Exhibit 10.1


XETA TECHNOLOGIES, INC.


2004 OMNIBUS STOCK INCENTIVE PLAN


(as amended April 15, 2004)


1.            Establishment and Purpose.


There is hereby adopted
the XETA Technologies, Inc. 2004 Omnibus Stock Incentive Plan (the “Plan”).
The Plan shall be in addition to the XETA Technologies 2000 Stock Option Plan.
The Plan is intended to promote the interests of the Company and the
stockholders of the Company by providing officers, other employees of the
Company, directors who are not employees of the Company, and other persons who
are expected to make a long-term contribution to the success of the Company
with appropriate incentives and rewards to encourage them to enter into and
continue in the employ of the Company and/or to acquire a proprietary interest
in the long-term success of the Company, thereby aligning their interest more
closely to the interest of stockholders.


2.            Definitions.


As used in the Plan, the
following definitions apply to the terms indicated below:


(a)                      “Award
Agreement” shall mean the written agreement between the Company and a
Participant evidencing an Incentive Award.


(b)                     “Board of
Directors” shall mean the Board of Directors of the Company.


(c)                      “Cause,”
when used in connection with the termination of a Participant’s employment by
the Company, shall mean (i)  the Participant’s willful and continued
failure to substantially perform his duties (other than any such failure
resulting from the Participant’s incapacity due to physical or mental
impairment); (ii) the willful conduct of the Participant which is demonstrably
and materially injurious to the Company or a Subsidiary, monetarily or
otherwise, or (iii) the conviction of the Participant for a felony by a court
of competent jurisdiction. The Committee shall determine whether a termination
of employment is for Cause.


(d)                     “Change in
Control” shall mean any of the following occurrences:


(i)                                     any
“person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act
(other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company’s then outstanding securities;










 



(ii)                                  during
any period of not more than two consecutive years (not including any period
prior to the adoption of the Plan), individuals who at the beginning of such
period constitute the Board of Directors and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii) or
(iv) of this Section) whose election by the Board of Directors or
nomination for election was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;


(iii)                               the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than (A) a merger or consolidation that
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 50%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no “person” (as herein above
defined) acquires more than 50% of the combined voting power of the Company’s
then outstanding securities; or


(iv)                              the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets.


(e)                      “Code” shall
mean the Internal Revenue Code of 1986, as amended from time to time.


(f)                        “Committee”
shall mean the Compensation Committee of the Board of Directors. The Committee
shall consist of two or more persons each of whom is an “outside director”
within the meaning of Section 162(m) of the Code and a “Non-Employee
Director” within the meaning of Rule 16b-3 under the Exchange Act (or who
satisfies any other criteria for administering employee benefit plans as may be
specified by the Securities and Exchange Commission in order for transactions
under such plan to be exempt from the provisions of Section 16(b) of the
Exchange Act).


(g)                     “Company”
shall mean XETA Technologies, Inc., an Oklahoma corporation.



 2
 






 



(h)                     “Common Stock”
shall mean the common stock of the Company, $0.001 par value per share.


(i)                         “Disability”
shall mean: (1) any physical or mental condition that would qualify a
Participant for a disability benefit under the long-term disability plan
maintained by the Company or a Subsidiary of the Company and applicable to such
Participant or, if such long-term disability plan is not applicable to the
Participant, then a “permanent and total disability” which enables the
Participant to be eligible for and receive a disability benefit under the
Federal Social Security Act ; or (2) when used in connection with the
exercise of an Incentive Stock Option following termination of employment,
disability within the meaning of Section 22(e)(3) of the Code.


(j)                         “Effective
Date” shall mean the date upon which this Plan is adopted by the Board of
Directors.


(k)                      “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.


(l)                         “Executive
Officer” shall have the meaning set forth in Rule 3b-7 promulgated under
the Exchange Act.


(m)                   “Exercise Date”
shall mean the date on which a Participant may exercise an Incentive Award.


(n)                     “Fair Market
Value” of a share of Common Stock, as of a date of determination, shall mean
(i) the closing sales price per share of Common Stock on the national
securities exchange on which such stock is principally traded for the last
preceding date on which there was a sale of such stock on such exchange, or
(ii) if the shares of Common Stock are not listed or admitted to trading
on any such exchange, the closing price as reported by the Nasdaq Stock Market
for the last preceding date on which there was a sale of such stock on such
exchange, or (iii) if the shares of Common Stock are not then listed on
the Nasdaq Stock Market, the average of the highest reported bid and lowest
reported asked prices for the shares of Common Stock as reported by the
National Association of Securities Dealers, Inc. Automated Quotations
System for the last preceding date on which there was a sale of such stock in
such market, or (iv) if the shares of Common Stock are not then listed on
a national securities exchange or traded in an over-the-counter market, such
value as determined by the Committee in good faith.


(o)                     “Incentive
Award” shall mean an Option, Tandem SAR, Stand-Alone SAR, Restricted Stock
grant, Phantom Stock grant or Stock Bonus granted pursuant to the terms of the
Plan.



 3
 






 



(p)                     “Incentive
Stock Option” shall mean an Option that is an “incentive stock option” within
the meaning of Section 422 of the Code.


(q)                     “Issue Date”
shall mean the date established by the Company on which shares of Restricted
Stock shall be registered in the name of the Participant pursuant to the terms
of Section 10(e) of the Plan.


(r)                        “Non-Qualified
Stock Option” shall mean an Option that is not an Incentive Stock Option.


(s)                      “Option”
shall mean an option to purchase shares of Common Stock granted pursuant to
Section 7 of the Plan.


(t)                        “Participant”
means any person who is both eligible to receive an Incentive Award pursuant to
the Plan (as set forth in Section 5) and to whom an Incentive Award is
granted pursuant to the Plan, and, upon his or her death, his or her
successors, heirs, executors and administrators, as the case may be.


(u)                     “Phantom
Stock” shall mean the right, granted pursuant to Section 11 of the Plan,
to receive in cash the Fair Market Value of a share of Common Stock.


(v)                     “Plan” shall
mean this 2004 Omnibus Stock Incentive Plan, as amended from time to time.


(w)                   “Reference
Value” shall mean, with respect to Stand-Alone SARs, the greater of the Fair
Market Value or the value given by the Compensation Committee.


(x)                       “Restricted
Stock” shall mean a share of Common Stock that is granted pursuant to the terms
of Section 10 hereof and that is subject to the restrictions set forth in
Section 10 of the Plan.


(y)                     “Rule 16b-3”
shall mean Rule 16b-3 promulgated under the Exchange Act.


(z)                       “Section 162(m)”
shall mean Section 162(m) of the Code and the regulations promulgated
thereunder.


(aa)                “Securities Act”
shall mean the Securities Act of 1933, as amended from time to time.


(ab)               “Stand-Alone SAR”
shall mean a stock appreciation right granted pursuant to Section 9 of the
Plan that is not related to any Option.


(ac)                “Stock Bonus”
shall mean a bonus payable in shares of Common Stock granted pursuant to
Section 12 of the Plan.



 4
 






 



(ad)               “Subsidiary” shall
mean a “subsidiary corporation” within the meaning of Section 424(f) of
the Code.


(ae)                “Tandem SAR” shall
mean a stock appreciation right granted pursuant to Section 8 of the Plan
that is related to an Option.


(af)                  “Termination of
employment,” or words of similar import, in the Plan shall be deemed,
(i) when applied to non-employee Directors, to mean “termination of
service as a director,” and (ii) when applied to employee-Directors, to
mean “termination of service as an employee and a director.”    Reference
to “termination of employment,” or words of similar import, in the Plan shall
not be deemed to apply to persons who were not employees or a director of the
Company or a Subsidiary of the Company.


(ag)               “Vesting Date”
shall mean the date established by the Committee on which an Incentive Award may
vest.


3.            Stock Subject to the Plan.


(a)                      Shares
Available for Awards.


The maximum number of
shares of Common Stock reserved for issuance under the Plan shall be 600,000
shares (subject to adjustment as provided herein). The total number of shares
reserved for issuance hereunder may be authorized but unissued Common Stock or
authorized and issued Common Stock held in the Company’s treasury or acquired
by the Company for the purposes of the Plan. The Committee may direct that any
stock certificate evidencing shares issued pursuant to the Plan shall bear a
legend setting forth such restrictions on transferability as may apply to such
shares pursuant to the Plan. The grant of a Tandem SAR shall not reduce the
number of shares of Common Stock with respect to which Incentive Awards may be
granted pursuant to the Plan. Upon the exercise of any Tandem SAR, the related
Option shall be canceled to the extent of the number of shares of Common Stock
as to which the Tandem SAR is exercised and, notwithstanding the foregoing,
such number of shares shall no longer be available for Incentive Awards under
the Plan. Subject to adjustment under Section 3(c) below, the maximum
number of shares of Common Stock that may be issued under the Plan shall be
increased as of November 1 each year, beginning November 1, 2004, by
three percent (3%) of the total number of shares of Common Stock that are
issued and outstanding on the immediately preceding October 31st. Any provision herein to the
contrary notwithstanding, the maximum number of shares of Common Stock that may
be issued pursuant to Incentive Stock Options granted hereunder shall not
exceed 600,000, subject to adjustment under Section 3(c) below.



 5
 






 



(b)                     Individual
Limitation.


The total number of
shares of Common Stock subject to Incentive Awards (including Incentive Awards
payable in cash but denominated as shares of Common Stock, i.e., Stand-Alone
SARs and Phantom Stock), awarded to any employee during any tax year of the
Company, shall not exceed 250,000 shares. Determinations under the preceding
sentence shall be made in a manner that is consistent with Section 162(m)
of the Code.


(c)                      Adjustment
for Change in Capitalization.


In the event that the
Committee shall determine that any dividend or other distribution (whether in
the form of cash, Common Stock, or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event, affects the Common Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of
Participants under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of
(i) the number and kind of shares of stock that may thereafter be issued
in connection with Incentive Awards, (ii) the number and kind of shares of
stock issued or issuable in respect of outstanding Incentive Awards, and
(iii) the exercise price, grant price, or purchase price relating to any
Incentive Award; provided that, with respect to Incentive Stock Options, such
adjustment shall be made in accordance with Section 424 of the Code.


(d)                     Re-Use of
Shares.


The following shares of
Common Stock shall again become available for Incentive Awards: any shares
subject to an Incentive Award that remain unissued upon the cancellation,
surrender, exchange or termination of such award for any reason whatsoever; any
shares of Restricted Stock forfeited; and any shares in respect of which a
stock appreciation right is settled for cash.


4.            Administration of the Plan.


The Plan shall be administered by the Committee. The
Committee shall have the authority in its sole discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan
and to exercise all the powers and authorities either specifically granted to
it under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Incentive Awards; to
determine the persons to whom and the time or times at which Incentive Awards
shall be granted; to determine the type and number of Incentive Awards to be
granted, the number of shares of Stock to which an Award may relate and the
terms, conditions, restrictions and performance criteria relating to any
Incentive Award; to determine whether, to what extent, and under what
circumstances an Incentive Award may be settled, canceled, forfeited, exchanged
(subject to shareholder approval), or surrendered; to grant Incentive Awards in
replacement of Incentive Awards previously granted under the Plan or under



 6
 






 



any other plan of the Company, including without
limitation a grant of Stock Options or Restricted Stock in exchange for a Participant’s
agreement to cancel a higher-priced stock option or options  previously granted to such Participant,
provided that any such exchange is approved by the Company’s shareholders; to
subject shares of Stock to which an Award may relate to rights of repurchase or
rights of refusal in favor of the Company under the circumstances and upon the
terms set forth in an Award Agreement; to make adjustments in the performance
goals in recognition of unusual or non-recurring events affecting the Company
or the financial statements of the Company (to the extent in accordance with
Section 162(m)of the Code, if applicable), or in response to changes in
applicable laws, regulations, or accounting principles; to construe and
interpret the Plan and any Incentive Award; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of Award Agreements; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.


The
Committee may, in its absolute discretion and without amendment to the Plan,
but only in the event of death, Disability, Change in Control or retirement,
(i) accelerate the date on which any Option or Stand-Alone SAR granted under
the Plan becomes exercisable, or waive or amend the operation of Plan
provisions respecting exercise after termination of employment (provided,
however, that with respect to Incentive Stock Options, no such change shall be
made that would cause the Incentive Stock Options to become Non-Qualified Stock
Options unless both the Participant and the Company expressly agree to such
change), and (ii) accelerate the Vesting Date or Issue Date, or waive any
condition imposed hereunder, with respect to any share of Restricted Stock or
Phantom Stock granted under the Plan.  In
addition, the Committee may, in its absolute discretion and without amendment
to the Plan, otherwise adjust any of the terms applicable to any such Option,
Stand Alone SAR, Restricted Stock or Phantom Stock granted under the Plan.


No member of the Committee shall be liable for any
action, omission or determination relating to the Plan, and the Company shall
indemnify and hold harmless each member of the Committee and each other
director or employee of the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been delegated against any
cost or expense (including counsel fees) or liability (including any sum paid
in settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination relating to the Plan, if, in either case,
such action, omission or determination was taken or made by such member,
director or employee in good faith and in a manner such member, director or
employee reasonably believed to be in or not opposed to the best interests of
the Company.


5.            Eligibility.


The persons who shall be eligible to receive Incentive
Awards pursuant to the Plan shall be all employees and directors of the Company
and its Subsidiaries and such other persons whom the Committee determines are
expected to make a contribution to the Company. 
The Committee may grant Incentive Awards to any, all or none of such
eligible persons at any time, from time to time, during the term of the Plan.



 7
 






 



6.            Awards Under the Plan; Award
Agreement.


The Committee may grant Options, Tandem SARs,
Stand-Alone SARs, shares of Restricted Stock, shares of Phantom Stock and Stock
Bonuses, in such amounts and with such terms and conditions as the Committee
shall determine, subject to the provisions of the Plan.


Each Incentive Award granted under the Plan (except an
unconditional Stock Bonus) shall be evidenced by an Award Agreement that shall
contain such provisions as the Committee may in its sole discretion deem
necessary or desirable. By accepting an Incentive Award, a Participant thereby
agrees that the award shall be subject to all of the terms and provisions of
the Plan and the applicable Award Agreement.


7.            Options.


(a)       Identification of Options.


Each Option shall be clearly identified in the
applicable Award Agreement as either an Incentive Stock Option or a
Non-Qualified Stock Option.


(b)                     Exercise
Price.


Each Award Agreement with respect to an Option shall
set forth the amount (the “option exercise price”) payable by the grantee to the
Company upon exercise of the Option. The Option exercise price per share shall
be set by the Committee in its discretion on a case by case basis, but shall
not be less than the Fair Market Value of a share of Common Stock on the date
of grant.


(c)                      Term and
Exercise of Options.


(i)                                     Unless
the applicable Award Agreement provides otherwise, an Option shall become
cumulatively exercisable as to 25 percent of the shares covered thereby on
each of the first, second, third and fourth anniversaries of the date of grant.
The Committee shall determine the expiration date of each Option; provided,
however, that no Incentive Stock Option shall be exercisable more than
10 years after the date of grant. Unless the applicable Award Agreement
provides otherwise, no Option shall be exercisable prior to the first
anniversary of the date of grant.


(ii)                                  An
Option shall be exercised by delivering notice to the Company’s principal
office, to the attention of its Secretary, no less than one business day in
advance of the effective date of the proposed exercise. An Option may also be
exercised electronically by notifying the Company’s agent, pursuant to the
methods then in use by that agent. Such notice shall specify the number of
shares of Common Stock with respect to which the Option is being exercised and
the effective date of the proposed exercise and shall be signed by the
Participant or other person then having the right to exercise the Option. Such
notice may be withdrawn at any time prior to the close



 8
 






 



of business on the business day immediately preceding
the effective date of the proposed exercise. Payment for shares of Common Stock
purchased upon the exercise of an Option shall be made on the effective date of
such exercise by one or a combination of the following means: (i) in cash,
by certified check, bank cashier’s check or wire transfer; (ii) by
delivering a properly executed exercise notice to the Company together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the full amount of the exercise
price, (iii) by delivering shares of Common Stock owned by the Participant
for at least six months with appropriate stock powers, (iv) by any other means
which the Committee, in its sole discretion, determines to provide legal
consideration for the Common Stock and to be consistent with the purposes of
the Plan, or (v) any combination of the foregoing forms. In determining
the number of shares of Common Stock necessary to be delivered to or retained by
the Company, such shares shall be valued at their Fair Market Value as of the
Exercise Date.


(iii)                               Certificates
for shares of Common Stock purchased upon the exercise of an Option shall be
issued in the name of the Participant or other person entitled to receive such
shares, and delivered to the Participant or such other person as soon as
practicable following the Effective Date on which the Option is exercised. In
the event of an exercise by way of electronic means, no actual Certificates
need be issued.


(d)                     Limitations
on Incentive Stock Options.


(i)                                     To
the extent that the aggregate Fair Market Value of shares of Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
a Participant during any calendar year under the Plan and any other stock
option plan of the Company (or any Subsidiary of the Company) shall exceed
$100,000, or such higher value as may be permitted under Section 422 of
the Code, such Options shall be treated as Non-Qualified Stock Options. Such
Fair Market Value shall be determined as of the date on which each such
Incentive Stock Option is granted.


(ii)                                  No
Incentive Stock Option may be granted to an individual if, at the time of the
grant, such individual owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company unless
(i) the exercise price per share of such Incentive Stock Option is at
least 110 percent of the Fair Market Value of a share of Common Stock of
the Company, or of its parent or subsidiary corporation, at the time such
Incentive Stock Option is granted and (ii) such Incentive Stock Option is
not exercisable after the expiration of five years from the date such Incentive
Stock Option is granted.



 9
 






 



(e)       Effect of Termination of Employment.


(i)                                     Unless
the applicable Award Agreement provides otherwise, in the event that the
employment of a Participant with the Company or a Subsidiary of the Company
shall terminate for any reason other than death, Disability or Cause,
(i) Options granted to such Participant, to the extent that they are
exercisable at the time of such termination, shall remain exercisable until the
date that is three months  (or
120 days in the case of a “Non-Qualified Stock Option”) after such
termination, on which date they shall expire, and (ii) Options granted to
such Participant, to the extent that they were not exercisable at the time of
such termination, shall expire at the close of business on the date of such
termination. Notwithstanding the foregoing, no Option shall be exercisable
after the expiration of its term.


(ii)                                  Unless
the applicable Award Agreement provides otherwise, in the event that the
employment of a Participant with the Company or a Subsidiary of the Company
shall terminate on account of the Disability or death of the Participant
(i) Options granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until the
first anniversary of such termination, on which date they shall expire, and
(ii) Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination. Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its term.


(iii)                               Unless
an applicable Award Agreement issued after the date hereof provides otherwise,
if a Participant’s employment with the Company or a Subsidiary of the Company
is terminated for Cause, all unexercised Options held by the Participant shall
immediately be forfeited.


(f)                        Effect of
Change in Control.


Upon the occurrence of a Change in Control,
(i) Options granted to a Participant, to the extent that they were
exercisable at the time of a Change in Control, shall remain exercisable until
their expiration notwithstanding the provisions of Section 7(e)(1) and
(2) of the Plan, and (ii) Options granted to such Participant, to the
extent they were not exercisable at the time of a Change in Control, shall
expire at the close of business on the date of such Change in Control.
Notwithstanding the foregoing, no Option shall be exercisable after the
expiration of its term. Any vested, exercisable Options outstanding at the time
of a Change in Control shall be cashed out, converted to options of the
acquiring entity, assumed by the acquiring entity or otherwise disposed of in
the manner provided in any shareholder-



 10
 






 



approved agreement or plan governing or providing for
such Change in Control (“Change in Control Agreement”); provided that any such
cash-out, conversion, assumption or disposition of the Options shall not
deprive the Option holder of the inherent value of his Options, measured solely
by the excess of the Fair Market Value of the underlying Option shares
immediately prior to the Change in Control over the Option exercise price,
without the holder’s consent. In the absence of such governing provisions in a
Change in Control Agreement, the Committee in its sole discretion may on a case
by case basis require any vested, exercisable Options that remain outstanding
upon a Change in Control to be cashed out and terminated in exchange for a lump
sum cash payment, shares of the acquiring entity or a combination thereof equal
in value to the fair market value of the Option, measured in the manner
described above, immediately prior to the Change in Control. Any non-vested
Options shall terminate upon a Change in Control unless: (i) otherwise
provided in the Change in Control Agreement or in a written agreement, such as
a severance agreement, between the Company and the Participant; or
(ii) the Committee in its sole discretion on a case by case basis elects
in writing to waive termination and/or accelerate vesting.


8.            Tandem SARs.


The Committee may grant in connection with any Option
granted hereunder one or more Tandem SARs relating to a number of shares of
Common Stock less than or equal to the number of shares of Common Stock subject
to the related Option. A Tandem SAR may be granted at the same time as, or, in
the case of a Non-Qualified Stock Option, subsequent to the time that, its
related Option is granted.


(a)                      Benefit Upon
Exercise.


The exercise of a Tandem SAR with respect to any
number of shares of Common Stock shall entitle the Participant to a cash
payment, for each such share, equal to the excess of (i) the Fair Market
Value of a share of Common Stock on the Exercise Date over (ii) the option
exercise price per share of the related Option. Such payment shall be made as
soon as practicable after the effective date of such exercise.


(b)                     Term and
Exercise of Tandem SAR.


(i)                                     A
Tandem SAR shall be exercisable only if and to the extent that its related
Option is exercisable.


(ii)                                  The
exercise of a Tandem SAR with respect to a number of shares of Common Stock
shall cause the immediate and automatic cancellation of its related Option with
respect to an equal number of shares. The exercise of an Option, or the
cancellation, termination or expiration of an Option (other than pursuant to
this Section 8(b)(2)), with respect to a number of shares of Common Stock
shall cause the automatic and immediate cancellation of any related Tandem SARs
to the extent that the number of shares of Common Stock remaining subject to
such Option is less than the number of shares then subject to such Tandem SAR. Such
Tandem SARs shall be canceled in the order in which they become exercisable.



 11














 


(iii)                               No
Tandem SAR shall be assignable or transferable otherwise than together with its
related Option, and any such transfer or assignment will be subject to the
provisions of Section 20 of the Plan.


(iv)                              A
Tandem SAR shall be exercisable by delivering notice to the Company’s principal
office, to the attention of its Secretary, no less than one business day in
advance of the effective date of the proposed exercise. A Tandem SAR may also
be exercised electronically by notifying the Company’s agent, pursuant to the
methods then in use by that agent. Such notice shall specify the number of
shares of Common Stock with respect to which the Tandem SAR is being exercised
and the effective date of the proposed exercise and shall be signed by the
Participant or other person then having the right to exercise the Option to
which the Tandem SAR is related. Such notice may be withdrawn at any time prior
to the close of business on the business day immediately preceding the
effective date of the proposed exercise.


9.                                    Stand-Alone
SARs.


(a)                      Benefit Upon
Exercise.


The exercise of a
Stand-Alone SAR with respect to any number of shares of Common Stock shall
entitle the Participant to a cash payment, for each such share, equal to the
excess of (i) the Fair Market Value of a share of Common Stock on the
Exercise Date over (ii) the Reference Value of the Stand-Alone SAR. Such
payments shall be made as soon as practicable after the effective date of such
exercise.


(b)                     Term and
Exercise of Stand-Alone SARs.


(i)                                     Unless
the applicable Award Agreement provides otherwise, a Stand-Alone SAR shall
become cumulatively exercisable as to 25 percent of the shares covered
thereby on each of the first, second, third and fourth anniversaries of the
date of grant. The Committee shall determine the expiration date of each
Stand-Alone SAR. Unless the applicable Award Agreement provides otherwise, no
Stand-Alone SAR shall be exercisable prior to the first anniversary of the date
of grant.


(ii)                                  A
Stand-Alone SAR shall be exercised by delivering notice to the Company’s
principal office, to the attention of its Secretary, no less than one business
day in advance of the effective date of the proposed exercise. A Stand-Alone
SAR may also be exercised electronically by notifying the Company’s agent,
pursuant to the



 12
 






 



methods then in use by
that agent. Such notice shall specify the number of shares of Common Stock with
respect to which the Stand-Alone SAR is being exercised, and the effective date
of the proposed exercise, and shall be signed by the Participant. The
Participant may withdraw such notice at any time prior to the close of business
on the business day immediately preceding the effective date of the proposed
exercise.


(c)                      Effect of
Termination of Employment.


The provisions set forth
in Section 7(e) with respect to the exercise of Options following
termination of employment shall apply as well to the exercise of Stand-Alone
SARs.


(d)                     Effect of
Change in Control.


Upon the occurrence of a
Change in Control, (i) Stand-Alone SARs granted under the Plan, to the
extent exercisable at the time of a Change in Control, shall remain exercisable
until their expiration notwithstanding the provisions of Section 7(e) of
the Plan that are incorporated into this Section 9, and
(ii) Stand-Alone SARs not exercisable at the time of a Change in Control
shall expire at the close of business on the date of such Change in Control.
Any vested, exercisable Stand-Alone SARs shall, upon a Change in Control, be
cashed out, converted, assumed or otherwise disposed of in the same manner as
applies to Options under Section 7(f).


10.          Restricted Stock.


(a)                      Issue Date
and Vesting Date.


At the time of the grant
of shares of Restricted Stock, the Committee shall establish an Issue Date or
Issue Dates and a Vesting Date or Vesting Dates that provide for a vesting
period that is not less than three (3) years pro rata, with respect to such
shares. The Committee may divide such shares into classes and assign a
different Issue Date and/or Vesting Date for each class. If the grantee is
employed by the Company or a Subsidiary of the Company on an Issue Date (which
may be the date of grant), the specified number of shares of Restricted Stock
shall be registered in the grantee’s name and evidenced in accordance with the
provisions of Section 10(e) of the Plan. Provided that all conditions to
the vesting of a share of Restricted Stock imposed pursuant to
Section 10(b) of the Plan are satisfied, and except as provided in
Section 10(g) of the Plan, upon the occurrence of the Vesting Date with
respect to a share of Restricted Stock, such share shall vest and the
restrictions of Section 10(c) of the Plan shall lapse.


(b)                     Conditions to
Vesting.


At the time of the grant
of shares of Restricted Stock, the Committee may impose such restrictions or
conditions to the vesting of such shares as it, in its absolute discretion,
deems appropriate.



 13
 






 



(c)                      Restrictions
on Transfer Prior to Vesting.


Prior to the vesting of a
share of Restricted Stock, no transfer of a Participant’s rights with respect
to such share, whether voluntary or involuntary, by operation of law or
otherwise, shall be permitted. Immediately upon any attempt to transfer such
rights, such share, and all of the rights related thereto, shall be forfeited
by the Participant.


(d)                     Dividends on
Restricted Stock.


The Committee in its
discretion may require that any dividends paid on shares of Restricted Stock
shall be held in escrow until all restrictions on such shares have lapsed.


(e)                      Restricted
Stock Certificates.


Each Restricted Stock
Award may be evidenced in such a manner as the Committee deems appropriate,
including, without limitation, book entry registration or issuance of a stock
certificate or certificates and by a Restricted Stock Award Agreement setting
forth the terms of such Restricted Stock award. To the extent a stock
certificate is issued, the Secretary of the Company shall hold such
certificates for the Participant’s benefit until the Vesting Date or until the
Restricted Stock is forfeited to the Company. The Company shall not cause a
stock certificate to be issued in the name of a Participant prior to the
Vesting Date unless it has received a stock power duly endorsed by the
Participant in blank with respect to such shares. Each such stock certificate
shall bear the following legend:


The transferability of
this certificate and the shares of stock represented hereby are subject to the
restrictions, terms and conditions (including forfeiture provisions and
restrictions against transfer) contained in the 2004 Omnibus Stock Incentive
Plan of XETA Technologies, Inc. and an Award Agreement entered into
between the registered owner of such shares and XETA Technologies, Inc. A
copy of such Plan and Award Agreement is on file in the office of the Secretary
of XETA Technologies, Inc., 1814 West Tacoma, Broken Arrow, Oklahoma
74012.


Such legend shall not be
removed until such shares vest pursuant to the terms of the applicable Award
Agreement.


(f)                        Consequences
of Vesting.


Upon the vesting of a
share of Restricted Stock pursuant to the terms of the applicable Award
Agreement, the restrictions of Section 10(c) of the Plan shall lapse,
except as otherwise provided in the Award Agreement. Reasonably promptly after
a share of Restricted Stock vests, the Company shall cause to be delivered to
the Participant to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Section 10(e) of the Plan.



 14
 






 



(g)                     Effect of
Termination of Employment.


(i)                                     Subject
to such other provision as the Committee may set forth in the applicable Award
Agreement, and to the Committee’s amendment authority pursuant to
Section 4 of the Plan, upon the termination of a Participant’s employment
by the Company or any Subsidiary of the Company for any reason other than
Cause, any and all shares that have not vested as of the date of such
termination shall be immediately forfeited by the Participant and transferred
to the Company, provided that if the Committee, in its sole discretion and
within thirty (30) days after such termination of employment notifies the Participant
in writing of its decision not to terminate the Participant’s rights in such
shares, then the Participant shall continue to be the owner of such shares
subject to such continuing restrictions as the Committee may prescribe in such
notice. If shares of Restricted Stock are forfeited in accordance with the
provision of this Section 10, the Company shall also have the right to
require the return of all dividends paid on such shares, whether by termination
of any escrow arrangement under which such dividends are held or otherwise.


(ii)                                  In
the event of the termination of a Participant’s employment for Cause, all
shares of Restricted Stock granted to such Participant that have not vested as
of the date of such termination shall be immediately forfeited by the
Participant and transferred to the Company, together with any dividends paid on
such shares.


(h)                     Effect of
Change in Control.


Upon the occurrence of a
Change in Control, (i) all restrictions on outstanding vested shares shall
immediately lapse, and (ii) all outstanding shares of Restricted Stock that
have not theretofore vested shall immediately expire and be cancelled unless
the Committee in its sole discretion on a case by case basis, in writing,
elects to waive such expiration and cancellation


(i)                         Special
Provisions Regarding Restricted Stock Awards.


The Committee may designate on a case-by-case basis
whether Restricted Stock Awards are intended to be “performance based
compensation” within the meaning of Code Section 162(m). The vesting of
Restricted Stock so designated shall be based on the attainment by the Company
(or a Subsidiary or division of the Company if applicable) of annual
performance goals pre-established by the Committee, limited to and based on one
or more of the following criteria: specified levels of or increases in the
Company’s (i) return on equity, (ii) earnings per share, (iii) total earnings,
(iv) earnings growth, (v) return on capital, (vi) return on assets, (vii)
economic value added, (viii) earnings before interest and taxes, (ix) sales
growth, (x) gross margin return on investment, (xi) increase in the FMV of the
shares, (xii) share price (including, but not limited to, growth measures and
total shareholder return), (xiii) net operating profit, (xiv) net income, (xv)
cash flow (including, but not limited to, operating cash flow and free cash
flow),



 15
 






 



(xvi) cash flow return on investments (which equals
net cash flow divided by total capital), (xvii) internal rate of return, or
(xviii) increase in net present value or expense targets.  Attainment of any such performance criteria
shall be determined in accordance with generally accepted accounting principles
as in effect from time to time. Such shares shall be released from restrictions
only after the attainment of such performance measures have been certified by
the Committee.


(j)                         Exception
to Minimum Three Year Vesting.


Notwithstanding anything herein to the contrary, the
Committee may grant shares of Restricted Stock with vesting periods shorter
than a three year, pro rata schedule, provided that the number of such shares
of Restricted Stock does not in the aggregate constitute more than five percent
(5%) of the shares authorized for issuance under the Plan.


11.          Phantom Stock.


(a)                      Vesting
Date.


At the time of the grant
of shares of Phantom Stock, the Committee shall establish a Vesting Date or
Vesting Dates with respect to such shares. The Committee may divide such shares
into classes and assign a different Vesting Date for each class. Provided that
all conditions to the vesting of a share of Phantom Stock imposed pursuant to
Section 11(c) of the Plan are satisfied, and except as provided in
Section 11(d) of the Plan, upon the occurrence of the Vesting Date with
respect to a share of Phantom Stock, such share shall vest.


(b)                     Benefit Upon
Vesting.


Upon the vesting of a
share of Phantom Stock, the Participant shall be entitled to receive in cash,
within 30 days of the date on which such share vests, an amount equal to
the sum of (i) the Fair Market Value of a share of Common Stock on the
date on which such share of Phantom Stock vests and (ii) the aggregate
amount of cash dividends paid with respect to a share of Common Stock during
the period commencing on the date on which the share of Phantom Stock was
granted and terminating on the date on which such share vests.


(c)                      Conditions
to Vesting.


At the time of the grant
of shares of Phantom Stock, the Committee may impose such restrictions or
conditions to the vesting of such shares as it, in its absolute discretion,
deems appropriate.


(d)                     Effect of
Termination of Employment.


(i)                                     Subject
to such other provisions as the Committee may set forth in the applicable Award
Agreement, and to the Committee’s amendment authority pursuant to Section 4
of the Plan, shares of



 16
 






 



Phantom Stock that have
not vested, together with any dividends credited on such shares, shall be
forfeited upon the Participant’s termination of employment for any reason other
than Cause.


(ii)                                  In
the event of the termination of a Participant’s employment for Cause, all
shares of Phantom Stock granted to such Participant that have not vested as of
the date of such termination shall immediately be forfeited, together with any
dividends credited on such shares.


(e)                      Effect of
Change in Control.


Upon the occurrence of a
Change in Control, all outstanding shares of Phantom Stock that have not
theretofore vested shall immediately expire and be cancelled unless the
Committee in its sole discretion on a case by case basis, in writing, elects to
waive such expiration and cancellation.


(f)                        Special
Provisions Regarding Phantom Stock Awards.


The Committee may
designate on a case by case basis whether Phantom Stock Awards are intended to
be “performance based compensation” within the meaning of Code Section162 (m).
The grant of Phantom Stock so designated shall be based on the attainment by
the Company (or a Subsidiary or division of the Company if applicable) of
annual performance goals pre-established by the Committee, limited to and based
on one or more of the following criteria: specified levels of or increases in
the Company’s (i) return on equity, (ii) earnings per share, (iii) total
earnings, (iv) earnings growth, (v) return on capital, (vi) return on assets,
(vii) economic value added, (viii) earnings before interest and taxes, (ix)
sales growth, (x) gross margin return on investment, (xi) increase in the FMV
of the shares, (xii) share price (including, but not limited to, growth
measures and total shareholder return), (xiii) net operating profit, (xiv) net
income, (xv) cash flow (including, but not limited to, operating cash flow and
free cash flow), (xvi) cash flow return on investments (which equals net cash
flow divided by total capital), (xvii) internal rate of return, or (xviii)
increase in net present value or expense targets.  Attainment of any such performance criteria
shall be determined in accordance with generally accepted accounting principles
as in effect from time to time. Such shares shall be released from restrictions
only after the attainment of such performance measures have been certified by
the Committee.


12.          Stock Bonuses.


In the event that the
Committee grants a Stock Bonus, a certificate for the shares of Common Stock
comprising such Stock Bonus shall be issued in the name of the Participant to
whom such grant was made and delivered to such Participant as soon as
practicable after the date on which such Stock Bonus is payable.


13.          Rights as a Stockholder.


No person shall have any rights as a stockholder with
respect to any shares of Common Stock covered by or relating to any Incentive
Award until the date of



 17
 






 



issuance of a stock certificate with respect to such
shares. Except as otherwise expressly provided in Section 3(c) of the
Plan, no adjustment to any Incentive Award shall be made for dividends or other
rights for which the record date occurs prior to the date such stock
certificate is issued.


14.          No Special Employment Rights; No Right
to Incentive Award.


Nothing contained in the Plan or any Award Agreement
shall confer upon any Participant any right with respect to the continuation of
employment by the Company or any Subsidiary of the Company or interfere in any
way with the right of the Company or any Subsidiary of the Company, subject to
the terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant. No person shall have any claim or right to receive an Incentive
Award hereunder. The Committee’s granting of an Incentive Award to a
Participant at any time shall neither require the Committee to grant any other
Incentive Award to such Participant or other person at any time or preclude the
Committee from making subsequent grants to such Participant or any other
person.


15.          Securities Matters.


(a)               The
Company shall be under no obligation to effect the registration pursuant to the
Securities Act of any interests in the Plan or any shares of Common Stock to be
issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing shares
of Common Stock pursuant to the Plan unless and until the Company is advised by
its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any securities exchange on which shares of Common Stock are
traded. The Committee may require, as a condition of the issuance and delivery
of certificates evidencing shares of Common Stock pursuant to the terms hereof
and of the applicable Award Agreement, that the recipient of such shares make
such covenants, agreements and representations, and that such certificates bear
such legends, as the Committee, in its sole discretion, deems necessary or
desirable.


(b)                     The transfer
of any shares of Common Stock hereunder shall be effective only at such time as
counsel to the Company shall have determined that the issuance and delivery of
such shares is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange on which
shares of Common Stock are traded. The Committee may, in its sole discretion,
defer the effectiveness of any transfer of shares of Common Stock hereunder in
order to allow the issuance of such shares to be made pursuant to registration
or an exemption from registration or other methods for compliance available
under federal or state securities laws. The Committee shall inform the Participant
in writing of its decision



 18
 






 



to defer the effectiveness of a transfer. During the
period of such deferral in connection with the exercise of an Option, the
Participant may, by written notice, withdraw such exercise and obtain the
refund of any amount paid with respect thereto.


16.          Withholding Taxes.


Whenever cash is to be
paid pursuant to an Incentive Award, the Company (or its agent) shall have the
right to deduct there from an amount sufficient to satisfy any federal, state
and local withholding tax requirements related thereto. Whenever shares of
Common Stock are to be delivered pursuant to an Incentive Award, the Company
(or its agent) shall have the right to require the Participant to remit to the
Company in cash an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto. With the approval of the
Committee, a Participant may satisfy the foregoing requirement, with respect to
all or any portion of the shares to be delivered pursuant to an Incentive Award,
by electing to have the Company (or its agent) withhold from delivery shares of
Common Stock having a fair market value equal to the minimum amount of tax to
be withheld. Such shares shall be valued at their Fair Market Value on the date
on which the amount of tax to be withheld is determined (the “Tax Date”).
Fractional share amounts shall be settled in cash.


17.          Notification of Election Under
Section 83(b) of the Code.


If any Participant shall,
in connection with the acquisition of shares of Common Stock under the Plan,
make the election permitted under Section 83(b) of the Code (i.e., an
election to include in gross income in the year of transfer the amounts
specified in Section 83(b)), such Participant shall notify the Company of
such election within 10 days of filing notice of the election with the
Internal Revenue Service, in addition to any filing and a notification required
pursuant to regulation issued under the authority of Code Section 83(b).


18.          Notification Upon Disqualifying
Disposition Under Section 421(b) of the Code.


Each Award Agreement with
respect to an Incentive Stock Option shall require the Participant to notify
the Company of any disposition of shares of Common Stock issued pursuant to the
exercise of such Option under the circumstances described in
Section 421(b) of the Code (relating to certain disqualifying
dispositions), within 10 days of such disposition.


19.          Amendment or Termination of the Plan.


The Board of Directors
may, at any time, suspend or terminate the Plan or revise or amend it in any
respect whatsoever; provided, however, that stockholder approval shall be
required if and to the extent the Board of Directors determines that such
approval is appropriate for purposes of satisfying Section 162(m) or 422
of the Code or to the extent such approval is required by the rules of Nasdaq
or any stock exchange on which the Common Stock is listed. Nothing herein shall
restrict the Committee’s ability to exercise its discretionary authority
pursuant to Section 4 of the Plan, which discretion may be exercised without
amendment to the Plan. No



 19
 






 



action hereunder may,
without the consent of a Participant, reduce the Participant’s rights under any
outstanding Incentive Award.


20.          Transfers Upon Death;
Non-Assignability.


Upon the death of a
Participant, outstanding Incentive Awards granted to such Participant may be
exercised only by the executor or administrator of the Participant’s estate or
by a person who shall have acquired the right to such exercise by will or by
the laws of descent and distribution. No transfer of an Incentive Award by will
or the laws of descent and distribution shall be effective to bind the Company
unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may
deem necessary to establish the validity of the transfer and (b) an
agreement by the transferee to comply with all the terms and conditions of the
Incentive Award that are or would have been applicable to the Participant and
to be bound by the acknowledgments made by the Participant in connection with
the grant of the Incentive Award.


During a Participant’s
lifetime, an outstanding Incentive Award granted to such Participant may only
be exercised by the Participant or, in the case of the Participant’s
Disability, by the Participant’s legal guardian or attorney-in-fact, and shall
not otherwise be transferable. 
Notwithstanding the foregoing, and subject to the Committee’s sole
discretion and any conditions as the Committee may prescribe, a Participant
may, with respect to an outstanding Option (unless such Option is an Incentive
Stock Option and the Committee and the Participant intend that it shall retain
such status), upon providing written notice to the Secretary of the Company,
elect to transfer  such Option to members
of his or her immediate family (including, but not limited to, children,
grandchildren, spouse and any other persons included in the definition of “family
member” in the General Instructions to Form S-8) or to trusts for the benefit
of such immediate family members or to partnerships in which such family
members are the only partners; provided, however, that no such transfer by any
Participant may be made in exchange for consideration.


21.          Expenses and Receipts.


The expenses of the Plan
shall be paid by the Company. Any proceeds received by the Company in
connection with any Incentive Award will be used for general corporate
purposes.


22.          Failure to Comply.


In addition to the
remedies of the Company elsewhere provided for herein, failure by a Participant
(or beneficiary or transferee) to comply with any of the terms and conditions
of the Plan or the applicable Award Agreement, unless such failure is remedied
by such Participant (or beneficiary or transferee) within ten days after notice
of such failure by the Committee, shall be grounds for the cancellation and
forfeiture of such Incentive Award, in whole or in part, as the Committee, in
its absolute discretion, may determine.



 20
 






 



23.          Effective Date and Term of Plan.


The Plan became effective
on the Effective Date, but the Plan (and any grants of Incentive Awards made
prior to stockholder approval of the Plan) shall be subject to the requisite
approval of the stockholders of the Company. In the absence of such approval,
any such Incentive Awards shall be null and void. Unless earlier terminated by
the Board of Directors, the right to grant Incentive Awards under the Plan will
terminate on the tenth anniversary of the Effective Date. Incentive Awards
outstanding at Plan termination will remain in effect according to their terms
and the provisions of the Plan.


24.          Applicable Law.


Except to the extent
preempted by any applicable federal law, the Plan will be construed and
administered in accordance with the laws of the State of Oklahoma, without
reference to the principles of conflicts of law.


25.          Participant Rights.


No Participant shall have
any claim to be granted any Incentive Award under the Plan, and there is no
obligation for uniformity of treatment for Participants. Except as provided
specifically herein, a Participant or a transferee of an Incentive Award shall
have no rights as a stockholder with respect to any shares covered by any award
until the date of the issuance of a Common Stock certificate to him for such
shares.


26.          Unfunded Status of Awards.


The Plan is intended to
constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Incentive
Award, nothing contained in the Plan or any Award Agreement shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.


27.          No Fractional Shares.


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


28.          Beneficiary.


A Participant may file
with the Committee a written designation of a beneficiary on such form as may
be prescribed by the Committee and may, from time to time, amend or revoke such
designation. If no designated beneficiary survives the Participant, the executor
or administrator of the Participant’s estate shall be deemed to be the
Participant’s beneficiary.


29.          Interpretation.


The Plan is designed and
intended to comply with Rule 16b-3 promulgated under the Exchange Act and,
with Section 162(m) of the Code, and all provisions hereof shall be
construed in a manner to so comply.



 21