Document:

Exhibit 10.8

CONVERTIBLE PROMISSORY NOTE

	
  
$160,000.00
  	
  
 
  	
  
Dallas, Texas
  	
  
 
  	
  
August 18, 2006
  

          FOR VALUE RECEIVED, the undersigned, Avatar Systems, Inc., a Texas corporation (the “Maker”), hereby unconditionally promises to pay to the order of Mrs. Ann Hankins, an individual resident of the State of Texas (“Payee”) the principal sum of One Hundred Sixty Thousand and No/100 Dollars ($160,000.00), in lawful money of the United States of America, together with interest (calculated on the basis of a 360-day year), on the unpaid principal balance from day-to-day remaining, computed until maturity at the rate per annum which shall from day-to-day be equal to the lesser of (a) the Maximum Rate, or (b) the Interest Rate.  Notwithstanding the foregoing, if at any time, the Interest Rate shall exceed the Maximum Rate, thereby causing the interest upon this Note to be limited to the Maximum Rate, then any subsequent reductions in the
Interest Rate shall not reduce the rate of interest charged hereunder below the Maximum Rate until the total amount of interest accrued hereon equals the amount of interest which would have accrued hereon if the Interest Rate had at all times been in effect.

          Section 1.  Definitions.  When used in this Note, the following terms shall have the respective meanings specified herein or in the section referred to:

          “Stock Purchase Agreement” shall mean that certain Stock Purchase Agreement dated as of July 31, 2006, by and among Maker, Payee and the other Seller named therein.

          “Business Day” shall mean a day upon which business is transacted by national banks in Dallas, Texas.

          “Event of Default” shall have the meaning ascribed to it in Section 6 hereof.

          “First Interest Payment Date” shall mean September 30, 2006.

          “First Principal Payment Date” shall mean the last day of the sixty-third (63rd) full calendar month following the date hereof.

          “Interest Rate” shall mean four percent (4.0%).

          “Maximum Rate” shall mean, with respect to the holder hereof, the highest non-usurious rate of interest, if any, permitted by applicable law on the date of determination.  Maker agrees that during the full term hereof, the maximum lawful interest rate for this Note as determined under Texas law shall be the “weekly ceiling” from time to time in effect under Texas Finance Code §303.305, as amended; provided, however, that the “Maximum Rate” for purposes of this Note shall not be limited to the applicable rate ceiling under Texas Finance Code §303.305 if Federal laws or other state laws now or hereafter in effect and applicable to this Note (and the interest contracted for, charged and collected hereunder) shall permit a higher rate of interest.  Payee shall not be required to notify Maker of changes in the “weekly ceiling” applicable
to this Note.

          “Note” shall mean this Convertible Promissory Note, together with any and all future renewals, extensions, restatements, reaffirmations, or amendments of, or supplements to, all or any part of this Convertible Promissory Note.

          “Obligation” shall mean all indebtedness, liabilities and obligations, of every kind and character, of Maker, now or hereafter existing in favor of Payee, regardless of whether they are direct, indirect, primary, secondary, joint, several, joint and several, liquidated, unliquidated, fixed or contingent, and regardless of whether the same may, prior to their acquisition by Payee, be or have been payable to some other person or entity, including, but not limited to, all indebtedness, liabilities and obligations arising under this Note or any other Transaction Document.

          “Transaction Documents” shall have the meaning assigned to such term in the Stock Purchase Agreement.  

          Section 2.  Payment.  The principal of and accrued interest upon this Note, computed as aforesaid, shall be due and payable as follows: (i) for a period of five (5) years following the date hereof, accrued and unpaid interest on this Note shall be paid in twenty (20) quarterly installments, commencing on the First Interest Payment Date and continuing thereafter on the last day of each third calendar month thereafter, and (ii) thereafter, principal of and accrued interest upon this Note shall be paid in twelve (12) equal quarterly installments, commencing on the First Payment Date and continuing thereafter on the last day of each third calendar month thereafter, with the final installment of the unpaid principal balance and all accrued and unpaid interest upon this Note to be paid on the date that is eight (8) years following the date hereof.

          Should the principal of, or any installment of the principal of or interest upon, this Note become due and payable on any day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day, and interest shall be payable with respect to such extension.  All payments of principal of and interest on this Note shall be made by Maker to Payee in federal or other immediately available funds.  Payments made to Payee by Maker hereunder shall be applied first to accrued interest and then to principal.    

          Section 3.  Rights Under Stock Purchase Agreement.  This Note has been executed and delivered in accordance with the terms and conditions set forth in the Stock Purchase Agreement and is one of the “Notes” referred to therein.  The holder of this Note shall be entitled to the benefits provided in the Stock Purchase Agreement. 

          Section 4.  Waiver.  Maker and each surety, endorser, guarantor and other party ever liable for payment of any sums of money payable upon this Note, jointly and severally waive presentment, demand, protest, notice of protest and non-payment, notice of acceleration and intention to accelerate, and agree that their liability under this Note shall not be affected by any renewal or extension in the time of payment hereof, or in any indulgences, or by any release or change in any security for the payment of this Note, and hereby consent to any and all renewals, extensions, indulgences, releases or changes, regardless of the number of such renewals, extensions, indulgences, releases or changes.

          No waiver by Payee of any of its rights or remedies hereunder or under any other document evidencing or securing this Note or otherwise, shall be considered a waiver of any other subsequent right or remedy of Payee; no delay or omission in the exercise or enforcement by Payee of any rights or remedies shall ever be construed as a waiver of any right or remedy of Payee; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Payee.

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          Section
5.  Conversion.  The outstanding principal balance of this Note
shall be convertible, at the option of Payee in its sole and absolute
discretion, in whole or in part and at any time or from time to time, into fully
paid and nonassessable shares (the “Conversion Shares”)
of common stock of Maker, par value $0.001 per share (the “Common
Stock”), at the conversion price equal to $3.50 per share (as
adjusted from time to time pursuant to the terms of this Note, the
“Conversion Price”).  If Payee elects to exercise
such option, then the following shall occur:

                    (a)          Payee shall deliver to Maker a notice of such election (the “Conversion Notice”), indicating the amount of principal of this Note to be converted (such amount to be converted referred to herein as the “Converted Amount”).

                    (b)          Upon its receipt of the Conversion Notice, the Maker shall immediately issue and deliver to Payee or its designated affiliates a certificate or certificates for the number of shares of Common Stock, registered in Payee’s or its designated affiliates’ name(s), to which Payee shall be entitled upon such conversion, bearing such legends as may be required by applicable state and federal securities laws. 

                    (c)          If the entire outstanding principal of this Note is converted, Payee shall deliver this Note to Maker marked “Canceled,” and Maker shall immediately pay to Payee all accrued and unpaid interest then due and owing on the date of such conversion.  If this Note is converted in part, Maker shall immediately pay to Payee all accrued and unpaid interest then due and owing on the date of such conversion, and Maker and Payee shall execute a document reasonably satisfactory to each of them evidencing the reduction in the principal amount of this Note as a result of such partial conversion.

                    (d)          No fractional shares will be issued on conversion of this Note.

          In the event of a stock split or subdivision of the Common Stock into a greater number of shares, or in the event of a dividend on the Common Stock payable in shares of Common Stock, the Conversion Price shall be proportionately decreased, and in the event of a combination of shares of the Common Stock into a smaller number of shares, the Conversion Price shall be proportionately increased, such increase or decrease, as the case may be.  In the event Maker at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, the outstanding principal of this Note shall thereafter be deemed to be convertible into an adjusted number of such securities and kind of securities as would have been issuable if such outstanding principal of this Note were converted pursuant to the terms hereof immediately prior to such
reclassification or other change.

          Section 6.  Events of Default
and Remedies.  An “Event of Default” shall
exist hereunder if any one or more of the following events shall occur and be
continuing:  (a) Maker shall fail to pay when due any principal of, or
interest upon, this Note or the Obligation; provided, however, that such failure
shall not constitute an Event of Default unless Payee has provided Maker with
written notice of such failure and Maker has failed to cure such failure during
the twenty (20) days following the date such written notice is delivered to
Maker; provided further, however, that after Payee has provided an aggregate of
five (5) such written notices to Maker due to such failure, an Event of Default
shall thereafter exist hereunder at any time Maker shall fail to pay when due
any principal of, or interest upon, this Note or the Obligation; (b) any of
the Transaction Documents shall cease to be legal, valid, binding agreements of
Maker enforceable against Maker in accordance with the respective terms thereof;
(c) Maker shall (1) apply for or consent to the appointment of a
receiver, trustee, intervenor, custodian or liquidator of itself or of all or a
substantial part of its assets, (2) be adjudicated a bankrupt or insolvent
or file a voluntary petition for bankruptcy or admit in writing that it is
unable to pay its debts as they become due, (3) make a general assignment
for the benefit of creditors, (4) file a petition or answer seeking
reorganization or an arrangement with creditors or to take advantage of any
bankruptcy or insolvency laws, or (5) file an answer admitting the material
allegations of, or consent to, or default in answering, a petition filed against
it in any bankruptcy, reorganization or insolvency proceeding, or take corporate
action for the purpose of effecting any of the foregoing; (d) an order,
judgment or decree shall be entered by any court of competent jurisdiction or
other competent authority approving a petition seeking reorganization of Maker
or appointing a receiver, trustee, intervenor or liquidator of any such person,
or of all or substantially all of its or their assets, and such order, judgment
or decree shall continue unstayed and in effect for a period of
sixty (60) days; or (e) the dissolution or termination of Maker. 

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          Upon the occurrence of any Event of Default hereunder, the holder hereof may, at its option, (i) declare the entire unpaid balance of principal of and accrued interest upon the Obligation to be immediately due and payable without presentment or notice of any kind which Maker waives pursuant to Section 4 herein, (ii) reduce any claim to judgment; and/or (iii) pursue and enforce any of Payee’s rights and remedies available pursuant to any applicable law, equity or agreement including, without limitation, foreclosing all liens and security interests securing payment thereof or any part thereof.  

          Section 7.  Notice.  Any notices required or permitted under this Note shall be given in accordance with, and deemed effective pursuant to, the terms of the Stock Purchase Agreement.  

          Section 8.  Voluntary Prepayment.  Maker reserves the right, subject to the terms of this Section 8, to prepay the outstanding principal balance of this Note, in whole or in part, at any time and from time to time, without premium or penalty.  Any such prepayment shall be made together with payment of interest accrued on the amount of principal being prepaid through the date of such prepayment, and shall be applied to the installments of principal due hereunder in the inverse order of maturity.  In the event Maker desires to prepay all or any of the outstanding principal balance of this Note, Maker shall provide to the Payee a notice stating the amount of the outstanding principal balance hereof to be prepaid and indicating the date such prepayment will be made, which such prepayment date shall be not less than fifteen (15) Business Days after such notice is
delivered to the Payee.  Payee shall have the option, at any time during such fifteen (15) Business Days, to convert all or any portion of the outstanding principal balance of this Note pursuant to Section 5 above.

          Section 9.  Usury Laws.  Regardless of any provisions contained in this Note, the Payee shall never be deemed to have contracted for or be entitled to receive, collect or apply as interest on the Note, any amount in excess of the highest lawful rate, and, in the event Payee ever receives, collects or applies as interest any such excess, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance of this Note, and, if the principal balance of this Note is paid in full, any remaining excess shall forthwith be paid to Maker.  In determining whether or not the interest paid or payable under any specific contingency exceeds the highest lawful rate, Maker and Payee shall, to the maximum extent permitted under applicable law, (a) characterize any non-principal payment (other than payments which are expressly designated as interest
payments hereunder) as an expense, fee, or premium, rather than as interest, (b) exclude voluntary prepayments and the effect thereof, and (c) spread the total amount of interest throughout the entire contemplated term of this Note so that the interest rate is uniform throughout such term.

          Section 10.  Costs.  If this Note is placed in the hands of an attorney for collection, or if it is collected through any legal proceeding at law or in equity, or in bankruptcy, receivership or other court proceedings, Maker agrees to pay all costs of collection, including, but not limited to, court costs and reasonable attorneys’ fees, including all costs of appeal.

          Section 11.  Applicable Law.  This Note is executed and delivered, and is intended to be performed in the State of Texas.  Except to the extent that the laws of the United States may apply to the terms hereof, the substantive laws of the State of Texas shall govern the validity, construction, enforcement and interpretation of this Note.  In the event of a dispute involving this Note or any other instruments executed in connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent jurisdiction in Dallas County, Texas.

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          IN WITNESS WHEREOF, Maker has duly executed this Note as of the day and year first written above.

	
  
 
  	
  
AVATAR   SYSTEMS, INC.
  
	
  
 
  	
  
 
  
	
   
  	
   
  
	
   
  	
  By:
  	
   
  
	
   
  	
   
  	
  

  
	
   
  	
   
  	
  Charles Shreve
  
	
   
  	
   
  	
  President and Chief Executive Officer
  

Signature Page to Convertible Promissory NoteEX-10.1

Exhibit 10.1

AVNET, INC.

Amended & Restated as of August 10, 2006

1997 Stock Option Plan

ARTICLE I

Purpose of the Plan

The 1997 Stock Option Plan (the “Plan”) is intended to advance the interests of the Company by
assisting Avnet and its Subsidiaries in attracting high caliber persons to serve as Eligible
Employees and Non-Employee Directors, and in inducing such persons to remain as Eligible
Employees and Non-Employee Directors, by virtue of the additional incentive to promote the
Company’s success which results from the possession of options to purchase shares of Avnet’s Common
Stock.

ARTICLE II

Definitions

The following words and phrases used herein shall, unless the context otherwise indicates,
have the following meanings:

1. “Avnet” shall mean Avnet, Inc.

2. “Board of Directors” and “Director” shall mean, respectively, the Board of Directors of
Avnet and any member thereof.

3. “Committee” shall mean a committee charged with administering this Plan, which Committee
shall be appointed by the Board of Directors, shall consist of three or more Non-Employee
Directors, none of whom is eligible to be granted Options or Stock Appreciation Rights by the
Committee under this Plan, shall have authority to grant Options and Stock Appreciation Rights
hereunder to Eligible Employees on such terms and subject to such conditions (not inconsistent with
the terms of this Plan) as such Committee shall determine, and shall have full authority to
construe this Plan, to prescribe and amend rules and regulations relating hereto, and to make all
other determinations in the administration hereof.

4. “Company” shall mean Avnet and all its Subsidiaries.

5. “Eligible Employees” shall mean any regular full-time employee of Avnet or of any of its
Subsidiaries (including any Director who is also such a regular full-time employee), and may
include, in appropriate circumstances relating to the granting of Options and Stock Appreciation
Rights hereunder, any person who is under consideration for employment by the Company and any
person employed by a business which is then to be acquired by Avnet. The term “Eligible Employees”
shall also include any person employed or retained by Avnet or any of its Subsidiaries to render
services as a consultant or advisor other than services in connection with the offer or sale of
securities in a capital-raising transaction.

6. “Fair Market Value” when used with respect to a particular date, shall mean the closing
price (as reported for New York Stock Exchange Composite Transactions) at which shares of the
Stock shall have been sold on such date or, if such date is a date for which no trading is so
reported, on the next preceding date for which trading is so reported.

7. “Non-Employee Director” shall mean a Director who is not an Eligible Employee.

8. “Option” shall mean any option granted or held pursuant to the provisions of this Plan.

9. “Option Agreement” shall mean the agreement evidencing any Option hereunder, including any
addendum thereto relating to Stock Appreciation Rights, which agreement may be in any form
prescribed or accepted by the Committee therefor (in the case of an Option Agreement with an
Eligible Employee), or in any form prescribed or accepted by the Board of Directors (in the case of
an Option Agreement with a Non-Employee Director).

10. “Optionee” shall mean any person who at the time in question holds any Option which then
remains unexercised in whole or in part, has not been surrendered for complete termination and has
not expired or terminated, and shall include any Successor Optionee.

11. “Plan” shall mean this stock option plan.

12. “Stock” shall, subject to the anti-dilution provisions set forth in Article VIII hereof,
mean the Common Stock of Avnet, as presently constituted.

13. “Stock Appreciation Right” or “SAR” shall mean any right granted under this Plan which
entitles an Optionee to receive (a) shares of Stock having a Fair Market Value at the date of
exercise of such SAR, or (b) cash in the amount of such Fair Market Value, or (c) a combination of
shares of Stock and cash equal in the aggregate to such Fair Market Value, equivalent to all or
part of the difference between the aggregate exercise price of the portion of the related Option
which is being surrendered for termination and the Fair Market Value at such date of the shares of
Stock for which such SAR is being exercised. An SAR may be granted by the Committee with respect to
any Option simultaneously or previously granted under this Plan to an Eligible Employee, and an SAR
may be granted by the Board of Directors with respect to any Option simultaneously or previously
granted under this Plan to a Non-Employee Director; and, when granted, may be granted by the
Committee or the Board of Directors upon such terms and subject to such conditions as the Committee
or the Board of Directors may in its discretion prescribe or approve; provided that an SAR shall
only be exercisable by the Optionee to whom such SAR was initially granted, shall only be
exercisable during the period when Optionee is an Eligible Employee or a Non-Employee Director and
shall not be exercisable by a Successor Optionee.

14. “Subsidiary” shall mean any corporation 80% of the total combined voting power of all
classes of capital stock of which shall at the time in question be owned by Avnet and/or any of its
subsidiaries.

15. “Successor Optionee” shall mean any person whom, under the provisions of Article V hereof,
shall have acquired the right to exercise any Option by will or the laws of descent and
distribution.

ARTICLE III

Shares Reserved for the Plan

1. Subject to the anti-dilution provisions set forth in Article VIII hereof, the maximum
number of shares of Stock which may be delivered by Avnet pursuant to the exercise of Options
and/or Stock Appreciation Rights shall be 1,000,000. At no time shall there be outstanding Options
for the purchase of more than 1,000,000 shares of Stock (subject to said anti-dilution provisions)
less the aggregate of the number of shares of Stock previously delivered pursuant to the exercise
of Options and the number of shares of Stock previously covered by Options terminated upon
surrender in connection with the exercise of Stock Appreciation Rights.

2. The shares of Stock subjected to Options and Stock Appreciation Rights may, in the
discretion of the Committee and with the consent of the Board of Directors (in the case of Options
and Stock Appreciation Rights granted to Eligible Employees), or in the discretion of the Board of
Directors (in the case of Options and Stock Appreciation Rights granted to Non-Employee Directors),
consist of authorized but unissued shares of Stock and/or shares of Stock held in the treasury of
Avnet.

3. If any Option shall be surrendered and terminated or for any other reason shall terminate
or expire, whether in whole or in part (except for terminations in connection with exercises of
Stock Appreciation Rights), the shares of Stock covered by such Option immediately prior to such
termination or expiration shall thereupon be added to the shares of Stock otherwise available for
subjection to Options and Stock Appreciation Rights hereunder.

ARTICLE IV

Administration of the Plan

1. This Plan shall be administered by the Committee with respect to Options and SARs granted
to Eligible Employees, and shall be administered by the Board of Directors with respect to Options
and SARs granted to Non-Employee Directors. The Committee and the Board of Directors each shall
have full power to construe and interpret the Plan in connection with their respective
administration of the Plan, and to establish and amend rules and regulations for such respective
administration.

2. In addition to paragraph 1 of this Article IV (and without limiting the generality
thereof), the Committee shall have plenary authority (subject to the provisions of Articles II,
III, V and VI hereof) in its discretion to determine the time or times at which Options and/or
Stock Appreciation Rights shall be granted to Eligible Employees, the Eligible Employees to whom
Options and/or Stock Appreciation Rights shall be granted and the number of shares of Stock to be
covered by each such Option and/or Stock Appreciation Right. The granting of Options and/or Stock
Appreciation Rights by the Committee shall be entirely discretionary; the terms and conditions (not
inconsistent with this Plan) prescribed or approved for any Option Agreement with an Eligible
Employee shall similarly be within the discretion of the Committee; and nothing in this Plan shall
be deemed to give any Eligible Employee any right to receive Options and/or Stock Appreciation
Rights.

2a. In addition to paragraph 1 of this Article IV (and without limiting the generality
thereof), the Board of Directors shall have plenary authority (subject to the provisions of
Articles II, III, V and VI hereof) in its discretion to determine the time or times at which
Options and/or Stock Appreciation Rights shall be granted to Non-Employee Directors, the
Non-Employee Directors to whom Options and/or Stock Appreciation Rights shall be granted and the
number of shares of Stock to be covered by each such Option and/or Stock Appreciation Right;
provided that the members of the Committee shall abstain from participating in any action taken by
the Board of Directors with respect to Options and/or Stock Appreciation Rights granted or to be
granted to any such members. The granting of Options and/or Stock Appreciation Rights by the Board
of Directors shall be entirely discretionary; the terms and conditions (not inconsistent with this
Plan) prescribed or approved for any Option Agreement with a Non-Employee Director shall similarly
be within the discretion of the Board of Directors; and nothing in this Plan shall be deemed to
give any Non-Employee Director any right to receive Options and/or Stock Appreciation Rights.”

3. The Committee is also specifically authorized, in the event of a public solicitation, by
any person, firm or corporation other than Avnet, of tenders of 50% or more of the then outstanding
Stock (known conventionally as a “tender offer”), to accelerate exercisability of any or all
Options and any or all of the related Stock Appreciation Rights held by Optionees then employed as
an Eligible Employee, so that such Options and Stock Appreciation Rights will immediately become
exercisable in full; provided that such accelerated exercisability shall continue in effect only
until expiration, termination or withdrawal of such “tender offer”, whereupon such Options and
related Stock Appreciation Rights will be (and continue thereafter to be) exercisable only to the
extent that they would have been exercisable if no such acceleration of exercisability had been
authorized.

3a. The Board of Directors is also specifically authorized, in the event of a tender offer, by
any person, firm or corporation other than Avnet, for 50% or more of the then outstanding Stock, to
accelerate exercisability of any or all Options and any or all of the related Stock Appreciation
Rights held by Optionees then serving as Non-Employee Directors, so that such Options and/or Stock
Appreciation Rights will immediately become exercisable in full; provided that such accelerated
exercisability shall continue in effect only until expiration, termination or withdrawal of such
‘tender offer,’ whereupon such Options and related Stock Appreciation Rights will be (and continue
thereafter to be) exercisable only to the extent they would have been exercisable if no such
acceleration of exercisability had been authorized.

4. A majority of the members of the Committee (but not less than two) shall constitute a
quorum, and all acts, decisions or determinations of the Committee shall be by majority vote of
such of its members as shall be present at a meeting duly held at which a quorum is so present.
Any act, decision, or determination of the Committee reduced to writing and signed by a majority of
its members (but not less than two) shall be fully effective as if it had been made, taken or done
by vote of such majority at a meeting duly called and held.

5. The Committee shall deliver a report to the Board of Directors with reasonable promptness
following the taking of any action(s) in the administration of this Plan, which report shall set
forth in full the action(s) so taken. The Committee shall also file such other reports and make
such other information available as may from time to time be prescribed by the Board of Directors.

ARTICLE V

Award and Modification of Options

1. Options may be granted by the Committee to Eligible Employees, and may be granted by the
Board of Directors to Non-Employee Directors, from time to time in their discretion prior to
November 19, 2007 or the earlier termination of the Plan as provided in Article IX.

2. During the period when any Option granted by the Committee to an Eligible Employee is
outstanding, the Committee may, for such consideration (if any) as may be deemed adequate by it and
with the prior consent of the Optionee, modify the terms of such Option, including the purchase
price, with respect to the unexercised portion thereof. During the period when any Option granted
by the Board of Directors to a Non-Employee Director is outstanding, the Board of Directors may,
for such consideration (if any) as may be deemed adequate by it and with the prior consent of the
Optionee, modify the terms of the Option, including the purchase price, with respect to the
unexercised portion thereof.

3. The purchase price per share of Stock upon the exercise of each Option shall be no less
than 85% of the Fair Market Value of the Stock at the date of the granting thereof; provided,
however, (i) that the purchase price per share of Stock shall in no event be less than the par
value per share of the Stock and (ii) options whose purchase price per share on exercise is less
than 100% of the Fair Market Value at the date of the granting thereof may be granted only in lieu
of a reasonable amount of cash compensation.

4. Subject to the specific authority bestowed upon the Committee in Article IV, paragraph 3
hereof, and to the specific authority bestowed upon the Board of Directors in Article IV, paragraph
3a hereof, (i) no Option shall be exercisable to any extent until the first anniversary of the date
of the granting thereof, (ii) thereafter, each Option shall be exercisable with respect to 25% of
the total number of shares of Stock subject thereto and (iii) upon each succeeding anniversary date
of the date of grant, each Option will become exercisable on a cumulative basis with respect to an
additional 25% of the shares subject thereto. To the extent that any Option shall have become
exercisable as provided in the preceding sentence, such Option may thereafter be exercised by the
Optionee in whole at any time or in part from time to time prior to the surrender for termination,
expiration or other termination of such Option. Each Option shall expire and cease to be
exercisable after the day prior to the tenth anniversary of the date of granting thereof.

5. The aggregate number of shares of Stock under any Option or Options granted hereunder to
any Optionee in any calendar year may not exceed 150,000.

6. No Option shall be assignable or transferable by an Optionee except in the event of the
death of such Optionee, nor shall any Option be exercisable during the lifetime of the Optionee
except by such Optionee. Subject to the provisions of paragraph 8 below, in the event of death,
while in the employ of the Company or while a Director, of any Optionee to whom an Option was
originally granted, such option shall remain exercisable (unless such Option shall sooner be
surrendered or expire) for one year after the date of death of such original Optionee, but only (a)
by the person or persons to whom the right to exercise such Option shall have passed by will or the
laws of descent and distribution, and (b) if and to the extent that such Option shall have been
exercisable by such original Optionee at such date of death.

7. In the event that any Eligible Employee shall cease to be employed by the Company for any
reason other than death, disability, retirement or other reasons determined by the Committee in its
sole discretion, each outstanding Option theretofore granted to such Eligible Employee shall
forthwith upon such cessation of employment terminate and cease to be exercisable. Subject to the
provisions of paragraph 8 below, in the event that any Eligible Employee shall cease to be employed
by the Company due to disability, retirement or other reasons determined by the Committee in its
sole discretion, each outstanding Option theretofore granted to such Eligible Employee shall remain
exercisable for three months after the date of such cessation of employment, but may be exercised
only (a) by such Eligible Employee or by the person or persons to whom the right to exercise such
Option shall have passed by will or the laws of descent and distribution, and (b) if and to the
extent that such Option was exercisable by such Eligible Employee at such date of cessation of
employment. At the end of the aforesaid three-month period, such Option (unless it shall sooner
have been surrendered for termination or have expired) shall terminate and cease to be exercisable.

7a. In the event that any Non-Employee Director shall cease to be a Director for any reason
other than death, disability, the normal expiration of such Non-Employee Director’s term as a
Director without re-election, or other reasons determined by the Board of Directors in its sole
discretion, each outstanding Option theretofore granted to such Non-Employee Director shall
forthwith upon such cessation terminate and cease to be exercisable. Subject to the provisions of
paragraph 8 below, in the event that any Non-Employee Director shall cease to be a Director due to
disability, the normal expiration of such Non-Employee Director’s term as a Director without
re-election, or other reasons determined by the Board of Directors in its sole discretion, each
outstanding Option theretofore granted to such Non-Employee Director shall remain exercisable for
such period, up to five years after the date on which the Optionee ceases to be a Director, as the
Board of Directors shall have fixed in the Option Agreement evidencing such Options, but may be
exercised only by such Non-Employee Director or by the person or persons to whom the right to
exercise such Option shall have passed by will or the laws of descent and distribution. Such
Option shall continue to become exercisable as provided in paragraph 4 of this Article V after the
date on which the Optionee ceases to be a Director. At the end of the aforesaid period of up to
five years, such Option (unless it shall sooner have been surrendered for termination or have
expired) shall terminate and cease to be exercisable.

8. Notwithstanding the provisions of the second sentence of paragraph 6 and the second
sentences of paragraphs 7 and 7a above, (a) no Option shall in any event be exercisable after the
day prior to the tenth anniversary of the date of the granting thereof, and (b) any Option for
which accelerated exercisability, authorized pursuant to Article IV, paragraph 3 or 3a hereof, was
in effect at the date of the original Optionee’s death or at the date of termination of the
Optionee’s employment or membership on the Board of Directors due to disability, retirement,
cessation of membership on the Board of Directors or otherwise as may be determined by the
Committee or the Board of Directors in its sole discretion, as the case may be, shall be subject to
the proviso to Article IV, paragraph 3 or 3a.

ARTICLE VI

Stock Appreciation Rights

1. Stock Appreciation Rights may be granted to Eligible Employees in the discretion of the
Committee and to Non-Employee Directors in the discretion of the Board of Directors, upon such
terms and conditions as the Committee or the Board of Directors may prescribe. Each SAR shall be
granted in connection with and shall relate to all or part of a specific Option simultaneously or
previously granted under the Plan. In the discretion of the Committee or the Board of Directors,
an SAR may be granted at any time prior to the exercise, expiration or termination of the Option
related thereto, and may be modified at any time the related Option is modified.

2. Upon exercise of a Stock Appreciation Right, the Optionee shall be entitled to receive (a)
shares of Stock having a Fair Market Value at the date of exercise, or (b) cash in the amount of
such Fair Market Value, or (c) a combination of shares of Stock and cash equal in the aggregate to
such Fair Market Value, equivalent to all or part of the difference between the aggregate exercise
price of the portion of the related Option which is being surrendered for termination and the Fair
Market Value at such date of the shares of Avnet’s Common Stock for which such SAR is being
exercised.

3. Each Stock Appreciation Right granted to an Eligible Employee shall be exercisable on such
dates or during such periods as may be determined by the Committee, and each Stock Appreciation
Right granted to a Non-Employee Director shall be exercisable on such dates or during such periods
as may be determined by the Board of Directors, provided that no SAR shall be exercisable at a time
when the Option related thereto could not be exercised nor may it be exercised with respect to a
number of shares in excess of the number for which such Option could then be exercised.

4. A Stock Appreciation Right may be exercised only upon surrender by the Optionee, for
termination, of the portion of the related Option, which is then exercisable to purchase the number
of shares for which the Stock Appreciation Right is being exercised. Shares covered by the
terminated Option or portion thereof shall not be available for subjection to other Options under
the Plan.

5. The Committee may impose any other conditions upon the exercise of Stock Appreciation
Rights granted to Eligible Employees, and the Board of Directors may impose any other conditions
upon the exercise of Stock Appreciation Rights granted to Non-Employee Directors, which conditions
may include a condition that any particular SARs or any class of SARs may only be exercised in
accordance with rules adopted by the Committee or the Board of Directors, as appropriate, from time
to time. Such rules may govern the right to exercise SARs granted prior to the adoption or
amendment of such rules as well as SARs granted thereafter.

6. The Committee or the Board of Directors may at any time amend, terminate or suspend any
Stock Appreciation Right theretofore granted by it under this Plan, provided that the terms of any
SAR after any amendment shall conform to the provisions of the Plan. Each SAR shall terminate and
cease to be exercisable upon the termination (other than a termination required in connection with
exercise of the SAR) or expiration of the Option related thereto.

ARTICLE VII

Additional Terms and Provisions

1. The Committee or the Board of Directors shall, promptly after the granting of any Option or
Stock Appreciation Right or the modification of any outstanding Option or SAR, cause such Optionee
to be notified of such action and shall cause Avnet to deliver to such Optionee an Option Agreement
(which Option Agreement is to be signed on behalf of Avnet by an officer of Avnet with appropriate
authorization therefor) evidencing the Option so granted or modified and the terms and conditions
thereof and including (when appropriate) an addendum evidencing the SAR so granted or modified and
the terms and conditions thereof.

2. The date on which the Committee or the Board of Directors approves the granting of any
Option or Stock Appreciation Right, or approves the modification of any outstanding Option or SAR,
shall be deemed the date on which such Option or SAR is granted or modified, regardless of the date
on which the Option Agreement evidencing the same is executed.

3. To the extent that any Option or Stock Appreciation Right shall have become exercisable as
provided in Article V or Article VI above, such Option or SAR may be exercised by the Optionee at
any time and from time to time by written notice to Avnet stating the number of shares of Stock
with respect to which such Option or SAR is being exercised, accompanied (as to an Option exercise)
by payment in full therefor as prescribed below and (as to an SAR exercise) by an instrument
effecting surrender for termination of the relevant portion of the Option related thereto. As soon
as practicable after receipt of such notice, Avnet shall, without requiring payment of any transfer
or issue tax by the Optionee, deliver to the Optionee, at the principal office of Avnet (or such
other place as Avnet may designate), a certificate or certificates representing the shares of Stock
acquired upon such exercise; provided, however, that the date for any such delivery may be
postponed by Avnet for such period as it may require, in the exercise of reasonable diligence (a)
to register the shares of Stock so purchased (together with any part or all of the balance of the
shares of Stock which may be delivered pursuant to the exercise of Options and/or Stock
Appreciation Rights) under the Securities Act of 1933, as amended, and/or to obtain the opinions of
counsel referred to in clauses (B) and (E) of paragraph 7 below, and (b) to comply with the
applicable listing requirements of any national securities exchange or with any other requirements
of law. If any Optionee shall fail to accept delivery of all or any part of the shares of Stock
with respect to which such Option or SAR is being exercised, upon tender thereof, the right of such
Optionee to exercise such Option and the related SAR, or to exercise such SAR and the related
Option, with respect to such unaccepted shares may, in the discretion of the Committee (in the case
of an Option granted to an Eligible Employee) or the Board of Directors (in the case of an Option
granted to a Non-Employee Director), be terminated. For purposes of this paragraph 3, payment upon
exercise of an Option may be made (i) by check (certified, if so required by Avnet) in the amount
of the aggregate exercise price of the portion of the Option being exercised, or (ii) in the form
of certificates representing shares of Stock (duly endorsed or accompanied by appropriate stock
powers, in either case with signature guaranteed if so required by Avnet) having a Fair Market
Value, at the date of receipt by Avnet of such certificates and the notice above mentioned, equal
to or in excess of such aggregate exercise price, or (iii) by a combination of check and
certificates for shares of Stock.

4. Notwithstanding paragraph 3 of this Article VII, upon each exercise of an Option, the
Optionee shall pay to Avnet an amount required to be withheld under applicable income tax laws in
connection with such exercise. An Optionee whose transactions in Common Stock are subject to the
provisions of Section 16(b) of the Securities Exchange Act of 1934 (the “Act”) may, in the
discretion of the Committee and subject to any rules as the Committee may adopt (in the case of an
Optionee who was an Eligible Employee on the date of grant), or in the discretion of the Board of
Directors and subject to such rules as the Board of Directors may adopt (in the case of an Optionee
who was a Non-Employee Director on the date of grant), elect to satisfy such obligation, in whole
or in part, by electing to have Avnet withhold shares of Stock having a Fair Market Value equal to
the amount required to be so withheld (an “election”). The Fair Market Value of a share of Stock
shall be the Fair Market Value on the date that the amount to be withheld is determined (the “Tax
Date”). An Optionee shall pay Avnet in cash for any fractional share that would otherwise be
required to be withheld. Each Election with respect to the exercise of an Option shall be subject
to the following restrictions:

(A) The Election must be made on or prior to the Tax Date;

(B) The Election shall be irrevocable;

(C) The Election is subject to the disapproval of the Committee (in the case of an Optionee
who was an Eligible Employee on the date of grant) or the Board of Directors (in the case of an
Optionee who was a Non-Employee Director on the date of grant);

(D) An Election by an Optionee may not be made within six months of the grant of the Option
with respect to which such Election is made; provided, however that this restriction shall not
apply in the event that the Optionee shall die or become disabled prior to the expiration of such
six-month period; and

5. The Plan shall not confer upon any Optionee any right with respect to continuance of
employment by the Company or continuance of membership on the Board of Directors, nor shall it
interfere in any way with his or her right, or the Company’s right, to terminate his or her
employment at any time.

6. No Optionee shall acquire or have any rights as a shareholder of Avnet by virtue of any
Option or any SAR until the certificates representing shares of Stock issued pursuant to the
exercise of such Option or SAR are delivered to such Optionee in accordance with the terms of the
Plan, but the rights as a shareholder of record as of the date of giving notice of the exercise of
such Option or SAR and making delivery to Avnet of the funds, certificates and/or other instruments
as provided in paragraph 3 above.

7. While it is Avnet’s present intention to register under the Securities Act of 1933, as
amended, the shares of Stock which may be delivered pursuant to the exercise of Options and/or
Stock Appreciation Rights granted under the Plan, nevertheless, any provisions in this Plan to the
contrary notwithstanding, Avnet shall not be obligated to sell or deliver any shares of Stock
pursuant to the exercise of any Option or any SAR unless (A) (i) such shares have at the time of
such exercise been registered under the Securities Act of 1933, as amended, (ii) no stop order
suspending the effectiveness of such registration statement has been issued and no proceedings
therefor have been instituted or threatened under said Act, and (iii) there is available at the
time of such exercise a prospectus containing certified financial statements and other information
meeting the requirements of Section 10(a)(3) of said Act, or (B) Avnet shall have received from its
counsel an opinion that registration of such shares under said Act is not required, (C) such shares
are at the same time of such exercise, or upon official notice of issuance will be, listed on each
national securities exchange on which the Stock is then listed, (D) the prior approval of such sale
has been obtained from any State regulatory body having jurisdiction (but nothing herein contained
shall be deemed to require Avnet to register or qualify as a foreign corporation in any State nor,
except as to any matter or transaction relating to the sale or delivery of such shares, to consent
to service of process in any State), and (E) Avnet shall have received an opinion from its counsel
with respect to compliance with the matters set forth in clauses (A), (C), and (D) above.

1

ARTICLE VIII

Adjustments upon Changes in Capitalization

1. In the event that the Stock shall be split up, divided or otherwise reclassified into or
exchanged for a greater or lesser number of shares of Stock or into shares of Common Stock and/or
any other securities of Avnet by reason of recapitalization, reclassification, stock split or
reverse split, combination of shares or other reorganization, the term “Stock” as used herein shall
thereafter mean the number and kind of shares or other securities into which the Stock shall have
been so split up, divided or otherwise reclassified or for which the Stock shall have been so
exchanged; and the remaining number of shares of Stock which may, in the aggregate, thereafter be
delivered pursuant to the exercise of Options and/or Stock Appreciation Rights (as specified in
paragraph 1 of Article III hereof) and the remaining number of shares of Stock which may thereafter
be delivered pursuant to the exercise of any Options and/or Stock Appreciation Rights then
outstanding shall be correspondingly adjusted. In the event that any dividend payable in shares of
Stock is paid to the holders of outstanding shares of Stock, the remaining number of shares of
Stock which may, in the aggregate, thereafter be delivered pursuant to the exercise of Options
and/or Stock Appreciation Rights (as specified in paragraph 1 of Article III hereof) and the
remaining number of shares of Stock which may thereafter be delivered pursuant to the exercise of
any Options and/or Stock Appreciation Rights then outstanding shall be increased by the percentage
which the number of shares of Stock so paid as a dividend bears to the total number of shares of
Stock outstanding immediately prior to the payment of such dividend.

2. In the event that the Stock shall be split up, divided or otherwise reclassified or
exchanged as provided in the preceding paragraph, the purchase price per share of Stock upon
exercise of outstanding Options shall be correspondingly adjusted.

3. Anything in this Article VIII to the contrary notwithstanding, in the event that, upon any
adjustment made in accordance with paragraph 1 above, the remaining number of shares of Stock which
may thereafter be delivered pursuant to the exercise of any Option or Stock Appreciation Right then
outstanding shall include a fractional share of Stock, such fractional share of Stock shall be
disregarded for all purposes of the Plan and the Optionee holding such Option or SAR shall become
entitled neither to purchase the same nor to receive cash or scrip in payment therefor or in lieu
thereof.

ARTICLE IX

Amendment or Termination of the Plan

The Board of Directors may amend the Plan from time to time as the Board may deem advisable
and in the best interests of Avnet and may terminate the Plan at any time (except as to Options and
Stock Appreciation Rights then outstanding hereunder); provided, however, that unless approved by
the affirmative vote of a majority of the votes cast at a meeting of the shareholders of Avnet duly
called and held for that purpose, no amendment to the Plan shall be adopted which shall (a) affect
the composition or functioning of the Committee, (b) increase the aggregate number of shares of
Stock which may be delivered pursuant to the exercise of Options and SARs, (c) decrease the minimum
purchase price per share of Stock (in relation to the Fair Market Value thereof at the respective
dates of grant) upon the exercise of Options, or (d) extend the ten year maximum period within
which an Option is exercisable or to the extent to which an SAR is exercisable, or the termination
date of the Plan.

2

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