Document:

Exhibit
10.1

 

AMENDED
AND RESTATED SUBORDINATED PROMISSORY NOTE

 

	
  €9,000,000 original
  principal amount

  	
  Amendment and
  restatement dated as of March 5, 2010 to the Subordinated Note dated
  March 8, 2005, as amended by the First Amendment thereto dated as of June 25,
  2008

  
	
   

  	
   

  
	
   

  	
  Germantown, Maryland

  

 

FOR VALUE RECEIVED, the undersigned, OPTELECOM-NKF, INC. (f/k/a
Optelecom, Inc.), a Delaware corporation (“Optelecom”) hereby
unconditionally promises to pay to DRAKA HOLDING N.V., a public company with
limited liability organized under the laws of The Netherlands, or its permitted
assigns (the “Holder”), in cash, the principal amount described in Section 1
below, with interest on the unpaid principal balance at the rate and on the
terms provided herein.

 

This amended and restated subordinated promissory note (this “Note”)
amends and restates
in its entirety the terms and obligations of Optelecom under that certain
Subordinated Note dated March 8, 2005, as amended by the First Amendment
thereto dated as of June 25, 2008, by Optelecom to the Holder (the “Original
Note”).   Nothing contained in this
Note shall be deemed to create or represent a novation or the issuance of new
indebtedness or the exchange by the undersigned of the Original Note for a new
promissory note.

 

1.                                       Agreement.  The Original Note was issued in connection
with the Share Purchase Agreement (the “Agreement”), dated as of March 8,
2005, by and among Optelecom, the Holder, NKF Vastgoed B.V., a private company
with limited liability organized in the Netherlands, and Optelecom-NKF, B.V.
(f/k/a NKF Electronics, B.V.), a private company with limited liability
organized in the Netherlands (“NKF Electronics”), and was the
Subordinated Note to which reference was made in the Agreement.  The Holder is entitled to the benefits of
(and subject to the obligations expressly contained in) this Note and may
exercise the remedies provided for hereby and thereby or otherwise available in
respect hereto and thereto.  The
€9,000,000 original principal amount of this Note was reduced in accordance
with the Agreement to €7,341,000, and will be (i) increased to €9,137,623
effective on the Original Maturity Date (as hereinafter defined) by the amount
of unpaid interest under this Note that has accrued during the period from March 8,
2005 to the Original Maturity Date (which accrued and unpaid interest shall be
treated for all purposes hereof as part of the principal amount of this Note,
effective the Original Maturity Date) and (ii) decreased to €8,982,456 by
the payment of the Taxable Portion Installment due on the Original Maturity
Date (as described below).  Capitalized
terms used herein without definition shall have the meaning ascribed to such
terms in the Agreement.

 

2.                                       Interest Rate;
Payment.

 

(a)                             The outstanding principal amount of this
Note shall bear interest at a rate of (i) SIX PERCENT (6%) per annum from March 8,
2005 until March 8, 2010 (the 

 

 

“Original Maturity Date”), and (ii) TEN PERCENT (10%) per
annum from March 9, 2010 until the entire principal amount of, and any
interest on, this Note shall be paid in full in cash.  Interest shall be calculated based on a
360-day year for the number of days elapsed. 
An installment of interest equal to ONE HUNDRED FIFTY FIVE THOUSAND ONE
HUNDRED SIXTY SEVEN Euro (€155,167) (corresponding to 30% of the interest
accrued for the 12 months preceding the Original Maturity Date) (the “Taxable
Portion Installment”) shall be due and payable in cash on the Original
Maturity Date.

 

(b)                            The principal and interest under this
Note shall be due and payable in the following manner, if not earlier
paid:  (i) on or before June 8,
2010, Optelecom shall pay the Holder an installment of interest equal to the
interest accrued and unpaid from March 9, 2010 through June 8, 2010
(the “First Interest Installment”); and (ii) on or before September 8,
2010, Optelecom shall pay the Holder an installment of interest equal to the
interest accrued and unpaid from June 9, 2010 through September 8,
2010 (the “Second Interest Installment”); and (iii) on or before December 8,
2010, Optelecom shall pay the Holder an installment of interest equal to the
interest accrued and unpaid from September 9, 2010 through December 8,
2010 (the “Third Interest Installment” and together with the First
Interest Installment and the Second Interest Installment, the “Interest
Installments”); and (iv) the principal amount outstanding under this
Note, together with all accrued and unpaid interest thereon (the “Maturity
Payment”), shall be due and payable in full on March 8, 2011 (the “Maturity
Date”).  Each of the Interest
Installments and the Maturity Payment shall be paid by wire transfer of
immediately available funds to the Holder’s account listed on Schedule 1.3(a) to
the Agreement (the “Bank Account”) or at such other bank as may be
specified in writing from time to time not later than two (2) Business
Days prior thereto by the Holder to Optelecom, without counterclaim or set
off.  The term “Business Day” shall mean
any day other than a Saturday, Sunday or other day in which banks located in
the State of Maryland are authorized or required by law to close.

 

(c)                             Optelecom shall have the right, without
premium or penalty, to prepay this Note in whole or in part at any time before
the Maturity Date, together with accrued and unpaid interest and all other
amounts payable hereunder. 
Notwithstanding the foregoing, if at any of June 30, 2010, September 30,
2010 or December 31, 2010 (each, a “Quarter End”) Optelecom has
cash in excess of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) (the
cash in excess of such  amount, the “Excess
Cash”), as determined in accordance with generally accepted accounting
principles in the United States, then not later than forty-five (45) days after
such Quarter End, Optelecom shall pay such Excess Cash to the Holder as a
prepayment under this Note (an “Excess Cash Prepayment”).  Partial prepayments, including any Excess
Cash Prepayment, shall be applied first to accrued and unpaid interest through
the date of such prepayment and then to reduce the principal balance of this
Note.

 

(d)                            If Optelecom does not pay any amount
under this Note (whether principal, interest or other amounts) on the date when
due (and whether or not the failure to pay such amount constitutes an Event of
Default under this Note by virtue of Sections 1(e) and 4(a), (b) or (c) hereof),
the rate of interest on such amount shall increase to FOURTEEN PERCENT (14%)
from the date such amount was due until paid in full in cash.

 

(e)                             Notwithstanding Section 4(a), (b) or
(c) hereof, or any other provision of this Note, under no circumstances
shall the failure to pay any amount under this 

 

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Note, including the Taxable Portion Installment, any
of the Interest Installments or any Excess Cash Prepayment (but excluding any
payment due under Section 9(d) hereof), prior to the Maturity Date be
deemed to be an “Event of Default” under this Note.

 

3.                                       [Intentionally Deleted].

 

4.                                       Events of Default. 
Any of the following shall constitute an “Event of Default” under
this Note:

 

(a)                             Subject to Section 2(e) hereof,
any failure to make any payment of any principal amount of this Note on the
date such payment is scheduled to be paid hereunder;

 

(b)                            Subject to Section 2(e) hereof,
any failure to make any payment of any installment of interest under this Note
more than five (5) days after the date such installment is scheduled to be
paid hereunder;

 

(c)                             Subject to Section 2(e) hereof,
any failure to make any payment of any amount due under this Note (other than
principal or interest) more than five (5) days after written notice of
such failure is furnished to Optelecom;

 

(d)                            Optelecom shall fail to observe or
perform any Covenant set forth in Section 8.1(a) or Section 8.2;

 

(e)                             Optelecom shall fail to observe or
perform any Covenant (other than as described in Section 4(d)), which
failure is not cured within thirty (30) days following written notice to
Optelecom and the Banks of such failure;

 

(f)                               any petition in bankruptcy being filed by
or against Optelecom or any Subsidiary thereof or any proceedings in
bankruptcy, insolvency or under any other laws relating to the relief of
debtors being commenced by or against Optelecom or any Subsidiary thereof,
either through reorganization, composition, extension or otherwise and which,
in the case of any involuntary proceedings shall be acquiesced to by Optelecom
or any Subsidiary thereof or shall continue for a period of ninety (90) days
undismissed or unstayed;

 

(g)                            acceleration of the Senior Indebtedness
(as defined in Section 6(a)) or the indebtedness permitted under Section 8.2(a)(ii);
or

 

(h)                            any representation or warranty made by
Optelecom in the Security Agreement (as defined in Section 7), or in any
certificate or writing in connection with this Note or the Security Agreement,
shall prove to have been incorrect in any material respect when made, and, if
such default is susceptible of cure and does not involve a representation
included in Section 4.01 of the Security Agreement or otherwise relating
to the creation, perfection or priority of the Holder’s Security Interest (as
defined in Section 7), such default is not cured within 30 days following
written notice to Optelecom of such default; or

 

(i)                                Optelecom shall fail to observe or
perform any of its covenants or agreements in Sections 3.01, 4.04, 4.05, 4.06
and 6.02 of the Security Agreement; or

 

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(j)                                Optelecom shall fail to observe or
perform any of its covenants or agreements in Sections 3.02, 4.07, 4.08, 5.02
and 5.03 of the Security Agreement and such failure shall continue for a period
in excess of 30 days; or

 

(k)                             Optelecom shall fail to observe or
perform any of its covenants or agreements in any Security Document (as defined
in Section 7) (other than a failure described in paragraphs (a) though
(j) of this Section 4), which failure is not cured within 30 days
following written notice to Optelecom of such failure.

 

5.                                       Acceleration; Change in Control.

 

(a)                             Acceleration upon an Event of Default. 
Upon an Event of Default, the Holder may, at its option, by notice in
writing to Optelecom and the Banks, declare this Note to be, and the Note shall
thereupon be, forthwith due and payable, together with accrued and unpaid
interest thereon, provided, that upon the occurrence of an Event of
Default under Section 4(f), this Note shall automatically be deemed to be
due and payable, together with accrued and unpaid interest thereon, without any
further action by the Holder and all amounts payable under this Note shall be
immediately due and payable.

 

(b)                            Acceleration upon a Change in Control. 
Upon a Change in Control (as defined herein) of Optelecom or any
Subsidiary thereof (each, an “Optelecom Entity”), Holder may, at its
option, by notice in writing to Optelecom and the Banks, declare this Note to
be, and the Note shall thereupon be, forthwith due and payable, together with
accrued and unpaid interest thereon.  For
purposes of this Note, the term “Change in Control” means, with respect
to any Optelecom Entity:

 

(A)                              A transaction or series of transactions
in which any Person or group (within the meaning of Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
other than an Optelecom Entity or a trustee or other fiduciary holding securities
under an employee benefit plan of an Optelecom Entity or a corporation owned
directly or indirectly by the stockholders of an Optelecom Entity in
substantially the same proportions as their ownership of stock of such
Optelecom Entity, becomes the beneficial owner (within the meaning of Rule 13(d)(3) under
the Exchange Act), directly or indirectly, of securities representing 50% or
more of the combined voting power of such Optelecom Entity’s then-outstanding
securities entitled generally to vote for the election of directors;

 

(B)                                Such Optelecom Entity’s stockholders
approve an agreement to merge or consolidate with another corporation (other
than a wholly owned subsidiary of such Optelecom Entity); or

 

(C)                                Such Optelecom Entity’s stockholders
approve an agreement (including, without limitation, an agreement of
liquidation) to sell or otherwise dispose of a material portion of the 

 

4

 

assets or
properties of such Optelecom Entity (including, without limitation, any shares
or other equity interest in any Subsidiary of such Optelecom Entity), other
than any disposition listed in clauses (i)-(vi) of Section 8.2(d).

 

6.                                       Senior Indebtedness.

 

(a)                             In this Note, the term “Senior
Indebtedness” means a revolving credit facility or facilities to be
provided by Presidential Financial Corporation or other unaffiliated working
capital lender that (in either case) executes and delivers or otherwise become
a party to the Intercreditor Agreement (as defined in Section 7 below)
(together with any unaffiliated working capital lender that subsequently
refinances or becomes a party to such revolving credit facility or facilities
and assumes the obligations of Presidential Financial Corporation or such other
working capital lender under the Intercreditor Agreement, the “Banks”)
to Optelecom in an aggregate amount not to exceed SEVEN HUNDRED FIFTY THOUSAND
Dollars ($750,000) (or the Euro currency equivalent of SEVEN HUNDRED FIFTY
THOUSAND Dollars ($750,000)) at any one time outstanding and any debentures,
notes or other evidence of indebtedness issued in exchange for such revolving
credit facility or facilities, in all cases whether direct or indirect,
absolute or contingent, liquidated or unliquidated, due or to become due, joint
or several, and including without limitation all interest, late fees, and
collection costs associated with such revolving credit facility or facilities
(the “Optelecom Revolver”).

 

(b)                            [Intentionally Deleted].

 

(c)                             [Intentionally Deleted].

 

(d)                            In the event of any bankruptcy
proceeding, insolvency proceeding, receivership, liquidation, reorganization,
dissolution or assignment for the benefit of creditors of Optelecom (each, a “Proceeding”),
the Banks shall be entitled to receive payment in full in cash of all of the
Senior Indebtedness of Optelecom before the Holder is entitled to receive any
payment or other distribution on account of this Note.  In connection with any Proceeding, no payment
to the Banks shall be deemed to have been made until such Bank actually has
received the payment. Without limiting the generality of the preceding
sentence, the Banks shall not be deemed to have received payment by virtue
solely of the approval or implementation of a reorganization plan in bankruptcy
or in any other Proceeding.

 

(e)                             If the Holder receives any payment or
distribution on account of this Note before all of the Senior Indebtedness is
paid in cash in full, and if such payment or distribution is not permitted
under this Note, then such payment or distribution shall be received and held
in trust by the Holder for the ratable benefit of the Banks and shall promptly
be paid over, ratably, to the Banks (to the extent of any outstanding Senior
Indebtedness).

 

(f)                               [Intentionally Deleted].

 

(g)                            Without the prior written consent of the
Banks, the Holder and Optelecom shall not further amend, restate, modify,
replace, or otherwise in any manner alter this Note (each, a “Note
Modification”) if any such Note Modification has the effect of increasing
the 

 

5

 

outstanding principal amount hereof or of modifying
the provisions of this Section 6 in a manner that adversely affects the
Banks.

 

(h)                            By the Holder’s acceptance of this Note,
the Holder agrees that (i) the provisions of this Section 6, and
other provisions of this Note that relate to the Senior Indebtedness and the
Holder’s subordination of all amounts payable hereunder to the payment of the
Senior Indebtedness, are for the benefit of the Banks, and, so long as any
Senior Indebtedness remains unpaid, may not be rescinded or canceled in whole
or in part without the prior written consent thereto of the Banks; (ii) the
Banks may rely on this Section 6 and the other provisions of this Note
that relate to the Senior Indebtedness and the Holder’s subordination of all
amounts payable hereunder to the payment of the Senior Indebtedness; and (iii) the
Banks shall be a third party beneficiary hereof and as such shall be entitled
to enforce this Section 6.

 

7.                                       Security.

 

(a)                             This Note is secured by (i) that
certain Deed of Pledge of Shares in Optelecom-NKF Holding B.V. (“ONH”)
dated June 27, 2008 by and among Optelecom, the Holder and ONH (as
amended, amended and restated, supplemented or otherwise modified, the “35%
Pledge Agreement”) under which thirty-five percent (35%) of the issued
share capital of ONH has been pledged to the Holder to secure Optelecom’s
obligations hereunder, as more particularly described therein, (ii) that
certain Deed of Pledge of an Additional 30% of the Shares in the Capital of
Optelecom-NKF Holding B.V. dated the date hereof by and among Optelecom, the
Holder and ONH (as amended, amended and restated, supplemented or otherwise
modified, the “30% Pledge Agreement” and collectively with the 35%
Pledge Agreement, the “Pledge Agreement”) under which an additional
thirty percent (30%) of the issued share capital of ONH is being pledged to the
Holder to secure Optelecom’s obligations hereunder, as more particularly
described therein, and (iii) that certain Security Agreement dated as of March 5,
2010 (as amended, amended and restated, supplemented or otherwise modified, the
“Security Agreement”; and together with the Pledge Agreement and any
other agreement or instrument delivered by Optelecom in favor of the Holder as
security for the obligations of Optelecom under this Note, collectively, the “Security
Documents”), by Optelecom to the Holder under which Optelecom has granted a
lien and security interest to the Holder (the “Holder’s Security Interest”)
in all assets of Optelecom (excluding all shares and other equity interests in
all direct and indirect Subsidiaries of Optelecom and all assets of all
Subsidiaries of Optelecom).  The Holder
hereby agrees to enter into an Intercreditor Agreement with the Banks and Optelecom
(the “Intercreditor Agreement”) to subordinate the security interest
granted to Holder under the Security Agreement to the lien and security
interest to be granted to the Banks to secure the Senior Indebtedness (the “U.S.
Lender’s Security Interest”), provided that the Intercreditor Agreement is
in form and substance acceptable to the Holder, in its reasonable judgment.

 

(b)                            [Intentionally Deleted].

 

(c)                             [Intentionally Deleted].

 

6

 

8.                                       Covenants of Optelecom.

 

8.1                                 Affirmative Covenants. 
Until this Note is paid in full in cash, Optelecom agrees and covenants
as follows (the “Affirmative Covenants”):

 

(a)                             Notice of Defaults. 
Optelecom shall promptly notify the Holder of (i) any default or
any condition which, with notice or lapse of time, or both, would constitute an
Event of Default, and (ii) any acceleration of all or any portion of the
Senior Indebtedness.

 

(b)                            SEC Filings. 
For so long as Optelecom is registered under the Exchange Act, Optelecom
shall provide the Holder with copies of all statements, reports, schedules,
forms, exhibits and other documents filed by Optelecom with the Securities and
Exchange Commission (the “SEC”) or otherwise furnished to the
stockholders of Optelecom after the date hereof (the “SEC Documents”)
under the Securities Act of 1933, as amended (the “Securities Act”), the
Exchange Act and/or the rules and regulations promulgated thereunder
within twenty (20) days after such SEC Documents are filed with the SEC or
furnished to stockholders, as the case may be.

 

(c)                             Financial Statements and Notices. 
If Optelecom is no longer registered with the SEC under the Exchange
Act, Optelecom shall provide the Holder with copies of the following materials:

 

(i)                                its unaudited quarterly and year-to-date
financial statements (including a quarterly, year-to-date, and trailing twelve
(12)-month (when applicable) balance sheet, profit and loss statement and cash
flow statement) within forty-five (45) days from the end of each fiscal
quarter;

 

(ii)                             its audited year-end balance sheet,
profit and loss statement and cash flow statement within one hundred twenty
(120) days of such accounting year-end, which shall be audited by an
independent accounting firm in accordance with U.S. GAAP;

 

(iii)                          any notices furnished to stockholders of
Optelecom; and

 

(iv)                         notice of an Material Adverse Change of
any Optelecom Entity.

 

(d)                            Board Meetings. 
Management of Optelecom shall provide the Holder with a verbal summary
of actions taken by the Board of Directors or any committee of the Board of
Directors of Optelecom (the “Board”) at any duly called and convened
meeting of the Board (a “Board Meeting”) not later than five (5) days
after such meeting and shall provide the Holder with a copy of written minutes
of such Board Meeting not later than twenty (20) days after such Board Meeting.
Optelecom will also provide Draka with a monthly status report no later than
the 20th day of each month (beginning on April 20, 2010) that outlines the
financial performance of Optelecom for the prior month (which status report
shall include, without limitation, (i) the consolidated unaudited balance
sheet and profit and loss statement of Optelecom and its Subsidiaries, and (ii) the
separate unaudited consolidated balance sheets and profit and loss statements
for the North American and for the European businesses of Optelecom and its
Subsidiaries, in the case of both (i) and (ii) as of the end of, and
for, such month).  The Holder
acknowledges and agrees that any information and materials it receives pursuant
to this Section 8.1(d) shall be deemed to be “Confidential
Information” under that certain Non-

 

7

 

Disclosure Agreement dated October 29, 2009
between Optelecom and the Holder (the “NDA”) and shall be subject to the
terms and conditions of the NDA.

 

8.2                                 Negative Covenants. 
Until this Note is paid in full in cash, Optelecom covenants and agrees
with the Holder not to do any of the following without the prior written
consent of the Holder (the “Negative Covenants” and collectively with
the Affirmative Covenants and the covenants under Section 8.3 hereof, the “Covenants”):

 

(a)                             Additional Indebtedness. Neither Optelecom nor any of its
Subsidiaries shall incur any indebtedness for borrowed money, or guarantee the
indebtedness or other obligations of any other person, other than the
incurrence of Permitted Debt (as defined herein).  For purposes of this Note, the term “Permitted
Debt” shall mean:

 

(i)                                the Senior Indebtedness of Optelecom;

 

(ii)                             indebtedness of Optelecom-NKF B.V. under
a revolving credit facility or facilities provided to Optelecom-NKF B.V. by ABN
AMRO (together with any other institution that assumes the obligations of ABN
AMRO under such facility or facilities, the “Dutch Bank”) in an
aggregate amount not to exceed TWO HUNDRED FIFTY THOUSAND Dollars ($250,000)
(or the Euro currency equivalent of TWO HUNDRED FIFTY THOUSAND Dollars
($250,000)) and any debentures, notes or other evidence of indebtedness issued
in exchange for such revolving credit facility or facilities;

 

(iii)                          any payables incurred by Optelecom or any
Subsidiary thereof in the ordinary course of business (as historically
conducted);

 

(iv)                         any unsecured indebtedness of Optelecom
that is junior in right of payment to the obligations under this Note on terms
no less favorable than those set forth on Exhibit A hereto; and

 

(v)                            any indebtedness of Optelecom or any
Subsidiary thereof to the extent such indebtedness and the lien securing such
indebtedness is permitted under Section 8.2(e)(iv)(G) hereof.

 

(b)                            Distributions. 
Optelecom shall not make or cause to be made any distribution of cash or
other property of Optelecom to any of its stockholders, whether such
distribution would be characterized as a dividend or otherwise, or otherwise
repurchase any shares of capital stock of Optelecom, other than repurchases of
capital stock from employees pursuant to agreements providing for such
repurchase as a result of termination of employment.

 

(c)                             Affiliate Transactions. Neither Optelecom nor its Subsidiaries
shall purchase or sell any property or services, borrow or lend money or
property from or to, or co-invest in any transaction with any of their
respective Affiliates, except for inter-company loans between Optelecom and its
direct and indirect wholly-owned Subsidiaries in the ordinary course of
business (as historically conducted) and except for reasonable and customary
employment compensation arrangements and except for transactions entered into
or incurred on an arm’s-length basis on commercially reasonable terms.

 

8

 

(d)                            Disposition of Assets. 
Neither Optelecom nor any of its Subsidiaries shall dispose of any
assets, whether by sale, lease, transfer or other disposition (including any
such disposition effected by way or merger or consolidation), other than (i) dispositions
or transfers by and among Optelecom and/or its wholly-owned Subsidiaries in the
ordinary course of business (as historically conducted), (ii) the
disposition of the assets used in the Electro-Optics business of Optelecom, (iii) the
licensing of patents, trademarks, copyrights and/or other intellectual property
in the ordinary course of business (as historically conducted) and upon
customary terms, (iv) dispositions of inventory and obsolete and surplus
property in the ordinary course of business (as historically conducted), (v) the
payment by Optelecom or any Subsidiary thereof, respectively, of any payables
incurred by such entity in the ordinary course of business (as historically
conducted), and (vi) if, upon consummation of such disposition, the
proceeds are used to satisfy in full, in cash, all of the outstanding
obligations under this Note.

 

(e)                                No Liens. Neither Optelecom nor any of its Subsidiaries shall
create or suffer to exist any lien, security interest, encumbrance, pledge,
hypothecation or assignment of any of its properties or assets, or any interest
therein, other than:

 

(i)                                the Holder’s Security Interest;

 

(ii)                             liens and security interests on property
and assets of Optelecom securing the Senior Indebtedness, provided that such
properties and assets are also subject to a perfected security interest and
lien in favor of the Holder securing the obligations of Optelecom under this
Note (subject in priority as provided in Section 7 hereof and the
Intercreditor Agreement);

 

(iii)                          liens and security interests on property
and assets of Optelecom-NKF B.V. securing the indebtedness permitted under Section 8.2(a)(ii);
and

 

(iv)                         (A) liens for
taxes which are not delinquent or which are being diligently contested in good
faith and by appropriate proceedings and adequate reserves with respect thereto
are maintained on the books of Optelecom; (B) deposits or pledges to
secure obligations under workers’ compensation, social security or similar
laws, or under unemployment insurance in the ordinary course of business; (C) judgment
liens to the extent the entry of such judgment does not constitute an Event of
Default under the terms of this Note or result in the sale or levy of, or
execution on, any of the collateral under the Holder’s Security Interest or the share capital of
ONH pledged under the Pledge Agreement; (D) statutory
liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent or which are being
contested in good faith; (E) liens against cash deposits to secure the
performance of tenders, statutory obligations, surety, customs bonds, bids,
government contracts, performance bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money); (F) deposits
made in the ordinary course of business to secure liability to insurance
carriers; (G) a purchase money security interest, attaching at the time of
acquisition, in equipment acquired after the date of this Note (provided,
however, that (x) the indebtedness secured by any such security interest
shall not exceed 100% of the cost of the equipment covered plus finance
charges, fees, costs and expenses (including attorneys fees) of documentation,
perfection, collection and enforcement, (y) each such security interest
shall attach only to the equipment so 

 

9

 

acquired for the purchase money for
that equipment, and (z) the outstanding liabilities secured by any such
purchase money security interests does not exceed Five Hundred Thousand Dollars
($500,000) per annum); and (H) any other liens existing as of the date of
this Note which are set forth on Schedule 8.2(e) attached hereto and made
a part hereof.

 

8.3                                 Tax Covenants. 
Optelecom agrees that it will (i) calculate, accrue and report for
all United States federal income tax purposes all interest and original issue
discount income (to the Holder) and expense (to Optelecom) with respect to this
Note, taking into account the “Taxable Portion Installments” paid in Optelecom
Common Stock in accordance with Section 3(b) of the Original Note for
years prior to 2009 as if paid on date such shares are issued; (ii) not
treat the Holder as the owner of any Optelecom Common Stock issued to the
Holder in accordance with Section 3 of the Original Note for any United
States federal income tax purpose unless and until the date such shares are
issued; (iii) treat any interest under this Note (whether paid in cash or
Optelecom Common Stock) as interest that is “portfolio interest” for purposes
of Sections 871(h) and 881(c) of the Internal Revenue Code of 1986 as
amended; (iv) treat any interest payable hereunder as eligible for
exemption from United States federal income tax pursuant to Article 12 of
the Convention Between the United States of America and the Kingdom of the
Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income; and (v) will perform any
applicable reporting on United States Internal Revenue Service Forms 1042 and
1042-S with respect to payments hereunder, consistent with the foregoing.

 

8.4                                      [Intentionally Deleted]

 

9.                                       Miscellaneous.

 

(a)                             All payments of cash under this Note
shall be made to the Holder by wire transfer to the Holder’s Bank Account as
the Holder may from time to time direct. 
No extension of time for payment of any amount owing hereunder shall
otherwise affect the liability of Optelecom for payment of the indebtedness
evidenced hereby.  No delay by the Holder
in exercising any power or right hereunder shall operate as a waiver of any power
or right hereunder.

 

(b)                            A delay by the Holder in exercising a
right or remedy with respect to this Note shall not constitute a waiver
thereof; a waiver of a default, right or remedy shall not constitute a waiver
of a subsequent default, right or remedy; and a single or partial exercise of a
right or remedy shall not preclude another or further exercise thereof or the
exercise of another right or remedy.

 

(c)                             Optelecom waives demand, presentment,
protest and, except as expressly set forth herein, all other demands and
notices of any kind, and no partial payment shall discharge Optelecom from
liability hereon in whole or in part (except to the extent of such partial
payments).

 

(d)                            Optelecom shall pay, promptly upon demand
by the Holder, (i) the reasonable fees and expenses actually incurred by
the Holder (including the reasonable fees and expenses of the Holder’s counsel)
in connection with the negotiation and the execution and

 

10

 

 

delivery of this amendment and restatement of the Original Note and all
Security Documents, and (ii) all costs and expenses of collection,
incurred in connection with enforcement of rights and remedies of the Holder
hereunder and under the Security Documents, the protection or realization of
any collateral under the Security Documents or in connection with the Holder’s
collection efforts, or in connection with any bankruptcy or other judicial
proceeding, whether or not suit on this Note or any foreclosure proceeding is
filed.

 

(e)          Each of Optelecom and the Holder, by
its acceptance hereof, agrees that:

 

(i)           all covenants and agreements by or on
behalf of Optelecom, the Holder or the Banks that are contained in this Note
shall bind and inure to the benefit of their respective successors and assigns;

 

(ii)          Optelecom may not assign all or any
portion of its rights or obligations under this Note or any Security Documents;
and

 

(iii)         the Holder may not assign all or any
portion of its rights or obligations under this Note or any Security Document,
unless, at the time of such assignment by the Holder, the Holder’s assignee
shall have executed an agreement to be bound by the terms hereof and of the
Intercreditor Agreement (such agreement to be in form reasonably satisfactory
to the Banks).

 

(f)          Except as provided for herein, no
waiver or modification of the terms of this Note shall be valid unless in
writing signed by Optelecom and the Holder.

 

(g)          This Note shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to principles or rules regarding conflicts of laws, other than such
principles directing application of the laws of the State of Delaware.

 

(h)         In case any provision contained herein
(or part thereof) shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or other
unenforceability shall not affect any other provision (or the remaining part of
the affected provision) hereof, but this Note shall be construed as if such
invalid, illegal or unenforceable provision (or part thereof) had never been
contained herein, but only to the extent that such provision is invalid,
illegal, or unenforceable.  No provision
of this Note shall be construed or shall operate to require Optelecom to pay
interest in an amount or at a rate greater than the maximum rate allowed from
time to time under applicable law.

 

(i)           Any legal action or proceeding with
respect to this Note or for recognition and enforcement of any judgment in
respect hereof brought by the Holder or its successors or assigns shall be
brought and determined by either (i) a state court or federal court
sitting in the State of Delaware, or (ii) an appropriate court sitting in
Amsterdam, The Netherlands, and the Holder and Optelecom hereby irrevocably
submits with regard to any such action or proceeding for itself and in respect
to its property, generally and unconditionally, to the exclusive jurisdiction
of the aforesaid courts.  Each of the
Holder and Optelecom hereby irrevocably waives, and agrees not to assert, by
way of motion, as a defense, counter claim or otherwise, in any action or
proceeding with respect to this Note, (A) any claim that it is not 

 

11

 

personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to serve process, (B) that it or its
property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), and (C) to the fullest extent
permitted by applicable law, that (I) the suit, action or proceeding in
any such court is brought in an inconvenient forum, (II) the venue of such
suit, action or proceeding is improper and (III) this Note, or the subject
matter hereof, may not be enforced in or by such courts.

 

(j)          IN ANY ACTION OR PROCEEDING ARISING
HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER OR
THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH
THIS NOTE, REGARDLESS OF THE FORM OF ACTION OR PROCEEDING.

 

(k)         All
notices, requests and other communications hereunder must be in writing and
will be deemed to have been duly given only if delivered personally or by
facsimile transmission against facsimile confirmation or mailed by an internationally
recognized overnight courier prepaid, to the parties at the following addresses
or facsimile numbers:

 

If to Optelecom to:

 

Optelecom-NKF, Inc.

12920 Cloverleaf Center
Drive

Germantown, Maryland  20874

Facsimile No.: (240)
912-3381

Attn:  President

 

with a copy (which shall
not constitute notice) to:

 

Venable LLP

8010 Towers Crescent
Drive, Suite 300

Vienna, Virginia  22182

Facsimile No.:  (703) 821-8949

Attn:  Thomas W. France, Esq.

 

If to the Holder to:

 

Draka Holding NV

De Boelelaan 7

P.O. Box 75979

1083 HJ Amsterdam

THE NETHERLANDS

Facsimile No.:  31 20 5689 895

Attn:  Jacoba Bremer

 

12

 

with a copy (which shall
not constitute notice) to:

 

Sullivan &
Worcester LLP

One
Post Office Square

Boston,
Massachusetts  02109

Facsimile
No.:  (617) 338-2880

Attn:  Harry E. Ekblom, Jr.

 

All such notices,
requests and other communications will (i) if delivered personally to the
address as provided in this Section 9(k), be deemed given upon delivery, (ii) if
delivered by facsimile transmission to the facsimile number as provided for in
this Section 9(k), be deemed given upon facsimile confirmation, and (c) if
delivered by overnight courier to the address as provided in this Section 9(k),  be deemed given on the earlier of the first
Business Day following the date sent by such overnight courier or upon receipt
(in each case regardless of whether such notice, request or other communication
is received by any other Person to whom a copy of such notice is to be delivered
pursuant to this Section 9(k)).  Any
party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.

 

(l)           No right, power or remedy conferred
hereby shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute
or otherwise.

 

(m)        Upon receipt of evidence reasonably
satisfactory to Optelecom of the loss, theft, destruction or mutilation of this
Note and, in the case of loss, theft or destruction, upon receipt of indemnity
or security reasonably satisfactory to Optelecom from the Holder or, in the
case of mutilation, upon surrender of the mutilated Note, Optelecom shall make
and deliver a new Note of like tenor in lieu of this Note.

 

13

 

IN WITNESS WHEREOF, the undersigned has caused this Note to be duly
executed and delivered by its authorized officer as of the date first written
above.

 

 

	
   

  	
  OPTELECOM-NKF, INC.
  (f/k/a Optelecom, Inc.)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ David B. Patterson

  
	
   

  	
   

  	
  Name: David B.
  Patterson

  
	
   

  	
   

  	
  Title:
  President & CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AGREED AND ACKNOWLEDGED:

  
	
   

  	
   

  
	
   

  	
  DRAKA HOLDING N.V.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Frank Dorjee

  
	
   

  	
   

  	
  Name: Frank Dorjee

  
	
   

  	
   

  	
  Title: CEO

  

 

14

 

Exhibit A

 

Junior Debt Terms

 

Any and all indebtedness
permitted under clause (iv) of Section 8.2(a) hereof (such
indebtedness, including principal, interest and other amounts, “Junior Debt”)
shall be expressly subordinate (in payment and in priority of security) to all
indebtedness evidenced by this Note, including principal, interest and other
amounts (collectively the “Senior Subordinated Debt”) pursuant to a subordination
agreement entered into between the Holder, Optelecom and the holder(s) of
such Junior Notes containing terms no less favorable to the Holder than the
following:

 

1.             No payment of principal, interest or other amounts on
such Junior Debt shall be made by Optelecom or its Subsidiaries, and the holder
thereof shall not be entitled to receive any such payment, until such time as
all Senior Subordinated Debt has been paid and satisfied in full in cash.

 

2.             In the event of any bankruptcy proceeding, insolvency
proceeding, receivership, liquidation, reorganization, dissolution or
assignment for the benefit of creditors of Optelecom (each, a “Proceeding”),
the Holder shall be entitled to receive payment in full in cash of all Senior
Subordinated Debt before any holder of such Junior Debt is entitled to receive
any payment or other distribution on account thereof.  In connection with any Proceeding, no payment
to the Holder shall be deemed to have been made until the Holder actually has
received the payment.  Without limiting
the generality of the preceding sentence, the Holder shall not be deemed to
have received payment by virtue solely of the approval or implementation of a
reorganization plan in bankruptcy or in any other Proceeding.

 

3.             If any holder of such Junior Debt receives any payment
or distribution on account thereof before all Senior Subordinated Debt is paid
in full in cash, then such payment or distribution shall be received and held
in trust by such holder for the ratable benefit of the Holder and shall
promptly be paid over to the Holder.

 

4.             No holder of any Junior Debt shall exercise any rights
or remedies available to it under applicable law or under any note, instrument
or agreement (including any agreement securing such Junior Debt) relating to
such indebtedness for collection or enforcement of such note, instrument or
agreement, and shall not commence or continue any action, suit or proceeding
against Optelecom or its Subsidiaries, or their assets, or exercise any other
remedies available to it at law or under such note, instrument or agreement,
for collection or enforcement of such Junior Debt.  Notwithstanding the foregoing , any holder of
such Junior Debt may take such actions as are necessary to preserve its claims
against Optelecom or its Subsidiaries in respect of any amounts due under any
note, instrument or agreement evidencing or securing such Junior Debt
(including, without limitation, filing a proof of claim, furnishing notices of
default, filing and prosecuting lawsuits with respect to non-payment
obligations, filing but not otherwise prosecuting a law suit for the
enforcement of payment obligations and other similar actions) if a default has
occurred thereunder and is continuing and the holder of such Junior Debt has
provided written notice to the Holder of such default.

 

15

 

5.             Each note, instrument, agreement or other document
relating to such Junior Debt shall provide that the holder thereof, by
accepting such note, instrument, agreement or document or the benefit thereof
shall agree that (i) the provisions of such note, instrument, agreement or
document relating to Senior Subordinated Debt and the subordination of any
Junior Debt to the payment of the Senior Subordinated Debt, are for the benefit
of the Holder, and, so long as any Senior Subordinated Debt remains unpaid, may
not be rescinded or canceled in whole or in part without the prior written
consent thereto of the Holder; (ii) the Holder may rely on the provisions
of such note, instrument, agreement or document relating to Senior Subordinated
Debt and the holder of the Junior Debt’s subordination of all amounts payable
thereunder to the payment of all Senior Subordinated Debt; and (iii) the
Holder shall be a third party beneficiary thereof and as such shall be entitled
to enforce such provisions thereof.

 

16

 

Schedule 8.2(e)

 

1.             $255,025 letter of credit for the benefit of the
landlord of the office space leased by Optelecom in Germantown, Maryland.Exhibit 10.14

 

FERRELL
COMPANIES, INC.

SUPPLEMENTAL SAVINGS PLAN

 

AMENDED AND
RESTATED EFFECTIVE JANUARY 1,
2010

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  I

  	
   

  	
  GENERAL

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
   

  	
  History,
  Purpose and Effective Date

  	
   

  	
  1

  
	
   

  	
  1.2

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
  1.3

  	
   

  	
  Source
  of Benefits

  	
   

  	
  1

  
	
   

  	
  1.4

  	
   

  	
  Notices

  	
   

  	
  2

  
	
   

  	
  1.5

  	
   

  	
  Applicable
  Law

  	
   

  	
  2

  
	
   

  	
  1.6

  	
   

  	
  Gender
  and Number

  	
   

  	
  2

  
	
   

  	
  1.7

  	
   

  	
  Action
  by Company

  	
   

  	
  2

  
	
   

  	
  1.8

  	
   

  	
  Severability

  	
   

  	
  2

  
	
   

  	
  1.9

  	
   

  	
  Nonassignment

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  DEFINITIONS

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  ELIGIBILITY AND PARTICIPATION

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
   

  	
  Eligibility

  	
   

  	
  7

  
	
   

  	
  3.2

  	
   

  	
  Participation

  	
   

  	
  7

  
	
   

  	
  3.3

  	
   

  	
  Plan
  Not Contract of Employment

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  CONTRIBUTIONS

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
   

  	
  Deferral
  Election and Bonus Deferral Election Procedures

  	
   

  	
  8

  
	
   

  	
  4.2

  	
   

  	
  Company
  Contributions

  	
   

  	
  9

  
	
   

  	
  4.3

  	
   

  	
  Discretionary
  Contributions

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  ACCOUNTS AND ACCOUNTING

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
   

  	
  Accounts

  	
   

  	
  10

  
	
   

  	
  5.2

  	
   

  	
  Valuation
  of Accounts

  	
   

  	
  10

  
	
   

  	
  5.3

  	
   

  	
  Adjustment
  of Accounts for Earnings

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  PAYMENT OF BENEFITS

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
   

  	
  Entitled
  to Benefit Payments

  	
   

  	
  11

  
	
   

  	
  6.2

  	
   

  	
  Payment
  of Benefits

  	
   

  	
  11

  
	
   

  	
  6.3

  	
   

  	
  Hardship
  Withdrawals

  	
   

  	
  11

  
	
   

  	
  6.4

  	
   

  	
  Specified
  Employees

  	
   

  	
  11

  
	
   

  	
  6.5

  	
   

  	
  Accelerated
  Distribution

  	
   

  	
  11

  
	
   

  	
  6.6

  	
   

  	
  Withholding
  for Tax Liability

  	
   

  	
  11

  
	
   

  	
  6.7

  	
   

  	
  Incapacity

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  ADMINISTRATION

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
   

  	
  General

  	
   

  	
  13

  
	
   

  	
  7.2

  	
   

  	
  Administrative
  Rules

  	
   

  	
  13

  
	
   

  	
  7.3

  	
   

  	
  Duties

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
   

  	
  CLAIMS PROCEDURE

  	
   

  	
  14

  

 

i

 

TABLE OF CONTENTS

(continued)

 

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
   

  	
  General

  	
   

  	
  14

  
	
   

  	
  8.2

  	
   

  	
  Denials

  	
   

  	
  14

  
	
   

  	
  8.3

  	
   

  	
  Notice

  	
   

  	
  14

  
	
   

  	
  8.4

  	
   

  	
  Appeals
  Procedure

  	
   

  	
  14

  
	
   

  	
  8.5

  	
   

  	
  Review

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  MISCELLANEOUS PROVISIONS

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
   

  	
  Amendment

  	
   

  	
  15

  
	
   

  	
  9.2

  	
   

  	
  Termination

  	
   

  	
  15

  
	
   

  	
  9.3

  	
   

  	
  Successors
  and Assigns

  	
   

  	
  15

  

 

ii

 

FERRELL
COMPANIES, INC.

SUPPLEMENTAL SAVINGS PLAN

 

INTRODUCTION

 

ARTICLE I

GENERAL

 

1.1          History, Purpose and Effective Date.  Ferrell Companies, Inc. (the “Company”),
has heretofore established the Ferrell Companies, Inc. 401(k) Investment
Plan (the “Savings Plan”) for its eligible employees.  The Company has also heretofore established
this Ferrell Companies, Inc. Supplemental Savings Plan (the “Plan”) to
provide certain highly compensated employees of the Company with the
opportunity to defer the receipt of compensation and to receive additional
retirement income from the Company.  The
Plan was amended, restated and continued to comply with section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”) effective as of January 1,
2009.  The following provisions
constitute an amendment, restatement and continuation of the Plan as in effect
immediately prior to January 1, 2010, the “Effective Date” of the Plan as
set forth herein.  The Plan is not
intended to qualify under section 401(a) of the Code, or to be subject to Part 2,
3 or 4 of Subtitle B of Title I of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”).  It is
intended that the provisions of the Plan conform to the requirements of section
409A of the Code and the Plan will be interpreted in all respects in accordance
with such requirements.  The provisions
of the Plan as set forth herein shall apply from and after the Effective Date
with respect to distributions commencing on or after the Effective Date.

 

1.2          Definitions.  Capitalized terms not otherwise defined in
the Plan shall have the meanings set forth in Article II, unless the
context plainly requires a different meaning:

 

1.3          Source of Benefits.
The amount of any benefit payable under the Plan will be paid in cash from the
general assets of the Company.  The
Company’s obligation under the Plan shall be reduced to the extent that any
amounts due under the Plan are paid from one or more trusts, the assets of
which are subject to the claims of the general creditors of the Company;
provided, however, that nothing in this Plan shall require the Company to
establish any trust to provide benefits under the Plan.  All amounts payable under the Plan shall be
reflected on the accounting records of the Company.  No employee or other individual entitled to
benefits under the Plan shall have any right, title or interest whatsoever in
any assets of the Company or any of its affiliates or to any investment
reserves, accounts or funds that the Company may purchase, establish or
accumulate to aid in providing the benefits under the Plan.  Neither an employee nor a beneficiary of an
employee shall acquire any interest greater than that of an unsecured creditor
of the Company.

 

 

1.4          Notices.  Any notice or document required to be given
to or filed with the Company, the Administrator or the Committee shall be
considered to be given or filed if mailed by registered or certified mail,
postage prepaid, to the Secretary of the Company, at the Company’s principal
executive offices.  Each Participant and
each beneficiary shall file with the Administrator, from time to time, in
writing, the post office address of the Participant, the post office address of
each of his Beneficiary, and each change of post office address. Any
communication, statement or notice addressed to the last post office address
filed with the Administrator (or if no such address was filed with the
Administrator, then to the last post office address of the Participant or
Beneficiary as shown on the Company’s records) shall be binding on the
Participant and each Beneficiary for all purposes of the Plan, and neither the
Administrator nor the Company shall be obligated to search for or ascertain the
whereabouts of any Participant or Beneficiary.

 

1.5          Applicable Law.  The Plan shall be construed and administered
in accordance with the internal laws of the State of Missouri to the extent not
superseded by the laws of the United States of America..

 

1.6          Gender and Number.  Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.

 

1.7          Action by Company.  Any action required or permitted to be taken
under the Plan by the Company shall be by resolution of its board of directors
or by a person or persons authorized by its board of directors.

 

1.8          Severability.  If any provision of the Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Plan, but the Plan shall be construed
and enforced as if such illegal or invalid provision had never been included
herein.

 

1.9          Nonassignment.  No Participant shall have the power to
pledge, transfer, assign, anticipate, mortgage or otherwise encumber or dispose
of in advance any interest in amounts payable hereunder or any of the payments
provided for herein, nor shall any interest in amounts payable hereunder or in
any payments be subject to seizure for payment of any Participant’s debts,
judgments, alimony or separate maintenance, or be reached or transferred by
operation of law in the event of any Participant’s bankruptcy, insolvency or
otherwise.

 

2

 

ARTICLE II

DEFINITIONS

 

Wherever used in the
Plan, the following words and phrases shall have the meaning set forth below,
unless the context plainly requires a different meaning:

 

(a)           “Account”
means the hypothetical account established on behalf of the Participant, as
described in Section 5.1.

 

(b)           “Administrator”
means the person or persons described in Article VII.

 

(c)           “Beneficiary”
means the legal or natural person or persons to whom a Participant’s benefits
under the Plan are to be paid if the Participant dies before he receives all of
his benefits.  A Participant shall
designate the Beneficiary(ies) (which can be designated successively or
contingently) and the portion of the Participant’s Vested Account Balance to be
paid to each of them by filing a signed beneficiary designation form with the
Administrator.  The beneficiary
designation form will be effective only when it is filed with the Administrator
while the Participant is alive and will cancel all beneficiary designation form
filed earlier.  If a deceased Participant
failed to designate a beneficiary as provided above, or if the designated
beneficiary of a deceased Participant died before him, his benefits shall be
paid in accordance with beneficiary designation form then on file for him under
the Savings Plan or, if there is no such beneficiary designation form on file
(or if all beneficiaries designated under the Savings Plan have died before the
Participant), in the following order of priority:  (i) to the Participant’s surviving
spouse; or if none, (ii) to the Participant’s children, per stirpes;  or
if none, (iii) to the Participant’s estate.

 

(d)           “Board” means
the governing body of the Company.

 

(e)           “Bonus Compensation”
means any incentive compensation payable under the Company’s annual bonus plan.

 

(f)            “Bonus Deferral Election”
means an election filed by an eligible employee or Participant pursuant to
which the Participant elects to defer receipt of a specified amount of his
Bonus Compensation for a Fiscal Year and to have such amount contributed to the
Plan as a Deferral Contribution.

 

(g)           “Code”
means the Internal Revenue Code of 1986, as amended from time to time.

 

(h)           “Committee”
means the executive compensation committee of the Board, if any, otherwise, the
Board or its designee.

 

(i)            “Company”
means Ferrell Companies, Inc. and any successor thereto.

 

3

 

(j)            “Compensation”
means an eligible employee’s base salary, excluding expense reimbursements,
fringe benefits, non-cash amounts and any Bonus Compensation.

 

(k)           “Deferral Contribution”
means the amount contributed to the Plan on behalf of a Participant pursuant to
his Deferral Election and/or Bonus Deferral Election.

 

(l)            “Deferral Election”
means an election filed by an eligible employee or Participant pursuant to
which the Participant elects to defer receipt of a specified amount of his
Compensation for a Plan Year and to have such amount contributed to the Plan as
a Deferral Contribution.

 

(m)          “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time.

 

(n)           “Fiscal Year”
means the Company’s fiscal year, which shall be the period commencing on August 1
and ending on the following July 31.

 

(o)           “Participant”
means an eligible employee of the Company who is participating in the Plan in accordance
with Article III.

 

(p)           “Plan” means the Ferrell
Companies, Inc. Supplemental Savings Plan, as set forth herein.

 

(q)           “Plan Year” means
the calendar year.

 

(r)            “Savings Plan” means
the Ferrell Companies, Inc. 401(k) Investment Plan.

 

(s)           “Separation from Service”
means a Participant’s termination of employment from the Company and its
affiliates which constitutes a “separation from service” within the meaning of
Code Section 409A or applicable guidance or regulations thereunder by
applying the default provisions thereof.

 

(t)            “Specified Employee”
shall be as defined in accordance with Section 409A and applicable
regulations thereunder.

 

(u)           “Unforeseeable Emergency”
means an unforeseeable, severe financial hardship to a Participant resulting
from:

 

(i)            a sudden and unexpected illness or accident of the
Participant or his dependent (as defined in Code Section 152(a), without
regard to Code Sections 152(b)(1), (b)(2) and (d)(1)(B));

 

4

 

(ii)           loss of the Participant’s property due to casualty
(including the need to rebuild a home following damage to the home not
otherwise covered by insurance); or

 

(iii)          other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Participant.

 

Neither the need to send a child to college
nor the purchase of a home shall constitute an Unforseeable Emergency.  Whether a Participant has an Unforeseeable
Emergency shall be determined based on the relevant facts and circumstances of
the applicable situation but, in any case, a distribution shall not be
considered to be on account of an Unforeseeable Emergency to the extent that
the emergency is or may be relieved through reimbursement or compensation from
insurance or otherwise or by liquidation of the Participant’s assets (to the
extent that the liquidation of such assets would not cause severe financial
hardship).  Distributions on account of
an Unforeseeable Emergency shall be limited to the amount reasonably necessary
to satisfy the emergency need (including amounts necessary to pay any federal,
state, local or foreign income taxes or penalties reasonably anticipated to
result from the distribution).

 

(v)           “Valuation Date” means
the last business day of each calendar quarter, the date as of which a
Participant’s benefits under the Plan are to be determined and such other dates
as determined from time to time
by the Administrator.

 

(w)          “Vested Account Balance”
means that portion, if any, of a Participant’s Account that is vested,
determined as follows:  (i) the
portion of a Participant’s Account attributable to Deferral Contributions shall
at all times be 100% vested, (ii) the portion of a Participant’s Account
attributable to Company Contributions shall be vested as if such contributions
were matching contributions that had been made under the provisions of the
Savings Plan, and (iii) the portion of a Participant’s Account
attributable to Discretionary Contributions shall be vested as determined by
the Committee and communicated to the Participant under procedures established
by the Administrator at the time such contributions are made.  Notwithstanding any other provision of the
Plan to the contrary, if a Participant’s Separation from Service is the result
of termination “for cause,” no benefits shall be payable to the Participant
under the Plan and his Vested Account Balance shall be zero.  A Participant shall be deemed to have been
terminated “for cause” if his Separation from Service occurs as a result of the
Participant’s fraud, misappropriation or embezzlement of funds or property of
the Company or any of its affiliates. 
The Committee shall determine whether a Participant’s Separation from
Service is “for cause.”  Unless otherwise
determined by the Committee, the following vesting schedule shall apply to
Company Contributions and Discretionary Contributions:

 

5

 

	
  Years
  of Service

  	
   

  	
  Percentage Vested

  	
   

  
	
  Less than 1

  	
   

  	
  0

  	
  %

  
	
  1 but less than 2

  	
   

  	
  20

  	
  %

  
	
  2 but less than 3

  	
   

  	
  40

  	
  %

  
	
  3 but less than 4

  	
   

  	
  60

  	
  %

  
	
  4 but less than 5

  	
   

  	
  80

  	
  %

  
	
  5 or more

  	
   

  	
  100

  	
  %

  

 

6

 

ARTICLE III

ELIGIBILITY AND PARTICIPATION

 

3.1                               Eligibility.  The Committee shall designate from time to
time those employees of the Company who shall participate in the Plan for any
Plan Year (or, with respect to deferrals of Bonus Compensation, any Fiscal
Year); provided, however, that such employees must be eligible to make pre-tax
contributions to the Savings Plan for the Plan Year or Fiscal Year, as
applicable, and must be members of a select group of management or highly
compensated employees, as such group is described in Sections 201(2),
301(a)(3), and 401(a)(1) of ERISA.

 

3.2                               Participation.  An eligible employee of the Company shall
become a “Participant” in the Plan on the first day of the first Plan Year (or,
with respect to Bonus Compensation, the Fiscal Year) following the date that he
is first designated as an eligible employee by the Committee and for which the
Participant has in effect a Deferral Election or Bonus Deferral Election, as
applicable, or, if earlier, the date on which Discretionary Contributions are
credited to his Account under the Plan. 
The participation of any Participant may be suspended or terminated by
the Committee at any time, but no such suspension or termination shall become
effective prior to the first day of the next Plan Year (or, with respect to
deferrals of Bonus Compensation, the first day of the next Fiscal Year) or
shall operate to reduce the balance in the Participant’s Account as of the
Valuation Date that preceded or coincides with the date of such suspension or
termination without such Participant’s consent. 
An employee shall cease to be a Participant when he has a Separation
from Service and the balance in his Account has been distributed under the
terms of the Plan.

 

3.3                               Plan Not Contract of Employment.  The Plan does not constitute a contract of
employment, and nothing in the Plan will give any Participant either the right
to be retained in the employ of the Company or any of its affiliates, or any
right or claim to any benefit under the Plan, except to the extent specifically
provided under the terms of the Plan.

 

 

7

 

ARTICLE IV

CONTRIBUTIONS

 

4.1                               Deferral Election and Bonus Deferral Election
Procedures.

 

(a)                        Each
eligible employee or Participant may file a Deferral Election for the portion
of the Participant’s Compensation (not to exceed 25 percent unless otherwise
provided by the Administrator) that shall be credited to his Account in
accordance with Article V for any Plan Year.  Each eligible employee or Participant may
file a Bonus Deferral Election for the portion of the Participant’s Bonus
Compensation (not to exceed 25 percent unless otherwise provided by the
Administrator) that shall be credited to his Account in accordance with Article V
for any Fiscal Year.

 

(b)                       A
Deferral Election shall be properly completed, executed and delivered to the
Administrator prior to the first day of the Plan Year for which the Deferral
Election is to be effective and shall be irrevocable as of the December 31
of the year prior to the Plan Year for which it is to be effective (or such
earlier date specified by the Administrator). 
No Deferral Elections for a Plan Year will be accepted after December 31
of the preceding Plan Year.  No more than
one Deferral Election may be entered into with respect to a Plan Year.

 

(c)                        A
Bonus Deferral Election shall be properly completed, executed and delivered to
the Administrator prior to the first day of the Fiscal Year for which the Bonus
Deferral Election is to be effective and shall be irrevocable as of the last
day of the Fiscal Year preceding the Fiscal Year for which it is to be
effective (or such earlier date specified by the Administrator).  No Bonus Deferral Elections for a Fiscal Year
will be accepted after the last day of the preceding Fiscal Year.  No more than one Bonus Deferral Election may
be entered into with respect to a Fiscal Year.

 

(d)                       Each
Deferral Election shall expire as of the last day of the Plan Year to which it
relates and a new Deferral Election will be required for each Plan Year.  Each Bonus Deferral Election shall expire as
of the last day of the Fiscal Year to which it relates and a new Bonus Deferral
Election will be required for each Fiscal Year. 
Once a Deferral Election has become effective and irrevocable for a Plan
Year, any modification or revocation thereof shall not become effective until
the first day of the first Plan Year following the date of such modification or
revocation except as otherwise specifically provided in the Plan, and (ii) once
a Bonus Deferral Election has become effective and irrevocable for a Fiscal
Year, any modification or revocation thereof shall not become effective until
the first day of the first Fiscal Year following the date of such modification
or revocation except as otherwise specifically provided in the Plan.

 

8

 

4.2                               Company Contributions.  Subject to such limitations as the Committee  may from time to time impose, if a Participant has filed (i) a
Deferral Election under the Plan for a Plan Year or (ii) a Bonus Deferral
Election under the Plan for the Fiscal Year that ends with or within a Plan
Year, the, for such Plan Year, the Participant’s Account shall be credited with
a “Company Contribution” equal to:

 

(a)                        50%
of the sum of the Participant’s salary deferrals under the Savings Plan for
such Plan Year plus the Participant’s Deferral Contributions for such
Plan Year (including Deferral Contributions attributable to the Participant’s
Bonus Deferral Election for the Fiscal Year that ends with or within such Plan
Year) under the Plan that, in the aggregate, do not exceed eight percent of the
sum of the Participant’s Compensation and Bonus Compensation for such Plan Year
(with the Bonus Compensation being equal to the Bonus Compensation payable to
the Participant for the Fiscal Year that ends with or within the Plan Year);

 

MINUS

 

(b)                       the
amount of matching contributions made on the Participant’s behalf under the
Savings Plan for such Plan Year.

 

Notwithstanding the
foregoing provisions of this Section 4.2, in no event will a Participant
be entitled to Company Contributions under the Plan for a Plan Year unless the
Participant has made the maximum permitted salary deferrals to the Savings Plan
for such Plan Year.

 

4.3                               Discretionary Contributions.  The Company, in its sole discretion, may
cause the Administrator to credit an additional amount (a “Discretionary
Contribution”) to a Participant’s Account for any Plan Year.  Notwithstanding the foregoing, in no event
shall a Discretionary Contribution be an offset to or in lieu of any other
payment or benefit to which the Participant already has a legally binding right
at the time of such contribution and, to the extent that the Discretionary
Contribution is to be made only if the Participant made contributions to the
Savings Plan, such contribution shall be made for a Plan Year only if the
Participant has made the maximum permitted salary deferrals to the Savings Plan
for such Plan Year.

 

9

 

ARTICLE V

ACCOUNTS AND ACCOUNTING

 

5.1                               Accounts.  The Administrator shall establish and
maintain one or more Accounts for each Participant, consisting of Deferral
Contributions, Company Contributions and Discretionary Contributions made on
behalf of the Participant in accordance with Article IV. All amounts
credited to a Participant’s Account shall be credited solely for purposes of
accounting and computation, and they shall remain assets of the Company subject
to the claims of the Company’s general creditors.  A Participant shall have no interest in or
right to such Account at any time.

 

5.2                               Valuation of Accounts.  The value of a Participant’s Account shall be
determined as of each Valuation Date by the Administrator in the following
manner:

 

(a)                        first,
adjust the Account balance for the applicable gains, losses, earnings and
expenses, in accordance with Section 5.3;

 

(b)                       then,
the Participant’s Account shall be credited with the amount of any Deferral
Contributions to be credited in accordance with Section 4.1, the amount of
Company Contributions to be credited in accordance with Section 4.2 and
the amount of any Discretionary Contributions to be credited in accordance with
Section 4.3, in each case that have not previously been credited; and

 

(c)                        then,
the Participant’s Account shall be charged with the amount of any distributions
under the Plan with respect to that Account that have not previously been
charged.

 

All allocations to, adjustments of and
deductions from a Participant’s Account under this Section 5.2 shall be
deemed to have been made on the applicable Valuation Date, in the order of
priority set forth in this Section 5.2, even though actually determined at
a later date.

 

5.3                               Adjustment of Accounts for Earnings.  The amounts credited to a Participant’s
Account in accordance with Section 5.2 shall be adjusted as of each
Valuation Date to reflect the value of an investment equal to the Participant’s
Account balance in one or more assumed investments that the Committee offers
from time to time, and which the Participant directs the Committee to use for
purposes of adjusting his Account. The Committee shall retain overriding
discretion over the selection of investment vehicles, and the Committee may
change, alter or modify its investment policy as it deems appropriate from time
to time.

 

10

 

ARTICLE VI

PAYMENT OF BENEFITS

 

6.1                               Entitlement to Benefit Payments.  Upon a Participant’s Separation from Service,
the Participant shall be entitled to payment of his Vested Account Balance,
payable by the Company in the form set forth in Section 6.2.  Any portion of the Participant’s Account that
is not vested as of the date of his Separation from Service shall be forfeited
and neither the Participant nor any other person shall have any right thereto.

 

6.2                               Payment of Benefits.  Subject to the terms and conditions of the
Plan. payment of a Participant’s Vested Account Balance shall be paid to him in
a lump sum within ninety (90) days following his Separation from Service. If
the Participant’s Separation from Service occurs on account of his death,
payment of his Vested Account Balance shall be made to his Beneficiary in a
lump sum within ninety (90) days following the Participant’s death.

 

6.3                               Hardship Withdrawals.  The Administrator may, pursuant to rules adopted
by it and applied in a uniform manner, accelerate the date of distribution of a
Participant’s Vested Account Balance because of an Unforeseeable Emergency at
any time.  Distributions on account of an
Unforeseeable Emergency shall be limited to the amount reasonably necessary to
satisfy the emergency need (including amounts necessary to pay any federal,
state, local or foreign income taxes or penalties reasonably anticipated to
result from the distribution).  Distribution
pursuant to this Section 6.3 of less than the Participant’s entire Vested
Account Balance shall be made pro rata from his assumed investments according
to the balances in such investments. 
Subject to the foregoing, payment of any amount with respect to which a
Participant has filed a request under this Section 6.3 shall be made in a
lump sum as soon as practicable (but in no event more than ninety (90) days)
after approval of such request by the Administrator.

 

6.4                               Specified Employees.  If a Participant is a Specified Employee at
the time of his separation from service, payment of the Participant’s Vested
Account Balance shall be made on the earlier of (a) on the later of (i) the
date otherwise scheduled for such payment or (ii) the first day of the
seventh month following such separation from service or (b) the date of
the Participant’s death.  Any payment
under this Section 6.4 shall be made as soon as practicable after the date
specified but in no later than ninety (90) days after such date.

 

6.5                               Accelerated Distribution.  If the Plan fails to meet the requirements of
Code Section 409A with respect to any Participant, the Participant will
receive a distribution equal to the amount required to be included in income as
a result of the failure but in no event greater than his Vested Account
Balance.

 

6.6                               Withholding for Tax Liability.  The Company may withhold or cause to be
withheld from any payment of benefits made pursuant to the Plan or any Deferral

 

11

 

Contributions to be
credited under the Plan any taxes required to be withheld with regard to such
payment or contribution.  Notwithstanding  the foregoing, withholding of Deferral Contributions under
the Plan shall be limited to (a) the amount required to pay the tax
imposed by the Federal Insurance Contributions Act (“FICA”) under sections
3101, 3121(a) and 3121(v)  on compensation deferred under the Plan
(the “FICA Amount”), and (b) income tax imposed under section 3401  or the corresponding withholding provisions
of applicable state, local or foreign tax laws as a result of the payment of
the FICA Amount and to pay the additional income tax attributable to the
pyramiding of wages under section 3401 and taxes.  Notwithstanding the foregoing, the total
amount of withholding pursuant to the preceding sentence shall not exceed the
aggregate FICA Amount and the income tax withholding related to such FICA
Amount.

 

6.7                               Incapacity.  If any person to whom a benefit is payable
under the Plan is an infant, or if the Administrator determines that any person
to whom such benefit is payable is incompetent by reason of physical or mental
disability, the Administrator may cause the payments becoming due to such
person to be made to another for his benefit. 
Payments made pursuant to this Section 6.7 shall, as to such
payment, operate as a complete discharge of the Plan, the Company, the
Committee and the Administrator.

 

12

 

ARTICLE VII

ADMINISTRATION

 

7.1                               General.  The Administrator shall be the Committee, or
such other person or persons as designated by the Board.  Except as otherwise specifically provided in
the Plan, the Administrator shall be responsible for the administration of the
Plan.  The Administrator shall be the “named
fiduciary,” within the meaning of Section 402(c)(2) of ERISA.

 

7.2                               Administrative Rules.  The Administrator may adopt such rules of
procedure as it deems desirable for the conduct of its affairs, except to the
extent that such rules conflict with the provisions of the Plan.

 

7.3                               Duties.  The Administrator shall have the following
rights, powers and duties:

 

(a)                        The
decision of the Administrator in matters within its jurisdiction shall be
final, binding and conclusive upon each Participant and upon any other person
affected by such decision, subject to the claims procedure hereinafter set
forth.

 

(b)                       The
Administrator shall have the duty and authority to conclusively interpret and
construe the provisions of the Plan; to decide any question which may arise
regarding the rights of employees, Participants and beneficiaries, and the
amounts of their respective interests; to adopt such rules and to exercise
such powers as the Administrator may deem necessary for the administration of
the Plan; and to exercise any other rights, powers or privileges granted to the
Administrator by the terms of the Plan.

 

(c)                        The
Administrator shall maintain full and complete records of its decisions. Its
records shall contain all relevant data pertaining to the Participants and
their rights and duties under the Plan. 
The Administrator shall have the duty to maintain Account records of all
Participants.

 

(d)                       The
Administrator shall cause the principal provisions of the Plan to be
communicated to the Participants, and a copy of the Plan and other documents
shall be available at the principal office of the Company for inspection by the
Participants at reasonable times determined by the Administrator.

 

(e)                        The
Administrator shall periodically report to the Committee with respect to the
status of the Plan.

 

13

 

ARTICLE VIII

CLAIMS PROCEDURE

 

8.1                               General.  Any claim for benefits under the Plan shall
be filed with the Administrator by a Participant or beneficiary (a “claimant”)
on the form prescribed for such purpose by the Administrator.

 

8.2                               Denials.  If a claim for benefits under the Plan is
wholly or partially denied, notice of the decision shall be furnished to the
claimant by the Administrator within a reasonable period of time after receipt
of the claim by the Administrator (but in no event more than ninety (90) days
thereafter).

 

8.3                               Notice.  Any claimant who is denied a claim for
benefits shall be furnished written notice setting forth:

 

(a)                        The
specific reason or reasons for the denial;

 

(b)                       Specific
reference to the pertinent provision of the Plan upon which the denial is
based;

 

(c)                        A
description of any additional material or information necessary for the
claimant to perfect the claim; and

 

(d)                       An
explanation of the claim review procedure under the Plan.

 

8.4                               Appeals Procedure.  In order that a claimant may appeal a denial
of a claim, the claimant or the claimant’s duly authorized representative may:

 

(a)                        Request
a review by written application to the Administrator, or its designee, no latex
than sixty (60) days after receipt by the claimant of written notification of
denial of a claim;

 

(b)                       Review
pertinent documents; and

 

(c)                        Submit
issues and comments in writing.

 

8.5                               Review.  A decision on review of a denied claim shall
be made not later than sixty (60) days after receipt of a request for review,
unless special circumstances require an extension of time for processing, in
which case a decision shall be rendered within a reasonable period of time, but
not later than one hundred and twenty (120) days after receipt of a request for
review.  The decision on review shall be
in writing and shall include the specific reasons for the decision and specific
references to the pertinent provisions of the Plan on which the decision is
based.

 

14

 

ARTICLE IX

MISCELLANEOUS PROVISIONS

 

9.1                               Amendment.  The Company reserves the right to amend the
Plan, in any manner that it deems advisable, by a resolution of the Board.  No amendment shall, without a Participant’s
consent, adversely affect the amount of that Participant’s Vested Account
Balance at the time the amendment becomes effective or the right of that
Participant to receive a distribution of his Vested Account Balance.

 

9.2                               Termination.  The Company reserves the right to terminate
the Plan at any time.  No termination
shall, without a Participant’s consent, adversely affect the amount of that
Participant’s Vested Account Balance prior to the termination or the right of
that Participant to receive a distribution of his Vested Account Balance.  No termination of the Plan shall result in an
acceleration of distribution of a Participant’s benefits under the Plan except
to the extent permitted under Code Section 409A.

 

9.3                               Successors and Assigns.  The provisions of the Plan are binding upon
and inure to the benefit of the Company and its successors and assigns, and to
each Participant and his beneficiaries, heirs, legal representatives and
assigns.

 

15

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