Document:

Exhibit 10.1 

EXECUTIVE EMPLOYMENT
AGREEMENT 

        THIS
AGREEMENT dated as of the 19th day of January 2009, to be effective as of the 26th day of
January 2009, by and between, AspenBio Pharma, Inc., a Colorado corporation (the
“Employer” or “Company”) and Daryl J. Faulkner (the
“Executive”). In consideration of the mutual covenants contained in this
Agreement, the Employer agrees to employ the Executive and the Executive agrees to be
employed by the Employer upon the terms and conditions hereinafter set forth. 

ARTICLE 1 
TERM OF EMPLOYMENT 

    
    1.1        Initial
Term. The initial term of employment hereunder shall commence as of the effective day
first written above (“Commencement Date”) and shall continue for a period of
one year from that date, unless terminated earlier as provided under Article 5.  

    
    1.2        Renewal;
Non- Renewal Benefits to Executive. At the end of the initial term of this Agreement,
and on the first anniversary after, the term of Executive’s employment shall be
automatically extended one additional year unless, at least 30 days prior to such
anniversary, the Executive shall have delivered to the Employer written notice that the
term of the Executive’s employment hereunder will not be extended. The Employer
shall have the right to provide such non-renewal notice to Executive, on the same terms
and conditions.  

ARTICLE 2 
DUTIES OF THE
EXECUTIVE 

    
    2.1        Duties.
The Executive shall be appointed to the Board of Directors and employed with the title of
Executive Chairman of the Board of Directors, with responsibilities and authorities as
are customarily performed by such position including, but not limited to those duties as
may from time to time be assigned to Executive by the Board of Directors of Employer.
Executive’s responsibilities and authorities for operating policies and procedures
are subject to the general direction and control of the Board of Directors. The Executive
shall have responsibility for and authority over all operational and management aspects
of the Company, to be delegated as he deems appropriate. Upon execution of this
Agreement, the Company’s Board of Directors shall also agree to appoint executive to
fill the vacancy on the Company’s Board of Directors.  

    
    2.2        Extent
and Place of Duties. Executive shall devote working time, efforts, attention and
energies to the business of the Employer on a substantial but not full time basis as may
further be agreed upon between the parties from time to time.  

ARTICLE 3 
COMPENSATION OF THE
EXECUTIVE 

    
    3.1        Salary.
As compensation for services rendered under this Agreement, the Executive will receive a
salary of $250,000 per year. Executive’s salary is payable in accordance with
Employer’s normal business practices. The parties agree that the salary and
compensation package will be reviewed at the end of the initial year by the Compensation
Committee of the Board of Directors.  

    
    3.2        Benefits.
Executive shall be entitled to participate in all of Employer’s employee benefit
plans and employee benefits, including any retirement, pension, profit-sharing, stock
option, insurance, hospital or other plans and benefits which now may be in effect or
which may hereafter be adopted, it being understood that Executive shall have the same
rights and privileges to participate in such plans and benefits as any other executive
employee during the term of this Agreement. Participation in any benefit plans shall be
in addition to the compensation otherwise provided for in this Agreement.  

    
    3.3        Expenses.
Executive shall be entitled to prompt reimbursement for all reasonable expenses incurred
by Executive in the performance of his duties hereunder.  

    
    3.4        Employee
Stock Options. Upon the Commencement Date of this Agreement Executive shall be
granted 500,000 options to purchase common stock of the Company at the market price on
the date of such grant. Such options shall be under the Company’s 2002 Stock
Incentive Plan, as amended and may consist of a combination of Incentive and
non-qualified options as are to be determined. Such options will be subject to the
provisions of the Company’s 2002 Stock Incentive Plan and as further defined in
Exhibit A, attached hereto.  

ARTICLE 4 
NON-COMPETITION;
CONFIDENTIALITY 

    
    4.1        During
the term of this Agreement, the Executive may make passive investments in companies
involved in industries in which the Company operates, provided any such investment does
not exceed a 5% equity interest, unless Executive obtains consent to acquire an equity
interest exceeding 5% by a vote of a majority of the directors.  

    
    4.2        During
the term of this Agreement the Executive may maintain any existing outside Board member
positions and that, subject to Aspen Board approval, which will not be unreasonably
withheld, the Executive could join additional non-competitive Boards as an Independent
Board member as well.  

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    4.3               Except
as provided in this Section 4 hereof, the Executive may not participate in any business
or other areas of business in which the Company is engaged during the term of this
Agreement except those he is currently engaged in or through and on behalf of the
Company, without the consent from a majority of the directors.  

    
    4.4        a.    
The Executive recognizes and acknowledges that the information, business, list of the
Employer’s customers and any other trade secret or other secret or confidential
information relating to Employer’s business as they may exist from time to time are
valuable, special and unique assets of Employer’s business. Therefore, Executive
agrees as follows:  

    
    
    
    
    
    (1)              That
Executive will hold in strictest confidence and not disclose, reproduce,
          publish or use in any manner, whether during or subsequent to this employment,
          without the express authorization of the Board of Directors of the Employer,
any           information, business, customer lists, or any other secret or confidential
          matter relating to any aspect of the Employer’s business, except as such
          disclosure or use may be required in connection with Executive’s work for
          the Employer.  

    
    
    
    
    
    (2)              That
upon request or at the time of leaving the employ of the Employer the           Executive
will deliver to the Employer, and not keep or deliver to anyone else,           any and
all notes, memoranda, documents and, in general, any and all material           relating
to the Employer’s business.  

    
    
    
    
    
    (3)             That
the Board of Directors of Employer may from time to time reasonably           designate
other subject matters requiring confidentiality and secrecy which           shall be
deemed to be covered by the terms of this Agreement.  

         
    
    
    b.       
          In the event of a breach or threatened breach by the Executive of the provisions
          of this paragraph 4.4, the Employer shall be entitled to an injunction (i)
          restraining the Executive from disclosing, in whole or in part, any information
          as described above or from rendering any services to any person, firm,
          corporation, association or other entity to whom such information, in whole or
          in part, has been disclosed or is threatened to be disclosed; and/or (ii)
          requiring that Executive deliver to Employer all information, documents, notes,
          memoranda and any and all other material as described above upon
          Executive’s leave of the employ of the Employer. Nothing herein shall be
          construed as prohibiting the Employer from pursuing other remedies available to
          the Employer for such breach or threatened breach, including the recovery of
          damages from the Executive. 

         
    
    
    c.       
          Executive hereby agrees that upon the execution of this Agreement he will sign
          the Company’s standard forms of; Code of Conduct, Confidentiality, Insider
          Trading Policy and Inventions agreements. 

ARTICLE 5 
TERMINATION OF
EMPLOYMENT 

    
    5.1        Termination.
 The Executive's  employment  hereunder may be terminated  without any breach of this
Agreement only under the following circumstances: 

    
    
    
    
    1.    By
Executive.   Upon the occurrence of any of the following events, this
          Agreement may be terminated by the Executive by written notice to Employer:  

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    (1)                     if
Employer makes a general assignment for the benefit of creditors, files a
          voluntary bankruptcy petition, files a petition or answer seeking a
          reorganization, arrangement, composition, readjustment, liquidation,
dissolution           or similar relief under any law, or there shall have been filed any
petition or           application for the involuntary bankruptcy of Employer, or other
similar           proceeding, in which an order for relief is entered or which remains
undismissed           for a period of thirty days or more, or Employer seeks, consents
to, or           acquiesces in the appointment of a trustee, receiver, or liquidator of
Employer           or any material part of its assets;  

    
    
    
    
    
    (2)                     the
sale by Employer of substantially all of its assets or a change of control           of
over 50% of Employer;  

    
    
    
    
    
    (3)                     a
decision by Employer, approved by the Board to terminate its business and
          liquidate its assets.  

    
    
    
    2.       Death.  
This Agreement shall terminate upon the death of Executive.  

    
    
    
    3.       Disability.  
The Employer may terminate this Agreement upon the disability           of the Executive.
Executive shall be considered disabled (whether permanent or           temporary) if he
is incapacitated to such an extent that he is unable to perform           substantially
all of his duties for Employer that he performed prior to such           incapacitation.  

    
    
    
    4.       Other
Termination.   The Employer may terminate the Executive’s           employment
hereunder for any reason.  

    
    
5.2        Notice
of Termination.   Any termination of the Executive’s employment by the Employer or
by the Executive (other than termination pursuant to subsection 5.1.2 above) shall be
communicated by written Notice of Termination to the other party.  

    
    
5.3        Date
of Termination.   “Date of Termination” shall mean (i) if the Executive’s
employment is terminated by his death, the date of his death; (ii) if the Executive’s
employment is terminated for Other Termination event (“Other Termination Event”),
the date on which a Notice of Termination is received by the Executive; and (iii) if the
Executive’s employment is terminated for any other reason stated above, the date
specified in a Notice of Termination by Employer or Executive, which date shall be no
less than 30 days following the date on which Notice of Termination is given.  

    
    5.4        Compensation
Upon Termination.  

    
    
    
    
  1.             Following
the termination of this Agreement pursuant to Section 5.1, the           Executive shall
be entitled to compensation only through the Date of           Termination; provided,
however, that Executive may be entitled to severance as           set forth in this
Section 5.4.  

    
    
    
      2.            Following
the termination of this Agreement pursuant to Section 5.1.2, Employer           shall pay
to Executive’s estate the compensation which would otherwise be           payable to
Executive for the three months following his death.  

    
    
    
      3.             In
the event of disability of the Executive as described in Section 5.1.3, if
          Employer elects to terminate this Agreement, Executive shall be entitled to
          receive compensation through the Date of Termination plus the compensation
which           would otherwise be payable to Executive for the three months following
such           termination for his disability.  

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      4.          If
Executive is terminated by Employer for any reason other than death or
          disability as set forth in this Article 5, then Executive is entitled to a
          severance payment equal to the equivalent of six months compensation following
          the date of Termination, under this Agreement.  

    
    5.5        Other
Termination Provisions.   Executive agrees that upon termination of this Agreement and
upon reasonable request by the Board of Directors, Executive shall resign from his
position on the Board as well as any other Officer or Committee positions.  

    
    5.6        Remedies.  
Any termination of this Agreement shall not prejudice any other remedy to which the
Employer or Executive may be entitled, either at law, equity, or under this Agreement.  

ARTICLE 6 
INDEMNIFICATION 

        To
the fullest extent permitted by applicable law, Employer agrees to indemnify, defend and
hold Executive harmless from any and all claims, actions, costs, expenses, damages and
liabilities, including, without limitation, reasonable attorneys’ fees, hereafter or
heretofore arising out of or in connection with activities of Employer or its employees,
including Executive, or other agents in connection with and within the scope of this
Agreement or by reason of the fact that he is or was a director or officer of Employer or
any affiliate of Employer. To the fullest extent permitted by applicable law, Employer
shall advance to Executive expenses of defending any such action, claim or proceeding.
However, Employer shall not indemnify Executive or defend Executive against, or hold him
harmless from any claims, damages, expenses or liabilities, including attorneys’
fees, resulting from the gross negligence or willful misconduct of Executive. The duty to
indemnify shall survive the expiration or early termination of this Agreement as to any
claims based on facts or conditions which occurred or are alleged to have occurred prior
to expiration or termination. 

ARTICLE 7 
GENERAL PROVISIONS 

    
    7.1        Governing
Law.   This Agreement shall be governed by and construed in accordance with the laws of
the State of Colorado.  

    
    7.2        Arbitration.  
Any controversy or claim arising out of or relating to this Agreement or the breach
thereof shall be settled by arbitration in the City and County of Denver, Colorado in
accordance with the rules then existing of the American Arbitration Association and
judgment upon the award may be entered in any court having jurisdiction thereof.  

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    7.3        Entire
Agreement.   This Agreement supersedes any and all other Agreements, whether oral or in
writing, between the parties with respect to the employment of the Executive by the
Employer. Each party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, orally or otherwise, have been made by either party, or anyone
acting on behalf of any party, that are not embodied in this Agreement, and that no
agreement, statement, or promise not contained in this Agreement shall be valid or
binding.  

    
    7.4        Successors
and Assigns.   This Agreement, all terms and conditions hereunder, and all remedies
arising herefrom, shall inure to the benefit of and be binding upon Employer, any
successor in interest to all or substantially all of the business and/or assets of
Employer, and the heirs, administrators, successors and assigns of Executive. Except as
provided in the preceding sentence, the rights and obligations of the parties hereto may
not be assigned or transferred by either party without the prior written consent of the
other party.  

    
    7.5        Notices.  
For purposes of this Agreement, notices, demands and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed as follows:  

	 	
Executive: 

       Daryl
Faulkner                            

       8516 Longview Club Drive

                                  Weddington, NC 28173 

	 	
Employer:

       AspenBio Pharma, Inc. 

       Attn:
President                            

       1585 South Perry Street

                                  Castle Rock, CO 80104 

	 	
With
a copy to:
       Theresa Mehringer

       Burns,
Figa & Will, P.C. 

       6400 South Fiddlers Green
Circle 
       Englewood, CO
80111  

or to such other address as either
party may have furnished to the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt. 

    
    7.6        Severability.  
If any provision of this Agreement is prohibited by or is unlawful or unenforceable under
any applicable law of any jurisdiction as to such jurisdiction, such provision shall be
ineffective to the extent of such prohibition without invalidating the remaining
provisions hereof.  

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    7.7        Section
Headings.   The section headings used in this Agreement are for convenience only
and shall not affect the construction of any terms of this Agreement.  

    
    7.8        Survival
of Obligations.   Termination of this Agreement for any reason shall not relieve
Employer or Executive of any obligation accruing or arising prior to such termination.  

    
    7.9        Amendments.
  This Agreement may be amended only by written agreement of both Employer and Executive.  

    
    7.10        Counterparts.  
This Agreement may be executed in one or more counterparts, each of which shall
constitute an original but all of which, when taken together, shall constitute only one
legal instrument. This Agreement shall become effective when copies hereof, when taken
together, shall bear the signatures of both parties hereto. It shall not be necessary in
making proof of this Agreement to produce or account for more than one such counterpart.  

    
    7.11        Fees
and Costs.   If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees,
costs and necessary disbursements in addition to any other relief to which that party may
be entitled.  

        IN
WITNESS WHEREOF, Employer and Executive enter into this Executive Employment Agreement
effective as of the date first set forth above. 

	 	

AspenBio Pharma, Inc. - "EMPLOYER"

By /s/ Gregory Pusey

Name   Gregory Pusey 

Title   Chairman  

	 	
Daryl J. Faulkner - "EXECUTIVE" 

Signed /s/ Daryl J. Faulkner

Daryl J. Faulkner, Individually 

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Exhibit A 

STOCK OPTIONS: 

As Executive Chairman of The Board of
Directors you will participate in the Company’s 2002 Stock Incentive Plan (the
“Plan”). 

Stock Options:   Upon your
employment Commencement Date, you will be granted stock options to purchase Five Hundred
Thousand (500,000) shares of common stock of the Company exercisable at the current fair
market value of the Company’s common stock on such date. Out of the total options
granted, 100,000 would be subject to forfeiture if within twenty-four months of your
effective starting date, a successful strategic event or development has not occurred.
Achievement of such a successful strategic event or development will be at the discretion
of the Compensation Committee’s recommendations to the Board, and would be based upon
factors such as; execution of a significant partnering agreement, significant strategic
transaction, significant improvement in the market value of the Company, achievement of
appreciable product sales, or other similar items. The stock options will be incentive
stock options as defined by the Internal Revenue Code, to the maximum extent possible. 

The stock options are subject to a
Three (3) year vesting schedule with 33.33% of such options vesting at the end of each
year. In the event of a change of control of the Company, any non-vested options would
become fully vested at that time. The options are exercisable for a period of ten (10)
years after the date of grant, subject to earlier termination on cessation of service and
certain corporate events. 

8Exhibit 10.1

 

XETA
TECHNOLOGIES, INC.

 

2004
OMNIBUS STOCK INCENTIVE PLAN

 

As
amended and Restated December 18, 2008

 

1.                          Establishment
and Purpose.

 

There is
hereby adopted the XETA Technologies, Inc. 2004 Omnibus Stock Incentive
Plan (the “Plan”). The Plan shall be in addition to the XETA Technologies 2000
Stock Option Plan. The Plan is intended to promote the interests of the Company
and the stockholders of the Company by providing officers, other employees of
the Company, directors who are not employees of the Company, and other persons
who are expected to make a long-term contribution to the success of the Company
with appropriate incentives and rewards to encourage them to enter into and
continue in the employ of the Company and/or to acquire a proprietary interest
in the long-term success of the Company, thereby aligning their interest more
closely to the interest of stockholders.

 

2.                          Definitions.

 

As used in the
Plan, the following definitions apply to the terms indicated below:

 

(a)                                  “Award
Agreement” shall mean the written agreement between the Company and a
Participant evidencing an Incentive Award.

 

(b)                               “Board
of Directors” shall mean the Board of Directors of the Company.

 

(c)                                  “Cause,” when used in
connection with the termination of a Participant’s employment by the Company,
shall mean (i)  the Participant’s willful and continued failure to
substantially perform his duties (other than any such failure resulting from
the Participant’s incapacity due to physical or mental impairment); (ii) the
willful conduct of the Participant which is demonstrably and materially
injurious to the Company or a Subsidiary, monetarily or otherwise, or (iii) the
conviction of the Participant for a felony by a court of competent
jurisdiction. The Committee shall determine whether a termination of employment
is for Cause.

 

(d)                                 “Change
in Control” shall mean any of the following occurrences:

 

(i)                                    any “person,” as
such term is used in Sections 13(d) and 14(d) of the Exchange Act
(other than the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any corporation owned,
directly or indirectly, by the 

 

 

stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), is or becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company’s then outstanding securities;

 

(ii)                                 during any period of not
more than two consecutive years (not including any period prior to the adoption
of the Plan), individuals who at the beginning of such period constitute the
Board of Directors and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this
Section) whose election by the Board of Directors or nomination for election
was approved by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof;

 

(iii)                              the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation that would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no “person” (as herein above defined) acquires
more than 50% of the combined voting power of the Company’s then outstanding
securities; or

 

(iv)                             the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all of the
Company’s assets.

 

(e)                                 “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

(f)                                    “Committee”
shall mean the Compensation Committee of the Board of Directors. The Committee
shall consist of two or more persons each of whom is an “outside director”
within the meaning of Section 162(m) of the Code and a “Non-Employee
Director” within the meaning of Rule 16b-3 

 

2

 

under the Exchange Act (or who satisfies any
other criteria for administering employee benefit plans as may be specified by
the Securities and Exchange Commission in order for transactions under such
plan to be exempt from the provisions of Section 16(b) of the
Exchange Act).

 

(g)                                 “Company”
shall mean XETA Technologies, Inc., an Oklahoma corporation.

 

(h)                                “Common
Stock” shall mean the common stock of the Company, $0.001 par value per share.

 

(i)                                     “Disability”
shall mean: (1) any physical or mental condition that would qualify a
Participant for a disability benefit under the long-term disability plan
maintained by the Company or a Subsidiary of the Company and applicable to such
Participant or, if such long-term disability plan is not applicable to the
Participant, then a “permanent and total disability” which enables the
Participant to be eligible for and receive a disability benefit under the
Federal Social Security Act ; or (2) when used in connection with the
exercise of an Incentive Stock Option following termination of employment,
disability within the meaning of Section 22(e)(3) of the Code.

 

(j)                                  “Effective
Date” shall mean the date upon which this Plan is adopted by the Board of
Directors.

 

(k)                                  “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.

 

(l)                                     “Executive
Officer” shall have the meaning set forth in Rule 3b-7 promulgated under
the Exchange Act.

 

(m)                              “Exercise
Date” shall mean the date on which a Participant may exercise an Incentive
Award.

 

(n)                                “Fair
Market Value” of a share of Common Stock, as of a date of determination, shall
mean (i) the closing sales price per share of Common Stock on the national
securities exchange on which such stock is principally traded for the last
preceding date on which there was a sale of such stock on such exchange, or (ii) if
the shares of Common Stock are not listed or admitted to trading on any such
exchange, the closing price as reported by the Nasdaq Stock Market for the last
preceding date on which there was a sale of such stock on such exchange, or (iii) if
the shares of Common Stock are not then listed on the Nasdaq Stock Market, the
average of the highest reported bid and lowest reported asked prices for the
shares of Common Stock as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System for the last preceding date on
which there was a sale of such stock in such market, or (iv) if the shares
of Common 

 

3

 

Stock are not then listed on a national
securities exchange or traded in an over-the-counter market, such value as
determined by the Committee in good faith.

 

(o)                                “Incentive
Award” shall mean an Option, Tandem SAR, Stand-Alone SAR, Restricted Stock
grant, Phantom Stock grant or Stock Bonus granted pursuant to the terms of the
Plan.

 

(p)                                 “Incentive
Stock Option” shall mean an Option that is an “incentive stock option” within
the meaning of Section 422 of the Code.

 

(q)                                 “Issue
Date” shall mean the date established by the Company on which shares of
Restricted Stock shall be registered in the name of the Participant pursuant to
the terms of Section 10(e) of the Plan.

 

(r)                                    “Non-Qualified
Stock Option” shall mean an Option that is not an Incentive Stock Option.

 

(s)                                  “Option”
shall mean an option to purchase shares of Common Stock granted pursuant to Section 7
of the Plan.

 

(t)                                    “Participant”
means any person who is both eligible to receive an Incentive Award pursuant to
the Plan (as set forth in Section 5) and to whom an Incentive Award is
granted pursuant to the Plan, and, upon his or her death, his or her
successors, heirs, executors and administrators, as the case may be.

 

(u)                                 “Phantom
Stock” shall mean the right, granted pursuant to Section 11 of the Plan,
to receive in cash the Fair Market Value of a share of Common Stock.

 

(v)                               “Plan”
shall mean this 2004 Omnibus Stock Incentive Plan, as amended from time to
time.

 

(w)                               “Reference
Value” shall mean, with respect to Stand-Alone SARs, the greater of the Fair
Market Value of a share of Common Stock or the value given by the Compensation
Committee.

 

(x)                                   “Restricted
Stock” shall mean a share of Common Stock that is granted pursuant to the terms
of Section 10 hereof and that is subject to the restrictions set forth in Section 10
of the Plan.

 

(y)                                 “Rule 16b-3”
shall mean Rule 16b-3 promulgated under the Exchange Act.

 

(z)                                   “Section 162(m)”
shall mean Section 162(m) of the Code and the regulations promulgated
thereunder.

 

4

 

(aa)                            “Securities
Act” shall mean the Securities Act of 1933, as amended from time to time.

 

(ab)                           “Stand-Alone
SAR” shall mean a stock appreciation right granted pursuant to Section 9
of the Plan that is not related to any Option.

 

(ac)                            “Stock
Bonus” shall mean a bonus payable in shares of Common Stock granted pursuant to
Section 12 of the Plan.

 

(ad)                           “Subsidiary”
shall mean a “subsidiary corporation” within the meaning of Section 424(f) of
the Code.

 

(ae)                            “Tandem
SAR” shall mean a stock appreciation right granted pursuant to Section 8
of the Plan that is related to an Option.

 

(af)                              “Termination
of employment,” or words of similar import, in the Plan shall be deemed, (i) when
applied to non-employee Directors, to mean “termination of service as a
director,” and (ii) when applied to employee-Directors, to mean “termination
of service as an employee and a director.”  Reference to “termination
of employment,” or words of similar import, in the Plan shall not be deemed to
apply to persons who were not employees or a director of the Company or a
Subsidiary of the Company.

 

(ag)                           “Vesting
Date” shall mean the date established by the Committee on which an Incentive
Award may vest.

 

3.                         Stock
Subject to the Plan.

 

(a)                     Shares
Available for Awards.

 

The maximum
number of shares of Common Stock reserved for issuance under the Plan shall be
600,000 shares (subject to adjustment as provided herein). The total number of
shares reserved for issuance hereunder may be authorized but unissued Common
Stock or authorized and issued Common Stock held in the Company’s treasury or
acquired by the Company for the purposes of the Plan. The Committee may direct
that any stock certificate evidencing shares issued pursuant to the Plan shall
bear a legend setting forth such restrictions on transferability as may apply
to such shares pursuant to the Plan. The grant of a Tandem SAR shall not reduce
the number of shares of Common Stock with respect to which Incentive Awards may
be granted pursuant to the Plan. Upon the exercise of any Tandem SAR, the
related Option shall be canceled to the extent of the number of shares of
Common Stock as to which the Tandem SAR is exercised and, notwithstanding the
foregoing, such number of shares shall no longer be available for Incentive
Awards under the Plan. Subject to adjustment under Section 3(c) below,
the maximum number of shares of Common Stock that 

 

5

 

may be issued
under the Plan shall be increased as of November 1 each year, beginning November 1,
2004, by three percent (3%) of the total number of shares of Common Stock that
are issued and outstanding on the immediately preceding October 31st. Any provision herein to the contrary
notwithstanding, the maximum number of shares of Common Stock that may be
issued pursuant to Incentive Stock Options granted hereunder shall not exceed
600,000, subject to adjustment under Section 3(c) below.

 

(b)                    Individual
Limitation.

 

The total
number of shares of Common Stock subject to Incentive Awards (including
Incentive Awards payable in cash but denominated as shares of Common Stock,
i.e., Stand-Alone SARs and Phantom Stock), awarded to any employee during any
tax year of the Company, shall not exceed 250,000 shares. Determinations under
the preceding sentence shall be made in a manner that is consistent with Section 162(m) of
the Code.

 

(c)                     Adjustment
for Change in Capitalization.

 

In the event
that the Committee shall determine that any dividend or other distribution
(whether in the form of cash, Common Stock, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Common Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems necessary or appropriate to any or
all of (i) the number and kind of shares of stock that may thereafter be
issued in connection with Incentive Awards, (ii) the number and kind of
shares of stock issued or issuable in respect of outstanding Incentive Awards,
and (iii) the exercise price, grant price, or purchase price relating to
any Incentive Award; provided that: (1) with respect to Incentive Stock
Options, such adjustment shall be made in accordance with Section 424 of
the Code; and (2) in no event shall such adjustment be made in a manner
that would cause Section 409A of the Code to apply to such adjusted
Incentive Awards.

 

(d)                     Re-Use of
Shares.

 

The following
shares of Common Stock shall again become available for Incentive Awards: any
shares subject to an Incentive Award that remain unissued upon the
cancellation, surrender, exchange or termination of such award for any reason
whatsoever; any shares of Restricted Stock forfeited; and any shares in respect
of which a stock appreciation right is settled for cash.

 

6

 

4.                           Administration
of the Plan.

 

The Plan shall
be administered by the Committee. The Committee shall have the authority in its
sole discretion, subject to and not inconsistent with the express provisions of
the Plan, to administer the Plan and to exercise all the powers and authorities
either specifically granted to it under the Plan or necessary or advisable in
the administration of the Plan, including, without limitation, the authority to
grant Incentive Awards; to determine the persons to whom and the time or times
at which Incentive Awards shall be granted; to determine the type and number of
Incentive Awards to be granted, the number of shares of Stock to which an Award
may relate and the terms, conditions, restrictions and performance criteria
relating to any Incentive Award; to determine whether, to what extent, and
under what circumstances an Incentive Award may be settled, canceled,
forfeited, exchanged (subject to shareholder approval), or surrendered; to
grant Incentive Awards in replacement of Incentive Awards previously granted
under the Plan or under any other plan of the Company, including without
limitation a grant of Stock Options or Restricted Stock in exchange for a Participant’s
agreement to cancel a higher-priced stock option or options previously granted
to such Participant, provided that any such exchange is approved by the Company’s
shareholders; to subject shares of Stock to which an Award may relate to rights
of repurchase or rights of refusal in favor of the Company under the
circumstances and upon the terms set forth in an Award Agreement; to make
adjustments in the performance goals in recognition of unusual or non-recurring
events affecting the Company or the financial statements of the Company (to the
extent in accordance with Section 162(m)of the Code, if applicable), or in
response to changes in applicable laws, regulations, or accounting principles;
to construe and interpret the Plan and any Incentive Award; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the
terms and provisions of Award Agreements; and to make all other determinations
deemed necessary or advisable for the administration of the Plan.

 

The Committee
may, in its absolute discretion and without amendment to the Plan, but only in
the event of death, Disability, Change in Control or retirement, (i) accelerate
the date on which any Option or Stand-Alone SAR granted under the Plan becomes
exercisable, or waive or amend the operation of Plan provisions respecting
exercise after termination of employment 
(provided, however, that: (1) with respect to Incentive Stock
Options, no such change shall be made that would cause the Incentive Stock
Options to become Non-Qualified Stock Options unless both the Participant and
the Company expressly agree to such change; and (2) in no event may an
exercise period be extended to a date later than the earlier of: (a) the
latest date upon which the Option or Stand-Alone SAR could have expired by its
original terms; or (b) the tenth anniversary of the original date of grant
of the Option or Stand-Alone SAR), and (ii) accelerate the Vesting Date or
Issue Date, or waive any condition imposed hereunder, with respect to any share
of Restricted Stock or Phantom Stock granted under the Plan.

 

No member of
the Committee shall be liable for any action, omission or determination
relating to the Plan, and the Company shall indemnify and hold harmless 

 

7

 

each member of the Committee and each other
director or employee of the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been delegated against any
cost or expense (including counsel fees) or liability (including any sum paid
in settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination relating to the Plan, if, in either case,
such action, omission or determination was taken or made by such member,
director or employee in good faith and in a manner such member, director or
employee reasonably believed to be in or not opposed to the best interests of
the Company.

 

5.                           Eligibility.

 

The persons
who shall be eligible to receive Incentive Awards pursuant to the Plan shall be
all employees and directors of the Company and its Subsidiaries and such other
persons whom the Committee determines are expected to make a contribution to
the Company.  The Committee may grant
Incentive Awards to any, all or none of such eligible persons at any time, from
time to time, during the term of the Plan.

 

6.                         Awards
Under the Plan; Award Agreement.

 

The Committee
may grant Options, Tandem SARs, Stand-Alone SARs, shares of Restricted Stock,
shares of Phantom Stock and Stock Bonuses, in such amounts and with such terms
and conditions as the Committee shall determine, subject to the provisions of
the Plan.

 

Each Incentive
Award granted under the Plan (except an unconditional Stock Bonus) shall be
evidenced by an Award Agreement that shall contain such provisions as the
Committee may in its sole discretion deem necessary or desirable. By accepting
an Incentive Award, a Participant thereby agrees that the award shall be
subject to all of the terms and provisions of the Plan and the applicable Award
Agreement.

 

7.                          Options.

 

(a)                                 Identification of
Options.

 

Each Option
shall be clearly identified in the applicable Award Agreement as either an
Incentive Stock Option or a Non-Qualified Stock Option.

 

(b)                                Exercise
Price.

 

Each Award Agreement
with respect to an Option shall set forth the amount (the “option exercise
price”) payable by the grantee to the Company upon exercise of the Option and
the number of shares subject to the Option, which shall be fixed on the date of
grant of the Option. The Option exercise price per share shall be set by the
Committee in its discretion on a case by case basis, but shall not be less than
the Fair Market Value of a share of Common Stock on the date of grant.

 

8

 

(c)                                 Term and Exercise of
Options.

 

(i)                                    Unless the
applicable Award Agreement provides otherwise, an Option shall become
cumulatively exercisable as to 25 percent of the shares covered thereby on
each of the first, second, third and fourth anniversaries of the date of grant.
The Committee shall determine the expiration date of each Option; provided,
however, that no Incentive Stock Option shall be exercisable more than
10 years after the date of grant. Unless the applicable Award Agreement
provides otherwise, no Option shall be exercisable prior to the first
anniversary of the date of grant.

 

(ii)                                 An Option shall be
exercised by delivering notice to the Company’s principal office, to the
attention of its Secretary, no less than one business day in advance of the
effective date of the proposed exercise. An Option may also be exercised
electronically by notifying the Company’s agent, pursuant to the methods then
in use by that agent. Such notice shall specify the number of shares of Common
Stock with respect to which the Option is being exercised and the effective
date of the proposed exercise and shall be signed by the Participant or other
person then having the right to exercise the Option. Such notice may be
withdrawn at any time prior to the close of business on the business day
immediately preceding the effective date of the proposed exercise. Payment for
shares of Common Stock purchased upon the exercise of an Option shall be made
on the effective date of such exercise by one or a combination of the following
means: (i) in cash, by certified check, bank cashier’s check or wire
transfer; (ii) by delivering a properly executed exercise notice to the
Company together with a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds to pay the full
amount of the exercise price, (iii) by delivering shares of Common Stock
owned by the Participant for at least six months with appropriate stock powers,
(iv) by any other means which the Committee, in its sole discretion,
determines to provide legal consideration for the Common Stock and to be
consistent with the purposes of the Plan, or (v) any combination of the
foregoing forms. In determining the number of shares of Common Stock necessary
to be delivered to or retained by the Company, such shares shall be valued at
their Fair Market Value as of the Exercise Date.

 

(iii)                              Certificates for shares
of Common Stock purchased upon the exercise of an Option shall be issued in the
name of the Participant or other person entitled to receive such shares, and
delivered to the Participant or such other person as soon as practicable
following the Effective Date on which the Option is exercised. In the event of
an 

 

9

 

exercise by way of electronic means, no actual Certificates need be
issued.

 

(d)                                Limitations on
Incentive Stock Options.

 

(i)                                    To the extent that
the aggregate Fair Market Value of shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year under the Plan and any other stock option plan of the
Company (or any Subsidiary of the Company) shall exceed $100,000, or such
higher value as may be permitted under Section 422 of the Code, such
Options shall be treated as Non-Qualified Stock Options. Such Fair Market Value
shall be determined as of the date on which each such Incentive Stock Option is
granted.

 

(ii)                                 No Incentive Stock
Option may be granted to an individual if, at the time of the grant, such
individual owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company unless (i) the
exercise price per share of such Incentive Stock Option is at least
110 percent of the Fair Market Value of a share of Common Stock of the
Company, or of its parent or subsidiary corporation, at the time such Incentive
Stock Option is granted and (ii) such Incentive Stock Option is not
exercisable after the expiration of five years from the date such Incentive
Stock Option is granted.

 

(e)                                  Effect
of Termination of Employment.

 

(i)                                    Unless the
applicable Award Agreement provides otherwise, in the event that the employment
of a Participant with the Company or a Subsidiary of the Company shall
terminate for any reason other than death, Disability or Cause, (i) Options
granted to such Participant, to the extent that they are exercisable at the
time of such termination, shall remain exercisable until the date that is three
months (or 120 days in the case of a “Non-Qualified Stock Option”) after
such termination, on which date they shall expire, and (ii) Options
granted to such Participant, to the extent that they were not exercisable at
the time of such termination, shall expire at the close of business on the date
of such termination. Notwithstanding the foregoing, no Option shall be
exercisable after the expiration of its term.

 

(ii)                                 Unless the applicable
Award Agreement provides otherwise, in the event that the employment of a
Participant with the Company or a Subsidiary of the Company shall terminate on
account of the Disability or death of the Participant (i) Options granted
to such Participant, to the extent that they were exercisable at the time of 

 

10

 

such termination, shall remain exercisable until the first anniversary
of such termination, on which date they shall expire, and (ii) Options
granted to such Participant, to the extent that they were not exercisable at
the time of such termination, shall expire at the close of business on the date
of such termination. Notwithstanding the foregoing, no Option shall be
exercisable after the expiration of its term.

 

(iii)                              Unless an applicable
Award Agreement issued after the date hereof provides otherwise, if a Participant’s
employment with the Company or a Subsidiary of the Company is terminated for
Cause, all unexercised Options held by the Participant shall immediately be
forfeited.

 

(f)                                    Effect
of Change in Control.

 

Upon the
occurrence of a Change in Control, (i) Options granted to a Participant,
to the extent that they were exercisable at the time of a Change in Control,
shall remain exercisable until their expiration notwithstanding the provisions
of Section 7(e)(i) and (ii) of the Plan, and (ii) Options
granted to such Participant, to the extent they were not exercisable at the
time of a Change in Control, shall expire at the close of business on the date
of such Change in Control. Notwithstanding the foregoing, no Option shall be
exercisable after the expiration of its term. Any vested, exercisable Options
outstanding at the time of a Change in Control shall be cashed out, converted
to options of the acquiring entity, assumed by the acquiring entity or
otherwise disposed of in the manner provided in any shareholder-approved
agreement or plan governing or providing for such Change in Control (“Change in
Control Agreement”); provided that any such cash-out, conversion, assumption or
disposition of the Options shall not deprive the Option holder of the inherent
value of his Options, measured solely by the excess of the Fair Market Value of
the underlying Option shares immediately prior to the Change in Control over
the Option exercise price, without the holder’s consent. In the absence of such
governing provisions in a Change in Control Agreement, the Committee in its
sole discretion may on a case by case basis require any vested, exercisable
Options that remain outstanding upon a Change in Control to be cashed out and
terminated in exchange for a lump sum cash payment, shares of the acquiring
entity or a combination thereof equal in value to the fair market value of the
Option, measured in the manner described above, immediately prior to the Change
in Control. Any non-vested Options shall terminate upon a Change in Control
unless: (i) otherwise provided in the Change in Control Agreement or in a
written agreement, such as a severance agreement, between the Company and the
Participant; or (ii) the Committee in its sole discretion on a case by
case basis elects in writing to waive termination and/or accelerate 

 

11

 

vesting,
provided, however, that in no event may an Option be exercisable after the
expiration of its term.

 

8.                         Tandem
SARs.

 

The Committee
may grant in connection with any Option granted hereunder one or more Tandem
SARs relating to a number of shares of Common Stock less than or equal to the
number of shares of Common Stock subject to the related Option.  The number of Tandem SARs shall be fixed on
or before the date of grant.  A Tandem
SAR must be granted at the same time its related Option is granted.

 

(a)                                  Benefit
Upon Exercise.

 

The exercise
of a Tandem SAR with respect to any number of shares of Common Stock shall
entitle the Participant to a cash payment, for each such share, equal to the
excess of (i) the Fair Market Value of a share of Common Stock on the
Exercise Date over (ii) the option exercise price per share of the related
Option. Such payment shall be made as soon as practicable after the effective
date of such exercise.

 

(b)                                 Term
and Exercise of Tandem SAR.

 

(i)                                     A Tandem SAR shall
be exercisable only if and to the extent that its related Option is
exercisable.

 

(ii)                                The exercise of a
Tandem SAR with respect to a number of shares of Common Stock shall cause the
immediate and automatic cancellation of its related Option with respect to an
equal number of shares. The exercise of an Option, or the cancellation,
termination or expiration of an Option (other than pursuant to this Section 8(b)(ii)),
with respect to a number of shares of Common Stock shall cause the automatic
and immediate cancellation of any related Tandem SARs to the extent that the
number of shares of Common Stock remaining subject to such Option is less than
the number of shares then subject to such Tandem SAR. Such Tandem SARs shall be
canceled in the order in which they become exercisable.

 

(iii)                             No Tandem SAR shall be
assignable or transferable otherwise than together with its related Option, and
any such transfer or assignment will be subject to the provisions of Section 20
of the Plan.

 

(iv)                            A Tandem SAR shall be
exercisable by delivering notice to the Company’s principal office, to the
attention of its Secretary, no less than one business day in advance of the
effective date of the proposed exercise. A Tandem SAR may also be exercised
electronically by notifying the Company’s agent, pursuant to the 

 

12

 

methods then in use by that agent. Such notice shall specify the number
of shares of Common Stock with respect to which the Tandem SAR is being
exercised and the effective date of the proposed exercise and shall be signed
by the Participant or other person then having the right to exercise the Option
to which the Tandem SAR is related. Such notice may be withdrawn at any time
prior to the close of business on the business day immediately preceding the
effective date of the proposed exercise.

 

9.                          Stand-Alone
SARs.

 

(a)                                   Benefit Upon
Exercise.

 

The exercise
of a Stand-Alone SAR with respect to any number of shares of Common Stock
(which shall be fixed on or before the date of grant) shall entitle the
Participant to a cash payment, for each such share, equal to the excess of (i) the
Fair Market Value of a share of Common Stock on the Exercise Date over (ii) the
Reference Value of the Stand-Alone SAR on the date of grant. Such payments
shall be made as soon as practicable after the effective date of such exercise.

 

(b)                                 Term
and Exercise of Stand-Alone SARs.

 

(i)                                    Unless the
applicable Award Agreement provides otherwise, a Stand-Alone SAR shall become
cumulatively exercisable as to 25 percent of the shares covered thereby on
each of the first, second, third and fourth anniversaries of the date of grant.
The Committee shall determine the expiration date of each Stand-Alone SAR.
Unless the applicable Award Agreement provides otherwise, no Stand-Alone SAR
shall be exercisable prior to the first anniversary of the date of grant.

 

(ii)                                 A Stand-Alone SAR
shall be exercised by delivering notice to the Company’s principal office, to
the attention of its Secretary, no less than one business day in advance of the
effective date of the proposed exercise. A Stand-Alone SAR may also be
exercised electronically by notifying the Company’s agent, pursuant to the methods
then in use by that agent. Such notice shall specify the number of shares of
Common Stock with respect to which the Stand-Alone SAR is being exercised, and
the effective date of the proposed exercise, and shall be signed by the
Participant. The Participant may withdraw such notice at any time prior to the
close of business on the business day immediately preceding the effective date
of the proposed exercise.

 

13

 

(c)                                   Effect
of Termination of Employment.

 

The provisions
set forth in Section 7(e) with respect to the exercise of Options
following termination of employment shall apply as well to the exercise of
Stand-Alone SARs.

 

(d)                                 Effect
of Change in Control.

 

Upon the
occurrence of a Change in Control, (i) Stand-Alone SARs granted under the
Plan, to the extent exercisable at the time of a Change in Control, shall
remain exercisable until their expiration notwithstanding the provisions of Section 7(e) of
the Plan that are incorporated into this Section 9, and (ii) Stand-Alone
SARs not exercisable at the time of a Change in Control shall expire at the
close of business on the date of such Change in Control. Any vested,
exercisable Stand-Alone SARs shall, upon a Change in Control, be cashed out,
converted, assumed or otherwise disposed of in the same manner as applies to
Options under Section 7(f).

 

10.                   Restricted
Stock.

 

(a)                                 Issue
Date and Vesting Date.

 

At the time of
the grant of shares of Restricted Stock, the Committee shall establish an Issue
Date or Issue Dates and a Vesting Date or Vesting Dates that provide for a
vesting period that is not less than three (3) years pro rata, with
respect to such shares. The Committee may divide such shares into classes and
assign a different Issue Date and/or Vesting Date for each class. If the
grantee is employed by the Company or a Subsidiary of the Company on an Issue
Date (which may be the date of grant), the specified number of shares of
Restricted Stock shall be registered in the grantee’s name and evidenced in
accordance with the provisions of Section 10(e) of the Plan. Provided
that all conditions to the vesting of a share of Restricted Stock imposed
pursuant to Section 10(b) of the Plan are satisfied, and except as
provided in Section 10(g) of the Plan, upon the occurrence of the
Vesting Date with respect to a share of Restricted Stock, such share shall vest
and the restrictions of Section 10(c) of the Plan shall lapse.

 

(b)                                  Conditions
to Vesting.

 

At the time of
the grant of shares of Restricted Stock, the Committee may impose such
restrictions or conditions to the vesting of such shares as it, in its absolute
discretion, deems appropriate.

 

(c)                                   Restrictions
on Transfer Prior to Vesting.

 

Prior to the
vesting of a share of Restricted Stock, no transfer of a Participant’s rights
with respect to such share, whether voluntary or involuntary, by operation of
law or otherwise, shall be permitted. 

 

14

 

Immediately
upon any attempt to transfer such rights, such share, and all of the rights
related thereto, shall be forfeited by the Participant.

 

(d)                                  Dividends
on Restricted Stock.

 

Any dividends
paid on shares of Restricted Stock shall be held in escrow, and are subject to
forfeiture, until all restrictions on such shares have lapsed.

 

 (e)                              Restricted Stock
Certificates.

 

Each Restricted Stock Award may be evidenced in such a manner as the
Committee deems appropriate, including, without limitation, book entry
registration or issuance of a stock certificate or certificates and by a
Restricted Stock Award Agreement setting forth the terms of such Restricted
Stock award. To the extent a stock certificate is issued, the Secretary of the
Company shall hold such certificates for the Participant’s benefit until the
Vesting Date or until the Restricted Stock is forfeited to the Company. The
Company shall not cause a stock certificate to be issued in the name of a
Participant prior to the Vesting Date unless it has received a stock power duly
endorsed by the Participant in blank with respect to such shares. Each such
stock certificate shall bear the following legend:

 

The
transferability of this certificate and the shares of stock represented hereby
are subject to the restrictions, terms and conditions (including forfeiture
provisions and restrictions against transfer) contained in the 2004 Omnibus
Stock Incentive Plan of XETA Technologies, Inc. and an Award Agreement
entered into between the registered owner of such shares and XETA Technologies, Inc.
A copy of such Plan and Award Agreement is on file in the office of the
Secretary of XETA Technologies, Inc., 1814 West Tacoma, Broken Arrow,
Oklahoma 74012.

 

Such legend
shall not be removed until such shares vest pursuant to the terms of the
applicable Award Agreement.

 

(f)                                    Consequences
of Vesting.

 

Upon the
vesting of a share of Restricted Stock pursuant to the terms of the applicable
Award Agreement, the restrictions of Section 10(c) of the Plan shall
lapse, except as otherwise provided in the Award Agreement. Reasonably promptly
after a share of Restricted Stock vests, the Company shall cause to be
delivered to the Participant to whom such shares were granted, a certificate
evidencing such share, free of the legend set forth in Section 10(e) of
the Plan.

 

15

 

(g)                                 Effect
of Termination of Employment.

 

(i)                                    Subject to such
other provision as the Committee may set forth in the applicable Award
Agreement, and to the Committee’s amendment authority pursuant to Section 4
of the Plan, upon the termination of a Participant’s employment by the Company
or any Subsidiary of the Company for any reason other than Cause, any and all
shares that have not vested as of the date of such termination shall be
immediately forfeited by the Participant and transferred to the Company, provided
that if the Committee, in its sole discretion and within thirty (30) days
after such termination of employment notifies the Participant in writing of its
decision not to terminate the Participant’s rights in such shares, then the
Participant shall continue to be the owner of such shares subject to such
continuing restrictions as the Committee may prescribe in such notice. If
shares of Restricted Stock are forfeited in accordance with the provision of
this Section 10, the Company shall terminate the escrow arrangement under
which any dividends paid on such shares are held and the dividends shall
thereby be returned to the Company.

 

(ii)                                 In the event of the
termination of a Participant’s employment for Cause, all shares of Restricted
Stock granted to such Participant that have not vested as of the date of such
termination shall be immediately forfeited by the Participant and transferred
to the Company, together with any dividends paid on such shares.

 

(h)                                 Effect
of Change in Control.

 

Upon the
occurrence of a Change in Control, (i) all restrictions on outstanding
vested shares shall immediately lapse, and (ii) all outstanding shares of
Restricted Stock that have not theretofore vested shall immediately expire and
be cancelled unless the Committee in its sole discretion on a case by case
basis, in writing, elects to waive such expiration and cancellation

 

(i)                                     Special
Provisions Regarding Restricted Stock Awards.

 

The Committee may designate on a case-by-case basis whether Restricted
Stock Awards are intended to be “performance based compensation” within the
meaning of Code Section 162(m). The vesting of Restricted Stock so
designated shall be based on the attainment by the Company (or a Subsidiary or
division of the Company if applicable) of annual performance goals
pre-established by the Committee, limited to and based on one or more of the
following criteria: specified levels of or increases in the Company’s (i) return
on equity, (ii) earnings per share, (iii) total earnings, (iv) earnings
growth, (v) return on capital, (vi) return on assets, (vii) economic
value added, (viii) earnings before interest and taxes, (ix) sales
growth, (x) gross margin return on investment, (xi) increase in the FMV of
the shares, (xii) share price (including, but not limited to, growth measures
and total 

 

16

 

shareholder return), (xiii) net operating profit, (xiv) net income,
(xv) cash flow (including, but not limited to, operating cash flow and free
cash flow), (xvi) cash flow return on investments (which equals net cash flow
divided by total capital), (xvii) internal rate of return, or (xviii) increase
in net present value or expense targets. 
Attainment of any such performance criteria shall be determined in
accordance with generally accepted accounting principles as in effect from time
to time. Such shares shall be released from restrictions only after the
attainment of such performance measures have been certified by the Committee.

 

(j)                         Exception
to Minimum Three Year Vesting.

 

Notwithstanding anything herein to the contrary, the Committee may
grant shares of Restricted Stock with vesting periods shorter than a three
year, pro rata schedule, provided that the number of such shares of Restricted
Stock does not in the aggregate constitute more than five percent (5%) of the
shares authorized for issuance under the Plan.

 

11.                   Phantom Stock.

 

(a)                                  Vesting Date.

 

At the time of
the grant of shares of Phantom Stock, the Committee shall establish a Vesting
Date or Vesting Dates with respect to such shares. The Committee may divide
such shares into classes and assign a different Vesting Date for each class.
Provided that all conditions to the vesting of a share of Phantom Stock imposed
pursuant to Section 11(c) of the Plan are satisfied, and except as
provided in Section 11(d) of the Plan, upon the occurrence of the
Vesting Date with respect to a share of Phantom Stock, such share shall vest.

 

(b)                                  Benefit
Upon Vesting.

 

Upon the
vesting of a share of Phantom Stock, the Participant shall be paid, within 30
days of the date on which such share vests, an amount equal to the sum of (i) the
Fair Market Value of a share of Common Stock on the date on which such share of
Phantom Stock vests and (ii) the aggregate amount of cash dividends paid
with respect to a share of Common Stock during the period commencing on the
date on which the share of Phantom Stock was granted and terminating on the
date on which such share vests.  The
payment shall be made in a lump sum payment of cash.

 

17

 

(c)                                 Conditions
to Vesting.

 

At the time of
the grant of shares of Phantom Stock, the Committee may impose such
restrictions or conditions to the vesting of such shares as it, in its absolute
discretion, deems appropriate.

 

(d)                                 Effect
of Termination of Employment.

 

(i)                                    Subject to such
other provisions as the Committee may set forth in the applicable Award
Agreement, and to the Committee’s amendment authority pursuant to Section 4
of the Plan, shares of Phantom Stock that have not vested, together with any
dividends credited on such shares, shall be forfeited upon the Participant’s
termination of employment for any reason other than Cause.

 

 (ii)                              In
the event of the termination of a Participant’s employment for Cause, all shares
of Phantom Stock granted to such Participant that have not vested as of the
date of such termination shall immediately be forfeited, together with any
dividends credited on such shares.

 

(e)                                 Effect
of Change in Control.

 

Upon the
occurrence of a Change in Control, all outstanding shares of Phantom Stock that
have not theretofore vested shall immediately expire and be cancelled unless
the Committee in its sole discretion on a case by case basis, in writing,
elects to waive such expiration and cancellation.

 

(f)                                   Special
Provisions Regarding Phantom Stock Awards.

 

The Committee
may designate on a case by case basis whether Phantom Stock Awards are intended
to be “performance based compensation” within the meaning of Code Section 162
(m). The grant of Phantom Stock so designated shall be based on the attainment
by the Company (or a Subsidiary or division of the Company if applicable) of
annual performance goals pre-established by the Committee, limited to and based
on one or more of the following criteria: specified levels of or increases in
the Company’s (i) return on equity, (ii) earnings per share, (iii) total
earnings, (iv) earnings growth, (v) return on capital, (vi) return
on assets, (vii) economic value added, (viii) earnings before
interest and taxes, (ix) sales growth, (x) gross margin return on
investment, (xi) increase in the FMV of the shares, (xii) share price
(including, but not limited to, growth measures and total shareholder return),
(xiii) net operating profit, (xiv) net income, (xv) cash flow (including, but
not limited to, operating cash flow and free cash flow), (xvi) cash flow return
on investments (which equals net cash flow divided by total capital), (xvii)
internal rate of return, or (xviii) increase in net present value or expense targets.  Attainment of any such performance criteria
shall be determined in accordance with generally accepted accounting principles
as in effect from time to time. Such shares shall be 

 

18

 

released from
restrictions only after the attainment of such performance measures have been
certified by the Committee.

 

(g)                                 Status
Under Section 409A of the Code

 

Because Phantom Stock awards are paid within the “short-term deferral”
period described in Treasury Regulation § 1.409A-1(b)(4)(i), it is the
understanding and intent of the Company that any Phantom Stock awards granted
pursuant to this Section 11 do not provide for a deferral of compensation
and thus are not subject to Section 409A of the Code.  This Section 11 and any other provisions
of this Plan relating to Phantom Stock awards shall be interpreted consistent
with this understanding and intent and operated in a manner that will ensure
that no adverse tax consequences occur under Section 409A of the Code with
respect to the Company or a Participant.

 

12.                   Stock Bonuses.

 

In the event
that the Committee grants a Stock Bonus, a certificate for the shares of Common
Stock comprising such Stock Bonus shall be issued in the name of the
Participant to whom such grant was made and delivered to such Participant as
soon as practicable after the date on which such Stock Bonus is payable.

 

13.                    Rights as a
Stockholder.

 

No person shall have any rights as a
stockholder with respect to any shares of Common Stock covered by or relating
to any Incentive Award until the date of issuance of a stock certificate with
respect to such shares. Except as otherwise expressly provided in Section 3(c) of
the Plan, no adjustment to any Incentive Award shall be made for dividends or
other rights for which the record date occurs prior to the date such stock
certificate is issued.

 

14.                   No Special
Employment Rights; No Right to Incentive Award.

 

Nothing
contained in the Plan or any Award Agreement shall confer upon any Participant
any right with respect to the continuation of employment by the Company or any
Subsidiary of the Company or interfere in any way with the right of the Company
or any Subsidiary of the Company, subject to the terms of any separate
employment agreement to the contrary, at any time to terminate such employment
or to increase or decrease the compensation of the Participant. No person shall
have any claim or right to receive an Incentive Award hereunder. The Committee’s
granting of an Incentive Award to a Participant at any time shall neither
require the Committee to grant any other Incentive Award to such Participant or
other person at any time or preclude the Committee from making subsequent
grants to such Participant or any other person.

 

19

 

15.                   Securities
Matters.

 

(a)                                  The
Company shall be under no obligation to effect the registration pursuant to the
Securities Act of any interests in the Plan or any shares of Common Stock to be
issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing shares
of Common Stock pursuant to the Plan unless and until the Company is advised by
its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any securities exchange on which shares of Common Stock are
traded. The Committee may require, as a condition of the issuance and delivery
of certificates evidencing shares of Common Stock pursuant to the terms hereof
and of the applicable Award Agreement, that the recipient of such shares make
such covenants, agreements and representations, and that such certificates bear
such legends, as the Committee, in its sole discretion, deems necessary or
desirable.

 

(b)                                 The
transfer of any shares of Common Stock hereunder shall be effective only at
such time as counsel to the Company shall have determined that the issuance and
delivery of such shares is in compliance with all applicable laws, regulations
of governmental authority and the requirements of any securities exchange on
which shares of Common Stock are traded. The Committee may, in its sole discretion,
defer the effectiveness of any transfer of shares of Common Stock hereunder in
order to allow the issuance of such shares to be made pursuant to registration
or an exemption from registration or other methods for compliance available
under federal or state securities laws. The Committee shall inform the
Participant in writing of its decision to defer the effectiveness of a
transfer. During the period of such deferral in connection with the exercise of
an Option, the Participant may, by written notice, withdraw such exercise and
obtain the refund of any amount paid with respect thereto.

 

16.                    Withholding
Taxes.

 

Whenever cash
is to be paid pursuant to an Incentive Award, the Company (or its agent) shall
have the right to deduct there from an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto. Whenever
shares of Common Stock are to be delivered pursuant to an Incentive Award, the
Company (or its agent) shall have the right to require the Participant to remit
to the Company in cash an amount sufficient to satisfy any federal, state and
local withholding tax requirements related thereto. With the approval of the
Committee, a Participant may satisfy the foregoing requirement, with respect to
all or any portion of the shares to be delivered pursuant to an Incentive
Award, by electing to have the Company (or its agent) withhold from delivery
shares of Common Stock having a fair market value equal to the minimum amount
of tax to be withheld. Such shares 

 

20

 

shall be
valued at their Fair Market Value on the date on which the amount of tax to be
withheld is determined (the “Tax Date”). Fractional share amounts shall be
settled in cash.

 

17.                   Notification of
Election Under Section 83(b) of the Code.

 

If any
Participant shall, in connection with the acquisition of shares of Common Stock
under the Plan, make the election permitted under Section 83(b) of
the Code (i.e., an election to include in gross income in the year of transfer
the amounts specified in Section 83(b)), such Participant shall notify the
Company of such election within 10 days of filing notice of the election
with the Internal Revenue Service, in addition to any filing and a notification
required pursuant to regulation issued under the authority of Code Section 83(b).

 

18.                     Notification
Upon Disqualifying Disposition Under Section 421(b) of the Code.

 

Each Award
Agreement with respect to an Incentive Stock Option shall require the
Participant to notify the Company of any disposition of shares of Common Stock
issued pursuant to the exercise of such Option under the circumstances
described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), within 10 days of such disposition.

 

19.                   Amendment or
Termination of the Plan.

 

The Board of
Directors may, at any time, suspend or terminate the Plan or revise or amend it
in any respect whatsoever; provided, however, that stockholder approval shall
be required if and to the extent the Board of Directors determines that such
approval is appropriate for purposes of satisfying Section 162(m) or
422 of the Code or to the extent such approval is required by the rules of
Nasdaq or any stock exchange on which the Common Stock is listed. Nothing herein
shall restrict the Committee’s ability to exercise its discretionary authority
pursuant to Section 4 of the Plan, which discretion may be exercised
without amendment to the Plan. No action hereunder may, without the consent of
a Participant, reduce the Participant’s rights under any outstanding Incentive
Award.

 

20.                    Transfers Upon
Death; Non-Assignability.

 

Upon the death
of a Participant, outstanding Incentive Awards granted to such Participant may
be exercised only by the executor or administrator of the Participant’s estate
or by a person who shall have acquired the right to such exercise by will or by
the laws of descent and distribution. No transfer of an Incentive Award by will
or the laws of descent and distribution shall be effective to bind the Company
unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may 

 

21

 

deem necessary
to establish the validity of the transfer and (b) an agreement by the
transferee to comply with all the terms and conditions of the Incentive Award
that are or would have been applicable to the Participant and to be bound by
the acknowledgments made by the Participant in connection with the grant of the
Incentive Award.

 

During a
Participant’s lifetime, an outstanding Incentive Award granted to such
Participant may only be exercised by the Participant or, in the case of the
Participant’s Disability, by the Participant’s legal guardian or
attorney-in-fact, and shall not otherwise be transferable.  Notwithstanding the foregoing, and subject to
the Committee’s sole discretion and any conditions as the Committee may
prescribe, a Participant may, with respect to an outstanding Option (unless such
Option is an Incentive Stock Option and the Committee and the Participant
intend that it shall retain such status), upon providing written notice to the
Secretary of the Company, elect to transfer such Option to members of his or
her immediate family (including, but not limited to, children, grandchildren,
spouse and any other persons included in the definition of “family member” in
the General Instructions to Form S-8) or to trusts for the benefit of such
immediate family members or to partnerships in which such family members are
the only partners; provided, however, that no such transfer by any Participant
may be made in exchange for consideration.

 

21.                   Expenses and
Receipts.

 

The expenses
of the Plan shall be paid by the Company. Any proceeds received by the Company
in connection with any Incentive Award will be used for general corporate
purposes.

 

22.                   Failure to
Comply.

 

In addition to
the remedies of the Company elsewhere provided for herein, failure by a
Participant (or beneficiary or transferee) to comply with any of the terms and
conditions of the Plan or the applicable Award Agreement, unless such failure
is remedied by such Participant (or beneficiary or transferee) within ten days
after notice of such failure by the Committee, shall be grounds for the
cancellation and forfeiture of such Incentive Award, in whole or in part, as
the Committee, in its absolute discretion, may determine.

 

23.                  Effective Date
and Term of Plan.

 

The Plan
became effective on the Effective Date, but the Plan (and any grants of
Incentive Awards made prior to stockholder approval of the Plan) shall be
subject to the requisite approval of the stockholders of the Company. In the
absence of such approval, any such Incentive Awards shall be null and void.
Unless earlier terminated by the Board of Directors, the right to grant
Incentive Awards under the Plan will terminate on the tenth anniversary of the
Effective Date. Incentive Awards 

 

22

 

outstanding at
Plan termination will remain in effect according to their terms and the
provisions of the Plan.

 

24.                    Applicable
Law.

 

Except to the
extent preempted by any applicable federal law, the Plan will be construed and
administered in accordance with the laws of the State of Oklahoma, without
reference to the principles of conflicts of law.

 

25.                    Participant
Rights.

 

No Participant
shall have any claim to be granted any Incentive Award under the Plan, and
there is no obligation for uniformity of treatment for Participants. Except as
provided specifically herein, a Participant or a transferee of an Incentive
Award shall have no rights as a stockholder with respect to any shares covered
by any award until the date of the issuance of a Common Stock certificate to
him for such shares.

 

26.                    Unfunded
Status of Awards.

 

The Plan is
intended to constitute an “unfunded” plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
pursuant to an Incentive Award, nothing contained in the Plan or any Award Agreement
shall give any such Participant any rights that are greater than those of a
general creditor of the Company.

 

27.                   No Fractional
Shares.

 

No fractional
shares of Common Stock shall be issued or delivered pursuant to the Plan. The
Committee shall determine whether cash, other Incentive Awards, or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.

 

28.                  Beneficiary.

 

A Participant
may file with the Committee a written designation of a beneficiary on such form
as may be prescribed by the Committee and may, from time to time, amend or
revoke such designation. If no designated beneficiary survives the Participant,
the executor or administrator of the Participant’s estate shall be deemed to be
the Participant’s beneficiary.

 

23

 

29.                  Interpretation.

 

The Plan is designed and intended to comply
with Rule 16b-3 promulgated under the Exchange Act and, with Section 162(m) of
the Code, and all provisions hereof shall be construed in a manner to so
comply.

 

30.                   Section 409A
of the Code

 

(a)                                  The Plan is designed with the intent that no
Incentive Award under the Plan be subject to Section 409A of the Code, and
all provisions hereof shall be construed in a manner consistent with that
intent.

 

(b)                                 To the extent that the Committee determines
that any Incentive Award granted under the Plan is subject to Section 409A
of the Code, the Award Agreement evidencing such Incentive Award shall
incorporate the terms and conditions necessary to avoid the consequences
specified in Section 409A(a)(1) of the Code.  To the extent applicable, the Plan and Award
Agreements shall be interpreted in accordance with Section 409A of the
Code and Department of Treasury regulations and other interpretive guidance
issued thereunder (“409A Guidance”). 
Notwithstanding any provision of the Plan to the contrary, in the event
that the Committee determines that any Incentive Award may be subject to Section 409A
of the Code, the Board of Directors may adopt such amendments to the Plan and
the applicable Award Agreement or adopt other policies and procedures
(including amendments, policies and procedures with retroactive effect), or
take any other actions, that the Board determines are necessary or appropriate
to: (i) exempt the Incentive Award from Section 409A of the Code
and/or preserve the intended tax treatment of the benefits provided with
respect to the Incentive Award; or (ii) comply with the requirements of Section 409A
of the Code and 409A Guidance.  Neither
the Company nor the Committee shall be responsible for any additional tax
imposed pursuant to Section 409A of the Code, nor will the Company or the
Committee be required to indemnify or otherwise reimburse a Participant for any
liability incurred as a result of Section 409A of the Code.

 

(b)                                 Notwithstanding
anything to the contrary in this Plan (and unless the Award Agreement provides
otherwise, with specific reference to this sentence), to the extent that a
Participant holding an Incentive Award that constitutes “deferred compensation”
for purposes of Section 409A of the Code is a “specified employee” (as
defined in Section 409A of the Code and 409A Guidance), no distribution or
payment of any amount shall be made before a date that is six (6) months
following the date of such Participant’s “separation from service” (as defined
in Section 409A of the Code and 409A Guidance) or, if earlier, the date of
the Participant’s death.

 

24

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