Document:

Exhibit
10.4

EXECUTION
VERSION

SECOND
AMENDED AND RESTATED EQUITY CONTRIBUTION AGREEMENT (this “Agreement”),
dated as of October 13, 2006, among EXCO RESOURCES, INC., a Texas corporation
(the “Equity Contributor”), EXCO PARTNERS OPERATING PARTNERSHIP, LP, a
Delaware limited partnership (the “Borrower”), and JPMORGAN CHASE BANK,
N.A., as Administrative Agent (in such capacity, the “Administrative Agent”)
for the banks and other financial institutions or entities (the “Lenders”)
from time to time parties to the Senior Term Credit Agreement, dated as of
October 2, 2006 (as amended, supplemented or otherwise modified from time to
time, the “Credit Agreement”), among the Borrower, the Guarantors party
thereto, the Lenders, certain other entities and the Administrative Agent.

W I T N E S S E T H:

WHEREAS, the Equity
Contributor owns, indirectly, 100% of the partners equity of the Borrower;

WHEREAS, pursuant to the
Credit Agreement, the Lenders have severally agreed to make extensions of
credit to the Borrower upon the terms and subject to the conditions set forth
therein;

WHEREAS, the Equity
Contributor will derive substantial benefit from the making of the extensions
of credit under the Credit Agreement; and

WHEREAS, the parties hereto
entered into an Equity Contribution Agreement dated as of October 2, 2006 (as
amended and restated by the Amended and Restated Equity Contribution Agreement
dated as of October 4, 2006) and wish to amend and restate such Agreement
pursuant to this Agreement;

NOW, THEREFORE, in consideration
of the premises set forth above and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:

SECTION
1.  DEFINITIONS

1.1  Defined Terms and Principles of Construction.  (a) 
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Credit Agreement (such definitions to
be equally applicable to both the singular and plural forms of the terms
defined), and the following terms shall have the following meanings:

“Administrative Agent”:  as defined in the preamble hereto.

“Agreement”:  as defined in the preamble hereto.

“Credit Agreement”:  as defined in the preamble hereto.

“Debt Incurrence Amount”:  as defined in Section 2.1(a) hereof.

“Equity Contribution”:  as defined in Section 2.1 hereof.

“Equity Contributor”:  as defined in the preamble hereto.

“Equity Contribution Date”:  the date that is eighteen months after the
Effective Date.

 

“Limitation Sentence”:  as defined in Section 2.1(a) hereof.

“Measurement Date”:  as defined in Section 2.1(a) hereof.

“Option”:  as defined in Section 2.1(b) hereof.

“RP Baskets”:  the baskets described in Section 4.05(a) or
4.05(b)(1) of the Senior Note Indenture, in each case as in effect on the date
hereof.

“Senior Credit Agreement”:  the Credit Agreement dated as of March 17,
2006 among the Equity Contributor, certain of its Subsidiaries, the Lenders
party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, as
amended by the First Amendment thereto dated as of October 2, 2006.

“Senior Note Indenture:  the Senior Note Indenture dated as of January
20, 2004 among the Equity Contributor, certain of its Subsidiaries and
Wilmington Trust Company, as trustee, as supplemented by the First Supplemental
Indenture thereto dated as of January 27, 2004, pursuant to which the Senior
Notes were issued.

“Senior Notes”:  the Equity Contributor’s 7-1/4% Senior Notes
due 2011.

(b)           The words “hereof”, “herein”, and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.

SECTION
2.  OBLIGATIONS OF THE EQUITY CONTRIBUTOR

2.1  Equity Contribution.  (a) 
Subject in all respects to the next sentence hereof (the “Limitation
Sentence”), if any Loans shall remain outstanding on the Equity
Contribution Date, the Equity Contributor hereby agrees, for the benefit of the
Borrower and the Secured Parties, to make a cash common equity contribution to
the Borrower on the Equity Contribution Date in an amount equal to the lesser
of (i) $150,000,000 and (ii) the aggregate principal amount of the Loans then
outstanding (the “Equity Contribution”). 
Notwithstanding the foregoing, the
agreement of the Equity Contributor in
this Section 2.1(a) shall be of
no force or effect, and shall not constitute an obligation of any nature, in an
amount that exceeds, on each day from and after the date hereof (each, a “Computation
Day”), the highest Interim Contribution Amount computed on any day during
the period from the date hereof to such Computation Day.  As used herein, “Interim Contribution
Amount” means, on each Computation Day, the lesser of (i) the amount
available under the RP Baskets on such Computation Day and (ii) the amount of
Indebtedness that may be incurred under Section 4.04(a) of the Senior Note
Indenture as of the most recent Measurement Date (as defined below) occurring
on or prior to such Computation Day (the “Debt Incurrence Amount”).  The
Debt Incurrence Amount shall be calculated on the date hereof, on the Equity
Contribution Date and, whether before or after the Equity Contribution Date, on
each date on which quarterly or annual financial statements of the Equity
Contributor become available and on each date on which any amount becomes
available under any RP Basket (each such calculation date, a “Measurement
Date”).  On the Equity Contribution
Date, the amount of the Equity Contribution required to be made shall equal the
lesser of (i) the full amount of the Equity Contribution and (ii) the
highest Interim Computation Amount as of any Computation Day occurring on or
prior to the Equity Contribution Date.   If, due to the Limitation Sentence,
the full amount of the Equity Contribution cannot be made on the Equity
Contribution Date, then, on each subsequent Measurement Date, the Equity
Contributor shall make an additional portion of the Equity Contribution in an
amount equal the lesser of (i) the
theretofore unfunded portion of the Equity Contribution, (ii) the amount
available under the RP Baskets on such

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Measurement Date and (iii) the Debt Incurrence
Amount as of such Measurement Date.  The Limitation Sentence shall cease to be
applicable if the Senior Notes are redeemed or defeased.  For avoidance of doubt, it is understood
that, if (i) the Senior Note Indenture does not permit the funding of the full
amount of the Equity Contribution on the Equity Contribution Date and (ii)
the Equity Contributor has not redeemed or defeased all of the Senior
Notes on or prior to the Equity Contribution Date, then the Equity Contributor
will be in violation of Section 4.2(e) hereof.  Notwithstanding anything to the contrary in
this Section 2.1(a), all or a portion of the Equity Contribution may be funded
by the Borrower’s parent, EXCO Partners, LP (the “Parent”), so long as
(i) the proceeds thereof are contributed to the Borrower in the form of common
equity and (ii) no more than 25% of the direct or indirect voting or economic
interest in the Parent may be issued or sold in connection therewith.

(b)           If
Lenders holding at least 66 2/3% of the aggregate principal amount of the Loans
(excluding for such purpose any Loans held by (1) any Lender that owns, or has
one or more affiliates that owns, greater than 10% of the voting or economic
interest in the Equity Contributor (determined in the aggregate with respect to
any Lender and its affiliates) or (2) any Lender that holds, or has an
affiliate that holds, a seat on the Board of Directors of the Equity
Contributor)so determine (the “Option”), then, in lieu of complying with
Section 2.1(a) hereof, on the Equity Contribution Date, (i) the Equity
Contributor shall be required to add the Borrower and its Subsidiaries as “Restricted
Subsidiaries” under and as defined in the Senior Credit Agreement and the
Senior Note Indenture and (ii) the Equity Contributor shall provide, and cause
the Restricted Subsidiaries as so defined to provide, guarantees secured by
blanket liens on all of their properties and assets in respect of the Loans on
terms substantially consistent with the guarantees and collateral provided
under the Credit Agreement, in each case pursuant to documentation reasonably
satisfactory to the Administrative Agent. 
Notwithstanding the foregoing, the Option shall be available only if
compliance with this Section 2.1(b) is permitted by the Senior Credit Agreement
(if still in effect).  The Equity
Contributor agrees to use commercially reasonable efforts to seek the requisite
consent of lenders under the Senior Credit Agreement to the exercise of the
Option.  If the Option is exercised, then
upon and during the effectiveness of the aforementioned guarantees and liens,
any provision of this Agreement specifically relating to the Equity
Contribution shall cease to be effective.

2.2  Application of the Cash Equity Contribution.  The proceeds of the Equity Contribution shall
be used by the Borrower to prepay the Loans in accordance with the terms of
Section 2.10 of the Credit Agreement.

2.3  Obligations Unconditional; Waiver of Defenses.

(a)           Except as provided
in Section 2.1, the obligations of the Equity Contributor to make, and the
Borrower’s right to receive, the Equity Contribution pursuant to Section
2.1(a), and, if applicable, the obligation of the Equity Contributor to comply
with Section 2.1(b), are irrevocable, absolute and unconditional.  The Equity Contributor hereby unconditionally
waives notice of acceptance hereof, of any action taken or omitted in reliance
hereon and of any defaults by the Borrower or any other Person in the payment
of any amounts due under any Loan Document, and further unconditionally waives
diligence, protest, presentment, filing of claims with a court in the event of
the bankruptcy of the Borrower or any other Person, any right to require a proceeding
against the Borrower or any other Person or that the Borrower or any other
Person be joined in any proceeding, any marshaling of assets of the Borrower or
any other Person, the Borrower’s or any other Person’s providing security for
any of the obligations hereunder or any notice of default with respect thereto,
or any other act or omission or requirement or delay to do any other act or
thing which might in any manner or to any extent operate as a discharge of any
of the obligations of the Equity Contributor hereunder.  The Equity Contributor agrees that this
Agreement shall remain in full force and effect without regard to, and shall
not be affected or impaired by, any invalidity, irregularity or unenforceability
in whole or in part of, or any default under,

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any
Loan Document which may now or hereafter be caused or imposed in any manner
whatsoever, or the bankruptcy or insolvency of the Borrower or any other
Person.

(b)           The obligations of
the Equity Contributor under this Agreement shall not be subject to (and the
Equity Contributor hereby unconditionally waives) any notice of non-payment,
demand, abatement, reduction, limitation, impairment, termination, set-off,
defense, counterclaim or recoupment whatsoever or any right to any thereof, and
shall not be released, discharged or in any way affected by any reorganization,
arrangement, compromise, composition or plan affecting the Borrower or any
other Person, or by any compromise, settlement, release, amendment, waiver,
addition, modification, or termination of any or all of the obligations,
conditions, covenants or agreements of the Borrower or any other Person under
or in respect of any Loan Document or by the taking or omission of any action
referred to in any Loan Document (including, without limitation, the
enforcement, assertion or exercise of any such right, power or remedy), or by
the exchange, surrender, substitution or modification of any security for the
Obligations, whether or not the undersigned shall have notice or knowledge of
any of the foregoing.

2.4  Overdue Amounts. 
From the date the Equity Contribution shall be due and payable under
this Agreement until the date the Equity Contributor shall have paid the Equity
Contribution in full, interest shall accrue on the unpaid amount thereof at a
rate per annum equal to the rate then applicable to ABR Loans plus 2%
and shall be payable by the Equity Contributor to the Borrower upon demand by
the Administrative Agent.

SECTION
3.  SPECIFIC PROVISIONS

3.1  Subrogation. 
The Borrower will not exercise any rights which it may have acquired by
way of subrogation under this Agreement, by any payment made hereunder or
otherwise, or accept any payment on account of any such subrogation rights,
unless and until all Obligations shall have been paid in full.

3.2  Reinstatement. 
This Agreement and the obligations of the Equity Contributor hereunder
shall automatically be reinstated if and to the extent that for any reason any
payment made pursuant to this Agreement is rescinded or must otherwise be
restored to the Equity Contributor by any beneficiary of this Agreement,
whether as a result of any proceedings in bankruptcy or reorganization or
otherwise with respect to the Borrower or any other Person or as a result of
any settlement or compromise with the Borrower or any other Person (including
the Equity Contributor) in respect of such payment, and the Equity Contributor
shall indemnify the Administrative Agent and each other Secured Party on demand
for all costs and expenses (including, without limitation, fees of counsel)
incurred by the Administrative Agent or any other Secured Party in connection
with such rescission or restoration.

3.3  Specific Performance.  The Equity Contributor hereby irrevocably
waives, to the extent it may do so under applicable law, any defense based on
the adequacy of a remedy at law that may be asserted as a bar to the remedy of
specific performance in any action brought against the Equity Contributor or
any of them for specific performance of this Agreement by the Administrative Agent,
the Borrower or any successor or assign thereof or for their benefit by a
receiver, custodian or trustee appointed for the Borrower or in respect of all
or a substantial part of their respective assets, under the bankruptcy or
insolvency laws of any jurisdiction to which the Borrower or its assets are
subject.

3.4  Bankruptcy Code Waiver.  The Equity Contributor hereby irrevocably
waives, to the extent it may do so under applicable law, any protection it may
be entitled to under Sections 365(c)(1) and 365(c)(2) of Title 11 of the U.S.
Code (11 U.S.C. § 101 et seq.) (the “Bankruptcy Code”), or any successor
provision of law of similar import, in the event of any voluntary or
involuntary bankruptcy, insolvency, reorganization, liquidation or arrangement,
proceeding or case with respect to the Borrower (a “Bankruptcy”).  Specifically, in the event that the trustee
in bankruptcy or the debtor-in-possession takes any action (including, without
limitation, the institution of any action, suit or other proceeding in a

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Bankruptcy for the purpose of enforcing the
obligations of the Borrower under this Agreement), the Equity Contributor shall
not assert any defense, claim or counterclaim denying liability hereunder on
the basis that this Agreement is an executory contract that cannot be assumed,
assigned or enforced or on any other theory directly or indirectly based on
Section 365(c)(1) or 365(c)(2) of the Bankruptcy Code or any successor
provision of law of similar import.  If a
Bankruptcy shall occur, the Equity Contributor agrees, after the occurrence of
the Bankruptcy, to reconfirm in writing, to the extent permitted by applicable
law, its pre-petition waiver of any protection it may be entitled to under
Sections 365(c)(1) and 365(c)(2) of the Bankruptcy Code and, to give effect to
such waiver, the Equity Contributor consents to the assumption and enforcement
of each provision of this Agreement by the debtor-in-possession or the Borrower’s
trustee in bankruptcy, as the case may be.

3.5  No Commencement of Bankruptcy Proceedings.  The Equity Contributor shall not commence or
join with any other Person (other than the Secured Parties) in commencing any
proceeding against the Borrower under any bankruptcy, reorganization,
liquidation or insolvency law or statute now or hereafter in effect in any
jurisdiction.

3.6  Actions by the Administrative Agent.  The Equity Contributor agrees that the
Administrative Agent (acting for the benefit of the Secured Parties) and any
assignee thereof shall be entitled to enforce this Agreement in its own name
and to exercise any and all rights of the Borrower under this Agreement in
accordance with the terms hereof (either in its own name or in the name of the
Borrower, as the Administrative Agent may elect), and the Equity Contributor and
the Borrower agree to comply and cooperate in all respects with such
exercise.  Without limiting the
generality of the foregoing, the Administrative Agent and any assignee thereof
shall have the full right and power to enforce directly against the Equity
Contributor all obligations of the Equity Contributor under this Agreement, and
otherwise to exercise all remedies available to the Borrower hereunder and to
make all demands and give all notices and make all requests (either in its own
name or in the name of the Borrower, as the Administrative Agent may elect)
required or permitted to be made or given by the Borrower under this Agreement,
including without limitation the right to make demand for payment of the Equity
Contribution pursuant to Section 2 hereof and to directly apply such payment to
prepay the Loans, and the right to exercise the Option on behalf of the
Required Lenders and to take all actions in connection therewith and the Equity
Contributor acknowledges and agrees that any such action taken by the
Administrative Agent shall be deemed effective for all purposes of this
Agreement to the same extent as if such action had been taken directly by the
Borrower or the Required Lenders, as the case may be.  If the Equity Contributor shall receive inconsistent
directions from the Borrower and the Administrative Agent, the directions of
the Administrative Agent shall be deemed the effective directions, and the
Equity Contributor shall accordingly comply with such directions of the
Administrative Agent.

3.7  Set-Off. 
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the failure
of the Equity Contributor to perform any of its obligations hereunder, each
Secured Party is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Secured Party (including,
without limitation, by branches and agencies of such Secured Party wherever
located) to or for the credit or the account of the Equity Contributor, against
and on account of the obligations of the Equity Contributor under this
Agreement, irrespective of whether or not such Secured Party shall have made
any demand hereunder and although said obligations, or any of them, shall be
contingent or unmatured.

SECTION
4.  REPRESENTATIONS AND WARRANTIES; COVENANTS

4.1  Representations and Warranties.  The Equity Contributor represents and
warrants that:

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(a)           The Equity
Contributor is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. 
The Equity Contributor has all corporate or other necessary power and
authority, and legal right, to enter into this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby, and
has by proper action duly authorized the execution and delivery of this
Agreement.  Neither the execution and
delivery by the Equity Contributor of this Agreement nor the consummation of
the transactions contemplated herein, nor performance by the Equity Contributor
of and compliance with the terms and provisions hereof will (i) violate or
conflict with, or cause or result in a default under, any provision of any
organizational documents or by-laws of the Equity Contributor or any of its
Subsidiaries, (ii) violate any material law, regulation, order, writ, judgment,
injunction, decree or permit applicable to it or any of its Subsidiaries, (iii)
violate or conflict with contractual provisions of, or cause an event of
default under, any indenture, loan agreement, mortgage, deed of trust, contract
or other agreement or instrument to which it or any of its Subsidiaries is a
party or by which it or any of its Subsidiaries may be bound (other than the
Senior Credit Agreement, which includes conditions to the funding of the Equity
Contribution as specified in the First Amendment thereto), or (iv) result in or
require the creation of any Lien upon or with respect to the Equity Contributor’s
or any of its Subsidiaries’ properties. No consent, approval, authorization or order
of, or filing, registration or qualification with, any court or Governmental
Authority or other Person is required in connection with the execution,
delivery or performance by the Equity Contributor of this Agreement, except to
the extent obtained and in full force and effect..  This Agreement has been duly executed and
delivered by the Equity Contributor and constitutes the legal, valid and
binding obligation of the Equity Contributor, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in proceedings in equity or at law.

(b)           The Equity
Contributor is not aware of any event or condition that could reasonably be
expected to have an adverse effect on the ability of the Equity Contributor to
perform its obligations under this Agreement (other than the Senior Credit
Agreement, which includes conditions to the funding of the Equity Contribution
as specified in the First Amendment thereto).

(c)           No litigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best of its knowledge, threatened against or affecting the Equity
Contributor or against or affecting any of its properties, rights, revenues or
assets or the transactions contemplated by this Agreement.

(d)           The Equity
Contributor is not an “investment company” or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended.

4.2  Covenants. 
The Equity Contributor hereby covenants and agrees that, so long as this
Agreement is in effect:

(a)           The Equity Contributor will not take,
nor will it permit any of its Subsidiaries to take, any action that could
reasonably be expected to impair rights of the Administrative Agent or the
Required Lenders or the obligations of the Equity Contributor hereunder,
including, without limitation, by entering into any agreement, or any amendment
or other modification to an existing agreement, if, after giving effect
thereto, the Equity Contributor would not be able to make the representations
and warranties set forth in Section 4.1 hereof.

(b)           The Equity Contributor will preserve
and maintain its existence as a validly existing corporation under the laws of
the State of Texas.

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(c)           The Equity
Contributor will not enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or dispose of all or a majority of its property or business
(determined on a consolidated basis including its Subsidiaries), provided
that this paragraph (c) shall not prohibit a merger of the Equity Contributor
with any other Person if the surviving Person (if not the Equity Contributor)
assumes all liabilities of the Equity Contributor under this Agreement pursuant
to such documentation as shall be reasonably satisfactory to the Administrative
Agent.

(d)           Whether or not the
Senior Note Indenture is then in effect, the Equity Contributor will not make,
and will not permit any Restricted Subsidiary (as defined in the Senior Note
Indenture as in effect on the date hereof) to make, any Restricted Payment (as
defined in the Senior Note Indenture as in effect on the date hereof) that
would constitute utilization of any of the RP Baskets, other than (i) payments
in respect of the Equity Contribution and (ii) other Restricted Payments not to
exceed $5,000,000 in the aggregate during the term of this Agreement.

(e)           The Equity
Contributor will (i) redeem or defease all of the Senior Notes on or prior to
the Equity Contribution Date (x) if the Senior Note Indenture would not permit
the funding of the full amount of the Equity Contribution on such date or (y)
in the event that the Option is selected, if the Senior Note Indenture would
not permit the exercise of the Option and (ii) use its best efforts to obtain
any necessary consents under the Senior Credit Agreement on or prior to the
Equity Contribution Date in the event that the conditions to the funding of the
full amount of the Equity Contribution on such date, as specified in the First
Amendment to the Senior Credit Agreement, cannot be satisfied.  In the event that the Option is selected, the
Equity Contributor will not, and will not permit any of its Subsidiaries to,
incur Indebtedness to redeem or defease the Senior Notes pursuant to the
preceding sentence unless such Indebtedness either (i) is incurred pursuant to
a borrowing base revolving credit facility or (ii) has a weighted average life
to maturity longer than the maturity of the Loans and is either unsecured or,
if secured, is secured on a pari passu basis with the Loans.

SECTION
5.  MISCELLANEOUS

5.1  Termination. 
This Agreement shall terminate upon the earliest date on which (i) funds
then sufficient to satisfy the obligations hereunder shall have been
contributed to the Borrower pursuant to Section 2.1 (or, if the Option is
selected, when the requirements thereof have been complied with) or (ii) the
Loans have been paid in full; provided that the agreements contained in
Sections 3.2 and 5.8 hereof shall survive any such termination.

5.2  No Waiver; Course of Dealing; Separate Causes of
Action.  No failure to exercise and
no delay in exercising, on the part of the Administrative Agent or any other
Secured Party, any right, remedy, power or privilege provided herein or by
statute or at law or in equity shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.  No
course of dealing between the Equity Contributor, on the one hand, and the
Borrower or the Administrative Agent or any other Secured Party, on the other
hand, shall operate as a waiver of any right, power or privilege hereunder of
the Administrative Agent or any other Secured Party.  Each and every default by the Equity
Contributor in payment hereunder shall give rise to a separate cause of action
hereunder, and separate suits may be brought hereunder as each cause of action
arises.

5.3  Remedies Cumulative.  Each and every right and remedy of the
Administrative Agent hereunder shall be cumulative and shall be in addition to
any other right or remedy given hereunder or now or hereafter existing at law
or in equity or by statute.

5.4  Severability. 
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or

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unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

5.5  Succession. 
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided that
neither the Equity Contributor nor the Borrower may assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of the Administrative Agent.

5.6  Amendments, Etc.  This Agreement may not be
amended, modified or supplemented except in a writing signed by each of the
parties hereto.

5.7  GOVERNING LAW, ETC.  THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.

5.8  Expenses, Etc.    The Equity Contributor agrees to pay or
reimburse the Administrative Agent and each other Secured Party for all its
costs and expenses incurred in enforcing or preserving any rights under this
Agreement, including, without limitation, the fees and disbursements of counsel
to the Administrative Agent. The Equity Contributor agrees, to the extent not
reimbursed by the Borrower within five Business Days after demand therefor
pursuant to Section 11.03 of the Credit Agreement, to (i) pay, and to save the
Administrative Agent and the other Secured Parties harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
taxes which may be payable or determined to be payable with respect to any of
the transactions contemplated by this Agreement and (ii) pay, and to save the
Administrative Agent and the other Secured Parties harmless from, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and administration
of this Agreement.

5.9  Notices. 
All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopy), and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand or, in the case of notice given by mail, private
courier, overnight delivery service or telecopy, when received, addressed as
follows in the case of the Equity Contributor and in accordance with the Credit
Agreement in the case of the Borrower and the Administrative Agent.

Equity
Contributor:                                         EXCO Resources, Inc.

12377 Merit Drive, Suite 1700

Dallas, Texas 75251

Attention:  Douglas H. Miller, Chief
Executive Officer

Telecopy No. (214) 368-2087

Any party hereto may change
its address for notices, requests and demands by notice to the other parties in
the manner provided in this Section 5.9.

5.10  Counterparts. 
This Agreement may be executed by one or more of the parties to this
Agreement on any number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.

5.11  Submission to Jurisdiction; Waivers.  Each
of the Borrower, the Administrative Agent and the Equity Contributor hereby
irrevocably and unconditionally:

(a)   submits
for itself and its property in any legal action or proceeding relating to this
Agreement, or for recognition and enforcement of any judgment in respect
thereof, to the

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non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;

(b)   consents
that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in
an inconvenient court and agrees not to plead or claim the same;

(c)   agrees
that nothing herein shall affect the right to effect service of process in any
manner permitted by law or shall limit the right to sue in any other
jurisdiction; and

(d)   waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any
special, exemplary, punitive or consequential damages.

5.12  WAIVER OF JURY TRIAL.  THE BORROWER, THE ADMINISTRATIVE AGENT AND
THE EQUITY CONTRIBUTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.

 9
 

 

IN WITNESS WHEREOF, the
parties hereto, by their officers duly authorized, intending to be legally
bound, have caused this Agreement to be duly executed and delivered as of the
date first above written.

	
   

  	
  EXCO RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ J. Douglas Ramsey

  	
   

  
	
   

  	
   

  	
  Name: J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Title: Vice President and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  EXCO PARTNERS OPERATING PARTNERSHIP, LP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  EXCO Partners OLP GP, LLC

  
	
   

  	
  its sole general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ J. Douglas Ramsey

  	
   

  
	
   

  	
   

  	
  Name: J. Douglas Ramsey, Ph.D.

  
	
   

  	
   

  	
  Title: Vice President and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A., as Administrative

  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ W. Mark Cranmer

  	
   

  
	
   

  	
   

  	
  Name: W. Mark Cranmer

  
	
   

  	
   

  	
  Title: Senior Vice President

  
						

 

 10EXHIBIT
4.1

VIDEO DISPLAY CORPORATION

2006 STOCK INCENTIVE PLAN

TABLE OF CONTENTS

	
  ARTICLE I. DEFINITIONS

  	
  3

  
	
  1.1

  	
  Award

  	
  3

  
	
  1.2

  	
  Board of Directors

  	
  3

  
	
  1.3

  	
  Cause

  	
  3

  
	
  1.4

  	
  Change in Control Event

  	
  3

  
	
  1.5

  	
  Code

  	
  3

  
	
  1.6

  	
  Common Stock or Stock

  	
  4

  
	
  1.7

  	
  Continuous Service

  	
  4

  
	
  1.8

  	
  Disability

  	
  4

  
	
  1.9

  	
  Effective Date

  	
  4

  
	
  1.10

  	
  Employee

  	
  4

  
	
  1.11

  	
  Fair Market Value

  	
  4

  
	
  1.12

  	
  Incentive Stock Option

  	
  4

  
	
  1.13

  	
  Nonqualified Stock Option

  	
  4

  
	
  1.14

  	
  Option

  	
  4

  
	
  1.15

  	
  Option Agreement

  	
  5

  
	
  1.16

  	
  Participant

  	
  5

  
	
  1.17

  	
  Plan Administrator

  	
  5

  
	
  1.18

  	
  Repriced

  	
  5

  
	
  1.19

  	
  Restricted Stock

  	
  5

  
	
  1.20

  	
  Restricted Stock Agreement

  	
  5

  
	
  1.21

  	
  Restriction Period

  	
  5

  
	
  ARTICLE 2. EFFECTIVE DATE

  	
  5

  
	
  ARTICLE 3. ADMINISTRATION

  	
  5

  
	
  3.1

  	
  Plan Administrator

  	
  5

  
	
  3.2

  	
  Meetings and Actions

  	
  6

  
	
  3.3

  	
  Powers of Plan Administrator

  	
  6

  
	
  3.4

  	
  Interpretation of Plan

  	
  6

  
	
  ARTICLE 4. STOCK SUBJECT TO THE PLAN

  	
  6

  
	
  4.1

  	
  Plan Limits

  	
  6

  
	
  4.2

  	
  Individual Limits

  	
  7

  
	
  4.3

  	
  Unused Stock

  	
  7

  
	
  4.4

  	
  Adjustment for Change in Outstanding Shares

  	
  7

  
	
  4.5

  	
  Retention of Rights

  	
  8

  
	
  4.6

  	
  Cancellation of Award

  	
  8

  
	
  ARTICLE 5. ELIGIBILITY

  	
  8

  
	
  5.1

  	
  Eligible Employees

  	
  8

  
	
  5.2

  	
  Consultants

  	
  8

  
	
  ARTICLE 6. STOCK OPTIONS

  	
  8

  
	
  6.1

  	
  Grant of Options

  	
  8

  

 

 1
 

 

 

	
  6.2

  	
  Option Agreement

  	
  8

  
	
  6.3

  	
  Nontransferability of Options

  	
  9

  
	
  6.4

  	
  Manner of Exercise

  	
  10

  
	
  6.5

  	
  Payment of Option Exercise Price

  	
  10

  
	
  6.6

  	
  Termination of Continuous Service

  	
  10

  
	
  ARTICLE 7. RESTRICTED STOCK

  	
  11

  
	
  7.1

  	
  Grant of Restricted Stock

  	
  11

  
	
  7.2

  	
  Restricted Stock Agreement

  	
  11

  
	
  7.3

  	
  Issuance of Restricted Stock

  	
  12

  
	
  7.4

  	
  Nontransferability of Restricted Stock

  	
  13

  
	
  7.5

  	
  Termination of Continuous Service

  	
  13

  
	
  ARTICLE 8. CHANGE IN CONTROL

  	
  13

  
	
  ARTICLE 9. ISSUANCE OF SHARES OF COMMON STOCK

  	
  14

  
	
  9.1

  	
  Transfer of Common Stock to Participant

  	
  14

  
	
  9.2

  	
  Legend

  	
  14

  
	
  9.3

  	
  Compliance With Laws

  	
  14

  
	
  ARTICLE 10. AMENDMENT AND TERMINATION

  	
  14

  
	
  10.1

  	
  Amendment of the Plan

  	
  14

  
	
  10.2

  	
  Termination of the Plan

  	
  15

  
	
  ARTICLE 11. GENERAL PROVISIONS

  	
  15

  
	
  11.1

  	
  No Employment Rights

  	
  15

  
	
  11.2

  	
  Other Employee Benefits

  	
  15

  
	
  11.3

  	
  Confidentiality of Information

  	
  15

  
	
  11.4

  	
  Severability

  	
  15

  
	
  11.5

  	
  Governing Law and Venue

  	
  15

  
	
  11.6

  	
  Use of Proceeds

  	
  15

  

 

 2

 

VIDEO DISPLAY CORPORATION

2006 STOCK INCENTIVE PLAN

INTRODUCTION

The purpose of the Video Display Corporation 2006
Stock Incentive Plan (the “Plan”) is to further the growth and development
of  Video Display Corporation, a Georgia
corporation ( “Video Display”), by affording an opportunity for stock ownership
to selected Employees of  Video Display
and its subsidiaries (collectively, the “Company”). The Plan is also intended
to assist the Company in attracting new Employees and retaining existing
Employees; to optimize the profitability and growth of the Company through
incentives that are consistent with the Company’s
goals; to provide incentives for excellence in individual performance; and to
promote teamwork.

ARTICLE I. DEFINITIONS

When used in this Plan, the following capitalized
terms shall have the meanings set forth below unless a different meaning is
plainly required by the context:

1.1        Award means the
grant of Options or Restricted Stock under the Plan.

1.2           Board of Directors means the Board of Directors of
Video Display.

1.3        Cause means “Cause,” as defined in the
Participant’s employment agreement, if applicable, or if
the Participant has not entered into an employment agreement with the Company,
as determined in the sole and absolute discretion of the Company, a termination
on account of dishonesty, fraud, misconduct, unauthorized use or disclosure of
confidential information or trade secrets or conviction or confession of a
crime punishable by law (except minor violations), in each such case as determined
by the Plan Administrator, and its determination shall be conclusive and
binding. Such actions constituting “Cause” shall include, without limitation, a
violation of the Company’s Code of Business Conduct and Ethics. A Participant
who agrees to resign from his or her affiliation with the Company in lieu of
being terminated for Cause shall be deemed to have been terminated for Cause
for purposes of the Plan.

1.4           Change
in Control Event means
the date on which one of the following, each referred to as a “Change in
Control Event,” shall have occurred: (a) the acquisition by any individual or
legal entity or “group” (as described in Rule 13d-5(b) promulgated by the
Securities and Exchange Commission as now in effect under the Securities
Exchange Act of 1934), of a number of voting shares of capital stock of Video
Display greater than 35% of the total voting power of the stock of  Video Display subsequent to the effective
date of the Plan; (b) a merger or consolidation of Video Display other than a
merger or consolidation immediately following which the directors of Video
Display, thereto constitute a majority of the board of
the surviving company or parent thereof; (c) a change in the majority of the
Board of Directors pursuant to an actual or threatened proxy contest; or (d) a
sale of substantially all of the Company’s assets. The Plan Administrator’s
reasonable determination as to whether a Change in Control Event has occurred
shall be final and conclusive.

1.5        Code means the Internal Revenue Code
of 1986, as amended from time to time.

 3
 

 

1.6           Common Stock or Stock means Video Display’s common
stock and any share or shares of Video Display’s capital stock hereafter issued
or issuable in substitution for such shares of common stock.

1.7        Continuous Service means the Participant’s service
with the Company that is not interrupted (other than pursuant to the Company’s
paid time off policy or as required by law) or terminated. The Participant’s
Continuous Service shall not be deemed to have terminated merely because of a
change in the affiliated entity for which the Participant renders such service,
provided that there is otherwise no interruption or, termination of the Participant’s Continuous
Service. The Plan Administrator, in its sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of any leave of absence approved by the Company, other than a
leave pursuant to the Company’s paid time off policy or as required by law.

1.8           Disability means the Participant is
determined to be disabled for purposes of the Company’s long-term disability
plan, if any. If no Company long-term disability plan covers the Participant, “Disability”
shall mean the date on which the Plan Administrator makes a final determination
that the Participant is suffering from a physical or mental impairment which
the Plan Administrator, determines renders the Participant physically
or mentally unable to continue to fulfill his or her duties as an active
Employee at his or, her
assigned level of responsibility or competence, and which thereafter prevents him or her from
being able to resume such duties or their equivalent.

1.9           Effective Date means the effective date of the
Plan as specified in Article 2.

1.10         Employee means a common law employee of
the Company and any person who has accepted a binding offer of employment from
the Company, but excludes any individual classified by the Company as an
independent contractor or leased employee. 
Employee includes an employee who is an
officer or a Director of Video Display or any subsidiary of Video Display.

1.11         Fair
Market Value means
the value of the Common Stock, determined by reference to the NASDAQ National
Market System average closing price for the Common Stock reflected in The Wall
Street Journal or another publication selected by the Board of Directors for
the ten (10) days preceding the day the Award is granted to each eligible
Employee. If the Common Stock has not been traded on the NASDAQ National Market
System for more than 10 days immediately preceding the granting of an Award, or
if deemed appropriate by the Board of Directors for any other reason, the Fair Market Value
of the Common Stock shall be as determined by the Board of Directors in such
other, manner
as it may deem appropriate.

1.12         Incentive Stock Option means any option granted to an
eligible Employee under the Plan, which the Company intends at the time the
option is granted to be an Incentive Stock Option within the meaning of Code
Section 422.

1.13         Nonqualified
Stock Option means any option granted to an eligible Employee under
the Plan that is not an
Incentive Stock Option.

1.14         Option means
and refers collectively to Incentive Stock Options and Nonqualified Stock
Options.

 4
 

 

1.15         Option Agreement means the agreement specified in
Section 6 2.

1.16         Participant means any Employee who is
granted an Award under the Plan. Participant also means the personal representative of a Participant and any other person who acquires the right to exercise or
receive payment pursuant to an Award by bequest or inheritance.

1.17         Plan Administrator means the body that is responsible for
the administration of the Plan, as
determined pursuant to  Section 3.1.

1.18         Repriced means any amendment or
adjustment of the Exercise Price of an Option or, the purchase price, if applicable, of
Restricted Stock through amendment, cancellation, replacement grants or any
other means. Repriced
shall also include any other action considered a repricing under
requirements of the NASDAQ National Market System.

1.19         Restricted Stock means Common Stock granted to a
Participant that is subject to the restrictions set forth in Article 7 of the Plan
and the Restricted Stock Agreement. Restricted Stock also means any shares of
the Company’s capital stock issued as the result of a dividend on or split of
Restricted Stock. Upon termination of the restrictions, such Common Stock or
other capital stock shall no longer be Restricted Stock.

1.20         Restricted
Stock Agreement means
the agreement specified in Section 7.2 between the Company and a Participant pursuant to
which Restricted Stock is granted to the Participant.

1.21         Restriction Period means the
period set forth in the Restricted Stock Agreement that is the period beginning
on the date of grant of the
Award and ending on the final vesting date of the Restricted Stock.

ARTICLE 2. EFFECTIVE DATE

The Effective Date of the Plan shall be the date on
which the Plan is approved by the stockholders of Video Display.

ARTICLE 3. ADMINISTRATION

3.1           Plan
Administrator. The Plan
Administrator shall be a committee appointed by the Board of Directors, shall
consist of two or more outside, independent members of the Board of Directors,
and in the judgment of the Board of Directors, shall be qualified to administer
the Plan as contemplated by (i) Rule 16b-3 of the Securities Exchange Act of
1934 (the “Exchange Act”) (or any successor rule) including, without
limitation, the possession of authority by the Plan Administrator to limit the
time of exercise of Options and the grant of Stock to specified periods, (ii) Section
162(m) of the Code, as amended, and the regulations thereunder (or any
successor Section and regulations) and (iii) any rules and regulations of the
Nasdaq Stock Market (or such other stock exchange on which the Stock is
traded).  Members of the Plan
Administrator may not possess an interest in any transaction for which
disclosure is required under Section 404(a) of Regulation S-K under the
Exchange Act or be engaged in a business relationship that must be disclosed
under Section 404(a) and must qualify as “outside directors” as

 5
 

 

defined in Section 162(m) of the Code and regulations thereunder.  Any member of the Plan Administrator who does
not satisfy the qualifications set out in the preceding sentence may recuse
himself or herself from any vote or other action taken by the Plan
Administrator.  The Board of Directors
may, at any time and in its complete discretion, remove any member of the Plan
Administrator and may fill any vacancy of the Plan Administrator.  Any member of the Plan Administrator shall be
deemed to have resigned automatically from the committee upon his or her
termination of service on the Board of Directors.

3.2           Meetings
and Actions. The Plan
Administrator shall hold meetings at such times and places as it may determine.
A majority of the members of any committee serving as Plan Administrator shall
constitute a quorum, and the acts of the majority of the members present at a
meeting or a consent in writing signed by all members of the Plan Administrator
shall be the acts of the Plan Administrator and shall be final, binding and
conclusive upon all persons, including the Company, its stockholders, and all
persons having any interest in Awards that may be or have been granted pursuant
to the Plan.

3.3           Powers
of Plan Administrator.  The Plan Administrator shall have the full and exclusive
right to grant and determine terms and conditions of all Awards granted under
the Plan and to prescribe, amend and rescind rules and regulations for
administration of the Plan. In selecting Participants and granting Awards, the
Plan Administrator shall take into consideration the contribution the
Participant has made or may make to the success of the Company and such other
factors as the Plan Administrator shall determine.  The Plan Administrator shall have all powers
vested in it by the terms of the Plan, such powers to include the authority to:

(i)            Select the
persons to be granted Awards under the Plan;

(ii)           Determine the
terms, conditions, form and amount of Awards to be made to each person
selected;

(iii)           Determine the
time when Awards are to be made and any conditions which must be satisfied
before an Award is made; and

(iv)                              Establish objectives and
conditions for earning Awards.

3.4           Interpretation
of Plan.  The Plan
Administrator may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or in any agreement entered into hereunder. The
determination of the Plan Administrator as to any disputed question arising
under the Plan, including questions of construction and interpretation, shall
be final, binding and conclusive upon all persons, including the Company, its
stockholders, and all persons having any interest in Awards that may be or, have been granted pursuant to the Plan.

ARTICLE 4. STOCK SUBJECT TO THE PLAN

4.1           Plan
Limits. Subject
to the provisions of Section 4.4, the
aggregate number, of
shares of Common Stock that may be issued under the Plan shall not exceed the
following designated shares of Common Stock outstanding as of the Effective
Date:

 6
 

 

·              With
respect to Options, 500,000 shares, and

·              With
respect to Restricted Stock, 100,000 shares.

Common Stock that may be issued under Awards may consist, in whole or
in part, of authorized but unissued stock or treasury stock of the Company not
reserved for any other purpose.

4.2           Individual
Limits. During
any single calendar year, no Employee shall be eligible to be granted Options
or Restricted Stock exceeding 10% of each of the limits set forth in Section 4.1.

4.3           Unused
Stock. If any
outstanding Award under the Plan expires or for any other, reason ceases to be exercisable, is forfeited
or, repurchased by the Company, in whole or in
part (other than upon exercise of an Option), the Common Stock subject to such
Award (and as to which the Award had not been exercised) shall continue to be
available under the Plan or revert to the Plan to again be available for
issuance under the Plan. Common Stock underlying vested and exercised Awards
shall not be available for future grant.

4.4           Adjustment .for Change in Outstanding Shares.

(a)           In General.  If there is any change,
increase or decrease, in the outstanding shares of Common Stock that is
effected without receipt of additional consideration by the Company, by reason
of a stock dividend, subdivision, reclassification, recapitalization, merger,
consolidation, stock split, combination or exchange of stock,  or other similar circumstances not involving
the receipt of consideration by the Company (each a Capitalization Event), then
in each such event, the Plan Administrator shall make an appropriate adjustment
in the aggregate number of shares of Common Stock available under the Plan, the
number of shares of Common Stock subject to each outstanding Award and the
Option or Restricted Stock prices in order to prevent the dilution or enlargement
of any Participant’s rights. In the event of any adjustment in the number of
shares of Common Stock covered by any Award, including those provided in
paragraph (b) below, each such Award shall cover only the number of fill shares
resulting from such adjustment. The Plan Administrator’s determinations in
making any adjustment shall be final and conclusive.

(b)           Adjustments for Certain
Distributions of Property. If the Company at any time
distributes with respect to its Common Stock securities or other property
(except cash or Common Stock), a proportionate part of those securities or, other, property
shall be set aside and delivered to the Participant when he exercises an Option
or the restrictions on Restricted Stock lapse. The securities or other property
shall be in the same ratio to the total securities and property set aside for
the Participant as the number of shares of Common Stock with respect to which
the Option is then exercised or the Restricted Stock then vests is to the total
shares of Common Stock subject to the Award.

(c)           Exceptions to
Adjustment. Except as expressly provided
herein, the issue by the Company of Common Stock of any class, or securities
convertible into or exchangeable for Common Stock of any class, for cash or
property or for labor or services, or upon sale or upon exercise of rights or
warrants to subscribe therefore, or upon conversion of shares or obligations of the
Company convertible into or exchangeable for Common Stock of any class, shall
not

 7
 

 

affect, and no adjustment by reason thereof shall be made with respect
to, the number of shares of Common Stock subject to any Award granted under the
Plan.

4.5           Retention
of Rights. The
existence of this Plan and any Award granted pursuant to the Plan shall not
affect the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations, or other
change in the Company’s capital structure or, its business, or a merger or consolidation of
the Company, or any issue of bonds, debentures, or preferred or preference
stock ranking before or affecting the Common Stock, or the dissolution of the
Company or any sale or transfer of all or any part of the Company’s assets or
business, or any other corporate act or proceeding, whether similar or not.

4.6           Cancellation
of Award. The
Plan Administrator may at anytime cancel an Award, whether vested or unvested,
if the Participant engages in conduct that the Plan Administrator in its sole
discretion determines to be detrimental to the best interest of the
Company.  Without limiting the foregoing,
the Plan Administrator may cancel all or any portion of an Award, whether
vested or unvested, if the Plan Administrator
determines that the Participant has failed at any time during the Participant’s
employment with the Company to comply with any policies or procedures of
the Company, including the Company’s Code of
Business Conduct and Ethics.

ARTICLE 5. ELIGIBILITY

5.1           Eligible
Employees. All
full-time and part-time Employees of the Company are eligible to receive an
Award at the discretion of the Plan Administrator.

5.2           Consultants.
Any consultant or advisor
who renders bona fide services to the Company, which services are not in
connection with the offer or sale of securities in a capital-raising
transaction, is eligible to receive an Award at the discretion of the Plan
Administrator.

ARTICLE
6. STOCK OPTIONS

6.1           Grant of Options. The Plan Administrator may from time to time in its discretion
determine which of the Employees of the Company should receive Options, the
type of Options to be granted (whether Incentive Stock Options or Nonqualified
Stock Options), the number of shares of Common Stock subject to such Options,
and the dates on which such Options are to be granted. To the extent that an Option
is granted under which the aggregate Fair Market Value (determined as of the
time each Option is granted) of the Common Stock with respect to which any of
such Employee’s Options are exercisable for, the first time during a calendar, year exceeds $100,000, the
Options granted that exceed the annual limitation shall be deemed to be
Nonqualified Stock Options rather than Incentive Stock Options.

6.2           Option Agreement. Each grant of
Options under the Plan shall be evidenced by a written Option Agreement setting
forth the terms upon which the Options are granted. Each Option Agreement shall
designate the type of Options being granted (whether Incentive Stock Options or
Nonqualified Stock Options), and shall state the number of shares of Common
Stock, as designated by the Plan Administrator, to which that Option pertains.
More than one type of Option, and any combination of Options and Restricted
Stock, may be granted to an Employee.

 8
 

 

(a)           Option
Exercise Price. The purchase
price of the Common Stock under each Option granted under the Plan shall not be
less than 100% of the Fair Market
Value (determined as of the day the Option is granted) of the Common Stock
subject to the Option (the “Exercise Price”) provided, however, that the
Exercise Price for any Participant who is the owner of ten percent (10%) or
more of the issued and outstanding stock of the Company shall be not less than
110% of the Fair Market Value (determined as of the day the Option is granted)
of the Common Stock subject to the Option. The Exercise Price of the Common
Stock under each Option is fixed and may not be Repriced.

(b)           Duration
of Options. Each grant of Options shall be of a duration
as specified in the Option Agreement; provided, however, that the term of each
Option grant shall not exceed the lesser of: (1) five (5) years from the date
the participant has the right to exercise such Option or portion thereof; or
(2) seven (7) years from the date the Options are granted.  Notwithstanding the preceding sentence, each
grant of Options to any Participant who is the owner of ten percent (10%) or
more of the issued and outstanding stock of the Company shall be of a duration
as specified in the Option Agreement; provided, however, that the term of each
Option grant shall not exceed the lesser of: (1) five (5) years from the date
the participant has the right to exercise such Option or portion thereof; or
(2) five (5) years from the date the Options are granted.

(c)           Vesting. The grant of Options may be subject to a
vesting schedule, which shall be set forth in the Option Agreement, and which
may be waived or accelerated by the Plan Administrator, at any time. To the extent required by
applicable state securities law, Options subject to a vesting schedule shall vest at least as rapidly as
20% per year within the five years following the date of grant of the Option.

(d)           Rights as Stockholder.  A Participant shall have no rights as a
stockholder of the Company with respect to the Common Stock covered by an
Option until the date of the issuance of the stock certificate for such Common
Stock.

(e)           Other Terms and Conditions. The Option Agreement may contain such other
provisions, which shall not be inconsistent with the Plan, as the Plan
Administrator shall deem appropriate, including, without limitation, provisions
that relate to the Participant’s ability to exercise an Option in whole or in
part due to the passage of time or the achievement of specific goals or the
occurrence of certain events, as specified by the Plan Administrator.
Notwithstanding the foregoing, the Option Agreement may not contain any term
that would cause the Option not to comply in all respects with Code Section
409A and related regulations.

6.3           Nontransferability
of Options. Options granted pursuant to the Plan are not
transferable by the Participant other than by will or the laws of descent and
distribution and shall be exercisable during the Participant’s lifetime only by
the Participant. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of the Options contrary to the provisions hereof, or upon the
levy of any attachment or similar process upon the Option, the Option shall
immediately become null and void. 
Notwithstanding the foregoing, to the extent specified in an Option
Agreement, an Option may be transferred by a Participant solely to (1) the
Participant’s immediate family (children, grandchildren, or, spouse) or trusts or other entities
established for the benefit of the Participant’s immediate family; or (2) the
trust underlying a nonqualified deferred compensation plan established and
maintained by the Company, to the

 9
 

 

extent specifically permitted in the trust agreement; provided that the
transferability of an Option under this section shall be limited to the extent
transfer is permitted by Rule 701 of the Securities Act, if and as required by
applicable state securities law. Any such transfer of an Incentive Stock Option
shall result in the conversion of the Option to a Nonqualified Stock Option.

6.4        Manner of Exercise. Subject to the limitations
and conditions of the Plan or the Option Agreement, an Option shall be
exercisable, in whole or in part, from time to time, by giving written notice
of exercise to the Chief Financial Officer of the Company or such other
individual, as directed from time to time by the Plan Administrator.  The notice shall specify the number of whole
shares of Common Stock to be purchased and shall be accompanied by (a) payment
in full to the Company of the Exercise Price under Section 6.2(a); plus (b) for
Nonqualified Stock Options, payment in full of such amount as the Plan
Administrator shall determine to be sufficient to satisfy any liability the
Company may have for any withholding of federal, state or local income or other
taxes incurred by reason of the exercise of the Option. At the Plan
Administrator’s discretion, payment in full of such amount as the Plan
Administrator, shall determine to be sufficient to satisfy
any liability the Company may have for any withholding of federal, state or
local income or other taxes incurred may also be requested upon the exercise of
an Incentive Stock Option.  Except as
provided in Section
6.5, the conditions of this Section 6.4 shall be satisfied at the time that the Option or, any part thereof is exercised, and no Common
Stock shall be issued or delivered until such conditions have been satisfied by
the Participant.

6.5        Payment of Option Exercise Price.  Payment
for Common Stock underlying the Option shall be in the form of either (a)
personal check, (b) a certified or bank cashier’s check to the order, of the Company, (c) shares of
Common Stock, properly endorsed to the Company, in an amount the Fair Market
Value of which on the date of receipt by the Company equals or, exceeds the aggregate Exercise
Price for the Option, provided that such Stock has been held outright by the
Participant for at least six months, (d) any other form of legal consideration
that may be acceptable to the Plan Administrator, or, (e) in any combination thereof; provided,
however, that no payment may be made in Common Stock unless the Plan
Administrator has approved of payment in such form by such Participant with
respect to the Option exercise in question. Payment for withholding taxes shall
be in the form of cash.

6.6         Termination
of Continuous Service. Other
than as prescribed in Section 8, any vesting of the Option shall cease upon
termination of the Participant’s Continuous Service, and the Option shall be
exercisable only to the extent that it was exercisable on the date of such
termination of Continuous Service. Any Option not exercisable as of the date of
termination, and any Option or portions thereof not exercised within the period
specified herein, shall terminate.

(a)           Termination Other than for Cause. Subject to any limitations set forth in the
Option Agreement, and provided that the notice of exercise is provided as
required by Section 6.4 prior
to the expiration of the Option, the Participant
shall be entitled to exercise the Option (i) during the Participant’s
Continuous Service, and (ii) for a period of ninety (90) calendar days
after the date of termination of the Participant’s Continuous Service for
reason other than Cause, or such longer period as may be set forth in the
Option Agreement.

(b)           Termination by Death. Notwithstanding paragraph
(a), if a Participant’s Continuous Service should terminate as a result of the
Participant’s death, or if a Participant should die within a period of three
months after termination of the Participant’s Continuous Service under

 10
 

 

circumstances in which paragraph (a) would permit the exercise of the
Option following termination, the personal representatives of the Participant’s
estate or the person or persons who shall
have acquired the Option from the Participant by bequest or, inheritance may exercise the
Option at any time within one year after the date of death, but not later than
the expiration date of the Option.

(c)           Termination by Disability. Notwithstanding paragraph
(a), if a Participant’s Continuous Service should terminate by reason of the
Participant’s Disability the Participant may exercise the Option at any time
within the earlier of (i) one year after the date of termination and (ii)
thirty (30) days after the Participant no longer has a Disability, but in any
event not later than the expiration date of the Option.

(d)           Termination for Cause; Breach of Covenant Not
to Compete or Nondisclosure Agreement. Notwithstanding
anything herein to the contrary, and unless otherwise provided by the Option
Agreement, all unexercised Options shall
terminate immediately if the Participant is terminated for Cause, breaches any
obligation under a covenant not to compete with the Company, or breaches
any obligation under an agreement not to use or disclose proprietary
information obtained from or through the Company, upon such occurrence.

(e)           Extension of Option
Termination Date. The Plan Administrator, in
its sole discretion, may extend the termination date of an Option granted under
the Plan without regard to the preceding provisions of this Section 6.6. Such extension may be
made in the Option Agreement as originally executed or by amendment to the
Option Agreement, either prior to or following termination of a Participant’s
Continuous Service. The Plan Administrator shall have no power to extend the
termination date of an Incentive Stock Option beyond the periods provided in
paragraphs (a), (b) and (c) prior to the termination of the Participant’s
Continuous Service or without the approval of the Participant, which may be
granted or withheld in the Participant’s sole discretion. Any extension of the
termination date of an Incentive Stock Option shall be deemed to be the grant
of a new Option for purposes of the Code.

ARTICLE 7. RESTRICTED STOCK

7.1           Grant
of Restricted Stock. The Plan Administrator may from time to time
in its sole discretion determine which of the Employees should receive grants
of Restricted Stock, the number of shares of Restricted Stock to be granted to
each Employee, the dates on which such shares of Restricted Stock are to be
granted, and the restrictions applicable to each grant of shares of Restricted
Stock.

7.2           Restricted
Stock Agreement. Each
grant of Restricted Stock under the Plan shall be evidenced by a written
Restricted Stock Agreement setting forth the terms upon which the Restricted
Stock is granted. Each Restricted Stock Agreement shall state the number of
shares of Common Stock, as designated by the Plan Administrator, to which that
Restricted Stock Award pertains; the price, if any, to be paid by the
Participant for the Restricted Stock; and the restrictions applicable to each
grant of Restricted Stock. More than one grant of Restricted Stock may be
granted to an Employee. The terms of any Restricted Stock Agreement need not be
identical to the terms of any other Restricted Stock Agreement applicable to
other grants of Restricted Stock under the Plan to the same or other
Participants.

 11
 

 

No Restricted Stock shall be issued under the Plan until the
Participant provides the Company with a signed Restricted Stock Agreement in
the form specified by the Plan Administrator.

7.3           Issuance of Restricted Stock.  If a purchase price for Restricted Stock is
imposed, the Participant’s right to receive Restricted Stock shall be
conditioned upon the delivery by the Participant of (i) payment in full, by
check or by certified or bank cashier’s check to the Company (or payment by
such other, consideration as shall be permitted by the
Plan Administrator) or, upon approval of the Plan Administrator, shares of the
Common Stock, properly endorsed to the Company, in an amount the Fair Market
Value of which on the date of receipt by the Company equals or exceeds the
aggregate purchase price of the Common Stock; (ii) payment in similar form
equal to such amount as the Company shall determine to be sufficient to satisfy
any liability it may have for any withholding of federal, state or local income
or other taxes incurred by reason of the vesting of the Restricted Stock or the
Participant’s election under Code Section 83(b); and (iii) a copy of the
executed Restricted Stock Agreement in the form specified by the Plan
Administrator.

(a)           Purchase
Price. A
purchase price shall not be required for Restricted Stock, except to the extent
required by applicable state securities law. Once established, the purchase
price of the Restricted Stock is fixed and may not be Repriced.

(b)           Vesting.  Restricted
Stock may be subject to a vesting schedule, which shall be set forth in the
Restricted Stock Agreement, and which may be waived or accelerated by the Plan
Administrator at any time. Unless otherwise provided in the Restricted Stock
Agreement, Restricted Stock shall not begin to vest prior to the first
anniversary of the date of the Award; provided, that, to the extent required by
applicable state securities law, Restricted Stock subject to a vesting schedule
shall vest at least as rapidly as 20% per year within the five years following
the date of grant of the Restricted Stock.

(c)           Stock
Certificates. The
stock certificate or certificates representing the Restricted Stock shall be
registered in the name of the Participant to whom such Restricted Stock shall
have been granted.  Such certificates
shall remain in the custody of the Company and the Participant shall deposit
with the Company stock powers or other instruments of assignment, each endorsed
in blank, so as to permit retransfer to the Company of all or a portion of the
Restricted Stock that shall be forfeited or
otherwise not become vested in accordance with the Plan and the applicable
Restricted Stock Agreement.

(d)           Restrictions
and Rights. Restricted
Stock shall constitute issued and outstanding shares of Common Stock for all
corporate purposes. The Participant shall have the right to vote such
Restricted Stock, to receive and retain all regular cash dividends and such
other distributions, as the Board of Directors may, in its discretion,
designate, pay or distribute on such Restricted Stock, and to exercise all
other rights, powers and privileges of a holder of Common Stock with respect to such Restricted Stock,
except as set forth in this Article
7. The Restricted Stock Agreement may
contain such other, provisions, which shall not be inconsistent
with the Plan, as the Plan Administrator shall deem appropriate.

(e)           Forfeiture.   If
the Participant fails to satisfy any applicable restrictions, terms and
conditions set forth in this Plan or in the Restricted Stock Agreement for any reason, any

 12
 

 

Restricted Stock held by
such Participant and affected by such conditions shall be forfeited to the
Company in return for such consideration as shall be specified in the
Restricted Stock Agreement. The Company and its officers are authorized to
reflect such forfeiture of Restricted Stock on the Company’s stock ledger.

(f)            Other Terms and Conditions. The Restricted Stock Agreement may contain such
other provisions, which shall not be inconsistent with the Plan, as the Plan
Administrator shall deem appropriate, including, without limitation, provisions
that relate to the Participant’s ability to received Restricted Stock due to
the passage of time or the achievement of specific goals or the occurrence of
certain events, as specified by the Plan Administrator. Notwithstanding the
foregoing, the Restricted Stock Agreement may not contain any term that would
cause any grant of  Restricted Stock not
to comply in all respects with Code Section 409A and related regulations.

7.4           Nontransferability of Restricted Stock. Restricted Stock granted pursuant to the Plan
is not transferable by the Participant until all restrictions on such
Restricted Stock shall have lapsed.  Upon
any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of
the Restricted Stock, contrary to the provisions hereof, or upon the levy of
any attachment or similar process upon the Restricted Stock, the Restricted
Stock shall immediately become null and void. 
Notwithstanding the foregoing, to the extent specified in a Restricted
Stock Agreement, Restricted Stock may be transferred by a Participant solely to
(1) the Participant’s immediate family (children, grandchildren, or spouse) or
trusts or other entities established for the benefit of the Participant’s
immediate family; or (2) the trust underlying a nonqualified deferred
compensation plan established and maintained by the Company, to the extent
specifically permitted in the trust agreement; provided that the
transferability of Restricted Stock under this section shall be limited to the
extent transfer is permitted by Rule 701 of the Securities Act, if and as
required by applicable state securities law.

7.5        Termination of Continuous Service. In
the event that a Participant terminates Continuous Service with the Company for
any reason any unvested Restricted Stock held by such Participant as of the
date of such termination of Continuous Service shall be forfeited to the Company
as of the date of termination of Continuous Service.

ARTICLE 8. CHANGE IN CONTROL

In the event of a Change in Control Event, the vesting of all Awards
held by Participants whose Continuous Service has not terminated shall be
accelerated in full. In anticipation of a Change in Control Event, the Plan
Administrator may, upon written notice to all Participants holding Options,
provide that all unexercised Options must be exercised upon the Change in
Control Event or, within a specified number of days of the date
of such Change in Control Event or such Options will terminate. In response to
such notice, a Participant may make an irrevocable election to exercise the
Participant’s Option contingent upon and effective as of the effective date
stated in such notice. Any Option shall terminate if not exercised upon the
time frame stated in the notice.

 13
 

 

ARTICLE 9. ISSUANCE OF SHARES OF COMMON
STOCK

9.1           Transfer
of Common Stock to Participant. As soon as practicable after (a) a Participant has
given the Company written notice of exercise
of an Option and has otherwise met the requirements of  Section 6.2, with
respect to an Option, or (b) a Participant has satisfied any applicable
restrictions, terms and conditions set forth in this Plan or in the Restricted
Stock Agreement with respect to Restricted Stock, the Company shall register a
certificate in such Participant’s name for the Common Stock as to which the
Option has been exercised or the Restricted Stock Award has been satisfied and
shall, upon the Participant’s request, deliver such certificate to the
Participant. In no event shall the Company be required to transfer fractional
shares of Common Stock to the Participant, and in lieu thereof, the Company may
pay an amount in cash equal to the Fair Market Value of such fractional shares
of Common Stock on
the date of exercise or vesting, as applicable.

9.2           Legend.
All certificates evidencing
shares of Common Stock originally issued pursuant to this Plan or, subsequently transferred to any
person or entity, and any shares of capital stock received in respect thereof,
may bear such legends and transfer, restrictions as the Company shall deem
reasonably necessary or desirable, including, without limitation, legends
restricting transfer of the Common Stock until there has been compliance with
federal and state securities laws and until the Participant or any other holder
of the Common Stock has paid the Company such amounts as may be necessary in
order, to
satisfy any withholding tax liability of the Company.

9.3           Compliance
With Laws. If the issuance or transfer
of Common Stock by the Company would for any reason, in the opinion of counsel
for the Company, violate any applicable federal or state laws or regulations,
the Company may delay issuance or transfer of such Stock to the Participant
until compliance with such laws can reasonably be obtained. In no event shall
the Company be obligated to effect or obtain any listing, registration,
qualification, consent or approval under any applicable federal or state laws
or regulations or any contract or agreement to which the Company is a party
with respect to the issuance of any such Stock. If, after reasonable efforts,
the Company is unable to obtain the authority that counsel for the Company
deems necessary for the lawful issuance and sale of Stock upon exercise of
Options or vesting of an Award under the Plan, the Company shall be relieved
from any liability for failure to issue and sell Common Stock upon exercise of
such Options or vesting of an Award unless and until such authority is
obtained.

ARTICLE 10. AMENDMENT AND TERMINATION

10.1         Amendment of the Plan. The Board of Directors may
at any time and from time to time alter, amend, suspend or terminate the Plan
or any part thereof as it may deem proper, except that no such action shall
diminish or impair the rights under an Award previously granted. However, if
Video Display is listed on the NASDAQ National Market System or another public
trading market, then any amendment that would require stockholder approval
under the requirements of the NASDAQ National Market System or such other
public trading market, as the case may be, shall only be effective when such
stockholder approval is obtained. Subject to the terms and conditions of the
Plan, the Plan Administrator may modify, extend or renew outstanding Awards
granted under the Plan, provided that such modification would not constitute a
Repriced Award, and provided further that no such action shall diminish or, impair the rights under an Award previously
granted without the consent of the Participant.

 14
 

 

10.2         Termination
of the Plan. This
Plan shall terminate on the date that is the tenth anniversary of the Effective
Date. The Board of Directors may at any time suspend or terminate the Plan. No
such suspension or termination shall diminish or impair the rights under an
Award previously granted without the consent of the Participant.  Notwithstanding the foregoing, no Incentive
Stock Options may be granted any time after ten years after the adoption by the
Board of Directors of any amendments to the Plan that constitute the adoption
of a new plan for purposes of Code Section 422.

ARTICLE
11. GENERAL PROVISIONS

11.1      No
Employment Rights. Nothing
contained in this Plan or in any Award granted under the Plan shall confer upon any Participant
any right with respect to the continuation of such Participant’s Continuous
Service by the Company or interfere in any way with the right of the Company,
subject to the terms of any separate employment agreement to the contrary, at
any time to terminate such Continuous Service or to increase or decrease the
compensation of the Participant from the rate in existence at the time of the
grant of the Award.

11.2         Other Employee Benefits. Unless so provided by
the applicable plan, the amount of compensation deemed to be received by a
Participant as a result of the exercise of an Award shall not constitute
earnings with respect to which any other employee benefits of the person are
determined, including without limitation benefits under any pension, profit sharing,
life insurance, or disability or other salary continuation plan.

11.3         Confidentiality
of Information.  Information regarding the
grant of Awards under this Plan is confidential and may not be shared by the
Participant with anyone other than the Participant’s immediate family and
personal financial advisor and other person(s) designated by Participant by
power of attorney or assignment, or as otherwise required by law.

11.4         Severability. If
any provision of this Plan is held by any court or governmental authority to be
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions. Instead, each provision held to be illegal or
invalid shall, if possible, be construed and enforced in a manner that will
give effect to the terms of such provision to the fullest extent possible while
remaining legal and valid.

11.5         Governing
Law and Venue.  This Plan, and all Awards granted
under this Plan, shall be construed and shall take effect in accordance with
the laws of the State of Georgia without regard to conflicts of laws
principles, Resolution of any disputes under the Plan or any Award under the
Plan shall only be held in courts in DeKalb County, Georgia.

11.6      Use of
Proceeds. Any
proceeds received by the Company from the sale of shares of Common Stock under
the Plan shall be used for general corporate purposes.

 15

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