be waived, no
party hereto shall ever be liable for any punitive damages on any claim (whether
founded in contract, tort, legal duty or any other theory of liability) arising
from or related in any manner to this Commitment Letter or the negotiation,
execution, administration, performance, breach, or enforcement of this
Commitment Letter or the instruments and agreements evidencing, governing or
relating to the Financing contemplated hereby or any amendment thereto or the
consummation of, or any failure to consummate, the Financing or any act,
omission, breach or wrongful conduct in any manner related thereto.

                  (h) Counterparts. This Commitment Letter may be executed in
one or more counterparts, each of which shall constitute an original, and all of
which together shall constitute one and the same agreement. Delivery of an
executed counterpart of this Commitment Letter by facsimile shall be effective
as delivery of a manually executed counterpart of this commitment Letter.

Please evidence your acceptance of the provisions of this Commitment Letter,
including, without limitation, the attached Summary of Terms, by (i) signing the
enclosed copy of this Commitment Letter; and (ii) returning the signed
Commitment Letter to the undersigned on or before 5:00 P.M. (Eastern Standard
Time) five (5) calendar days after the date of execution of this Commitment
Letter by the Lender, the time at which this Commitment Letter (if not so
accepted prior thereto) will expire.

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Very truly yours,

PRIVATE EQUITY MANAGEMENT
GROUP, INC.

By:                                    By:
      ----------------------------        ----------------------------------
      Robert J. Anderson                        Peter Paul Mendel
      Chief Operating Officer                   Secretary and General Counsel

            [ THE BORROWER' EXECUTED COUNTERPART ON FOLLOWING PAGE ]

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AGREED TO AND ACCEPTED ON BEHALF OF THE BORROWERS as of this _____ day of
November, 2007:
EMRISE CORPORATION
A Delaware Corporation

By:
   ---------------------------

Name:
     -------------------------

Title:
       -----------------------

     One Park Plaza, Suite 550, Irvine, California 92614 Phone 949.757.0977
                                Fax 949.757.0978
                                www.pemgroup.com

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                                    EXHIBIT A

                                SUMMARY OF TERMS

This Summary of Terms is part of the Commitment Letter, dated November 7, 2007
addressed to Emrise Corporation ("Emrise") that Private Equity Management Group,
Inc. ("PEM Group") will arrange to establish through an entity that will lend
(hereinafter referred to as the "Lender") a Financing Facility of $23,000,000
(the "Facility"). The Facility will provide capital for (i) the payment of
certain specified obligations, (ii) the making of certain specified
acquisitions, and (iii) general working capital requirements.

BORROWER:                           Emrise Corporation (the "Parent") and
--------                            certain of its domestic subsidiaries as
                                    required by the Lender (collectively the
                                    "Borrower").

GUARANTORS:                         Certain foreign subsidiaries of the Parent
----------                          (the Borrower and the Guarantors
                                    each a "Loan Party" and collectively the
                                    "Loan Parties").

LENDER:                             GVEC Resource IV Inc.
------

FACILITY:                            A facility totaling not more than $23
--------                            million outstanding, consisting of a
                                    revolving loan limited to $7 million (the
                                    "Revolving Loan"). A Term Loan A for $6
                                    million and a Term Loan B for $10 million.
                                    Term Loan A shall be fully funded on the
                                    Closing Date (as defined herein).

CLOSING DATE AND FUNDING:           The first date on which definitive loan
-----------------------             documentation satisfactory to the Lender is
                                    executed by the Loan Parties and the

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                                    Lender but no later than December 7, 2007.
                                    The Revolving Loan will be limited to $7
                                    million. The advance rate to the Borrower
                                    shall not exceed eighty-five percent (85%)
                                    of the Borrower's eligible accounts
                                    receivable, up to fifty percent (50%) of the
                                    finished goods inventory and up to ten
                                    percent (10%) of the raw material inventory
                                    as defined by the Lender. All accounts
                                    receivable proceeds whether eligible
                                    accounts receivable or not will float
                                    through lock boxes established at commercial
                                    banks of mutual agreement by the Lender and
                                    the Borrower with regard to foreign accounts
                                    and U.S. receivables.

                                    Term Loan A shall be fully funded and paid
                                    into an account specified by the Borrower on
                                    the Closing Date subject to payment of the
                                    commitment fee as provided below. Term Loan
                                    B will be available for funding for up to
                                    eighteen (18) months ("Availability Period")
                                    after the Closing Date.

TERM:                               The Revolving Loan will have a term of a one
----                                (1) year, Term Loan A will have a term of
                                    three (3) years, and any portion of Term
                                    Loan B that has been used prior to the
                                    expiration of the Availability Period will
                                    have a term of three (3) years following the
                                    Closing Date (the "Maturity Dates"). The
                                    Borrower may elect to require the Lender to
                                    renew the Revolving Loan two (2) times, each
                                    for a period of one (1) year, subject to
                                    such specific conditions as outlined by the
                                    Lender.

INTEREST:                           The Revolving Loan shall bear interest at
--------                            the rate per annum equal to one and one
                                    quarter percent (1.25%) above the Reference
                                    Rate adjusted on the 1st day of every month
                                    following any change to the Reference Rate.
                                    Term Loan A and Term Loan

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                                    B shall bear interest at the rate per annum
                                    equal to four and one quarter percent
                                    (4.25%) above the Reference Rate from time
                                    to time in effect, adjusted on the 1st day
                                    of the month following any change to the
                                    Reference Rate.

                                    At no time shall the Reference Rate referred
                                    to above be less than eight and one quarter
                                    percent (8.25%). As used herein, "Reference
                                    Rate" means at any time, the rate of
                                    interest most recently published in the
                                    "Money Rates" column of the Wall Street
                                    Journal as the "Prime Rate." All interest
                                    and fees shall be computed on the basis of a
                                    year of 360 days for the actual days
                                    elapsed. If any event of default shall occur
                                    and be continuing, interest shall accrue at
                                    a rate per annum equal to four percent (4%)
                                    in excess of the rate of interest otherwise
                                    in effect until such time as the default has
                                    been cured.

TRANSACTION                         Borrower shall pay PEMG an advisory fee
-----------                         equal to three and three-quarters percent
ADVISORY FEE:                       (3.75%) of the Maximum Credit amount
------------                        available under the Facility. The entire
                                    advisory fee will be deemed earned upon
                                    issuance and execution of the commitment
                                    letter and payable at the earlier of the
                                    close or expiration of said commitment.

UNUSED                              Borrower shall pay an unused line fee of one
-----                               half percent (0.5%) per annum, payable
LINE FEES:                          monthly, on the unused portion of the
---------                           Revolving Loan commitment and an unused
                                    facility fee equal to one half of one
                                    percent (0.5%) per annum, payable monthly,
                                    on the unused portion of the Term Loan B
                                    commitment.

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WARRANTS:                           Lender or an entity of Lender's choice shall
                                    receive Warrants, to purchase the Borrower's
                                    common stock, with a value equal to twenty
                                    percent (20%) of the committed amounts of
                                    Term Loan A and B. The Warrants shall be for
                                    a term of seven (7) years and at a strike
                                    price equal to $1.10 per share. By way of
                                    example, assuming the total amount of the
                                    Term Loan A and Term Loan B is equal to
                                    $16,000,000, Borrower will issue a Warrants
                                    to purchase 2,909,090 shares of Borrower's
                                    common stock calculated as follows:
                                    [($16,000,000 total term debt x 20%
                                    coverage) / $1.10 strike price]. Lender
                                    shall receive registration rights with
                                    respect to the shares of common stock
                                    underlying the Warrants and standard
                                    minority investor rights, including but not
                                    limited to anti-dilution rights and
                                    piggy-back rights. The Warrants shall be
                                    exercisable in cash. However, if after one
                                    year from the date of closing there is no
                                    effective registration statement registering
                                    or no current prospectus available for, the
                                    resale of the shares of common stock
                                    underlying the Warrants by the Lender, then
                                    the Warrants may also be exercised at such
                                    time and thereafter by means of a "cashless
                                    exercise."

USE OF PROCEEDS:                    The Loans under the Facility will be used
---------------                     for (i) the payment of certain specified
                                    obligations consistent with the schedule of
                                    the sources and uses of funds attached
                                    hereto as Annex A, (ii) the making of
                                    certain specified acquisitions, and (iii)
                                    general working capital requirements
                                    necessary to operate the business. The use
                                    of proceeds for the Term Loan B shall be
                                    approved by Lender, which approval shall not
                                    be unreasonably withheld.

REPRESENTATIONS                     Usual representations and warranties,
---------------                     including, but not limited to, corporate
AND WARRANTIES:                     existence and good standing, authority to
--------------                      enter into

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                                    loan documentation, governmental approvals,
                                    non-violation of other agreements, financial
                                    statements, litigation, compliance with
                                    environmental, pension and other laws,
                                    taxes, insurance, absence of material
                                    adverse change.

COVENANTS:                          Usual covenants, including, but not limited
---------                           to, provision of financial statements,
                                    notices of litigation, compliance with
                                    pension, environmental and other laws,
                                    inspection of properties, books and records,
                                    maintenance of insurance, limitations with
                                    respect to liens and encumbrances, dividends
                                    and retirement of capital stock, guarantees,
                                    sale and lease back transactions,
                                    consolidations and mergers, investments,
                                    capital expenditures, loans and advances,
                                    indebtedness, operating leases, transactions
                                    with affiliates, prepayment of other
                                    indebtedness and amendments to material
                                    agreements.

                                    Financial covenants including maximum
                                    leverage ratio, debt service coverage ratio,
                                    minimum EBITDA and maximum capital
                                    expenditures, which shall be reasonably
                                    determined by the Lender and mutually agreed
                                    to by Borrower.

                                    Financial reporting to include: (i) annual
                                    financial statements, (ii) quarterly,
                                    internally prepared, financial statements,
                                    and (v) other reporting as required by the
                                    Lender.

EVENTS OF DEFAULT:                  Usual events of default with mutually
-----------------                   acceptable cure periods, including, but not
                                    limited to, payment, cross-default,
                                    violation of covenants, breach of
                                    representations or warranties, bankruptcy or
                                    insolvency, judgment, ERISA, environmental
                                    and change of control.

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SYNDICATION RIGHTS:                 The Lender reserves the right to assign any
------------------                  portion of the Facility to one or more of
                                    its affiliated lenders or funds at any time.

                                    The Lender reserves the right to syndicate,
                                    sell or participate out any portion of the
                                    Facility to a commercial bank, financial
                                    institution or any other person provided
                                    that the Lender's obligations under the loan
                                    documents remain unchanged.

CONDITIONS                          The obligation of the Lender to make any
----------                          Loans under the Facility will be subject to
PRECEDENT:                          customary conditions precedent including,
---------                           without limitation, the following initial
                                    conditions precedent:

                                    a)       Execution and delivery of
                                             appropriate legal documentation in
                                             form and substance satisfactory to
                                             and required by the Lender and its
                                             counsel (including, without
                                             limitation, the financing
                                             agreement, the security and pledge
                                             agreements, the mortgages and title
                                             insurance policies, the guaranties
                                             and the control agreements,
                                             completion of background checks on
                                             key managers and principals and
                                             entities (the results of which are
                                             satisfactory to the Lender) and the
                                             satisfaction of the conditions
                                             precedent by the Lender.

                                    b)       There shall have occurred no event
                                             or condition which has had, or is
                                             reasonably likely to have, a
                                             material adverse change.

                                    c)       The Lender's completion of its
                                             legal due diligence, including,
                                             without limitation, all ERISA,
                                             environmental, tax, accounting

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                                             and labor matters, with results
                                             satisfactory to the Lender; all
                                             necessary governmental and third
                                             party consents and approvals
                                             necessary in connection with the
                                             Facility and the transactions
                                             contemplated thereby shall have
                                             been obtained (without the
                                             imposition of any conditions that
                                             are not reasonably acceptable to
                                             the Lender) and shall remain in
                                             effect; and no law or regulation
                                             shall be applicable in the
                                             reasonable judgment of the Lender
                                             that restrains, prevents or imposes
                                             materially adverse conditions upon
                                             the Facility or the transactions
                                             contemplated thereby.

                                    d)       The Lender shall have been granted
                                             a perfected, first priority lien on
                                             all collateral, and shall have
                                             received UCC, tax and judgment lien
                                             searches and other appropriate
                                             evidence (including title reports
                                             and surveys relating to all owned
                                             real property comprising
                                             collateral), evidencing the absence
                                             of any other liens on the
                                             collateral, except existing liens
                                             acceptable to the Lender. All of
                                             the outstanding stock of the
                                             Borrower's subsidiaries as well as
                                             the proceeds and products of the
                                             foregoing shall be pledged as part
                                             of the collateral.

                                    e)       Opinions from the Loan Parties'
                                             counsel as to such matters as the
                                             Lender and counsel to the Lender
                                             may reasonably request.

                                    f)       The Lender's loan origination costs
                                             including, without limitation,
                                             audit fees, attorneys' fees, search
                                             fees, title fees, documentation and
                                             filing fees, shall have been paid
                                             by the Borrower. The Lender shall
                                             have received such financial and
                                             other information regarding the
                                             Loan Parties as the Lender may
                                             reasonably request.

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                                    g)       Subordination of the Yost and
                                             McDermott notes.

                                    h)       The existing senior debt
                                             obligations of the Borrower shall
                                             be repaid at closing.

                                    i)       Such other conditions precedent as
                                             set forth in the October 12, 2007
                                             draft Credit Agreement circulated
                                             among the Lender and the Borrower.

CONDITIONS                          Within thirty (30) days of the Closing Date,
----------                          the Borrowers shall deliver to the Lender
SUBSEQUENT                          executed landlord waivers (for warehouses of
----------                          the Borrowers), in form and substance
                                    satisfactory to the Lender and its counsel.

PREPAYMENT PENALTIES:               Prepayment penalties for the Facility is as
-------------------                 follows:
                                    3% Year 1
                                    2% Year 2

EXCLUSIVITY:                        None of the Loan Parties, its subsidiaries,
-----------                         the Borrower or their representatives shall
                                    enter into discussions with any other person
                                    regarding a competing debt transaction until
                                    expiration of the commitment letter. If any
                                    entity or person makes any inquiry,
                                    proposal, offer, or contact with respect to
                                    any transaction described above, the
                                    Borrower will immediately notify Lender in
                                    writing of such incident and all related
                                    details.

GOVERNING LAW:                      All documentation in connection with the
--------------                      Facility shall be governed by the laws of
                                    the State of California or as determined by
                                    the Lender at their sole discretion.

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LENDERS LOAN DOCUMENTATION:         Lender's loan documentation shall be
--------------------------          consistent with the terms stated in this
                                    Summary of Terms.

OUT-OF-POCKET                       All fees, including reasonable legal fees,
-------------                       costs and expenses of counsel to the Lender,
EXPENSES AND DEPOSIT:               and all out-of-pocket expenses associated
--------------------                with the transaction, are to be paid by the
                                    Loan Parties whether or not the transaction
                                    is consummated. Lender reserves the right to
                                    request additional deposits from the
                                    Borrower to cover the expenses detailed
                                    above regardless of whether a transaction is
                                    consummated or not.

ADVERTISEMENT OF                    Lender shall have the right to publish
----------------                    tombstone advertisements containing
PARTICIPATION IN                    Borrower's logo and announcing its
----------------                    participation in the financing of Borrower.
TRANSACTION                         Borrower has the right to approve the
-----------                         contents of any advertisements prior to
                                    publication by Lender, which consent will
                                    not be unreasonably withheld. In addition,
                                    Borrower will include reference to Lender's
                                    participation in any tombstones issued by
                                    Borrower regarding the financing
                                    transaction.

                                     - 18 -usmicrobics_s8-ex0401.htm

    EXHIBIT
      4.1

    

    US
      Microbics, Inc.

    

    2007-II
      EMPLOYEE STOCK INCENTIVE PLAN

    

    As
      Adopted  November 8th, 2007

     

    1.           PURPOSE.

    

    The
      purpose of this Plan is to provide incentives to attract, retain and motivate
      eligible persons whose present and potential contributions are important to
      the
      success of the Company, its Parent and Subsidiaries, by offering them an
      opportunity to participate in the Company’s future performance through awards of
      Options, Restricted Stock and Stock Bonuses.  Capitalized terms not
      defined in the text are defined in Section 2.

    

    2.           DEFINITIONS.

    

    As
      used
      in this Plan, the following terms will have the following meanings:

    

    “AWARD”
      means any award under this Plan, including any Option, Restricted Stock or
      Stock
      Bonus.

    

    “AWARD
      AGREEMENT” means, with respect to each Award, the signed written agreement
      between the Company and the Participant setting forth the terms and conditions
      of the Award.

    

    “BOARD”
      means the Board of Directors of the Company.

    

    “CAUSE”
      means any cause, as defined by applicable law, for the termination of a
      Participant’s employment with the Company or a Parent or Subsidiary of the
      Company.

    

    “CODE”
      means the Internal Revenue Code of 1986, as amended.

    

    “COMPANY”
      means US Microbics, Inc., a Colorado corporation, or any successor
      corporation.

    

    “DISABILITY”
      means a disability, whether temporary or permanent, partial or total, as
      determined by the Board.

    

    “EXCHANGE
      ACT” means the Securities Exchange Act of 1934, as amended.

    

    “EXERCISE
      PRICE” means the price at which a holder of an Option may purchase the
      Shares issuable upon exercise of the Option.

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

       

    

    “FAIR
      MARKET VALUE” means, as of any date, the value of a share of the Company’s
      Common Stock determined as follows:

    

    
      	
               

            	
              (a)

            	
              if
                such Common Stock is publicly traded and is then listed on a national
                securities exchange, its closing price on the date of determination
                on the
                principal national securities exchange on which the Common Stock
                is listed
                or admitted to trading as reported in The Wall Street
                Journal;

            

    

    

    
      	
               

            	
              (b)

            	
              if
                such Common Stock is quoted on the NASDAQ National Market, its closing
                price on the NASDAQ National Market on the date of determination
                as
                reported in The Wall Street
                Journal;

            

    

    

    
      	
               

            	
              (c)

            	
              if
                such Common Stock is publicly traded but is not listed or admitted
                to
                trading on a national securities exchange, the average of the closing
                bid
                and asked prices on the date of determination as reported by Bloomberg,
                L.P.;

            

    

    

    
      	
               

            	
              (d)

            	
              in
                the case of an Award made on the Effective Date, the price per share
                at
                which shares of the Company’s Common Stock are initially offered for sale
                to the public by the Company’s underwriters in the initial public offering
                of the Company’s Common Stock pursuant to a registration statement filed
                with the SEC under the Securities Act;
                or

            

    

    

    
      	
               

            	
              (e)

            	
              if
                none of the foregoing is applicable, by the Board in good
                faith.

            

    

    

    “INSIDER”
      means an officer or director of the Company or any other person whose
      transactions in the Company’s Common Stock are subject to Section 16 of the
      Exchange Act.

    

    “OPTION”
      means an award of an option to purchase Shares pursuant to Section
      6.

    

    “PARENT”
      means any corporation (other than the Company) in an unbroken chain of
      corporations ending with the Company if each of such corporations other than
      the
      Company owns stock possessing 50% or more of the total combined voting power
      of
      all classes of stock in one of the other corporations in such
      chain.

    

    “PARTICIPANT”
      means a person who receives an Award under this Plan.

    

    “PERFORMANCE
      FACTORS” means the factors selected by the Board, in its sole and absolute
      discretion, from among the following measures to determine whether the
      performance goals applicable to Awards have been satisfied:

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	
               

            	
              (a)

            	
              Net
                revenue and/or net revenue growth;

            

    

    

    
      	
               

            	
              (b)

            	
              Earnings
                before income taxes and amortization and/or earnings before income
                taxes
                and amortization growth;

            

    

    

    
      	
               

            	
              (c)

            	
              Operating
                income and/or operating income
                growth;

            

    

    

    
      	
               

            	
              (d)

            	
              Net
                income and/or net income growth;

            

    

    

    
      	
               

            	
              (e)

            	
              Earnings
                per share and/or earnings per share
                growth;

            

    

    

    
      	
               

            	
              (f)

            	
              Total
                stockholder return and/or total stockholder return
                growth;

            

    

    

    
      	
               

            	
              (g)

            	
              Return
                on equity;

            

    

    

    
      	
               

            	
              (h)

            	
              Operating
                cash flow return on income;

            

    

    

    
      	
               

            	
              (i)

            	
              Adjusted
                operating cash flow return on
                income;

            

    

    

    
      	
               

            	
              (j)

            	
              Economic
                value added; and

            

    

    

    
      	
               

            	
              (k)

            	
              Individual
                confidential business objectives.

            

    

    

    “PERFORMANCE
      PERIOD” means the period of service determined by the Board, not to exceed
      five years, during which years of service or performance is to be measured
      for
      Restricted Stock Awards or Stock Bonuses.

    

    “PLAN”
      means this US Microbics, Inc. 2007-II Employee Stock Incentive Plan, as amended
      from time to time.

    

    “RESTRICTED
      STOCK AWARD” means an award of Shares pursuant to Section 7.

    

    “SEC”
      means the Securities and Exchange Commission.

    

    “SECURITIES
      ACT” means the Securities Act of 1933, as amended.

    

    “SHARES”
      means shares of the Company’s Common Stock reserved for issuance under this
      Plan, as adjusted pursuant to Sections 3 and 19, and any successor
      security.

    

    “STOCK
      BONUS” means an award of Shares, or cash in lieu of Shares, pursuant to
      Section 8.

    

    “SUBSIDIARY”
      means any corporation (other than the Company) in an unbroken chain of
      corporations beginning with the Company if each of the corporations other than
      the last corporation in the unbroken chain owns stock possessing 50% or more
      of
      the total combined voting power of all classes of stock in one of the other
      corporations in such chain.

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

       

    

    “TERMINATION”
      or “TERMINATED” means, for purposes of this Plan with respect to a
      Participant, that the Participant has for any reason ceased to provide services
      as an employee, officer, director, consultant, independent contractor, or
      advisor to the Company or a Parent or Subsidiary of the Company. An employee
      will not be deemed to have ceased to provide services in the case of (i) sick
      leave, (ii) military leave, or (iii) any other leave of absence approved by
      the
      Company, provided that such leave is for a period of not more than 90 days,
      unless reemployment upon the expiration of such leave is guaranteed by contract
      or statute or unless provided otherwise pursuant to a formal policy adopted
      from
      time to time by the Company and issued and promulgated to employees in
      writing.  In the case of any employee on an approved leave of absence,
      the Board may make such provisions respecting suspension of vesting of the
      Award
      while on leave from the employ of the Company or a Subsidiary as it may deem
      appropriate, except that in no event may an Option be exercised after the
      expiration of the term set forth in the Option agreement. The Board will have
      sole discretion to determine whether a Participant has ceased to provide
      services and the effective date on which the Participant ceased to provide
      services (the “TERMINATION DATE”).

    

    “UNVESTED
      SHARES” means “Unvested Shares” as defined in the Award
      Agreement.

    

    “VESTED
      SHARES” means “Vested Shares” as defined in the Award
      Agreement.

    

    3.           SHARES
      SUBJECT TO THE PLAN.

    

    3.1           Number
      of Shares Available.  Subject to Sections 3.2 and 19, the total
      aggregate number of Shares reserved and available for grant and issuance
      pursuant to this Plan will be 50,000,000 plus Shares that are subject to: (a)
      issuance upon exercise of an Option but cease to be subject to such Option
      for
      any reason other than exercise of such Option; (b) an Award granted hereunder
      but forfeited or repurchased by the Company at the original issue price; and
      (c)
      an Award that otherwise terminates without Shares being issued.  At
      all times the Company shall reserve and keep available a sufficient number
      of
      Shares as shall be required to satisfy the requirements of all outstanding
      Options granted under this Plan and all other outstanding but unvested Awards
      granted under this Plan.

    

    3.2           Adjustment
      of Shares.  In the event that the number of outstanding shares is
      changed by a stock dividend, recapitalization, stock split, reverse stock split,
      subdivision, combination, reclassification or similar change in the capital
      structure of the Company without consideration, then (a) the number of Shares
      reserved for issuance under this Plan, (b) the Exercise Prices of and number
      of
      Shares subject to outstanding Options, and (c) the number of Shares subject
      to
      other outstanding Awards will be proportionately adjusted, subject to any
      required action by the Board or the stockholders of the Company and compliance
      with applicable securities laws; provided, however, that fractions of a Share
      will not be issued but will either be replaced by a cash payment equal to the
      Fair Market Value of such fraction of a Share or will be rounded up to the
      nearest whole Share, as determined by the Board.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

       

    

    4.           ELIGIBILITY.

    

     ISOs
      (as defined in Section 6 below) may be granted only to employees (including
      officers and directors who are also employees) of the Company or of a Parent
      or
      Subsidiary of the Company.  All other Awards may be granted to
      employees, officers, directors, consultants, independent contractors and
      advisors of the Company or any Parent or Subsidiary of the Company; provided
      such consultants, contractors and advisors render bona fide services not in
      connection with the offer and sale of securities in a capital-raising
      transaction.

    

    5.           ADMINISTRATION.

    

    5.1           Board
      Authority.  This Plan will be administered by the
      Board.  Subject to the general purposes, terms and conditions of this
      Plan, the Board will have full power to implement and carry out this Plan.
      Without limitation, the Board will have the authority to:

    

    
      	
               

            	
              (a)

            	
              construe
                and interpret this Plan, any Award Agreement and any other agreement
                or
                document executed pursuant to this
                Plan;

            

    

    

    
      	
               

            	
              (b)

            	
              prescribe,
                amend and rescind rules and regulations relating to this Plan or
                any
                Award;

            

    

    

    
      	
               

            	
              (c)

            	
              select
                persons to receive Awards;

            

    

    

    
      	
               

            	
              (d)

            	
              determine
                the form and terms of Awards;

            

    

    

    
      	
               

            	
              (e)

            	
              determine
                the number of Shares or other consideration subject to
                Awards;

            

    

    

    
      	
               

            	
              (f)

            	
              determine
                whether Awards will be granted singly, in combination with, in tandem
                with, in replacement of, or as alternatives to, other Awards under
                this
                Plan or any other incentive or compensation plan of the Company or
                any
                Parent or Subsidiary of the
                Company;

            

    

    

    
      	
               

            	
              (g)

            	
              grant
                waivers of Plan or Award
                conditions;

            

    

    

    
      	
               

            	
              (h)

            	
              determine
                the vesting, ability to exercise and payment of
                Awards;

            

    

    

    
      	
               

            	
              (i)

            	
              correct
                any defect, supply any omission or reconcile any inconsistency in
                this
                Plan, any Award or any Award
                Agreement;

            

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      	
               

            	
              (j)

            	
              determine
                whether an Award has been earned;
                and

            

    

    

    
      	
               

            	
              (k)

            	
              make
                all other determinations necessary or advisable for the administration
                of
                this Plan.

            

    

    

    5.2           Board
      Discretion.  Any determination made by the Board with respect to
      any Award will be made at the time of grant of the Award or, unless in
      contravention of any express term of this Plan or Award, at any later time,
      and
      such determination will be final and binding on the Company and on all persons
      having an interest in any Award under this Plan.  The Board may
      delegate to one or more officers of the Company the authority to grant an Award
      under this Plan to Participants who are not Insiders of the
      Company.

    

    6.           OPTIONS.

    

     The
      Board may grant Options to eligible persons and will determine whether such
      Options will be Incentive Stock Options within the meaning of the Code (“ISO”)
      or Nonqualified Stock Options (“NQSOS”), the number of Shares subject to the
      Option, the Exercise Price of the Option, the period during which the Option
      may
      be exercised, and all other terms and conditions of the Option, subject to
      the
      following:

    

    6.1           Form
      of Option Grant.  Each Option granted under this Plan will be
      evidenced by an Award Agreement that will expressly identify the Option as
      an
      ISO or an NQSO (hereinafter referred to as the “STOCK OPTION AGREEMENT”), and
      will be in such form and contain such provisions (which need not be the same
      for
      each Participant) as the Board may from time to time approve, and which will
      comply with and be subject to the terms and conditions of this
      Plan.

    

    6.2           Date
      of Grant.  The date of grant of an Option will be the date on
      which the Board makes the determination to grant such Option, unless otherwise
      specified by the Board.  The Stock Option Agreement and a copy of this
      Plan will be delivered to the Participant within a reasonable time after the
      granting of the Option.

    

    6.3           Exercise
      Period. Options may be exercisable within the times or upon the events
      determined by the Board as set forth in the Stock Option Agreement governing
      such Option; provided, however, that no Option will be exercisable after the
      expiration of ten (10) years from the date the Option is granted; and provided
      further that no ISO granted to a person who directly or by attribution owns
      more
      than ten percent (10%) of the total combined voting power of all classes of
      stock of the Company or of any Parent or Subsidiary of the Company (“TEN PERCENT
      STOCKHOLDER”) will be exercisable after the expiration of five (5) years from
      the date the ISO is granted.  The Board also may provide for Options
      to become exercisable at one time or from time to time, periodically or
      otherwise, in such number of Shares or percentage of Shares as the Board
      determines.

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

       

    

    6.4           Exercise
      Price.  The Exercise Price of an Option will be determined by the
      Board when the Option is granted and may be not less than 85% of the Fair Market
      Value of the Shares on the date of grant; provided that:  (a) the
      Exercise Price of an ISO will be not less than 100% of the Fair Market Value
      of
      the Shares on the date of grant; and (b) the Exercise Price of any ISO granted
      to a Ten Percent Stockholder will not be less than 110% of the Fair Market
      Value
      of the Shares on the date of grant.  Payment for the Shares purchased
      may be made in accordance with Section 9 of this Plan.

    

    6.5           Method
      of Exercise.  Options may be exercised only by delivery to the
      Company of a written stock option exercise agreement  (the “EXERCISE
      AGREEMENT”) in a form approved by the Board, (which need not be the same for
      each Participant), stating the number of Shares being purchased, the
      restrictions imposed on the Shares purchased under such Exercise Agreement,
      if
      any, and such representations and agreements regarding Participant’s investment
      intent and access to information and other matters, if any, as may be required
      or desirable by the Company to comply with applicable securities laws, together
      with payment in full of the Exercise Price for the number of Shares being
      purchased.

    

    6.6           Termination.  Notwithstanding
      the exercise periods set forth in the Stock Option Agreement, exercise of an
      Option will always be subject to the following:

    

    (a)          If
      the Participant’s service is Terminated for any reason except death or
      Disability, then the Participant may exercise such Participant’s Options only to
      the extent that such Options would have been exercisable upon the Termination
      Date no later than three (3) months after the Termination Date (or such shorter
      or longer time period not exceeding five (5) years as may be determined by
      the
      Board, with any exercise beyond three (3) months after the Termination Date
      deemed to be an NQSO), but in any event, no later than the expiration date
      of
      the Options.

    

    (b)          If
      the Participant’s service is Terminated because of Participant’s death or
      Disability (or the Participant dies within three (3) months after a Termination
      other than for Cause or because of Participant’s Disability), then Participant’s
      Options may be exercised only to the extent that such Options would have been
      exercisable by Participant on the Termination Date and must be exercised by
      Participant (or Participant’s legal representative or authorized assignee) no
      later than twelve (12) months after the Termination Date (or such shorter or
      longer time period not exceeding five (5) years as may be determined by the
      Board, with any such exercise beyond (i) three (3) months after the Termination
      Date when the Termination is for any reason other than the Participant’s death
      or Disability, or (ii) twelve (12) months after the Termination Date when the
      Termination is for Participant’s death or Disability, deemed to be an NQSO), but
      in any event no later than the expiration date of the Options.

    

    (c)           Notwithstanding
      the provisions in paragraph 6.6(a) above, if a Participant’s service is
      Terminated for Cause, neither the Participant, the Participant’s estate nor such
      other person who may then hold the Option shall be entitled to exercise any
      Option with respect to any Shares whatsoever, after Termination, whether or
      not
      after Termination the Participant may receive payment from the Company or
      Subsidiary for vacation pay, for services rendered prior to Termination, for
      services rendered for the day on which Termination occurs, for salary in lieu
      of
      notice, or for any other benefits.  For the purpose of this paragraph,
      Termination shall be deemed to occur on the date when the Company dispatches
      notice or advice to the Participant that his service is Terminated.

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

       

    

    6.7           Limitations
      on Exercise.  The Board may specify a reasonable minimum number of
      Shares that may be purchased on any exercise of an Option, provided that such
      minimum number will not prevent Participant from exercising the Option for
      the
      full number of Shares for which it is then exercisable.

    

    6.8           Limitations
      on ISO.  The aggregate Fair Market Value (determined as of the
      date of grant) of Shares with respect to which ISO are exercisable for the
      first
      time by a Participant during any calendar year (under this Plan or under any
      other incentive stock option plan of the Company, Parent or Subsidiary of the
      Company) will not exceed $100,000.  If the Fair Market Value of Shares
      on the date of grant with respect to which ISO are exercisable for the first
      time by a Participant during any calendar year exceeds $100,000, then the
      Options for the first $100,000 worth of Shares to become exercisable in such
      calendar year will be ISO and the Options for the amount in excess of $100,000
      that become exercisable in that calendar year will be NQSOs.  In the
      event that the Code or the regulations promulgated thereunder are amended after
      the Effective Date of this Plan to provide for a different limit on the Fair
      Market Value of Shares permitted to be subject to ISO, such different limit
      will
      be automatically incorporated herein and will apply to any Options granted
      after
      the effective date of such amendment.

    

    6.9           Modification,
      Extension or Renewal.  The Board may modify, extend or renew
      outstanding Options and authorize the grant of new Options in substitution
      therefor, provided that any such action may not, without the written consent
      of
      a Participant, impair any of such Participant’s rights under any Option
      previously granted.  Any outstanding ISO that is modified, extended,
      renewed or otherwise altered will be treated in accordance with Section 424(h)
      of the Code.  The Board may reduce the Exercise Price of outstanding
      Options without the consent of Participants affected by a written notice to
      them; provided, however, that the Exercise Price may not be reduced below the
      minimum Exercise Price that would be permitted under Section 6.4 of this Plan
      for Options granted on the date the action is taken to reduce the Exercise
      Price.

    

    6.10           No
      Disqualification.  Notwithstanding any other provision in this
      Plan, no term of this Plan relating to ISO will be interpreted, amended or
      altered, nor will any discretion or authority granted under this Plan be
      exercised, so as to disqualify this Plan under Section 422 of the Code or,
      without the consent of the Participant affected, to disqualify any ISO under
      Section 422 of the Code.

    

    7.           RESTRICTED
      STOCK.

    

    A
      Restricted Stock Award is an offer by the Company to sell to an eligible person
      Shares that are subject to restrictions.  The Board will determine to
      whom an offer will be made, the number of Shares the person may purchase, the
      price to be paid (the “PURCHASE PRICE”), the restrictions to which the Shares
      will be subject, and all other terms and conditions of the Restricted Stock
      Award, subject to the following:

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

       

    

    7.1           Form
      of Restricted Stock Award.  All purchases under a Restricted Stock
      Award made pursuant to this Plan will be evidenced by an Award Agreement (the
      “RESTRICTED STOCK PURCHASE AGREEMENT”) that will be in such form (which need not
      be the same for each Participant) as the Board will from time to time approve,
      and will comply with and be subject to the terms and conditions of this
      Plan.  The offer of Restricted Stock will be accepted by the
      Participant’s execution and delivery of the Restricted Stock Purchase Agreement
      and full payment for the Shares to the Company within thirty (30) days from
      the
      date the Restricted Stock Purchase Agreement is delivered to the person. If
      such
      person does not execute and deliver the Restricted Stock Purchase Agreement
      along with full payment for the Shares to the Company within thirty (30) days,
      then the offer will terminate, unless otherwise extended by the
      Board.

    

    7.2           Purchase
      Price.  The Purchase Price of Shares sold pursuant to a Restricted
      Stock Award will be determined by the Board on the date the Restricted Stock
      Award is granted, except in the case of a sale to a Ten Percent Stockholder,
      in
      which case the Purchase Price will be 100% of the Fair Market
      Value.  Payment of the Purchase Price must be made in accordance with
      Section 9 of this Plan.

    

    7.3           Terms
      of Restricted Stock Awards.  Restricted Stock Awards shall be
      subject to such restrictions as the Board may impose.  These
      restrictions may be based upon completion of a specified number of years of
      service with the Company or upon completion of the performance goals as set
      out
      in advance in the Participant’s individual Restricted Stock Purchase Agreement.
      Restricted Stock Awards may vary from Participant to Participant and between
      groups of Participants.  Prior to the grant of a Restricted Stock
      Award, the Board shall:  (a) determine the nature, length and starting
      date of any Performance Period for the Restricted Stock Award; (b) select from
      among the Performance Factors to be used to measure performance goals, if any;
      and (c) determine the number of Shares that may be awarded to the
      Participant.  Prior to the payment of any Restricted Stock Award, the
      Board shall determine the extent to which such Restricted Stock Award has been
      earned.  Performance Periods may overlap and Participants may
      participate simultaneously with respect to Restricted Stock Awards that are
      subject to different Performance Periods and have different performance goals
      and other criteria.

    

    7.4           Termination
      During Performance Period.  If a Participant is Terminated during
      a Performance Period for any reason, then such Participant will be entitled
      to
      payment (whether in Shares, cash or otherwise) with respect to the Restricted
      Stock Award only to the extent earned as of the date of Termination in
      accordance with the Restricted Stock Purchase Agreement, unless the Board
      determines otherwise.

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

       

    

    8.           STOCK
      BONUSES.

    

    8.1           Awards
      of Stock Bonuses. A Stock Bonus is an award of Shares (which may consist of
      Restricted Stock) for extraordinary services rendered to the Company or any
      Parent or Subsidiary of the Company.  A Stock Bonus will be awarded
      pursuant to an Award Agreement (the “STOCK BONUS AGREEMENT”) that will be in
      such form (which need not be the same for each Participant) as the Board will
      from time to time approve, and will comply with and be subject to the terms
      and
      conditions of this Plan.  A Stock Bonus may be awarded upon
      satisfaction of such performance goals as are set out in advance in the
      Participant’s individual Award Agreement (the “PERFORMANCE STOCK BONUS
      AGREEMENT”) that will be in such form (which need not be the same for each
      Participant) as the Board will from time to time approve, and will comply with
      and be subject to the terms and conditions of this Plan.  Stock
      Bonuses may vary from Participant to Participant and between groups of
      Participants, and may be based upon the achievement of the Company, Parent
      or
      Subsidiary and/or individual performance factors or upon such other criteria
      as
      the Board may determine.

    

    8.2           Terms
      of Stock Bonuses.  The Board will determine the number of Shares
      to be awarded to the Participant.  If the Stock Bonus is being earned
      upon the satisfaction of performance goals pursuant to a Performance Stock
      Bonus
      Agreement, then the Board will: (a) determine the nature, length and starting
      date of any Performance Period for each Stock Bonus; (b) select from among
      the
      Performance Factors to be used to measure the performance, if any; and (c)
      determine the number of Shares that may be awarded to the
      Participant.  Prior to the payment of any Stock Bonus, the Board shall
      determine the extent to which such Stock Bonuses have been
      earned.  Performance Periods may overlap and Participants may
      participate simultaneously with respect to Stock Bonuses that are subject to
      different Performance Periods and different performance goals and other
      criteria.  The number of Shares may be fixed or may vary in accordance
      with such performance goals and criteria as may be determined by the
      Board.  The Board may adjust the performance goals applicable to the
      Stock Bonuses to take into account changes in law and accounting or tax rules
      and to make such adjustments as the Board deems necessary or appropriate to
      reflect the impact of extraordinary or unusual items, events or circumstances
      to
      avoid windfalls or hardships.

    

    8.3           Form
      of Payment.  The earned portion of a Stock Bonus may be paid to
      the Participant by the Company either currently or on a deferred basis, with
      such interest or dividend equivalent, if any, as the Board may
      determine.  Payment may be made in the form of cash or whole Shares or
      a combination thereof, either in a lump sum payment or in installments, all
      as
      the Board will determine.

    

    9.           PAYMENT
      FOR SHARE PURCHASES.

    

    9.1           Payment.  Payment
      for Shares purchased pursuant to this Plan may be made in cash (by check) or,
      where expressly approved for the Participant by the Board and where permitted
      by
      law:

     

    
      	 	(a)  	by
              cancellation of indebtedness of the Company to the
              Participant; 

    

     

    
      
         

      

      
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              (b)

            	
              by
                surrender of shares that either: (1) have been owned by Participant
                for
                more than one year and have been paid for within the meaning
                of  Rule 144 of the Securities Act of 1933 (and, if such shares
                were purchased from the Company by use of a promissory note, such
                note has
                been fully paid with respect to such shares); or (2) were obtained
                by
                Participant in the public market;

            

      	 	 	 

      	 	
              (c) 

            	
              by
                waiver of compensation due or accrued to the Participant for services
                rendered; 

            

      	 	 	 

      	 	
              (d) 

            	
              with
                respect only to purchases upon exercise of an Option, and provided
                that a
                public market for the Company’s stock
                exists: 

            

    

     

    
      	
               

            	 	
              (1)

            	
              through
                a “same day sale” commitment from the Participant and a broker-dealer that
                is a member of the National Association of Securities Dealers (an
“NASD
                DEALER”) whereby the Participant irrevocably elects to exercise the Option
                and to sell a portion of the Shares so purchased to pay for the Exercise
                Price, and whereby the NASD Dealer irrevocably commits upon receipt
                of
                such Shares to forward the Exercise Price directly to the Company;
                or

            

    

    

    
      	
               

            	 	
              (2)

            	
              through
                a “margin” commitment from the Participant and a NASD Dealer whereby the
                Participant irrevocably elects to exercise the Option and to pledge
                the
                Shares so purchased to the NASD Dealer in a margin account as security for
                a loan from the NASD Dealer in the amount of the Exercise Price,
                and
                whereby the NASD Dealer irrevocably commits upon receipt of such
                Shares to
                forward the Exercise Price directly to the Company;
                or

            

    

    

    (e)           by
      any combination of the foregoing.

    

    10.           WITHHOLDING
      TAXES.

    

    10.1           Withholding
      Generally.  Whenever Shares are to be issued in satisfaction of
      Awards granted under this Plan, the Company may require the Participant to
      remit
      to the Company an amount sufficient to satisfy federal, state and local
      withholding tax requirements prior to the delivery of any certificate or
      certificates for such Shares.  Whenever, under this Plan, payments in
      satisfaction of Awards are to be made in cash, such payment will be net of
      an
      amount sufficient to satisfy federal, state, and local withholding tax
      requirements.

    

    10.2           Stock
      Withholding.  When, under applicable tax laws, a participant
      incurs tax liability in connection with the exercise or vesting of any Award
      that is subject to tax withholding and the Participant is obligated to pay
      the
      Company the amount required to be withheld, the Board may allow the Participant
      to satisfy the minimum withholding tax obligation by electing to have the
      Company withhold from the Shares to be issued that number of Shares having
      a
      Fair Market Value equal to the minimum amount required to be withheld,
      determined on the date that the amount of tax to be withheld is to be
      determined.  All elections by a Participant to have Shares withheld
      for this purpose will be made in accordance with the requirements established
      by
      the Board and be in writing in a form acceptable to the Board.

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

       

    

    11.           PRIVILEGES
      OF STOCK OWNERSHIP.

    

    11.1           Voting
      and Dividends.  No Participant will have any of the rights of a
      stockholder with respect to any Shares until the Shares are issued to the
      Participant.  After Shares are issued to the Participant, the
      Participant will be a stockholder and will have all the rights of a stockholder
      with respect to such Shares, including the right to vote and receive all
      dividends or other distributions made or paid with respect to such Shares;
      provided, that if such Shares are Restricted Stock, then any new, additional
      or
      different securities the Participant may become entitled to receive with respect
      to such Shares by virtue of a stock dividend, stock split or any other change
      in
      the corporate or capital structure of the Company will be subject to the same
      restrictions as the Restricted Stock; provided, further, that the Participant
      will have no right to retain such stock dividends or stock distributions with
      respect to Shares that are repurchased at the Participant’s Purchase Price or
      Exercise Price pursuant to Section 12.

    

    11.2           Financial
      Statements.  Pursuant to regulation 260.140.46 of the Rules of the
      California Corporations Commissioner, the Company will provide financial
      statements to each Participant prior to such Participant’s purchase of Shares
      under this Plan, and to each Participant annually during the period such
      Participant has Awards outstanding; provided, however, the Company will not
      be
      required to provide such financial statements to Participants whose services
      in
      connection with the Company assure them access to equivalent
      information.

    

    12.           TRANSFERABILITY.

    

    Awards
      granted under this Plan, and any interest therein, will not be transferable
      or
      assignable by Participant, and may not be made subject to execution, attachment
      or similar process, other than by will or by the laws of descent and
      distribution.  During the lifetime of the Participant an Award will be
      exercisable only by the Participant.  During the lifetime of the
      Participant, any elections with respect to an Award may be made only by the
      Participant unless otherwise determined by the Board and set forth in the Award
      Agreement with respect to Awards that are not ISOs.

    

    13.           RESTRICTIONS
      ON SHARES.

    

    At
      the
      discretion of the Board, the Company may reserve to itself and/or its
      assignee(s) in the Award Agreement a right to repurchase a portion of or all
      Unvested Shares held by a Participant following such Participant’s Termination
      at any time within ninety (90) days after the later of (a) Participant’s
      Termination Date, or (b) the date Participant purchases Shares under this
      Plan.  Such repurchase by the Company shall be for cash and/or
      cancellation of purchase money indebtedness, and the price per share shall
      be
      the Participant’s Exercise Price or the Purchase Price, as
      applicable.

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

       

    

    14.           CERTIFICATES.

    

    All
      certificates for Shares or other securities delivered under this Plan will
      be
      subject to such stock transfer orders, legends and other restrictions as the
      Board may deem necessary or advisable, including restrictions under any
      applicable federal, state or foreign securities law, or any rules, regulations
      and other requirements of the SEC or any stock exchange or automated quotation
      system upon which the Shares may be listed or quoted.

    

    15.           ESCROW;
      PLEDGE OF SHARES.

    

    To
      enforce any restrictions on a Participant’s Shares, the Board may require the
      Participant to deposit all certificates representing Shares, together with
      stock
      powers or other instruments of transfer approved by the Board appropriately
      endorsed in blank, with the Company or an agent designated by the Company to
      hold in escrow until such restrictions have lapsed or terminated, and the Board
      may cause a legend or legends referencing such restrictions to be placed on
      the
      certificates.  Any Participant who is permitted to execute a
      promissory note as partial or full consideration for the purchase of Shares
      under this Plan will be required to pledge and deposit with the Company all
      or
      part of the Shares so purchased as collateral to secure the payment of
      Participant’s obligation to the Company under the promissory note; provided,
      however, that the Board may require or accept other or additional forms of
      collateral to secure the payment of such obligation and, in any event, the
      Company will have full recourse against the Participant under the promissory
      note notwithstanding any pledge of the Participant’s Shares or other
      collateral.  In connection with any pledge of the Shares, Participant
      will be required to execute and deliver a written pledge agreement in such
      form
      as the Board will from time to time approve.  The Shares purchased
      with the promissory note may be released from the pledge on a pro rata basis
      as
      the promissory note is paid.

    

    16.           EXCHANGE
      AND BUYOUT OF AWARDS.

    

    The
      Board
      may, at any time or from time to time, authorize the Company, with the consent
      of the respective Participants, to issue new Awards in exchange for the
      surrender and cancellation of any or all outstanding Awards.  The
      Board may at any time buy from a Participant an Award previously granted with
      payment in cash, Shares (including Restricted Stock) or other consideration,
      based on such terms and conditions as the Board and the Participant may
      agree.

    

    17.           SECURITIES
      LAW AND OTHER REGULATORY COMPLIANCE.

    

    An
      Award
      will not be effective unless such Award is in compliance with all applicable
      federal and state securities laws, rules and regulations of any governmental
      body, and the requirements of any stock exchange or automated quotation system
      upon which the Shares may then be listed or quoted, as they are in effect on
      the
      date of grant of the Award and also on the date of exercise or other issuance.
      Notwithstanding any other provision in this Plan, the Company will have no
      obligation to issue or deliver certificates for Shares under this Plan prior
      to:
      (a) obtaining any approvals from governmental agencies that the Company
      determines are necessary or advisable; and/or (b) completion of any registration
      or other qualification of such Shares under any state or federal law or ruling
      of any governmental body that the Company determines to be necessary or
      advisable. The Company will be under no obligation to register the Shares with
      the SEC or to effect compliance with the registration, qualification or listing
      requirements of any state securities laws, stock exchange or automated quotation
      system, and the Company will have no liability for any inability or failure
      to
      do so.

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

       

    

    18.           NO
      OBLIGATION TO EMPLOY.

    

     Nothing
      in this Plan or any Award granted under this Plan will confer or be deemed
      to
      confer on any Participant any right to continue in the employ of, or to continue
      any other relationship with, the Company or any Parent or Subsidiary of the
      Company or limit in any way the right of the Company or any Parent or Subsidiary
      of the Company to terminate Participant’s employment or other relationship at
      any time, with or without cause.

    

    19.           CORPORATE
      TRANSACTIONS.

    

    19.1           Assumption
      or Replacement of Awards by Successor.  In the event of (a) a
      dissolution or liquidation of the Company, (b) a merger or consolidation in
      which the Company is not the surviving corporation (other than a merger or
      consolidation with a wholly-owned subsidiary, a reincorporation of the Company
      in a different jurisdiction, or other transaction in which there is no
      substantial change in the stockholders of the Company or their relative stock
      holdings and the Awards granted under this Plan are assumed, converted or
      replaced by the successor corporation, which assumption will be binding on
      all
      Participants), (c) a merger in which the Company is the surviving corporation
      but after which the stockholders of the Company immediately prior to such merger
      (other than any stockholder that merges, or which owns or controls another
      corporation that merges, with the Company in such merger) cease to own their
      shares or other equity interest in the Company, (d) the sale of substantially
      all of the assets of the Company, or (e) the acquisition, sale, or transfer
      of
      more than 50% of the outstanding shares of the Company by tender offer or
      similar transaction, any or all outstanding Awards may be assumed, converted
      or
      replaced by the successor corporation (if any), which assumption, conversion
      or
      replacement will be binding on all Participants.  In the alternative,
      the successor corporation may substitute equivalent Awards or provide
      substantially similar consideration to Participants as was provided to
      stockholders (after taking into account the existing provisions of the Awards).
      The successor corporation may also issue, in place of outstanding Shares of
      the
      Company held by the Participant, substantially similar shares or other property
      subject to repurchase restrictions no less favorable to the
      Participant.  In the event such successor corporation (if any) refuses
      to assume or substitute Awards, as provided above, pursuant to a transaction
      described in this Subsection 19.1, such Awards will expire on such transaction
      at such time and on such conditions as the Board will
      determine.  Notwithstanding anything in this Plan to the contrary, the
      Board may provide that the vesting of any or all Awards granted pursuant to
      this
      Plan will accelerate upon a transaction described in this Section
      19.  If the Board exercises such discretion with respect to Options,
      such Options will become exercisable in full prior to the consummation of such
      event at such time and on such conditions as the Board determines, and if such
      Options are not exercised prior to the consummation of the corporate
      transaction, they shall terminate at such time as determined by the
      Board.

    

    19.2           Other
      Treatment of Awards.  Subject to any greater rights granted to
      Participants under the foregoing provisions of this Section 19, in the event
      of
      the occurrence of any transaction described in Section 19.1, any outstanding
      Awards will be treated as provided in the applicable agreement or plan of
      merger, consolidation, dissolution, liquidation, or sale of assets.

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

       

    

    19.3           Assumption
      of Awards by the Company.  The Company, from time to time, also
      may substitute or assume outstanding awards granted by another company, whether
      in connection with an acquisition of such other company or otherwise, by either:
      (a) granting an Award under this Plan in substitution of such other company’s
      award; or (b) assuming such award as if it had been granted under this Plan
      if
      the terms of such assumed award could be applied to an Award granted under
      this
      Plan.  Such substitution or assumption will be permissible if the
      holder of the substituted or assumed award would have been eligible to be
      granted an Award under this Plan if the other company had applied the rules
      of
      this Plan to such grant.  In the event the Company assumes an award
      granted by another company, the terms and conditions of such award will remain
      unchanged (except that the exercise price and the number and nature of Shares
      issuable  upon exercise of any such option will be adjusted
      appropriately pursuant to Section 424(a) of the Code).  In the event
      the Company elects to grant a new Option rather than assuming an existing
      option, such new Option may be granted with a similarly adjusted Exercise
      Price.

    

    20.           ADOPTION
      AND STOCKHOLDER APPROVAL.

    

    This
      Plan
      will become effective on the date on which it is adopted by the Board (the
      “Effective Date”).  Upon the Effective Date, the Board may grant
      Awards pursuant to this Plan.  The Company intends to seek stockholder
      approval of the Plan within twelve (12) months after the date this Plan is
      adopted by the Board; provided, however, if the Company fails to obtain
      stockholder approval of the Plan during such 12-month period, pursuant to
      Section 422 of the Code, any Option granted as an ISO at any time under the
      Plan
      will not qualify as an ISO within the meaning of the Code and will be deemed
      to
      be an NQSO.

    

    21.           TERM
      OF PLAN/GOVERNING LAW.

    

    Unless
      earlier terminated as provided  herein, this Plan will terminate ten
      (10) years from the date this Plan is adopted by the Board or, if earlier,
      the
      date of stockholder approval.  This Plan and all agreements there
      under shall be governed by and construed in accordance with the laws of the
      State of California.

    

    22.           AMENDMENT
      OR TERMINATION OF PLAN.

    

    The
      Board
      may at any time terminate or amend this Plan in any respect, including without
      limitation amendment of any form of Award Agreement or instrument to be executed
      pursuant to this Plan; provided, however, that the Board will not, without
      the
      approval of the stockholders of the Company, amend this Plan in any manner
      that
      requires such stockholder approval.

    

    23.           NONEXCLUSIVITY
      OF THE PLAN.

    

    Neither
      the adoption of this Plan by the Board, the submission of this Plan to the
      stockholders of the Company for approval, nor any provision of this Plan will
      be
      construed as creating any limitations on the power of the Board to adopt such
      additional compensation arrangements as it may deem desirable, including,
      without limitation, the granting of stock options and bonuses otherwise than
      under this Plan, and such arrangements may be either generally applicable or
      applicable only in specific cases.

    

    24.           ACTION
      BY BOARD.

    

    Any
      action permitted or required to be
      taken by the Board or any decision or determination permitted or required to
      be
      made by the Board pursuant to this Plan shall be taken or made in the Board’s
      sole and absolute discretion.

     

    15

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