Document:

exv10w1

 

Exhibit 10.1

PARALLEL PETROLEUM CORPORATION

2008 LONG-TERM INCENTIVE PLAN

     The Parallel Petroleum Corporation 2008 Long-Term Incentive Plan (this “Plan”) was adopted by
the Board of Directors of Parallel Petroleum Corporation, a Delaware corporation (the “Company”),
effective as of May 28, 2008, subject to approval by the Company’s stockholders.

ARTICLE 1

PURPOSE

     The purpose of this Plan is to attract and retain the services of key Employees, key
Consultants and Outside Directors of the Company and its Subsidiaries and to provide such persons
with a proprietary interest in the Company through the granting of incentive stock options,
nonqualified stock options, restricted stock, performance awards and other awards, whether granted
singly or in combination, that will

     (a) increase the interest of such persons in the Company’s welfare;

     (b) furnish an incentive to such persons to continue their services for the Company;
and

     (c) provide a means through which the Company may attract able persons as Employees,
Consultants and Outside Directors.

     With respect to Reporting Participants, the Plan and all transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (the “1934 Act”). To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void ab initio, to the extent permitted
by law and deemed advisable by the Committee.

ARTICLE 2

DEFINITIONS

     For purposes of this Plan, unless the context requires otherwise, the following terms shall
have the meanings indicated:

     2.1 “Award” means the grant of any Incentive Stock Option, Nonqualified Stock Option,
Restricted Stock, Performance Award or Other Award, whether granted singly or in combination (each
individually referred to herein as an “Incentive”).

     2.2 “Award Agreement” means a written agreement between a Participant and the Company which
sets out the terms of the grant of an Award.

     2.3 “Award Period” means the period set forth in the Award Agreement during which one or more
Incentives granted under an Award may be exercised.

     2.4 “Board” means the Board of Directors of the Company.

 

 

     2.5 “Change in Control” means the occurrence of any of the following:

     (a) Any “Person” (as defined below), other than (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding stock under an employee benefit plan
of the Company or any of its “Affiliates” (as defined below), (iii) an underwriter
temporarily holding stock pursuant to an offering of such stock, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, acquires ownership of stock of the
Company that, together with stock held by such Person, constitutes more than 50% of the
total fair market value or total voting power of the Company’s stock. However, if any
Person is considered to own more than 50% of the total fair market value or total voting
power of the Company’s stock, the acquisition of additional stock by the same Person is not
considered to be a Change in Control;

     (b) During any 12-month period, a majority of members of the Board is replaced by
directors whose appointment or election is not endorsed by a majority of the Board before
the date of the appointment or election; provided, however, that any such director shall not
be considered to be endorsed by the Board if his or her initial assumption of office occurs
as a result of an actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or

     (c) There is consummated a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation, except if:

     (i) the merger or consolidation would result in the voting stock of the Company
outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting stock of the surviving entity or any
parent thereof) more than 70% of the total voting power of the stock of the Company
or such surviving entity or any parent thereof outstanding immediately after such
merger or consolidation; or

     (ii) the merger or consolidation is effected to implement a recapitalization of
the Company (or similar transaction) in which no Person is or becomes the beneficial
owner, directly or indirectly, during the 12-month period ending on the date of the
most recent acquisition by such Person, of stock of the Company (not including in
the stock beneficially owned by such Person any stock acquired directly from the
Company or its Affiliates other than in connection with the acquisition by the
Company or its Affiliates of a business) representing 30% or more of the total
voting power of the Company’s then outstanding stock; or

     (d) Any Person acquires (or has acquired during the 12-month period ending on the date
of the most recent acquisition by such Person) assets of the Company that have a total gross
fair market value equal to at least 40% of the total gross fair market value of all of the
Company’s assets immediately before such acquisition or acquisitions. However, there is no
Change in Control when there is such a sale or transfer to (i) a stockholder of the Company
(immediately before the asset transfer) in exchange for or with respect to the Company’s
then outstanding stock; (ii) an entity, at least 50% of the total value or voting power of
the stock of which is owned, directly or indirectly, by the Company; (iii) a Person that
owns directly or indirectly, at least 50% of the total value or voting power of the
outstanding stock of the Company; or (iv) an entity, at least 50% of the total value or
voting power of the stock of which are owned by a Person that owns, directly or indirectly,
at least 50% of the total value or voting power of the outstanding stock of the Company.

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     For purposes of this Section 2.5:

     (a) “Person” shall have the meaning given in Section 7701(a)(1) of the Code. Person
shall include more than one Person acting as a group as defined by the Final Treasury
Regulations issued under Section 409A of the Code.

     (b) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under
Section 12 of the Securities Exchange Act of 1934, as amended.

     The provisions of this Section 2.5 shall be interpreted in accordance with the requirements of
the Final Treasury Regulations under Code Section 409A, it being the intent of the parties that
this Section 2.5 shall be in compliance with the requirements of said Code Section and said
Regulations.

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

     2.7 “Committee” means the committee appointed or designated by the Board to administer the
Plan in accordance with Article 3 of this Plan.

     2.8 “Common Stock” means the common stock, par value $0.01 per share, which the Company is
currently authorized to issue or may in the future be authorized to issue, or any securities into
which or for which the common stock of the Company may be converted or exchanged, as the case may
be, pursuant to the terms of this Plan.

     2.9 “Company” means Parallel Petroleum Corporation, a Delaware corporation, and any successor
entity.

     2.10 “Consultant” means any natural person, who is not an Employee, rendering bona fide
services to the Company or a Subsidiary, with compensation, pursuant to a written independent
contractor agreement between such person and the Company or a Subsidiary, provided that such
services are not rendered in connection with the offer or sale of securities in a capital raising
transaction and do not directly or indirectly promote or maintain a market for the Company’s
securities.

     2.11 “Corporation” means any entity that (i) is defined as a corporation under Section 7701 of
the Code and (ii) is the Company or is in an unbroken chain of corporations (other than the
Company) beginning with the Company, if each of the corporations other than the last corporation in
the unbroken chain owns stock possessing a majority of the total combined voting power of all
classes of stock in one of the other corporations in the chain. For purposes of clause (ii)
hereof, an entity shall be treated as a “corporation” if it satisfies the definition of a
corporation under Section 7701 of the Code.

     2.12 “Date of Grant” means the effective date on which an Award is made to a Participant as
set forth in the applicable Award Agreement; provided, however, that solely for purposes of Section
16 of the 1934 Act and the rules and regulations promulgated thereunder, the Date of Grant of an
Award shall be the date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement. The determination of Fair Market
Value shall, where applicable, be in compliance with Section 409A of the Code.

     2.13 “Employee” means a common law employee (as defined in accordance with the Regulations and
Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary
of the Company.

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     2.14 “Executive Officer” means an officer of the Company or a Subsidiary subject to Section 16
of the 1934 Act or a “covered employee” as defined in Section 162(m)(3) of the Code.

     2.15 “Fair Market Value” means, as of a particular date, (a) if the shares of Common Stock are
listed on the Nasdaq Global Market, the closing sales price per share of Common Stock on the Nasdaq
Global Market on that date, or, if there shall have been no such sale so reported on that date, on
the last preceding date on which such a sale was so reported, (b) if the shares of Common Stock are
listed on any other established national securities exchange, the closing sales price per share of
Common Stock on the consolidated transaction reporting system for the principal securities exchange
for the Common Stock on that date, or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so reported, (c) if the shares of Common
Stock are not so listed but are quoted on the Nasdaq National Market System, the closing sales
price per share of Common Stock on the Nasdaq National Market System on that date, or, if there
shall have been no such sale so reported on that date, on the last preceding date on which such a
sale was so reported, (d) if the Common Stock is not so listed or quoted, the mean between the
closing bid and asked price on that date, or, if there are no quotations available for such date,
on the last preceding date on which such quotations shall be available, as reported by Nasdaq, or,
if not reported by Nasdaq, by the National Quotation Bureau, Inc., or (e) if none of the above is
applicable, such amount as may be determined by the Committee (acting on the advice of an
Independent Third Party, should the Committee elect in its sole discretion to utilize an
Independent Third Party for this purpose), in good faith, to be the fair market value per share of
Common Stock. Notwithstanding the foregoing provisions of this Section 2.15, to the extent an
Award is intended to be in compliance with some or all of the requirements of Section 409A of the
Code, “ Fair Market Value” for purposes of the Plan and any Award shall be the definition provided
for under Section 409A of the Code and Section 1.409A-1(b)(5)(iv) of the regulations issued
thereunder or any successor provision thereto.

     2.16 “Independent Third Party” means an individual or entity independent of the Company having
experience in providing investment banking or similar appraisal or valuation services and with
expertise generally in the valuation of securities or other property for purposes of this Plan.
The Committee may utilize one or more Independent Third Parties.

     2.17 “Incentive” is defined in Section 2.1 hereof.

     2.18 “Incentive Stock Option” means an incentive stock option within the meaning of Section
422 of the Code, granted pursuant to this Plan.

     2.19 “Nonqualified Stock Option” means a nonqualified stock option, granted pursuant to this
Plan, which is not an Incentive Stock Option.

     2.20 “Option Price” means the price which must be paid by a Participant upon exercise of a
Stock Option to purchase a share of Common Stock.

     2.21 “Other Award” means an Award issued pursuant to Section 6.6 hereof.

     2.22 “Outside Director” means a director of the Company who is not an Employee or a
Consultant.

     2.23 “Participant” means an Employee, Consultant or Outside Director of the Company or a
Subsidiary to whom an Award is granted under this Plan.

     2.24 “Plan” means this Parallel Petroleum Corporation 2008 Long-Term Incentive Plan, as
amended from time to time.

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     2.25 “Performance Award” means an Award hereunder of cash or shares of Common Stock pursuant
to Section 6.5 hereof.

     2.26 “Performance Goal” means any of the goals set forth in Section 6.7 hereof.

     2.27 “Reporting Participant” means a Participant who is subject to the reporting requirements
of Section 16 of the 1934 Act.

     2.28 “Restricted Stock” means shares of Common Stock issued or transferred to a Participant
pursuant to Section 6.4 of this Plan which are subject to restrictions or limitations set
forth in this Plan and in the related Award Agreement.

     2.29 “Retirement” means any Termination of Service solely due to retirement upon or after
attainment of age sixty-five (65), or permitted early retirement as determined by the Committee.

     2.30 “Stock Option” means a Nonqualified Stock Option or an Incentive Stock Option.

     2.31 “Subsidiary” means (i) any corporation in an unbroken chain of corporations beginning
with the Company, if each of the corporations other than the last corporation in the unbroken chain
owns stock possessing a majority of the total combined voting power of all classes of stock in one
of the other corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general partnership interest and a
majority of the limited partnership interests entitled to vote on the removal and replacement of
the general partner, and (iii) any partnership or limited liability company, if the partners or
members thereof are composed only of the Company, any corporation listed in item (i) above or any
limited partnership listed in item (ii) above. “Subsidiaries” means more than one of any such
corporations, limited partnerships, partnerships or limited liability companies.

     2.32 “Termination of Service” occurs when a Participant who is (i) an Employee of the Company
or any Subsidiary ceases to serve as an Employee of the Company and its Subsidiaries, for any
reason; (ii) an Outside Director of the Company or a Subsidiary ceases to serve as a director of
the Company and its Subsidiaries for any reason; or (iii) a Consultant of the Company or a
Subsidiary ceases to serve as a Consultant of the Company and its Subsidiaries for any reason.
Except as may be necessary or desirable to comply with applicable federal or state law, a
“Termination of Service” shall not be deemed to have occurred when a Participant who is an Employee
becomes an Outside Director or Consultant or vice versa. If, however, a Participant who is an
Employee and who has an Incentive Stock Option ceases to be an Employee but does not suffer a
Termination of Service, and if that Participant does not exercise the Incentive Stock Option within
the time required under Section 422 of the Code upon ceasing to be an Employee, the Incentive Stock
Option shall thereafter become a Nonqualified Stock Option. Notwithstanding the foregoing
provisions of this Section 2.32, if an Award issued under this Plan is subject to Section
409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply
with the requirements of Section 409A of the Code, the definition of “Termination of Service” for
purposes of such Award shall be the definition of “separation from service” provided for under
Section 409A of the Code and the regulations or other guidance issued thereunder.

     2.33 “Total and Permanent Disability” means a Participant is qualified for long-term
disability benefits under the Company’s or Subsidiary’s disability plan or insurance policy; or, if
no such plan or policy is then in existence or if the Participant is not eligible to participate in
such plan or policy, that the Participant, because of a physical or mental condition resulting from
bodily injury, disease, or mental disorder, is unable to perform his or her duties of employment
for a period of six (6) continuous months, as determined in good faith by the Committee, based upon
medical reports or other evidence satisfactory to the Committee; provided that,
with respect to any Incentive Stock Option, Total and Permanent Disability shall have the
meaning given it

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under the rules governing Incentive Stock Options under the Code. Notwithstanding the foregoing
provisions of this Section 2.33, if an Award issued under the Plan is subject to Section
409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply
with the requirements of Section 409A of the Code, the definition of “Total and Permanent
Disability” for purposes of such Award shall be the definition of “disability” provided for under
Section 409A of the Code and the regulations or other guidance issued thereunder.

ARTICLE 3

ADMINISTRATION

     Subject to the terms of this Article 3, the Plan shall be administered by the Board or
such committee of the Board as is designated by the Board to administer the Plan (the “Committee”).
The Committee shall consist of not fewer than two persons. Any member of the Committee may be
removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in
the membership of the Committee may be filled by appointment by the Board. At any time there is no
Committee to administer the Plan, any references in this Plan to the Committee shall be deemed to
refer to the Board.

     If necessary to satisfy the requirements of Section 162(m) of the Code and/or Rule 16b-3
promulgated under the 1934 Act, membership on the Committee shall be limited to those members of
the Board who are “outside directors” under Section 162(m) of the Code and/or “non-employee
directors” as defined in Rule 16b-3 promulgated under the 1934 Act. The Committee shall select one
of its members to act as its Chairman. A majority of the Committee shall constitute a quorum, and
the act of a majority of the members of the Committee present at a meeting at which a quorum is
present shall be the act of the Committee.

     The Committee shall determine and designate from time to time the eligible persons to whom
Awards will be granted and shall set forth in each related Award Agreement, where applicable, the
Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance
requirements, as are approved by the Committee, but not inconsistent with the Plan. The Committee
shall determine whether an Award shall include one type of Incentive or two or more Incentives
granted in combination and shall determine, where applicable, whether the requirements of Section
162(m) of the Code shall apply to an Award to be granted to an Executive Officer. Although the
members of the Committee shall be eligible to receive Awards, all decisions with respect to any
Award, and the terms and conditions thereof, to be granted under the Plan to any member of the
Committee shall be made solely and exclusively by the other members of the Committee, or if such
member is the only member of the Committee, by the Board.

     The Committee, in its sole discretion, shall (i) interpret the Plan, (ii) prescribe, amend and
rescind any rules and regulations necessary or appropriate for the administration of the Plan,
(iii) establish performance goals for an Award and certify the extent of their achievement, and
(iv) make such other determinations or certifications and take such other action as it deems
necessary or advisable in the administration of the Plan. Any interpretation, determination or
other action made or taken by the Committee shall be final, binding, and conclusive on all
interested parties.

     The Committee may delegate to officers of the Company, pursuant to a written delegation, the
authority to perform specified functions under the Plan. Any actions taken by any officers of the
Company pursuant to such written delegation of authority shall be deemed to have been taken by the
Committee. Notwithstanding the foregoing, to the extent necessary to satisfy the requirements of
Section 162(m) of the Code and/or Rule 16b-3 promulgated under the 1934 Act, any function relating
to a Reporting Participant or a covered employee (as defined in Section 162(m) of the Code) shall
be performed solely by the Committee.

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     With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3
promulgated under the 1934 Act, Section 422 of the Code, Section 162(m) of the Code, the rules of
any exchange or inter-dealer quotation system upon which the Company’s securities are listed or
quoted, or any other applicable law, rule or restriction (collectively, “applicable law”), to the
extent that any such restrictions are no longer required by applicable law, the Committee shall
have the sole discretion and authority to grant Awards that are not subject to such mandated
restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards.

ARTICLE 4

ELIGIBILITY

     Any Employee (including an Employee who is also a director or an officer), Consultant or
Outside Director of the Company whose judgment, initiative and efforts contributed or may be
expected to contribute to the successful performance of the Company is eligible to participate in
the Plan; provided that only Employees of a corporation shall be eligible to receive Incentive
Stock Options. The Committee, upon its own action, may grant, but shall not be required to grant,
an Award to any Employee, Consultant or Outside Director of the Company or any Subsidiary. Awards
may be granted by the Committee at any time and from time to time to new Participants, or to then
Participants, or to a greater or lesser number of Participants, and may include or exclude previous
Participants, as the Committee shall determine. Except as required by this Plan, Awards granted at
different times need not contain similar provisions. The Committee’s determinations under the Plan
(including, without limitation, determinations of which Employees, Consultants or Outside
Directors, if any, are to receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same) need not be uniform and may be made
by it selectively among Participants who receive, or are eligible to receive, Awards under the
Plan.

ARTICLE 5

SHARES SUBJECT TO PLAN

     5.1 Number Available for Awards. Subject to adjustment as provided in Articles 11 and
12, the maximum number of shares of Common Stock that may be delivered pursuant to Awards
granted under the Plan is 2,000,000 shares, of which 2,000,000 shares may be delivered pursuant to
Incentive Stock Options. Subject to adjustment pursuant to Articles 11 and 12, the maximum
number of shares of Common Stock with respect to which Stock Options may be granted to any
Participant during any calendar year is 2,000,000 shares of Common Stock. Shares to be issued may
be made available from authorized but unissued Common Stock, Common Stock held by the Company in
its treasury, or Common Stock purchased by the Company on the open market or otherwise. During the
term of this Plan, the Company will at all times reserve and keep available the number of shares of
Common Stock that shall be sufficient to satisfy the requirements of this Plan.

     5.2 Reuse of Shares. To the extent that any Award under this Plan shall be forfeited, shall
expire or be canceled, in whole or in part, then the number of shares of Common Stock covered by
the Award or stock option so forfeited, expired or canceled may again be awarded pursuant to the
provisions of this Plan. If previously acquired shares of Common Stock are delivered to the
Company in full or partial payment of the exercise price for the exercise of a Stock Option granted
under this Plan, the number of shares of Common Stock available for future Awards under this Plan
shall be reduced only by the net number of shares of Common Stock issued upon the exercise of the
Stock Option. Previously acquired shares of Common Stock surrendered to the Company for payment of
applicable employment tax withholding or other tax payment due with respect to any Award may again
be awarded pursuant to the provisions of this Plan. Awards that may be satisfied either by the
issuance of shares of Common Stock or by cash or other consideration shall be counted against the
maximum number of shares of Common Stock that may be issued under this Plan only during the period
that the Award is outstanding or to the extent the Award is ultimately satisfied by the issuance of
shares

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of Common Stock. Awards will not reduce the number of shares of Common Stock that may be
issued pursuant to this Plan if the settlement of the Award will not require the issuance of
shares of Common Stock. Notwithstanding any provisions of this Plan to the contrary, only shares
forfeited back to the Company, shares canceled on account of termination, expiration or lapse of an
Award, shares surrendered in payment of the exercise price of an option or shares withheld for
payment of applicable employment taxes and/or withholding obligations resulting from the exercise
of an option shall again be available for grant of Incentive Stock Options under the Plan, but
shall not increase the maximum number of shares described in Section 5.1 above as the
maximum number of shares of Common Stock that may be delivered pursuant to Incentive Stock Options.

ARTICLE 6

GRANT OF AWARDS

     6.1 In General.

     (a) The grant of an Award shall be authorized by the Committee and shall be evidenced
by an Award Agreement setting forth the Incentive or Incentives being granted, the total
number of shares of Common Stock subject to the Incentive(s), the Option Price (if
applicable), the Award Period, the Date of Grant, and such other terms, provisions,
limitations, and performance objectives, as are approved by the Committee, but (i) not
inconsistent with the Plan, (ii) to the extent an Award issued under the Plan is subject to
Section 409A of the Code, in compliance with the applicable requirements of Section 409A of
the Code and the regulations or other guidance issued thereunder and (iii) to the extent the
Committee determines that an Award shall comply with the requirements of Section 162(m) of
the Code, in compliance with the applicable requirements of Section 162(m) of the Code and
the regulations and other guidance issued thereunder. The Company shall execute an Award
Agreement with a Participant after the Committee approves the issuance of an Award. Any
Award granted pursuant to this Plan must be granted within ten (10) years of the date of
adoption of this Plan. The Plan shall be submitted to the Company’s stockholders for
approval; however, the Committee may grant Awards under the Plan prior to the time of
stockholder approval. Any such Award granted prior to such stockholder approval shall be
made subject to such stockholder approval. The grant of an Award to a Participant shall not
be deemed either to entitle the Participant to, or to disqualify the Participant from,
receipt of any other Award under the Plan.

     (b) If the Committee establishes a purchase price for an Award, the Participant must
accept such Award within a period of thirty (30) days (or such shorter period as the
Committee may specify) after the Date of Grant by executing the applicable Award Agreement
and paying such purchase price.

     (c) Any Award under this Plan that is settled in whole or in part in cash on a deferred
basis may provide for interest equivalents to be credited with respect to such cash payment.
Interest equivalents may be compounded and shall be paid upon such terms and conditions as
may be specified by the grant.

     6.2 Option Price. The Option Price for any share of Common Stock which may be purchased under
a Nonqualified Stock Option for any share of Common Stock may be equal to or greater than the Fair
Market Value of the share on the Date of Grant. The Option Price for any share of Common Stock
which may be purchased under an Incentive Stock Option must be at least equal to the Fair Market
Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who
owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more
than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any
parent or Subsidiary), the Option Price shall be at least 110% of the Fair Market Value of the
Common Stock on the Date of Grant.

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     6.3 Maximum ISO Grants. The Committee may not grant Incentive Stock Options under the Plan to
any Employee which would permit the aggregate Fair Market Value (determined on the Date of Grant)
of the Common Stock with respect to which Incentive Stock Options (under this and any other plan of
the Company and its Subsidiaries) are exercisable for the first time by such Employee during any
calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is
designated as an Incentive Stock Option exceeds this limit or otherwise fails to qualify as an
Incentive Stock Option, such Stock Option (or any such portion thereof) shall be a Nonqualified
Stock Option. In such case, the Committee shall designate which stock will be treated as Incentive
Stock Option stock by causing the issuance of a separate stock certificate and identifying such
stock as Incentive Stock Option stock on the Company’s stock transfer records.

     6.4 Restricted Stock. If Restricted Stock is granted to or received by a Participant under an
Award (including a Stock Option), the Committee shall set forth in the related Award Agreement: (i)
the number of shares of Common Stock awarded, (ii) the price, if any, to be paid by the Participant
for such Restricted Stock and the method of payment of the price, (iii) the time or times within
which such Award may be subject to forfeiture, (iv) specified Performance Goals of the Company, a
Subsidiary, any division thereof or any group of Employees of the Company, or other criteria, which
the Committee determines must be met in order to remove any restrictions (including vesting) on
such Award, and (v) all other terms, limitations, restrictions and conditions of the Restricted
Stock, which shall be consistent with this Plan, to the extent the Committee determines that an
Award shall comply with the requirements of Section 162(m) of the Code, in compliance with the
requirements of Section 162(m) of the Code and the regulations issued thereunder, and to the
extent Restricted Stock granted under the Plan is subject to Section 409A of the Code, in
compliance with the applicable requirements of Section 409A of the Code and the regulations or
other guidance issued thereunder. The provisions of Restricted Stock need not be the same with
respect to each Participant.

     (a) Legend on Shares. Each Participant who is awarded or receives Restricted Stock
shall be issued a stock certificate or certificates in respect of such shares of Common
Stock. Such certificate(s) shall be registered in the name of the Participant, and shall
bear an appropriate legend referring to the terms, conditions and restrictions applicable to
such Restricted Stock, substantially as provided in Section 15.9 hereof.

     (b) Restrictions and Conditions. Shares of Restricted Stock shall be subject to the
following restrictions and conditions:

     (i) Subject to the other provisions of this Plan and the terms of the
particular Award Agreements, during such period as may be determined by the
Committee commencing on the Date of Grant or the date of exercise of an Award (the
“Restriction Period”), the Participant shall not be permitted to sell, transfer,
pledge or assign shares of Restricted Stock. Except for these limitations, the
Committee may in its sole discretion, remove any or all of the restrictions on such
Restricted Stock whenever it may determine that, by reason of changes in applicable
laws or other changes in circumstances arising after the date of the Award, such
action is appropriate.

     (ii) Except as provided in sub-paragraph (i) above or in the applicable Award
Agreement, the Participant shall have, with respect to his or her Restricted Stock,
all of the rights of a stockholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon. Certificates for shares of
Common Stock free of restriction under this Plan shall be delivered to the
Participant promptly after, and only after, the Restriction Period shall expire
without forfeiture in respect of such shares of Common Stock or after any other
restrictions imposed on such shares of Common Stock by the applicable

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Award Agreement or other agreement have expired. Certificates for the shares of
Common Stock forfeited under the provisions of the Plan and the applicable Award
Agreement shall be promptly returned to the Company by the forfeiting Participant.
Each Award Agreement shall require that each Participant, in connection with the
issuance of a certificate for Restricted Stock, shall endorse such certificate in
blank or execute a stock power in form satisfactory to the Company in blank and
deliver such certificate and executed stock power to the Company.

     (iii) The Restriction Period of Restricted Stock shall commence on the Date of
Grant or the date of exercise of an Award, as specified in the Award Agreement, and,
subject to Article 12 of this Plan, unless otherwise established by the
Committee in the Award Agreement setting forth the terms of the Restricted Stock,
shall expire upon satisfaction of the conditions set forth in the Award Agreement,
which such conditions may provide for vesting based on such Performance Goals as may
be determined by the Committee in its sole discretion.

     (iv) Except as otherwise provided in the particular Award Agreement, upon
Termination of Service for any reason during the Restriction Period, the nonvested shares of Restricted Stock shall be forfeited by the Participant. If a Participant
has paid any consideration to the Company for such forfeited Restricted Stock, the
Committee shall specify in the Award Agreement that either (i) the Company shall be
obligated to, or (ii) the Company may, in its sole discretion, elect to, pay to the
Participant, as soon as practicable after the event causing forfeiture, in cash, an
amount equal to the lesser of the total consideration paid by the Participant for
such forfeited shares or the Fair Market Value of such forfeited shares as of the
date of Termination of Service, as the Committee, in its sole discretion shall
select. Upon any forfeiture, all rights of a Participant with respect to the
forfeited shares of the Restricted Stock shall cease and terminate, without any
further obligation on the part of the Company.

     6.5 Performance Awards.

     (a) The Committee may grant Performance Awards to one or more Participants. The terms
and conditions of Performance Awards shall be specified at the time of the grant and may
include provisions establishing the performance period, the Performance Goals to be achieved
during a performance period, and the maximum or minimum settlement values, provided that
such terms and conditions are (i) not inconsistent with the Plan and (ii) to the extent a
Performance Award issued under the Plan is subject to Section 409A of the Code, in
compliance with the applicable requirements of Section 409A of the Code and the regulations
or other guidance issued thereunder. If the Performance Award is to be in shares of Common
Stock, the Performance Awards may provide for the issuance of the shares of Common Stock at
the time of the grant of the Performance Award or at the time of the certification by the
Committee that the Performance Goals for the performance period have been met; provided,
however, if shares of Common Stock are issued at the time of the grant of the Performance
Award and if, at the end of the performance period, the Performance Goals are not certified
by the Committee to have been fully satisfied, then, notwithstanding any other provisions of
this Plan to the contrary, the Common Stock shall be forfeited in accordance with the terms
of the grant to the extent the Committee determines that the Performance Goals were not met.
The forfeiture of shares of Common Stock issued at the time of the grant of the Performance
Award due to failure to achieve the established Performance Goals shall be separate from and
in addition to any other restrictions provided for in this Plan that may be applicable to
such shares of Common Stock. Each Performance Award granted to one or more Participants
shall have its own terms and conditions.

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     To the extent the Committee determines that a Performance Award shall comply with the
requirements of Section 162(m) of the Code and if it is determined to be necessary in order
to satisfy Section 162(m) of the Code, at the time of the grant of a Performance Award
(other than a Stock Option) and to the extent permitted under Section 162(m) of the Code and
the regulations issued thereunder, the Committee shall provide for the manner in which the
Performance Goals shall be reduced to take into account the negative effect on the
achievement of specified levels of the Performance Goals which may result from enumerated
corporate transactions, extraordinary events, accounting changes and other similar
occurrences which were unanticipated at the time the Performance Goal was initially
established. In no event, however, may the Committee increase the amount earned under such
a Performance Award, unless the reduction in the Performance Goals would reduce or eliminate
the amount to be earned under the Performance Award and the Committee determines not to make
such reduction or elimination.

     With respect to a Performance Award that is not intended to satisfy the requirements
of Code Section 162(m), if the Committee determines, in its sole discretion, that the
established performance measures or objectives are no longer suitable because of a change
in the Company’s business, operations, corporate structure, or for other reasons that the
Committee deemed satisfactory, the Committee may modify the performance measures or
objectives and/or the performance period.

     (b) Performance Awards may be valued by reference to the Fair Market Value of a share
of Common Stock or according to any formula or method deemed appropriate by the Committee,
in its sole discretion, including, but not limited to, achievement of Performance Goals or
other specific financial, production, sales or cost performance objectives that the
Committee believes to be relevant to the Company’s business and/or remaining in the employ
of the Company for a specified period of time. Performance Awards may be paid in cash, shares of Common Stock, or other consideration, or any combination thereof. If payable in
shares of Common Stock, the consideration for the issuance of such shares may be the achievement of the performance objective established at the time of the grant of the
Performance Award. Performance Awards may be payable in a single payment or in installments
and may be payable at a specified date or dates or upon attaining the performance objective.
The extent to which any applicable performance objective has been achieved shall be
conclusively determined by the Committee.

     (c) Notwithstanding the foregoing, in order to comply with the requirements of Section
162(m) of the Code, no Participant may receive in any calendar year Performance Awards
intended to comply with the requirements of Section 162(m) of the Code which have an
aggregate value of more than $1,000,000, and if such Performance Awards involve the issuance
of shares of Common Stock, said aggregate value shall be based on the Fair Market Value of
such shares at the time of the grant such Performance Awards. In no event, however, shall
any Performance Awards not intended to comply with the requirements of Section 162(m) of the
Code be issued contingent upon the failure to attain the Performance Goals applicable to the
Performance Awards intended to comply with the requirements of Section 162(m) of the Code.

     6.6 Other Awards. The Committee may grant to any Participant other forms of Awards, based
upon, payable in, or otherwise related to, in whole or in part, shares of Common Stock, if the
Committee determines that such other form of Award is consistent with the purpose and restrictions
of this Plan. The terms and conditions of such other form of Award shall be specified by the
grant. Such Other Awards may be granted for no cash consideration, for such minimum consideration
as may be required by applicable law, or for such other consideration as may be specified by the
grant.

     6.7 Performance Goals. Awards of Restricted Stock, Performance Awards and Other Awards
(whether relating to cash or shares of Common Stock) under the Plan may be made subject to the
attainment of

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Performance Goals relating to one or more business criteria which, where applicable, shall be
within the meaning of Section 162(m) of the Code and consist of one or more or any combination of
the following criteria: one or more measures of reserves of oil and natural gas; one or more
components of the production or costs of production of oil and natural gas; cash flow; cost;
revenues; sales; ratio of debt to debt plus equity; net borrowing, credit quality or debt ratings;
profit before tax; economic profit; earnings before interest and taxes; earnings before interest,
taxes, depreciation and amortization; gross margin; earnings per share (whether on a pre-tax,
after-tax, operational or other basis); operating earnings; capital expenditures; expenses or
expense levels; economic value added; ratio of operating earnings to capital spending or any other
operating ratios; free cash flow; net profit; net sales; net asset value per share; the
accomplishment of mergers, acquisitions, dispositions, public offerings or similar extraordinary
business transactions; sales growth; price of the Company’s Common Stock; return on assets, equity
or stockholders’ equity; or total return to stockholders (“Performance Criteria”). Any Performance
Criteria may be used to measure the performance of the Company as a whole or any business unit of
the Company and may be measured relative to a peer group or index. Any Performance Criteria may
include or exclude (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii)
gains or losses on the disposition of a business, (iii) changes in tax or accounting regulations or
laws, (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and
annual earnings releases, or (v) other similar occurrences. In all other respects, Performance
Criteria shall be calculated in accordance with the Company’s financial statements, under generally
accepted accounting principles, or under a methodology established by the Committee prior to the
issuance of an Award which is consistently applied and identified in the audited financial
statements, including footnotes, or which is identified in the Compensation Discussion and
Analysis section of the Company’s annual report. However, to the extent Section 162(m) of the Code
is applicable, the Committee may not in any event increase the amount of compensation payable to an
individual upon the attainment of a Performance Goal.

ARTICLE 7

AWARD PERIOD; VESTING

     7.1 Award Period. Subject to the other provisions of this Plan, the Committee may, in its
discretion, provide that an Incentive may not be exercised in whole or in part for any period or
periods of time or beyond any date specified in the Award Agreement. Except as provided in the
Award Agreement, an Incentive may be exercised in whole or in part at any time during its term.
The Award Period for an Incentive shall be reduced or terminated upon Termination of Service. No
Incentive granted under the Plan may be exercised at any time after the end of its Award Period.
No portion of any Incentive may be exercised after the expiration of ten (10) years from its Date
of Grant. However, if an Employee owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes
of stock of the Company (or any parent or Subsidiary) and an Incentive Stock Option is granted to
such Employee, the term of such Incentive Stock Option (to the extent required by the Code at the
time of grant) shall be no more than five (5) years from the Date of Grant.

     7.2 Vesting. The Committee, in its sole discretion, may determine that an Incentive will be
immediately vested in whole or in part, or that all or any portion may not be vested until a date,
or dates, subsequent to its Date of Grant, or until the occurrence of one or more specified events,
subject in any case to the terms of the Plan. If the Committee imposes conditions upon vesting,
then, subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the
date on which all or any portion of the Incentive may be vested.

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ARTICLE 8

EXERCISE OR CONVERSION OF INCENTIVE

     8.1 In General. A vested Incentive may be exercised or converted, during its Award Period,
subject to limitations and restrictions set forth in the Award Agreement

     8.2 Securities Law and Exchange Restrictions. In no event may an Incentive be exercised or
shares of Common Stock be issued pursuant to an Award if a necessary listing or quotation of the
shares of Common Stock on a stock exchange or inter-dealer quotation system or any registration
under state or federal securities laws required under the circumstances has not been accomplished.

     8.3 Exercise of Stock Option.

     (a) In General. If a Stock Option is exercisable prior to the time it is vested, the
Common Stock obtained on the exercise of the Stock Option shall be Restricted Stock which is
subject to the applicable provisions of this Plan and the Award Agreement. If the Committee
imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may,
in its sole discretion, accelerate the date on which all or any portion of the Stock Option
may be exercised. No Stock Option may be exercised for a fractional share of Common Stock.
The granting of a Stock Option shall impose no obligation upon the Participant to exercise
that Stock Option.

     (b) Notice and Payment. Subject to such administrative regulations as the Committee
may from time to time adopt, a Stock Option may be exercised by the delivery of written
notice to the Committee setting forth the number of shares of Common Stock with respect to
which the Stock Option is to be exercised and the date of exercise thereof (the “Exercise
Date”) which shall be at least three (3) days after giving such notice unless an earlier
time shall have been mutually agreed upon. On the Exercise Date, the Participant shall
deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, payable as provided in the Award Agreement, which may provide for
payment in any one or more of the following ways: (a) cash or check, bank draft, or money
order payable to the order of the Company, (b) Common Stock (including Restricted Stock)
owned by the Participant on the Exercise Date, valued at its Fair Market Value on the
Exercise Date, and which the Participant has not acquired from the Company within six (6)
months prior to the Exercise Date, (c) by delivery (including by FAX or electronic
transmission) to the Company or its designated agent of an executed irrevocable option
exercise form together with irrevocable instructions from the Participant to a broker or
dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock
purchased upon exercise of the Stock Option or to pledge such shares as collateral for a
loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to
pay such purchase price, and/or (d) in any other form of valid consideration that is
acceptable to the Committee in its sole discretion. If shares of Restricted Stock are
tendered as consideration for the exercise of a Stock Option, a number of shares of Common
Stock issued upon the exercise of the Stock Option with an Option Price equal to the value
of Restricted Stock used as consideration therefor shall be subject to the same restrictions
and provisions as the Restricted Stock so tendered.

     (c) Issuance of Shares. Except as otherwise provided in Section 6.4 hereof
(with respect to shares of Restricted Stock) or in the applicable Award Agreement, upon
payment of all amounts due from the Participant, the Company shall cause certificates (or at
the Company’s discretion, uncertified shares) for the Common Stock then being purchased to
be delivered as directed by the Participant (or the person exercising the Participant’s
Stock Option in the event of his death) at its principal business office promptly after the
Exercise Date; provided that if the Participant has exercised an Incentive Stock Option,
the Company may at its option retain physical possession of any

13

 

certificate evidencing the shares acquired upon exercise until the expiration of the holding
 periods described in Section 422(a)(1) of the Code. The obligation of the Company to deliver
shares of Common Stock shall, however, be subject to the condition that, if at any time the
Committee shall determine in its discretion that the listing, registration or qualification
of the Stock Option or the Common Stock upon any securities exchange or inter-dealer
quotation system or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary as a condition of, or in connection with, the
Stock Option or the issuance or purchase of shares of Common Stock thereunder, the Stock
Option may not be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of any
conditions not reasonably acceptable to the Committee.

     (d) Failure to Pay. Except as may otherwise be provided in an Award Agreement, if the
Participant fails to pay for any of the Common Stock specified in such notice or fails to
accept delivery thereof, that portion of the Participant’s Stock Option and right to
purchase such Common Stock may be forfeited by the Company.

     8.4 Disqualifying Disposition of Incentive Stock Option. If shares of Common Stock acquired
upon exercise of an Incentive Stock Option are disposed of by a Participant prior to the expiration
of either two (2) years from the Date of Grant of such Stock Option or one (1) year from the
transfer of shares of Common Stock to the Participant pursuant to the exercise of such Stock
Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code,
such Participant shall notify the Company in writing of the date and terms of such disposition. A
disqualifying disposition by a Participant shall not affect the status of any other Stock Option
granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code.

ARTICLE 9

AMENDMENT OR DISCONTINUANCE

     Subject to the limitations set forth in this Article 9, the Board may at any time and
from time to time, without the consent of the Participants, alter, amend, revise, suspend or
discontinue the Plan in whole or in part; provided, however, that no amendment for which
stockholder approval is required either (i) by any securities exchange or inter-dealer quotation
system on which the Common Stock is listed or traded or (ii) in order for the Plan and Incentives
awarded under the Plan to continue to comply with Sections 162(m), 421, and 422 of the Code,
including any successors to such Sections, or other applicable law, shall be effective unless such
amendment shall be approved by the requisite vote of the stockholders of the Company entitled to
vote thereon. Any such amendment shall, to the extent deemed necessary or advisable by the
Committee, be applicable to any outstanding Incentives theretofore granted under the Plan,
notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such
amendment to the Plan, the holder of any Incentive outstanding under the Plan shall, upon request
of the Committee and as a condition to the exercisability thereof, execute a conforming amendment
in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding
anything contained in this Plan to the contrary, unless required by law, no action contemplated or
permitted by this Article 9 shall adversely affect any rights of Participants or
obligations of the Company to Participants with respect to any Incentive theretofore granted under
the Plan without the consent of the affected Participant.

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ARTICLE 10

TERM

     The Plan shall be effective from the date that this Plan is approved by the Board. Unless
sooner terminated by action of the Board, the Plan will terminate on May 28, 2018, but Incentives
granted before that date will continue to be effective in accordance with their terms and
conditions.

ARTICLE 11

CAPITAL ADJUSTMENTS

     If any dividend or other distribution (whether in the form of cash, Common Stock, other
securities or other property), recapitalization, stock split, reverse stock split, rights offering,
reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision,
repurchase or exchange of Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event affects the fair value of an Award, then the Committee shall adjust
any or all of the following so that the fair value of the Award immediately after the transaction
or event is equal to the fair value of the Award immediately prior to the transaction or event: (i)
the number of shares and type of Common Stock (or the securities or property) which thereafter may
be made the subject of Awards, (ii) the number of shares and type of Common Stock (or other
securities or property) subject to outstanding Awards, (iii) the number of shares and type of
Common Stock (or other securities or property) specified as the annual per-participant limitation
under Section 5.1 of the Plan, (iv) the Option Price of each outstanding Award, and (v) the
amount, if any, the Company pays for forfeited shares of Common Stock in accordance with
Section 6.4; provided however, that the number of shares of Common Stock (or other
securities or property) subject to any Award shall always be a whole number. Notwithstanding the
foregoing, no such adjustment shall be made or authorized to the extent that such adjustment would
cause the Plan or any Stock Option to violate Section 422 of the Code or Section 409A of the Code.
Such adjustments shall be made in accordance with the rules of any securities exchange, stock
market or stock quotation system to which the Company is subject.

     Upon the occurrence of any such adjustment, the Company shall provide notice to each affected
Participant of its computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.

ARTICLE 12

RECAPITALIZATION, MERGER AND CONSOLIDATION

     12.1 No Effect on Company’s Authority. The existence of this Plan and Incentives granted
hereunder shall not affect in any way the right or power of the Company or its stockholders to make
or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the
Company’s capital structure and its business, or any Change in Control, or any merger or
consolidation of the Company, or any issuance of bonds, debentures, preferred or preference stocks
ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights,
options or warrants to purchase same), or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.

     12.2 Conversion of Incentives Where Company Survives. Subject to any required action by the
stockholders and except as otherwise provided by Section 12.4 hereof or as may be required
to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, if
the Company shall be the surviving or resulting corporation in any merger, consolidation or
share exchange, any Incentive granted

15

 

hereunder shall pertain to and apply to the securities or rights (including cash, property, or
assets) to which a holder of the number of shares of Common Stock subject to the Incentive would
have been entitled.

     12.3 Exchange or Cancellation of Incentives Where Company Does Not Survive. Except as
otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A
of the Code and the regulations or other guidance issued thereunder, in the event of any merger,
consolidation or share exchange pursuant to which the Company is not the surviving or
resulting corporation, there shall be substituted for each share of Common Stock subject to the
unexercised portions of outstanding Incentives, that number of shares of each class of stock or
other securities or that amount of cash, property, or assets of the surviving, resulting or
consolidated company which were distributed or distributable to the stockholders of the Company in
respect to each share of Common Stock held by them, such outstanding Incentives to be thereafter
exercisable for such stock, securities, cash, or property in accordance with their terms.

     12.4 Cancellation of Incentives. Notwithstanding the provisions of Sections 12.2 and
12.3 hereof, and except as may be required to comply with Section 409A of the Code and the
regulations or other guidance issued thereunder, all Incentives granted hereunder may be canceled
by the Company, in its sole discretion, as of the effective date of any Change in Control, merger,
consolidation or share exchange, or any issuance of bonds, debentures, preferred or preference
stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any
rights, options, or warrants to purchase same), or of any proposed sale of all or substantially all
of the assets of the Company, or of any dissolution or liquidation of the Company, by either:

     (a) giving notice to each holder thereof or his personal representative of its
intention to cancel those Incentives for which the issuance of shares of Common Stock
involved payment by the Participant for such shares, and permitting the purchase during the
thirty (30) day period next preceding such effective date of any or all of the shares of
Common Stock subject to such outstanding Incentives, including in the Board’s discretion
some or all of the shares as to which such Incentives would not otherwise be vested and
exercisable; or

     (b) in the case of Incentives that are either (i) settled only in shares of Common
Stock, or (ii) at the election of the Participant, settled in shares of Common Stock, paying
the holder thereof an amount equal to a reasonable estimate of the difference between the
net amount per share payable in such transaction or as a result of such transaction, and the
price per share of such Incentive to be paid by the Participant (hereinafter the “Spread”),
multiplied by the number of shares subject to the Incentive. In cases where the shares
constitute, or would after exercise, constitute Restricted Stock, the Company, in its
discretion, may include some or all of those shares in the calculation of the amount payable
hereunder. In estimating the Spread, appropriate adjustments to give effect to the
existence of the Incentives shall be made, such as deeming the Incentives to have been
exercised, with the Company receiving the exercise price payable thereunder, and treating
the shares receivable upon exercise of the Incentives as being outstanding in determining
the net amount per share. In cases where the proposed transaction consists of the
acquisition of assets of the Company, the net amount per share shall be calculated on the
basis of the net amount receivable with respect to shares of Common Stock upon a
distribution and liquidation by the Company after giving effect to expenses and charges,
including but not limited to taxes, payable by the Company before such liquidation could be
completed.

     (c) An Award that by its terms would be fully vested or exercisable upon a Change in
Control will be considered vested or exercisable for purposes of Section 12.4(a)
hereof.

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ARTICLE 13

LIQUIDATION OR DISSOLUTION

     Subject to Section 12.4 hereof, in case the Company shall, at any time while any
Incentive under this Plan shall be in force and remain unexpired, (i) sell all or substantially all
of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each Participant shall
be entitled to receive, in lieu of each share of Common Stock of the Company which such Participant
would have been entitled to receive under the Incentive, the same kind and amount of any securities
or assets as may be issuable, distributable or payable upon any such sale, dissolution, liquidation
or winding up with respect to each share of Common Stock of the Company. If the Company shall, at
any time prior to the expiration of any Incentive, make any partial distribution of its assets, in
the nature of a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as such) and an
adjustment is determined by the Committee to be appropriate to prevent the dilution of the benefits
or potential benefits intended to be made available under the Plan, then the Committee shall, in
such manner as it may deem equitable, make such adjustment in accordance with the provisions of
Article 11 hereof.

ARTICLE 14

INCENTIVES IN SUBSTITUTION FOR

INCENTIVES GRANTED BY OTHER ENTITIES

     Incentives may be granted under this Plan from time to time in substitution for similar
instruments held by employees, consultants or directors of a corporation, partnership, or limited
liability company who become or are about to become Employees, Consultants or Outside Directors of
the Company or any Subsidiary as a result of a merger or consolidation of the employing corporation
with the Company, the acquisition by the Company of equity of the employing entity, or any other
similar transaction pursuant to which the Company becomes the successor employer. The terms and
conditions of the substitute Incentives so granted may vary from the terms and conditions set forth
in this Plan to such extent as the Committee at the time of grant may deem appropriate to conform,
in whole or in part, to the provisions of the Incentives in substitution for which they are
granted.

ARTICLE 15

MISCELLANEOUS PROVISIONS

     15.1 Investment Intent. The Company may require that there be presented to and filed with it
by any Participant under this Plan, such evidence as it may deem necessary to establish that the
Incentives granted or the shares of Common Stock to be purchased or transferred are being acquired
for investment and not with a view to their distribution.

     15.2 No Right to Continued Employment. Neither this Plan nor any Incentive granted under the
Plan shall confer upon any Participant any right with respect to continuance of employment by the
Company or any Subsidiary.

     15.3 Indemnification of Board and Committee. No member of the Board or the Committee, nor any
officer or Employee of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board and the Committee, each officer of the Company,
and each Employee of the Company acting on behalf of the Board or the Committee shall, to the
extent permitted by law, be fully indemnified and protected by the Company in respect of any such
action, determination or interpretation.

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     15.4 Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the
Committee shall be deemed to give any person any right to be granted an Award or any other rights
except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the
Committee and executed on behalf of the Company, and then only to the extent and upon the terms and
conditions expressly set forth therein.

     15.5 Compliance With Other Laws and Regulations. Notwithstanding anything contained herein to
the contrary, the Company shall not be required to sell or issue shares of Common Stock under any
Incentive if the issuance thereof would constitute a violation by the Participant or the Company of
any provisions of any law or regulation of any governmental authority or any national securities
exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted
or traded (including, without limitation, Section 16 of the 1934 Act and Section 162(m) of the
Code); and, as a condition of any sale or issuance of shares of Common Stock under an Incentive,
the Committee may require such agreements or undertakings, if any, as the Committee may deem
necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant
and exercise of Incentives hereunder, and the obligation of the Company to sell and deliver shares
of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.

     15.6 Tax Requirements. The Company or, if applicable, any Subsidiary (for purposes of this
Section 15.6, the term “Company” shall be deemed to include any applicable Subsidiary),
shall have the right to deduct from all amounts paid in cash or other form in connection with this
Plan, any Federal, state, local, or other taxes required by law to be withheld in connection with
an Award granted under this Plan. The Company may, in its sole discretion, also require the
Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of
any taxes that the Company is required to withhold in connection with the Participant’s income
arising with respect to the Award. Such payments shall be required to be made when requested by
the Company and may be required to be made prior to the delivery of any certificate representing
shares of Common Stock. Such payment may be made (i) by the delivery of cash to the Company in an
amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the
required tax withholding obligations of the Company; (ii) if the Company, in its sole discretion,
so consents in writing, the actual delivery by the exercising Participant to the Company of shares
of Common Stock that the Participant has not acquired from the Company within six (6) months prior
to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals
or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax
withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the
Company’s withholding of a number of shares to be delivered upon the exercise of the Stock Option,
which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the
required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may,
in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by
the Company to the Participant. The Committee may in the Award Agreement impose any additional tax
requirements or provisions that the Committee deems necessary or desirable.

     15.7 Assignability. Incentive Stock Options may not be transferred, assigned, pledged,
hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and
distribution and may be exercised during the lifetime of the Participant only by the Participant or
the Participant’s legally authorized representative, and each Award Agreement in respect of an
Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not
constitute a transfer of the Stock Option. The Committee may waive or modify any limitation
contained in the preceding sentences of this Section 15.7 that is not required for
compliance with Section 422 of the Code.

     Except as otherwise provided herein, Nonqualified Stock Options may not be transferred,
assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws
of descent and distribution. The Committee may, in its discretion, authorize all or a portion of a
Nonqualified Stock Option to

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be granted to a Participant on terms which permit transfer by such Participant to (i) the spouse
(or former spouse), children or grandchildren of the Participant (“Immediate Family Members”), (ii)
a trust or trusts for the exclusive benefit of such Immediate Family Members, (iii) a partnership
or limited liability company in which the only partners or members are (1) such Immediate Family
Members and/or (2) entities which are controlled by the Participant and/or Immediate Family
Members, (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the
Code or any successor provision, or (v) a split interest trust or pooled income fund described in
Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be
no consideration for any such transfer, (y) the Award Agreement pursuant to which such Nonqualified
Stock Option is granted must be approved by the Committee and must expressly provide for
transferability in a manner consistent with this Section, and (z) subsequent transfers of
transferred Nonqualified Stock Options shall be prohibited except those by will or the laws of
descent and distribution.

     Following any transfer, any such Nonqualified Stock Option shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer, provided that for
purposes of Articles 8, 9, 11, 13 and 15 hereof the term “Participant” shall be deemed to
include the transferee. The events of Termination of Service shall continue to be applied with
respect to the original Participant, following which the Nonqualified Stock Options shall be
exercisable or convertible by the transferee only to the extent and for the periods specified in
the Award Agreement. The Committee and the Company shall have no obligation to inform any
transferee of a Nonqualified Stock Option of any expiration, termination, lapse or acceleration of
such Stock Option. The Company shall have no obligation to register with any federal or state
securities commission or agency any Common Stock issuable or issued under a Nonqualified Stock
Option that has been transferred by a Participant under this Section 15.7.

     15.8 Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Incentives
granted under this Plan shall constitute general funds of the Company.

     15.9 Legend. Each certificate representing shares of Restricted Stock issued to a Participant
shall bear the following legend, or a similar legend deemed by the Company to constitute an
appropriate notice of the provisions hereof (any such certificate not having such legend shall be
surrendered upon demand by the Company and so endorsed):

On the face of the certificate:

“Transfer of this stock is restricted in accordance with
conditions printed on the reverse of this certificate.”

On the reverse:

“The shares of stock evidenced by this certificate are
subject to and transferable only in accordance with that
certain Parallel Petroleum Corporation 2008 Long-Term
Incentive Plan, a copy of which is on file at the principal
office of the Company in Midland, Texas. No transfer or
pledge of the shares evidenced hereby may be made except in
accordance with and subject to the provisions of said Plan.
By acceptance of this certificate, any holder, transferee or
pledgee hereof agrees to be bound by all of the provisions
of said Plan.”

     The following legend shall be inserted on a certificate evidencing Common Stock issued under
the Plan if the shares were not issued in a transaction registered under the applicable federal and
state securities laws:

19

 

“Shares of stock represented by this certificate have been
acquired by the holder for investment and not for resale,
transfer or distribution, have been issued pursuant to
exemptions from the registration requirements of
applicable state and federal securities laws, and may not
be offered for sale, sold or transferred other than pursuant
to effective registration under such laws, or in
transactions otherwise in compliance with such laws, and
upon evidence satisfactory to the Company of compliance with
such laws, as to which the Company may rely upon an opinion
of counsel satisfactory to the Company.”

     A copy of this Plan shall be kept on file in the principal office of the Company in Midland,
Texas.

***************

20exv10w1

 

EXHIBIT 10.1

LOAN AND SECURITY AGREEMENT

dated as of March 24, 2008

among

America’s Healthcare/Rx Plan Agency, Inc. and Access Plans USA, Inc., 
as Borrowers

and

CFG LLC,

as Lender and Secured Party

Loan No. 8005

 

 

LOAN AND SECURITY AGREEMENT

     THIS LOAN AND SECURITY AGREEMENT (the “Loan Agreement”) is made and entered into as of
March 24 , 2008 by and between America’s Healthcare/Rx Plan Agency, Inc., a Delaware corporation
(the “Borrower”), Access Plans USA, Inc., an Oklahoma corporation (the
“Co-Borrower”), and CFG LLC, a Delaware limited liability company (“CFG” or
“Lender”).

     WHEREAS, the parties desire to enter into this Loan Agreement to provide funds necessary to
provide working capital financing for the Borrower; and

     WHEREAS, the Borrower desires to secure all of the Obligations hereunder by granting to the
Lender, a first priority perfected security interest in the Collateral in accordance with the terms
hereof;

     NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants
herein contained, the Borrower, the Co-Borrower and the Lender agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.1. Certain Definitions. As used in this Loan Agreement and all incorporated
exhibits, the following terms have the following meanings:

     “Accounts Receivable” shall mean each and every account, receivable contract right,
and other rights of the Borrower, individually and collectively, to the payment of money, of every
nature, type and description, whether now owing to the Borrower, individually or collectively, or
hereafter arising, along with all moneys and other proceeds now or hereafter to become due thereon,
whether now owned or hereafter acquired, including without limitation, all of the right, title and
interest that the Borrower severally or jointly now has or may have in and to all accounts
receivable, all amounts payable but not already paid, and all moneys and all claims for all moneys
due or to become due for insurance and other products sold by the Borrower and the Borrower’s
agents, representatives, and/or employees. This definition includes the “Commission Rights” as that
term is defined herein, and specifically includes all commission books of business contributing to
the Commission Rights payments currently and in future.

     “ACH Debit” means, with respect to any payment hereunder, a wire transfer from the
Collections Account to the CFG Payment Account initiated by the Lender pursuant to the
authorization granted by the ACH Payment Withdrawal Authorization, and hereby expressly ratified by
the Borrower for all purposes (absent Lender’s fraud or willful misconduct).

     “ACH Payment Withdrawal Authorization” means the ACH payment withdrawal authorization
substantially in the form of Exhibit C hereto, and delivered by the Borrower to Lender on the date
hereof.

     “Affiliate” means, with respect to any Person, any other Person that directly
or indirectly through one or more intermediaries controls, is controlled by or is under common
control with such Person. For purposes of this definition, control of a Person means the power,
direct or indirect, to direct or cause the direction of the management and policies of such Person
whether by contract or otherwise and, in any event and without limitation of the foregoing, any
Person owning twenty-five percent (25%) or more of the voting securities of a second Person shall
be deemed to control that second Person.

Loan No. 8005

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     “Borrower” has the meaning set forth in the first paragraph hereof.

     “CFG Payment Account” means that certain bank account maintained by Lender and
referenced in Section 2.4 or any other bank account so designated in writing by the Lender.

     “CFG Service Fee” shall mean a fee of $25.00/month to cover the costs of processing
the loan payments. This fee is to be added to the Loan Payment and is to be included in the
Scheduled Payment.

     “Closing Date” shall mean the date hereof.

     “Co-Borrower” has the meaning set forth in the first paragraph hereof.

     “Collateral” shall mean all the Borrower’s right, title and interest in, to and under
the Borrower’s (i) Accounts Receivable, including, without limitation, Commission Rights (as more
fully described below), (ii) books and records of the Borrower relating to the Accounts Receivable,
(iii) moneys and deposits, including without limitation the property and assets of the Borrower,
(iv) all amendments, supplements, modifications, replacements, additions, accessions,
substitutions, products of any of the foregoing, and (v) proceeds of or relating to the items
described herein. This term specifically includes (x) Commission Rights and each and every
commission book of business related thereto with each and every insurance carrier (including
without limitation the Insurance Companies) with whom Borrower now has contracts or in future has
contracts, (y) all monies received with respect to each such commission book of business on and
after the date hereof or received as an advance payment of amounts which are due on or after the
date hereof, and (z) any property held by Borrower that secures any such commission book of
business. Such books of business are to be considered as assets of the Borrower that may be
liquidated upon the occurrence and during the continuation of a Default or Event of Default solely
at the option of CFG. This term specifically excludes any Excluded Commission Rights, for all
purposes.

     “Collections Account” means that certain bank account, numbered 1004233 maintained
with Trinity Bank, N.A. and subject to the ACH Payment Withdrawal Authorization, and into which all
receipts from the insurance carriers Commission Rights are received. CFG will hold an irrevocable
automatic assignment of the Loan Payment amount on this account.

     “Commission Rights” means all right, title and interest of Borrower or its
Affiliates in or to any commission payments or other compensation for the sale of insurance
policies, including but not limited to any right to receive first year, new, renewal, contingent or
override commission payments, coverage, bonuses, service fees or other similar payments;
provided that for purposes hereof “Commission Rights” shall be limited to compensation
payable on or after the date hereof in respect of the sale of insurance policies (issued before, on
and after the date hereof); and provided, further, that “Commission Rights” shall
include all Commission Rights of Borrower or any Affiliate of Borrower arising from or relating to
(i) any replacement or conversion of any of the policies described above whether such new policy is
written by the Insurance Company that issued the original policy or another insurance company and
whether issued on or after the date hereof, and (ii) the exercise of a policyholder option to
purchase additional coverage without evidence of insurability.

     “Default” means any breach of a term of this Loan Agreement or any of the Loan
Documents.

     “Event of Default” means any of the events specified in this Loan Agreement or any

Loan No. 8005

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of
the other Loan Documents, provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, have been satisfied. If more than one Shortfall event occurs
during the loan term, it may be declared as an Event of Default at the sole discretion of CFG.

     “Excluded Commission Rights” means none.

     “Insurance Company(ies)” means all or any insurers paying the commissions being
pledged, including without limitation, those insurers listed on Schedule 3.18 attached
hereto (as may be amended from time to time).

     “Insurance Contract(s)” means, with respect to any of the Commission Rights, all
contract(s) and agreement(s) between Borrower (and its Affiliates) and the applicable Insurance
Company which provide for or in any way address or affect such Commission Rights.

     “Insurance Policies” means all insurance policies the sale or renewal of which gave
rise to the Commission Rights. The term “Insurance Policy” means any of the Insurance
Policies, as the usage dictates.

     “Late Payment” means a Scheduled Payment that has not been received by 2:00 p.m.
(Delaware time) on the Payment Date.

     “Licenses” means all licenses, permits, certificates of authority, variances,
authorizations, approvals, registrations, franchises, orders and similar consents issued by any
governmental body or other Person.

     “Lien” shall mean any mortgage, deed of trust, deed to secure debt, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), or
preference, priority, or other security agreement or preferential
arrangement of any kind or nature whatsoever, including without limitation, any conditional
sale or other title retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement or completion of any
required action under the Uniform Commercial Code (other than any such financing statement filed
for informational purposes only) or comparable law of any jurisdiction to evidence any of the
foregoing.

     “Loan” means a loan made by CFG to the Borrower and the Co-Borrower on the date
hereof, and evidenced by the Promissory Note attached hereto as Exhibit A.

     “Loan Amortization” means standard amortization with daily interest computed using the
parameters contained in Section 2.4 hereof, and as may be amended from time to time in accordance
with the terms hereof.

     “Loan Documents” shall mean this Loan Agreement and its incorporated exhibits, any
financing statements, and all other documents, agreements and instruments or certificates delivered
in connection with this Loan (whether at, prior to or after the closing). All of the Loan Documents
are considered to be part of one and the same agreement. When referred to individually, the
referenced document is understood to be one of the Loan Documents.

     “Loan Payment” means the monthly payment amount specified by the Loan Amortization,
exclusive of the CFG Service Fee.

     “Obligations” means all loans, advances, debts, liabilities and obligations, for the
performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such
performance is then required or contingent, or such amounts are liquidated or determinable) owing
by the Borrower to Lender. This term includes all principal, interest (including all interest that
accrues after the commencement of any case or proceeding by or

Loan No. 8005

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against the Borrower in bankruptcy,
whether or not allowed in such case or proceeding), the CFG Service Fee, expenses, attorneys’ fees
and any other sum chargeable to Borrower under any Loan Document.

     “Payment Date” means the 1st day of each month beginning April 24, 2008 by which the
payment, plus the CFG Service Fee must be received.

     “Person” means any individual, corporation, partnership, limited liability company,
joint venture, association, joint stock company, trust, unincorporated organization or governmental
body, including any nation or government, any state or other political subdivision thereof, and any
agency, department or other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

     “Prime Interest Rate” shall mean the prime interest as set forth in the Wall Street
Journal. Changes in the Prime Interest Rate will be applied to the Loan Amortization schedule
beginning in the month following the change and will apply until a subsequent change occurs.

     “Requirements of Law” means any laws, statutes, regulations, rules, codes, by-laws,
guidelines, directives, standards, policies, orders, decrees or ordinances and other requirements
enacted, adopted, issued or promulgated by any Person that is a governmental body.

     “Scheduled Payment” means an automatic payment in the amount of the Loan Payment plus
the CFG Service Fee which is to be transferred to the CFG Payment Account from the Borrower’s
Collections Account each and every month of the loan term on or before the Payment Date. The
specification of this transfer shall be irrevocable.

     “Shortfall” means a payment that is a Late Payment and/or for which the amount
received is less than the payment due under the terms hereof.

     “Shortfall Penalty” means a penalty of 5% of the total Payment Amount due. Any
Shortfall event is subject to the Shortfall Penalty. This penalty is leveled on the Borrower and is
due immediately.

     “Solvent” means, with respect to any Person on a particular date, that on such date
(a) the fair market value of the property of such Person is greater than the total amount of its
liabilities, (b) the present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person neither believes nor reasonably should believe that it
will incur debts or
liabilities beyond its ability to pay as such debts and liabilities mature and (d) such Person
is not engaged in business or a transaction, and is not about to engage in business or a
transaction, for which its property would constitute an unreasonably small amount of capital.

     “UCC Financing Statements” means any or all Uniform Commercial Code financing
statements substantially in the form of Exhibit D hereto to be filed against the Borrower to
evidence and perfect the security interest granted to the Lender hereunder.

ARTICLE II

LOAN

     Section 2.1. Loan Amount. Borrower agrees that the principal amount of the Loan will
be $1,604,972.00. This Loan is a non-revolving loan, and no amount repaid with respect to the Loan
may be reborrowed.

     Section 2.2. Closing Date Distributions. If, and only if, all conditions for closing
set forth in Article III have been met, the closing will be executed by making distribution of all
funds as follows:

Loan No. 8005

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	CFG (Origination Fee)
	 	$	401,560.78	 
	Payoff of CFG Indebtedness
	 	 	115,470.00	 
	Payoff of Trinity Bank Indebtedness
	 	 	213,474.52	 
	Borrower
	 	 	874,466.70	 

     Section 2.3. Interest.

               (a) The principal amount outstanding on the Loan together with amortized interest shall accrue
interest at the initial rate of 10.25% per annum from the Closing Date. On subsequent dates
throughout the term of the Loan the annual amortized interest rate may be modified so as to
maintain the current annual interest rate as the greater of (x) five (5) percentage points above
the prime rate as defined in the Wall Street Journal as of the first publication day of the month,
and (y) 10%.

               (b) In no event shall the interest charged with respect to the notes (if any) or any other
obligations of Borrower under any Loan Document exceed the maximum amount permitted under the laws
of the State of Delaware or of any other applicable jurisdiction.

               (c) Notwithstanding anything to the contrary herein or elsewhere, if at any time
the rate of interest payable hereunder or under any note or other Loan Document (the “Stated
Rate”) would exceed the highest rate of interest permitted under any applicable Law to be
charged (the “Maximum Lawful Rate”), then for so long as the Maximum Lawful Rate would be
so exceeded, the rate of interest payable shall be equal to the Maximum Lawful Rate; provided, that
if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate, Borrower shall, to
the extent permitted by Law, continue to pay interest at the Maximum Lawful Rate until such time as
the total interest received is equal to the total interest which would have been received had the
Stated Rate been (but for the operation of this provision) the interest rate payable. Thereafter,
the interest rate payable shall be the Stated Rate unless and until the Stated Rate again would
exceed the Maximum Lawful Rate, in which event this provision shall again apply.

               (d) In no event shall the total interest received by the Lender exceed the amount which it
could lawfully have received had the interest been calculated for the full term hereof at the
Maximum Lawful Rate. If, notwithstanding the prior sentence, the Lender has received interest
hereunder in excess of the Maximum Lawful Rate, such excess amount shall be applied to the
reduction of the principal balance of the Loan or to other amounts (other than interest)
payable hereunder, and if no such principal or other amounts are then outstanding, such excess or
part thereof remaining shall be paid to Borrower. In computing interest payable with reference to
the Maximum Lawful Rate applicable to the Lender, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made.

               (e) In computing interest payable with reference to the Maximum Lawful Rate applicable to the
Lender, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided
by the number of days in the year in which such calculation is made.

     Section 2.4. Scheduled Repayments.

               (f) Loan Amortization. Principal and interest per the initial amortized interest rate shall
become due and payable in 36 monthly payments beginning on the first Payment Date of the month
following the date hereof each in the amount of $52,001.52, which includes the monthly CFG Service
Fee. The amount of the monthly payments and the final payment may be adjusted as a consequence of
the terms of this Loan Agreement allowing for fluctuation in the Prime

Loan No. 8005

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Interest Rate. Borrower
shall repay the Loan through scheduled payments on each Payment Date, each equal to the applicable
amount set forth in the loan parameters below (or, if less, the outstanding amount of the Loan):

	 	 	 	 	 
	Loan Parameters	 	 	 	 
	Loan Amount
	 	$	1,604,972.00	 
	Amortized Rate
	 	 	10.25%	 
	First Payment Date
	 	 	April 24, 2008	 
	Payment Amount
	 	$	51,976.52	 
	Service Fee (per month)
	 	$	25.00	 
	Applied to Loan
	 	$	52,001.52	 
	Payment Period
	 	Monthly	 
	Number of Payments
	 	 	36	 

          (b) Application of Collections. At any time and from time to time, (x) Borrower shall
pay (or cause to be paid), or (y) Lender may withdraw via an ACH Debit, amounts on deposit in the
Collection Account to make payments in satisfaction of the Obligations, to the extent then due and
payable. In the absence of a Default or Event of Default, any amounts in the Collections Account in
excess of the amounts required to satisfy the Obligations shall be retained by the Borrower; and

          (c) CFG Payment Account. All payments made in satisfaction of the Obligations
hereunder shall be made via wire transfer of immediately available funds to CFG at its notice
address contained in Section 9.7 of this Agreement or at such other location as CFG shall designate
in writing. Payments received by Lender at or prior to 2:00 p.m. (Delaware time) on any business
day shall be deemed received on such business day. Payments received after 2:00 p.m. (Delaware
time) on any business day or on any day not a business day shall be deemed to have been received on
the following business day.

     Section 2.5. Adjustments. In the event that the interest rate is modified due to a
change in the
prime interest rate, the amortization set forth in Section 2.4(a) will be modified to maintain
the same payment amount but with adjusted term and final payment per the new interest rate.

     Section 2.6. Disputes. All disputes regarding loan payment amounts, payment dates,
outstanding balances, interest paid and principal paid shall be resolved based upon the information
contained in the amortization schedule set forth in Section 2.4(a) or as it may be modified by the
consequences of the actual payments made and their respective payment dates, adjustments pursuant
to Section 2.5, and/or by subsequent agreement between CFG and the Borrower.

     Section 2.7. Prepayments. Payment and prepayments on the Loan shall be applied first
to late charges and other fees and penalties due hereunder, second to reimburse CFG for any costs
and/or expenses incurred by CFG hereunder or under any of the documents attached hereto, third to
accrued interest and the remainder to reduce the principal amount. The Loan may be prepaid in whole
or in part at any time without penalty and without consent of CFG. Any such prepayment shall not
reduce the amount of any regularly scheduled payment unless said prepayment reduces all outstanding

Loan No. 8005

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amounts owed (principal, interest, late fees, and any other charges payable under this Loan
Agreement) to $0.00.

     After deduction of late charges and other fees and penalties due and/or expenses incurred by
CFG, as described in the preceding paragraph, the residual amount will be applied to the Loan
Amortization schedule on the date of receipt, with the consequent modification of the succeeding
balances throughout the remaining term of the Loan Agreement, however as the Loan Agreement may be
modified by changes in the interest rate per changes in the prime interest rate.

     Section 2.8. Late Payment Penalty. Interest and penalties shall accrue on any
payment that is not received by the applicable Payment Date. In such a case, daily interest shall
accrue in the amount of the current annual interest rate from the original date said payment was
due until the date payment is received by CFG, irrespective of the date the Borrower transmitted
said payment. A Shortfall Penalty shall also be due and immediately payable for each Shortfall.

     Section 2.9. Use of Proceeds. The proceeds of the Loan shall be used solely for
business purposes and working capital needs of Borrower.

     Section 2.10. Joint and Several Liability. The Borrower and the Co-Borrower agree to
be jointly and severally liable to make the monthly payments required hereunder and CFG may seek to
collect said payments from either the Borrower or the Co-Borrower at CFG’s sole discretion.

ARTICLE III

CONDITIONS

     Section 3.1. Conditions to Obligation of Lender. The obligation of Lender to
consummate the transactions contemplated hereby is subject to the satisfaction of the following
conditions:

          (d) Representations and Warranties True. The representations and warranties of
Borrower hereunder shall be true and correct in all respects on the date hereof with the same
effect as if then made, and the Borrower shall have performed in all respects all obligations to be
performed by the Borrower hereunder on or prior to the date hereof.

          (e) Loan Documents. Each of the Borrower and Co-Borrower shall have delivered to
Lender this Loan Agreement (including Schedule 3.18 hereof) and each other Loan Document
requested by the Lender to be delivered on or before the date hereof, each such Loan Document shall
be duly executed by each party thereto.

          (f) ACH Payment Withdrawal Authorization. Borrower shall have delivered to the Lender
the ACH Payment Withdrawal Authorization, authorizing the Lender to initiate wire transfers from
the Collections Account to the CFG Payment Account at any time, and
from time to time, to satisfy the Obligations.

          (g) UCC Financing Statements. UCC Financing Statements, in form and substance
satisfactory to the Lender shall have been filed with the appropriate filing office of the State of
Utah.

ARTICLE IV

BORROWER REPRESENTATIONS AND WARRANTIES

     Section 4.1. Existence and Good Standing. Borrower is a corporation duly formed,
validly existing and in good standing under the laws of the State of Delaware, and is duly
qualified to do business in each jurisdiction in which the conduct of its business requires
qualification.

     Section 4.2. Power and Authority. The execution, delivery and performance under
the terms of this Loan Agreement and all other Loan Documents are within the power of the Borrower
and have been duly authorized by all necessary partner, member, manager, and/or shareholder action,
if necessary, are not in contravention of law or the terms of the Borrower’s Articles of
Incorporation or Bylaws (or similar governing documents) or any amendment thereto, or any
indenture, agreement, or

Loan No. 8005

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undertaking to which the Borrower is a party or by which the Borrower is
bound. The Borrower has the power to enter into, and to perform the Obligations hereunder and under
the other Loan Documents, and has taken all necessary legal action to authorize the execution,
delivery and performance of this Loan Agreement and the other Loan Documents to which it is a
party.

     Section 4.3. Binding Effect. This Loan Agreement and the other Loan Documents
constitutes the legal, valid and binding obligations of each of Borrower and Co-Borrower and each
is enforceable in accordance with its terms subject to applicable bankruptcy and insolvency laws
and laws affecting creditor’s rights and the enforcement thereof, generally, and subject to proper
filing and/or recordation of the security documents.

     Section 4.4. Material Contracts; No Liens. All contracts, agreements and general
business arrangements under which Borrower or Co-Borrower conducts business, with any and all
organizations, are in full force and effect. All sources of income to Borrower or Co-Borrower are
free and clear of all security interests, Liens, charges and encumbrances of others, and there have
been no material notices, orders, or other developments or correspondence in respect of the
Commission Rights and payments with respect thereto that have not been disclosed to CFG. Neither
Borrower nor Co-Borrower has sold, pledged, assigned or transferred any right, title or interest in
or to these sources of income and neither have they been levied upon, attached, foreclosed upon,
served, restricted, or subjected to garnishment or other legal process or proceedings, except as
disclosed in writing to CFG.

     Section 4.5. Creditor Matters. There are no attachments, executions, assignments for
the benefit of creditors, or voluntary proceedings in either bankruptcy or under any other debtor
relief laws contemplated by the Borrower or Co-Borrower, or pending or threatened against the
Borrower or Co-Borrower, or the Collateral, excepting those disclosed to CFG.

     Section 4.6. No Violation. The execution, delivery and performance of this Loan
Agreement, and all documents executed pursuant to this Loan Agreement, will not violate any
provision of any law or regulation or of any order or decree of any court or governmental
authority.

     Section 4.7. Governmental Authorization; No Contravention. The execution, delivery and
performance of this Loan Agreement by each of Borrower and Co-Borrower, and the consummation of the
transactions contemplated hereby will not require the consent, approval or authorization of any
Person of public authority which has not been obtained, will not violate, with or without the
giving of notice and/or the passage of time, any Requirements of Law applicable to the Borrower or
Co-Borrower, and will not conflict with or result in a Lien, breach or charge or encumbrance upon
any of the property or assets of the Borrower or Co-Borrower pursuant to any order, judgment,
award, decree, statute, ordinance, regulation or any other restriction of any kind or character, to
which the Borrower or Co-Borrower is a party, or by which the Borrower or Co-Borrower or any of the
assets or properties of the Borrower or CoBorrower may be bound.

     Section 4.8. Judgments. Each of Borrower and Co-Borrower has sufficient
property or assets to satisfy any judgment, award, or decree currently outstanding against the
Borrower or Co-Borrower, except as proceeds of this loan transaction may be used to satisfy any
such judgment, award, or decree and where such application of the Loan proceeds has been approved
by CFG.

     Section 4.9. Tax Matters. There are no federal, state, or municipal tax Liens
outstanding against Borrower or Co-Borrower that have not been made known to CFG, and neither
Borrower nor Co-Borrower has knowledge that procedures to file a federal, state, or municipal Lien
are contemplated by any taxing authority.

     Section 4.10. Full Disclosure. None of the information and/or documents furnished or
to be furnished by the Borrower or Co-Borrower to CFG or any of its representatives in connection
with the execution, delivery and closing of this Loan Agreement is false or misleading or contains
any

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untrue statement of a material fact or omits to state
any material fact required to be stated
to make the statements therein not misleading.

     Section 4.11. No Defaults. Neither Borrower nor Co-Borrower is in default in the
payment or performance of any obligations or any of the covenants or conditions to be performed
pursuant to the terms and provisions of any mortgage, indenture, instrument, security agreement,
contract, agreement or other undertaking to which it is a party or by which it may be bound, except
as disclosed to CFG.

     Section 4.12. Bulk Transfer. The transfer, assignment and conveyance of the Collateral
by Borrower and Co-Borrower pursuant to this Loan Agreement is not subject to the Uniform
Commercial Code bulk transfer provisions or any similar statutory provisions in effect in any
applicable jurisdiction.

     Section 4.13. Solvency. Each of Borrower and Co-Borrower is and after giving effect to
the transactions contemplated by this Loan Agreement will be, Solvent.

     Section 4.14. Fairness of Consideration. Each of Borrower and Co-Borrower
acknowledges that the Loan it will receive under this Loan Agreement constitutes reasonably
equivalent value, as such term is used in section 548 of the United States Bankruptcy Code, 11
U.S.C. § 101 et seq. and as such term is used in sections 4 and 5 of the Uniform Fraudulent
Transfer Act, in exchange for the security interest granted to the Lender in all of the Collateral.

     Section 4.15. Creditors. Neither Borrower nor Co-Borrower is not assigning an interest
in the Collateral to Lender with any intent to hinder, delay or defraud any of Borrower’s or
CoBorrower’s creditors.

     Section 4.16. Collateral. Borrower or Co-Borrower is the sole and absolute
owner of, and has the power to transfer, the Collateral, (b) none of the Collateral constitutes, or
is the proceeds of, “farm products” as defined in §9.1-102(a)(34) of the Uniform Commercial Code of
the State of New York, (c) none of the account debtors or other persons obligated on any of the
Collateral is a governmental authority subject to the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such Collateral, (d) neither Borrower nor
CoBorrower holds any commercial tort claim except as disclosed to the Lender, (e) each of the
Borrower and the Co-Borrower has at all times operated its business in compliance with all
applicable provisions of the federal Fair Labor Standards Act, as amended, and with all applicable
provisions of federal, state and local statutes and ordinances dealing with the control, shipment,
storage or disposal of hazardous materials or substances, and (f) all other information disclosed
to the Lender pertaining to the
Collateral is accurate and complete in all material respects.

     Section 4.17. Operation. (a) each of Borrower and Co-Borrower is and has been at all
times in compliance with all Requirements of Law regulating the practices of selling insurance
products sold by Borrower or Co-Borrower, including but not limited to applicable Requirements of
Law regulating advertisements or illustrations, requiring mandatory disclosure of policy
information, requiring disclosure of information regarding commissions or other compensation
payable to the Borrower, Co-Borrower or their producers in connection with the sale of insurance
policies, prohibiting the use of unfair methods of competition and deceptive acts or practices and
regulating replacement transactions.

     (b) either Borrower or Co-Borrower is and has been at all times duly appointed by the
appropriate insurance carrier(s) to act as an agent, broker or producer for such insurance carrier
with respect to the sale of the Insurance Policies and duly licensed as an insurance agent, broker
or producer for the sale of the Insurance Policies in the particular jurisdictions in which
Borrower or Co-Borrower, as the case may be, wrote, sold or produced such business. At the time
that each Insurance Policy was marketed and issued, the agent or producer who marketed such
Insurance

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Policy was duly licensed by the appropriate Persons in all states in which the owner of
the policy resided and all states in which the coverage was marketed.

     (c) either Borrower or Co-Borrower was duly appointed by the appropriate insurance carrier to
act as a producer, agent or broker for all business written, sold or produced by Borrower or
Co-Borrower, as the case may be.

     (d) neither Borrower nor Co-Borrower is not involved in any material dispute with any agent,
broker, producer or other Person involving the Insurance Policies or the Commission Rights.

     Section 4.18. Regulatory Filings. Each of Borrower and Co-Borrower has timely filed,
or caused to be timely filed, all reports, statements, documents, registrations, filings or
submissions required to be filed by Borrower or Co-Borrower with any Person in connection with
Borrower’s or Co-Borrower’s business. All such registrations, filings and submissions were in
compliance with all Requirements of Law when filed or as amended or supplemented, and no
deficiencies have been asserted by any such Person with respect to such registrations, filings or
submissions.

     Section 4.19. Commission Rights. Schedule 3.18 contains (i) a true,
correct and complete list of all Insurance Companies together with a summary list of the Insurance
Policies issued by each Insurance Company, and (ii) a listing of commission rates payable to
Borrower by each Insurance Company. The obligations of each Insurance Company in respect of the
Commission Rights are in full force and effect. None of the Commission Rights is, or will be,
subject to any right of set off, rescission, counterclaim, dispute, adverse claim or defense (other
than (1) insurance company rights commonly found in agency agreements permitting rescission or
suspension of the payment of commissions, none of which have been asserted by any Insurance
Company, or (2) a defense that any commission payment is not owed because the underlying Insurance
Policy is no longer in force or any premiums due in respect of such policy have not been paid),
whether arising in connection with the underlying Insurance Policy, the Insurance Contract(s) or
otherwise. All Commission Rights are fully and freely transferable and assignable with the consent
of the Insurance Company(ies), subject to standard restrictions and conditions imposed by the
Insurance Company(ies) and Insurance Contract(s). No Insurance Company or other Person has alleged
in any proceeding or otherwise alleged in writing, that any Commission Rights are illegal or
unenforceable.

     Section 4.20. Insurance Contract(s) and Insurance Policies. Borrower has delivered or
caused to be delivered to Lender or to Lender’s representative a true, correct and complete copy of
each Insurance Contract. Each Insurance Contract and each of the underlying Insurance Policies is
in full
force and effect and constitutes a legal, valid and binding agreement of the respective
Insurance Company(ies), underwriters, brokers, agencies or insured parties thereto, enforceable in
accordance with its terms. Neither Borrower, Co-Borrower nor any other party to an Insurance
Contract, is in violation or breach of or default under such Insurance Contract and no condition
exists or event has occurred and is continuing that with notice or lapse of time or both, would be
a violation or breach of or default under such Insurance Contract or would impair the vesting of
the Commission Rights. To the knowledge of Borrower, there is no existing default under the terms
of the underlying Insurance Policies and no condition exists or event has occurred and is
continuing that with notice, the lapse of time or both would constitute such a default. The
Insurance Contract(s) have not been amended or modified and will not be amended or modified without
the prior written consent of Lender. Neither Borrower nor Co-Borrower has not and will not waive or
otherwise surrender any rights it has under the Insurance 

Contract(s).

     Section 4.21. No Advances, Loan or Extensions. Borrower and Co-Borrower have disclosed
in writing to Lender all advances, loans, or extensions of credit by any Insurance Company(ies) to
Borrower or Co-Borrower.

     Section 4.22. Payments to Collections Account. Each of Borrower and Co-Borrower has

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instructed and will instruct each insurance carrier making any payments with respect to the
Commission Rights and proceeds therefrom to fund any such payments to the Collections Account.

ARTICLE V

COVENANTS

     The Borrower and Co-Borrower jointly and severally covenant and agree that, until the
Obligations hereunder are paid in full, it will do the following, unless specifically waived in
writing by CFG:

     Section 5.1. Maintain Existence. The Borrower shall do, or cause to be done, all
things necessary to preserve, renew and keep in full force and effect Borrower’s corporate
existence (or other organizational existence), along with all rights, licenses and permits. The
Borrower shall at all times maintain, preserve and protect all franchises and trade names and
preserve all Collateral, subject to the right to make reasonable termination of the foregoing
consistent with the best interest of CFG, and from time to time to make, or to cause to be made,
all needful and proper repairs, renewals, replacements, betterments and improvements thereto, so
that the business carried on and in connection therewith may be conducted as presently conducted.

     Section 5.2. [Intentionally omitted]

     Section 5.3. Inspections. Upon reasonable advance notice, the Borrower shall allow any
representative of CFG to visit and inspect any of the properties of the Borrower, the books of
account and other records and files of the Borrower relating to this Loan Agreement, to inspect and
make audits (at CFG’s expense), and to discuss the affairs, business, finances, and accounts that
relate to this Loan Agreement, with the chief financial officer (or similar officer) and members of
senior management, all at such reasonable times and as often as CFG may request, provided,
however, that prior to a Default hereunder, CFG shall not make any such inspection visit
more frequently than twice in each calendar year.

     Section 5.4. Payment and Performance of Obligations. The Borrower shall make full and
timely payments on this Loan Agreement and all other Obligations under the Loan Documents, whether
now existing or hereafter arising and shall duly comply with all terms and covenants contained in
each of the instruments and documents given to CFG pursuant to the Loan Documents at all times and
places in the manner set forth herein. The Borrower shall timely perform all of its
obligations with respect to all other outstanding indebtedness.

     Section 5.5. Notice of Changes. The Borrower shall notify CFG immediately of any
change in the name of the Borrower, the principal place of business of the Borrower, the office
where the books and records of the Borrower are maintained, or any change in the registered agent
for Borrower, or the residence of the Co-Borrower.

     Section 5.6. Production and Tax Reports. The Borrower shall provide CFG with
quarterly production report information suitably describing the then current state of the
commissions book, and renewal and first year commissions receipts for that period. In addition,
Borrower will annually deliver a copy of the Borrower’s tax report, and such financial information
and data as CFG may from time to time request.

     Section 5.7. Protection of Collateral. Each of Borrower and Coi-Borrower agrees to
safeguard the Collateral at all times. Each of Borrower and Co-Borrower agrees to immediately
execute and deliver all documents, including any financing statements, including without
limitation, all documents deemed by CFG to be necessary to protect the interests of CFG in any
Collateral or to accomplish the intent of this Loan Agreement.

     Section 5.8. No Distributions or Assignments. Neither Borrower nor Co-Borrower shall
distribute or assign any policies now in force, or that become in force due to future sales, agency

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and/or book acquisitions or as the result of any other form of acquisition, and/or new
appointments. Any such distributions or assignments will not be made to other agents, agencies or
entities without CFG approval in writing.

     Section 5.9. Books and Records Marked. Each of Borrower and Co-Borrower shall, at its
own expense, indicate in its books and records that a security interest in the Collateral have been
granted to Lender pursuant to this Loan Agreement.

     Section 5.10. Name Change. If the Borrower makes any change in its name,
identity or corporate structure that would make any financing statement or continuation statement
filed in accordance herewith seriously misleading within the applicable provisions of the Uniform
Commercial Code or any title statute, the Borrower shall give Lender written notice thereof at
least forty-five (45) days prior to such change.

     Section 5.11. Other Liens or Interests. Except pursuant to this Loan Agreement,
neither Borrower nor Co-Borrower has nor shall sell, pledge, assign or transfer to any Person, or
grant, create, incur, assume, or suffer to exist any Lien on, or any interest in, to or under the
Collateral, and each of Borrower and Co-Borrower shall defend the right, title and interest of
Lender in, to and under the Collateral against all claims of third parties claiming through or
under Borrower or Co-borrower.

     Section 5.12. Maintenance of Insurance Policies. Neither Borrower, Co-Borrower nor any
Affiliate of Borrower or Co-Borrower shall, directly or indirectly, (i) engage in any effort to
induce any Person to surrender, convert, replace, lapse or forfeit any Insurance Policy, (ii)
encourage any agent or other Person to engage in such efforts or activities, (iii) discuss any such
efforts or activities with any agent or other Person, or (iv) breach or permit the occurrence of a
breach with respect to any agreement with any Insurance Company(ies) that could result in the
impairment of Lender’s receipt of the payments on account of the Collateral.

     Section 5.13. Maintenance of Insurance Contract(s). Neither Borrower nor Co-Borrower
shall amend or modify any Insurance Contract without prior written consent of Lender. Neither
Borrower nor Co-Borrower shall waive or otherwise surrender any rights it has under any Insurance
Contract.

     Section 5.14. Further Assurance. Each of Borrower and Co-Borrower shall take all
actions and execute and deliver all documents reasonably requested by Lender, including execution
and delivery of any additional documents required to maintain the perfection of the security
interest
granted to Lender, including in Collateral arising under any replacement or conversion
policies. At Lender’s request, each of Borrower and Co-Borrower shall obtain from the Insurance
Company(ies) and deliver to Lender at such intervals as Lender may reasonably require, current
listings of the in-force Insurance Policies issued by the Insurance Company(ies), the most recent
commission statements relating to the Collateral in respect of such Insurance Company(ies) and such
other information regarding such Insurance Policies and Collateral as Lender may reasonably
require. In the event that, after the date hereof, any Insurance Company fails to pay Lender any of
the compensation attributable to the Collateral on the grounds that Lender does not hold the
Licenses required by a particular state as a condition of the receipt of such compensation, each of
Borrower and Co-Borrower, at Lender’s written request, shall use its best efforts to collect such
compensation from the Insurance Company and shall promptly remit the amounts collected to Lender or
its designee and shall take any other actions that Lender may reasonably request in order to give
Lender the full benefit of its bargain hereunder.

     Section 5.15. Regulatory Compliance. Each of Borrower and Co-Borrower shall at all
times comply with all Requirements of Law, including, but not limited to, laws, regulations,
directives and opinions of Governmental Bodies relating to advertising, licensing and sales
practice.

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     Section 5.16. Payments to Collections Account. Each of Borrower and Co-Borrower shall
instruct each new insurance carrier making any payments with respect to the Commission Rights and
proceeds therefrom to fund any such payments to the Collections Account.

     Section 5.17. Insurance Company Statements. Promptly upon request therefore,
each of Borrower and Co-Borrower shall provide to CFG copies of all monthly commission statements
Borrower or Co-Borrower receives from each Insurance Company indicating the amount of payments made
with respect to the applicable Commission Rights.

ARTICLE VI

COLLATERAL MATTERS

     Section 6.1. Grant of Security Interest. Each of Borrower and Co-Borrower hereby
grants to the Lender, as secured party (in such capacity, “Secured Party”) a security
interest in the Collateral to secure the payments due per the Loan Documents and the performance in
full of all of the Obligations, and so pledges and assigns to Lender such Collateral, wherever
located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.

     Section 6.2. Filings. Each of Borrower and Co-Borrower hereby irrevocably authorizes
CFG to, from time to time, file any initial financing statements or amendments thereto (including
financing statements identifying the Collateral as “all assets” or words of similar effect), and
appoint CFG as their attorney-in-fact to file such financing statements or other such instruments
on behalf of the Borrower or Co-Borrower. Each of Borrower and Co-Borrower further ratifies and
confirms the prior filing by Lender of any financing statements which identify Lender as secured
party. Each of Borrower and Co-Borrower shall cooperate fully with Lender in connection with the
rights set forth above and shall execute any and all documents reasonably required to fulfill the
intent of this Section.

     Section 6.3. Location of Collateral. Each of Borrower and Co-borrower shall keep the
Collateral separate and identifiable and at the address of Borrower, as set forth herein, and
neither Borrower nor Co-Borrower shall remove the Collateral from that address without the prior
written consent of the Secured Party.

     Section 6.4. Exercise of Remedies. Should Borrower or Co-Borrower be in default under
the Loan Documents, then the Secured Party may exercise any of the remedies hereunder and the
documents attached thereto. In addition, upon the occurrence and during the continuation of a
Default or Event of Default, each of Borrower and Co-Borrower agrees to assemble the
Collateral and make it available to the Secured Party at a place designated by the Secured Party
that is reasonably convenient to all parties. Unless the Collateral threatens to decline speedily
in value or is of a type customarily sold on a recognizable market, the Secured Party shall give
Borrower and Co-Borrower reasonable notice of the time and place of any public sale of the
Collateral or of the time at which any private sale or any other intended disposition of the
Collateral will be made. The requirement of reasonable notice shall be met if the notice is mailed,
postage prepaid, to the address of Borrower, at least ten (10) days prior to the time of the sale
or disposition. Each of Borrower and Co-Borrower agree to be jointly and severally responsible for
the Secured Party’s expenses incurred in retaking, holding, preparing for sale, and/or selling, or
the like, the Collateral, which expenses shall include reasonable attorney’s fees and legal
expenses incurred by the Secured Party.

     Section 6.5. Notification to Account Debtors and Other Persons Obligated on
Collateral. If an Event of Default shall have occurred and be continuing, each of Borrower and
Co-Borrower shall, at the request of Lender, notify account debtors and other persons obligated on
any of the Collateral of the security interest of Lender in any account, chattel paper, general
intangible, instrument or other Collateral and that payment thereof is to be made directly to
Lender or to any financial institution designated by Lender, and Lender may itself, if a Default or
an Event of Default shall

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have occurred and be continuing, without notice to or demand upon the
Agency, so notify account debtors and other persons obligated on Collateral.

     Section 6.6. Assignments and Redirections. In furtherance of the foregoing, upon the
occurrence and during the continuation of a Default or Event of Default, each of Borrower and
Co-Borrower shall immediately assign and redirect (“Assignment and Redirection
”) any and
all incomes from all Commission Rights and payments with respect thereto and any additional sources
of income, to the Collections Account by means of instructions to the insurance carriers or other
payors providing these income sources. Any such assignments and redirections shall be considered as
irrevocable and shall continue until the Default or Event of Default is cured to the satisfaction
of CFG. Without in any way limiting the respective obligations of Borrower and CoBorrower set forth
above, CFG, in its sole discretion, may exercise such Assignment and Redirection rights by
negotiating and entering into assignment agreements directly with any such insurance carrier or
other payor on behalf of Borrower and Co-Borrower pursuant to the Contingent Power of Attorney
described in Section 6.7.

     Section 6.7. Contingent Power of Attorney. Each of Borrower and Co-Borrower has on and
as of the date hereof executed and delivered to CFG a contingent power of attorney, which is
attached hereto as Exhibit B and is coupled with an interest. Upon the occurrence and during the
continuation of a Default or Event of Default, CFG at its option may invoke and exercise the
Contingent Power of Attorney contained in Exhibit B and CFG shall have the rights and powers
specified therein.

ARTICLE VII

SHORTFALLS; EVENTS OF DEFAULT

     Section 7.1. Shortfall Event.

          (e) In any payment month for which the Loan Payment is received at the CFG Payment Account
later than the Payment Date, or is less than the payment amount due under the terms of this Loan
Agreement, CFG will have the option to declare a Shortfall. If more than one Shortfall has occurred
and been declared by CFG during the term of the Loan, CFG has the option, at its sole discretion,
to declare a Default. If a Shortfall is declared, all available cash then and subsequently received
shall be distributed as follows: first to cover any and all penalties and incurred
expenses, second to accrued interest and finally to Loan principal. This
distribution priority shall obtain until such Shortfall has been cured to the satisfaction of CFG.

          (f) On receipt of a payment after declaration of a Shortfall the loan amortization schedule
will be modified by insertion of the actual payment date and payment amount into the schedule in
the proper date sequence with daily interest computed from the date of the last payment. If the
payment received is less than the interest due, then the unpaid interest due will be added to the
Loan balance calculated at the Payment Date. The next interest will be calculated on this adjusted
balance amount.

     The consequent adjustment in the outstanding balance for that date, and all
subsequent outstanding balances will then apply for the remainder of the term of this Loan
Agreement, with any changes in the loan interest rate due to changes in the Prime Interest Rate
incorporated in the modified amortization schedule.

          (g) Notwithstanding the foregoing, if the Shortfall Penalty and the Shortfall Amount have not
been received by the close of business on a date specified in a formal communication from CFG to
Borrower, then CFG may at its discretion declare a Default.

     Section 7.2. Default. The Borrower and the Co-Borrower, jointly and severally, shall
be in default if any of the following events occurs:

          (h) the Borrower creates more than one Shortfall event during the term of

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the Loan, and CFG
elects to declare a Default rather than a Shortfall. If CFG has declared a Shortfall and determines
that the Shortfall is not being cured to CFG’s satisfaction, then CFG may declare a Default;

          (b) any representation made by the Borrower herein or in any certificate, financial or other
statement furnished at any time under or in connection with this Loan Agreement is untrue or
becomes untrue in any material respect, or if the Borrower fails to disclose any material fact to
CFG, and CFG suffers or may suffer a loss due to said falsehood and/or nondisclosure;

          (c) the Borrower fails to obtain and maintain the insurance policy required by the terms of
this Loan Agreement;

          (d) the Borrower makes or has made a false or misleading statement to CFG or its
representatives;

          (e) the Borrower is dissolved and/or the Co-Borrower is dissolved;

          (f) a petition or complaint under any Federal or State bankruptcy or insolvency laws is filed
by or against the Borrower, or if the Borrower is unable to pay its debts as they become due, or if
the Borrower admits either orally or in writing that it is unable to pay its debts as they become
due;

          (g) CFG believes in good faith that the prospect of payment or performance hereunder is
impaired, or a material, adverse change has occurred in the Borrower’s financial condition;

          (h) the Borrower fails to perform any duty or obligation set forth in this Loan Agreement
and/or the other Loan Documents; or

          (i) the Borrower undertakes to modify the irrevocable payment delivery arrangements required
herein or undertakes to divert designated payments from the Collections Account.

ARTICLE VIII

REMEDIES

     Section 8.1. Generally. In the event that of a default under any Loan Document,
the Borrower and the Co-Borrower each agree to be jointly and severally liable to CFG for all costs
and expenses incurred by CFG in collecting, with or without litigation, the amount owed under this
Loan Agreement and/or in disposing of the Collateral as that term is defined herein, including
reasonable attorney’s fees and court costs.

     In the event of a Default under this Loan Agreement or the other Loan Documents, CFG shall
have the right to accelerate and declare all Obligations hereunder immediately due and payable in
full without demand or notice. CFG shall have all rights and remedies available under applicable
law, including the right to liquidate any and all collateral and assets. CFG shall have the right,
immediately and without further notice or action, to set off against this Loan Agreement any and
all money owed, whether or not due, by CFG to the Borrower. CFG shall not be deemed to have waived
any of its rights or remedies unless done so in a signed and dated writing, nor shall any act,
delay or omission be deemed to be a waiver of any of CFG’s rights or remedies of any kind.

     Each of the Borrower and the Co-Borrower waives presentment, demand, protest, notice of
dishonor and all defenses based on suretyship or impairment of Collateral. Each of the Borrower and
the Co-Borrower waives the benefit of all homestead and other exemptions to the fullest extent
permitted by law.

     If any Default or Event of Default shall occur then without any request or the taking of any
other action by Lender, (i) Borrower shall immediately comply with the provisions of Section 6.6

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with respect to the Assignments and Redirections, (ii) Lender shall, at its option, invoke and
exercise the Contingent Power of Attorney referenced at Section 6.7, and (iii) Lender may invoke
and exercise the confession of judgment rights referenced at Section 8.2 below.

     Section 8.2. Confession of Judgment. In the event of any Default or Event of Default
under this Loan Agreement, including without limitation, any payment under this Loan Agreement not
being paid when due, whether at maturity by acceleration or otherwise, each Borrower hereby
irrevocably appoints and constitutes CFG as Borrower’s duly appointed attorney-at-law to appear in
open court in the Superior Court for the City of Wilmington, Delaware, or in any other court of
competent jurisdiction, and to confess judgment pursuant to the provisions of Title 10 Section 4732
of the Delaware Code, as amended, against Borrower for all principal and interest and any other
amounts due and payable under this Loan Agreement, together with attorney’s fees and collection
fees as provided in this Loan Agreement (to the extent permitted by law). This power of attorney is
coupled with an interest and may not be revoked and/or terminated by the Borrower. This power of
attorney shall not be revoked and/or terminated by virtue of the death, disability and/or
dissolution of the Borrower. No single exercise of the power to confess judgment shall be deemed to
exhaust the power and no judgment against the Borrower shall bar subsequent action or judgment
against such entity against whom the judgment has not been obtained in this Loan Agreement.

ARTICLE IX

GENERAL

     Section 9.1. Time of the Essence. Time is of the essence in connection with the
performance of each of the terms and conditions of this Loan Agreement and all other Loan
Documents.

     Section 9.2. Confidentiality. Borrower shall not disclose the terms of this
Loan Agreement or the other Loan Documents; provided, however, that the foregoing
shall not preclude communications or disclosures necessary to implement the provisions of this Loan
Agreement or to comply with applicable law or the rules or regulations of a national or foreign
stock exchange or self-regulatory organization.

     Section 9.3. Indemnification by Borrower. Borrower shall protect, defend, indemnify
and hold Lender and its assigns and their officers, directors and agents harmless from and against
all losses and expenses of every kind and character resulting from or relating to or arising out of
(i) the inaccuracy, nonfulfillment or breach of any representation, warranty, covenant or agreement
made by Borrower in this Loan Agreement or (ii) any set off, counterclaim, defense or contractual
exclusion asserted by any Insurance Company(ies) with respect to any payment otherwise due Lender
on the Commission Rights.

     Section 9.4. Severability. Any provision of this Loan Agreement which is prohibited by
law or otherwise unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability shall not invalidate or render unenforceable
such provision in any other jurisdiction.

     Section 9.5. Payment of Expenses. Borrower and CFG each agree to pay its own costs and
expenses in connection with the preparation, execution and delivery of this Loan Agreement,
including, without limitation, attorneys and accounting fees. Borrower agrees to pay the reasonable
expenses of CFG (including reasonable attorney’s fees) in connection with the enforcement of the
rights of CFG under this Loan Agreement. CFG agrees to pay the reasonable expenses of Borrower
(including reasonable attorney’s fees) in connection with the enforcement of the rights of Borrower
under this Loan Agreement.

     Section 9.6. Survival; Liabilities After Termination. The respective representations,
warranties, covenants and obligations by each of the parties hereto set forth in or made pursuant
to

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this Loan Agreement and each other Loan Document shall remain in full force and effect until the
repayment in full of the Loan, and the termination of the Loan Documents, except for provisions
which by the their terms survive the termination. Upon termination of the Loan Documents, no party
hereto shall thereafter have any further liability or obligation hereunder; provided,
however, that such termination shall not relieve any party of (a) any liability arising
pursuant to Section 9.2 hereof, (b) for any breach of this Loan Agreement prior to the date of such
termination or (c) for fraud.

     Section 9.7. Notices. All notices, consents, requests and demands to or upon the
respective parties hereto to be effective shall be made in writing and delivered by hand delivery,
US Mail, facsimile, or recognized delivery service and, unless expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, deposited in the US Mail, postage
prepaid, or sent via facsimile, or recognized delivery service to the addresses or facsimile
numbers set forth below, or to such addresses and facsimile numbers as may be hereafter notified by
the Borrower or CFG or any future assignee of this Loan Agreement:

	 	 	 	 	 
	 	 	To Borrower:
	 

	 	 	 	America’s Healthcare/Rx Plan Agency,
	 

	 	 	 	Inc. 4929 W. Royal Lane Irving, TX 75063
	 

	 	 	 	Attn: Ian Stewart
	 	 	To CFG:
	 

	 	 	 	CFG
	 

	 	 	 	415 4th St. 
	 

	 	 	 	NE Suite 4
	 

	 	 	 	Charlottesville, VA 22902
	 

	 	 	 	ATTN: Mark Cohen
	 

	 	 	 	with a copy to:
	 

	 	 	 	Daniel G. Schmedlen, Jr., Esq.
	 

	 	 	 	33 North Central Avenue, Suite 317
	 

	 	 	 	Medford, OR 97501

     Section 9.8. Further Assurances. Borrower and CFG shall each execute and deliver any
additional documents and instruments and perform any additional acts that may be necessary or
appropriate to effectuate and perform the provisions of this Loan Agreement and the transactions
contemplated hereby.

     Section 9.9. Amendments. The provisions of this Loan Agreement and the other Loan
Documents may only be amended, supplemented, waived or changed in a writing signed by the Borrower
and CFG.

     Section 9.10. Third Parties; Successors and Assigns. The agreements contained in the
Loan Documents shall be binding upon and inure to the benefit of the parties hereto and thereto and
to their respective permitted successors, assigns, heirs, executors, administrators and legal
representatives and are not for the benefit of any third parties.

     Section 9.11. Assignment. Neither the Borrower nor the Co-Borrower may assign,
transfer, or convey by operation of law or otherwise, any of its obligations, duties or assets
under this Loan Agreement without the prior written consent of the Lender, which may be withheld at
the absolute discretion of the Lender. Any unauthorized assignment shall be voidable;
provided, that each of the Borrower and the Co-Borrower hereby agrees that CFG has the
right to assign all of its right, title and interest in this Loan at any time to any third party of
its designation without Borrower’s or the Co-Borrower’s approval and without notice to the Borrower
or the CoBorrower. All terms and conditions of the Loan and its associated Note and Loan Documents,
all exhibits and any amendments shall continue and shall survive unaltered following any such
Assignment by the Lender.

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     Section 9.12. Headings. The section headings herein are for convenience only and shall
not affect the interpretation of this Loan Agreement or any other Loan Document.

     Section 9.13. Governing Law. This Loan Agreement is executed and delivered in
the State of Delaware and shall be construed and enforced in accordance with the laws of this state
without giving effect to its choice of law rules. Any action to enforce this Loan Agreement or any
other Loan Document shall be brought in any state or federal court located within the State of
Delaware for the City of Wilmington, Delaware.

     Section 9.14. Interpretation. This Loan Agreement is deemed to have been drafted by
each and every party hereto and the doctrine of contra proferentum shall not apply in construing
its meaning.

     Section 9.15. Signatures. All signatures appearing on the signature page of this Loan
Agreement are to be construed as specific agreement to and acceptance of all terms and conditions
of this Loan Agreement.

     Section 9.16. Counterparts. This Loan Agreement may be signed by the individual
parties in counterparts such that each signature taken separately is to be construed as if all
parties had signed the same document.

     Section 9.17. Entire Agreement. All exhibits and schedules referred to herein
(including, but not limited to, any schedules that are delivered separately and not attached
hereto) are hereby incorporated by reference into this Loan Agreement as if they were set forth at
length in the text of this Loan Agreement. This Loan Agreement, the exhibits and schedules and all
other Loan Documents delivered pursuant hereto, supersede all prior agreements and undertakings,
both written and oral, of the parties hereto, with respect to the subject matter hereof and
constitute the entire understanding of the parties hereto with respect to the subject matter
hereof.

[signatures to follow]

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SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT

     WITNESS the following signatures as of the ___ day of March 2008, accepting this Loan Agreement
including all of the conditions of its exhibits:

	 	 	 	 	 
	AMERICA’S HEALTHCARE/RX PLAN AGENCY, INC.	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name: Ian R. Stuart	 	 
	Title: Authorized Signatory	 	 
	 
	 	 	 	 
	ACCESS PLANS USA, INC.	 	 
	 
	 	 	 	 
	By:

	 	/S/ IAN R. STUART	 	 
	 

	 	 	 	 
	Name: Ian R. Stuart, Interim President and C.E.O.	 	 
	 
	 	 	 	 
	CFG LLC	 	 
	 
	 	 	 	 
	By:

	 	/S/ Daniel G. Schmedlen, Jr.	 	 
	 

	 	 	 	 
	Name: Daniel G. Schmedlen, Jr.	 	 
	Title: Vice President	 	 

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Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}]]