Document:

Exhibit 4.3

 

ESCROW AGREEMENT

 

THIS
ESCROW AGREEMENT, dated as of the 20th day of April, 2006
(this “Agreement”), is entered into by and between Ethanol Grain Processors, LLC, a Tennessee limited liability
company (the “Company”), and Regions Bank, an
Alabama banking corporation (the “Escrow
Agent”).

 

RECITALS

 

A.           The Company is offering up to 31,175,000 capital units
(in total, the “Units”) at a purchase price of $2.00 per Unit pursuant to an
offering registered with the Securities and Exchange Commission and various
state governmental agencies (the “Offering”).

 

B.             The minimum
investment by a subscriber (a “Subscriber” or, collectively, “Subscribers”) is
$20,000, with a payment in the amount of ten percent (10%) of the total
purchase price due on subscription (the “Initial Payment(s)”), and payment for
the remaining ninety percent (90%) due in one or more installments (such
payments together with the Initial Payment(s), the “Payment(s)”) upon 30 days
written notice from the Company pursuant to the terms of a promissory note to
be executed and delivered on subscription.

 

C.             In order to
facilitate the Offering, the Company is providing for the escrow of the
proceeds to be received from the Offering in an escrow account until certain
conditions have been met.

 

D.            The Company and the Escrow Agent desire to enter into
an agreement with respect to said escrow of proceeds in an escrow account to be
established with the Escrow Agent (the “Escrow Account”) in accordance with the
terms and conditions of this Agreement.

 

NOW
THEREFORE, in consideration of the premises and covenants set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for
themselves, their successors and assigns, hereby agree as follows:

 

1.              Definitions.
The following terms shall have the following meanings when used herein:

 

“Escrow Funds”
shall mean the funds deposited with the Escrow Agent pursuant to this
Agreement, together with any interest and other income thereon.

 

“Final Escrow Closing
Date” shall mean April 30, 2007, unless prior to such date, the
Company provides written notice to the Escrow Agent of the extension of the
Final Escrow Closing Date in accordance with applicable federal and state laws,
in which case the Final Escrow Closing Date shall mean the extended date
established by such extension.

 

“Notice of Escrow
Closing” shall mean a written certification that is signed on behalf of the
Company by a duly authorized person thereof stating that the following
conditions to closing on the Escrow Funds being held in the Escrow Account have
been satisfied:

 

 

	
  Ethanol
  Grain Processors, LLC

  	
   

  	
  Public
  Offering Escrow Agreement

  

 

(i)                                     The Company has received a minimum of
$50,000,000 in offering proceeds;

 

(ii)                                  The Company has closed on an amount of
debt financing which the Company has determined will, together with the Company’s
equity financing and grant awards, allow the Company to construct its proposed
ethanol plant and commence start-up operations with a reasonable amount of
working capital;

 

(iii)                               The
Company has executed a design-build agreement with Fagen, Inc. for the
construction of its proposed ethanol plant; and

 

(iv)                              The
Company has obtained all permits necessary to begin construction of its proposed
ethanol plant.

 

“Payment Instrument”
shall mean a check, money order or similar instrument received by the Company
as a Payment for the Units subscribed for by any Subscriber in the Offering.

 

“Subscription
Accounting” shall mean an accounting prepared by the Company of all
subscriptions for Units received by the Company as of the date of such
accounting for which Payments have been deposited into the Escrow Account,
indicating for each subscription (i) the Subscriber’s name, address and
federal taxpayer identification number, (ii) the amount of the Payment(s)
received, (iii) the date of deposit by the Company of the Payment
Instrument(s) relating thereto and notations of any nonpayment of such Payment
Instrument(s), (iv) any withdrawal of any such subscription by the
Subscriber (if permitted), and (v) any rejection of any such subscription
in whole or in part by the Company, or any other termination, for whatever
reason, of any such subscription.

 

2.              Appointment of
and Acceptance by Escrow Agent. The Company hereby appoints the Escrow
Agent to serve as escrow agent hereunder, and the Escrow Agent hereby accepts
such appointment and agrees to act as Escrow Agent in accordance with the terms
of this Agreement.

 

3.              No Endorsement.
The parties hereto understand that the Escrow Agent, by accepting the
appointment and designation as escrow agent hereunder, in no way endorses the
merits of the offering of the securities. The Company agrees to notify any
person acting on its behalf that the Escrow Agent’s position as escrow agent
does not constitute such an endorsement, and to prohibit said persons from the
use of the Escrow Agent’s name as an endorser of such offering.

 

4.              Deposits
into Escrow.

 

a.               Delivery of
Payment Instruments. From time to time prior to the termination of this
Agreement, the Company shall forward Payment Instruments to the Escrow Agent
for deposit into the Escrow Account, endorsed (if appropriate) to the Escrow
Agent, together with a list of the applicable Subscribers showing, with respect
to each such Subscriber, the Subscriber’s name, address and federal taxpayer
identification number and the amount of the Payment Instruments allocable
thereto.

 

ALL
ESCROW FUNDS SHALL REMAIN THE PROPERTY OF THE SUBSCRIBERS ACCORDING TO THEIR
RESPECTIVE INTERESTS AND SHALL NOT BE SUBJECT TO

 

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ANY
LIEN OR CHARGE BY THE ESCROW AGENT, ANY LIEN OR CLAIM BY THE COMPANY OR BY
JUDGMENT OR CREDITORS CLAIMS AGAINST THE COMPANY UNLESS AND UNTIL RELEASED TO
THE COMPANY IN ACCORDANCE WITH SECTION 5 HEREOF. IN NO EVENT SHALL
ANY OF THE ESCROW FUNDS BE COMMINGLED WITH DEPOSIT ACCOUNTS OF THE ESCROW AGENT
OR OTHERWISE TREATED AS A DEPOSIT ACCOUNT OF THE ESCROW AGENT OR REFLECTED ON
THE FINANCIAL STATEMENTS OF THE ESCROW AGENT.

 

b.              Availability of
Funds. Notwithstanding anything to the contrary contained in this
Agreement, the Company understands and agrees that all Payment Instruments
received by the Escrow Agent hereunder are subject to collection requirements
of presentment and final payment, and that the funds represented thereby cannot
be drawn upon or disbursed until such time as final payment in collected funds
has been made and is no longer subject to dishonor. Upon receipt, the Escrow
Agent shall process each Payment Instrument it receives for collection, and the
proceeds thereof shall be held as part of the Escrow Funds and disbursed
in accordance with Sections 5 and 6 hereof. If, upon presentment for
payment, any Payment Instrument is dishonored, the Escrow Agent shall notify
the Company of such dishonor and return such Payment Instrument to the Company
to take whatever action it deems necessary. The Escrow Agent shall have no duty
or responsibility to establish whether any Payment Instrument is valid and
enforceable or represents collectible funds and shall have no duty or
responsibility to take any action for the collection (other than deposit for
payment) or enforcement of any Payment Instrument.

 

5.              Disbursement
of Funds to the Company.

 

a.               Escrow Closing. Promptly upon receipt of the following documents
from or at the direction of the Company, the Escrow Agent shall disburse to the
Company the balance of the Escrow Funds, together with all interest or other
income earned on the Escrow Funds (after deducting amounts payable to
Subscribers pursuant to Section 6.b. hereof or payable to the
Escrow Agent pursuant to Section 13 hereof), by wire transfer or
such other means as may be requested by the Company:

 

1.               A Notice of Escrow Closing in the form attached
hereto as Exhibit A; and

 

2.               A Subscription Accounting as of the date
of the Notice of Escrow Closing.

 

Notwithstanding anything
to the contrary herein provided, the Escrow Agent shall be entitled to rely
conclusively and without inquiry on any documents furnished to the Escrow Agent
by the Company which purport to be those documents contemplated by this Section 5(a).
Without limiting the foregoing, the Escrow Agent shall have no duty or
responsibility to review or seek to determine the truth, accuracy or
sufficiency of any such documents, it being the understanding and agreement of
the parties hereto that the Escrow Agent shall disburse the Escrow Funds upon
receipt of documents the Escrow Agent believes, without any duty of further
inquiry, to conform to the requirements set forth in this Section 5(a).

 

b.              Issuance of Certificates. Until the terms of this Agreement have
been met and the funds hereunder released to the Company, the Company shall not
issue any certificates or other evidences of securities with respect to the
funds hereunder.

 

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6.              Return of
Funds to Subscribers.

 

a.               Failure to Reach
Escrow Closing. If, by the date that is five (5) business days after
the Final Escrow Closing Date, the Escrow Agent is not in receipt of the
documents described in Section 5.a., then the Escrow Agent shall (i) notify
the Company in writing that the conditions set forth in Section 5.a.
have not been satisfied, (ii) as soon as practicable but no later than
thirty (30) days following the Final Escrow Closing Date, return the Escrow
Funds then held by the Escrow Agent to the Subscribers by certified mail in
accordance with their respective Payments on deposit in the Escrow Account,
together with each Subscriber’s pro rata portion of the net interest or other
income earned in the Escrow Account (after deducting amounts paid to the Escrow
Agent pursuant to Section 13 hereof), and (iii) then notify
the Company in writing of such refund.

 

b.              Rejection of Any
Subscription. As soon as practicable but no later than thirty (30) days
after receipt by the Escrow Agent of written notice from the Company that the
Company intends to reject a Subscriber’s subscription in whole or in part, the
Escrow Agent shall return to the applicable Subscriber, by certified mail, that
amount of the Payment(s) paid by or on behalf of such Subscriber for which the
Subscriber’s subscription was rejected in whole or in part, together with such
Subscriber’s pro rata portion of the interest or other income earned in the Escrow
Account.

 

c.               Abandonment of
Offering; Insolvency of the Company; Company Obligation to Notify. As soon
as practicable but no later than thirty (30) days after receipt by the Escrow
Agent of (i) written notice from the Company that it is abandoning the Offering,
together with a copy of a resolution of the Company’s Board of Governors so
abandoning the Offering, duly attested to by the Secretary of the Company, or (ii) written
notice from the Company of the Company’s insolvency or bankruptcy, or the institution
of bankruptcy, reorganization, insolvency, or liquidation proceedings by or
against the Company and, if against the Company, such proceedings have
continued without termination for at least one hundred twenty (120) days; the
Escrow Agent shall return the Escrow Funds then held by the Escrow Agent to the
Subscribers by certified mail in accordance with their respective Payments on
deposit in the Escrow Account, together with each Subscriber’s pro rata portion
of the net interest or other income earned in the Escrow Account (after
deducting amounts paid to the Escrow Agent pursuant to Section 13
hereof). The Company shall promptly notify the Escrow Agent in writing of the
occurrence of any of the events described in this Section 6.c.

 

d.              Interest or Income
Earned. Computation of any Subscriber’s share of the (net) interest or
other income earned will be made based on the proportion of such Subscriber’s
Payment(s) in the Escrow Account to all Payments held by the Escrow Agent and
upon the length of time in days such Payment was held in the Escrow Account as
compared to all Payments held. All computations with respect to each Subscriber’s
allocable share of (net) interest or other income shall be made by the Escrow
Agent, which determinations shall be final and conclusive.

 

e.               Accounting. In
connection with a return of funds to Subscribers pursuant to this Section 6,
the Company shall provide the Escrow Agent with a Subscription Accounting. Under
no circumstances may a Subscriber receive less than the principal amount
of all Payments made by the Subscriber in connection with a return of funds to
Subscribers pursuant to this Section 6.

 

7.              Suspension
of Performance or Disbursement Into Court. If, at any time,
there shall exist any dispute between the Company, the Escrow Agent, any
Subscriber or any other person with respect to

 

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the holding or
disposition of any portion the Escrow Funds or any other obligations of the
Escrow Agent hereunder, or if at any time the Escrow Agent is unable to
determine, to the Escrow Agent’s reasonable satisfaction, the proper
disposition of any portion of the Escrow Funds or the Escrow Agent’s proper
actions with respect to its obligations hereunder, or if the Company has not
within 30 days of the furnishing by the Escrow Agent of a notice of resignation
pursuant to Section 10 hereof appointed a successor Escrow Agent to
act hereunder, then the Escrow Agent may, in its sole discretion, consult legal
counsel selected by it and take either or both of the following actions:

 

a.               Suspend the
performance of any of its obligations under this Agreement until such dispute
or uncertainty shall be resolved to the reasonable satisfaction of the Escrow
Agent or until a successor Escrow Agent shall have been appointed (as the case may be);
provided, however, that the Escrow Agent shall continue to invest
the Escrow Funds in accordance with Section 8 hereof; and/or

 

b.              Petition (by means of an interpleader action or any
other appropriate method) any court of competent jurisdiction in Davidson
County, Tennessee, for instructions with respect to such dispute or
uncertainty, and pay into such court all funds held by it in the Escrow Funds
for holding and disposition in accordance with the instructions of such court,
and the Escrow Agent shall thereupon be discharged from all further duties
under this Escrow Agreement.

 

The Escrow Agent shall
have no liability to the Company, any Subscriber or any other person with
respect to any such suspension of performance or disbursement into court,
specifically including any liability or claimed liability that may arise,
or be alleged to have arisen, out of or as a result of any delay in the
disbursement of funds held in the Escrow Funds or any delay in or with respect
to any other action required or requested of the Escrow Agent, except in
instances of the Escrow Agent’s gross negligence or willful misconduct.

 

8.              Investment
of Funds. The Escrow Agent shall invest and reinvest the Escrow
Funds as the Company shall direct (subject to applicable minimum investment
requirements) in writing; provided, however, that no investment
or reinvestment may be made except in the following:

 

a.               United States Treasury Money Market funds
(money market funds investing exclusively in U.S. Treasury securities and other
investments that are backed by the full faith and credit of the United States
of America); or

 

b.              Regions Bank’s Time Demand Open Account
(TDOA).

 

If the Escrow Agent has
not received written instructions from the Company when an investment decision
needs to be made, the Escrow Agent shall invest the Escrow Funds, or such
portion thereof as to which no written instructions have been received, in
Regions Bank’s Time Demand Open Account (TDOA). Each of the foregoing
investments shall be made in the name of the Escrow Agent in its stated
capacity hereunder. Any and all investments hereunder shall be made in
investments that are currently marketable or may be liquidated within five
(5) business days without penalty or charge. Notwithstanding anything to
the contrary contained herein, the Escrow Agent may, without notice to the
Company, sell or liquidate any of the foregoing investments at any time if the
proceeds thereof are required for any release of funds permitted or required hereunder.
The Escrow Agent shall have no liability for any loss or diminution in the
Escrow Account resulting from investments made in accordance with the
provisions of this Agreement.

 

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9.              Inspection
of Records. Any state or federal governmental authority and the
Company may, at any time upon reasonable notice, inspect the records of the
Escrow Agent, insofar as they relate to this Agreement, for the purpose of
determining compliance with and conformance to the provisions of this
Agreement.

 

10.       Resignation and Removal of Escrow Agent. The Escrow Agent may resign from
the performance of its duties hereunder at any time by giving thirty (30) days’
prior notice to the Company and upon providing an accounting of all Escrow
Funds accepted, held and disbursed by the Escrow Agent hereunder. The Escrow
Agent may be removed, with or without cause, by the Company, at any time
upon thirty (30) days’ prior written notice to the Escrow Agent. Such
resignation or removal shall take effect upon the appointment of a successor
Escrow Agent, as provided herein below, and upon receipt by the Company and a
successor Escrow Agent of an accounting of all Escrow Funds accepted, held and
disbursed by the Escrow Agent hereunder. Upon any such notice of resignation or
removal, the Company shall appoint a successor Escrow Agent hereunder. Upon the
acceptance in writing of any appointment as Escrow Agent hereunder by a
successor Escrow Agent, and upon receipt of the full accounting referred to
above, such successor Escrow Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Escrow
Agent, and the retiring Escrow Agent shall be discharged from its duties and
obligations under this Agreement, but shall not be discharged from any
liability hereunder for actions taken as Escrow Agent hereunder prior to such
succession. Notwithstanding anything to the contrary herein provided, in the
event the Escrow Agent resigns as Escrow Agent hereunder and no successor
Escrow Agent has been designated and accepted appointment as successor Escrow
Agent within forty-five (45) days following the date of the Escrow Agent’s
notice of resignation, the Escrow Agent shall have the right to deposit all property
held pursuant to this Agreement into the registry of any court of competent
jurisdiction and notify the parties hereto of such deposit, and thereupon the
Escrow Agent shall be discharged from all further duties and responsibilities
as Escrow Agent under this Agreement. After any Escrow Agent’s resignation or
removal, the provisions of this Agreement shall continue to apply as to any
actions taken or omitted to be taken by it while it was Escrow Agent under this
Agreement.

 

11.       Duty and Liability of Escrow
Agent. The
sole duty of the Escrow Agent, other than as herein specified, shall be to
receive the Escrow Funds, invest and hold them subject to release, in
accordance herewith, and the Escrow Agent shall be under no duty to determine
whether the Company is complying with requirements of this Agreement or any
applicable laws or regulations, including but not limited to federal or state
securities laws, in tendering to the Escrow Agent said proceeds from the sale
of the Units. The Escrow Agent may conclusively rely upon and shall be
protected in acting upon any statement, certificate, notice, request, consent,
order or other document believed by it to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall have no duty
or liability to verify any such statement, certificate, notice, request,
consent, order or other document, and its sole responsibility shall be to act
only as expressly set forth in this Agreement. The Escrow Agent shall be under
no obligation to institute or defend any action, suit or proceeding in
connection with this Agreement unless first indemnified to its satisfaction.
The Escrow Agent may consult counsel with respect to any question arising
under this Agreement and the Escrow Agent shall not be liable for any action
taken or omitted in good faith upon advice of such counsel. The Escrow Agent
shall not be required to act upon or take notice of any direction, demand,
notice, communication or instructions provided to the Escrow Agent by any

 

6

 

Subscriber, but shall act
upon and take notice solely of notices, communications and instructions
provided to the Escrow Agent by the Company or as otherwise set forth in this
Agreement. The Escrow Agent shall have no implied duties or obligations and
shall not be charged with knowledge or notice of any fact or circumstance not
specifically set forth herein or in any notices given to it in accordance with
the notice provisions of this Agreement. The Escrow Agent shall have no
liability with respect to the transfer or distribution of any funds effected by
the Escrow Agent pursuant to wiring or transfer instructions provided to the
Escrow Agent by any party to this Agreement. The Escrow Agent shall not be obligated
to take any legal action or to commence any proceedings in connection with the
Escrow Account or this Agreement, or to appear in, prosecute or defend in any
such legal action or proceedings. In performing its duties under this
Agreement, or upon the claimed failure to perform its duties, the Escrow
Agent shall have no liability except for the Escrow Agent’s willful misconduct
or gross negligence. In no event shall the Escrow Agent be liable for
incidental, indirect, special, consequential, or punitive damages.

 

12.       Indemnification.
The Company shall indemnify and hold harmless the Escrow Agent and each
director, officer, employee, and agent of the Escrow Agent (collectively, the “Indemnified
Parties”) from and against any and all claims, demands, suits, actions or
proceedings (including any inquiry or investigation) arising directly or
indirectly from or in connection with the negotiation, preparation, execution,
performance or failure of performance of this Agreement or any transactions
contemplated herein, whether or not any such Indemnified Party is a party to
any such action, proceeding, suit or the target of any such inquiry or
investigation. This indemnity and hold harmless agreement shall include
indemnity against all costs, expenses, damages and liabilities, including
reasonable attorneys’ fees and expenses, incurred by or asserted against any of
the Indemnified Parties in connection with any such claims, demands, suits,
actions or proceedings, except for any consequential damages suffered by the
Indemnified Parties as a result of any such claims, demands, suits, actions or
proceedings, which consequential damages are expressly excluded from the
foregoing indemnity. Provided, further, that the foregoing indemnity shall not
apply to any claims demands, suits, actions or proceedings arising from the
gross negligence or willful misconduct of any Indemnified Parties. The
provisions of this Section 12 shall survive the termination of this
Agreement, any distribution of Escrow Funds hereunder, and any resignation or
removal of the Escrow Agent.

 

13.       Fees and
Expenses of Escrow Agent. The Escrow Agent shall be entitled to
compensation as described in Exhibit B attached hereto, promptly
paid by the Company at such time or times as set forth therein, for the
services provided by Escrow Agent hereunder. The provisions of this Section 13
shall survive any termination of this Agreement or the resignation or removal
of the Escrow Agent. The fees agreed upon for services rendered hereunder are
intended as full compensation for the Escrow Agent’s services as contemplated
by this Agreement; provided, however, that in the event the Escrow Agent
renders any material service not contemplated in this Agreement or there is any
assignment of interest in the subject matter of this Agreement, or any material
modification hereof, or if any material controversy arises hereunder, or the
Escrow Agent is made a party to any litigation pertaining to this Agreement, or
the subject matter hereof, then the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all costs and
expenses, including reasonable attorney’s fees, occasioned by any delay,
controversy, litigation or event, and the same shall be recoverable from the
Company, but not from the Escrow Account.

 

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14.       Representations
and Warranties.

 

a.               The Company makes
the following representations and warranties to the Escrow Agent, as of the
date hereof:

 

1.               The
Company is a limited liability company duly organized, validly existing, and in
good standing under the laws of the State of Tennessee and has full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder;

 

2.               This Agreement has been duly approved by
all necessary corporate action of the Company, has been executed by duly
authorized persons of the Company, and constitutes a valid and binding
agreement of the Company, enforceable in accordance with its terms;

 

3.               The
execution, delivery, and performance by the Company of this Agreement will not
violate, conflict with, or cause a default under the Company’s governing
instruments, any applicable law or regulation, any court order or
administrative ruling or decree to which the Company is a party or any of its
property is subject, or any agreement, contract, indenture or other binding
arrangement to which the Company is a party or any of its property is subject;
and

 

4.               The
Company hereby acknowledges that the status of the Escrow Agent is that of agent
only for the limited purposes set forth herein, and hereby represents and
covenants that no representations or implications shall be made that the Escrow
Agent has investigated the desirability or advisability of an investment in the
Units or has approved, endorsed or passed upon the merits of the investments
therein and that the name of the Escrow Agent has not and shall not be used in
any manner in connection with the offer or sale of the Units other than to
state that the Escrow Agent has agreed to serve as agent for the limited
purposes set forth herein.

 

b.              The Escrow Agent represents and warrants to
the Company, as of the date hereof, that the Escrow Agent has all necessary
powers and authority to act as an escrow agent as set forth in this Agreement.

 

The Escrow Agent shall have no duty or responsibility
for determining whether the Units or the offer and sale thereof conform to
the requirements of applicable Federal or state securities laws, including but
not limited to the Securities Act of 1933 or the Securities Exchange Act of
1934. The Company represents and warrants to the Escrow Agent that the Units
and the offer and sale thereof will comply in all respects with applicable
Federal and state securities laws and further represents and warrants that it
has obtained and acted upon the advice of legal counsel with respect to such
compliance with applicable Federal and state securities laws. The Escrow Agent
has not participated in the preparation or review of any sales or offering
material relating to the Units described in this Agreement. In addition to any
other indemnities provided for in this Agreement, the Company shall indemnify
and hold harmless the Escrow Agent and each of its officers, directors, agents
and employees from and against all claims, liabilities, losses and damages
(including attorneys’ fees) incurred by the Escrow Agent or such persons and
which directly or indirectly result from any violation or alleged violation of
Federal or state securities laws. The term “Regions Bank” or any similar words
shall not be used by the Company or reproduced in any prospectus or offering,
sales or similar material utilized by the Company or anyone acting on the
Company’s behalf in connection with the offering or sale of the Units, other
than to state that the

 

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Company will hold subscription deposits and proceeds
in an escrow account that it has established at Regions Bank.

 

15.       Consent
to Jurisdiction and Venue. In the event that any party hereto
commences a lawsuit or other proceeding relating to or arising from this
Agreement, the parties hereto agree that the courts in Davidson County,
Tennessee shall have sole and exclusive jurisdiction and shall be proper venue
for any such lawsuit or judicial proceeding and the parties hereto waive any
objection to such venue. The parties hereto consent to and agree to submit to
the jurisdiction of the courts specified herein and agree to accept service or
process to vest personal jurisdiction over them in any of these courts.

 

16.       Notice. Any notice and other communications hereunder shall
be in writing and shall be deemed to have been validly served, given or
delivered five (5) days after deposit in the United States mail, by
certified mail with return receipt requested and postage prepaid, at the time
of delivery when delivered personally, one (1) day after delivery to any
overnight courier, or when transmitted by facsimile transmission facilities,
and addressed to the party to be notified as follows; provided, however, that
the Escrow Agent shall not be deemed to have received any notice or
communication prior to its actual receipt thereof:

 

If to the Company:

 

Ethanol Grain Processors,
LLC

Attention: Chief
Executive Officer

P.O. Box 95

Obion, TN 38240

Fax:  (731) 536-1287

 

If to the Escrow Agent:

 

Regions
Bank

Corporate
Trust Department

417
North 20th Street, Suite 1420

Birmingham,
Alabama 35203

Attn:
Rebecca Brayman

205-801-5236
- Direct

205-326-7077
- Facsimile

Rebecca.brayman@regions.com

 

or to such other address
as each party may designate for itself by like notice.

 

17.       Amendment
or Waiver. This Agreement may be changed, waived,
discharged or terminated only by a writing signed by the Company and the Escrow
Agent. No delay or omission by any party in exercising any right with respect
hereto shall operate as a waiver. A waiver on any one occasion shall not be
construed as a bar to, or wavier of, any right or remedy on any future
occasion.

 

18.       Severability.
To the extent any provision of this Agreement is prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

 

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19.       Governing
Law. This Agreement shall be construed and interpreted in
accordance with the internal laws of the State of Tennessee without giving
effect to the conflict of laws principles thereof.

 

20.       Entire
Agreement. This Agreement constitutes the entire agreement
between the parties relating to the acceptance, collection, holding, investment
and disbursement of the Escrow Funds and sets forth in their entirety the
obligations and duties of the Escrow Agent with respect to the Escrow Funds.

 

21.       Binding Effect. All of the terms of this Agreement, as amended from
time to time, shall be binding upon, inure to the benefit of and be enforceable
by the respective successors and assigns of the Company and the Escrow Agent;
provided, however, that neither this Agreement nor any rights or obligations
hereunder may be assigned by any party hereto without the express written
consent of each of the other party hereto.

 

22.       Execution
in Counterparts. This Agreement may be executed in any
number of counterparts, which, when so executed, shall constitute one and the
same agreement.

 

23.       Termination.
Upon the first to occur of the disbursement of all amounts in the Escrow
Account pursuant to Section 5 or 6 hereof or deposit of all amounts
in the Escrow Account into court pursuant to Section 7 hereof, this
Agreement shall terminate and the Escrow Agent shall have no further
responsibilities whatsoever with respect to this Agreement or the Escrow Funds,
except that the Escrow Agent shall be required to prepare and issue IRS Forms
1099 to the Subscribers in the event that an IRS Form 1099 filing
requirement arises with respect to interest or other income earned on the
Escrow Funds.

 

24.       Force Majeure. No party to this Agreement shall be liable to
any other party for losses arising out of, or the inability to perform its
obligations under the terms of this Agreement, due to acts of God, which shall
include, but shall not be limited to hurricanes, fire, floods, strikes,
mechanical failure, war, riot, nuclear accident, earthquake, terrorist attack,
computer piracy, cyber-terrorism or other acts beyond the control of the
parties hereto.

 

25.       USA PATRIOT ACT. None of Company is (or will be) a person with
whom Escrow Agent is restricted from doing business with under regulations of
the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury
of the United States of America (including, those persons named on OFAC’s
Specially Designated and Blocked Persons list) or under any statute, executive
order (including, the September 24, 2001 Executive Order Blocking Property
and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other
governmental action and is not and shall not engage in any dealings or transactions
or otherwise be associated with such persons. In addition, the Company hereby
agrees to provide to Escrow Agent with any additional information that Escrow
Agent deems necessary from time to time in order to ensure compliance with all
applicable laws concerning money laundering and similar activities. The
following notification is provided to the Company pursuant to Section 326
of the USA Patriot Act of 2001, 31 U.S.C. Section 5318 (“Patriot Act”):  IMPORTANT INFORMATION ABOUT PROCEDURES FOR
OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism
and money laundering activities, Federal law requires all

 

10

 

financial
institutions to obtain, verify, and record information that identifies each
person or entity that opens an account, including any deposit account, treasury
management account, loan, other extension of credit, or other financial
services product. What this means for depositors:  When a depositor opens an account, if such
depositor is an individual, a lender (including Escrow Agent) will ask for such
depositor’s name, taxpayer identification number, residential address,  date of birth, and other information that
will allow the lender to identify such depositor, and, if such depositor is not
an individual, the Escrow Agent will ask for such depositor’s name, taxpayer
identification number, business address, and other information that will allow
the lender to identify such depositor. The Escrow Agent may also ask, if
such depositor is an individual, to see depositor’s driver’s license or other
identifying documents, and, if such depositor is not an individual, to see such
depositor’s legal organizational documents or other identifying documents. In the event
the Company violates any of the provisions of the USA Patriot Act and the
regulations thereunder, such event shall constitute a default hereunder and
shall entitle the Escrow Agent to exercise all of its rights and remedies at
law or in equity, including but not limited to terminating this Escrow
Agreement.

 

26.       Illegal Activities. Escrow Agent
shall have the rights in its sole discretion to not accept appointment as
escrow agent and reject funds and collateral from any depositor in the event
that Escrow Agent has reason to believe that such funds or collateral violate
applicable banking practices or applicable laws or regulations, including but
not limited to the Patriot Act. In the event of suspicious or illegal activity
and pursuant to all applicable laws, regulations and practices, the other
parties to this Agreement will assist Escrow Agent and comply with any reviews,
investigations and examinations directed against the deposited Escrow Funds.

 

[Signatures
appear on following page]

 

11

 

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and effective as of the date first above written.

 

	
   

  	
  ETHANOL GRAIN PROCESSORS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James K. Patterson

  	
   

  
	
   

  	
  Name:

  	
  James
  K. Patterson

  	
   

  
	
   

  	
  Its:

  	
  Chief
  Executive Officer

  	
   

  
	
   

  	
  Federal Taxpayer I.D.
  number:

  	
  20-1834045

  	
   

  
	
   

  	
  State Taxpayer I.D.
  number:

  	
  N/A

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  REGIONS
  BANK, Escrow Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Rebecca K. Brayman

  	
   

  
	
   

  	
  Name:

  	
  Rebecca
  K. Brayman

  	
   

  
	
   

  	
  Its:

  	
    Assistant
  Vice President

  	
   

  
								

 

12

 

EXHIBIT A

 

Form of Notice of Escrow Closing

 

(to be on Company letterhead)

 

	
  Regions
  Bank

  	
   

  	
  (date)

  
	
  Corporate
  Trust Department

  	
   

  	
   

  
	
  417
  North 20th Street, Suite 1420

  	
   

  	
   

  
	
  Birmingham,
  Alabama 35203

  	
   

  	
   

  
	
  Attn:
  Rebecca Brayman

  	
   

  	
   

  

 

Re: Notice of
Escrow Closing – Public Offering

 

Dear Sir/Madam:

 

Pursuant to the Escrow
Agreement dated (date), you are hereby notified that the following conditions
to closing on the Escrow Funds being held in the Escrow Account have been
satisfied:

 

(i)                                     The Company has received a minimum of
$50,000,000 in offering proceeds;

 

(ii)                                  The Company has closed on an amount of
debt financing which the Company has determined will, together with the Company’s
equity financing and grant awards, allow the Company to construct its proposed
ethanol plant and commence start-up operations with a reasonable amount of
working capital;

 

(iii)                               The
Company has executed a design-build agreement with Fagen, Inc. for the
construction of its proposed ethanol plant; and

 

(iv)                              The
Company has obtained all permits necessary to begin construction of its
proposed ethanol plant.

 

IN WITNESS WHEREOF, the undersigned hereby certifies he is
duly authorized to execute this notice on behalf of Ethanol Grain Processors,
LLC.

 

	
   

  	
  ETHANOL GRAIN PROCESSORS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
					

 

A-1

 

EXHIBIT B

 

Compensation of Escrow Agent

 

	
  Acceptance Fee:

  	
   

  	
  $

  	
  500.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Annual Administration Fee:

  	
   

  	
  $

  	
  2,000.00

  	
   

  

 

The
Acceptance Fee and the Annual Administration Fee are due upon execution of the
escrow agreement. All other fees, if any, will be billed to the client in
arrears.

 

 

[These fees are based upon our current understanding of our duties under
of this agreement. Regions Bank reserves the rights to adjust its fees should
its duties change under the agreement]

 

B-1Exhibit 10.1

AMENDED AND
RESTATED LONG-TERM STOCK INCENTIVE PLAN

1. PURPOSE. The Purposes of the Plan are to provide
additional incentive to those directors, officers and other employees of the
Company and its Subsidiaries whose substantial contributions are essential to
the continued growth and success of the Company’s business in order to
strengthen their commitment to the Company and its Subsidiaries, to motivate
such officers and employees to faithfully and diligently perform their assigned
responsibilities and to attract and retain competent and dedicated individuals
whose efforts will result in the long-term growth and profitability of the
Company. The purpose of the Plan is also to secure for the Company and its
stockholders the benefits of the incentive inherent in increased common stock
ownership by the members of the Board who are not employees of the Company or
any of its subsidiaries. To accomplish such purposes, the Plan provides that
the Company may grant Incentive Stock Options, Nonqualified Stock Options,
Restricted Stock Awards, Performance Units or Stock Appreciation Rights.

2. DEFINITIONS. For purposes of this Plan:

(a) “Award” means a grant of Restricted Stock,
Performance Units or Stock Appreciation Rights, or any or all of them.

(b) “Award Agreement” means the written agreement
between the Company and a Grantee evidencing the grant of an Award and setting
forth the terms and conditions thereof.

(c) “Board” means the Board of Directors of the
Company.

(d) “Cause” means the willful failure by an
Optionee or Grantee to perform his duties with the Company or with the
Subsidiary or the willful engaging in conduct, which is injurious to the
Company or any Subsidiary, monetarily or otherwise.

(e) “Change in Capitalization” means any
increase, reduction, change or exchange of Shares for a different number or
kind of shares or other securities of the Company by reason of a
reclassification, re-capitalization, merger, consolidation, reorganization,
issuance of warrants or rights, stock dividend, stock split or reverse stock
split, combination or exchange of shares, repurchase of shares, change in
corporate structure or otherwise.

(f) “Code” means the Internal Revenue Code of
1986, as amended.

(g) “Committee”
means a committee, consisting of at least two directors of the Company, which
is appointed by the Board to administer the Plan and to perform the functions
set forth herein; provided, however, that if the Committee consists of less
than the entire Board, each member shall be a “non-employee director” within
the meaning of Exchange Act Rule 16b-3; provided, further, however,
that to the extent necessary for any Option or Award intended to qualify as
performance—based compensation under Section 162(m) of the Code to so
qualify, each member of the Committee shall be an “outside director” within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder. Notwithstanding the preceding sentence, the Board may, in its
discretion, establish another committee and delegate to this committee any or
all of the authority and responsibility of the Committee with respect to grants
of Options or Awards to Eligible Participants who are not executive officers of
the Company on the date such Options or Awards are granted. Such other
committee may consist of one or more directors. To the extent that the Board
has delegated the authority and responsibility of the Committee to such other
committee, all references to the Committee in the Plan shall be to such other
committee.

(h) “Company” means Axsys Technologies, Inc.,
a Delaware corporation.

(i) “Disability” means the condition which
results when an individual has become permanently and totally disabled within
the meaning of Section 22(e)(3) of the Code.

 5
 

 

(j) “Eligible Participant” means any director,
officer or employee of the Company or a Subsidiary designated by the Committee
as eligible to receive Options or Awards subject to the conditions set forth
herein.

(k) “Exchange Act” means the Securities Exchange
Act of 1934, as amended.

(l) “Fair Market Value” means the fair market
value of the Shares as determined by the Committee in its sole discretion;
provided, however, that (A) if the Shares are listed on a national
securities exchange, including without limitation the Nasdaq National Market or
The Nasdaq SmallCap Market of the Nasdaq Stock Market (“Nasdaq”), Fair Market
Value on any date shall be the closing sales price for the Shares (or the
closing bid, if no sales were reported) on such date as such price is
officially reported on Nasdaq or as such price is quoted in the composite tape
of transactions on such exchange; or (B) if the Shares are admitted to
quotation on Nasdaq but selling prices are not reported, Fair Market Value on
any date shall be the average of the high bid and low asked prices on the date
of determination, or on the last day on which there are quoted prices prior to
the date of determination.

(m) “Grantee” means a person to whom an Award has
been granted under the Plan.

(n) “Incentive Stock Option” means an Option that
is intended to satisfy the requirements of Section 422 of the Code and is
designated an Incentive Stock Option at the time of grant.

(o) “Non-Employee
Director” means any director of the Company who is not an employee of the
Company or any of its Subsidiaries.

(p) “Nonqualified Stock Option” means an Option,
which is designated at the time of grant as not constituting an Incentive Stock
Option.

(q) “Option” means an Incentive Stock Option, a
Nonqualified Stock Option, or either or both of them.

(r) “Option Agreement” means the written
agreement between the Company and an Optionee evidencing the grant of an Option
and setting forth the terms and conditions thereof.

(s) “Optionee” means a person to whom an Option
has been granted under the Plan.

(t) “Parent” means any corporation that, with
respect to the Company, is described in section 424(e) of the Code.

(u) “Performance Unit” means a performance unit
granted under Section 9 of the Plan.

(v) “Plan” means the Amended and Restated
Long-Term Stock Incentive Plan as set forth in this instrument and as it may be
further amended from time to time.

(w) “Restricted Stock” means Shares issued or
transferred to an Eligible Participant, which are subject to restrictions as
provided in Section 8 hereof.

(x) “Shares” means the common stock, par value
$.01 per share, of the Company (including any new, additional or different
stock or securities resulting from a Change in Capitalization).

(y) “Stock Appreciation Right” means a right to
receive all or some portion of the increase in the value of shares of Common
Stock as provided in Section 7 hereof.

(z) “Subsidiary” means any corporation that, with
respect to the Company, is described in Section 424(f) of the Code.

(aa) “Successor Corporation” means a corporation, or a
Parent or Subsidiary thereof, which issues or assumes a stock option in a
transaction to which Section 424(a) of the Code applies.

 6
 

 

 3. ADMINISTRATION.

(a) The Plan shall be administered by the
Committee, which shall hold meetings at such times as may be necessary for the
proper administration of the Plan. The Committee shall keep minutes of its
meetings. A majority of the Committee shall constitute a quorum and a majority
of a quorum may authorize any action. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan, the Options or the Awards, and all members of
the Committee shall be fully indemnified and held harmless by the Company with
respect to any such action, determination or interpretation.

(b) Subject
to the express terms and conditions set forth herein, the Committee shall have
the power from time to time:

(1)    to
determine those Eligible Participants to whom Options shall be granted under
the Plan and the number of Shares subject to Incentive Stock Options and/or
Nonqualified Options to be granted to each Eligible Participant and to
prescribe the terms and conditions (which need not be identical) of each
Option, including the purchase price per share of each Option;

(2)    to select
those Eligible Participants to whom Awards shall be granted under the Plan and
to determine the number of Performance Units, shares of Restricted Stock and/or
Stock Appreciation Rights to be granted pursuant to each Award, the terms and
conditions of each Award, including the restrictions or performance criteria
relating to such units, shares or rights, the purchase price per share, if any,
of Restricted Stock, the maximum value, if any, of the amount payable pursuant
to each Performance Unit and whether Stock Appreciation Rights will be granted
alone or in conjunction with an Option;

(3)    to
construe and interpret the Plan and the Options and Awards granted thereunder
and to establish, amend and revoke rules and regulations for the
administration of the Plan, including, but not limited to, correcting any
defect or supplying any omission, or reconciling any inconsistency in the Plan
or in any Agreement, in the manner and to the extent it shall deem necessary or
advisable to make the Plan fully effective, and all decisions and
determinations by the Committee in the exercise of this power shall be final
and binding upon the Company or a Subsidiary, the Optionees and the Grantees,
as the case may be;

(4)    to
determine the duration and purposes for leaves of absence which may be granted
to an Optionee or Grantee without constituting a termination of employment or
service for purposes of the Plan; and

(5)    generally,
to exercise such powers and to perform such acts as are deemed necessary or
advisable to promote the best interest of the Company with respect to the Plan.

4. STOCK SUBJECT TO PLAN.

(a) The maximum number of Shares that may be
issued or transferred pursuant to Options and Awards under this Plan is
1,550,000 (or the number and kind of shares of stock or other securities which
are substituted for those Shares or to which those Shares are adjusted upon a
Change in Capitalization) and the Company shall reserve for the purposes of the
Plan, out of its authorized but unissued Shares or out of Shares held in the
Company’s treasury, or partly out of each, such number of Shares as shall be
determined by the Board. The aggregated number of shares actually issued or
transferred by the Company upon the exercise of Incentive Stock Options will
not exceed 1,550,000.

(b) Whenever any outstanding Option or portion
thereof expires, is cancelled or is otherwise terminated (other than by
exercise of the Option or any related Stock Appreciation Right), the shares of
Common Stock allocable to the unexercised portion of such Option may again be
the subject of Options and Awards hereunder.

(c) Whenever any Shares subject to an Award or
Option are resold to the Company, or are forfeited for any reason pursuant to
the terms of the Plan, or any Shares are delivered to pay the exercise price of
an Option or to satisfy the withholding obligation with respect to an Option or
Award, any such Shares may again be the 

 7
 

 

subject of Options and Awards hereunder. Upon payment
in cash of the benefit provided by any award granted under the Plan, any shares
that were covered by that Option Award will again be available for issue or
transfer hereunder.

(d) An eligible participant may not be granted
Options and Awards in the aggregate in respect of more than 90,000 Shares per
calendar year.

5. ELIGIBILITY. Subject to the provisions of the Plan,
the Committee shall have full and final authority to select those Eligible
Participants who will receive Options and/or Awards; provided, however, that no
Eligible Participant shall receive any Incentive Stock Option unless he is an
employee of the Company or a Subsidiary at the time the Incentive Stock Option
is granted.

6. STOCK OPTIONS. The Committee may grant Options in
accordance with the Plan, the terms and conditions of which shall be set forth
in an Option Agreement. Each Option and Option Agreement shall be subject to
the following conditions:

(a) PURCHASE PRICE. The purchase price, which
shall not be less than the fair market value on the date of grant of the
Option, or the manner in which the purchase price is to be determined for
Shares under each Option shall be set forth in the Option Agreement.

(b) DURATION. Options granted hereunder shall be
for such term as the Committee shall determine. The Committee may, subsequent
to the granting of any Option, extend the term thereof. Notwithstanding the
foregoing, no option will be exercisable more than 10 years from the date of
the Option.

(c) NON-TRANSFERABILITY. No Option granted
hereunder shall be transferable by the Optionee to whom granted otherwise than
by will or the laws of descent and distribution, and an Option may be exercised
during the life time of such Optionee only by the Optionee or his guardian or
legal representative. The terms of such Option shall be binding upon the
beneficiaries, executors, administrators, heirs and successors of the Optionee.

(d) VESTING. Subject to Section 12(b) hereof,
each Option shall be exercisable in such installments (which need not be equal)
and at such times as may be designated by the Committee and set forth in the
Option Agreement.   Any grant of Options
may specify performance objectives that must be achieved as a condition to the
exercise of such Option. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time after becoming
exercisable, but not later than the date the Option expires. The Committee may
accelerate the exercisability of any Option or portion thereof at any time.

(e) METHOD OF EXERCISE. The exercise of an Option
shall be made only by a written notice delivered in person or by mail to the
Secretary of the Company at the Company’s principal executive office,
specifying the number of Shares to be purchased and accompanied by payment
therefor and otherwise in accordance with the Option Agreement pursuant to
which the Option was granted. The purchase price for any Shares purchased
pursuant to the exercise of an Option shall be paid in full upon such exercise
in cash, by check, or at the discretion of the Committee and upon such terms
and conditions as the Committee shall approve, by transferring Shares to the
Company. Any Shares transferred to the Company as payment of the purchase price
under an Option shall be valued at their Fair Market Value on the day preceding
the date of exercise of such Option. If requested by the Committee, the
Optionee shall deliver the Option Agreement evidencing the Option and the
Option Agreement evidencing any related Stock Appreciation Right to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and return such agreement(s), to the Optionee. No less than 100 Shares may be
purchased at any time upon the exercise of an Option unless the number of
Shares so purchased constitutes the total number of Shares then purchasable
under the Option.

(f) RIGHTS OF
OPTIONEES. No Optionee shall be deemed for any purpose to be the owner of any
Shares subject to any Option unless and until (i) the Option shall have
been exercised pursuant to the terms thereof, (ii) the Company shall have
issued and delivered the shares to the Optionee, and (iii) the Optionee’s
name shall have been entered as a stockholder of record on the books of the
Company. Thereupon, the Optionee shall have full voting, dividend and other
ownership rights with respect to such Shares.

 8
 

 

(g)  TERMINATION OF EMPLOYMENT. In the event that
an Optionee ceases to be employed by the Company or any Subsidiary, any
outstanding Options held by such Optionee shall, unless the Option Agreement
evidencing such Option provides otherwise, terminate on the earliest of the
following:

(1)    If the
Optionee’s termination of employment is due to his death or Disability, the
Option (to the extent exercisable at the time of the Optionee’s termination of
employment) shall be exercisable for a period of one (1) year following
such termination of employment, and shall thereafter terminate;

(2)    If the
Optionee’s termination of employment is by the Company or a Subsidiary for
Cause, the Option shall terminate on the date of the Optionee’s termination of
employment;

(3)    (a) If
the Optionee’s termination of employment is by the Company or any Subsidiary
for any other reason (including an Optionee’s ceasing to be employed by a
Subsidiary as a result of the sale of such Subsidiary or an interest in such
Subsidiary), the Option (to the extent exercisable at the time of the Optionee’s
termination of employment) shall be exercisable for a period of ninety (90)
days following such termination of employment, and shall thereafter terminate;
and (b) If the Optionee’s termination of employment is by the Optionee
(other than as set forth in paragraph (1) above) the Option (to the extent
exercisable at the time of the Optionee’s termination of employment) shall be
exercisable for a period of ten (10) days following such termination of
employment and shall thereafter terminate; and (c) If the Optionee’s
employment terminates due to Disability (as described in paragraph (1) above)
or under circumstances described in paragraph (3)(a) above, and the
Optionee dies prior to the permissible period of exercise for any outstanding
Option then held by the Optionee, the Option (to the extent exercisable at the
time of the Optionee’s termination of employment) shall be exercisable for a
period of one (1) year following the Optionee’s death, and shall thereafter
terminate.

(4)    Notwithstanding
the foregoing, in no event will the Option be exercisable beyond the term of
the Option.

Notwithstanding the foregoing, the Committee may
provide, either at the time an Option is granted or thereafter, that the Option
may be exercised after the periods provided for in this Section 6(g), but
in no event beyond the term of the Option.

(h)  Subject to the terms of the Plan, the
Committee may modify outstanding Options or accept the surrender of outstanding
Options (to the extent not exercised) and grant new Options in substitution
therefor. Notwithstanding the foregoing, no modification of an Option shall
alter or impair any rights or obligations under the Option without the Optionee’s
consent.

7. STOCK APPRECIATION RIGHTS. The Committee may, in
its discretion, either alone or in connection with the grant of an Option,
grant Stock Appreciation Rights in accordance with the Plan, the terms and
conditions of which shall be set forth in an Award Agreement. If granted in
connection with an Option, a Stock Appreciation Right shall cover the same
Shares covered by the Option (or such lesser number of Shares as the Committee
may determine) and shall, except as provided in this Section 7, be subject
to the same terms and conditions as the related Option.

(a) TIME OF
GRANT. A Stock Appreciation Right may be granted:

(1)    at any
time if unrelated to an Option; or

(2)    if related
to an Option, either at the time of grant, or at any time thereafter during the
term of the Option.

(b) STOCK
APPRECIATION RIGHTS RELATED TO AN OPTION.

(i)     PAYMENT.
A Stock Appreciation Right granted in connection with an Option shall entitle
the holder thereof, upon exercise of the Stock Appreciation Right or any
portion thereof, to receive payment of an amount computed pursuant to

Section 7(b)(iii).

 9
 

 

(ii)    EXERCISE.
A Stock Appreciation Right granted in connection with an Option shall be
exercisable at such time or times and only to the extent that the related
Option is exercisable, and will not be transferable except to the extent the
related Option may be transferable. A Stock Appreciation Right granted in
connection with an Incentive Stock Option shall be exercisable only if the Fair
Market Value of a Share on the date of exercise exceeds the purchase price specified
in the related Incentive Stock Option.

(iii)   AMOUNT
PAYABLE. Except as otherwise provided in an Award Agreement (as contemplated by
Section 12, upon the exercise of a Stock Appreciation Right related to an
Option, the Grantee shall be entitled to receive an amount determined by
multiplying (A) the excess of the Fair Market Value of a Share on the date
of exercise of such Stock Appreciation Right over the per Share purchase price
under the related Option, by (b) the number of Shares as to which such Stock
Appreciation Right is being exercised. Notwithstanding the foregoing, the
Committee may limit in any manner the amount payable with respect to any Stock
Appreciation Right by including such a limit in the Award Agreement evidencing
the Stock Appreciation Right at the time it is granted.

(iv)   TREATMENT
OF RELATED OPTIONS AND STOCK APPRECIATION RIGHTS UPON EXERCISE. Upon the
exercise of a Stock Appreciation Right granted in connection with an Option,
the Option shall be canceled to the extent of the number of Shares as to which
the Stock Appreciation Right is exercised, and upon the exercise of an Option
granted in connection with a Stock Appreciation Right or the surrender of such
Option as may be provided for in any Option Agreement, the Stock Appreciation
Right shall be cancelled to the extent of the number of Shares as to which the
Option is exercised or surrendered.

(v)    CUMULATIVE
EXERCISE OF STOCK APPRECIATION RIGHT AND OPTION. The Committee may provide,
either at the time a Stock Appreciation Right is granted in connection with a
Nonqualified Stock Option or thereafter during the term of the Stock
Appreciation Right, that, upon exercise of such Option or the surrender of the
Option as may be provided for in any Option Agreement, the Stock Appreciation
Right shall automatically be deemed to be exercised to the extent of the number
of Shares as to which the Option is exercised or surrendered. In such event,
the Grantee shall be entitled to receive the amount described in Section 7(b)(iii) or,
if otherwise provided for in the Award Agreement, as set forth therein, in
addition to the Shares acquired or cash received pursuant to the exercise or
surrender of the Option. The inclusion in an Award Agreement evidencing a Stock
Appreciation Right of a provision described in this Section 7(b)(v) may
be in addition to and not in lieu of the right to exercise the Stock
Appreciation Right as otherwise provided herein and in the Award Agreement.

(c) STOCK APPRECIATION RIGHTS UNRELATED TO AN
OPTION. The Committee may grant to Eligible Participants Stock Appreciation
Rights unrelated to Options. Stock Appreciation Rights unrelated to Options
shall contain such terms and conditions as to exercisability, vesting
(including the achievement of the performance objectives) and duration as the
Committee shall determine. Except as otherwise provided in an Award Agreement
(as contemplated by Section 12, the amount payable upon exercise of such
Stock Appreciation Rights shall be determined in accordance with Section 7(b)(iii),
except that “Fair Market Value of a Share on the date of the grant of the Stock
Appreciation Right” shall be substituted for “purchase price under the related
Option.”  No Stock Appreciation Right
unrelated to an Option will be exercised more than 10 years from the date of a
grant of such Stock Appreciation Right.

(d) METHOD OF EXERCISE. Stock Appreciation Rights
shall be exercised by a Grantee only by a written notice delivered in person or
by mail to the Secretary of the Company at the Company’s principal executive
office, specifying the number of Shares with respect to which the Stock
Appreciation Right is being exercised. If requested by the Committee, the
Grantee shall deliver the Award Agreement evidencing the Stock Appreciation
Right being exercised and the Option Agreement evidencing any related Option to
the Secretary of the Company who shall endorse thereon a notation of such
exercise and return such agreement(s) to the Grantee.

(e) FORM OF PAYMENT. Payment of the amount
determined under Sections 7(b)(iii) or 7(c), shall be made, at the sole
discretion of the Committee, either (i) solely in whole shares of Common
Stock in a number determined at their Fair Market Value on the date of exercise
of the Stock Appreciation Right, (ii) solely in 

 10
 

 

cash, (iii) by delivery of a note or other
security, or (iv) in a combination of any of the foregoing. If the
Committee decides to make full payment in Shares, and the amount payable
results in a fractional Share, payment for the fractional Share will be made in
cash.

8. RESTRICTED
STOCK. The Committee may grant Awards of Restricted Stock which shall be
evidenced by an Award Agreement between the Company and the Grantee. Each Award
Agreement shall contain such restrictions, terms and conditions as the
Committee may require and (without limiting the generality of the foregoing)
such Award Agreements may require that an appropriate legend be placed on Share
certificates. Awards of Restricted Stock shall be subject to the following
terms and provisions:

(a)  RIGHTS OF
GRANTEE.

(i)     Shares of
Restricted Stock granted pursuant to an Award hereunder shall be issued in the
name of the Grantee as soon as reasonably practicable after the Award is
granted and the purchase price, if any, is paid by the Grantee, provided that
the Grantee has executed an Award Agreement evidencing the Award, an escrow
agreement, appropriate stock powers and any other documents which the
Committee, in its absolute discretion, may require as a condition to the
issuance of such Shares. If a Grantee shall fail to execute the Award Agreement
evidencing a Restricted Stock Award, an escrow agreement or appropriate blank
stock powers or shall fail to pay the purchase price, if any, for the
Restricted Stock, the Award shall be null and void. Shares issued in connection
with a Restricted Stock award shall be deposited together with the stock powers
with an escrow agent designated by the Committee. Except as restricted by the
terms of the Award Agreement, upon delivery of the Shares to the escrow agent,
the Grantee shall have all of the rights of a stockholder with respect to such
Shares, including the right to vote the Shares and to receive all dividends or
other distributions paid or made with respect to the Shares.

(ii)    If a
Grantee receives any dividends or other distributions with respect to any
Shares which were awarded to him as Restricted Stock prior to the lapsing of
restrictions imposed upon such Shares, such dividends and distributions shall
be held by the escrow agent subject to the restrictions and obligations
(including forfeiture provisions) provided by this Plan. Any such dividends and
distributions shall be held by the escrow agent for the account of the Grantee
prior to the earlier of (i) the lapsing of restrictions imposed upon such
Shares and (ii) the forfeiture of such Shares; and, upon the lapsing of
such restrictions, there shall be credited to the Grantee interest at a rate to
be determined by the Committee on any cash dividend paid thereon for the period
held by the escrow agent pursuant hereto.

(b)  NON-TRANSFERABILITY.
Until any restrictions upon the Shares of Restricted Stock awarded to a Grantee
shall have lapsed in the manner set forth in Section 8(c), such Shares
shall not be sold, transferred or otherwise disposed of and shall not be pledged
or otherwise hypothecated, nor shall they be delivered to the Grantee. Upon the
termination of employment of the Grantee, all of such Shares with respect to
which restrictions have not lapsed shall be resold by the Grantee to the
Company at the same price, if any, paid by the Grantee for such Shares or shall
be forfeited and automatically transferred to and reacquired by the Company at
no cost to the Company if no purchase price had been paid for such Shares. The
Committee may also impose such other restrictions and conditions on the Shares
as it deems appropriate.

(c)  LAPSE OF
RESTRICTIONS.

(i)     Restrictions
upon Shares of Restricted Stock awarded hereunder shall lapse at such time or
times and on such terms, conditions and satisfaction of performance objectives
(as described in Section 9(a)) as the Committee may determine; provided,
however, that the restrictions upon such Shares shall lapse only if the Grantee
on the date of such lapse is then and has continuously been an employee or
director, as applicable, of the Company or a Subsidiary from the date the Award
was granted.

(ii)    In the
event of termination of employment or directorship, as applicable, as a result
of the death or Disability of a Grantee, the Committee, in its absolute
discretion, may determine that the restrictions upon some or all Shares of
Restricted Stock awarded to the Grantee shall thereupon immediately lapse. The 

 11
 

 

Committee may also decide
at any time, in its absolute discretion and on such terms and conditions as it
deems appropriate, to remove or modify the restrictions upon Shares of
Restricted Stock awarded hereunder.

(d)  DELIVERY OF
SHARES. Upon the lapse of the restrictions on Shares of Restricted Stock
awarded hereunder, the Committee shall cause a stock certificate to be delivered
to the Grantee with respect to such Shares, free of all restrictions.

9. PERFORMANCE UNITS. The Committee may grant
Performance Units, the terms and conditions of which shall be set forth in an
Award Agreement between the Company and the Grantee. Each Performance Unit
shall represent the right to receive a Share, or a cash payment equal to the
Fair Market Value thereof, contingent upon the Company’s attainment of
specified performance objectives within a specified award period. Each Award
Agreement shall specify the number of the Performance Units to which it
relates, the performance objectives which must be satisfied in order for the
Performance Units to vest, and the award period within which such objectives
must be satisfied.

(a) PERFORMANCE OBJECTIVES. Performance
objectives relating to any Option or Award may be expressed in terms of (a) net
earnings or net worth, (b) return on equity or assets, (c) earnings
per Share, (d) Share price, (e) pre-tax profits, (f) gross
revenues, (g) EBITDA, (h) dividends, (i) market share or market
penetration or (j) any combination of the foregoing, and may be determined
before or after accounting changes, special charges, foreign currency effects,
acquisitions, divestitures or other extraordinary events. Performance objectives
may be absolute or relative to the performance of other companies.   Each grant may specify in respect of such
performance objectives, a minimum acceptable level of achievement and will set
forth the formula for determining the number of Options or Awards that will be
earned if performance is at or above the minimum level but falls short of full
achievement of the specified performance objectives.

(b) VESTING AND FORFEITURE. A Grantee shall
become vested with respect to the Performance Units to the extent that the
performance objectives set forth in the Award Agreement are satisfied within
the award period. Subject to the terms of any Award Agreement (as contemplated
by Section 12 hereof), if the specified performance objectives are not
satisfied within the award period, the Grantee’s rights with respect to the
Performance Units shall be forfeited.

(c) PAYMENT OF AWARDS. Subject to the terms of
any Award Agreement (as contemplated by Section 12), payments to Grantees
in respect of vested Performance Units shall be made within 2 weeks after the
availability of audited financial statements for the award period to which such
Award relates but in no event later than 2 1⁄2 months after the end of the
period; provided, however, that prior to the vesting, payment, settlement or
lapsing of any restrictions with respect to any Performance Unit intended to
qualify as performance-based compensation under Section 162(m) of the
Code, the Committee shall certify in writing that the applicable performance
objectives have been satisfied. Such payments may be made entirely in Shares,
entirely in cash, or in a combination of Shares and cash, in each case as the
Committee shall determine. Except as provided in the terms of any Award
Agreement (as contemplated by Section 12), if payment is made in the form
of cash, the amount payable in respect of any Share shall be equal to the Fair
Market Value of such Share on the last day of the award period.

(d) TERMINATION OF EMPLOYMENT. In the event that
a Grantee ceases to be employed by the Company or a Subsidiary prior to the
expiration of an award period for any reason, any nonvested Performance Units
previously awarded to said Eligible Participant shall be forfeited unless the
Committee in its discretion determines that some part or all of said
Performance Units shall continue in effect under the Plan to the extent the
applicable performance objectives are satisfied within the award period.

(e) NON-TRANSFERABILITY. No amounts payable under
this Plan in respect of Performance Units shall be transferable by the Grantee
otherwise than by will or by the laws of descent and distribution provided that
the Grantee may designate a beneficiary to receive such amounts in the event of
the Grantee’s death.

 12

 

10. LOANS.

(a) To the extent permitted by law and at the
discretion of the Committee the Company or any Subsidiary may make loans to a
Grantee or Optionee in connection with the purchase of Shares pursuant to an
Award or in connection with the exercise of an Option, subject to the following
terms and conditions and such other terms and conditions not inconsistent with
the Plan including the rate of interest, if any, as the Committee shall impose
from time to time.

(b) No loan made under the Plan shall exceed the
sum of (i) the aggregate purchase price payable pursuant to the Option or
Award with respect to which the loan is made plus (ii) the amount of the
reasonably estimated income taxes payable by the Optionee or Grantee with
respect to the Option or Award. In no event may any such loan exceed the Fair
Market Value, at the date of exercise, of any such Shares.

(c) No loan shall have an initial term exceeding
ten (10) years; provided, that loans under the Plan shall be renewable at
the discretion of the Committee; and provided, further, that the indebtedness
under each loan shall become due and payable, as the case may be, on a date no
later than (i) one (1) year after termination of the Optionee’s or
Grantee’s employment due to death, retirement or Disability, or (ii) the
date of termination of the Optionee’s or Grantee’s employment for any reason
other than death, retirement or Disability.

(d) Loans under the Plan may be satisfied by an
Optionee or Grantee, as determined by the Committee, in cash or, with the
consent of the Committee, in whole or in part by the transfer to the Company of
Shares whose Fair Market Value on the date of such payment is equal to the cash
amount due and payable under such loans.

(e) A loan shall be secured by a pledge of Shares
with a Fair Market Value of not less than the principal amount of the loan.
After partial repayment of a loan, pledged Shares no longer required as
security may, at the discretion of the Committee, be released to the Optionee
or Grantee.

(f) Every loan shall meet all applicable laws,
regulations and rules of the Federal Reserve Board and any other
governmental agency having jurisdiction.

11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.

(a) In the event of a Change in Capitalization,
the Committee shall conclusively determine the appropriate adjustments, if any,
to the maximum number and class of shares of stock with respect to which
Options or Awards may be granted under the Plan, the number and class of shares
or units as to which Options or Awards may be granted under the Plan, the
number and class of shares or units as to which Options or Awards have been
granted under the Plan, and the purchase price therefor, if applicable.

(b) Any such adjustment in the Shares or other
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code
and only to the extent otherwise permitted by Section 422 and 424 of the
Code.

(c) If, by reason of a Change in Capitalization,
a Grantee of an Award shall be entitled to new, additional or different shares
of stock, securities or Performance Units (other than rights or warrants to
purchase securities), such new additional or different shares shall thereupon
be subject to all of the conditions, restrictions and performance criteria
which were applicable to the Shares or units pursuant to the Award prior to
such Change in Capitalization.

12. EFFECT OF CERTAIN TRANSACTIONS.

(a) In the event of (i) a merger or
consolidation or (ii) the sale or disposition of all or substantially all
of the Company’s assets, the Company shall have the authority to make provision
in connection with such transaction (x) for the assumption of Options or
Awards theretofore granted under the Plan, or the substitution for such Options
or Awards of new options or awards of the Successor Corporation, with
appropriate adjustment as to the number and kind of shares and the purchase
price for shares thereunder, or (y) for the surrender of outstanding
Options and Awards and the payments of cash in consideration therefor at their
fair market value.

 13
 

 

(b) Except as otherwise determined by the
Committee at the time of grant of an Option or Award, upon a Change in Control (as
defined below), all outstanding Options and Stock Appreciation Rights shall
become vested and exercisable; all restrictions on Restricted Stock shall
lapse, all performance goals shall be deemed achieved at target levels and all
other terms and conditions are met; and all Performance Units shall be
delivered. The Committee may, in its sole discretion, provide or agree to
provide for payments in consideration for the exercise of, surrender or
repurchase of an Option or Award (at such times and in such amounts determined
by the Committee in its sole discretion, which amounts, in the case of a change
of control, may be based upon the highest price per share paid in the
transaction even if greater than the Fair Market Value at the time of exercise,
surrender or repurchase). Any such determination by the Committee may be set
forth in the applicable Option Agreement, Award Agreement or otherwise. With
respect to Options and Awards intended to qualify as performance based
compensation under Section 162(m) of the Code, the Committee shall
set forth in the applicable Option Agreement or Award Agreement any terms as to
acceleration of the exercisability or vesting of the Option or Award
(including, but not limited to, acceleration upon the occurrence of a change of
control (as defined in the applicable Option Agreement or Award Agreement)).

A “Change in
Control” shall mean the occurrence of any of the following:

(i)     An
acquisition (other than directly from the Company) of any Shares or other
voting securities of the Company entitled to vote generally for the election of
directors (the “Voting Securities”) by any “Person” (as the term “person” is
used for purposes of Section 13(d) or 14(d) of the Exchange
Act), immediately after which such Person has “Beneficial Ownership” (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of
fifty percent or more of the then outstanding Shares or the combined voting
power of the Company’s then outstanding Voting Securities; provided, however,
in determining whether a Change in Control has occurred, Shares or Voting
Securities which are acquired in a Non-Control Acquisition (as hereinafter
defined) shall not constitute an acquisition which would cause a Change in
Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an
employee benefit plan (or a trust forming a part thereof) maintained by (A) the
Company or (B) any corporation or other Person of which a majority of its
voting power or its voting equity securities or equity interest is owned,
directly or indirectly, by the Company (a “Subsidiary”), (ii) the Company
or its Subsidiaries, (iii) any Person in connection with a Non-Control
Transaction (as hereinafter defined) or (iv) an Affiliate;

(ii)    The
individuals who, as of the date of this agreement, are members of the Board
(the “Incumbent Board”), cease for any reason to constitute at least a majority
of the members of the Board; provided, however, that if the election, or
nomination for election by the Company’s stockholders, of any new director was
approved by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened “Election Contest” (as
described in Rule 14a-11 promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board (a “Proxy Contest”) including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy Contest; or

(iii)   The
consummation of:

(A)   A merger,
consolidation, reorganization or other business combination with or into the
Company or in which securities of the Company are issued, unless such merger,
consolidation, reorganization or other business combination is a “Non-Control
Transaction.”  A “Non-Control Transaction”
shall mean a merger, consolidation, reorganization or other business
combination with or into the Company or in which securities of the Company are
issued where:

(1)    the
stockholders of the Company, immediately before such merger, consolidation,
reorganization or other business combination own directly or indirectly
immediately following such merger, consolidation, reorganization or other
business combination, at least fifty percent of the combined voting power of
the outstanding voting securities of the corporation resulting from such merger
or consolidation, reorganization or other business combination (the “Surviving
Corporation”) in substantially the same proportion as their 

 14
 

 

ownership of the Voting Securities immediately before
such merger, consolidation, reorganization, or other business combination,

(2)    the
individuals who were members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger, consolidation,
reorganization or other business combination constitute at least two-thirds of
the members of the board of directors of the Surviving Corporation, or a
corporation beneficially directly or indirectly owning a majority of the
combined voting power of the outstanding voting securities of the Surviving
Corporation, and

(3)    no Person other
than (i) the Company, (ii) any Subsidiary, (iii) any employee
benefit plan (or any trust forming a part thereof) that, immediately prior to
such merger, consolidation, reorganization or other business combination was
maintained by the Company, the Surviving Corporation, or any Subsidiary, or (iv) any
Person who, immediately prior to such merger, consolidation, reorganization or
other business combination had Beneficial Ownership of fifty percent or more of
the then outstanding Voting Securities or common stock of the Company, has
Beneficial Ownership of fifty percent or more of the combined voting power of
the Surviving Corporation’s then outstanding voting securities or its common
stock.

(B)    A complete
liquidation or dissolution of the Company; or

(C)    The sale
or other disposition of all or substantially all of the assets of the Company
to any Person (other than (i) any such sale or disposition that results in
at least fifty percent of the Company’s assets being owned by a Subsidiary or
Subsidiaries or (ii) a distribution to the Company’s stockholders of the
stock of a Subsidiary or any other assets); provided, however, that no
transaction or series of transactions by which Stephen W. Bershad, or any
Person in which Stephen W. Bershad has Beneficial Ownership, directly or
indirectly, of 25 percent of the outstanding ownership interests or voting
power, acquires fifty percent or more of the then outstanding Shares or the
combined voting power of the Company’s then outstanding Voting Securities shall
constitute a Change in Control for purposes of this Agreement (regardless of
the form of transaction or series of transactions by which such acquisition
occurs (including, without limitation, any acquisition described in clause (a) hereof
or any merger or other transaction described in clause (c) hereof)).

Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the “Subject Person”)
acquired Beneficial Ownership of more than the permitted amount of the then
outstanding Shares or Voting Securities as a result of the acquisition of
Shares or Voting Securities by the Company which, by reducing the number of
Shares or Voting Securities then outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person, provided that if a Change
in Control would occur (but for the operation of this sentence) as a result of
the acquisition of Shares or Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Shares or Voting Securities which increase the
percentage of the then outstanding Shares or Voting Securities Beneficially
Owned by the Subject Person, then a Change in Control shall occur.

13. RELEASE OF FINANCIAL INFORMATION. A copy of the
Company’s annual report to stockholders shall be delivered to each Optionee and
Grantee at the time such report is distributed to the Company’s stockholders. Upon
request, the Company shall furnish to each Optionee and Grantee a copy of its
most recent annual report and each quarterly report and current report filed
under the Exchange Act, since the end of the Company’s prior fiscal year.

14. TERMINATION AND AMENDMENT OF THE PLAN. The Plan
shall terminate on August 31, 2009 and no Option or Award may be granted
thereafter. The Board may sooner terminate or amend the Plan at any time, and
from time to time and in any manner provided, however, that any amendment which
must be approved by the stockholders of the Company in order to comply with
applicable law or the rules of the NASDAQ National Market System or, if
the Common Shares are not traded under the NASDAQ National Market System, the
principal national securities exchange upon which the Common Shares are traded
or quoted, will not be effective unless and until such approval has been
obtained. Except as provided in Sections 11 and 12 hereof, rights and
obligations under any Option or Award granted before any amendment of the Plan
shall not be 

 15
 

 

altered or impaired by such amendment, except with the
consent of the Optionee or Grantee, as the case may be.

15. LIMITATION OF
LIABILITY. As illustrative of the limitations of liability of the Company, but
not intended to be exhaustive thereof, nothing in the Plan shall be construed
to:

(a)  give any
person any right to be granted an Option or Award other than at the sole
discretion of the Committee;

(b)  give any
person any rights whatsoever with respect to Shares except as specifically
provided in the Plan;

(c)  limit in any
way the right of the Company or a Subsidiary to terminate the employment of any
person at any time; or

(d)  be evidence
of any agreement or understanding, expressed or implied, that the Company or
any Subsidiary will employ any person in any particular position at any
particular rate of compensation or for any particular period of time.

16. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.

(a) This Plan and the rights of all persons
claiming any interest hereunder shall be construed and determined in accordance
with the laws of the State of Delaware without giving effect to the choice of
law principles thereof, except to the extent that such law is preempted by
federal law.

(b) The obligation of the Company to sell or
deliver Shares with respect to Options and Awards granted under the Plan shall
be subject to all applicable laws, rules and regulations, including all
applicable federal and state securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or appropriate by
the Committee.

(c) Except as otherwise provided in Section 15,
the Board may make such changes as may be necessary or appropriate to comply
with the rules and regulations of any government authority, or to obtain
for Eligible Participants granted Incentive Stock Options the tax benefits
under the applicable provisions of the Code and regulations promulgated
thereunder.

(d) Each Option and Award is subject to the
requirement that, if at any time the Committee determines, in its absolute
discretion, that the listing, registration or qualification of Shares issuable
pursuant to the Plan is required by any securities exchange or under any state
or federal law, or the consent or approval of any governmental regulatory body
is necessary or desirable as a condition of, or in connection with, the grant
of an Option or the issuance of Shares, no Options shall be granted or payment
made or Shares issued, in whole or in part, unless listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions as acceptable to the Committee.

(e) In the event that the disposition of Shares
acquired pursuant to the Plan is not covered by a then current registration
statement under the Securities Act of 1933, as amended, and is not otherwise exempt
from such registration, such Shares shall be restricted against transfer to the
extent required by the Securities Act of 1933, as amended, or regulations
thereunder, and the Committee may require any individual receiving Shares
pursuant to the Plan, as a condition precedent to receipt of such Shares
(including upon exercise of an Option), to represent to the Company in writing
that the Shares acquired by such individual are acquired for investment only
and not with a view to distribution.

17. MISCELLANEOUS.

(a) MULTIPLE AGREEMENTS. The terms of each Option
or Award may differ from other Options or Awards granted under the Plan at the
same time, or at some other time. The Committee may also grant more than one
Option or Award to a given Eligible Participant during the term of the Plan,
either in addition to, or in 

 16
 

 

substitution for, one or more Options or Awards
previously granted to that Eligible Participant. The grant of multiple Options
and/or Awards may be evidenced by a single Agreement or multiple Agreements, as
determined by the Committee.

(b) WITHHOLDING OF TAXES. The Company shall have
the right to deduct from any distribution of cash to any Optionee or Grantee an
amount equal to the federal, state and local income taxes and other amounts
required by law to be withheld with respect to any Option or Award. Notwithstanding
anything to the contrary contained herein, if any Optionee or Grantee is
entitled to receive Shares upon exercise of an Option or pursuant to an Award,
the Company shall have the right to require such Optionee or Grantee, prior to
the delivery of such Shares, to pay to the Company the amount of any federal,
state or local income taxes and other amounts which the Company is required by
law to withhold.

(c) DESIGNATION OF BENEFICIARY. Each Optionee and
Grantee may, with the consent of the Committee, designate a person or persons
to receive in the event of his/her death, any Option or Award or any amount
payable pursuant thereto, to which he/she would then be entitled. Such
designation will be made upon forms supplied by and delivered to the Company
and may be revoked by the Optionee or Grantee in writing. If an Optionee or
Grantee fails effectively to designate a beneficiary, then his/her estate will
be deemed to be the beneficiary.

18. INTERPRETATION.

(a) RULE 16B-3. The Plan is intended to
comply with Exchange Act Rule 16b-3 and the Committee shall
interpret and administer the provisions of the Plan or any Option Agreement or
Award Agreement in a manner consistent therewith. Any provisions inconsistent
with such Rule shall be inoperative and shall not affect the validity of
the Plan. The Board is authorized to amend the Plan and to make any such
modifications to Option Agreements or Award Agreements to comply with Exchange
Act Rule 16b-3, as it may be amended from time to time, and to make
any other such amendments or modifications deemed necessary or appropriate to
better accomplish the purposes of the Plan in light of any amendments made to
Exchange Act Rule 16b-3.

(b) SECTION 162(M) OF THE CODE. Unless
otherwise expressly stated in the relevant Option Agreement or Award Agreement,
each Option, Stock Appreciation Right and Performance Unit granted under the
Plan to an executive officer of the Company is intended to be performance-based
compensation within the meaning of Section 162(m)(4)(c) of the Code
(except that, upon a change of control (as defined in the applicable Option
Agreement or Award Agreement), payment of an Option or Award to an Eligible
Participant who remains a “covered employee” with respect to such payment
within the meaning of Section 162(m)(3) of the Code may not qualify
as performance-based compensation). The Committee shall not be entitled to
exercise any discretion otherwise authorized hereunder with respect to such
Options and Awards if the ability to exercise such discretion or the exercise
of such discretion itself would cause the compensation attributable to such
Options and Awards to fail to qualify as performance-based compensation. Notwithstanding
anything to the contrary in the Plan, the provisions of the Plan may at any
time be bifurcated by the Board or the Committee in any manner so that certain
provisions of the Plan or any Option or Award intended (or required in order)
to satisfy the applicable requirements of Section 162(m) of the Code
are only applicable to persons whose compensation is subject to Section 162(m).

19. EFFECTIVE DATE. The effective date of the Plan
shall be the date of its adoption by the Board, subject only to the approval by
the affirmative vote of a majority of the votes eligible to be cast at a
meeting of stockholders of the Company to be held within twelve (12) months of
such adoption.

20. AWARD AND OPTION
GRANTS TO NON-EMPLOYEE DIRECTORS.

(a) The Board may, from time to time, upon such
terms and conditions and in such amounts as it may determine, authorize the
granting to Non-Employee Directors Options to purchase shares of Common Stock,
SARs, Restricted Stock and Performance Units. Each grant of an Award to a
Non-Employee Director will be upon such terms and conditions as approved by the
Board. If a Non-Employee Director subsequently becomes an employee of the
Company or a Subsidiary while remaining a member of the Board, any Award or 

 17
 

 

Option held under the Plan by such individual at the
time of such commencement of employment will not be affected thereby.

(b) TERMINATION
OF DIRECTORSHIP.

(i)     In the
event that an Optionee ceases to be a Non-Employee Director of the Company, any
outstanding Options held by such Optionee shall terminate as follows:

(A)   If the Optionee’s
termination of directorship is due to his death or Disability, the Option (to
the extent exercisable at the time of the Optionee’s termination of
directorship) shall be exercisable for a period of one (1) year following
such termination of directorship, and shall thereafter terminate;

(B)    If the
Optionee’s termination of directorship is by the Company for Cause, the Option
shall terminate on the date of the Optionee’s termination of directorship;

(C)    If the
Optionee’s directorship terminates for any other reason, the Option (to the
extent exercisable at the time of the Optionee’s termination of directorship)
shall be exercisable for a period of ninety (90) days following such
termination of directorship, and shall thereafter terminate; and

(D)   If the
Optionee’s directorship terminates under circumstances described in paragraph (iii) above,
and the Optionee dies prior to the permissible period of exercise for any
outstanding Option then held by the Optionee, the Option (to the extent
exercisable at the time of the Optionee’s termination of directorship) shall be
exercisable for a period of one (1) year following the Optionee’s death,
and shall thereafter terminate.

(ii)    In the
event that a Grantee ceases to be a Non-Employee Director of the Company, all
Shares of Restricted Stock with respect to which restrictions have not lapsed
shall be resold by the Grantee to the Company at the same price, if any, paid
by the Grantee for such Shares or shall be forfeited and automatically
transferred to and reacquired by the Company at no cost to the Company if no
purchase price had been paid for such Shares.

(iii)   In the
event that a Grantee ceases to be a Non-Employee Director of the Company prior
to the expiration of an award period for any reason, any nonvested Performance
Units previously awarded to said Eligible Participant shall be forfeited unless
the Committee in its discretion determines that some part or all of said
Performance Units shall continue in effect under the Plan to the extent the
applicable performance
objectives are satisfied within the award period.

COMPLIANCE WITH SECTION 409A OF THE CODE.  To the extent applicable, it is intended that
this Plan and any grants made hereunder comply with the provisions of Section 409A
of the Code. The Plan and any grants made hereunder shall be administered in a
manner consistent with this intent, and any provision that would cause the Plan
or any grant made hereunder to fail to satisfy Section 409A of the Code
shall have no force and effect until amended to comply with Section 409A
of the Code (which amendment may be retroactive to the extent permitted by Section 409A
of the Code and may be made by the Company without the consents of
Participants). Any reference in this Plan to Section 409A of the Code will
also include any proposed, temporary or final regulations, or any other
guidance, promulgated with respect to such Section by the U.S. Department
of the Treasury or the Internal Revenue Service.

 18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}]]