Document:

Exhibit 4.2

    THIS
      DEBENTURE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
      REFERRED TO AND IS REGISTERED IN THE NAME OF THE CLEARING AGENCY OR A NOMINEE
      OF
      THE CLEARING AGENCY. THIS DEBENTURE IS EXCHANGEABLE FOR DEBENTURES REGISTERED
      IN
      THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN
      THE
      LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
      DEBENTURE (OTHER THAN A TRANSFER OF THIS DEBENTURE AS A WHOLE BY THE CLEARING
      AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE CLEARING
      AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY
      BE
      REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

     

    UNLESS
      THIS DEBENTURE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
      TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT
      FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY DEBENTURE ISSUED
      IS
      REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
      AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON
      IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
      OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.

     

    LINCOLN
      NATIONAL CORPORATION

     

    6.75%
      Capital Securities due 2066

    
      	 	 
	
              No.
                R-1

            	
              $275,000,000

            
	 	
              CUSIP
                No. 534187 80 2

            

    

    

            LINCOLN
      NATIONAL CORPORATION, a corporation organized and existing under the laws of
      Indiana (hereinafter called the “Company”, which term includes any successor
      corporation under the Indenture hereinafter referred to), for value received,
      hereby promises to pay to Cede & Co., or registered assigns, the principal
      sum of TWO HUNDRED AND SEVENTY-FIVE MILLION DOLLARS ($275,000,000) on April
      20,
      2066 (the “Maturity Date”). Notwithstanding the preceding sentence, in the event
      that the Maturity Date is not a Business Day, then the Maturity Date will be
      the
      next succeeding day which is a Business Day. The Company further promises to
      pay
      interest on said principal sum from April 20, 2006 or from the most recent
      interest payment date to which interest has been paid or duly provided for.
      Until the Maturity 

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Date
      or
      earlier redemption, each Outstanding Capital Security will bear interest at
      the
      per annum rate of 6.75% (the “Coupon Rate”) payable (subject to the interest
      deferral provisions of Article IV of the Second Supplemental Junior
      Subordinated Indenture) quarterly in arrears on January 20, April 20, July
      20
      and October 20 of each year (each such date, an “Interest Payment Date”),
      commencing on July 20, 2006, and (to the extent that payment of such interest
      is
      enforceable under applicable law) on any overdue installment of interest at
      such
      interest rate, compounded quarterly. Interest payments will include accrued
      interest from and including the last date in respect of which interest has
      been
      duly paid or provided for to, but not including, the next succeeding Interest
      Payment Date or the date of redemption, as the case may be. The amount of
      interest payable for any full Interest Payment Period will be computed on the
      basis of a 360-day year of twelve thirty-day months, and the amount of interest
      payable for any period shorter than a full Interest Payment Period for which
      interest is computed will be computed on the basis of thirty-day months and,
      for
      periods of less than a thirty-day month, the actual number of days elapsed
      per
      thirty-day month. In the event that any date on which interest is payable on
      this Capital Security is not a Business Day, then payment of interest payable
      on
      such date will be made on the next succeeding day which is a Business Day (and
      without any interest or other payment in respect of such delay). The interest
      installment so payable, and punctually paid or duly provided for, on any
      Interest Payment Date will, as provided in the Base Indenture, be paid to the
      Person in whose name this Capital Security (or one or more Predecessor
      Securities, as defined in said Base Indenture) is registered at the close of
      business on the day next preceding the Interest Payment Date; provided, that
      in
      the event the Capital Securities will not continue to remain in book-entry
      form
      or are not in the form of a Global Certificate, the record date for each
      Interest Payment Date shall be the first day of the month in which such Interest
      Payment Date occurs. Any such interest installment not punctually paid or duly
      provided for shall forthwith cease to be payable to the registered Holders
      on
      such record date, and may be paid to the Person in whose name this Capital
      Security (or one or more Predecessor Securities) is registered at the close
      of
      business on a special record date to be fixed by the Trustee for the payment
      of
      such defaulted interest after the Company has deposited with the Trustee an
      amount of money equal to the aggregate amount proposed to be paid in respect
      of
      such defaulted interest, notice whereof shall be given to the registered Holders
      of this series of Capital Securities not less than ten days prior to such
      special record date, or may be paid at any time in any other lawful manner
      not
      inconsistent with the requirements of any securities exchange on which the
      Capital Securities may be listed, and upon such notice as may be required by
      such exchange, all as more fully provided in the Indenture. The principal of
      (and premium, if any) and the interest (including Compounded Interest) on this
      Capital Security shall be payable at the office or agency of the Trustee
      maintained for that purpose in the United States, in any coin or currency of
      the
      United States of America which at the time of payment is legal tender for
      payment of public and private debts; provided, however, that payment of interest
      may be made at the option of the Company by check mailed to the registered
      Holder at such address as shall appear in the Security Register.

     

     

    
      
        
        

      

      
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    The
      indebtedness evidenced by this Capital Security is, to the extent provided
      in
      the Indenture, subordinate and junior in right of payment to the prior payment
      in full of all Senior Indebtedness, and this Capital Security is issued subject
      to the provisions of the Indenture with respect thereto. Each Holder of this
      Capital Security, by accepting the same, (a) agrees to and shall be bound
      by such provisions, (b) authorizes and directs the Trustee on his behalf to
      take such action as may be necessary or appropriate to acknowledge or effectuate
      the subordination so provided and (c) appoints the Trustee his
      attorney-in-fact for any and all such purposes. Each Holder hereof, by his
      acceptance hereof, hereby waives all notice of the acceptance of the
      subordination provisions contained herein and in the Indenture by each Holder
      of
      Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
      reliance by each such Holder upon said provisions.

     

    Reference
      is hereby made to the further provisions of this Capital Security set forth
      on
      the reverse hereof, which further provisions shall for all purposes have the
      same effect as if set forth at this place.

     

    Unless
      the certificate of authentication hereon has been executed by the Trustee
      referred to on the reverse hereof by manual signature, this Capital Security
      shall not be entitled to any benefit under the Indenture or be valid or
      obligatory for any purpose.

     

    [signature
      page follows]

     

    

     

    
      
        
          

          

          

        

        
        

      

      
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    IN
      WITNESS WHEREOF, Lincoln National Corporation has caused this instrument to
      be
      duly executed under its corporate seal.

     

    LINCOLN
      NATIONAL CORPORATION

    

    By:
      ____________________________

    Name: Frederick
      J. Crawford

    Title:  
      Senior
      Vice President and

                       
      Chief
      Financial Officer

    

    

    By:
      ____________________________

    Name: Duane
      Bernt 

    Title:  
      Vice
      President and Treasurer

    

    Attest:
      _________________________

     
      Name: C. Suzanne Womack

     
      Title:   Secretary

    

    Dated:
      April 20, 2006

    

    
      
        
          

          

          

        

        
        

      

      
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    Dated:
      April 20, 2006

    

    TRUSTEE’S
      CERTIFICATE OF AUTHENTICATION

     

    This
      is
      one of the Securities of the series designated herein and referred to in the
      within-mentioned Indenture.

     

    J.P.
      MORGAN TRUST COMPANY, 

    NATIONAL
      ASSOCIATION, as Trustee

    

    

    By:
      ________________________________

    Authorized
      Signatory

    

     

     

    

     

    
      
        
          

          

        

        
        

      

      
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    [REVERSE
      OF DEBENTURE]

     

     

    LINCOLN
      NATIONAL CORPORATION

     

    6.75%
      Capital Securities due 2066

     

    This
      Debenture is one of a duly authorized issue of securities of the Company (herein
      called the “Capital Securities”), issued and to be issued in one or more series
      under a Junior Subordinated Indenture, dated as of May 1, 1996 (herein
      called the “Base Indenture”), between the Company and J.P. Morgan Trust Company,
      National Association (herein called the “Trustee”, which term includes any
      successor trustee under the Indenture), as supplemented by a Second Supplemental
      Junior Subordinated Indenture, dated as of April 20, 2006 (the “Second
      Supplemental Junior Subordinated Indenture” and the Base Indenture as so
      supplemented, the “Indenture”), to which Indenture and all indentures
      supplemental thereto reference is hereby made for a statement of the respective
      rights, limitations of rights, duties and immunities thereunder of the Trustee,
      the Company and the Holders of the Capital Securities, and of the terms upon
      which the Capital Securities are, and are to be, authenticated and delivered.
      This Capital Security is one of the series designated on the face hereof,
      limited in aggregate principal amount to $275,000,000.

     

    All
      terms
      used in this Capital Security that are defined in the Indenture shall have
      the
      meanings assigned to them in the Indenture.

     

    Notwithstanding
      the provisions of Article XI of the Base Indenture, the Company shall have
      the
      right to redeem the Capital Securities for cash, in whole or in part, on or
      after April 20, 2011. Prior to April 20, 2011, the Company shall have the right
      to redeem the Capital Securities in whole but not in part and only after the
      occurrence of a Tax Event. The redemption price in each case will be 100% of
      the
      principal amount of the Capital Securities to be redeemed plus accrued and
      unpaid interest, together with any Compounded Interest, to the date of
      redemption; provided, that if the Capital Securities are not redeemed in whole,
      the Company may not effect such redemption unless at least $50,000,000 aggregate
      principal amount of Capital Securities, excluding any Capital Securities held
      by
      the Company or any of its affiliates, remains outstanding after giving effect
      to
      such redemption. With respect to any redemption of Capital Securities as a
      result of a Tax Event, the date fixed for such redemption will be within 180
      days following the occurrence of such Tax Event; provided, however, that if
      at
      that time the Company is able to eliminate, within the 180-day period, the
      Tax
      Event by taking some ministerial action (such as making an election or filing
      a
      form) that has no adverse effect on the Company or the Holders of the Capital
      Securities, the Company will pursue such action in lieu of redemption. The
      Company will have no right or obligation to redeem the Capital Securities while
      pursuing such measure.

     

    Any
      redemption will be made upon not less than fifteen days nor more than sixty
      days
      notice before the date fixed for redemption to the registered Holder of the
      Capital Securities. If the Capital Securities are to be redeemed in part, the
      Capital 

     

     

     

    
      
        
        

      

      
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    Securities
      will be redeemed pro rata or by lot or by any other method utilized by the
      Trustee that the Trustee shall deem fair and appropriate. Any notice mailed
      as
      provided herein shall be conclusively presumed to have been duly given, whether
      or not the Holder receives such notice, but failure duly to give such notice
      by
      mail, or any defect in such notice or in the mailing thereof, to any Holder
      of
      the Capital Securities designated for redemption shall not affect the validity
      of the proceedings for the redemption of any other Capital Securities. Each
      such
      notice given to a Holder shall state: (i) the date of redemption;
      (ii) the redemption price; (iii) that the Capital Securities are being
      redeemed pursuant to the Indenture or the terms of the Capital Securities
      together with the facts permitting such redemption; (iv) if less than all
      outstanding Capital Securities are to be redeemed, the identification (and,
      in
      the case of partial redemption, the principal amounts) of the particular capital
      securities to be redeemed; (v) the place or places where the Capital
      Securities are to be redeemed; and (vi) that interest on the Capital
      Securities to be redeemed will cease to accrue on the date of redemption.
      Notwithstanding the foregoing, if the Capital Securities are issued in
      book-entry form through The Depository Trust Company or any other similar
      facility, notice of redemption may be given to the Holders of Capital Securities
      at such time and in any manner permitted by such facility. The redemption price
      shall be paid prior to 12:00 p.m., New York City time, on the date of such
      redemption or at such earlier time as the Company determines and specifies
      in
      the notice of redemption. The Company shall deposit with the Trustee or with
      a
      Paying Agent an amount of money sufficient to pay the redemption price of such
      Capital Securities or any portion thereof which are to be redeemed on that
      date.

     

    If
      any
      notice of redemption has been given as provided herein, the Capital Securities
      or portion of the Capital Securities with respect to which such notice has
      been
      given shall become due and payable on the date and at the place or places stated
      in such notice at the applicable redemption price. From and after such date,
      the
      Capital Securities to be redeemed shall cease to bear interest. If any Capital
      Securities called for redemption shall not be so paid upon surrender thereof
      for
      redemption, the principal of and premium, if any, on such Capital Securities
      shall, until paid, bear interest from the date of redemption at the Coupon
      Rate.
      On presentation and surrender of such Capital Securities at a place of payment
      in said notice specified, the said securities or the specified portions thereof
      shall be paid and redeemed by the Company at the applicable redemption price.
      Upon presentation of any Capital Securities redeemed in part only, the Company
      shall execute and the Trustee shall authenticate and deliver to the Holder
      thereof, at the expense of the Company, new Capital Securities of the same
      series, of authorized denominations, in aggregate principal amount equal to
      the
      unredeemed portion of the Capital Securities so presented and having the same
      original issue date, Maturity Date and terms. If a Global Security is so
      surrendered, such new Capital Securities will also be a new Global
      Security.

     

    The
      Capital Securities are not entitled to the benefit of any sinking
      fund.

     

    If
      an
      Event of Default with respect to Capital Securities of this series shall occur
      and be continuing, the principal of the Capital Securities of this series may
      be

     

     

     

     

    
      
        
        

      

      
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    declared
      due and payable in the manner, with the effect and subject to the conditions
      provided in the Indenture.

     

    The
      Indenture contains provisions for satisfaction, discharge and defeasance at
      any
      time of the entire indebtedness of this Capital Security upon compliance by
      the
      Company with certain conditions set forth in the Indenture.

     

    The
      Indenture permits, with certain exceptions as therein provided, the Company
      and
      the Trustee at any time to enter into a supplemental indenture or indentures
      for
      the purpose of modifying in any manner the rights and obligations of the Company
      and of the Holders of the Securities, with the consent of the Holders of not
      less than a majority in principal amount of the Outstanding Securities of each
      series to be affected by such supplemental indenture. The Indenture also
      contains provisions permitting Holders of specified percentages in principal
      amount of the Securities of each series at the time Outstanding, on behalf
      of
      the Holders of all Securities of such series, to waive compliance by the Company
      with certain provisions of the Indenture and certain past defaults under the
      Indenture and their consequences. Any such consent or waiver by the Holder
      of
      this Capital Security shall be conclusive and binding upon such Holder and
      upon
      all future Holders of this Capital Security and of any Capital Security issued
      upon the registration of transfer hereof or in exchange herefor or in lieu
      hereof, whether or not notation of such consent or waiver is made upon this
      Capital Security.

     

    So
      long
      as no Event of Default or Trigger Event has occurred and is continuing under
      the
      Indenture, the Company may elect at any time during the term of the Capital
      Securities, and from time to time, to defer one or more payments of interest
      on
      such Capital Securities (an “Optional Deferral” and any such deferred interest,
“Optionally Deferred Interest”) for up to five years (excluding any time an
      Optional Deferral is suspended pursuant to Section 4.3 of the Second
      Supplemental Junior Subordinated Indenture). During any period of Optional
      Deferral (an “Optional Deferral Period”), the Company may pay Optionally
      Deferred Interest out of any source of funds. Optionally Deferred Interest
      will
      continue to accrue and compound quarterly on each Interest Payment Date, to
      the
      extent permitted by applicable law, at the Coupon Rate. If Optional Deferral
      has
      continued beyond the Fifth Deferral Anniversary (as defined in Section 6.3
      of the Second Supplemental Junior Subordinated Indenture), then the provisions
      of Section 6.3 of the Second Supplemental Junior Subordinated Indenture
      will apply, and the Company must (except upon an Event of Default with respect
      to the Capital Securities) make Commercially Reasonable Efforts to sell certain
      Qualifying Securities and may pay Optionally Deferred Interest only out of
      the
      net proceeds from the sale of such Qualifying Securities. Additionally, during
      any Optional Deferral Period, the restrictions on payment by the Company of
      dividends and other distributions on capital stock pursuant to Section 6.2
      of the Second Supplemental Junior Subordinated Indenture will apply. There
      is no
      limit on the number of Optional Deferral Periods that the Company may
      begin.

     

    The
      Company shall provide a notice of any Optional Deferral no more than sixty
      and
      no fewer than fifteen days prior to the relevant Interest Payment Date.

     

     

     

    
      
        
        

      

      
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    Subject
      to Section 4.2(b) of the Second Supplemental Junior Subordinated Indenture,
      a notice of Optional Deferral, once given, will be irrevocable and the deferral
      of payments on the related Interest Payment Date will be considered an Optional
      Deferral, unless a Trigger Event has occurred as of the thirtieth day prior
      to
      such Interest Payment Date.

     

    By
      not
      later than the fifteenth day prior to each Interest Payment Date during a
      Trigger Period, the Company will give notice of the continuance of such Trigger
      Period to the Holders of the Capital Securities. Such notice will, depending
      on
      which condition is relied upon in determining that a Trigger Event has occurred,
      set forth either (x) the Covered Life Insurance Subsidiaries’ Most Recent
      Weighted Average NAIC RBC Ratio or (y) the Trailing
      Four Quarters Consolidated Net Income Amount
      and the
      Adjusted Shareholders’ Equity Amount, as applicable, and the extent to which
      these amounts must increase in order for payments of interest from sources
      other
      than pursuant to Section 6.3 of the Second Supplemental Junior Subordinated
      Indenture to resume.

     

    If
      and to
      the extent that a Trigger Event has occurred and is continuing, and regardless
      of any notice of Optional Deferral that has been previously delivered, the
      Company may pay interest on the Capital Securities (other than any interest
      that
      had accrued during an Optional Deferral Period prior to the Fifth Deferral
      Anniversary and prior to the occurrence of a Trigger Event) only to the extent
      that such interest is paid in accordance with Section 6.3 of the Second
      Supplemental Junior Subordinated Indenture. Any interest that is accrued and
      unpaid during a period when a Trigger Event has occurred and is continuing
      (a
“Trigger Period”) will continue to accrue and compound quarterly, to the extent
      permitted by applicable law, at the Coupon Rate.

     

    In
      the
      event that a Trigger Period is no longer continuing and at the termination
      of
      the Trigger Period there is no unpaid interest from an Optional Deferral Period
      that had continued beyond the Fifth Deferral Anniversary, the Company may pay
      subsequent interest in cash from any source of funds. Notwithstanding the
      foregoing, any unpaid interest, together with any Compounded Interest, that
      accrued during the continuance of a Trigger Period may only be satisfied in
      accordance with the provisions of Section 6.3 of the Second Supplemental
      Junior Subordinated Indenture, except upon an Event of Default; provided,
      however, that any accrued and unpaid interest will in all events be due and
      payable upon maturity or redemption of the Capital Securities, except for
      Foregone Interest if certain events of bankruptcy, insolvency or receivership,
      whether voluntary or not, occur with respect to the Company prior to the
      maturity or redemption of the Capital Securities.

     

    During
      such Trigger Period, the restrictions on interest payments from sources other
      than the Alternative Coupon Satisfaction Mechanism will continue until neither
      of the conditions in clauses (i) and (ii) of the definition of “Trigger
      Event” exists as of the thirtieth day prior to an Interest Payment Date. In
      addition, in the case of a restriction arising under clause (ii) of the
      definition of “Trigger Event,” such restrictions will continue until neither of
      the conditions in clauses (i) and (ii) of the definition of “Trigger Event”
exists as of the thirtieth day prior to an Interest Payment Date and the
      Company’s Adjusted Shareholders’ Equity Amount has increased or has declined by
      less 

     

     

     

    
      
        
        

      

      
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    than
      10%,
      in either case as compared to the Adjusted Shareholders’ Equity Amount at the
      end of the Benchmark Quarter for each Interest Payment Date as to which interest
      payment restrictions were imposed under clause (ii) of the definition of
“Trigger Event” and Section 4.3(a) of the Second Supplemental Junior
      Subordinated Indenture. 

     

    The
      Company may not pay on any Interest Payment Date interest that has accrued
      on
      any Capital Security during the Interest Payment Period immediately preceding
      such Interest Payment Date, unless the Company pays therewith all Optionally
      Deferred Interest at such time outstanding on such Capital Security. The
      foregoing covenant shall not be construed to limit the ability of the Holders
      of
      the Capital Securities to recover amounts in case of any receivership,
      insolvency, liquidation,
      bankruptcy, reorganization, readjustment, arrangement, composition or judicial
      proceeding affecting the Company and its property.

     

    Each
      Holder of a Capital Security, by such Holder’s acceptance thereof, agrees that
      upon any payment or distribution of assets to creditors of the Company upon
      any
      liquidation, dissolution, winding up, reorganization, or in connection with
      any
      insolvency, receivership or proceeding with respect to the Company, such Holder
      shall not have a claim for, and thus no right to receive, interest that is
      unpaid due to certain consequences of a Trigger Event (including Compounded
      Interest) and has not been settled through the application of the Alternative
      Coupon Satisfaction Mechanism, to the extent that the aggregate amount thereof
      (including Compounded Interest) exceeds 25% of the original principal amount
      of
      such Capital Security in respect of which such interest was
      deferred.

     

    Except
      as
      provided in the immediately preceding paragraph and Article XI of the Second
      Supplemental Junior Subordinated Indenture, no reference herein to the Indenture
      and no provision of this Capital Security or of the Indenture shall alter or
      impair the obligation of the Company, which is absolute and unconditional,
      to
      pay the principal of (and premium, if any) and interest on this Capital Security
      at the times, place and rate, and in the coin or currency, herein
      prescribed.

     

    As
      provided in the Indenture and subject to certain limitations therein set forth,
      the transfer of this Capital Security is registrable in the Securities Register,
      upon surrender of this Capital Security for registration of transfer at the
      office or agency of the Company maintained under Section 10.2 of the Base
      Indenture duly endorsed by, or accompanied by a written instrument of transfer
      in form satisfactory to the Company and the Securities Registrar duly executed
      by, the Holder hereof or his attorney duly authorized in writing, and thereupon
      one or more new Capital Securities of this series, of authorized denominations
      and for the same aggregate principal amount, will be issued to the designated
      transferee or transferees. No service charge shall be made for any such
      registration of transfer or exchange, but the Company may require payment of
      a
      sum sufficient to cover any tax or other governmental charge payable in
      connection therewith.

     

    Prior
      to
      due presentment of this Capital Security for registration of transfer, the
      Company, the Trustee and any agent of the Company or the Trustee may

     

     

    
      
        
        

      

      
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    treat
      the
      Person in whose name this Capital Security is registered as the owner hereof
      for
      all purposes, whether or not this Capital Security be overdue, and neither
      the
      Company, the Trustee nor any such agent shall be affected by notice to the
      contrary.

     

    The
      Capital Securities are issuable only in registered form without coupons in
      denominations of $25 and any integral multiple thereof. This Global Security
      is
      exchangeable for Capital Securities in definitive form only under certain
      limited circumstances set forth in the Indenture. Capital Securities so issued
      are issuable only in registered form without coupons in denominations of $25
      and
      any integral multiple thereof. As provided in the Base Indenture and subject
      to
      certain limitations therein set forth, Capital Securities are exchangeable
      for a
      like aggregate principal amount of Capital Securities of a different authorized
      denomination, as requested by the Holder surrendering the same.

     

    No
      recourse shall be had for the payment of the principal of or the interest on
      this Capital Security, or for any claim based hereon, or otherwise in respect
      hereof, or based on or in respect of the Indenture, against any incorporator,
      shareholder, officer or director, past, present or future, as such, of the
      Company or of any predecessor or successor corporation, whether by virtue of
      any
      constitution, statute or rule of law, or by the enforcement of any assessment
      or
      penalty or otherwise, all such liability being, by the acceptance hereof and
      as
      part of the consideration for the issuance hereof, expressly waived and
      released.

     

    The
      Company agrees and, by its acceptance of this Capital Security or a beneficial
      interest therein, the Holder of, and any Person that acquires a beneficial
      interest in, this Capital Security agrees to treat this Capital Security as
      indebtedness for United States federal, state and local tax
      purposes.

     

    THE
      INDENTURE AND THIS CAPITAL SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
      ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
      AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.

     

     

    11EXHIBIT 10.1

                                    AGREEMENT

         The following is an agreement (the "Agreement") by and between Charles
William Reed ("Executive") and Escalade, Incorporated, an Indiana corporation
("Escalade") regarding Executive's retirement from all positions held by
Executive with Escalade and its various subsidiaries and affiliates. Escalade
and Executive are sometimes referred to collectively as the "parties" and
individually as a "party," and the term "Company" shall mean Escalade and its
various subsidiaries and affiliates collectively.

                                    Recitals:

         A.       Executive is the President, Chief Executive Officer and a
Director of Escalade and is an officer and/or director of various subsidiaries
and affiliates of Escalade; and

         B.       Executive has announced his intention to retire from all
positions with the Company; and

         C.       Executive and the Company have reached an agreement with
respect to all matters related to Executive's retirement.

         NOW, THEREFORE, in consideration of the mutual promises contained in
this Agreement, the Company and Executive agree as follows:

         1.       Retirement. Executive hereby affirms his retirement from his
positions as President, Chief Executive Officer and a Director of Escalade and
from all other executive officer and director positions that he holds with any
of Escalade's subsidiaries and their affiliates, effective as of April 19, 2006
(the "Executive Transition Date"). Executive acknowledges and agrees as of the
Executive Transition Date he also retires as a trustee or other administrator of
any and all Company benefit plans, including without limitation the Company's
retirement plan. Executive hereby affirms his withdrawal of his proposed
nomination for election to Escalade's Board of Directors at Escalade's Annual
Meeting of Stockholders scheduled for April 22, 2006. Executive and the Company
agree that Executive's resignation as a Director of Escalade is not related to
any disagreement between them. Executive further hereby acknowledges and agrees
that he will retire as an employee from all other positions held by him with the
Company effective as of July 17, 2006 (the "Retirement Date").

         2.       Ongoing Employment. Executive and the Company agree that for
the ninety (90) day period commencing on the Executive Transition Date and
ending on the Retirement Date (such ninety day period being hereafter referred
to as the "Continuing Employment Period"), Executive shall continue as an
employee of the Company to work on such projects as requested from time to time
by Escalade's Board of Directors or Chief Executive Officer, which services may
include without limitation advisory and transition services, special projects,
the development and retention of employee, customer and supplier relationships,

                                       4
<PAGE>

and providing information about existing, past and prospective customers and
vendors of the Company. Executive acknowledges and agrees that the Company shall
have no obligation to provide him with an office or secretary following the
expiration of thirty (30) days after the Executive Transition Date, provided,
however, the Company shall provide administrative support to Executive as
reasonably needed to allow Executive to deliver his services to the Company as
contemplated herein. The Company acknowledges and agrees that Executive's
planned two week vacation at the end of May shall not constitute a violation or
breach of any provision of this Agreement.

         3.       Compensation and Benefits. In consideration of the services to
be provided by Executive hereunder and provided that Executive fulfills his
obligations as set forth in this Agreement, and provided further with respect to
all obligations of the Company to be provided after the Retirement Date, that
Executive has signed on or promptly after the Retirement Date an Additional
Release (as defined in Section 14(f) of this Agreement), which Additional
Release has been delivered to the Company and by its terms has become effective,
the Company agrees as follows:

                  (a)      Compensation. The Company will pay Executive cash in
the following amounts at the times provided: (i) his current salary in the
amount of Twenty Two Thousand Nine Hundred Seventeen Dollars ($22,917) per month
for the three months commencing on the Executive Transition Date and ending on
the day prior to the Retirement Date (the "Earned Compensation"), plus any
unpaid director fees earned prior to the Executive Transition Date (the "Unpaid
Director Fees"); (ii) Twenty Three Thousand Two Hundred Dollars ($23,200) per
month for eighteen (18) months commencing on the Retirement Date and ending on
January 16, 2008 (the "Initial Post-Employment Period"); and (iii) Twenty Five
Thousand One Hundred Dollars ($25,100) per month for fifteen (15) months
commencing on the day following the end of the Initial Post-Employment Period
and ending on April 16, 2009 (the "Subsequent Post-Employment Period"). The cash
amounts payable pursuant to Section 3(a)(ii) and (iii) are sometimes referred to
hereafter collectively as the "Cash Retirement Payments". The Earned
Compensation, the Director Fees and the Cash Retirement Payments shall be in
lieu of any further salary or bonus that may have otherwise become payable to
Executive if he had continued as an executive officer and director of the
Escalade and its various subsidiaries and affiliates following the Executive
Transition Date. Each installment of Earned Compensation and each installment of
Cash Retirement Payments shall be paid by the Company to Executive when due as
provided in this Section 3(a) in regular installments in accordance with
Company's general payroll practices for salaried employees commencing with the
next payroll date following the Executive Transition Date, provided, however,
that no Cash Retirement Payment shall be made to Executive prior to January 18,
2007 (the "Delayed Payment Date"), in accordance with Section 409A of the
Internal Revenue Code of 1986, as amended. Any and all Cash Retirement Payments
so delayed shall be paid to Executive in one lump sum on the Delayed Payment
Date. The Company shall pay the Unpaid Director Fees to Executive at the time
and in the manner that such fees would be paid in the ordinary course of
business in accordance with past practices.

                  (b)      Stock Options. Executive currently has options to
purchase additional shares of Escalade common stock which have been granted to
him pursuant to the terms of Escalade's 1997 Incentive Stock Option Plan (the

                                       5
<PAGE>

"Plan"). Escalade shall accelerate the vesting of all such options as of the
Retirement Date and Executive shall have ninety (90) days thereafter to exercise
all or part of such options, if any, in his sole discretion. Any unexercised
options outstanding upon the conclusion of this ninety day period will then
expire without any further action by Executive or the Company.

                  (c)      Medical Benefits. Through the Continuing Employment
Period, the Company shall at its expense continue on behalf of Executive and his
dependents and beneficiaries (to the same extent provided to the dependents and
beneficiaries prior to the Executive Transition Date) the medical, dental, and
hospitalization benefits (including deductibles and costs) as currently provided
by the Company to Executive Officer. Beginning on the Retirement Date, Executive
shall be eligible to elect COBRA continuation coverage under the group medical,
dental and hospitalization plan in which Executive was enrolled immediately
prior to the Retirement Date, it being understood and agreed that such COBRA
continuation coverage will not include the Execucare coverage provided to
Executive through the Retirement Date. If Executive timely elects COBRA
continuation coverage, the Company shall pay for such coverage during the
Initial Post-Employment Period unless Executive elects to earlier terminate such
coverage. Following the end of the Initial Post-Employment Period, Executive
shall thereafter be solely responsible for obtaining and maintaining medical,
dental and hospitalization benefits for Executive and his dependents at
Executive's own expense. The Company's obligation pursuant to this Section 3(c)
with respect to medical, dental and hospitalization benefits shall be limited to
the extent that Executive obtains any such benefits pursuant to a subsequent
employer's benefit plans, in which case the Company may reduce the coverage of
any benefits it is required to provide Executive hereunder as long as the
aggregate coverages and benefits of the combined benefit plans are no less
favorable to Executive than the coverages and benefits required to be provided
hereunder.

                  (d)      Deferred Compensation Plan. On the Retirement Date,
the Company shall pay to Executive Four Hundred Eleven Thousand One Hundred
Fifty Six Dollars ($411,156) in a lump sum, which amount is equal to Executive's
account balance as of December 31, 2004 under the Company's deferred
compensation plan. The remaining balance of Sixty One Thousand One Hundred
Ninety Dollars ($61,190) in Executive's account in the Company's deferred
compensation plan as of the Retirement Date shall continue to bear interest at
the rate of 9% per annum, accruing monthly, until the Delayed Payment Date. On
the Delayed Payment Date, the Company shall pay Executive's entire account
balance as of such date, in accordance with Section 409A of the Internal Revenue
Code of 1986, as amended.

                  (e)      No Other Continuing Employee Benefits. Except as
provided in Section 3(c), beginning on the Retirement Date, the Company shall
have no obligation to provide any other employee benefits to Executive. The
benefits which the Company may cease providing to Executive as of the Retirement
Date include, without limitation, (i) participation in the Company's 401(k) plan
and/or any other retirement plan, (ii) disability insurance coverage, (iii) life
insurance policies, including the existing $150,000 term life insurance policy
on Executive's life, of which policy Executive's spouse is the current
designated beneficiary, (iv) cell phone coverage and reimbursement, (v) country
club dues and expenses, (vi) any AOL or other internet account, and (vii)
participation in Execucare..

                                       6
<PAGE>

                  (f)      Personal Property.

                  (i)      Promptly following the Executive Transition Date,
         Executive may remove all of his personal items, including office
         furnishings, from the Company's offices on or before the Retirement
         Date. Upon the Company's request, Executive shall provide reasonably
         satisfactory evidence of ownership of any or all such items to the
         Company.

                  (ii)     On or before the Retirement Date, the Company shall
         permit Executive to remove his current personal computer from
         Executive's office and the Company shall transfer title to such
         personal computer to Executive. Prior to Executive's removal of such
         personal computer, Company personnel shall remove all information
         relating to the Company that is contained in such computer and all of
         Executive's personal information contained therein shall either remain
         therein or shall be transferred onto a disk, which disk will be
         provided to Executive. Executive may observe and participate in this
         file transfer procedure, and both Executive and the Company agree to
         cooperate in good faith to accomplish the orderly transfer of such
         information.

                  (iii)    On or before the Retirement Date, the Company and
         Executive shall cooperate in transferring Executive's cell phone
         account and phone number to the Company, provided, however, that the
         Company and Executive agree that Executive shall be provided ownership
         of his existing cell phone to the extent not already owned by him.

                  (g)      Expense Reimbursement; Prepaid Expenses. Upon
submission of receipts and/or other appropriate documentation, in accordance
with the Company's existing policies and procedures, the Company shall reimburse
Executive in the ordinary course of business for all reasonable and necessary
business expenses incurred by Executive prior to the Executive Transition Date
and for all reasonable and necessary business expenses incurred through the
Continuing Employment Period relating to services requested by the Company in
accordance with Section 2 hereof. Promptly following the Executive Transition
Date, Executive shall return to the Company any and all outstanding advances and
prepaid expenses obtained by Executive prior to the Executive Transition Date
and, as applicable, shall obtain any related credits that may be available from
third parties with respect to such items, including all refunds and credits
relating to prepaid airline tickets. To the extent that such credits are or will
be issued by such third parties to Executive, Executive agrees that he will
write a check to the Company in the aggregate amount of such credits received or
to be received no later than thirty (30) days following the Executive Transition
Date. Executive shall provide to the Company appropriate documentation relating
to any such matters and credits, including copies of credit card invoices, as
requested by the Company. Subsequent to the Executive Transition Date, no new
advances or prepaid expenses shall be made to Executive without the Company's
prior written consent.

         4.       Indemnification. The Company shall indemnify and defend
Executive from and against all claims and causes of action which arose, or may
arise, relating to events and circumstances occurring prior to the Executive
Transition Date asserted against Executive by third parties by reason of his

                                       7
<PAGE>

actions or omissions as an executive officer or Director of the Company to the
fullest extent not otherwise prohibited by law, the Company's Articles of
Incorporation or Bylaws. The Company affirms that it will not cancel any
coverage for Executive that exists under any current director and officer
liability insurance policy maintained by the Company and will not discriminate
against Executive vis-a-vis other officers and former officers in any purchase
or renewal of any such policy or any purchase of a replacement policy or of an
extended reporting period under a policy that is not renewed.

         5.       Executive's Obligations. In consideration of the payments and
benefits provided in Section 3 above, Executive will:

                  (a)      transfer his responsibilities as the Company's
President and Chief Executive Officer before the Executive Transition Date in an
appropriate manner and take such actions as are necessary to assure a smooth
transition;

                  (b)      not represent or bind the Company or enter into any
agreement on behalf of the Company at any time without the prior approval of
another executive officer of the Company or the Company's Board of Directors;

                  (c)      fully cooperate and assist the Company with any
litigation matters or regulatory or agency proceedings for which his testimony
or cooperation is requested by Company following the Executive Transition Date,
provided that he is reimbursed for any reasonable and necessary expenses
incurred as a result of his cooperation and assistance, and further provided
that the Company and Executive shall discuss in advance of Executive's providing
any such cooperation and assistance the anticipated time commitment that would
likely be required of Executive with respect to any such matter and shall
mutually determine whether Executive should be compensated for his time and the
amount of any such compensation, it being understood and agreed that if the
parties cannot reach agreement as to any such compensation, then the Company
shall not request, and Executive shall not be required, to provide cooperation
and assistance with respect to such litigation or proceeding;

                  (d)      sign all necessary resignations from the boards of
directors and/or all other officer, employee and trustee positions of the
Company, but in any event Executive shall be deemed to have resigned any such
executive officer, director and trustee positions as of the Executive Transition
Date and from all other positions as of the Retirement Date;

                  (e)      through the Continuing Employment Period, continue to
comply with the Company's Insider Trading Policy, Code of Ethics and all other
Company policies and procedures applicable to employees of the Company; and

                  (f)      comply with all covenants contained in this
Agreement, including without limitation Sections 6, 7 and 8.

                                       8
<PAGE>

         6.       Mutual Nondisparagement.

                  (a)      Executive's Covenant. Beginning on the Executive
Transition Date and continuing through the end of the Subsequent Post-Employment
Period, Executive shall not make, participate in the making of, or encourage or
facilitate any other person to make, any statements, written or oral, which
criticize, disparage, or defame the goodwill or reputation of, or which
embarrass or adversely affect the morale of, the Company, its subsidiaries and
their affiliates or any of their respective present, former or future directors,
officers, executives, employees and/or shareholders.

                  (b)      Company's Covenant. Beginning on the Executive
Transition Date and continuing through the end of the Subsequent Post-Employment
Period, the Company shall not, and shall instruct the members of Escalade's
Board of Directors and executive officers not to, make, participate in the
making of, or encourage or facilitate any employees or any other person to make,
any statements, written or oral, which criticize, disparage, or defame the
reputation of, or which are intended to embarrass, the Executive.

         7.       Confidentiality.  Executive understands and agrees that:

                  (a)      Escalade is required to describe the material terms
of this Agreement in a Current Report on Form 8-K to be filed with the
Securities and Exchange Commission within four (4) business days after this
Agreement is signed by the Executive and Escalade, and that the Company will
attach this Agreement in its entirety as an Exhibit to such public filing. Until
such filing is made, Executive will hold in confidence, and will not disclose to
anyone, any of the terms hereof other than to immediate family members,
attorneys and other professional advisors;

                  (b)      Executive has been through the Executive Transition
Date, and may be during the Continuing Employment Period, in the course of
employment with the Company entrusted with or obtained access to information
proprietary to the Company with respect to the following (all of which
information is referred to hereinafter collectively as the "Information"): the
organization and management of the Company; the names, addresses, buying habits,
and other special information regarding past, present and potential customers,
employees and suppliers of the Company; customer and supplier contracts and
transactions or price lists of the Company and their suppliers; products,
services, programs and processes sold, licensed or developed by the Company;
technical data, plans and specifications, present and/or future development
projects of the Company; financial and/or marketing data respecting the conduct
of the present or future phases of business of the Company; computer programs,
systems and/or software; ideas, inventions, trademarks, trade secrets, business
information, know-how, processes, improvements, designs, redesigns, discoveries
and developments of the Company; and other information considered confidential
by any of the Company or its customers or suppliers. At all times during the
Continuing Employment Period and thereafter, Executive agrees to retain the
Information in absolute confidence and not to disclose the Information to any
person or organization except as required in the performance of Executive's
duties for the Company as provided in this Agreement, without the express
written consent of the Company; provided that Executive's obligation of
confidentiality shall not extend to any Information which becomes generally
available to the public other than as a result of disclosure by Executive; and

                                       9
<PAGE>

                  (c)      Executive and the Company agree that effective no
later than the Retirement Date, Executive will no longer be privy to material,
non-public information regarding the Company. Accordingly, the Company agrees
that Executive shall not be subject to the Company's Insider Trading Policy
following the Retirement Date, provided, however, that if and to the extent that
Executive may from time to time acquire knowledge of material, non-public
information regarding the Company, Executive acknowledges and agrees that he may
not trade based upon such information and must comply with all applicable laws
prohibiting insider trading. The Company further agrees that it will not
intentionally provide material, non-public information to Executive following
the Retirement Date except in connection with such events, actions or
circumstances that would require stockholder approval and the Company has made a
good faith determination that it is necessary and appropriate to disclose such
information to Executive given his then current ownership of Escalade common
stock, and that the Company will use its reasonable best efforts to prevent any
inadvertent disclosures of material, non-public information to Executive.

         8.       Covenant Not to Compete, No Interference; No Solicitation. At
all times through the end of the Subsequent Post-Employment Period (or if this
period is unenforceable by law, then for such period as shall be enforceable):

                  (a)      Executive will not engage in any business offering
products or services related to the current business of the Company, whether as
a principal, partner, joint venture, agent, employee, salesman, consultant,
director or officer, where such business or business activity is in competition
with the Company in any geographic market where the Company does business;

                  (b)      Executive will not interfere with or adversely
affect, either directly or indirectly, the Company's relationships with any
person, firm, association, corporation or other entity which is known by
Executive to be, or is included on any listing to which Executive had access
during the course of his employment as a customer, client, supplier, consultant
or employee of the Company, and Executive will not divert or change, or attempt
to divert or change, any such relationship to the detriment of the Company or to
the benefit of any other person, firm, association, corporation or other entity;
and

                  (c)      Executive will not induce, seek to induce or
participate directly or indirectly with any third party in seeking to induce,
any other employee of the Company to terminate his or her employment
relationship with the Company, provided, however, that this restriction shall
not prohibit Executive from hiring any employee who seeks employment from
Executive or any third party with whom Executive may be employed or affiliated
with in the future on an unsolicited basis as long as such employment is not in
competition with any business or operations of the Company.

                  Executive acknowledges and agrees that the covenants,
restrictions, agreements, and obligations set forth herein are founded upon
valuable consideration, and, with respect to the covenants, restrictions,
agreements, and obligations set forth in this Section 8 are reasonable in
duration and geographic scope. The time period and geographical area set forth
in this Section 8 are each divisible and separable, and, in the event that the
covenants not to compete and/or not to divert business or employees contained

                                       10
<PAGE>

therein are judicially held invalid or unenforceable as to such time period
and/or geographical area, they will be valid and enforceable in such
geographical area(s) and for such time period(s) which the court determines to
be reasonable and enforceable. Executive agrees that in the event that any court
of competent jurisdiction determines that the above covenants are invalid or
unenforceable to join with the Company in requesting such court to construe the
applicable provision by limiting or reducing it so as to be enforceable to the
extent compatible with the then applicable law. Furthermore, it is agreed that
any period of restriction or covenant hereinabove stated shall not include any
period of violation or period of time required for litigation or arbitration to
enforce such restrictions or covenants.

         9.       Tax Liability; Tax Withholding. Executive acknowledges and
agrees that he is responsible for the payment of all taxes relating to the
consideration to be provided to him as contemplated by this Agreement, including
the payment of any taxes relating to his exercise of stock options.
Notwithstanding any other provision of this Agreement, the Company may withhold
from any amounts payable under this Agreement, or any other benefits received
pursuant hereto, such federal, state and/or local taxes as shall be required to
be withheld under any applicable law or regulation.

         10.      No Mitigation; No Offset. In no event shall Executive be
obligated to seek other employment or to take any other action that would
mitigate the amounts payable to Executive under this Agreement. In the event
that Executive would obtain subsequent employment, the Company may not offset
any compensation or other amounts earned by Executive from such subsequent
employment or engagement of his services against the Executive's entitlements
under this Agreement other than as provided in Section 3(c). Moreover, subject
to Executive's compliance with the covenants set forth in Sections 6, 7 and 8 of
this Agreement, Executive shall be free to pursue any unsolicited,
non-competitive opportunities for employment or services as may arise from the
Company's customers, vendors, employees and affiliates.

         11.      Section 16 Reports. Executive and the Company agree that
notwithstanding Executive's retirement as an executive officer and a Director of
Escalade as of the Executive Transition Date, Executive may continue to be
subject to the reporting requirements of Section 16 of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder for up to six
months following the Executive Transition Date. Accordingly, Executive agrees to
provide timely notice to Escalade's chief financial officer of all transactions
undertaken by Executive in Escalade common stock, including the purchase or sale
of any shares of Escalade common stock and the exercise of any stock options,
during the six month period following the Executive Transition Date, and the
Company shall prepare and file the appropriate Section 16 reports with the
Securities and Exchange Commission on behalf of Executive. Upon the conclusion
of such six month period, the Company acknowledges that Executive will no longer
be deemed an affiliate of the Company and, absent Executive being in possession
of material, non-public information concerning the Company, may freely engage in
trades of Escalade securities.

         12.      Effect of Death or Change in Control.

                  (a)      Death. Upon Executive's death, the Company shall
accelerate the payment of all unpaid amounts due to Executive pursuant to
Section 3 of this Agreement, including without limitation Earned Compensation,

                                       11
<PAGE>

Cash Retirement Payments, distributions from the Company's deferred compensation
plan and unreimbursed business expenses, and the Company shall make a lump sum
payment of all such amounts, without any discount or reduction, to Executive's
estate no later than thirty (30) days following Executive's death. Upon the
payment of such lump sum amount, the Company shall have no further obligation to
make any payments or to provide any benefits to the Executive's estate, heirs or
legal representatives pursuant to Section 3 of this Agreement nor shall the
Executive's estate, heirs or legal representatives be further subject to the
provisions of Sections 6 or 8 of this Agreement.

                  (b)      Change in Control. Immediately and automatically upon
the event of a Change in Control (as defined below), the Company or its
successor, as the case may be, shall accelerate the payment of all unpaid
amounts due to Executive pursuant to Section 3 of this Agreement, including
without limitation Earned Compensation, Cash Retirement Payments, distributions
from the Company's deferred compensation plan and unreimbursed business
expenses, and the Company shall make a lump sum payment to Executive, without
any discount or reduction,. Any unvested stock options owned by Executive shall
immediately vest upon a Change in Control. Notwithstanding such accelerated
payment and vesting, all other provisions of this Agreement shall remain in full
force and effect .

                  For purposes of this Section 12(b), the term "Change in
Control" shall mean with respect to Escalade:

                  (i)      any "person" (as such term is used in Sections 13(d)
                  and 14(d)(2) of the Exchange Act) becomes a beneficial owner
                  of (or otherwise has the authority to vote), directly or
                  indirectly, securities representing forty percent (40%) or
                  more of the total voting power of all of Escalade's then
                  outstanding voting securities; or

                  (ii)     Escalade becomes a party to a merger, consolidation
                  or share exchange in which either (A) Escalade will not be the
                  surviving corporation or (B) Escalade will be the surviving
                  corporation and any outstanding shares of Escalade common
                  stock will be converted into shares of any other company
                  (other than a reincorporation or the establishment of a
                  holding company involving no change of ownership of the
                  Company) or other securities or cash or other property
                  (excluding payments made solely for fractional shares);

                  (iii)    Escalade sells all or substantially all of its assets
                  to an unaffiliated third party;

                  (iv)     Escalade consummates a transaction which results in
                  Escalade "going private" within the meaning of Rule 13e-3
                  promulgated under the Securities Exchange Act of 1934, as
                  amended; or

                  (v)      any other event that a majority of the Company's
                  Board of Directors, in its sole discretion, shall determine
                  constitutes a Change of Control.

                                       12
<PAGE>

         13.      Remedies.

                  (a)      Submission to Jurisdiction. Executive and the Company
each submit to the exclusive jurisdiction of any state or federal court sitting
in Marion County, Indiana, or a judicial district which includes Marion County,
Indiana, and which court has jurisdiction over the matter in dispute, in any
action or proceeding arising out of or relating to this Agreement, and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party agrees it will institute any such
action, if at all, only in a court in Marion County, Indiana, or its judicial
district. Each party waives any defense of inconvenient forum to the maintenance
of any action or proceedings so brought and waives any bond, surety or other
security that might be required of any other party with respect thereto.
Executive and the Company agree that a final non-appealable judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law. Each party agrees to
bear his or its own attorneys' fees and costs in connection with any such court
proceeding and related actions.

                  (b)      Injunctive Relief. Executive agrees that in the event
of any actual or threatened breach by him of any of the provisions contained in
this Agreement, including those covenants specifically set forth in Sections 6,
7 and 8 hereof, the Company shall be entitled to cease its obligations to
Executive pursuant to Section 3 and to seek immediate temporary injunctive and
other equitable relief, without the necessity of showing actual monetary
damages, subject to hearing as soon thereafter as possible. In the event of such
injunctive relief, the periods of time referred to in Sections 7 and 8 shall be
deemed extended for a period equal to the respective period during which
Employee is in breach thereof, in order to provide for injunctive relief and
specific performance for a period equal to the full term thereof. In the event
that the Company breaches its obligations to make payments and to provide the
benefits specified in Section 3 hereof, Executive may seek specific performance
in addition to monetary damages and Executive will not be subject to the
provisions of Section 6, 7 or 8 hereof until such time as the breach is cured.
Nothing contained herein shall be construed as prohibiting Executive or the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of any damages which it is able to
prove.

         14.      Mutual Release. In consideration of the payments and benefits
set forth in this Agreement, such payments and benefits being good and valuable
consideration:

                  (a)      Release by Executive. Subject to Section 13(b),
Executive, on his own behalf and on behalf of his heirs, administrators,
executors, successors, assigns and personal representatives, covenants not to
sue and hereby fully and forever releases, acquits and discharges the Company,
its shareholders, directors, officers, employees, agents, representatives,
insurance carriers, and their successors and assigns (collectively the
"Releasees"), from any and all claims, demands, actions and causes of action of
every kind, nature or description (collectively "claims") that Executive may
have had, may now have, or may hereafter have against Releasees, including
without limitation any and all claims in any way related to or based upon
Executive's employment with the Company through the Executive Transition Date
and/or the cessation of Executive's service as an employee, executive officer
and director of the Company, including without limitation any claims for breach
of contract, implied contract, promissory estoppel, tortious conduct or claims

                                       13
<PAGE>

arising under any federal or state statute or law or local ordinance, including
but not limited to: the Age Discrimination in Employment Act as amended
("ADEA"); Older Workers' Benefit Protection Act ("OWBPA"); Americans with
Disabilities Act ("ADA") as amended; the Family and Medical Leave Act ("FMLA");
Title VII of the Civil Rights Act of 1964; the Civil Rights Acts of 1991; the
Employee Retirement Income Security Act ("ERISA"); 42 U.S.C. ss. 1981; 29 U.S.C.
ss. 206(d)(1); Section 503 and 504 of the Rehabilitation Disabilities Act; the
WARN Act; Indiana's fair employment practices statutes; any other federal, state
or local law dealing with employment discrimination; and any federal or state
"Whistleblower" law, existing as of the date of this Agreement. Provided,
however, that if the Company were to breach this Agreement, this release would
not bar an action by Executive against the Company to enforce its term(s) or any
applicable law. In addition, this Section 14(a) shall not affect adversely any
benefits to which Executive may be entitled arising out of any social security,
workers' compensation or unemployment laws, or under the terms of any employee
pension or welfare or benefit plans or programs of the Company, which may be
payable now or in the future to Executive.

                  (b)      Acknowledgements by Executive. Executive specifically
acknowledges and agrees that: (i) Executive is waiving claims under the
foregoing laws, including specifically the ADEA and the OWBPA; (ii) this waiver
of any rights or claims is knowing and voluntary; (iii) this Agreement is
written in a manner that Executive understands; (iv) the Company has hereby
advised Executive to consult with an attorney before executing this Agreement
and that Executive has so consulted; (v) the waiver of rights under Section
14(a) does not waive rights or claims arising after the date of this Agreement;
(vi) Executive has been given a period of 21 days within which to consider this
Agreement; (vii) for a period of seven days following Executive's execution of
this Agreement, Executive may revoke this Agreement and this Agreement will not
become enforceable or effective until the revocation period expires; and (viii)
the waiver of rights in Section 14(a) is in exchange for consideration in
addition to anything of value to which Executive was already entitled to
receive.

                  (c)      Release by the Company. Subject to Section 13(b), the
Company, on behalf of itself and its successors and assigns, covenants not to
sue and hereby fully and forever releases, acquits and discharges Executive and
his successors and assigns, from any and all claims, demands, actions and causes
of action of every kind, nature or description (collectively "claims") that the
Company may have had, may now have, or may hereafter have against Executive,
including without limitation any and all claims in any way related to or based
upon Executive's employment with the Company, its subsidiaries and affiliates
through the Executive Transition Date and/or the cessation of Executive's
service as an executive officer or director of the Company, including without
limitation any claims for breach of contract, implied contract, promissory
estoppel, tortious conduct or claims arising under any federal or state statute
or law or local ordinance, existing as of the date of this Agreement. Provided,
however, that if Executive were to breach this Agreement, this release would not
bar an action by the Company against Executive to enforce its term(s) or any
applicable laws.

                  (d)      Unknown Claims. This Agreement covers both claims
that Executive and/or the Company know about and those that Executive and/or the
Company may not know about. The parties hereto expressly waive all rights
afforded by any statute that limits the effect of a release with respect to
unknown claims. Each of Executive and the Company understand the significance of

                                       14
<PAGE>

its respective release of unknown claims and the waiver of statutory protection
against a release of unknown claims. However, this release shall not apply to
any claim based on the fraud or intentional misconduct of the other party or to
any act that is determined to be a criminal act under any federal, state or
local law committed or perpetrated by Executive or the Company at any time prior
to and through the Executive Transition Date. Neither Executive nor the Company,
based on the knowledge of Escalade's Board of Directors and of the Company's
executive officers other than Executive, is currently aware of any fraud or
intentional misconduct of the other party to this Agreement.

                  (e)      Future Claims Related to Employee and/or Shareholder
Status. Notwithstanding any provision of this Section 14 that may be construed
to the contrary, Executive and the Company agree that neither Executive nor the
Company waive or release the other party hereto from any claim that may arise
based on events occurring after the Executive Transition Date and that are based
upon Executive's employment with the Company during the Continuing Employment
Period. Executive and the Company further agree that Executive may not, based
upon Executive's status as a shareholder of the Company, assert any claim
subsequent to the Executive Transition Date against the Company or any Releasees
relating to any potential claim or matter that is the subject of or is otherwise
covered by the release granted by Executive in this Agreement or is in any way
related to the event of Executive's retirement from the Company.

                  (f)      Additional Release. Provided that Executive has
signed and delivered on or promptly after the Retirement Date to the Company a
general release identical in form and substance to the form of release attached
hereto as Exhibit A relating to claims arising or that may arise from events
during the Continuing Employment Period (the "Additional Release"), which
Additional Release by its terms has become effective and is in compliance with
the material terms of this Agreement, the Company further releases Executive,
his successors and assigns from any and all claims, demands, actions and causes
of action of every kind, nature or description (collectively "claims") that the
Company may have had, may now have, or may hereafter have against Executive,
including without limitation any and all claims in any way related to or based
upon Executive's employment with the Company during the Continuing Employment
Period and/or the cessation of Executive's service as an employee of the
Company, including without limitation any claims for breach of contract, implied
contract, promissory estoppel, tortious conduct or claims arising under any
federal or state statute or law or local ordinance, existing as of the date of
this Agreement and the Company shall sign and deliver at such time a general
release to such effect identical in form and substance to the form of release
attached hereto as Exhibit B. Provided, however, that if either party were to
breach this Agreement, such further release would not bar an action by the
non-breaching party against the breaching party to enforce its term(s) or any
applicable laws nor would such release cover any action based on a claim
excluded from the release by Section 14(d).

         15.      Future Service as Employee, Executive Officer or Director.
Executive agrees that his retirement as an employee, executive officer and
director of the Company is irrevocable, and that the Company shall have no
obligation whatsoever to rehire, reappoint or elect Executive to any such
officer, director or other position with the Company. Executive further agrees
that if he would seek any such position and is not so hired, nominated,
appointed or elected, Executive will not bring a claim against the Company
and/or any Releasee for refusal to so hire, nominate, appoint or elect.

                                       15
<PAGE>

         16.      Binding Effect; Authority. This Agreement shall bind the
Executive's heirs, executors, administrators, personal representatives, spouse,
dependents, successors and assigns. Escalade represents and warrants to
Executive that the individual signing this Agreement on behalf of the Company is
duly authorized to enter into this Agreement and to bind the Company hereunder.

         17.      Non-Admission. This Agreement shall not be construed as an
admission by either party of any wrongdoing or any violation of any federal,
state or local law, regulation or ordinance, and the parties specifically
disclaim any wrongdoing or violation.

         18.      Assignability. Neither this Agreement, nor any right or
interest hereunder, shall be assignable by Executive, his beneficiaries or legal
representatives, without the prior written consent of an executive officer of
Escalade.

         19.      Entire Agreement. This Agreement sets forth the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any other written or oral promises concerning the subject matter of
this Agreement except as expressly stated otherwise herein. The terms of this
Agreement may not be modified other than in a writing signed by the parties.

         20.      Governing Law. This Agreement shall in all respects be
interpreted, enforced and governed by the laws of the State of Indiana without
giving effect to provisions thereof regarding conflict of laws.

         In witness whereof, the parties have entered into this Agreement as of
this 19th day of April, 2006.

                                                   /s/ CHARLES WILLIAM REED
                                                   -----------------------------
                                                   Charles William Reed

                                                   ESCALADE, INCORPORATED

                                                   By: /s/ ROBERT E. GRIFFIN
                                                       -------------------------
                                                   Name:  Robert E. Griffin
                                                   Title: Chairman

                                       16
<PAGE>

                                    EXHIBIT A

                                 GENERAL RELEASE
                                 ---------------

         I, Charles William Reed (the "Executive"), in consideration of and
subject to the performance by Escalade, Incorporated, an Indiana corporation
("Escalade," and together with its subsidiaries and affiliates, the "Company"),
of its obligations under the Agreement dated and entered into by the undersigned
and Escalade as of April 19, 2006 (the "Agreement"), do hereby agree as follows:

         1.       Executive covenants not to sue and hereby fully and forever
releases, acquits and discharges the Company, its shareholders, directors,
officers, employees, agents, representatives, insurance carriers, and their
successors and assigns (collectively the "Releasees"), from any and all claims,
demands, actions and causes of action of every kind, nature or description
(collectively "claims") that Executive may have had, may now have, or may
hereafter have against Releasees, including without limitation any and all
claims in any way related to or based upon Executive's employment with the
Company through July 17, 2006 (the "Retirement Date") and/or the cessation of
Executive's service as an employee, executive officer and director of the
Company, including without limitation any claims for breach of contract, implied
contract, promissory estoppel, tortious conduct or claims arising under any
federal or state statute or law or local ordinance, including but not limited
to: the Age Discrimination in Employment Act as amended ("ADEA"); Older Workers'
Benefit Protection Act ("OWBPA"); Americans with Disabilities Act ("ADA") as
amended; the Family and Medical Leave Act ("FMLA"); Title VII of the Civil
Rights Act of 1964; the Civil Rights Acts of 1991; the Employee Retirement
Income Security Act ("ERISA"); 42 U.S.C. ss. 1981; 29 U.S.C. ss. 206(d)(1);
Section 503 and 504 of the Rehabilitation Disabilities Act; the WARN Act;
Indiana's fair employment practices statutes; any other federal, state or local
law dealing with employment discrimination; and any federal or state
"Whistleblower" law, existing as of the Retirement Date; provided, however, that
if the Company were to breach the Agreement, this release would not bar an
action by Executive against the Company to enforce its term(s) or any applicable
law. In addition, this release shall not affect adversely any benefits to which
Executive may be entitled arising out of any social security, workers'
compensation or unemployment laws, or under the terms of any employee pension or
welfare or benefit plans or programs of the Company, which may be payable now or
in the future to Executive.

         2.       Executive agrees that this release covers both claims that
Executive knows about and those that Executive may not know about. Executive
expressly waives all rights afforded by any statute that limits the effect of a
release with respect to unknown claims. Executive understands the significance
of his release of unknown claims and the waiver of statutory protection against
a release of unknown claims. However, this release shall not apply to any claim
based on the fraud or intentional misconduct of the Company or to any act that
is determined to be a criminal act under any federal, state or local law
committed or perpetrated by the Company at any time prior to and through the
Retirement Date. Executive is not currently aware of any fraud or intentional
misconduct of the Company.

                                      A-1
<PAGE>

         3.       Notwithstanding any provision of this release that may be
construed to the contrary, Executive does not waive or release the Company from
any claim that may arise based on events occurring after the Retirement Date.
Executive further agrees that he may not, based upon his status as a shareholder
of the Company, assert any claim subsequent to the Retirement Date against the
Company or any Releasees relating to any potential claim or matter that is the
subject of or is otherwise covered by this release or is in any way related to
the event of Executive's retirement from the Company.

         4.       Executive understands that the Company's commitments and
obligations as set forth in the Agreement represent, in part, consideration for
signing this release. Executive understands and agrees that he will not receive
the payments and benefits specified in the Agreement payable after the
Retirement Date unless Executive executes this release, does not revoke this
release within the time period permitted hereafter and does not breach this
release.

         5.       Executive represents that he has made no assignment or
transfer of any claim covered by this release.

         6.       Executive agrees that neither this release, nor the furnishing
of the consideration for this release, shall be deemed or construed at any time
to be an admission by the Company, the Releasees or the Executive of any
improper or unlawful conduct.

         7.       Whenever possible, each provision of this release shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this release is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this release shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

BY SIGNING THIS RELEASE, EXECUTIVE REPRESENTS AND AGREES THAT:

(a)      EXECUTIVE HAS READ IT CAREFULLY;

(b)      EXECUTIVE UNDERSTANDS THAT EXECUTIVE IS WAIVING CLAIMS UNDER THE
         FOREGOING LAWS SPECIFIED IN PARAGRAPH 1. ABOVE, INCLUDING SPECIFICALLY
         THE ADEA AND THE OWBPA;

(c)      THIS WAIVER OF ANY RIGHTS OR CLAIMS IS KNOWING AND VOLUNTARY;

(d)      THIS RELEASE IS WRITTEN IN A MANNER THAT EXECUTIVE UNDERSTANDS;

(e)      THE COMPANY HAS ADVISED EXECUTIVE TO CONSULT WITH AN ATTORNEY BEFORE
         EXECUTING THIS RELEASE AND THAT EXECUTIVE HAS SO CONSULTED;

                                      A-2
<PAGE>

(f)      THE WAIVER OF RIGHTS UNDER THIS RELEASE DOES NOT WAIVE RIGHTS OR CLAIMS
         ARISING AFTER THE DATE OF THIS RELEASE;

(g)      EXECUTIVE HAS BEEN GIVEN A PERIOD OF 21 DAYS WITHIN WHICH TO CONSIDER
         THIS RELEASE AND THE AGREEMENT;

(h)      FOR A PERIOD OF SEVEN DAYS FOLLOWING EXECUTIVE'S EXECUTION OF THIS
         RELEASE, EXECUTIVE MAY REVOKE THIS RELEASE AND THIS RELEASE WILL NOT
         BECOME ENFORCEABLE OR EFFECTIVE UNTIL THE REVOCATION PERIOD EXPIRES;

(i)      THE WAIVER OF RIGHTS IN THIS RELEASE IS IN EXCHANGE FOR CONSIDERATION
         IN ADDITION TO ANYTHING OF VALUE TO WHICH EXECUTIVE WAS ALREADY
         ENTITLED TO RECEIVE; AND

(j)      EXECUTIVE AGREES THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE
         AMENDED, WAIVED, CHANGE OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING
         SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY EXECUTIVE.

DATE:____________, ____                         ________________________________
                                                Charles William Reed

                                      A-3
<PAGE>

                                    EXHIBIT B

                                 GENERAL RELEASE
                                 ---------------

         Escalade, Incorporated, an Indiana corporation ("Escalade," and
together with its subsidiaries and affiliates, the "Company"), in consideration
of and subject to the performance by Charles William Reed (the "Executive") of
his obligations under the Agreement dated and entered into by the Escalade and
the Executive as of April 19, 2006 (the "Agreement"), does hereby agree as
follows:

         1.       The Company, on behalf of itself and its successors and
assigns, covenants not to sue and hereby fully and forever releases, acquits and
discharges Executive and his successors and assigns (collectively, the
"Releasees"), from any and all claims, demands, actions and causes of action of
every kind, nature or description (collectively "claims") that the Company may
have had, may now have, or may hereafter have against Executive, including
without limitation any and all claims in any way related to or based upon
Executive's employment with the Company, its subsidiaries and affiliates through
the Retirement Date and/or the cessation of Executive's service as an employee,
executive officer or director of the Company, including without limitation any
claims for breach of contract, implied contract, promissory estoppel, tortious
conduct or claims arising under any federal or state statute or law or local
ordinance, existing as of the date of this release; provided, however, that if
Executive were to breach the Agreement, this release would not bar an action by
the Company against Executive to enforce its term(s) or any applicable laws.

         2.       The Company agrees that this release covers both claims that
the Company knows about and those that the Company may not know about. The
Company expressly waives all rights afforded by any statute that limits the
effect of a release with respect to unknown claims. The Company understands the
significance of its release of unknown claims and the waiver of statutory
protection against a release of unknown claims. However, this release shall not
apply to any claim based on the fraud or intentional misconduct of the Executive
or to any act that is determined to be a criminal act under any federal, state
or local law committed or perpetrated by the Executive at any time prior to and
through the Retirement Date. The Company, based on the knowledge of Escalade's
Board of Directors and of the Company's executive officers other than Executive,
is not currently aware of any fraud or intentional misconduct of the Executive.

         3.       Notwithstanding any provision of this release that may be
construed to the contrary, the Company does not waive or release the Executive
from any claim that may arise based on events occurring after the Retirement
Date.

         4.       The Company understands that the Executive's commitments and
obligations as set forth in the Agreement represent, in part, consideration for
signing this release. The Company understands and agrees that it will not
receive the benefits specified in the Agreement after the Retirement Date unless
the Company executes this release and does not breach this release.

         5.       The Company represents that it has made no assignment or
transfer of any claim covered by this release.

                                      B-1
<PAGE>

         6.       The Company agrees that neither this release, nor the
furnishing of the consideration for this release, shall be deemed or construed
at any time to be an admission by the Executive, the Releasees or the Company of
any improper or unlawful conduct.

         7.       Whenever possible, each provision of this release shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this release is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this release shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

BY SIGNING THIS RELEASE, THE COMPANY REPRESENTS AND AGREES THAT:

(a)      THE UNDERSIGNED AUTHORIZED SIGNATORY HAS READ IT CAREFULLY ON BEHALF OF
         THE COMPANY;

(b)      THIS WAIVER OF ANY RIGHTS OR CLAIMS IS KNOWING AND VOLUNTARY;

(c)      THE WAIVER OF RIGHTS UNDER THIS RELEASE DOES NOT WAIVE RIGHTS OR CLAIMS
         ARISING AFTER THE DATE OF THIS RELEASE;

(d)      THE WAIVER OF RIGHTS IN THIS RELEASE IS IN EXCHANGE FOR CONSIDERATION
         IN ADDITION TO ANYTHING OF VALUE TO WHICH THE COMPANY WAS ALREADY
         ENTITLED TO RECEIVE;

(e)      THE COMPANY AGREES THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE
         AMENDED, WAIVED, CHANGE OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING
         SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY EXECUTIVE;
         AND

(f)      THE INDIVIDUAL SIGNING THIS RELEASE ON BEHALF OF THE COMPANY IS DULY
         AUTHORIZED TO ENTER INTO THIS RELEASE AND TO BIND THE COMPANY
         HEREUNDER.

                                                ESCALADE, INCORPORATED

DATE:____________, ____                         By:_____________________________
                                                   Name:
                                                   Title:

                                      B-2

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