Document:

$642,831.68 term note between Champion Industries, Inc. and First Bank of Charleston,
      Inc. dated as of August 30, 2006 Page Exhibit (10.2)-p1

    EXHIBIT
      10.2

     

    

      PROMISSORY
        NOTE 

      Principal  Loan
        Date
        Maturity Loan No. Call/Coll 
        Account Officer Initials

      $642,831.68 08-30-2006
        09-05-2011 315713 022 

      References
        in the shaded area are for Lender's use only and do not limit the applicability
        of this document to any particular loan or item. Any item above containing
        "***"
        has been omitted due to text length limitations.

      

      

      

      Borrower: CHAMPION
        INDUSTRIES, INC. 

      (TIN:
        55-0717455)

      POST
        OFFICE BOX 2968

      HUNTINGTON.
        WV 25728 

      

      Lender: FIRST
        BANK OF CHARLESTON, INC.

      201
        PENNSYLVANIA AVENUE 

      CHARLESTON.
        WV 25302

      (304)
        340-3000

      

      Principal
        Amount: $642,831.68 Interest
        Rate: 8.250% Date
        of Note: August 30, 2006

       

      PROMISE
        TO PAY. CHAMPION INDUSTRIES INC ("Borrower") promises to pay to FIRST BANK
        OF
        CHARLESTON. INC. ("Lender"), or order, In lawful money of the United States
        of
        America. the principal amount of Six Hundred Forty-two Thousand Eight Hundred
        Thirty-one & 68/100 Dollars ($642,831.68), together with interest at the
        rate of 8.250% per annum on the unpaid principal balance from August 30,
        2006,
        until paid in full.

       

      PAYMENT.
        Borrower will pay this loan in 36 payments of $13,165.37 each payment.
        Borrower's first payment is due October 5, 2006. and all subsequent payments
        are
        due on the same day of each month after that. Borrower's final payment will
        be
        due on September 5, 2011, and will be for all principal and all accrued interest
        not yet paid. Payments include principal and interest. Unless otherwise agreed
        or required by applicable law. payments will be applied first to any accrued
        unpaid interest; then to principal; then to any unpaid collection costs;
        and
        then to any late charges, The annual Interest rate for this Note Is computed
        on
        a 365/360 basis; that is, by applying the ratio of the annual interest rate
        over
        a year of 360 days, multiplied by the outstanding principal balance, multiplied
        by the actual number of days the principal balance Is outstanding. Borrower
        will
        pay Lender at Lender's address shown above or at such other place as Lender
        may
        designate in writing.

       

      VARIABLE
        INTEREST RATE. The
        interest rate on this Note is subject to change from time to time based on
        changes in an independent index which is The Wall Street Journal Prime Rate
        (the
“Index”). The Index is not necessarily the lowest rate charged by the Lender on
        its loans. If the index becomes unavailable during the term of this loan,
        Lender
        may designate a substitute index after notifying Borrower. Lender may designate
        a substitute index after notifying Borrower. Lender will tell Borrower the
        current index rate upon Borrower’s request. The interest rate change will not
        occur more often than each day. Borrower understands that Lender may make
        loans
        based on other rates as well. The
        index currently is 8.250% per annum. The
        interest rate to be applied to the unpaid principal balance during this Note
        will be at a rate equal to the Index, resulting in an initial rate of 8.250%
        per
        annum. NOTICE: Under no circumstances will the interest rate on this Note
        be
        more than the maximum rate allowed by applicable law. Whenever increases
        occur
        in the interest rate, Lender, at its option, may do one or more of the
        following: (A) increase Borrower’s payments to ensure Borrower’s loan will pay
        off by its original final maturity date, (B) increase Borrower’s payments to
        cover accruing interest, (C) increase the number of Borrower’s payments, and (D)
        continue Borrower’s payments at the same amount and increase Borrower’s final
        payment. 

       

      PREPAYMENT;
        MINIMUM INTEREST CHARGE.
        In any
        event, even upon full prepayment of this Note, Borrower understands that
        Lender
        is entitled to a minimum
        interest charge of $7.50.
        Other
        than Borrower's obligation to pay any minimum interest charge, Borrower may
        pay
        without penalty all or a portion of the amount owed earlier than it is due.
        Early payments will not, unless agreed to by Lender in writing, relieve Borrower
        of Borrower's obligation to continue to make payments under the payment
        schedule. Rather, early payments will reduce the principal balance due and
        may
        result in Borrower's making fewer payments. Borrower agrees not to send Lender
        payments marked "paid in full", "without recourse", or similar language.
        If
        Borrower sends such a payment, Lender may accept it without losing any of
        Lender's rights under this Note, and Borrower will remain obligated to pay
        any
        further amount owed to Lender. All written communications concerning disputed
        amounts including any check or other payment instrument that indicates that
        the
        payment constitutes "payment in full" of the amount owed or that is tendered
        with other conditions or limitations or as full satisfaction of a disputed
        amount must be mailed or delivered to: FIRST BANK OF CHARLESTON, INC.; 201
        Pennsylvania Avenue; Charleston, WV 25302.

       

      LATE
        CHARGE.
        If a
        payment is 10 days or more late, Borrower will be charged 5.000%
        of the unpaid portion of the regularly scheduled payment or $50.00, whichever
        is
        greater.

       

      INTEREST
        AFTER DEFAULT.
        Upon
        default, including failure to pay upon final maturity, Lender, at its option,
        may, if permitted under applicable law, increase the interest rate on this
        Note
        to 18.000% per annum. The interest rate will not exceed the maximum rate
        permitted by applicable law.

      DEFAULT.
        Each of
        the following shall constitute an event of default ("Event of Default") under
        this Note:

      Payment
        Default. Borrower
        fails to make any payment when due under this Note.

       

      Other
        Defaults.
        Borrower
        fails to comply with or to perform any other term, obligation, covenant or
        condition contained in this Note or in any of the related documents or to
        comply
        with or to perform any term, obligation, covenant or condition contained
        in any
        other agreement between Lender and Borrower.

       

      Default
        in Favor of Third Parties.
        Borrower
        or any Grantor defaults under any loan, extension of credit. security agreement,
        purchase or sales agreement, or any other agreement, in favor of any other
        creditor or person that may materially affect any of Borrower's property
        or
        Borrower's ability to repay this Note or perform Borrower's obligations under
        this Note or any of the related documents.

       

      False
        Statements.
        Any
        warranty, representation or statement made or furnished to Lender by Borrower
        or
        on Borrower's behalf under this Note or the related documents is false or
        misleading in any material respect, either now or at the time made or furnished
        or becomes false or misleading at any time thereafter.

       

      Insolvency.
        The
        dissolution or termination of Borrower's existence as a going business, the
        insolvency of Borrower, the appointment of a receiver for any part of Borrower's
        property, any assignment for the benefit of creditors. any type of creditor
        workout, or the commencement of any proceeding under any bankruptcy or
        insolvency laws by or against Borrower.

       

      Creditor
        or Forfeiture Proceedings.
        Commencement of foreclosure or forfeiture proceedings, whether by judicial
        proceeding, self-help, repossession or any other method, by any creditor
        of
        Borrower or by any governmental agency against any collateral securing the
        loan.
        This includes a garnishment of any of Borrower's accounts, including deposit
        accounts, with Lender. However, this Event of Default shall not apply if
        there
        is a good faith dispute by Borrower as to the validity or reasonableness
        of the
        claim which is the basis of the creditor or forfeiture proceeding and if
        Borrower gives Lender written notice of the creditor or forfeiture proceeding
        and deposits with Lender monies or a surety bond for the creditor or forfeiture
        proceeding, in an amount determined by Lender, in its sole discretion, as
        being
        an adequate reserve or bond for the dispute.

       

      Events
        Affecting Guarantor.
        Any of
        the preceding events occurs with respect to any guarantor, endorser, surety,
        or
        accommodation party of any of the indebtedness or any guarantor, endorser,
        surety, or accommodation party dies or becomes incompetent. or revokes or
        disputes the validity of, or liability under, any guaranty of the indebtedness
        evidenced by this Note. In the event of a death, Lender, at its option, may,
        but
        shall not be required to, permit the guarantor's estate to assume
        unconditionally the obligations arising under the guaranty in a manner
        satisfactory to Lender, and, in doing so, cure any Event of
        Default.

       

      Change
        In Ownership. Any
        change in ownership of twenty-five percent (25%) or more of the common stock
        of
        Borrower.

       

      Adverse
        Change.
        A
        material adverse change occurs in Borrower's financial condition, or Lender
        believes the prospect of payment or performance of this Note is
        impaired.

      Insecurity.
        Lender
        in good faith believes itself insecure.

       

      Cure
        Provisions.
        If any
        default, other than a default in payment is curable and if Borrower has not
        been
        given a notice of a breach of the same provision of this Note within the
        preceding twelve (12) months, it may be cured if Borrower, after receiving
        written notice from Lender demanding cure of such default: (1) cures the
        default
        within ten (10) days; or (2) if the cure requires more than ten (10) days,
        immediately initiates steps which Lender deems in Lender's sole discretion
        to be
        sufficient to cure the default and thereafter continues and completes all
        reasonable and necessary steps sufficient to produce compliance as soon as
        reasonably practical.

       

      LENDER'S
        RIGHTS.
        Upon
        default, Lender may declare the entire unpaid principal balance on this Note
        and
        all accrued unpaid interest immediately due, and then Borrower will pay that
        amount.

       

      ATTORNEYS'
        FEES; EXPENSES. Lender
        may hire or pay someone else to help collect this Note if Borrower does not
        pay.
        Borrower will pay Lender that amount. This includes, subject to any limits
        under
        applicable law, Lender's attorneys' fees and Lender's legal expenses, whether
        or
        not there is a lawsuit, including attorneys' fees, expenses for bankruptcy
        proceedings (including efforts to modify or vacate any automatic stay or
        injunction), and appeals. If not prohibited by applicable law. Borrower also
        will pay any court costs, in addition to all other sums provided by
        law.

       

      JURY
        WAIVER. Lender
        and Borrower hereby waive the right to any jury trial in any action, proceeding,
        or counterclaim brought by either Lender or Borrower against the
        other.

       

      GOVERNING
        LAW.
        This
        Note will be governed by federal law applicable to Lender and, to the extent
        not
        preempted by federal law, the laws of the State of West Virginia without
        regard
        to its conflicts of law provisions. This Note has been accepted by Lender
        in the
        State of West Virginia.

       

      DISHONORED
        ITEM FEE.
        Borrower
        will pay a fee to Lender of $7.00 if Borrower makes a payment on Borrower's
        loan
        and the check or pre authorized charge with which Borrower pays is later
        dishonored.

       

      RIGHT
        OF SETOFF.
        To the
        extent permitted by applicable law. Lender reserves a right of setoff in
        all
        Borrower's accounts with Lender (whether checking. savings, or some other
        account). This includes all accounts Borrower holds jointly with someone
        else
        and all accounts Borrower may open in the future. However, this does not
        include
        any IRA or Keogh accounts, or any trust accounts for which setoff would be
        prohibited by law. Borrower authorizes Lender, to the extent permitted by
        applicable law, to charge or setoff all sums owing on the indebtedness against
        any and all such accounts, and, at Lender's option, to administratively freeze
        all such accounts to allow Lender to protect Lender's charge and setoff rights
        provided in this paragraph.

       

      COLLATERAL.
        Borrower
        acknowledges this Note is secured by the following collateral described in
        the
        security instrument listed herein: collateral described in a Commercial Security
        Agreement dated August 30, 2006.

       

      SUCCESSOR
        INTERESTS. The
        terms
        of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal
        representatives, successors and assigns, and shall inure to the benefit of
        Lender and its successors and assigns.

       

      NOTIFY
        US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING
        AGENCIES.
        Please
        notify us if we report any inaccurate information about your account(s) to
        a
        consumer reporting agency. Your written notice describing the specific
        inaccuracy(ies) should be sent to us at the following address: FIRST BANK
        OF
        CHARLESTON PO Box 6907 Charleston, WV 25362.

       

      GENERAL
        PROVISIONS. If
        any
        part of this Note cannot be enforced, this fact will not affect the rest
        of the
        Note. Lender may delay or forgo enforcing any of its rights or remedies under
        this Note without losing them. Borrower and any other person who signs,
        guarantees or endorses this Note, to the extent allowed by law, waive
        presentment, demand for payment, and notice of dishonor. Upon any change
        in the
        terms of this Note, and unless otherwise expressly stated in writing, no
        party
        who signs this Note, whether as maker, guarantor, accommodation maker or
        endorser, shall be released from liability. All such parties agree that Lender
        may renew or extend (repeatedly and for any length of time) this loan or
        release
        any party or guarantor or collateral; or impair, fail to realize upon or
        perfect
        Lender's security interest in the collateral; and take any other action deemed
        necessary by Lender without the consent of or notice to anyone. All such
        parties
        also agree that Lender may modify this loan without the consent of or notice
        to
        anyone other than the party with whom the modification is made. The obligations
        under this Note are joint and several.

       

      WEST
        VIRGINIA INSURANCE NOTICE. Unless
        Borrower provides lender with evidence of the insurance coverage required
        by
        Borrower's agreement with Lender, Lender may purchase insurance at Borrower's
        expense to protect Lender's interests in the collateral. This insurance may,
        but
        need not, protect Borrower's interests. The coverage that lender purchases
        may
        not pay any claim that Borrower makes or any claim that is made against Borrower
        in connection with the collateral. Borrower may later cancel any insurance
        purchased by lender, but only after providing lender with evidence that Borrower
        has obtained insurance as required by their agreement. If lender purchases
        insurance for the collateral. Borrower will be responsible for the costs
        of that
        Insurance, including Interest and any other charges lender may impose in
        connection with the placement of the insurance, until the effective date
        of the
        cancellation or expiration of the Insurance. The costs of the insurance may
        be
        added to Borrower's total outstanding balance or obligation. The costs of
        the
        insurance may be more than the cost of insurance Borrower may be able to
        obtain
        on Borrower's own.

      

      PRIOR
        TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD All THE PROVISIONS OF
        THIS
        NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE.

      BORROWER
        ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY
        NOTE.

      

      BORROWER:

      

      

      CHAMPION
        INDUSTRIES INC

      

      

      

      By:
        /s/ Toney K. Adkins

      TONEY
        K ADKINS. President of
        CHAMPION INDUSTRIES INC

      

      By:
        /s/ Walter Sansom

      WALTER
        SANSOM, Secretary of CHAMPION INDUSTRIES INC

      

      

      LASER
        PRO Lending, Var. 5.30.00.004 Copr. Harland Financial Solutions, Inc. 1997,
        2006. All Rights Reserved - WV M:\LASPERPRO\CFI\LPL\D20,FC TR-1868
        PR-8

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      COMMERCIAL
        SECURITY AGREEMENT

      Principal  Loan
        Date
        Maturity Loan No. Call/Coll 
        Account Officer Initials

      $642,831.68 08-30-2006
        09-05-2011 315713 022 

      References
        in the shaded area are for Lender’s use only and do not limit the applicability
        of this document to any particular loan or item. Any item above containing
“ ***
” has been omitted due to text length limitations.

      

      

      Grantor: CHAMPION
        INDUSTRIES, INC. 

      (TIN:
        55-0717455)

      POST
        OFFICE BOX 2968

      HUNTINGTON.
        WV 25728 

      

      Lender:
        FIRST
        BANK OF CHARLESTON, INC.

      201
        PENNSYLVANIA AVENUE 

      CHARLESTON.
        WV 25302

      (304)
        340-3000

      

      THIS
        COMMERCIAL SECURITY AGREEMENT dated August 30, 2006, is made and executed
        between CHAMPION INDUSTRIES INC ("Grantor") and FIRST BANK OF CHARLESTON.
        INC.
        ("Lender").

       

      GRANT
        OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
        a
        security interest in the Collateral to secure the Indebtedness and agrees
        that
        Lender shall have the rights stated in this Agreement with respect to the
        Collateral, in addition to all other rights which Lender may have by
        law.

       

      COLLATERAL
        DESCRIPTION.
        The word
        "Collateral" as used in this Agreement means the following described property,
        whether now owned or hereafter acquired. whether now existing or hereafter
        arising, and wherever located, in which Grantor is giving to Lender a security
        interest for the payment of the Indebtedness and performance of all other
        obligations under the Note and this Agreement:

       

      Purchase
        Money Security Interest in all printing related equipment including but not
        limited to hardware, software, attachments and accessories on the attached
        invoices and made part of this agreement.

       

      In
        addition, the word "Collateral" also includes all the following, whether
        now
        owned or hereafter acquired, whether now existing or hereafter arising, and
        wherever located:

       

      (A)
        All
        accessions, attachments, accessories, replacements of and additions to any
        of
        the collateral described herein, whether added now or later.

      (B)
        All
        products and produce of any of the property described in this Collateral
        section.

       

      (C)
        All
        accounts, general intangibles, instruments, rents, monies. payments, and
        all
        other rights. arising out of a sale, lease, consignment or other disposition
        of
        any of the property described in this Collateral section.

       

      (D)
        All
        proceeds (including insurance proceeds) from the sale, destruction, loss,
        or
        other disposition of any of the property described in this Collateral section,
        and sums due from a third party who has damaged or destroyed the Collateral
        or
        from that party's insurer, whether due to judgment, settlement or other
        process.

       

      (E)
        All
        records and data relating to any of the property described in this Collateral
        section, whether in the form of a writing, photograph, microfilm, microfiche,
        or
        electronic media, together with all of Grantor's right, title, and interest
        in
        and to all computer software required to utilize, create, maintain, and process
        any such records or data on electronic media.

      

      RIGHT
        OF SETOFF.
        To the
        extent permitted by applicable law. Lender reserves a right of setoff in
        all
        Grantor's accounts with Lender (whether checking. savings. or some other
        account). This includes all accounts Grantor holds jointly with someone else
        and
        all accounts Grantor may open in the future. However, this does not include
        any
        IRA or Keogh accounts, or any trust accounts for which setoff would be
        prohibited by law. Grantor authorizes Lender, to the extent permitted by
        applicable law, to charge or setoff all sums owing on the Indebtedness against
        any and all such accounts, and at Lender's option, to administratively freeze
        all such accounts to allow Lender to protect Lender's charge and setoff rights
        provided in this paragraph.

       

      GRANTOR'S
        REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
        COLLATERAL.
        With
        respect to the Collateral, Grantor represents and promises to Lender
        that:

       

      Perfection
        of Security Interest.
        Grantor
        agrees to take whatever actions are requested by Lender to perfect and continue
        Lender's security interest in the Collateral. Upon request of Lender, Grantor
        will deliver to Lender any and all of the documents evidencing or constituting
        the Collateral, and Grantor will note Lender's interest upon any and all
        chattel
        paper and instruments if not delivered to Lender for possession by
        Lender.

       

      Notices
        to Lender.
        Grantor
        will promptly notify Lender in writing at Lender's address shown above (or
        such
        other addresses as Lender may designate from time to time) prior to any (1)
        change in Grantor's name; (2) change in Grantor's assumed business name(s);
        (3)
        change in the management of the Corporation Grantor; (4) change in the
        authorized signer(s); (5) change in Grantor's principal office address; (6)
        change in Grantor's state of organization; (7) conversion of Grantor to a
        new or
        different type of business entity; or (8) change in any other aspect of Grantor
        that directly or indirectly relates to any agreements between Grantor and
        Lender. No change in Grantor's name or state of organization will take effect
        until after Lender has received notice.

       

      No
        Violation.
        The
        execution and delivery of this Agreement will not violate any law or agreement
        governing Grantor or to which Grantor is a party, and its certificate or
        articles of incorporation and bylaws do not prohibit any term or condition
        of
        this Agreement.

       

      Enforceability
        of Collateral.
        To the
        extent the Collateral consists of accounts, chattel paper, or general
        intangibles, as defined by the Uniform Commercial Code, the Collateral is
        enforceable in accordance with its terms, is genuine, and fully complies
        with
        all applicable laws and regulations concerning form, content and manner of
        preparation and 

       

      execution,
        and all persons appearing to be obligated on the Collateral have authority
        and
        capacity to contract and are in fact obligated as they appear to be on the
        Collateral. There shall be no setoffs or counterclaims against any of the
        Collateral, and no agreement shall have been made under which any deductions
        or
        discounts may be claimed concerning the Collateral except those disclosed
        to
        Lender in writing.

       

      Location
        of the Collateral.
        Except
        in the ordinary course of Grantor's business, Grantor agrees to keep the
        Collateral at Grantor's address shown above or at such other locations as
        are
        acceptable to Lender. Upon Lender's request, Grantor will deliver to Lender
        in
        form satisfactory to Lender a schedule of real properties and Collateral
        locations relating to Grantor's operations, including without limitation
        the
        following: (1) all real property Grantor owns or is purchasing; (2) all real
        property Grantor is renting or leasing; (3) all storage facilities Grantor
        owns,
        rents, leases, or uses; and (4) all other properties where Collateral is
        or may
        be located.

       

      Removal
        of the Collateral. Except
        in
        the ordinary course of Grantor's business, Grantor shall not remove the
        Collateral from its existing location without Lender's prior written consent.
        Grantor shall, whenever requested, advise Lender of the exact location of
        the
        Collateral.

       

      Transactions
        Involving Collateral.
        Except
        for inventory sold or accounts collected in the ordinary course of Grantor's
        business, or as otherwise provided for in this Agreement, Grantor shall not
        sell, offer to sell, or otherwise transfer or dispose of the Collateral.
        Grantor
        shall not pledge, mortgage, encumber or otherwise permit the Collateral to
        be
        subject to any lien, security interest, encumbrance, or charge, other than
        the
        security interest provided for in this Agreement, without the prior written
        consent of Lender. This includes security interests even if junior in right
        to
        the security interests granted under this Agreement. Unless waived by Lender,
        all proceeds from any disposition of the Collateral (for whatever reason)
        shall
        be held in trust for Lender and shall not be commingled with any other funds;
        provided however, this requirement shall not constitute consent by Lender
        to any
        sale or other disposition. Upon receipt, Grantor shall immediately deliver
        any
        such proceeds to Lender.

       

      Title.
        Grantor
        represents and warrants to Lender that Grantor holds good and marketable
        title
        to the Collateral, free and clear of all liens and encumbrances except for
        the
        lien of this Agreement. No financing statement covering any of the Collateral
        is
        on file in any public office other than those which reflect the security
        interest created by this Agreement or to which Lender has specifically
        consented. Grantor shall defend Lender's rights in the Collateral against
        the
        claims and demands of all other persons.

       

      Repairs
        and Maintenance.
        Grantor
        agrees to keep and maintain, and to cause others to keep and maintain, the
        Collateral in good order, repair and condition at all times while this Agreement
        remains in effect. Grantor further agrees to pay when due all claims for
        work
        done on, or services rendered or material furnished in connection with the
        Collateral so that no lien or encumbrance may ever attach to or be filed
        against
        the Collateral.

      

      Inspection
        of Collateral.
        Lender
        and Lender's designated representatives and agents shall have the right at
        all
        reasonable times to examine and inspect the Collateral wherever
        located.

      

      Taxes,
        Assessments and Liens.
        Grantor
        will pay when due all taxes, assessments and liens upon the Collateral, its
        use
        or operation, upon this Agreement, upon any promissory note or notes evidencing
        the Indebtedness, or upon any of the other Related Documents. Grantor may
        withhold any such payment or may elect to contest any lien if Grantor is
        in good
        faith conducting an appropriate proceeding to contest the obligation to pay
        and
        so long as Lender's interest in the Collateral is not jeopardized in Lender's
        sole opinion. If the Collateral is subjected to a lien which is not discharged
        within fifteen (15) days, Grantor shall deposit with Lender cash, a sufficient
        corporate surety bond or other security satisfactory to Lender in an amount
        adequate to provide for the discharge of the lien plus any interest, costs,
        attorneys' fees or other charges that could accrue as a result of foreclosure
        or
        sale of the Collateral. In any contest Grantor shall defend itself and Lender
        and shall satisfy any final adverse judgment before enforcement against the
        Collateral. Grantor shall name Lender as an additional obligee under any
        surety
        bond furnished in the contest proceedings. Grantor further agrees to furnish
        Lender with evidence that such taxes, assessments, and governmental and other
        charges have been paid in full and in a timely manner. Grantor may withhold
        any
        such payment or may elect to contest any lien if Grantor is in good faith
        conducting an appropriate proceeding to contest the obligation to pay and
        so
        long as Lender's interest in the Collateral is not jeopardized.

       

      Compliance
        with Governmental Requirements.
        Grantor
        shall comply promptly with all laws, ordinances, rules and regulations of
        all
        governmental authorities, now or hereafter in effect, applicable to the
        ownership, production, disposition, or use of the Collateral, including all
        laws
        or regulations relating to the undue erosion of highly-erodible land or relating
        to the conversion of wetlands for the production of an agricultural product
        or
        commodity. Grantor may contest in good faith any such law, ordinance or
        regulation and withhold compliance during any proceeding, including appropriate
        appeals, so long as Lender's interest in the Collateral, in Lender's opinion,
        is
        not jeopardized.

       

      Hazardous
        Substances.
        Grantor
        represents and warrants that the Collateral never has been, and never will
        be so
        long as this Agreement remains a lien on the Collateral, used in violation
        of
        any Environmental Laws or for the generation, manufacture, storage,
        transportation, treatment, disposal, release or threatened release of any
        Hazardous Substance. The representations and warranties contained herein
        are
        based on Grantor's due diligence in investigating the Collateral for Hazardous
        Substances. Grantor hereby (1) releases and waives any future claims against
        Lender for indemnity or contribution in the event Grantor becomes liable
        for
        cleanup or other costs under any Environmental Laws, and (2) agrees to indemnify
        and hold harmless Lender against any and all claims and losses resulting
        from a
        breach of this provision of this Agreement. This obligation to indemnify
        shall
        survive the payment of the Indebtedness and the satisfaction of this
        Agreement.

       

      Maintenance
        of Casualty Insurance.
        Grantor
        shall procure and maintain all risks insurance, including without limitation
        fire, theft and liability coverage together with such other insurance as
        Lender
        may require with respect to the Collateral, in form, amounts, coverages and
        basis reasonably acceptable to Lender and issued by a company or companies
        reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver
        to Lender from time to time the policies or certificates of insurance in
        form
        satisfactory to Lender, including stipulations that coverages will not be
        cancelled or diminished without at least thirty (30) days' prior written
        notice
        to Lender and not including any disclaimer of the insurer's liability for
        failure to give such a notice. Each insurance policy also shall include an
        endorsement providing that coverage in favor of Lender will not be impaired
        in
        any way by any act, omission or default of Grantor or any other person. In
        connection with all policies covering assets in which Lender holds or is
        offered
        a security interest, Grantor will provide Lender with such loss payable or
        other
        endorsements as Lender may require. If Grantor at any time fails to obtain
        or
        maintain any insurance as required under this Agreement, Lender may (but
        shall
        not be obligated to) obtain such insurance as Lender deems appropriate,
        including if Lender so chooses "single interest insurance," which will cover
        only Lender's interest in the Collateral.

       

      Application
        of Insurance Proceeds.
        Grantor
        shall promptly notify Lender of any loss or damage to the Collateral if the
        estimated cost of repair or replacement exceeds $ $250.00, whether or not
        such
        casualty or loss is covered by insurance. Lender may make proof of loss if
        Grantor fails to do so within fifteen (15) days of the casualty. All proceeds
        of
        any insurance on the Collateral, including accrued proceeds thereon, shall
        be
        held by Lender as part of the Collateral. If Lender consents to repair or
        replacement of the damaged or destroyed Collateral, Lender shall, upon
        satisfactory proof of expenditure, payor reimburse Grantor from the proceeds
        for
        the reasonable cost of repair or restoration. If Lender does not consent
        to
        repair or replacement of the Collateral, Lender shall retain a sufficient
        amount
        of the proceeds to pay all of the Indebtedness, and shall pay the balance
        to
        Grantor. Any proceeds which have not been disbursed within six (6) months
        after
        their receipt and which Grantor has not committed to the repair or restoration
        of the Collateral shall be used to prepay the Indebtedness.

       

      Insurance
        Reserves.
        Lender
        may require Grantor to maintain with Lender reserves for payment of insurance
        premiums, which reserves shall be created by monthly payments from Grantor
        of a
        sum estimated by Lender to be sufficient to produce, at least fifteen (15)
        days
        before the premium due date, amounts at least equal to the insurance premiums
        to
        be paid. If fifteen (15) days before payment is due, the reserve funds are
        insufficient, Grantor shall upon demand pay any deficiency to Lender. The
        reserve funds shall be held by Lender as a general deposit and shall constitute
        a non-interest-bearing account which Lender may satisfy by payment of the
        insurance premiums required to be paid by Grantor as they become due. Lender
        does not hold the reserve funds in trust for Grantor, and Lender is not the
        agent of Grantor for payment of the insurance premiums required to be paid
        by
        Grantor. The responsibility for the payment of premiums shall remain Grantor's
        sole responsibility.

       

      Insurance
        Reports.
        Grantor,
        upon request of Lender, shall furnish to Lender reports on each existing
        policy
        of insurance showing such information as Lender may reasonably request including
        the following: (1) the name of the insurer; (2) the risks insured; (3) the
        amount of the policy; (4) the property insured; (5) the then current value
        on
        the basis of which insurance has been obtained and the manner of determining
        that value; and (6) the expiration date of the policy. In addition, Grantor
        shall upon request by Lender (however not more often than annually) have
        an
        independent appraiser satisfactory to Lender determine, as applicable, the
        cash
        value or replacement cost of the Collateral.

       

      Financing
        Statements.
        Grantor
        authorizes Lender to file a UCC financing statement, or alternatively, a
        copy of
        this Agreement to perfect Lender's security interest. At Lender's request,
        Grantor additionally agrees to sign all other documents that are necessary
        to
        perfect, protect, and continue Lender's security interest in the Property.
        Grantor will pay all filing fees, title transfer fees, and other fees and
        costs
        involved unless prohibited by law or unless Lender is required by law to
        pay
        such fees and costs. Grantor irrevocably appoints Lender to execute documents
        necessary to transfer title if there is a default. Lender may file a copy
        of
        this Agreement as a financing statement. If Grantor changes Grantor's name
        or
        address, or the name or address of any person granting a security interest
        under
        this Agreement changes, Grantor will promptly notify the Lender of such
        change.

       

      GRANTOR'S
        RIGHT TO POSSESSION. Until
        default, Grantor may have possession of the tangible personal property and
        beneficial use of all the Collateral and may use it in any lawful manner
        not
        inconsistent with this Agreement or the Related Documents, provided that
        Grantor's right to possession and beneficial use shall not apply to any
        Collateral where possession of the Collateral by Lender is required by law
        to
        perfect Lender's security interest in such Collateral. If Lender at any time
        has
        possession of any Collateral, whether before or after an Event of Default,
        Lender shall be deemed to have exercised reasonable care in the custody and
        preservation of the Collateral if Lender takes such action for that purpose
        as
        Grantor shall request or as Lender, in Lender's sole discretion, shall deem
        appropriate under the circumstances, but failure to honor any request by
        Grantor
        shall not of itself be deemed to be a failure to exercise reasonable care.
        Lender shall not be required to take any steps necessary to preserve any
        rights
        in the Collateral against prior parties, nor to protect, preserve or maintain
        any security interest given to secure the Indebtedness.

       

      LENDER'S
        EXPENDITURES.
        If any
        action or proceeding is commenced that would materially affect Lender's interest
        in the Collateral or if Grantor fails to comply with any provision of this
        Agreement or any Related Documents, including but not limited to Grantor's
        failure to discharge or pay when due any amounts Grantor is required to
        discharge or pay under this Agreement or any Related Documents, Lender on
        Grantor's behalf may (but shall not be obligated to) take any action that
        Lender
        deems appropriate, including but not limited to discharging or paying all
        taxes,
        liens, security interests, encumbrances and other claims, at any time levied
        or
        placed on the Collateral and paying all costs for insuring, maintaining and
        preserving the Collateral. All such expenditures incurred or paid by Lender
        for
        such purposes will then bear interest at the rate charged under the Note
        from
        the date incurred or paid by Lender to the date of repayment by Grantor.
        All
        such expenses will become a part of the Indebtedness and, at Lender's option,
        will (A) be payable on demand; (B) be added to the balance of the Note and
        be
        apportioned among and be payable with any installment payments to become
        due
        during either (1) the term of any applicable insurance policy; or (2) the
        remaining term of the Note; or (C) be treated as a balloon payment which
        will be
        due and payable at the Note's maturity. The Agreement also will secure payment
        of these amounts. Such right shall be in addition to all other rights and
        remedies to which Lender may be entitled upon Default.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      DEFAULT.
        Each
        of
        the following shall constitute an Event of Default under this
        Agreement:

      

      Payment
        Default. Grantor
        fails to make any payment when due under the Indebtedness.

       

      

       

      Other
        Defaults.
        Grantor
        fails to comply with or to perform any other term, obligation, covenant or
        condition contained in this Agreement or in any of the Related Documents
        or to
        comply with or to perform any term, obligation, covenant or condition contained
        in any other agreement between Lender and Grantor.

       

      Default
        in Favor of Third Parties.
        Should
        Borrower or any Grantor default under any loan, extension of credit, security
        agreement, purchase or sales agreement, or any other agreement, in favor
        of any
        other creditor or person that may materially affect any of Grantor's property
        or
        Grantor's or any Grantor's ability to repay the Indebtedness or perform their
        respective obligations under this Agreement or any of the Related
        Documents.

       

      False
        Statements.
        Any
        warranty, representation or statement made or furnished to Lender by Grantor
        or
        on Grantor's behalf under this Agreement or the Related Documents is false
        or
        misleading in any material respect, either now or at the time made or furnished
        or becomes false or misleading at any time thereafter.

      

      Defective
        Collateralization.
        This
        Agreement or any of the Related Documents ceases to be in full force and
        effect
        (including failure of any collateral document to create a valid and perfected
        security interest or lien) at any time and for any reason.

       

      Insolvency.
        The
        dissolution or termination of Grantor's existence as a going business, the
        insolvency of Grantor, the appointment of a receiver for any part of Grantor's
        property, any assignment for the benefit of creditors, any type of creditor
        workout, or the commencement of any proceeding under any bankruptcy or
        insolvency laws by or against Grantor.

       

      Creditor
        or Forfeiture Proceedings.
        Commencement of foreclosure or forfeiture proceedings, whether by judicial
        proceeding, self-help, repossession or any other method, by any creditor
        of
        Grantor or by any governmental agency against any collateral securing the
        Indebtedness. This includes a garnishment of any of Grantor's accounts,
        including deposit accounts, with Lender. However, this Event of Default shall
        not apply if there is a good faith dispute by Grantor as to the validity
        or
        reasonableness of the claim which is the basis of the creditor or forfeiture
        proceeding and if Grantor gives Lender written notice of the creditor or
        forfeiture proceeding and deposits with Lender monies or a surety bond for
        the
        creditor or forfeiture proceeding, in an amount determined by Lender, in
        its
        sole discretion, as being an adequate reserve or bond for the
        dispute.

       

      Events
        Affecting Guarantor.
        Any of
        the preceding events occurs with respect to any guarantor, endorser, surety,
        or
        accommodation party of any of the Indebtedness or guarantor, endorser, surety,
        or accommodation party dies or becomes incompetent or revokes or disputes
        the
        validity of, or liability under, any Guaranty of the Indebtedness.

       

      Adverse
        Change.
        A
        material adverse change occurs in Grantor's financial condition, or Lender
        believes the prospect of payment or performance of the Indebtedness is
        impaired.

      Insecurity.
        Lender
        in good faith believes itself insecure.

       

      Cure
        Provisions.
        If any
        default, other than a default in payment is curable and if Grantor has not
        been
        given a notice of a breach of the same provision of this Agreement within
        the
        preceding twelve (12) months, it may be cured if Grantor, after receiving
        written notice from Lender demanding cure of such default: (1) cures the
        default
        within ten (10) days; or (2) if the cure requires more than ten (10) days,
        immediately initiates steps which Lender deems in Lender's sole discretion
        to be
        sufficient to cure the default and thereafter continues and completes all
        reasonable and necessary steps sufficient to produce compliance as soon as
        reasonably practical.

       

      RIGHTS
        AND REMEDIES ON DEFAULT.
        If an
        Event of Default occurs under this Agreement, at any time thereafter, Lender
        shall have all the rights of a secured party under the West Virginia Uniform
        Commercial Code. In addition and without limitation, Lender may exercise
        anyone
        or

      more
        of
        the following rights and remedies:

       

      Accelerate
        Indebtedness.
        Lender
        may declare the entire Indebtedness, including any prepayment penalty which
        Grantor would be required to pay, immediately due and payable, without notice
        of
        any kind to Grantor.

       

      Assemble
        Collateral.
        Lender
        may require Grantor to deliver to Lender all or any portion of the Collateral
        and any and all certificates of title and other documents relating to the
        Collateral. Lender may require Grantor to assemble the Collateral and make
        it
        available to Lender at a place to be designated by Lender. Lender also shall
        have full power to enter upon the property of Grantor to take possession
        of and
        remove the Collateral. If the Collateral contains other goods not covered
        by
        this Agreement at the time of repossession, Grantor agrees Lender may take
        such
        other goods, provided that Lender makes reasonable efforts to return them
        to
        Grantor after repossession.

       

      Sell
        the Collateral.
        Lender
        shall have full power to sell, lease, transfer, or otherwise deal with the
        Collateral or proceeds thereof in Lender's own name or that of Grantor. Lender
        may sell the Collateral at public auction or private sale. Unless the Collateral
        threatens to decline speedily in value or is of a type customarily sold on
        a
        recognized market, Lender will give Grantor, and other persons as required
        by
        law, reasonable notice of the time and place of any public sale, or the time
        after which any private sale or any other disposition of the Collateral is
        to be
        made. However, no notice need be provided to any person who, after Event
        of
        Default occurs, enters into and authenticates an agreement waiving that person's
        right to notification of sale. The requirements of reasonable notice shall
        be
        met if such notice is given at least ten (10) days before the time of the
        sale
        or disposition. All expenses relating to the disposition of the Collateral,
        including without limitation the expenses of retaking, holding, insuring,
        preparing for sale and selling the Collateral, shall become a part of the
        Indebtedness secured by this Agreement and shall be payable on demand, with
        interest at the Note rate from date of expenditure until repaid.

       

      Appoint
        Receiver.
        Lender
        shall have the right to have a receiver appointed to take possession of all
        or
        any part of the Collateral, with the power to protect and preserve the
        Collateral, to operate the Collateral preceding foreclosure or sale, and
        to
        collect the Rents from the Collateral and apply the proceeds, over and above
        the
        cost of the receivership, against the Indebtedness. The receiver may serve
        without bond if permitted by law. Lender's right to the appointment of a
        receiver shall exist whether or not the apparent value of the Collateral
        exceeds
        the Indebtedness by a substantial amount. Employment by Lender shall not
        disqualify a person from serving as a receiver.

       

      Collect
        Revenues, Apply Accounts.
        Lender,
        either itself or through a receiver, may collect the payments, rents, income,
        and revenues from the Collateral. Lender may at any time in Lender's discretion
        transfer any Collateral into Lender's own name or that of Lender's nominee
        and
        receive the payments, rents, income, and revenues therefrom and hold the
        same as
        security for the Indebtedness or apply it to payment of the Indebtedness
        in such
        order of preference as Lender may determine. Insofar as the Collateral consists
        of accounts, general intangibles, insurance policies, instruments, chattel
        paper, choses in action, or similar property, Lender may demand, collect,
        receipt for, settle, compromise, adjust, sue for, foreclose, or realize on
        the
        Collateral as Lender may determine, whether or not Indebtedness or Collateral
        is
        then due. For these purposes, Lender may, on behalf of and in the name of
        Grantor, receive, open and dispose of mail addressed to Grantor; change any
        address to which mail and payments are to be sent; and endorse notes, checks,
        drafts, money orders, documents of title, instruments and items pertaining
        to
        payment, shipment, or storage of any Collateral. To facilitate collection,
        Lender may notify account debtors and obligors on any Collateral to make
        payments directly to Lender.

       

      Obtain
        Deficiency.
        If
        Lender chooses to sell any or all of the Collateral, Lender may obtain a
        judgment against Grantor for any deficiency remaining on the Indebtedness
        due to
        Lender after application of all amounts received from the exercise of the
        rights
        provided in this Agreement. Grantor shall be liable for a deficiency even
        if the
        transaction described in this subsection is a sale of accounts or chattel
        paper.

       

      Other
        Rights and Remedies.
        Lender
        shall have all the rights and remedies of a secured creditor under the
        provisions of the Uniform Commercial Code, as may be amended from time to
        time.
        In addition, Lender shall have and may exercise any or all other rights and
        remedies it may have available at law, in equity, or otherwise.

       

      Election
        of Remedies.
        Except
        as may be prohibited by applicable law, all of Lender's rights and remedies,
        whether evidenced by this Agreement, the Related Documents, or by any other
        writing, shall be cumulative and may be exercised singularly or concurrently.
        Election by Lender to pursue any remedy shall not exclude pursuit of any
        other
        remedy, and an election to make expenditures or to take action to perform
        an
        obligation of Grantor under this Agreement, after Grantor's failure to perform,
        shall not affect Lender's right to declare a default and exercise its
        remedies.

      MISCELLANEOUS
        PROVISIONS.
        The
        following miscellaneous provisions are a part of this Agreement:

       

      Amendments.
        This
        Agreement, together with any Related Documents, constitutes the entire
        understanding and agreement of the parties as to the matters set forth in
        this
        Agreement. No alteration of or amendment to this Agreement shall be effective
        unless given in writing and signed by the party or parties sought to be charged
        or bound by the alteration or amendment.

       

      Attorneys'
        Fees; Expenses.
        Grantor
        agrees to pay upon demand all of Lender's costs and expenses, including Lender's
        attorneys' fees and Lender's legal expenses, incurred in connection with
        the
        enforcement of this Agreement. Lender may hire or pay someone else to help
        enforce this Agreement, and Grantor shall pay the costs and expenses of such
        enforcement. Costs and expenses include Lender's attorneys' fees and legal
        expenses whether or not there is a lawsuit, including attorneys' fees and
        legal
        expenses for bankruptcy proceedings (including efforts to modify or vacate
        any
        automatic stay or injunction), appeals, and any anticipated post-judgment
        collection services. Grantor also shall pay all court costs and such additional
        fees as may be directed by the court.

       

      Caption
        Headings. Caption
        headings in this Agreement are for convenience purposes only and are not
        to be
        used to interpret or define the provisions of this Agreement.

       

      Governing
        Law.
        This Agreement will be governed by federal law applicable to Lender and,
        to the
        extent not preempted by federal law, the laws of the State of West Virginia
        without regard to its conflicts of law provisions.
        This Agreement has
        been accepted by Lender in the State of West Virginia.

       

      No
        Waiver by Lender.
        Lender
        shall not be deemed to have waived any rights under this Agreement unless
        such
        waiver is given in writing and signed by Lender. No delay or omission on
        the
        part of Lender in exercising any right shall operate as a waiver of such
        right
        or any other right. A waiver by Lender of a provision of this Agreement shall
        not prejudice or constitute a waiver of Lender's right otherwise to demand
        strict compliance with that provision or any other provision of this Agreement.
        No prior waiver by Lender, nor any course of dealing between Lender and Grantor,
        shall constitute a waiver of any of Lender's rights or of any of Grantor's
        obligations as to any future transactions. Whenever the consent of Lender
        is
        required under this Agreement, the granting of such consent by Lender in
        any
        instance shall not constitute continuing consent to subsequent instances
        where
        such consent is required and in all cases such consent may be granted or
        withheld in the sole discretion of Lender.

      

      Notices.
        Any
        notice required to be given under this Agreement shall be given in writing,
        and
        shall be effective when actually delivered, when actually received by
        telefacsimile (unless otherwise required by law), when deposited with a
        nationally recognized overnight courier, or, if mailed, when deposited in
        the
        United States mail, as first class, certified or registered mail postage
        prepaid, directed to the addresses shown near the beginning of this Agreement.
        Any party may change its address for notices under this Agreement by giving
        formal written notice to the other parties, specifying that the purpose of
        the
        notice is to change the party's address. For notice purposes, Grantor agrees
        to
        keep Lender informed at all times of Grantor's current address. Unless otherwise
        provided or required by law, if there is more than one Grantor, any notice
        given
        by Lender to any Grantor is deemed to be notice given to all
        Grantors.

       

      Power
        of Attorney.
        Grantor
        hereby appoints Lender as Grantor's irrevocable attorney-in-fact for the
        purpose
        of executing any documents necessary to perfect, amend, or to continue the
        security interest granted in this Agreement or to demand termination of filings
        of other secured parties. Lender may at any time, and without further
        authorization from Grantor, file a carbon, photographic or other reproduction
        of
        any financing statement or of this Agreement for use as a financing statement.
        Grantor will reimburse Lender for all expenses for the perfection and the
        continuation of the perfection of Lender's security interest in the
        Collateral.

       

      Severability.
        If a
        court of competent jurisdiction finds any provision of this Agreement to
        be
        illegal, invalid, or unenforceable as to any circumstance, that finding shall
        not make the offending provision illegal, invalid, or unenforceable as to
        any
        other circumstance. If feasible, the offending provision shall be considered
        modified so that it becomes legal, valid and enforceable. If the offending
        provision cannot be so modified, it shall be considered deleted from this
        Agreement. Unless otherwise required by law, the illegality, invalidity,
        or
        unenforceability of any provision of this Agreement shall not affect the
        legality, validity or enforceability of any other provision of this
        Agreement.

       

      Successors
        and Assigns.
        Subject
        to any limitations stated in this Agreement on transfer of Grantor's interest,
        this Agreement shall be binding upon and inure to the benefit of the parties,
        their successors and assigns. If ownership of the Collateral becomes vested
        in a
        person other than Grantor, Lender, without notice to Grantor, may deal with
        Grantor's successors with reference to this Agreement and the Indebtedness
        by
        way of forbearance or extension without releasing Grantor from the obligations
        of this Agreement or liability under the Indebtedness.

       

      Survival
        of Representations and Warranties.
        All
        representations, warranties, and agreements made by Grantor in this Agreement
        shall survive the execution and delivery of this Agreement, shall be continuing
        in nature, and shall remain in full force and effect until such time as
        Grantor's Indebtedness shall be paid in full.

       

      Time
        is of the Essence.
        Time is
        of the essence in the performance of this Agreement.

       

      Waive
        Jury.
        All
        parties to this Agreement hereby waive the right to any jury trial in any
        action, proceeding, or counterclaim brought by any party against any other
        party.

      DEFINITIONS.
        The
        following capitalized words and terms shall have the following meanings when
        used in this Agreement. Unless specifically stated to the contrary, all
        references to dollar amounts shall mean amounts in lawful money of the United
        States of America. Words and terms used in the singular shall include the
        plural, and the plural shall include the singular, as the context may require.
        Words and terms not otherwise defined in this Agreement shall have the meanings
        attributed to such terms in the Uniform Commercial Code:

       

      Agreement.
        The
        word
        "Agreement" means this Commercial Security Agreement, as this Commercial
        Security Agreement may be amended or modified from time to time, together
        with
        all exhibits and schedules attached to this Commercial Security Agreement
        from
        time to time.

       

      Borrower.
        The
        word
        "Borrower" means CHAMPION INDUSTRIES INC and includes all co-signers and
        co-makers signing the Note and all their successors and assigns.

       

      Collateral.
        The word
        "Collateral" means all of Grantor's right, title and interest in and to all
        the
        Collateral as described in the Collateral Description section of this
        Agreement.

      Default.
        The
        word
        "Default" means the Default set forth in this Agreement in the section titled
        "Default".

       

      Environmental
        Laws. The
        words
        "Environmental Laws" mean any and all state, federal and local statutes,
        regulations and ordinances relating to the protection of human health or
        the
        environment, including without limitation the Comprehensive Environmental
        Response. Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
        Section
        9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act
        of
        1986, Pub. L. No. 99-499 ("SARA"). the Hazardous Materials Transportation
        Act,
        49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act,
        42
        U.S.C. Section 6901, et seq., or other applicable state or federal laws,
        rules
        or regulations adopted pursuant thereto.

       

      Event
        of Default. The
        words
        "Event of Default" mean any of the events of default set forth in this Agreement
        in the default section of this Agreement.

      Grantor.
        The word
        "Grantor" means CHAMPION INDUSTRIES INC.

       

      Guaranty.
        The word
        "Guaranty" means the guaranty from guarantor, endorser, surety, or accommodation
        party to lender, including without limitation a guaranty of all or part of
        the
        Note.

       

      Hazardous
        Substances.
        The
        words "Hazardous Substances" mean materials that. because of their quantity,
        concentration or physical, chemical or infectious characteristics, may cause
        or
        pose a present or potential hazard to human health or the environment when
        improperly used, treated, stored, disposed of generated, manufactured,
        transported or otherwise handled. The words "Hazardous Substances" are used
        in
        their very broadest sense and include without limitation any and all hazardous
        or toxic substances, materials or waste as defined by or listed under the
        Environmental laws. The term "Hazardous Substances" also includes, without
        limitation, petroleum and petroleum by-products or any fraction thereof and
        asbestos.

       

      Indebtedness.
        The word
        "Indebtedness" means the indebtedness evidenced by the Note or Related
        Documents, including all principal and interest together with all other
        indebtedness and costs and expenses for which Grantor is responsible under
        this
        Agreement or under any of the Related Documents.

       

      Lender.
        The word
        "Lender" means FIRST BANK OF CHARLESTON, INC., its successors and
        assigns.

       

      Note.
        The word
        "Note" means the Note executed by CHAMPION INDUSTRIES INC in the principal
        amount of $642,831.68 dated April 30, 2006, together with all renewals of
        extensions of, modifications of, refinancings of, consolidations of, and
        substitutions for the note or credit agreement.

       

      Property.
        The word
        "Property" means all of Grantor's right, title and interest in and to all
        the
        Property as described in the "Collateral Description" section of this
        Agreement.

       

      Related
        Documents. The
        words
        "Related Documents" mean all promissory notes, credit agreements, loan
        agreements, environmental agreements, guaranties, security agreements,
        mortgages, deeds of trust, security deeds, collateral mortgages, and all
        other
        instruments, agreements and documents, whether now or hereafter existing,
        executed in connection with the Indebtedness.

       

      GRANTOR
        HAS READ AND UNDERSTOOD All THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT
        AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AUGUST 30,
        2006.

      GRANTOR:

      

      

      

      CHAMPION
        INDUSTRIES, INC.

      

      

      By: /s/
        Toney K.
        Adkins                         

      TONEY
        K. ADKINS, President of CHAMPION INDUSTRIES, INC.

      

      

      COMMUNITY
        TRUST BANK, INC.

      

      

      X_________________________________

      Authorized
        Signer

      

      

      LASER
        PRO
        Landing. v.. 5.30.00.0001 COPl'. Hd
        FinWlcl8l Solulioni. Ino. 1917.2001. All Righi' "-ved. . WV
        M:\LASERPRO\CFl\lPL\UO.FC TFI-1868
        PR.8

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      BUSINESS
        LOAN AGREEMENT

      Principal  Loan
        Date
        Maturity Loan No. Call/Coll 
        Account Officer Initials

      $642,831.68 08-30-2006
        09-05-2011 315713 022 

      References
        in the shaded area are for Lender's use only and do not limit the applicability
        of this document to any particular loan or item. Any item above containing
        "'***" has been omitted due to text length limitations.

      

      

      

      Borrower: CHAMPION
        INDUSTRIES, INC. 

      (TIN:
        55-0717455)

      POST
        OFFICE BOX 2968

      HUNTINGTON.
        WV 25728 

      

      Lender: FIRST
        BANK OF CHARLESTON, INC.

      201
        PENNSYLVANIA AVENUE 

      CHARLESTON.
        WV 25302

      (304)
        340-3000

      

      THIS
        BUSINESS LOAN AGREEMENT dated August 30, 2006, is made and executed between
        CHAMPION INDUSTRIES INC ("Borrower") and FIRST BANK OF CHARLESTON, INC.
        ("Lender") on the following terms and conditions. Borrower has received prior
        commercial Loans from Lender or has applied to Lender for a commercial Loan
        or
        Loans or other financial accommodations, including those which may be described
        on any exhibit or schedule attached to this Agreement ("Loan"). Borrower
        understands and agrees that: (A) in granting, renewing. or extending any
        Loan,
        Lender is relying upon Borrower's representations, warranties, and agreements
        as
        set forth in this Agreement; (B) the granting, renewing, or extending of
        any
        Loan by Lender at all times shall be subject to Lender's sole judgment and
        discretion; and (C) all such Loans shall be and remain subject to the terms
        and
        conditions of this Agreement.

       

      TERM.
        This
        Agreement shall be effective as of August 30, 2006, and shall continue in
        full
        force and effect until such time as all of Borrower's Loans in favor of Lender
        have been paid in full, including principal, interest, costs, expenses,
        attorneys' fees, and other fees and charges, or until September 5,
        2011.

       

      CONDITIONS
        PRECEDENT TO EACH ADVANCE.
        Lender's obligation to make the initial Advance and each subsequent Advance
        under this Agreement shall be subject to the fulfillment to Lender's
        satisfaction of all of the conditions set forth in this Agreement and in
        the
        Related Documents.

       

      Loan
        Documents.
        Borrower shall provide to Lender the following documents for the Loan: (1)
        the
        Note; (2) Security Agreements granting to Lender security interests in the
        Collateral; (3) financing statements and all other documents perfecting Lender's
        Security Interests; (4) evidence of insurance as required below; (5) together
        with all such Related Documents as Lender may require for the Loan; all in
        form
        and substance satisfactory to Lender and Lender's counsel.

       

      Borrower's
        Authorization.
        Borrower shall have provided in form and substance satisfactory to Lender
        properly certified resolutions, duly authorizing the execution and delivery
        of
        this Agreement, the Note and the Related Documents. In addition, Borrower
        shall
        have provided such other resolutions, authorizations, documents and instruments
        as Lender or its counsel, may require.

       

      Payment
        of Fees and Expenses.
        Borrower shall have paid to Lender all fees, charges, and other expenses
        which
        are then due and payable as specified in this Agreement or any Related
        Document.

       

      Representations
        and Warranties.
        The
        representations and warranties set forth in this Agreement, in the Related
        Documents, and in any document or certificate delivered to Lender under this
        Agreement are true and correct.

       

      No
        Event of Default.
        There
        shall not exist at the time of any Advance a condition which would constitute
        an
        Event of Default under this Agreement or under any Related
        Document.

       

      REPRESENTATIONS
        AND WARRANTIES.
        Borrower represents and warrants to Lender, as of the date of this Agreement,
        as
        of the date of each disbursement of Loan proceeds, as of the date of any
        renewal, extension or modification of any Loan and at all times any Indebtedness
        exists:

       

      Organization.
        Borrower
        is a corporation for profit which is, and at all times shall be, duly organized,
        validly existing, and in good standing under and by virtue of the laws of
        the
        State of West Virginia. Borrower is duly authorized to transact business
        in all
        other states in which Borrower is doing business, having obtained all necessary
        filings, governmental licenses and approvals for each state in which Borrower
        is
        doing business. Specifically, Borrower is, and at all times shall be, duly
        qualified as a foreign corporation in all states in which the failure to
        so
        qualify would have a material adverse effect on its business or financial
        condition. Borrower has the full power and authority to own its properties
        and
        to transact the business in which it is presently engaged or presently proposes
        to engage. Borrower maintains its principal office at 2450-90 FIRST AVENUE,
        HUNTINGTON, WV 25703. Unless Borrower has designated otherwise in writing,
        this
        is the principal office at which Borrower keeps its books and records including
        its records concerning the Collateral. Borrower will notify Lender prior
        to any
        change in the location of Borrower's state of organization or any change
        in
        Borrower's name. Borrower shall do all things necessary to preserve and to
        keep
        in full force and effect its existence, rights and privileges, and shall
        comply
        with all regulations, rules, ordinances, statutes, orders and decrees of
        any
        governmental or quasi-governmental authority or court applicable to Borrower
        and
        Borrower's business activities.

       

      Assumed
        Business Names.
        Borrower has filed or recorded all documents or filings required by law relating
        to all assumed business names used by Borrower. Excluding the name of Borrower,
        the following is a complete list of all assumed business names under which
        Borrower does business:

      

      Authorization.
        Borrower's execution, delivery, and performance of this Agreement and all
        the
        Related Documents have been duly authorized by all necessary action by Borrower
        and do not conflict with, result in a violation of, or constitute a default
        under (1) any provision of (a) Borrower's articles of incorporation or
        organization, or bylaws, or (b) any agreement or other instrument binding
        upon
        Borrower or (2) any law, governmental regulation, court decree, or order
        applicable to Borrower or to Borrower's properties.

       

      Financial
        Information.
        Each of
        Borrower's financial statements supplied to Lender truly and completely
        disclosed Borrower's financial condition as of the date of the statement,
        and
        there has been no material adverse change in Borrower's financial condition
        subsequent to the date of the most recent financial statement supplied to
        Lender. Borrower has no material contingent obligations except as disclosed
        in
        such financial statements.

       

      Legal
        Effect.
        This
        Agreement constitutes, and any instrument or agreement Borrower is required
        to
        give under this Agreement when delivered will constitute legal, valid, and
        binding obligations of Borrower enforceable against Borrower in accordance
        with
        their respective terms.

       

      Properties.
        Except
        as contemplated by this Agreement or as previously disclosed in Borrower's
        financial statements or in writing to Lender and as accepted by Lender, and
        except for property tax liens for taxes not presently due and payable, Borrower
        owns and has good title to all of Borrower's properties free and clear of
        all
        Security Interests, and has not executed any security documents or financing
        statements relating to such properties. All of Borrower's properties are
        titled
        in Borrower's legal name, and Borrower has not used or filed a financing
        statement under any other name for at least the last five (5)
        years.

       

      Hazardous
        Substances.
        Except
        as disclosed to and acknowledged by Lender in writing, Borrower represents
        and
        warrants that: (1) During the period of Borrower's ownership of the Collateral,
        there has been no use, generation, manufacture, storage, treatment, disposal,
        release or threatened release of any Hazardous Substance by any person on,
        under, about or from any of the Collateral. (2) Borrower has no knowledge
        of, or
        reason to believe that there has been (a) any breach or violation of any
        Environmental laws; (b) any use, generation, manufacture, storage, treatment,
        disposal, release or threatened release of any Hazardous Substance on, under,
        about or from the Collateral by any prior owners or occupants of any of the
        Collateral; or (c) any actual or threatened litigation or claims of any kind
        by
        any person relating to such matters. (3) Neither Borrower nor any tenant,
        contractor, agent or other authorized user of any of the Collateral shall
        use,
        generate, manufacture, store, treat, dispose of or release any Hazardous
        Substance on, under, about or from any of the Collateral; and any such activity
        shall be conducted in compliance with all applicable federal, state, and
        local
        laws, regulations, and ordinances, including without limitation all
        Environmental laws. Borrower authorizes Lender and its agents to enter upon
        the
        Collateral to make such inspections and tests as Lender may deem appropriate
        to
        determine compliance of the Collateral with this section of the Agreement.
        Any
        inspections or tests made by Lender shall be at Borrower's expense and for
        Lender's purposes only and shall not be construed to create any responsibility
        or liability on the part of Lender to Borrower or to any other person. The
        representations and warranties contained herein are based on Borrower's due
        diligence in investigating the Collateral for hazardous waste and Hazardous
        Substances. Borrower hereby (1) releases and waives any future claims against
        Lender for indemnity or contribution in the event Borrower becomes liable
        for
        cleanup or other costs under any such laws, and (2) agrees to indemnify and
        hold
        harmless Lender against any and all claims, losses, liabilities, damages,
        penalties, and expenses which Lender may directly or indirectly sustain or
        suffer resulting from a breach of this section of the Agreement or as a
        consequence of any use, generation, manufacture, storage, disposal, release
        or
        threatened release of a hazardous waste or substance on the Collateral. The
        provisions of this section of the Agreement, including the obligation to
        indemnify, shall survive the payment of the Indebtedness and the termination,
        expiration or satisfaction of this Agreement and shall not be affected by
        Lender's acquisition of any interest in any of the Collateral, whether by
        foreclosure or otherwise.

      Litigation
        and Claims.
        No
        litigation, claim, investigation, administrative proceeding or similar action
        (including those for unpaid taxes) against Borrower is pending or threatened,
        and no other event has occurred which may materially adversely affect Borrower's
        financial condition or properties, other than litigation, claims, or other
        events, if any, that have been disclosed to and acknowledged by Lender in
        writing.

       

      Taxes.
        To the
        best of Borrower's knowledge, all of Borrower's tax returns and reports that
        are
        or were required to be filed, have been filed, and all taxes, assessments
        and
        other governmental charges have been paid in full, except those presently
        being
        or to be contested by Borrower in good faith in the ordinary course of business
        and for which adequate reserves have been provided.

       

      Lien
        Priority.
        Unless
        otherwise previously disclosed to Lender in writing, Borrower has not entered
        into or granted any Security Agreements, or permitted the filing or attachment
        of any Security Interests on or affecting any of the Collateral directly
        or
        indirectly securing repayment of Borrower's Loan and Note, that would be
        prior
        or that may in any way be superior to Lender's Security Interests and rights
        in
        and to such Collateral.

       

      Binding
        Effect.
        This
        Agreement, the Note, all Security Agreements (if any), and all Related Documents
        are binding upon the signers thereof, as well as upon their successors,
        representatives and assigns, and are legally enforceable in accordance with
        their respective terms.

      AFFIRMATIVE
        COVENANTS.
        Borrower covenants and agrees with Lender that, so long as this Agreement
        remains in effect, Borrower will:

       

      Notices
        of Claims and Litigation.
        Promptly inform Lender in writing of (1) all material adverse changes in
        Borrower's financial condition, and (2) all existing and all threatened
        litigation, claims, investigations, administrative proceedings or similar
        actions affecting Borrower or any Guarantor which could materially affect
        the
        financial condition of Borrower or the financial condition of any
        Guarantor.

       

      Financial
        Records.
        Maintain its books and records in accordance with GAAP, applied on a consistent
        basis, and permit Lender to examine and audit Borrower's books and records
        at
        all reasonable times.

      Financial
        Statements.
        Furnish
        Lender with the following:

       

      Annual
        Statements.
        As soon
        as available, but in no event later than thirty (30) days after the end of
        each
        fiscal year, Borrower's balance sheet and income statement for the year ended,
        compiled by a certified public accountant satisfactory to Lender.

       

      Tax
        Returns.
        As soon
        as available, but in no event later than thirty (30) days after the applicable
        filing date for the tax reporting period

      ended,
        Federal and other governmental tax returns, prepared by a certified public
        accountant satisfactory to  Lender.

       

      All
        financial reports required to be provided under this Agreement shall be prepared
        in accordance with GAAP, applied on a consistent basis, and certified by
        Borrower as being true and correct.

      Additional
        Information.
        Furnish
        such additional information and statements, as Lender may request from time
        to
        time.

       

      Insurance.
        Maintain fire and other risk insurance, public liability insurance, and such
        other insurance as Lender may require with respect to Borrower's properties
        and
        operations, in form, amounts, coverages and with insurance companies acceptable
        to Lender. Borrower, upon request of Lender, will deliver to Lender from
        time to
        time the policies or certificates of insurance in form satisfactory to Lender,
        including stipulations that coverages will not be cancelled or diminished
        without at least thirty (30) days prior written notice to Lender. Each insurance
        policy also shall include an endorsement providing that coverage in favor
        of
        Lender will not be impaired in any way by any act, omission or default of
        Borrower or any other person. In connection with all policies covering assets
        in
        which Lender holds or is offered a security interest for the Loans, Borrower
        will provide Lender with such Lender's loss payable or other endorsements
        as
        Lender may require.

       

      Insurance
        Reports.
        Furnish
        to Lender, upon request of Lender, reports on each existing insurance policy
        showing such information as Lender may reasonably request, including without
        limitation the following: (1) the name of the insurer; (2) the risks insured;
        (3) the amount of the policy; (4) the properties insured; (5) the then current
        property values on the basis of which insurance has been obtained, and the
        manner of determining those values; and (6) the expiration date of the policy.
        In addition, upon request of Lender (however not more often than annually).
        Borrower will have an independent appraiser satisfactory to Lender determine,
        as
        applicable, the actual cash value or replacement cost of any Collateral.
        The
        cost of such appraisal shall be paid by Borrower.

       

      Other
        Agreements.
        Comply
        with all terms and conditions of all other agreements, whether now or hereafter
        existing, between Borrower and any other party and notify Lender immediately
        in
        writing of any default in connection with any other such
        agreements.

       

      Loan
        Proceeds.
        Use all
        Loan proceeds solely for Borrower's business operations, unless specifically
        consented to the contrary by Lender in writing.

       

      Taxes,
        Charges and Liens.
        Pay and
        discharge when due all of its indebtedness and obligations, including without
        limitation all assessments, taxes, governmental charges, levies and liens,
        of
        every kind and nature, imposed upon Borrower or its properties, income, or
        profits, prior to the date on which penalties would attach, and all lawful
        claims that, if unpaid, might become a lien or charge upon any of Borrower's
        properties, income, or profits.

       

      Performance.
        Perform
        and comply, in a timely manner, with all terms, conditions, and provisions
        set
        forth in this Agreement, in the Related Documents, and in all other instruments
        and agreements between Borrower and Lender. Borrower shall notify Lender
        immediately in writing of any default in connection with any
        agreement.

       

      Operations.
        Maintain executive and management personnel with substantially the same
        qualifications and experience as the present executive and management personnel;
        provide written notice to Lender of any change in executive and management
        personnel; conduct its business affairs in a reasonable and prudent
        manner.

       

      Environmental
        Studies.
        Promptly conduct and complete, at Borrower's expense, all such investigations,
        studies, samplings and testings as may be requested by Lender or any
        governmental authority relative to any substance, or any waste or by-product
        of
        any substance defined as toxic or a hazardous substance under applicable
        federal, state, or local law, rule, regulation, order or directive, at or
        affecting any property or any facility owned, leased or used by
        Borrower.

       

      Compliance
        with Governmental Requirements.
        Comply
        with all laws, ordinances, and regulations, now or hereafter in effect, of
        all
        governmental authorities applicable to the conduct of Borrower's properties,
        businesses and operations, and to the use or occupancy of the Collateral,
        including without limitation, the Americans With Disabilities Act. Borrower
        may
        contest in good faith any such law, ordinance, or regulation and withhold
        compliance during any proceeding, including appropriate appeals, so long
        as
        Borrower has notified Lender in writing prior to doing so and so long as,
        in
        Lender's sole opinion, Lender's interests in the Collateral are not jeopardized.
        Lender may require Borrower to post adequate security or a surety bond,
        reasonably satisfactory to Lender, to protect Lender's interest.

       

      Inspection.
        Permit
        employees or agents of Lender at any reasonable time to inspect any and all
        Collateral for the Loan or Loans and Borrower's other properties and to examine
        or audit Borrower's books, accounts, and records and to make copies and
        memoranda of Borrower's books, accounts, and records. If Borrower now or
        at any
        time hereafter maintains any records (including without limitation computer
        generated records and computer software programs for the generation of such
        records) in the possession of a third party, Borrower, upon request of Lender,
        shall notify such party to permit Lender free access to such records at all
        reasonable times and to provide Lender with copies of any records it may
        request, all at Borrower's expense.

       

      Environmental
        Compliance and Reports.
        Borrower shall comply in all respects with any and all Environmental laws;
        not
        cause or permit to exist, as a result of an intentional or unintentional
        action
        or omission on Borrower's part or on the part of any third party, on property
        owned and/or occupied by Borrower, any environmental activity where damage
        may
        result to the environment, unless such environmental activity is pursuant
        to and
        in compliance with the conditions of a permit issued by the appropriate federal,
        state or local governmental authorities; shall furnish to Lender promptly
        and in
        any event within thirty (30) days after receipt thereof a copy of any notice,
        summons, lien, citation, directive, letter or other communication from any
        governmental agency or instrumentality concerning any intentional or
        unintentional action or omission on Borrower's part in connection with any
        environmental activity whether or not there is damage to the environment
        and/or
        other natural resources.

       

      Additional
        Assurances.
        Make,
        execute and deliver to Lender such promissory notes, mortgages, deeds of
        trust,
        security agreements, assignments, financing statements, instruments, documents
        and other agreements as Lender or its attorneys may reasonably request to
        evidence and secure the Loans and to perfect all Security
        Interests.

       

      LENDER'S
        EXPENDITURES.
        If any
        action or proceeding is commenced that would materially affect Lender's interest
        in the Collateral or if Borrower fails to comply with any provision of this
        Agreement or any Related Documents, including but not limited to Borrower's
        failure to discharge or pay when due any amounts Borrower is required to
        discharge or pay under this Agreement or any Related Documents, Lender on
        Borrower's behalf may (but shall not be obligated to) take any action that
        Lender deems appropriate, including but not limited to discharging or paying
        all
        taxes, liens, security interests, encumbrances and other claims, at any time
        levied or placed on any Collateral and paying all costs for insuring,
        maintaining and preserving any Collateral. All such expenditures incurred
        or
        paid by Lender for such purposes will then bear interest at the rate charged
        under the Note from the date incurred or paid by Lender to the date of repayment
        by Borrower. All such expenses will become a part of the indebtedness and,
        at
        Lender's option, will (A) be payable on demand; (B) be added to the balance
        of
        the Note and be apportioned among and be payable with any installment payments
        to become due during either (1) the term of any applicable insurance policy;
        or
        (2) the remaining term of the Note; or (C) be treated as a balloon payment
        which
        will be due and payable at the Note's maturity.

      

       

      CESSATION
        OF ADVANCES.
        If
        Lender has made any commitment to make any Loan to Borrower, whether under
        this
        Agreement or under any other agreement, Lender shall have no obligation to
        make
        Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor
        is
        in default under the terms of this Agreement or any of the Related Documents
        or
        any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower
        or any Guarantor dies, becomes incompetent or becomes insolvent, files a
        petition in bankruptcy or similar proceedings, or is adjudged a bankrupt;
        (C)
        there occurs a material adverse change in Borrower's financial condition,
        in the
        financial condition of any Guarantor, or in the value of any Collateral securing
        any Loan; or (DI any Guarantor seeks, claims or otherwise attempts to limit,
        modify or revoke such Guarantor's guaranty of the Loan or any other Loan
        with
        Lender; or (E) Lender in good faith deems itself insecure, even though no
        Event
        of Default shall have occurred.

      

      RIGHT
        OF SETOFF.
        To the
        extent permitted by applicable law, Lender reserves a right of setoff in
        all
        Borrower's accounts with Lender (whether checking, savings, or some other
        account). This includes all accounts Borrower holds jointly with someone
        else
        and all accounts Borrower may open in the future. However, this does not
        include
        any IRA or Keogh accounts, or any trust accounts for which setoff would be
        prohibited by law. Borrower authorizes Lender, to the extent permitted by
        applicable law, to charge or setoff all sums owing on the Indebtedness against
        any and all such accounts, and, at Lender's option, to administratively freeze
        all such accounts to allow Lender to protect Lender's charge and setoff rights
        provided in this paragraph.

      

      DEFAULT.
        Each of
        the following shall constitute an Event of Default under this
        Agreement:

      

      Payment
        Default.
        Borrower fails to make any payment when due under the Loan.

       

      

       

      Other
        Defaults.
        Borrower fails to comply with or to perform any other term, obligation, covenant
        or condition contained in this Agreement or in any of the Related Documents
        or
        to comply with or to perform any term, obligation, covenant or condition
        contained in any other agreement between Lender and Borrower.

      

      Default
        in Favor of Third Parties.
        Borrower or any Grantor defaults under any Loan, extension of credit, security
        agreement, purchase or sales agreement, or any other agreement, in favor
        of any
        other creditor or person that may materially affect any of Borrower's or
        any
        Grantor's property or Borrower's or any Grantor's ability to repay the Loans
        or
        perform their respective obligations under this Agreement or any of the Related
        Documents.

      

      False
        Statements.
        Any
        warranty, representation or statement made or furnished to Lender by Borrower
        or
        on Borrower's behalf under this Agreement or the Related Documents is false
        or
        misleading in any material respect, either now or at the time made or furnished
        or becomes false or misleading at any time thereafter.

      

      Insolvency.
        The
        dissolution or termination of Borrower's existence as a going business, the
        insolvency of Borrower, the appointment of a receiver for any part of Borrower's
        property, any assignment for the benefit of creditors, any type of creditor
        workout, or the commencement of any proceeding under any bankruptcy or
        insolvency laws by or against Borrower.

      

      Defective
        Collateralization.
        This
        Agreement or any of the Related Documents ceases to be in full force and
        effect
        (including failure of any collateral document to create a valid and perfected
        security interest or lien) at any time and for any reason.

      

      Creditor
        or Forfeiture Proceedings.
        Commencement of foreclosure or forfeiture proceedings, whether by judicial
        proceeding, self-help, repossession or any other method, by any creditor
        of
        Borrower or by any governmental agency against any collateral securing the
        Loan.
        This includes a garnishment of any of Borrower's accounts, including deposit
        accounts, with Lender. However, this Event of Default shall not apply if
        there
        is a good faith dispute by Borrower as to the validity or reasonableness
        of the
        claim which is the basis of the creditor or forfeiture proceeding and if
        Borrower gives Lender written notice of the creditor or forfeiture proceeding
        and deposits with Lender monies or a surety bond for the creditor or forfeiture
        proceeding, in an amount determined by Lender, in its sole discretion, as
        being
        an adequate reserve or bond for the dispute.

      

      Events
        Affecting Guarantor.
        Any of
        the preceding events occurs with respect to any Guarantor of any of the
        Indebtedness or any Guarantor dies or becomes incompetent, or revokes or
        disputes the validity of, or liability under, any Guaranty of the Indebtedness.
        In the event of a death, Lender, at its option, may, but shall not be required
        to, permit the Guarantor's estate to assume unconditionally the obligations
        arising under the guaranty in a manner satisfactory to Lender, and, in doing
        so,
        cure any Event of Default.

      

      Change
        in Ownership.
        Any
        change in ownership of twenty-five percent (25%) or more of the common stock
        of
        Borrower.

      

      Adverse
        Change.
        A
        material adverse change occurs in Borrower's financial condition, or Lender
        believes the prospect of payment or performance of the Loan is
        impaired.

      

      Insecurity.
        Lender
        in good faith believes itself insecure.

      

      Right
        to Cure.
        If any
        default, other than a default on Indebtedness, is curable and if Borrower
        or
        Grantor, as the case may be, has not been given a notice of a similar default
        within the preceding twelve (12) months, it may be cured if Borrower or Grantor,
        as the case may be, after receiving written notice from Lender demanding
        cure of
        such default: (1) cure the default within ten (10) days; or (2) if the cure
        requires more than ten (10) days, immediately initiate steps which Lender
        deems
        in Lender's sole discretion to be sufficient to cure the default and thereafter
        continue and complete all reasonable and necessary steps sufficient to produce
        compliance as soon as reasonably practical.

      

      EFFECT
        OF AN EVENT OF DEFAULT.
        If any
        Event of Default shall occur, except where otherwise provided in this Agreement
        or the Related Documents, all commitments and obligations of Lender under
        this
        Agreement or the Related Documents or any other agreement immediately will
        terminate (including any obligation to make further Loan Advances or
        disbursements), and, at Lender's option, all Indebtedness immediately will
        become due and payable, all without notice of any kind to Borrower, except
        that
        in the case of an Event of Default of the type described in the "Insolvency"
        subsection above, such acceleration shall be automatic and not optional.
        In
        addition, Lender shall have all the rights and remedies provided in the Related
        Documents or available at law, in equity, or otherwise. Except as may be
        prohibited by applicable law, all of Lender's rights and remedies shall be
        cumulative and may be exercised singularly or concurrently. Election by Lender
        to pursue any remedy shall not exclude pursuit of any other remedy, and an
        election to make expenditures or to take action to perform an obligation
        of
        Borrower or of any Grantor shall not affect Lender's right to declare a default
        and to exercise its rights and remedies.

      

      MISCELLANEOUS
        PROVISIONS.
        The
        following miscellaneous provisions are a part of this Agreement:

      

      Amendments.
        This
        Agreement, together with any Related Documents, constitutes the entire
        understanding and agreement of the parties as to the matters set forth in
        this
        Agreement. No alteration of or amendment to this Agreement shall be effective
        unless given in writing and signed by the party or parties sought to be charged
        or bound by the alteration or amendment.

      

      Attorneys'
        Fees; Expenses.
        Borrower agrees to pay upon demand all of Lender's costs and expenses, including
        Lender's attorneys' fees and Lender's legal expenses, incurred in connection
        with the enforcement of this Agreement. Lender may hire or pay someone else
        to
        help enforce this Agreement, and Borrower shall pay the costs and expenses
        of
        such enforcement. Costs and expenses include Lender's attorneys' fees and
        legal
        expenses whether or not there is a lawsuit, including attorneys' fees and
        legal
        expenses for bankruptcy proceedings (including efforts to modify or vacate
        any
        automatic stay or injunction), appeals, and any anticipated post-judgment
        collection services. Borrower also shall pay all court costs and such additional
        fees as may be directed by the court.

      

      Caption
        Headings.
        Caption
        headings in this Agreement are for convenience purposes only and are not
        to be
        used to interpret or define the provisions of this Agreement.

      

      Consent
        to Loan Participation.
        Borrower agrees and consents to Lender's sale or transfer, whether now or
        later,
        of one or more participation interests in the Loan to one or more purchasers,
        whether related or unrelated to Lender. Lender may provide, without any
        limitation whatsoever, to anyone or more purchasers, or potential purchasers,
        any information or knowledge Lender may have about Borrower or about any
        other
        matter relating to the Loan, and Borrower hereby waives any rights to privacy
        Borrower may have with respect to such matters. Borrower additionally waives
        any
        and all notices of sale of participation interests, as well as all notices
        of
        any repurchase of such participation interests. Borrower also agrees that
        the
        purchasers of any such participation interests will be considered as the
        absolute owners of such interests in the Loan and will have all the rights
        granted under the participation agreement or agreements governing the sale
        of
        such participation interests. Borrower further waives all rights of offset
        or
        counterclaim that it may have now or later against Lender or against any
        purchaser of such a participation interest and unconditionally agrees that
        either Lender or such purchaser may enforce Borrower's obligation under the
        Loan
        irrespective of the failure or insolvency of any holder of any interest in
        the
        Loan. Borrower further agrees that the purchaser of any such participation
        interests may enforce its interests irrespective of any personal claims or
        defenses that Borrower may have against Lender.

      

      Governing
        Law.
        This
        Agreement will be governed by federal law applicable to Lender and, to the
        extent not preempted by federal law, the laws of the State of West Virginia
        without regard to its conflicts of law provisions. This Agreement has been
        accepted by Lender in the State of West Virginia.

      

      No
        Waiver by Lender.
        Lender
        shall not be deemed to have waived any rights under this Agreement unless
        such
        waiver is given in writing and signed by Lender. No delay or omission on
        the
        part of Lender in exercising any right shall operate as a waiver of such
        right
        or any other right. A waiver by Lender of a provision of this Agreement shall
        not prejudice or constitute a waiver of Lender's right otherwise to demand
        strict compliance with that provision or any other provision of this Agreement.
        No prior waiver by Lender, nor any course of dealing between Lender and
        Borrower. or between Lender and any Grantor, shall constitute a waiver of
        any of
        Lender's rights or of any of Borrower's or any Grantor's obligations as to
        any
        future transactions. Whenever the consent of Lender is required under this
        Agreement, the granting of such consent by Lender in any instance shall not
        constitute continuing consent to subsequent instances where such consent
        is
        required and in all cases such consent may be granted or withheld in the
        sole
        discretion of Lender.

       

      Notices.
        Any
        notice required to be given under this Agreement shall be given in writing,
        and
        shall be effective when actually delivered, when actually received by
        telefacsimile (unless otherwise required by law), when deposited with a
        nationally recognized overnight courier, or, if mailed, when deposited in
        the
        United States mail, as first class, certified or registered mail postage
        prepaid, directed to the addresses shown near the beginning of this Agreement.
        Any party may change its address for notices under this Agreement by giving
        formal written notice to the other parties, specifying that the purpose of
        the
        notice is to change the party's address. For notice purposes, Borrower agrees
        to
        keep Lender informed at all times of Borrower's current address. Unless
        otherwise provided or required by law, if there is more than one Borrower,
        any
        notice given by Lender to any Borrower is deemed to be notice given to all
        Borrowers.

       

      Severability.
        If a
        court of competent jurisdiction finds any provision of this Agreement to
        be
        illegal, invalid, or unenforceable as to any circumstance, that finding shall
        not make the offending provision illegal, invalid, or unenforceable as to
        any
        other circumstance. If feasible, the offending provision shall be considered
        modified so that it becomes legal, valid and enforceable. If the offending
        provision cannot be so modified, it shall be considered deleted from this
        Agreement. Unless otherwise required by law, the illegality, invalidity,
        or
        unenforceability of any provision of this Agreement shall not affect the
        legality, validity or enforceability of any other provision of this
        Agreement.

       

      Subsidiaries
        and Affiliates of Borrower.
        To the
        extent the context of any provisions of this Agreement makes it appropriate,
        including without limitation any representation, warranty or covenant, the
        word
        "Borrower" as used in this Agreement shall include all of Borrower's
        subsidiaries and affiliates. Notwithstanding the foregoing however, under
        no
        circumstances shall this Agreement be construed to require Lender to make
        any
        Loan or other financial accommodation to any of Borrower's subsidiaries or
        affiliates.

       

      Successors
        and Assigns.
        All
        covenants and agreements by or on behalf of Borrower contained in this Agreement
        or any Related Documents shall bind Borrower's successors and assigns and
        shall
        inure to the benefit of Lender and its successors and assigns. Borrower shall
        not, however, have the right to assign Borrower's rights under this Agreement
        or
        any interest therein, without the prior written consent of Lender.

       

      Survival
        of Representations and Warranties.
        Borrower understands and agrees that in making the Loan, Lender is relying
        on
        all representations, warranties, and covenants made by Borrower in this
        Agreement or in any certificate or other instrument delivered by Borrower
        to
        Lender under this Agreement or the Related Documents. Borrower further agrees
        that regardless of any investigation made by Lender. all such representations,
        warranties and covenants will survive the making of the Loan and delivery
        to
        Lender of the Related Documents, shall be continuing in nature, and shall
        remain
        in full force and effect until such time as Borrower's Indebtedness shall
        be
        paid in full, or until this Agreement shall be terminated in the manner provided
        above, whichever is the last to occur.

      

      Time
        is of the Essence.
        Time is
        of the essence in the performance of this Agreement. 

      

      Waive
        Jury. All parties to this Agreement hereby waive the rig to any jury trial
        in
        any action, proceeding, or counterclaim brought by any party against any
        other
        party.

      

      DEFINITIONS.
        The
        following capitalized words and terms shall have the following meanings when
        used in this Agreement. Unless specifically stated to the contrary, all
        references to dollar amounts shall mean amounts in lawful money of the United
        States of America. Words and terms used in the singular shall include the
        plural, and the plural shall include the singular, as the context may require.
        Words and terms not otherwise defined in this Agreement shall have the meanings
        attributed to such terms in the Uniform Commercial Code. Accounting words
        and
        terms not otherwise defined in this Agreement shall have the meanings assigned
        to them in accordance with generally accepted accounting principles as in
        effect
        on the date of this Agreement: 

      Advance.
        The
        word "Advance" means a disbursement of Loan funds made, or to be made, to
        Borrower or on Borrower's behalf on a line of credit or multiple advance
        basis
        under the terms and conditions of this Agreement.

      Agreement.
        The
        word" Agreement" means this Business Loan Agreement, as this Business Loan
        Agreement may be amended or modified from time to time, together with all
        exhibits and schedules attached to this Business Loan Agreement from time
        to
        time.

      Borrower.
        The word
        "Borrower" means CHAMPION INDUSTRIES INC and includes all co-signers and
        co-makers signing the Note and all their successors and assigns.

      Collateral.
        The word
        "Collateral" means all property and assets granted as collateral security
        for a
        Loan, whether real or personal property, whether granted directly or indirectly,
        whether granted now or in the future, and whether granted in the form of
        a
        security interest, mortgage, collateral mortgage, deed of trust, assignment,
        pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
        trust, factor's lien, equipment trust, conditional sale, trust receipt, lien,
        charge, lien or title retention contract, lease or consignment intended as
        a
        security device, or any other security or lien interest whatsoever, whether
        created by law, contract, or otherwise.

      Environmental
        Laws.
        The
        words "Environmental Laws" mean any and all state, federal and local statutes,
        regulations and ordinances relating to the protection of human health or
        the
        environment, including without limitation the Comprehensive Environmental
        Response, Compensation, and Liability Act of 1980, as amended. 42 U.S.C.
        Section
        9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act
        of
        1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation
        Act.
        49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act,
        42
        U.S.C. Section 6901, et seq., or other applicable state or federal law, rules,
        or regulations adopted pursuant thereto.

      Event
        of Default.
        The
        words "Event of Default" mean any of the events of default set forth in this
        Agreement in the default section of this Agreement.

      GAAP.
        The word
        "GAAP" means generally accepted accounting principles.

      Grantor.
        The
        word "Grantor" means each and all of the persons or entities granting a Security
        Interest in any Collateral for the Loan, including without limitation all
        Borrowers granting such a Security Interest.

      Guarantor.
        The
        word "Guarantor" means any guarantor, surety, or accommodation party of any
        or
        all of the Loan.

      Guaranty.
        The
        word "Guaranty" means the guaranty from Guarantor to Lender, including without
        limitation a guaranty of all or part of the Note.

      Hazardous
        Substances.
        The
        words "Hazardous Substances" mean materials that, because of their quantity,
        concentration or physical, chemical or infectious characteristics, may cause
        or
        pose a present or potential hazard to human health or the environment when
        improperly used, treated, stored, disposed of, generated, manufactured,
        transported or otherwise handled. The words "Hazardous Substances" are used
        in
        their very broadest sense and include without limitation any and all hazardous
        or toxic substances, materials or waste as defined by or listed under the
        Environmental Laws. The term "Hazardous Substances" also includes, without
        limitation, petroleum and petroleum by-products or any fraction thereof and
        asbestos.

      Indebtedness.
        The
        word "Indebtedness" means the indebtedness evidenced by the Note or Related
        Documents, including all principal and interest together with all other
        indebtedness and costs and expenses for which Borrower is responsible under
        this
        Agreement or under any of the Related Documents.

      Lender.
        The
        word "Lender" means FIRST BANK OF CHARLESTON, INC. its successors and
        assigns.

      Loan.
        The word
        "Loan" means any and all Loans and financial accommodations from Lender to
        Borrower whether now or hereafter existing, and however evidenced, including
        without limitation those Loans and financial accommodations described herein
        or
        described on any exhibit or schedule attached to this Agreement from time
        to
        time.

      Note.
        The word
        "Note" means the Note executed by CHAMPION INDUSTRIES INC in the principal
        amount of $642,831.68 dated August 30, 2006, together with all renewals of,
        extensions of, modifications of, refinancings of, consolidations of, and
        substitutions for the note or credit agreement.

      Related
        Documents.
        The
        words "Related Documents" mean all promissory notes, credit agreements, Loan
        agreements, environmental agreements, guaranties, security agreements,
        mortgages, deeds of trust, security deeds, collateral mortgages, and all
        other
        instruments, agreements and documents, whether now or hereafter existing,
        executed in connection with the Loan.

      Security
        Agreement.
        The
        words "Security Agreement" mean and include without limitation any agreements,
        promises, covenants, arrangements, understandings or other agreements, whether
        created by law, contract, or otherwise, evidencing, governing, representing,
        or
        creating a. Security Interest.

      Security
        Interest.
        The
        words "Security Interest" mean, without limitation, any and all types of
        collateral security, present and future, whether in the form of a lien, charge,
        encumbrance, mortgage, deed of trust, security deed, assignment, pledge,
        crop
        pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's
        lien, equipment trust, conditional sale, trust receipt, lien or title retention
        contract, lease or consignment intended as a security device, or any other
        security or lien interest whatsoever whether created by law, contract, or
        otherwise.

       

      BORROWER
        ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT
        AND
        BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED AUGUST
        30,
        2006.

      

      BORROWER:

      

      

      

      CHAMPION
        INDUSTRIES, INC.

      

      

      By:  /s/
        Toney K.
        Adkins                         

      TONEY
        K ADKINS. President of
        CHAMPION INDUSTRIES INC

      

      

      By:  /s/
        Walter
        Sansom                         

      WALTER
        SANSOM, Secretary of CHAMPION INDUSTRIES INC

      

      LENDER:

      

      FIRST
        BANK OF CHARLESTON, INC.

      

      

      By:_______________________________

      Authorized
        Signer

      

      LASER
        PRO Lending, Var. 5.30.00.004 Copr. Harland Financial Solutions, Inc. 1997,
        2006. All Rights Reserved - WV M:\LASPERPRO\CFI\LPL\D20,FC TR-1868
        PR-8Exhibit 10.1 - Equity Incentive Plan

    
      

    

    Exhibit
      10.1

     

    

      ICO,
        Inc.

      2007
        Equity Incentive Plan

      

      [Amending
        and Restating the Fourth Amended and Restated

      ICO,
        Inc. 1998 Stock Option Plan] 

      

      

      This
        ICO,
        Inc. 2007 Equity Incentive Plan (the “Plan”) has been adopted by the Board of
        Directors of ICO, Inc. (the “Company”), effective on January 25, 2007, subject
        to approval by the stockholders of the Company no later than twelve months
        thereafter.

       

      ARTICLE
        1

      Objectives

      

      The
        Plan
        is an amendment and complete restatement of the Company’s Fourth Amended and
        Restated ICO, Inc. 1998 Stock Option Plan. The Plan is intended to advance
        the
        interests of the Company, its shareholders, and its subsidiaries by encouraging
        and enabling selected key employees of the Company, upon whose judgment,
        initiative and effort the Company is largely dependent for the successful
        conduct of its business, to acquire and/or increase and retain a proprietary
        interest in the Company by ownership of its stock.

      

      ARTICLE
        2

      Definitions

      

      
        	
                2.1

              	
                For
                  purposes of the Plan the following terms shall have the definition
                  that is
                  attributed to them, unless another definition is clearly indicated
                  by a
                  particular usage and context.

              

      

      

      
        	 	
                (a)

              	
                “Affiliates”
                  means, except to the extent otherwise not permitted under Code
                  Section
                  424(f), any one or more corporations which are members of a
                  “parent-subsidiary controlled group” as such term is defined in Code
                  Section 1563(a)(1), except that “at least 50 percent” shall be
                  substituted for “at least 80 percent” each place it appears in Code
                  Section 1563(a)(1).

              

      

      

      
        	 	
                (b)

              	
                “Award”
                  means any form of award authorized and granted under the Plan,
                  whether
                  singly or in combination, pursuant to such terms, conditions, restrictions
                  and/or limitations (if any) as the Committee may establish. Awards
                  granted
                  under the Plan may include:

              

      

      

      (i)
         Options;
        and

       

      (ii)
         Restricted
        Shares.

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

      
        	 	
                (c)

              	
                “Award
                  Agreement”
                  means an agreement between a Participant and ICO, Inc. evidencing
                  an
                  Award. 

              

      

      

      
        	 	
                (d)

              	
                “Change
                  of Control” has
                  the meaning ascribed to it in Section
                  10.3.

              

      

      

      
        	 	
                (e)

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

              

      

      

      
        	 	
                (f)

              	
                “Committee”
                  means the Compensation Committee, or such other committee comprised
                  solely
                  of “non-employee directors,” as defined in Rule 16b-3(b)(3), as designated
                  by the Board of Directors, vested with authority for administration
                  of the
                  Plan by the Board. The Committee shall be comprised solely of two
                  (2) or
                  more outside directors (within the meaning of the term “outside directors”
                  as used in Code Section 162(m) and applicable interpretive authority
                  thereunder, and within the meaning of “Nonemployee
                  Director”
                  as defined in Rule 16b-3, as currently in effect or as hereinafter
                  modified or amended). 

              

      

      

      
        	 	
                (g)

              	
                The
                  “Company”
                  means ICO, Inc. and any Affiliate of ICO.

              

      

      

      
        	 	
                (h)

              	
                “Date
                  of Exercise”
                  means the date on which the Company has received a written notice
                  of
                  exercise of an Option, in such form as is acceptable to the Company,
                  and
                  full payment of the purchase price.

              

      

      

      
        	 	
                (i)

              	
                “Date
                  of Grant”
                  means the date when the grant of an Award is effective, which shall
                  be
                  designated by the Committee at the time it makes an Award, and
                  shall be
                  either the date when the Award is made or a date in the future
                  specified
                  by the Committee. 

              

      

      

      
        	 	
                (j)

              	
                “Effective
                  Date”
                  means January 25, 2007.

              

      

      

      
        	 	
                (k)

              	
                “Eligible
                  Employee”
                  means any individual employed by the Company who performs services
                  for the
                  Company and is treated as an employee for federal income tax purposes
                  either in the U.S. or in another country where such individual
                  is employed
                  or is otherwise taxable. Eligible Employees include individuals
                  employed
                  by the Company and on foreign assignment or working for the Company
                  in a
                  business unit that is located outside of such individual’s country of
                  citizenship.

              

      

      

      
        	 	
                (l)

              	
                The
                  “Fair
                  Market Value”
                  of
                  a Share on a specified date means the last sale price reported
                  on the
                  NASDAQ Global MarketTM (the “NASDAQ”) on the specified date, or if Shares
                  are no longer traded on the NASDAQ, the last sales price reported
                  on any
                  other stock exchange or over-the-counter trading system on which
                  Shares
                  are trading on the specified date. If no sale has been made on
                  a specified
                  date, then the Fair Market Value of the Shares on that date shall
                  mean the
                  last sales price on the last preceding day on which any sales of
                  Shares
                  were made on the NASDAQ or other applicable stock exchange or
                  over-the-counter trading
                  system.

              

      

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

      
        	 	
                (m)

              	
                “Incentive
                  Stock Option”
                  shall have the same meaning as given to that term by Section 422
                  of the
                  Code.

              

      

      

      
        	 	
                (n)

              	
                “Nonqualified
                  Stock Option”
                  means any Option granted under the Plan that is not considered
                  an
                  Incentive Stock Option.

              

      

      

      
        	 	
                (o)

              	
                “Option”
                  means the right to purchase a stated number of Shares at a specified
                  price. An Option may be granted to an Eligible Employee subject
                  to the
                  terms of this Plan, and such other conditions and restrictions
                  as the
                  Committee deems appropriate. Each Option shall be designated by
                  the
                  Committee to be either an Incentive Stock Option or a Nonqualified
                  Stock
                  Option.

              

      

      

      
        	 	
                (p)

              	
                “Option
                  Expiration Date”
                  is
                  the last day of the term of an Option, i.e. the last date when
                  an Option
                  may be exercised.

              

      

      

      
        	 	
                (q)

              	
                “Option
                  Price”
                  means the purchase price per Share subject to an Option and shall
                  be fixed
                  by the Committee, but shall not be less than 100% of the Fair Market
                  Value
                  of a Share on the Date of Grant. 

              

      

      

      
        	 	
                (r)

              	
                “Participant”
                  means
                  any Eligible Employee who is granted an Award under the Plan.
                  

              

      

      

      
        	 	
                (s)

              	
                “Performance
                  Measures” has
                  the meaning ascribed to it in Section
                  3.3.

              

      

      

      
        	 	
                (t)

              	
                “Performance
                  Period”
                  has the meaning ascribed to it in Section
                  3.3.

              

      

      

      
        	 	
                (u)

              	
                “Permanent
                  Disability”
                  means any medically determinable physical or mental impairment
                  rendering
                  an individual unable to engage in any substantial gainful activity,
                  which
                  disability can be expected to result in death or which has lasted
                  or can
                  be expected to last for a continuous period of not less than 12
                  months.

              

      

      

      
        	 	
                (v)

              	
                “Plan”
                  means this ICO, Inc. 2007 Equity Incentive Plan, which is a restatement
                  of
                  the previously adopted Fourth Amended and Restated ICO, Inc. 1998
                  Stock
                  Option Plan. 

              

      

      

      
        	 	
                (w)

              	
                “Restricted
                  Period”
                  has the meaning ascribed to it in Section
                  7.1.

              

      

      

      
        	 	
                (x)

              	
                An
                  Award of “Restricted
                  Shares”
                  has the meaning ascribed to it in Section
                  7.1.

              

      

      

      
        	 	
                (y)

              	
                Rule
                  16b-3(b)(3)
                  means Rule 16b-3 promulgated under the Securities Exchange Act
                  of
                  1934.

              

      

      

      
        	 	
                (z)

              	
                “Share”
                  means one share of the common stock, no par value, of ICO,
                  Inc.

              

      

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

      
        	 	
                (aa)

              	
                “Termination
                  of Employment”
                  means the cessation of a Participant’s relationship as an employee of the
                  Company for federal tax purposes in any jurisdiction where the
                  individual
                  is subject to federal income taxes as an employee of the
                  Company.

              

      

      

      
        	 	
                (bb)

              	
                “Vesting
                  Period”
                  means the continuous period of employment required for an Award
                  of Options
                  or Restricted Shares to become fully earned and exercisable.
                  

              

      

      

      ARTICLE
        3

      Administration

      

      
        	
                3.1

              	
                The
                  Plan shall be administered by the Committee. Actions shall be taken
                  by a
                  majority of the Committee members.

              

      

      

      
        	
                3.2

              	
                Except
                  as specifically limited by the provisions of the Plan, the Committee
                  in
                  its discretion shall have the authority
                  to:

              

      

      

      
        	 	
                (a)

              	
                determine
                  which Eligible Employees shall be granted
                  Awards;

              

      

      

      
        	 	
                (b)

              	
                determine
                  the number of Shares which may be subject to each
                  Award;

              

      

      

      
        	 	
                (c)

              	
                for
                  any Award that is an Option, determine the Option Price and the
                  Option
                  Expiration Date;

              

      

      

      
        	 	
                (d)

              	
                determine
                  the term and Vesting Period, if any, applicable to each Award of
                  Options
                  and Restricted Shares;

              

      

      

      
        	 	
                (e)

              	
                for
                  any Award that is an Option, determine whether each such Option
                  is an
                  Incentive Stock Option or Nonqualified Stock
                  Option;

              

      

      

      
        	 	
                (f)

              	
                for
                  each Award, designate the Date of Grant of the Award, which must
                  be on or
                  after the date when a majority of the Committee members have specifically
                  approved the material terms of the Award, and which Date of Grant
                  cannot
                  be retroactive;

              

      

      

      
        	 	
                (g)

              	
                interpret
                  the provisions of the Plan and decide all questions of fact arising
                  in its
                  application; and

              

      

      

      
        	 	
                (h)

              	
                prescribe
                  such rules and procedures for Plan administration as from time
                  to time it
                  may deem advisable.

              

      

      

      
        	
                3.3

              	
                An
                  Award may be granted contingent upon the achievement of performance
                  or
                  other objectives (“Performance Measures”) during a specified period (the
                  “Performance Period”). Except as specifically limited by the provisions of
                  the Plan, the Committee in its discretion shall have the authority
                  to
                  determine the Performance Period and Performance Measures, if any,
                  applicable to an 

              

      

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

      Award,
        and the Performance Period and Performance Measures applicable to the Award
        shall be set forth in the Award Agreement. If an Award is subject to Performance
        Measures, the number of Options that vest, or the number of Restricted Shares
        earned, will be contingent on the degree to which the Performance Measures
        established at the time of the initial Award are satisfied or achieved, in
        the
        sole discretion of the Committee. The Committee shall have the sole discretion
        to revise the Performance Measures or Performance Period to reflect significant
        events or changes that occurred during the Performance Period.

      

      
        	
                3.4

              	
                Any
                  action, decision, interpretation or determination by the Committee
                  with
                  respect to the application or administration of this Plan shall
                  be final
                  and binding upon all persons, and need not be uniform with respect
                  to its
                  determination of recipients, amount, timing, form, terms or provisions
                  of
                  Awards.

              

      

      

      
        	
                3.5

              	
                No
                  member of the Committee shall be liable for any action or determination
                  taken or made in good faith with respect to the Plan or any Award
                  granted
                  hereunder, and to the extent permitted by law, all members shall
                  be
                  indemnified by the Company for any liability and expenses that
                  may occur
                  through any claim or cause of
                  action.

              

      

      

      

      ARTICLE
        4

      Shares
        Subject to Plan

      

      
        	
                4.1

              	
                Number
                  of Authorized Shares.
                  The Shares that may be made subject to Awards granted under the
                  Plan shall
                  not exceed 1,960,000 Shares in the aggregate. Except as provided
                  in
                  Section 4.2 and to the extent permitted under Rule 16b-3, upon
                  lapse or
                  termination of any Award for any reason without being completely
                  exercised, the Shares that were subject to such Award may again
                  be subject
                  to other Awards. The aggregate number of Shares which may be issued
                  under
                  the Plan shall be subject to adjustment in the same manner as provided
                  in
                  Article 10 hereof with respect to Shares subject to Awards then
                  outstanding. Exercise of an Award in any manner shall result in
                  a decrease
                  in the number of Shares which may thereafter be available, both
                  for
                  purposes of the Plan and for sale to any one individual, by the
                  number of
                  Shares as to which the Award is exercised. Separate stock certificates
                  may
                  be, but are not required to be, issued by the Company for those
                  Shares
                  acquired pursuant to the exercise of an Incentive Stock Option,
                  for those
                  Shares acquired pursuant to the exercise of a Nonqualified Stock
                  Option,
                  or upon satisfaction of applicable Vesting Period and/or Performance
                  Measures under an Award of Restricted Shares.

              

      

      

      
        	
                4.2

              	
                Annual
                  Grant Limitation.
                  The maximum number of Shares with respect to which Awards (in any
                  combination of Options and Restricted Shares) may be granted to
                  any
                  Participant during each fiscal year of ICO, Inc. is 400,000 (subject
                  to
                  adjustment in the same manner as provided in Article 10 hereof
                  with
                  respect to Shares subject to Awards then outstanding). The limitation
                  set
                  forth in the preceding sentence shall be applied in a manner which
                  will
                  permit compensation generated under the Plan to constitute
                  “performance-based” compensation for purposes of Code Section 162(m),
                  including, without limitation, counting against such maximum number
                  of
                  Shares, 

              

      

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

      to
        the
        extent required under Code Section 162(m), any Shares subject to Options
        that
        are canceled or repriced. 

      

      
        	
                4.3

              	
                Term
                  of Plan.
                  Subject to the terms and conditions of the Plan, the Committee
                  may, from
                  time to time prior to January 25, 2017, grant Awards to Eligible
                  Employees
                  on such terms and conditions as the Committee may determine. More
                  than one
                  Award may be granted to the same Eligible
                  Employee.

              

      

      

      

      ARTICLE
        5

      Award
        Agreements

      

      
        	
                5.1

              	
                All
                  Awards granted under the Plan shall be evidenced by a written Award
                  Agreement in such form or forms as the Committee in its sole discretion
                  may determine.

              

      

      

      
        	
                5.2

              	
                Each
                  Participant, by acceptance of an Award under this Plan, shall be
                  deemed to
                  have consented to be bound, on the Participant’s own behalf and on behalf
                  of the Participant’s heirs, assigns and legal representatives, by all
                  terms and conditions of this Plan, as amended from time to
                  time.

              

      

      

      

      ARTICLE
        6

      Stock
        Option Awards 

      

      
        	
                6.1

              	
                Option
                  Expiration Dates.
                  Subject to specific provisions relating to Incentive Stock Options
                  set
                  forth in Section 6.5 below, and subject to the provisions regarding
                  Termination of Awards in Article 9 below, each Option shall be
                  for a term
                  of from one to ten years from the Date of Grant. In the event that
                  the
                  Option Expiration Date is not specified in the Option Award Agreement,
                  it
                  shall be ten years from the Date of Grant.

              

      

      

      
        	
                6.2

              	
                Revisions
                  to Option Awards.
                  The Committee, subject to the Participant’s approval, on or after the Date
                  of Grant, may establish different exercise schedules and impose
                  other
                  conditions upon exercise and vesting for any particular Option
                  or groups
                  of Options. In addition, the Committee may, at any time subject
                  to the
                  Participant’s approval, reclassify an Incentive Stock Option as a
                  Nonqualified Stock Option. 

              

      

      

      
        	
                6.3

              	
                Exercise
                  of Options.
                  Any person entitled to exercise an Option in whole or in part may
                  do so by
                  delivering a written notice of exercise to the Company, attention
                  Corporate Secretary, at its principal office. The written notice
                  shall
                  specify the number of Shares for which an Option is being exercised
                  and
                  the Date of Grant of the Option being exercised, and shall be accompanied
                  by full payment of the Option Price for the Shares being
                  purchased.

              

      

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

      6.4 Payment
        of Option Price.

      

      
        	 	
                (a)

              	
                Payment
                  of the Option Price may be made in cash, by the tender of Shares,
                  or both,
                  or in such other form as may be determined by the Committee. Shares
                  tendered for payment of the Option Price shall be valued at their
                  Fair
                  Market Value on the Date of Exercise.

              

      

      

      
        	 	
                (b)

              	
                Payment
                  through tender of Shares may be made by instruction from the Participant
                  to the Company to withhold from the Shares issuable upon exercise
                  that
                  number which have a Fair Market Value equal to the exercise price
                  for the
                  Option or portion thereof being
                  exercised.

              

      

      

      6.5 Designation
        as Incentive Stock Options or Nonqualified Stock Options

      

      
        	 	
                (a)

              	
                The
                  Committee in its discretion may designate whether an Option is
                  to be
                  considered an Incentive Stock Option or a Nonqualified Stock Option.
                  The
                  Committee may grant both an Incentive Stock Option and a Nonqualified
                  Stock Option to the same individual. However, where both an Incentive
                  Stock Option and a Nonqualified Stock Option are awarded at one
                  time, such
                  Options shall be deemed to have been awarded in separate grants,
                  shall be
                  clearly identified, and in no event will the exercise of one such
                  Option
                  affect the right to exercise the other such
                  Option.

              

      

      

      
        	 	
                (b)

              	
                Any
                  Option designated by the Committee as an Incentive Stock Option
                  will be
                  subject to the general provisions applicable to all Options granted
                  under
                  the Plan. In addition, the Incentive Stock Option shall be subject
                  to the
                  following specific provisions:

              

      

      

      
        	 	
                (1)

              	
                At
                  the time the Incentive Stock Option is granted, if the Eligible
                  Employee
                  owns, directly or indirectly, stock representing more than 10%
                  of (i) the
                  total combined voting power of all classes of stock of the Company,
                  or
                  (ii) a corporation that owns 50% or more of the total combined
                  voting
                  power of all classes of stock of the Company,
                  then:

              

      

      

      
        	 	
                (i)

              	
                the
                  Option Price must equal at least 110% of the Fair Market value
                  of the
                  Shares on the Date of Grant, and

              

      

      

      
        	 	
                (ii)

              	
                the
                  term of the Option shall not be greater than five years from Date
                  of
                  Grant.

              

      

      

      
        	 	
                (2)

              	
                The
                  aggregate Fair Market Value of Shares (determined at the Date of
                  Grant)
                  with respect to which Incentive Stock Options are exercisable by
                  a
                  Participant for the first time during any calendar year under this
                  Plan or
                  any other plan maintained by the Company shall not exceed
                  $100,000.

              

      

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

      
        	 	
                (c)

              	
                If
                  any Option is not granted, exercised, or held pursuant to the provisions
                  noted immediately above, it will be considered a Nonqualified Stock
                  Option
                  to the extent that the Award is in conflict with these
                  restrictions.

              

      

      

      

      ARTICLE
        7

      Restricted
        Share Awards 

      

      
        	
                7.1

              	
                “Restricted
                  Shares” are Awards consisting of grants of Shares to Participants, the
                  vesting of which are subject to a Vesting Period and/or Performance
                  Measures established by the Committee. The period when any Restricted
                  Shares have not yet been earned because the Vesting Period and/or
                  Performance Measures have not been satisfied is referred to herein
                  as the
                  “Restricted Period.” 

              

      

       

      
        	
                7.2

              	
                The
                  Committee shall designate the Participants to whom Restricted Shares
                  are
                  to be awarded and the number of Shares that are subject to the
                  Award.

              

      

       

      
        	
                7.3

              	
                Grants
                  of Restricted Shares awarded to Participants under the Plan shall
                  be
                  subject to the following terms and conditions and to such other
                  terms and
                  conditions, not inconsistent with the Plan, as shall be prescribed
                  by the
                  Committee in its sole discretion and as shall be contained in the
                  Award
                  Agreement:

              

      

       

      
        	 	
                (a)

              	
                Restricted
                  Shares awarded to Participants may not be sold, assigned, transferred,
                  pledged or otherwise encumbered, except as provided otherwise herein,
                  for
                  a Restricted Period of ten (10) years or such shorter period as
                  the
                  Committee may determine at the time of the Award of such Restricted
                  Shares. Under no circumstances shall the Restricted Period be less
                  than
                  one (1) year (“Minimum Restricted
                  Period”).

              

      

       

      
        	 	
                (b)

              	
                Except
                  for the restrictions described in the preceding paragraph, and
                  as
                  otherwise provided in an Award Agreement, during the Restricted
                  Period the
                  Participant as owner of such Restricted Shares shall have all the
                  rights
                  of a stockholder, including but not limited
                  to:

              

      

       

      
        	 	
                i.

              	
                the
                  right to vote such Restricted Shares, and

              

      

       

      
        	 	
                ii.

              	
                the
                  right to receive all dividends paid on such Restricted
                  Shares.

              

      

       

      
        	 	
                (c)

              	
                The
                  Committee may, subject to the Participant’s approval, at any time after
                  the date of an Award of Restricted Shares, adjust the length of
                  any
                  applicable Vesting Period or Performance Period to account for
                  individual
                  circumstances of a Participant or group of Participants, provided
                  that the
                  Restricted Period may not be less than the Minimum Restricted
                  Period.

              

      

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

      
        	 	
                (d)

              	
                Each
                  certificate issued in respect of Restricted Shares awarded under
                  the Plan
                  shall be registered in the name of the Participant and, at the
                  discretion
                  of the Committee, until the conclusion of the Restricted Period
                  each such
                  certificate may be deposited in a bank or alternative location
                  designated
                  by the Committee. Each such certificate shall bear the following
                  (or a
                  similar) legend:

              

      

       

      “The
        transferability of this certificate and the shares of stock represented hereby
        are subject to the terms and conditions (including forfeiture) contained
        in the
        ICO, Inc. 2007 Equity Incentive Plan and an agreement entered into between
        the
        registered owner and ICO, Inc. A copy of such plan and agreement is on file
        in
        the office of the Secretary of ICO, Inc., 1811 Bering Drive, Suite 200, Houston,
        Texas 77057 [or current ICO, Inc. address].”

       

      
        	 	
                (e)

              	
                At
                  the end of the Vesting Period applicable to a Restricted Share
                  Award (that
                  is not subject to Performance Measures), such Restricted Shares
                  will be
                  transferred free of all restrictions to a Participant (or the
                  Participant’s successors). At the end of the Performance Period applicable
                  to a Restricted Share Award: the Committee shall determine the
                  number of
                  Restricted Shares that have been earned in accordance with the
                  provisions
                  of Section 3.3 above; provided that the Vesting Period, if any,
                  has been
                  satisfied, such Restricted Shares will be transferred free of all
                  restrictions to the Participant (or the Participant’s successors); and any
                  such Restricted Shares that are not earned because of failure to
                  satisfy
                  applicable Performance Measures shall be
                  forfeited.

              

      

       

      
        	
                7.4

              	
                Substitution
                  of Cash.
                  If provided for in the applicable Award Agreement, the Committee
                  may, in
                  its discretion, substitute cash equal to the Fair Market Value
                  (determined
                  as of the date of distribution) of Restricted Shares otherwise
                  required to
                  be distributed to a Participant. 

              

      

       

      

       

      ARTICLE
        8

      Transferability
        of Awards

      

      During
        the lifetime of a Participant to whom an Award of Options or Restricted Shares
        has been granted, such Options or Restricted Shares are not transferable
        voluntarily or by operation of law, and may be exercised only by the designated
        Participant. Upon the death of a Participant to whom an Award of Options
        or
        Restricted Shares has been granted, the Options or Restricted Shares may
        be
        transferred to the beneficiaries or heirs of the deceased Participant by
        will or
        by the laws of descent and distribution. In addition, to the extent permitted
        in
        an Award Agreement, the Committee may, in its discretion, allow for the
        transferability of any Nonqualified Stock Options or Restricted Shares granted
        pursuant to this Plan.

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

      ARTICLE
        9

      Termination
        of Awards

      

      
        	
                9.1

              	
                Termination
                  During Period of Continuous Employment.
                  During a Participant’s period of continuous employment with the Company,
                  an Award of Options or Restricted Shares will be terminated only
                  if it (a)
                  has been fully exercised or earned, (b) has not vested due to failure
                  to
                  satisfy any Performance Measures or other terms of grant, or (c)
                  has
                  expired or been forfeited by its
                  terms.

              

      

      

      9.2    Termination
        of Employment.

      

      
        	 	
                (a)

              	
                Options.
                  

              

      

      

      
        	 	
                (1)

              	
                Unless
                  an Option Award Agreement provides otherwise, upon Termination
                  of
                  Employment for any reason, the then exercisable portion of any
                  Option will
                  terminate upon the earlier of (i) the first business day following
                  expiration of the three month period after the date of Termination
                  of
                  Employment, or (ii) the Option Expiration Date set forth in the
                  Award
                  Agreement pursuant to which the Option was granted. The portion
                  of any
                  Option Award not exercisable will terminate on the date of Termination
                  of
                  Employment. For purposes of the Plan, a leave of absence approved
                  by the
                  Company shall not be deemed to be Termination of
                  Employment.

              

      

      

      
        	 	
                (2)

              	
                Notwithstanding
                  the preceding paragraph, if a Participant holding an Option dies
                  or
                  becomes subject to Permanent Disability while employed or within
                  three
                  months after Termination of Employment, such Option may be exercised,
                  to
                  the extent exercisable on the date of the occurrence of the event
                  which
                  triggers the operation of this paragraph, at any time by the estate
                  or
                  guardian of such person or by those persons to whom the Option
                  may have
                  been transferred by will or by the laws of descent and distribution
                  until
                  the earlier of (i) the date which is one year after the date of
                  such death
                  or occurrence of Permanent Disability, or (ii) the Option Expiration
                  Date
                  set forth in the Award Agreement.

              

      

      

      
        	 	
                (3)

              	
                The
                  Committee may at any time prior to three months after the date
                  of
                  Termination of Employment provide that particular Options not be
                  affected
                  by such termination and continue in force whether or not exercisable
                  at
                  the date of such Termination of Employment until the Option Expiration
                  Date set forth in the Award Agreement or any date prior
                  thereto.

              

      

      

      
        	 	
                (4)

              	
                Except
                  as provided in Article 10 hereof, in no event will the continuation
                  of the
                  term of an Option beyond the date of Termination of Employment
                  allow the
                  Participant, or the Participant’s beneficiaries or heirs, to accrue
                  additional rights under the Plan, or to purchase more Shares through
                  the
                  exercise of an Option that 

              

      

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

      could
        have been purchased on the day that employment was terminated. In addition,
        notwithstanding anything contained herein, no Option may be exercised in
        any
        event after the expiration of ten years from the Date of Grant of such
        Option.

      

      
        	 	
                (b)

              	
                Restricted
                  Shares.
                  Except as otherwise determined by the Committee in its sole discretion,
                  a
                  Participant whose employment with the Company terminates prior
                  to the end
                  of the Vesting Period applicable to a Restricted Share Award for
                  any
                  reason shall forfeit all Restricted Shares remaining subject to
                  such
                  outstanding Restricted Share Award.

              

      

      

      
        	 	
                (c)

              	
                Termination
                  Due to Death or Permanent Disability - Awards Subject to Performance
                   Measures.
                  In
                  the event that the employment with the Company of a Participant
                  with
                  Options or Restricted Shares conditioned on Performance Measures
                  terminates because of death or because the Participant becomes
                  subject to
                  Permanent Disability, and the Performance Period has not ended
                  at the time
                  of such termination due to death or Permanent Disability, the Committee
                  shall have sole discretion to determine whether all or any portion
                  of the
                  Award that is subject to Performance Measures will be deemed earned.
                  

              

      

      

      

      ARTICLE
        10

      Adjustments
        to Awards due to Changed Circumstances

      

      
        	
                10.1

              	
                In
                  the event of changes in the outstanding common stock of the Company
                  as a
                  result of stock dividends, split-ups, recapitalizations, combinations
                  of
                  Shares, exchanges of Shares or related transactions, the number
                  and class
                  of Shares and price per Share for each outstanding award of Options
                  or
                  Restricted Shares shall be correspondingly adjusted by the
                  Committee.

              

      

      

      
        	
                10.2

              	
                The
                  Committee shall make appropriate adjustments in the Option Price
                  of any
                  outstanding award of Options to reflect any spin-off of assets,
                  extraordinary dividends or other distributions to
                  shareholders.

              

      

      

      
        	
                10.3

              	
                In
                  event that the Company shall, pursuant to action by its Board of
                  Directors, at any time propose to merge into, consolidate with,
                  or sell or
                  transfer substantially all of its assets, or otherwise enter in
                  to a
                  transaction pursuant to which ICO, Inc. is not the surviving corporation
                  (other than a corporate restructuring among Company Affiliates),
                  or in
                  which the outstanding Shares of ICO, Inc. are converted to cash,
                  other
                  securities or other property (any such circumstances referred to
                  herein as
                  a “Change of Control”) and provision is not made pursuant to the terms of
                  the transaction(s) relating to such Change of Control (the “Transaction”)
                  for the assumption by the surviving, resulting or acquiring corporation
                  of
                  any outstanding category of Awards under the Plan, or for the substitution
                  of new Awards therefor, with regard for Awards for which no provision
                  is
                  made the following shall apply:

              

      

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

      
        	 	
                (a)

              	
                Options.
                  The Committee shall cause written notice of the proposed Transaction
                  to be
                  given to each Option holder not more than twenty (20) days prior
                  to the
                  anticipated effective date of the proposed Transaction, and the
                  Participant’s Option, unless otherwise provided for under the terms of the
                  Option Award Agreement, shall become fully (100%) vested and, prior
                  to a
                  date specified in such notice, which shall not be more than ten
                  days prior
                  to the anticipated effective date of the proposed Transaction,
                  each
                  Participant shall have the right to exercise his or her Option
                  to purchase
                  any or all Shares then subject to such Option (unless otherwise
                  provided
                  under the terms of the Option Award Agreement), including those,
                  if any,
                  which by reason of other provisions of the Plan have not then become
                  available for purchase. Each Participant, by so notifying the Company
                  in
                  writing, may, in exercising his or her Option, condition such exercise
                  upon, and provide that such exercise shall become effective at
                  the time
                  of, but immediately prior to, the consummation of the Transaction,
                  in
                  which event such Participant need not make payment for the Shares
                  to be
                  purchased upon exercise of such Option until five days after written
                  notice by the Company to such Participant that the Transaction
                  has been
                  consummated. If the transaction is consummated, each Option, to
                  the extent
                  not previously exercised prior to the date specified in the foregoing
                  notice, shall terminate on the effective date of the Transaction.
                  If the
                  Transaction is abandoned, (i) any Shares not purchased upon exercise
                  of
                  such Option shall continue to be available for purchase in accordance
                  with
                  the other provisions of the Plan and (ii) to the extent that any
                  Option
                  not exercised prior to such abandonment shall have vested solely
                  by
                  operation of this paragraph, such vesting shall be deemed annulled,
                  and
                  the original vesting schedule set forth shall be reinstituted,
                  as of the
                  date of such abandonment.

              

      

      

      
        	 	
                (b)

              	
                Restricted
                  Shares.
                  The Committee shall cause written notice of the proposed Transaction
                  to be
                  given to each Participant holding Restricted Shares not more than
                  twenty
                  (20) days prior to the anticipated effective date of the proposed
                  Transaction, and unless provided for under the terms of the Restricted
                  Share Award Agreement, all restrictions imposed on Restricted Shares
                  shall
                  lapse and such Restricted Shares shall become fully (100%) vested
                  as of a
                  date specified in the notice, which shall not be more than ten
                  (10) days
                  prior to the anticipated effective date of the proposed
                  Transaction.

              

      

      

      

      ARTICLE
        11

      Amendment
        or Discontinuance of Plan

      

      
        	
                11.1

              	
                The
                  Board of Directors may at any time amend, suspend, or discontinue
                  the
                  Plan; provided, however, that except as otherwise permitted by
                  Rule 16b-3,
                  Code Section 162(m) or Code Section 422, no amendments by the Board
                  of
                  Directors shall, without further approval of the shareholders of
                  ICO,
                  Inc.:

              

      

      

      
        	 	
                (a)

              	
                change
                  the class of Eligible
                  Employees;

              

      

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

      

      
        	 	
                (b)

              	
                except
                  as provided in Articles 4 and 9 hereof, increase the number of
                  Shares
                  which may be subject to Award granted under the Plan;
                  or

              

      

      

      
        	 	
                (c)

              	
                cause
                  the Plan or any Award granted under the Plan to fail to (i) qualify
                  for
                  exemption from Section 16(b) of the Act, (ii) be excluded from
                  the $1
                  million deduction limitation imposed by Code Section 162(m), or
                  (iii)
                  qualify as an “Incentive Stock Option” as defined by Code Section
                  422.

              

      

      

      
        	
                11.2

              	
                No
                  amendment or discontinuance of the Plan shall alter or impair any
                  Option
                  granted under the Plan without the consent of the holder
                  thereof.

              

      

      

      

      ARTICLE
        12

      Effective
        Date

      

      The
        Plan
        became effective on January 12, 1998, having been adopted by the Board of
        Directors on that date and approved by the shareholders of the Company within
        twelve (12) months thereafter. The Plan was amended and restated by the Board
        of
        Directors on December 18, 2001, and approved by the shareholders of the Company
        on March 15, 2002. The Plan was amended and restated by the Board of Directors
        on January 27, 2004, and approved by the shareholders of the Company on March
        5,
        2004. The Plan was amended by the Board of Directors on September 8, 2005
        and
        was amended and restated by the Board of Directors on November 16, 2005 (without
        the necessity of shareholder approval for such amendments). The Plan was
        amended
        and restated by the Board of Directors on January 26, 2006, and approved
        by the
        shareholders of the Company on March 14, 2006. The Plan was amended and restated
        by the Board of Directors on January 25, 2007, and approved by the shareholders
        of the Company on [March 5, 2007].

      

      

      ARTICLE
        13

      Miscellaneous

      

      
        	
                13.1

              	
                Nothing
                  contained in this Plan or in any action taken by the Board of Directors
                  or
                  shareholders of the Company shall constitute the granting of an
                  Award, and
                  an Award shall not be deemed granted unless: a written Award Agreement
                  has
                  been delivered to the respective employee; the employee has executed
                  the
                  Award Agreement respecting the Award in conformance with the provisions
                  of
                  the Plan and the terms of grant; and the Award Agreement has been
                  executed
                  on behalf of the Company.

              

      

      

      
        	
                13.2

              	
                Nothing
                  contained in this Plan or in any Award granted pursuant to it shall
                  confer
                  upon any employee any right to continue in the employ of the Company
                  or to
                  interfere in any way with the right of the Company to terminate
                  employment
                  at any time. So long as a holder of an Award shall continue to
                  be an
                  employee of the Company, the Award shall not be affected by any
                  change of
                  the Participant’s duties or
                  position.

              

      

      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      

      

      
        	
                13.3

              	
                Certificates
                  for Shares purchased through exercise of Options or received due
                  to an
                  award of Restricted Shares will be issued in regular course after
                  exercise
                  of the Option and payment therefor as called for by the terms of
                  the
                  Option, or the vesting and/or performance terms of the award of
                  Restricted
                  Shares. No persons holding an Option granted under this Plan shall
                  have
                  any rights or privileges of a shareholder of the Company with respect
                  to
                  any Shares issuable upon exercise of such Option until certificates
                  representing such Shares shall have been issued and delivered.
                  No Shares
                  shall be issued and delivered upon exercise of an Option unless
                  and until
                  the Company, in the opinion of its counsel, has complied with all
                  applicable registration requirements of the Securities Act of 1933
                  and any
                  applicable state securities laws, and with any applicable listing
                  requirements of any national securities exchange on which ICO,
                  Inc.’s
                  securities may then be listed as well as any other requirements
                  of
                  law.

              

      

      

      
        	
                13.4

              	
                This
                  Plan shall continue in effect until the expiration of all Awards
                  granted
                  under the Plan unless terminated earlier in accordance with Article
                  11;
                  provided, however, that it shall otherwise terminate ten years
                  after the
                  Effective Date. 

              

      

       

      
        	
                13.5

              	
                Notwithstanding
                  any provision in this Plan or in any Award Agreement, no Restricted
                  Share
                  Award granted after the Effective Date of this amendment and restatement
                  of the Plan shall be exercisable prior to the date the ICO, Inc.
                  2007
                  Equity Incentive Plan (amending and restating the Fourth Amended
                  and
                  Restated ICO, Inc. 1998 Stock Option Plan) is approved by the shareholders
                  of the Company (“Date of Shareholder Approval”). In the event that any
                  Options are granted after the Effective Date, such Options may
                  only be
                  exercisable prior to the Date of Shareholder Approval if, as of
                  the Date
                  of Grant of such Options, the total number of Options subject to
                  awards
                  under the Plan does not exceed the limit of Shares available for
                  grant
                  under the Plan as set forth in the Fourth Amended and Restated
                  ICO, Inc.
                  1998 Stock Option Plan.

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