Document:

exv10w7

EXHIBIT 10.7

ASTRONICS CORPORATION

EMPLOYMENT TERMINATION BENEFITS AGREEMENT DATED DECEMBER 16, 2003 BETWEEN ASTRONICS

CORPORATION AND DAVID C. BURNEY, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER OF ASTRONICS

CORPORATION

EMPLOYMENT TERMINATION BENEFITS AGREEMENT

          AGREEMENT, made this 16th day of December, 2003, between ASTRONICS CORPORATION, a New
York corporation with an office and place of business at 1801 Elmwood Avenue, Buffalo, New York
14207 (the “Company”), and David C. Burney who resides at 111 Pinewood Drive, West Seneca, New York
14224 (“Executive”).

          RECITALS:

          Executive is presently employed by Company and the Board of Directors of Company (the “Board”)
recognizes that Executive’s contribution to the growth and success of Company has been substantial;

          The Board desires to establish appropriate employment arrangements which the Board has
determined will reinforce and encourage Executive’s continued attention and dedication to the
Company’s business and success as a member of the Company’s management, furthering the best
interest of the Company and its shareholders; and

          Executive is willing to commit himself to continue to serve Company on the terms and
conditions herein provided.

          NOW, THEREFORE, in consideration of the mutual promises and the respective covenants and
agreements of the parties herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:

          — DEFINITIONS

          Terms Defined. In addition to any words and terms elsewhere defined herein, the following
words and terms shall have the meanings indicated below unless the context or use indicates a
different meaning:

          “CAUSE” shall mean any act that is materially inimical to the best interests of the Company
and that constitutes, on the part of the Executive, intentional or grievous wrong, including, but
not limited to, common law fraud, a felony, or other gross malfeasance of duty.

          A “CHANGE OF CONTROL” shall mean the transfer in one or more transactions, extending over a
period of not more than 24 months, of Common Stock of the Company possessing 25% or more of the
total combined voting power of all Class A and Class B Shares of Common Stock. A transfer shall be
deemed to occur if shares of Common Stock are either transferred or made the subject of options,
warrants, or similar rights granting a third party the opportunity to acquire ownership or voting
control of such Common Stock.

          “COMMON STOCK” shall mean the Class A and Class B $1.00 par value shares of the capital stock
of the Company, as well as all other securities with voting rights or convertible into securities
with voting rights.

          “COMPENSATION” shall mean the base salary paid to the Executive for a calendar year plus any
cash bonus or cash incentive payments earned for or attributable to that year, whether or not the
bonus or incentive payments are paid during that year. “AVERAGE ANNUAL COMPENSATION” shall mean
the average of the Compensation paid to Executive for the two years preceding termination.

          “COMPENSATION COMMITTEE” shall mean the Executive Compensation Committee of Board, as it is
constituted from time to time.

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          “COMPANY” shall mean ASTRONICS CORPORATION, as well as any successors or assigns of ASTRONICS
CORPORATION, whether by transfer, merger, consolidation, acquisition of all or substantially all of
the business assets, change in identity, or otherwise by operation of law and for purposes of
employment of Executive shall also mean any parent, subsidiary or affiliated entity to whom
Executive’s services may be assigned.

          “DISABILITY” shall mean the inability of Executive to perform a substantial portion of his
duties hereunder for a continuous period of 6 months or more.

          “EFFECTIVE DATE” shall mean the date of this Agreement.

          “INVOLUNTARY TERMINATION OF EMPLOYMENT” shall mean a severance of the Executive’s employment
relationship prior to age 65, other than for death, Disability, Retirement, or Cause, by or at the
instigation of Company or by or at the instigation of Executive where Executive’s pay has been
diminished or reduced to a greater extent than any diminution or reduction of Company’s Executives
generally. Where there has been a Change of Control, Involuntary Termination of Employment shall
mean a termination of the employment relationship by or at the instigation of Company or by or at
the instigation of Executive (whether before or after age 65) within two years of the Change of
Control.

          “RETIREMENT” shall mean the election of Executive to retire from active employment with
Company at the end of the month in which Executive attains 65 years of age or thereafter.
Retirement shall also mean a similar election by Executive prior to age 65, where Executive elects
to receive early Retirement benefits under the Company’s Profit Sharing Plan or any successor
Company retirement plan.

          “TERM OF EMPLOYMENT” means the period commencing on the effective date and expiring on the
earliest to occur of (i) Executive’s death, Disability or Retirement, (ii) the Voluntary
Termination of Employment by Executive, or (iii) Termination for Cause of Executive’s employment.

          “TERMINATION FOR CAUSE” shall mean severance of the Employment relationship based upon or
brought about by Cause as defined in paragraph (a) above.

          “VOLUNTARY TERMINATION OF EMPLOYMENT” shall mean a severance of the Employment relationship by
or at the instigation of Executive, other than a termination occurring upon a Change of Control as
defined in paragraph (b) above, or upon death, Disability or Retirement.

          — EMPLOYMENT, TERM, DUTIES

          Employment. Company hereby hires Executive, and Executive agrees to serve Company, for a term
beginning on the Effective Date of this Agreement, and ending on the last day of the Term of this
Agreement.

          Term. The term of this Agreement shall begin on the Effective Date, and shall end as provided
in Section 5.01. Unless benefits under this Agreement are being provided at that time, this
Agreement shall also end upon Executive’s attainment of age 70.

          Capacity. Executive shall serve in such executive or managerial capacity as the Board of
Directors of the Company shall determine, and shall have all of the duties, responsibilities,
obligations and privileges commensurate with such position.

          Duties. Executive agrees to devote his full business time and energy to the business and
affairs of Company and to utilize his best efforts, skill and abilities to promote such interest,
performing such duties as may be assigned on the executive or managerial level. Company agrees
that Executive shall have such powers and authority as shall reasonably be required to enable
Executive to discharge his duties in an efficient manner.

          Base of Operations. Company agrees that Executive’s base of operations shall be Executive’s
location as of the Effective Date of this Agreement. Although Executive recognizes that
substantial traveling may be required in connection with employment, Executive shall not be
required to operate from any other area without Executive’s prior consent.

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          — COMPENSATION AND BENEFITS

          Base Salary and Profit Share. During the Term of Employment, Company shall pay Executive for
all services to be rendered as set forth herein, a base salary as determined from time to time by
the Compensation Committee, plus an annual bonus award based on the performance of the Company and
of the Executive as the Compensation Committee may determine. The base salary shall be payable in
periodic installments not less frequently than on a monthly basis. Any bonus award shall be
payable annually in the month of January and shall be based on performance for the prior fiscal
year.

          This Agreement shall not be deemed abrogated or terminated if Company, in its discretion,
shall determine to modify the base compensation of Executive for any period of time, and Executive
accepts the modification, but nothing herein contained shall be deemed to obligate Company to make
any increase in base compensation.

          Other Employment Benefits. Executive shall be entitled to all rights and benefits for which
he shall be eligible under any retirement, profit sharing, employee stock purchase plan, savings
and investment plan, business travel, group life, disability, accident or health insurance,
vacation, and other benefit plans which Company provides for its employees generally, as well as
for any stock option, incentive compensation, club memberships, supplemental medical and life
insurance coverages and similar benefit plans which Company provides for executive personnel having
duties and responsibilities similar to those of Executive.

          Reimbursement of Expenses. Company shall provide Executive with an automobile or an allowance
for automobile use and shall pay or reimburse Executive for all reasonable traveling or other
expenses incurred or paid by Executive in connection with the performance of his services under
this Agreement upon presentation of expense statements or vouchers, and such other supporting
information as it may from time to time request.

          — NON COMPETITION, CONFIDENTIAL DATA

          Non-Competition. During the term of this Agreement, and in the event of Involuntary
Termination upon a Change in Control until the last payment of any benefits to Executive under this
Agreement, Executive will not directly or indirectly engage in or compete with the business of the
Company, either as owner, partner or employee. In the event that Executive shall compete with the
business of the Company, payment of benefits under this Agreement will be suspended so long as
Executive engages in activity deemed to be in competition with the business of the Company.

          Confidential Information. Executive agrees, during the term of this Agreement and thereafter,
not to use or make use of nor to divulge to anyone other than authorized personnel or
representatives of Company, any information or knowledge relating to the business, business methods
or techniques of Company including, without being limited to, information about accounting
procedures, training methods or techniques, data, processes, research manufacturing formulae,
costing, sales prospects, customers’ or suppliers’ lists, bidding formulae, sales, profits or
costs, except to the extent that Executive can establish the same to be generally known to the
public or recognized as standard practice in the business in which Company is engaged or to the
extent Executive is required to divulge such information or knowledge in connection with any legal
proceeding.

          Patents and Inventions. Executive agrees that any patents, inventions, improvements,
discoveries, formulae or processes which he may obtain, make or conceive during the period of
employment hereunder, shall be the sole and exclusive property of Company, and that he will sign
and execute any and all applications, assignments or other instruments necessary or appropriate to
assign, convey or otherwise make available exclusively to Company all such patents, inventions,
improvements, discoveries, formulae or processes.

          Enforcement. Executive agrees that in the event of a breach or threatened breach by Executive
of any provision of this Article, Company may institute legal proceedings to compel Employee
compliance hereunder, including injunctive relief and any other remedy provided in law or equity.
If the scope of any restriction contained in this Agreement is too broad to permit enforcement of
such restriction to its full extent, then such restriction shall be enforced to the maximum extent
permitted by law, and Executive hereby consents and agrees that such scope may be judicially
modified accordingly in any proceeding brought to enforce such restriction.

          In the event of such judicial modification, Company may, if it determines in its sole judgment
that such action is contrary to the best interests of Company, within ten days after notification
of such modification, terminate all obligations of Company under this Agreement by giving Executive
not less than 15 days notice of such termination.

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          — TERMINATION

          Termination of Employment. Executive’s employment by Company shall terminate on the earliest
to occur of (a) Executive’s death, Disability or Retirement, (b) Voluntary Termination of
Employment by Executive, or (c) Termination for Cause of Executive’s employment. In any such event
this Agreement shall also terminate other than for the provisions of Articles IV, VI and VII, which
shall survive such Termination.

          The existence of Disability, as defined herein, shall be determined in the sole judgment of
the Compensation Committee, and effective upon delivery to Executive of written notice that such
determination has been made, Executive’s employment shall be terminated and Executive shall be
removed from all positions, as an officer, director, or otherwise, with Company.

          5.02 Effect of Involuntary Termination. This Agreement shall survive an Involuntary
Termination of Employment.

          5.03 Executive Obligations Upon Termination. Executive agrees that upon termination of
services under this Agreement, for any cause whatsoever, he will deliver to Company all documents,
drawings, papers, computer tapes or discs, notes, memoranda, handbooks, manuals, and all other
tangible material on which information is stored or recorded, and all copies thereof which
Executive has in his control or possession in any way related to the business of Company, its
customers, suppliers or affiliates.

          — BENEFITS UPON TERMINATION

          Death, Disability, Retirement. In the event of termination upon death, or by virtue of
Retirement or Disability, Executive’s surviving spouse or estate shall be entitled to the benefits
provided generally by the Company to its executives.

          Termination For Cause. Upon termination of Executive’s employment for Cause, Executive shall
be entitled to his base salary up to the date of such termination, as well as any vested benefits
under any Company retirement plan or supplemental retirement plan in which Executive may
participate. Under such termination, Executive shall not be entitled to participate in any profit
share award or incentive compensation payable after the date of termination, but will be eligible
to receive a payment in cash for any unutilized vacation benefits accrued for Executive. Unless
otherwise provided by law, Executive shall not have the right or privilege of exercising any stock
options held by Executive and issued under any stock option plan or stock purchase plan of the
Company.

          Voluntary Termination of Employment. In the event of Executive’s Voluntary Termination of
Employment with Company, Executive shall be entitled to his employment benefits up to the date of
termination, including any vested benefits under any Company profit sharing, retirement plan or
supplemental retirement plan, in which Executive may participate, but unless any profit share award
or incentive compensation is payable prior to such termination, Executive shall not receive any
such payment. Executive shall receive a payment in cash for any unutilized vacation benefits
accrued for Executive. Executive shall have the right to exercise any stock options previously
granted to Executive to the extent permitted by the terms of the applicable stock option plan or
the grant thereunder

          Involuntary Termination of Employment. In the event of the Involuntary Termination of
Employment in the circumstance of a Change in Control, Executive shall be entitled to receive his
base salary then in effect or his Average Annual Compensation, whichever is greater, for a period
of one (1) year; any vested benefits under any Company retirement plan, profit sharing or
supplemental retirement plan in which he may participate; the continuation at Company’s expense for
one (1) year of any club memberships held by Executive for which reimbursement was provided by
Company; and, for a period of one (1) year, continue to be provided with an automobile, or
reimbursement of automobile expense. In lieu of the continuation of the foregoing pay and benefits
provided for in the foregoing sentence, Executive may elect to receive some or all of such pay and
benefits in a lump sum, the same to be paid within sixty (60) days of Executive’s written election,
which election must be made within sixty (60) days of the Involuntary Termination of Employment.
Executive shall have the right to exercise any vested or unvested stock options held by Executive
at the date of termination within the one year period after the date of such Involuntary
Termination of Employment but not later than the expiration date(s) of such stock options, or if
such exercise is not permitted or, in any event, if Executive so elects, an amount equal to the
bargain element of such options, vested or unvested, shall be paid. Executive shall also receive
for one (1) year after Termination the same health, life and disability insurance coverages for
which he was eligible during employment. Executive shall also receive a payment in cash for any
unutilized vacation benefits accrued for Executive. Notwithstanding the foregoing, if the
Executive dies within three months from the date of the Involuntary Termination of Employment, his
vested and unvested stock

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options may be exercised within the one year period after the date of such Involuntary
Termination of Employment but not later than the expiration date(s) of such stock options, or if
such exercise is not permitted or, in any event, if Executive so elects, an amount equal to the
bargain element of such options, vested or unvested, shall be paid. For purposes of this Section
6.04, the bargain element of options shall be determined as of the date a Change of Control occurs.

          — MISCELLANEOUS

          Notices. All notices, requests, demands and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given when received, if
personally delivered, electronically transmitted, or mailed, first class postage prepaid, addressed
to Company at 130 Commerce Way, East Aurora, New York 14052 (with a copy to Hodgson Russ LLP,
attention John B. Drenning, Esq., One M & T Plaza, Suite 2000 Buffalo, New York 14203), or to
Executive at the address on the first page, or such other address as may be designated by notice in
accordance with the provisions of this Section.

          Arbitration. All disputes, differences and controversies arising under or in connection with
this Agreement, including but not limited to its interpretation, construction, performance or
application, shall be settled and finally determined by arbitration in the City of Buffalo, New
York, under the then existing rules of the American Arbitration Association.

          Entire Agreement. This instrument contains the entire agreement of the parties with respect
to its subject matter, and supersedes and replaces any prior agreement or understanding, and no
amendment, modification or waiver of any provision hereof shall be valid unless it be in writing
and signed by Company and Executive.

          Non-Waiver. The waiver of, or failure to take action with regard to, any breach of any term
or condition of this Agreement shall not be deemed to constitute a continuing waiver or a waiver of
any other breach of the same or any other term or condition.

          Paragraph and Other Headings. The section and other headings contained in this Agreement are
for reference purposes only and shall not affect in any way, the meaning or interpretation of this
Agreement.

          Gender and Number. The masculine gender used herein shall be deemed to include the feminine
and neuter genders, and vice versa, and the singular or plural, shall be deemed to include the
plural or singular, as the case may be, when required by the context, and the word “person” shall
include corporation, firm, partnership or other form of association.

          Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any
of which shall be deemed an original, and all of which together shall constitute one and the same
instrument, notwithstanding that all of the parties are not signatory to the original or the same
counterpart.

          Persons Bound — Non-Assignment. This Agreement and all of the provisions hereof shall be
binding upon the parties hereto, their legal representatives, heirs, distributees, successors and
assigns. Except as expressly stated herein, nothing in this Agreement is intended to confer upon
any other person any rights or remedies under or by reason of this Agreement. Neither this
Agreement nor any rights hereunder shall be assignable by Executive.

          Guarantee of Company. If Executive’s services are assigned to any parent, subsidiary or
affiliate of Company, Company shall remain liable as a guarantor of the obligations hereunder.

          Inconsistent Provisions. If any provision of this Agreement is inconsistent with any
provision or any plan or resolution (including a severance pay resolution) providing benefits
substantially similar to those provided by this Agreement or any other document required or
executed pursuant to this Agreement, the provisions of this Agreement shall be controlling.

          Severability. If any provision of this Agreement or the application thereof to any person or
circumstances is held invalid, the remainder of this Agreement and the application of such
provision to the other person and circumstances shall not be affected thereby and each term and
condition of the Agreement shall be valid and enforced to the fullest extent permitted by law.

          Choice of Law. This Agreement shall be construed as to both validity and performance and
enforced in accordance with and governed by the laws of the State of New York, without giving
effect to the choice of law principles of those laws.

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          No Conflicting Agreement. Executive represents and warrants to Company that he is not a party
to, or bound by, any agreement, understanding or plan which would interfere with or prevent
performance under this Agreement. Company similarly represents and warrants to Executive.

          Attorney’s Fees. In the event that any dispute or difference arising under or in connection
with this Agreement results in arbitration or litigation, Company shall reimburse Executive for all
reasonable Attorney’s fees and expenses if Executive prevails in such proceeding.

          Authorization. Company represents to Executive that this Agreement has been duly approved by
its Board of Directors and execution by an appropriate officer duly authorized.

          IN WITNESS WHEREOF, the undersigned parties hereto have duly executed this Agreement as of the
day and year first above written

	 	 	 	 	 	 	 	 	 

	WITNESS:	 	 	 	ASTRONICS CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 
	 	By
	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 
	 	By
	 	 

	 	 
	 

	 	 
	 	
	 	 

DAVID C. BURNEY
	 	 

FIRST AMENDMENT

of the

EMPLOYMENT TERMINATION BENEFITS AGREEMENT

          THIS AMENDMENT, dated as of December 31, 2008, is between ASTRONICS CORPORATION (the
“Company”), and DAVID C. BURNEY (the “Executive”).

RECITALS:

          A. The Company and the Executive have entered into an Employment Termination Benefits
Agreement dated as December 16, 2003 (the “Agreement”).

          B. It is intended that the Agreement comply with the provisions of Section 409A of the Code
and the regulations and guidance of general applicability issued thereunder (referred to herein as
“Section 409A”) so as to not subject the Executive to the payment of additional interest and taxes
under Section 409A. In furtherance of this intent, the Agreement shall be interpreted, operated
and administered in a manner consistent with these intentions, and to the extent Section 409A would
result in the Executive being subject to the payment of additional income taxes or interest under
Section 409A, the parties agree to amend the Agreement in order to avoid the application of such
taxes and interest. Consistent with this intent, the Company and the Executive desire to amend the
Agreement to reflect certain changes to the terms and conditions of the Agreement by entering into
this First Amendment to the Agreement (this “Amendment”).

          NOW THEREFORE, in consideration of the foregoing, the Company and the Executive agree to amend
the Agreement effective as of December 31, 2008 as follows:

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          1. Termination of Employment. For purposes of Section 6.04 of the Agreement, no
Involuntary Termination of Employment, shall be considered to have occurred unless such Involuntary
Termination of Employment would also qualifies as a “separation from service” within the meaning of
Section 409A.

          2. Delayed Payments. Notwithstanding any provision in the Agreement to the contrary,
if the Executive is a “specified employee” (within the meaning of Section 409A), to the extent
needed to comply with Section 409A, payments due under Section 6.04 of the Agreement which are
considered part of a deferred compensation arrangement under Section 409A will be subject to a six
(6) month delay such that amounts otherwise payable during the six (6) month period following the
Executive’s separation from service shall be accumulated and paid in a lump-sum catch-up payment as
of the first day of the seventh month following the Executive’s separation from service (or, if
earlier, the date of the Executive’s death).

          3. Treatment as Separation Pay. Section 2 of this Amendment will not apply to the
extent such payments can be considered to be “separation pay” that is not part of a deferred
compensation arrangement under Section 409A. If permitted by Section 409A, payments to the
Executive pursuant to Section 6.04 of the Agreement shall be considered first to come from
“separation pay.”

          4. Timing of Reimbursement Payments. Notwithstanding any provision in Section 6.04 of
the Agreement to the contrary, any reimbursement of expenses provided for in this Section 6.04 will
be made no later than the last day of the calendar year following the year in which the Executive
incurred the expense.

          5. The second sentence of Section 6.04 is deleted in its entirety.

          Except as specifically amended hereby, the Agreement shall continue in full force and effect
as written.

          This Amendment may be executed in any number of counterparts, each of which will be deemed to
be an original and all of which taken together will be deemed to constitute one and the same
instrument.

          IN WITNESS WHEREOF, the parties have duly executed this Amendment as of this 31 day of
December, 2008.

COMPANY:

	 	 	 	 	 	 	 

	 	 	ASTRONCIS CORPORATION	 	 
	 
	 	 	 	 	 	 
	 
	 	By	 	 	 	 
	 

	 	
	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

EXECUTIVE:

	 	 	 	 	 

	 

	 	 

David C. Burney
	 	 

7exv10w8

EXHIBIT 10.8

ASTRONICS CORPORATION

2005 DIRECTOR STOCK OPTION PLAN

ARTCILE I

PURPOSE

     The purpose of this 2005 Director Stock Option Plan (the “Plan”) is to advance the interest of
ASTRONICS CORPORATION, a New York corporation (the “Company”), by encouraging the efforts of
directors of the Company who are not employees, by heightening the desire of such persons to
continue in their service and by assisting the Company to compete effectively with other
enterprises for new directors.

ARTCILE II

GRANTING OF OPTIONS

     Subject to the terms and conditions of this Plan, the Company may issue options (“Options”) to
purchase up to two hundred thousand (200,000) shares of its $.01 par value Common Stock (“Shares”)
to persons eligible to participate under Section 4.1 below. Two hundred thousand (200,000) of the
Company’s authorized but unissued shares of Common Stock are hereby reserved for issuance under
this Plan; provided, however, that treasury shares shall also be available for issuance under this
Plan at the Company’s discretion. Any Share subject to an Option that terminates for any reason
other than exercise may be made subject to a subsequent Option.

ARTCILE III

TERM

3.1 Effective Date.

     This plan shall become effective upon its adoption by the Board of Directors. The Plan shall
be submitted to the shareholders of the Company for their approval within twelve months of such
adoption. No Option shall be exercisable unless and until the shareholders of the Company have
approved the Plan.

3.2 Termination.

     This Plan shall terminate when all of the Shares have been acquired through exercise of
Options unless sooner terminated by the Board of Directors. Any Option outstanding under this Plan
at the time of its termination shall remain in effect in accordance with its terms and conditions
and those of this Plan.

ARTCILE IV

PARTICIPANTS

4.1 Eligible Directors.

     Options may be granted to directors of the Company unless at the time of grant they are also
an executive officer or employee of the Company or any of its subsidiary corporations. As used in
this Plan, “Participant” means a director of the Company and includes a director’s legal
representative if he or she is incompetent or deceased, or any other person who acquires the legal
right to exercise a Participant’s Options.

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ARTCILE V

GENERAL TERMS

5.1 Written Agreement.

     Options shall be evidenced by a written Option Agreement that shall contain such terms and
conditions as this Plan requires and such additional provisions as the Committee, as defined in
Section 6.1, may deem necessary or appropriate in its sole discretion and that do not conflict with
the provisions of this Plan. Each Option Agreement shall be signed by the Participant and an
officer of the Company designated by the Committee. Options granted pursuant to this Plan need not
be identical, but each Option shall be subject to the terms and conditions set forth in this Plan.

5.2 Time of Grant.

     Options shall be granted only during the thirty (30) day period commencing one week after a
press release announcing quarterly or annual results of operations of the Company.

5.3 Price.

     The purchase price of the Shares under each Option shall be as determined by the Committee,
but in no event less than the fair market value of the Shares optioned on the date of granting.
“Fair market value” shall be deemed to be:

	 	1.	 	The closing price on the date of grant as reflected in reports of the
automated quotation service or national securities exchange on which
the price of the Shares is reported. In all cases where the Shares are
selling ex-dividend on the date of grant, the amount of the dividend
shall be added to the ex-dividend quotation to determine the fair
market value of the Shares as of the date of grant; or
	 
	 	2.	 	If the fair market value cannot be established under the provisions of
(1) above, then the “fair market value” shall be that value determined
in good faith by the Board of Directors based on a consideration of
the following relevant factors: the Company’s net worth, prospective
earning power, its dividend paying capacity, the value of its
underlying assets, and any other factors such as the goodwill of the
business, the economic outlook in the industry, the Company’s position
in the industry and its management, and the value of securities of
corporation engaged in the same or similar businesses which are listed
on a national securities exchange. The weight to be accorded by
comparison or any other evidentiary factors considered by the Board of
Directors in the determination of value will depend on the particular
circumstances applying at the time. In every case, the determination
of the Board of Directors shall be final.

5.4 Payment of Exercise Price; Taxes.

     5.4.1 The exercise price of each Option shall be paid in full at the time of exercise by
cash or certified check or the exchange of Shares, or a combination of both such that the sum of
(a) the aggregate fair market value (as of the exercise date) of the Shares exchanged by the
Participant (as determined by the Committee), and (b) the cash paid, equals the total exercise
price of the Option.

     5.4.2 If the exercise of an Option gives rise to an obligation of the Company to withhold
state or federal income or other taxes, or gives rise to any other tax liability of the Company of
any kind, the Participant shall tender the amount of such tax to the Company along with the
exercise price, unless the incidence of such tax cannot lawfully be placed on the Participant.

	5.5	 	Exercise of Options.

     Options shall be exercisable as provided in the Option Agreement. Except as provided in
Section 5.6, in no event shall Options be exercised during the six (6) month period immediately
following such grant.

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5.6 Duration of Option.

     Each Option shall be exercisable for so long as the Participant is a director of the Company
and, to the extent that the Option is exercisable on the date of termination of the Participant’s
directorship, for thirty (30) days thereafter, but not longer than ten (10) years from the date the
Option is granted. Unless otherwise expressly provided for by the Committee, on the date of
termination of a Participant’s directorship, Options granted but not yet exercisable shall
thereupon become exercisable. Nothing in this Plan requires Options to be exercisable upon grant.

5.7 Death or Disability.

     If a Participant dies or is “permanently and totally disabled” (within the meaning of section
22(e)(3) of the Internal Revenue Code of 1986, as amended (“Code”)) while serving as a director of
the Company, the thirty (30) day period specified in Section 5.6 above shall be one (1) year.

5.8 Misconduct.

     If a Participant is determined by the Committee to have committed an act of embezzlement,
fraud, dishonesty, deliberate or repeated disregard for the rules of the Company, unauthorized
disclosure of any of the trade secrets or confidential information of the Company, unfair
competition with the Company, inducement of any customer of the Company to breach a contract with
the Company, inducement of any principal for whom the Company acts as agent to terminate that
agency relationship or any culpable degree of negligence, then neither the Participant nor the
Participant’s estate shall be entitled to exercise any Option after termination of the
Participant’s directorship, whether or not, after termination of such directorship, such
Participant may receive payment from the Company for services rendered prior to termination,
services for the day on which termination occurs, or other benefits.

5.9 Transferability of Option.

     Options shall be transferable only by will or the laws of descent and distribution.

5.10 No Employment Agreement.

     No Option Agreement, nor anything contained in this Plan, shall confer upon any Participant
any right to continue as a director of the Company nor limit in any way the right of the Company,
or the shareholders thereof, to terminate a Participant’s directorship at any time.

5.11 Adjustments to Options.

     Subject to the general limitations of this Plan, the Committee may modify or extend existing
Options. However, without the consent of the Optionee, no modification may impair the Optionee’s
rights or increase the Optionee’s obligations under the Plan. No reductions in the purchase price
of shares under Options previously granted may be made except as occasioned by Section 7.1.

5.12 Form of Agreement.

     The Committee shall adopt a form of Option Agreement to be used pursuant to this Plan and may
modify, add to, or delete from the form as it shall deem appropriate, subject to the provisions set
forth herein.

ARTCILE VI

ADMINISTRATION AND AMENDMENT OF THE PLAN

6.1 The Committee.

     This Plan shall be administered by a committee (“Committee”) of at least two persons not
eligible to participate in the Plan and who are appointed by the Board of Directors and may or may
not be members of the Board. The Board of Directors shall fill vacancies on the Committee and may
from time to time remove members from, or add members to, the Committee, provided that at all times
the Committee shall have at least two members. The Committee shall act pursuant to the written
consent of a majority of its members or the majority vote of its members at any meeting thereof.

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6.2 Committee Rights and Powers.

     Subject to this Plan and to the supervision of the Board of Directors, the Committee shall
have the authority and discretion:

	 	(a)	 	to determine which of the Company’s directors shall receive Options;
	 
	 	(b)	 	to determine when Options shall be granted (subject to Section 5.2 above);
	 
	 	(c)	 	to determine the terms and conditions of Options (which terms and
conditions may differ between Options);
	 
	 	(d)	 	to interpret the Plan; and
	 
	 	(e)	 	to take such action as is necessary or appropriate to the administration
of the Plan.

     All decisions, determinations, and interpretations of the Committee shall be final and binding
on all Participants (subject to review by the Board of Directors in its sole and absolute
discretion).

6.3 Administration.

     The Committee from time to time may adopt rules and regulations for implementing this Plan,
and it may from time to time suspend or terminate this Plan or make such changes and additions
hereto as it may deem desirable, without further action on the part of the Board of Directors or
the shareholders of the Company; provided, however, that unless the Company’s shareholders shall
have first given their approval, then (a) the total number of Shares that may be purchased under
the Plan shall not be increased except as otherwise provided in this Plan; (b) the description of
the persons eligible to receive Options shall not be changed; and (c) the minimum exercise price
shall not be changed. The suspension, termination or amendment of this Plan shall not, without the
consent of the Participant, alter or impair any rights or obligations under any Options theretofore
granted under this Plan.

ARTCILE VII

ADJUSTMENT OF AND CHANGES IN STOCK

7.1 Changes in Stock; Stock Dividends.

     If the Shares presently constituted are changed into or exchanged for a different number or
kind of shares of stock or other securities of the Company or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification, split-up, combination of
shares, or otherwise), or if the number of Shares shall be increased through the payment of a stock
dividend or other distribution, then notwithstanding any other provision of this Plan, there shall
be substituted for or added to each Share subject to this Plan the number and kind of shares of
stock or other securities into which each outstanding Share shall be entitled, as the case may be.
Outstanding Options shall also be amended as to price and other terms if necessary to reflect the
foregoing events. If there shall be any other change in the number or kind of the outstanding
Shares, or of any stock or other securities into which it shall have been exchanged, then if the
Committee shall, in its sole discretion, determine that such change equitably requires an
adjustment in any Option theretofore granted or that may be granted under this Plan, such
adjustment shall be made in accordance with such determination.

7.2 Termination of Business.

     Upon any merger of the Company with another corporation where the Company is not the surviving
corporation, dissolution or liquidation of the Company, sale of substantially all the property of
the Company, or the acquisition of more than 80% of the voting power of the stock of the Company by
another corporation, then the Company shall have the right, at its option, to do any of the
following:

	 	(a)	 	provide for the continuance of this Plan and all outstanding Options
granted hereunder;
	 
	 	(b)	 	permit the immediate exercise of all outstanding Options not otherwise
immediately exercisable;

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	 	(c)	 	terminate all outstanding Options, whether exercisable or not, by
paying each holder an amount equal to the aggregate current market
price of Shares underlying the Options held by the holder less the
aggregate exercise price of such Shares; or
	 
	 	(d)	 	terminate this Plan and all Options granted hereunder after giving
written notice to all holders of exercisable Options informing them of
the Company’s intention to terminate the Options and giving the
holders a reasonable opportunity to exercise their exercisable
Options.

	7.3	 	Fractional Shares.

     No right to purchase fractional Shares shall result from any adjustment in Options pursuant to
this Article VII. In the case of any such adjustment, the Shares subject to Options of each
Participant shall be rounded down to the nearest whole Share. Notice of any adjustment shall be
given by the Company to each holder of Options that shall have been so adjusted and such adjustment
(whether or not such notice is given) shall be effective and binding for all purposes of the Plan.

ARTCILE VIII

BINDING ON HEIRS, SUCCESSORS AND ASSIGNS

     Except as provided in Section 7.2 above, this Plan shall inure to the benefit of, and be
binding upon, each successor to the Company. All obligations imposed upon the Participants and all
rights granted to the Company under this Plan shall be binding upon each Participant’s heirs, legal
representatives, and successors. This Plan and the Option Agreements executed between the Company
and each Participant shall be the sole and exclusive source of any and all rights that each
Participant and his or her heirs, legal representatives, or successors may have in respect to this
Plan or any Options or Shares granted hereunder, whether to the Participant or to any other person.

ARTCILE IX

TAX STATUS

     Options granted hereunder are not intended to be eligible for favorable tax treatment under
Section 422 of the Code. The Company does not hereby, nor by way of any Plan, document, or
otherwise, attempt to make any representation to any person, including the Participants, with
respect to the tax effect on such person of the grant or exercise of an Option or the subsequent
disposition of Shares obtained by the exercise of an Option pursuant to this Plan or any other
aspect of this Plan.

ARTCILE X

PLAN GOVERNS

     If there is any discrepancy between this Plan and any documents related to this Plan,
including any Option Agreement, this Plan shall govern. Nothing contained in this Plan shall be
construed to constitute, or be evidence of, any right in favor of any person to receive Options
hereunder or any obligation on the part of the Company to issue Options.

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