Document:

2005 Stock Plan

 Exhibit 4.3 
 The Alarion Bank 2005 Stock Plan was assumed by Alarion Financial Services, Inc. pursuant to an Agreement and Plan of Share Exchange dated September 14, 2005 
 ALARION BANK 
 2005 STOCK PLAN 
 SECTION 1 
 BACKGROUND AND PURPOSE

 The name of this Stock Plan is the “2005 Stock Plan.” The purpose of this Plan is to promote the interests of Alarion Bank
through grants to Employees and Directors of Options to purchase Stock, grants of Stock Appreciation Rights and grants of Restricted Stock and Stock Units in order: (i) to attract and retain Employees and Directors; (ii) to provide an
additional incentive to each Employee and Director to work to increase the value of Stock; and (iii) to provide each Employee and Director with a stake in the future of Alarion, which corresponds to the stake of each of our shareholders.

 SECTION 2 
 DEFINITIONS 
 Each term set forth in this Section 2 shall have the meaning set forth opposite such term for purposes of
this Plan and, for purposes of such definitions, the singular shall include the plural and the plural shall include the singular. 
 2.1.
“Alarion” means Alarion Bank, a Florida corporation, and any Subsidiary or successor to such corporation. 
 2.2. “Board” means the Board of Directors of Alarion. 
 2.3. “Change in
Control” means a change in control of Alarion of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act as in effect at the time of such
“change in control,” provided that such a change in control shall be deemed to have occurred at such time as: 
 (i)
any “person” (as that term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly, of securities representing 50% or more of
the combined voting power for election of directors of the then outstanding securities of Alarion or any successor of Alarion; 
 (ii) during any period of two consecutive years or less, individuals who at the beginning of such period constitute the Board cease, for any reason, to constitute at least a majority of the Board, unless the election or nomination for
election of each new Director was approved by a vote of at least two-thirds of the directors then still in office who were Directors at the beginning of the period; 
  

 (iii) the shareholders of Alarion approve any reorganization, merger, consolidation or
share exchange as a result of which the common stock of Alarion shall be changed, converted or exchanged into or for securities of another corporation (other than a merger with a wholly-owned subsidiary of Alarion) or any dissolution or liquidation
of Alarion or any sale or the disposition of 50% or more of the assets or business of Alarion; or 
 (iv) the shareholders of
Alarion approve any reorganization, merger, consolidation or share exchange unless: 
 (A) the persons who were the beneficial
owners of the outstanding shares of the common stock of Alarion immediately before the consummation of such transaction beneficially own more than 50% of the outstanding shares of the common stock of the successor or survivor corporation in such
transaction immediately following the consummation of such transaction; and 
 (B) the number of shares of the common stock of
such successor or survivor corporation beneficially owned by the persons described in Section 2.2(iv)(A) immediately following the consummation of such transaction is beneficially owned by each such person in substantially the same proportion
that each such person had beneficially owned shares of Alarion common stock immediately before the consummation of such transaction; provided 
 (C) the percentage described in Section 2.2(iv)(A) of the beneficially owned shares of the successor or survivor corporation and the number described in 2.2(iv)(B) of the beneficially owned shares of the
successor or survivor corporation shall be determined exclusively by reference to the shares of the successor or survivor corporation which result from the beneficial ownership of shares of common stock of Alarion by the persons described in
Section 2.2(iv)(A) immediately before the consummation of such transaction. 
 2.4. “Code” means the
Internal Revenue Code of 1986, as amended. 
 2.5. “Committee” means a Committee of the Board to which the
responsibility to administer this Plan is delegated by the Board and which shall consist of at least two members of the Board, each of whom shall be a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, and
each of whom shall be (or be treated as) an “outside director” for purposes of Section 162(m) of the Code. 
 2.6.
“Covered Employee” means an Employee whom the Committee on the date he or she is granted an Option, SAR, Restricted Stock or Stock Units deems likely to be a “covered employee” (within the meaning of
Section 162(m) of the Code) as of any date on or after the date of such grant. 
  

 2.7. “Director” means a member of the Board who is not an employee of
Alarion or any Subsidiary or Parent Corporation. 
 2.8. “Employee” means a select employee of Alarion or any
Subsidiary whose performance is, in the judgment of the Committee acting in its absolute discretion, directly or indirectly material to the success of Alarion or such Subsidiary and who is not a Ten Percent Shareholder. 
 2.9. “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 2.10. “Fair Market Value” means: (1) the closing price on any date for a share of Stock reported by a newspaper or
trade journal selected by the Committee or, if no such closing price is available on such date; (2) such closing price as so reported in accordance with Section 2.10(1) for the immediately preceding business day, or, if no newspaper or
trade journal reports such closing price; (3) the price which the Committee acting in good faith determines through any reasonable valuation method that a share of Stock might change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts. In no instance shall the Fair Market Value of Stock ever be less than its book value. 
 2.11. “ISO” means an Option granted under Section 7 of this Plan to purchase Stock, which is evidenced by an Option
Agreement which provides that the Option is intended to satisfy the requirements for an incentive stock option under Section 422 of the Code. 
 2.12. “NQO” means a nonqualified option, i.e., an Option granted under Section 7 of this Plan to purchase Stock, which is evidenced by an Option Agreement which provides that the Option shall not be
treated as an incentive stock option under Section 422 of the Code. 
 2.13. “Option” means an ISO or an
NQO. 
 2.14. “Option Agreement” means the written agreement or instrument which sets forth the terms of an
Option granted to an Employee or Director under this Plan. 
 2.15. “Option Price” means the price which shall
be paid to purchase one share of Stock upon the exercise of an Option granted under this Plan. 
 2.16. “Parent
Corporation” means any corporation which is a parent corporation (within the meaning of Section 424[e] of the Code) of Alarion. 
 2.17. “Plan” means the 2005 Stock Plan, as amended from time to time. 
 2.18.
“Restricted Stock” means Stock granted to an Employee or Director pursuant to Section 8 of this Plan. 
 2.19. “Rule 16b-3” means the exemption under Rule 16b-3 to Section 16(b) of the Exchange Act or any successor to such rule. 
 2.20. “Stock” means the Five Dollar ($5.00) par value common stock of Alarion. 
  

 2.21. “Stock Agreement” means the written agreement or instrument which
sets forth the terms of a Restricted Stock grant or Stock Unit grant to an Employee or Director under this Plan. 
 2.22.
“Stock Appreciation Right or SAR” means a right which is granted pursuant to the terms of Section 7 of this Plan to the appreciation in the Fair Market Value of a share of Stock in excess of the SAR Share Value for
such a share. 
 2.23. “SAR Agreement” means the written agreement or instrument which sets forth the terms of
a SAR granted to an Employee under this Plan. 
 2.24. “SAR Share Value” means the figure which is set forth
in each SAR Agreement and which is no less than the Fair Market Value of a share of Stock on the date the related SAR is granted. 
 2.25.
“Stock Unit” means a contractual right granted to an Employee or Director pursuant to Section 8 to receive a Restricted Stock at a certain date or upon the occurrence of a certain event. 
 2.26. “Subsidiary” means any corporation which is a subsidiary corporation (within the meaning of Section 424(f) of
the Code) of Alarion. 
 2.27. “Ten Percent Shareholder” means a person who owns (after taking into account
the attribution rules of Section 424[d] of the Code) more than ten percent of the total combined voting power of all classes of stock of either Alarion, a Subsidiary or a Parent Corporation. 
 SECTION 3 
 SHARES RESERVED UNDER
PLAN 
 3.1. Share. There shall (subject to Section 11) be reserved for issuance under this Plan, 225,000 shares of
Stock. Furthermore, upon any future issuance of Stock, 15% of such newly issued shares shall also be reserved for issuance under this Plan. Provided, however, that no more than 450,000 shares of Stock shall ever be reserved for issuance under this
Plan. 
 3.2. Source of Shares. The shares of Stock described in Section 3.1 shall be reserved from authorized but
unissued shares of Stock. Furthermore, any shares of Stock issued pursuant to a Restricted Stock grant which are forfeited thereafter shall again become available for issuance under this Plan, but any shares of Stock used to satisfy a withholding
obligation under Section 14.4 shall not again become available for issuance under this Plan. The exercise of a SAR or a surrender right in an Option shall reduce the number of shares available for issuance under this Plan only to the extent of
the shares of Stock, if any, actually issued upon such exercise. Finally, if the Option Price of an Option is paid in whole or in part in shares of Stock or if shares of Stock are tendered to Alarion in satisfaction of any condition to a grant of
Restricted Stock, such shares thereafter shall be treated the same as any other shares of Stock available for issuance under this Plan. 

 3.3. Use of Proceeds. The proceeds which Alarion receives from the sale of any shares of
Stock under this Plan shall be used for general corporate purposes and shall be added to the general funds of Alarion. 
 SECTION 4

 EFFECTIVE DATE 
 This Plan shall be effective on the date the shareholders of Alarion (acting at a duly called meeting of such shareholders) approve the adoption of this Plan. 
 SECTION 5 
 COMMITTEE 
 This Plan shall be administered by the Committee. Subject to the provisions of this Plan (including Sections 11, 12, 13 and 14), the Committee shall have
the power, authority, and sole and exclusive discretion to construe, interpret and administer this Plan, including without limitation, the power and authority to make factual determinations relating to Plan grants and correct mistakes in Option, SAR
or Stock Agreements, and to take such other action in the administration and operation of this Plan as the Committee deems equitable under the circumstances. Such actions of the Committee shall be binding on Alarion, on each affected Employee and
Director and on each other person directly or indirectly affected by such action. The Committee may delegate such powers and duties, whether ministerial or discretionary, as the Committee may deem appropriate, including, but not limited to,
authorizing the Committee’s delegate to execute agreements evidencing the grant of Options, SARs, Restricted Stock and Stock Units or other documents on the Committee’s behalf. 
 SECTION 6 
 ELIGIBILITY 
 Employees and Directors shall be eligible for the grant of Options, SARs, Restricted Stock and Stock Units under this Plan. 
 SECTION 7 
 OPTIONS AND SARs

 7.1. Options. The Committee, acting in its absolute discretion, shall have the right to grant Options to Employees and
Directors under this Plan from time to time and Options may be granted for any reason the Committee deems appropriate under the circumstances. Each grant of an Option shall be evidenced by an Option Agreement, and each Option Agreement shall set
forth whether the Option is an ISO or a NQO and shall set forth such other terms and conditions of such grant as the Committee acting in its absolute discretion deems consistent with the terms of this Plan. All Options granted to Directors shall be
NQOs. 
 7.2. $100,000 Limit. The aggregate Fair Market Value of ISOs granted to an Employee under this Plan and ISOs granted
to such Employee under any other stock option plan adopted by Alarion, a Subsidiary or a Parent Corporation which first become exercisable in any calendar year shall not exceed $100,000. Such Fair Market Value figure shall be determined by the
Committee on the date the ISO is granted, and the Committee shall interpret and administer the limitation set forth in this Section 7.2 in accordance with Section 422(d) of the Code. 
  

 7.3. Option Price and Exercise Period. 
 (a) Option Price. The Option Price for each share of Stock subject to an Option shall be no less than the Fair Market Value of a
share of Stock on the date the Option is granted. The Option Price shall be payable in full upon the exercise of any Option. Except in accordance with the provisions of Section 11 of this Plan, the Committee shall not, absent the approval of
Alarion’s shareholders, take any action, whether through amendment, cancellation, replacement grants, or any other means, to reduce the Option Price of any outstanding Options. 
 (b) Exercise Period. Each Option granted under this Plan shall be exercisable, in whole or in part, at such time or times as set
forth in the related Option Agreement, but no Option Agreement shall make an Option exercisable before the date such Option is granted or on or after the date which is the tenth anniversary of the date such Option is granted. In the discretion of
the Committee, an Option Agreement may provide for the exercise of an Option after the employment of an Employee or the status of an individual as a Director has terminated for any reason whatsoever, including death or disability. 
 7.4. Method of Exercise. 
 (a) Committee Rules. An Option may be exercised as provided in this Section 7.4 pursuant to procedures (including, without limitation, procedures restricting the frequency or method of exercise) as shall
be established by the Committee or its delegate from time to time for the exercise of Options. 
 (b) Notice and
Payment. An Option shall be exercised by delivering to the Committee or its delegate during the period in which such Option is exercisable: (1) written notice of exercise in a form acceptable to the Committee indicating the specific number
of shares of Stock subject to the Option which are being exercised; and (2) payment in full of the Option Price for such specific number of shares. An Option Agreement, at the discretion of the Committee, may provide for the payment of the
Option Price by any of the following means: 
 (1) in cash, electronic funds transfer or a check acceptable to the Committee;

 (2) in Stock which has been held by the Employee or Director for a period acceptable to the Committee and which Stock is
otherwise acceptable to the Committee, provided that the Committee may impose whatever restrictions it deems necessary or desirable with respect to such method of payment; 
 (3) through a broker-facilitated cashless exercise procedure acceptable to the Committee; or 
  

 (4) in any combination of the methods described in this Section 7.5(b) which is
acceptable to the Committee. 
 Any payment made in Stock shall be treated as equal to the Fair Market Value of such Stock on the date the
properly endorsed stock certificate for such Stock is delivered to the Committee or, if payment is effected through a certification of ownership of Stock in lieu of a stock certificate, on the date the Option is exercised. 
 (c) Restrictions. The Committee may from time to time establish procedures for restricting the exercise of Options on any given
date as the result of excessive volume of exercise requests or any other problem in the established system for processing Option exercise requests or for any other reason the Committee or its delegate deems appropriate or necessary. 
 7.5. Nontransferability. Except to the extent the Committee deems permissible under Section 422(b) of the Code and Rule 16b-3 and
consistent with the best interests of Alarion, neither an Option granted under this Plan nor any related surrender rights nor any SAR shall be transferable by an Employee or a Director other than by will or by the laws of descent and distribution.
Any such Option grant and surrender rights under this Plan and any SAR granted under this Plan shall be exercisable during an Employee’s or Director’s lifetime, as the case may be, only by the Employee or the Director, provided that in the
event an Employee or Director is incapacitated and unable to exercise such Employee’s or Director’s Option or SAR, such Employee’s or Director’s legal guardian or legal representative whom the Committee (or its delegate) deems
appropriate based on all applicable facts and circumstances presented to the Committee (or its delegate) may exercise such Employee’s or Director’s Option or SAR, in accordance with the provisions of the Plan and the applicable Option
Agreement or SAR Agreement. The person or persons to whom an Option or a SAR is transferred by will or by the laws of descent and distribution thereafter shall be treated as the Employee or the Director under this Plan. 
 7.6. SARs and Surrender Rights. 
 (a) SARs. The Committee acting in its absolute discretion may grant an Employee or Director a SAR which will give the Employee or Director the right to the appreciation in one, or more than one, share(s) of
Stock, and any such appreciation shall be measured from the related SAR Share Value. The Committee shall have the right to make any such grant subject to such additional terms as the Committee deems appropriate, and such terms shall be set forth in
the related SAR Agreement. 
 (b) Option Surrender Rights. The Committee acting in its absolute discretion also may
incorporate a provision in an Option Agreement to give an Employee or Director the right to surrender his or her Option, in whole or in part, in lieu of the exercise (in whole or in part) of that Option to purchase Stock on any date that:

 (1) the Fair Market Value of the Stock subject to such Option exceeds the Option Price for such Stock; and 
 (2) the Option to purchase such Stock is otherwise exercisable. 
  

 (c) Procedure. The exercise of a SAR or a surrender right in an Option shall be
effected by the delivery of the related SAR Agreement or Option Agreement to the Committee (or to its delegate) together with a statement signed by the Employee or Director which specifies the number of shares of Stock as to which the Employee or
Director, as appropriate, exercises his or her SAR or exercises his or her right to surrender his or her Option and (at the Employee’s or Director’s option) how he or she desires payment to be made with respect to such shares. 

(d) Payment. An Employee or Director who exercises his or her SAR or right to surrender his or her Option shall (to the extent
consistent with an exemption under Rule 16b-3) receive a payment in cash or in Stock, or in a combination of cash and Stock, equal in amount on the date such exercise is effected to (i) the number of shares of Stock with respect to which, as
applicable, the SAR or the surrender right is exercised times (ii) the excess of the Fair Market Value of a share of Stock on such date over, as applicable, the SAR Share Value for a share of Stock subject to the SAR or the Option Price for a
share of Stock subject to an Option. The Committee acting in its absolute discretion shall determine the form and timing of such payment, and the Committee shall have the right (1) to take into account whatever factors the Committee deems
appropriate under the circumstances, including any written request made by the Employee or Director and delivered to the Committee (or to its delegate) and (2) to forfeit an Employee’s or Director’s right to payment of cash in lieu of
a fractional share of Stock if the Committee deems such forfeiture necessary in order for the surrender of his or her Option under this Section 7.6 to come within an exemption under Rule 16b-3. Any cash payment under this Section 7.6 shall
be made from Alarion’s general assets, and an Employee or Director shall be no more than a general and unsecured creditor of Alarion with respect to such payment. 
 (e) Restrictions. Each SAR Agreement and each Option Agreement which incorporates a provision to allow an Employee or Director to
surrender his or her Option shall incorporate such additional restrictions on the exercise of such SAR or surrender right as the Committee deems necessary to satisfy the conditions to the exemption under Rule 16b-3. 
 SECTION 8 
 RESTRICTED STOCK AND
STOCK UNITS 
 8.1. Committee Action. 
 (a) General. The Committee acting in its absolute discretion shall have the right to grant Restricted Stock and Stock Units to
Employees and Directors under this Plan from time to time. 
 (b) Limitations. No Restricted Stock or Stock Unit grant
may be made to an Employee or Director in any calendar year with respect to more than 10,000 shares of Restricted Stock. Each Restricted Stock grant and each Stock Unit grant shall be evidenced by a Stock Agreement, and each Stock Agreement shall
set forth the conditions, if any, which will need to be timely satisfied before the grant will be effective and the conditions, if any, under which the Employee’s or Director’s interest in the related Restricted Stock will be forfeited.

  

 8.2. Conditions. 
 (a) Conditions for Issuance of Restricted Stock. The Committee acting in its absolute discretion may make the issuance of
Restricted Stock to an Employee or Director subject to the satisfaction of one, or more than one, objective employment, performance or other grant condition (which may or may not include performance criteria described in Section 8.2(c)) which
the Committee deems appropriate under the circumstances, and the related Stock Agreement shall set forth each such condition and the deadline for satisfying each such condition. 
 (b) Forfeiture Conditions for Restricted Stock and Stock Units. The Committee may make Restricted Stock issued to an Employee or
Director subject to one, or more than one, objective employment, performance or other forfeiture condition (which may or may not include any performance goals described in Section 8.2[c]) which the Committee acting in its absolute discretion
deems appropriate under the circumstances, and the related Stock Agreement shall set forth each such forfeiture condition and the deadline for satisfying each such forfeiture condition. An Employee’s or Director’s non-forfeitable interest
in the shares of Stock issued pursuant to a Restricted Stock or Stock Unit grant shall depend on the extent to which each such condition is timely satisfied. Each share of Stock issued pursuant to a Restricted Stock grant shall again become
available under Section 3 if such share is forfeited as a result of a failure to timely satisfy a forfeiture condition, in which event such share of Stock shall again become available under Section 3 as of the date of such failure. When a
Stock certificate is issued for shares of Restricted Stock, such certificate shall be issued subject to: (i) the conditions, if any, described in this Section 8.2(b) and Section 8.2(c) to, or for the benefit of, the Employee or
Director; and (ii) a stock power in favor of Alarion in order for Alarion to effect any forfeitures of such Restricted Stock called for under this Section 8.2(b). 
 (c) Performance Goals. 
 (1) A performance goal is described in this Section 8.2(c) if such goal relates to Alarion’s: 
  

	 	(i)	return over capital costs or increases in return over capital costs, 

  

	 	(ii)	total earnings or the growth in such earnings, 

  

	 	(iii)	consolidated earnings or the growth in such earnings, 

  

	 	(iv)	earnings per share or the growth in such earnings, 

  

	 	(v)	net earnings or the growth in such earnings, 

  

	 	(vi)	earnings before interest expense, taxes, depreciation, amortization and other non-cash items or the growth in such earnings, 

  

	 	(vii)	earnings before interest and taxes or the growth in such earnings, 

	 	(viii)	consolidated net income or the growth in such income, 

  

	 	(ix)	the value of Alarion’s Stock or the growth in such value, 

  

	 	(x)	Stock price or the growth in such price, 

  

	 	(xi)	return on assets or the growth on such return, 

  

	 	(xii)	total shareholder return or the growth in such return, 

  

	 	(xiii)	expenses or the reduction of expenses, 

  

	 	(xiv)	sales growth, 

  

	 	(xv)	overhead ratios or changes in such ratios, 

  

	 	(xvi)	expense-to-sales ratios or the changes in such ratios, 

  

	 	(xvii)	economic value added or changes in such value added, or 

  

	 	(xviii)	other financial performance measures deemed appropriate by the Committee. 

 A performance goal described in this Section 8.2(c)(1) may be set in any manner determined by the Committee, including looking to achievement on an absolute or relative basis in relation to peer groups or
indexes, and may relate to Alarion as a whole or one or more operating units of Alarion. 
 (2) When the Committee determines
whether a performance goal has been satisfied for any period, the Committee may exclude any or all “extraordinary items” as determined under U.S. generally accepted accounting principles and any other unusual or non-recurring items,
including, without limitation, the charges or costs associated with restructurings of Alarion, discontinued operations, and the cumulative effects of accounting changes. The Committee may also adjust any performance goal for a period as it deems
equitable in recognition of unusual or non-recurring events affecting Alarion, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine (including, without limitation, any adjustments that would
result in Alarion paying non-deductible compensation to an Employee). 
 (3) If the Committee determines that a performance
goal has been satisfied and the satisfaction of such goal was intended to meet the requirements of Section 162(m) of the Code, the Committee shall certify that the goal has been satisfied in accordance with the requirements set forth under such
section of the Code. 
 8.3. Dividends and Voting Rights. 
 (a) Cash Dividends. Each Stock Agreement which evidences a Restricted Stock or Stock Unit grant shall state whether the Employee or
Director shall have a right to receive any cash dividends, which are paid after any shares of Restricted Stock are issued to him or to her and before the first day that the Employee’s or Director’s interest in such Stock is forfeited
completely, or becomes completely non-forfeitable. If such a Stock Agreement provides that an Employee or Director has no right to receive a cash dividend when paid, such Stock Agreement shall set forth the conditions, if any, under which the
Employee or Director will be eligible to receive one, or more than one, payment in the future to compensate the Employee or Director for the fact that he or she had no right to receive any cash dividends on his or her Restricted Stock when such
dividends were paid. If such a Stock 

 
Agreement calls for any such payments to be made, Alarion shall make such payments from Alarion’s general assets, and the Employee or Director shall be
no more than a general and unsecured creditor of Alarion with respect to such payments. 
 (b) Stock Dividends. If a
Stock dividend is declared on a share of Restricted Stock, such Stock dividend shall be treated as part of the grant of the related Restricted Stock or Stock Unit, and an Employee’s or Director’s interest in such Stock dividend shall be
forfeited or shall become non-forfeitable at the same time as the Stock with respect to which the Stock dividend was paid is forfeited or becomes non-forfeitable. Unless otherwise set forth in the Stock Agreement which evidences a Stock Unit grant,
if a Stock dividend is declared on any shares of Stock described in a Stock Unit grant, such dividend shall increase the number of shares of Stock described in such Stock Unit grant. 
 (c) Voting Rights. An Employee or Director shall have the right to vote shares of Restricted Stock which have been issued pursuant
to Section 8.2(b) before his or her interest in such Stock has been forfeited or has become non-forfeitable. 
 (d)
Nontransferability. No Restricted Stock grant and no shares issued pursuant to a Restricted Stock grant shall be transferable by an Employee or a Director other than by will or by the laws of descent and distribution before an Employee’s
or Director’s interest in such shares have become completely non-forfeitable, and no interests in a Stock Unit grant shall be transferable other than by will or the laws of descent and distribution except as otherwise provided in the related
Stock Agreement. 
 (e) Creditor Status. An Employee or a Director to whom a Stock Unit grant is made shall be no more
than a general and unsecured creditor of Alarion with respect to any cash payment due under such grant. 
 8.4 Satisfaction of
Forfeiture Conditions. A share of Stock shall cease to be Restricted Stock at such time as an Employee’s or Director’s interest in such Stock becomes non-forfeitable under this Plan, and the certificate representing such share
shall be reissued as soon as practicable thereafter without any further restrictions related to Section 8.2(b) or Section 8.3 and shall be transferred to the Employee or Director. 
 SECTION 9 
 SECURITIES REGISTRATION 
 Each Option Agreement, SAR Agreement and Stock Agreement shall provide that, upon the receipt of shares of Stock as a result of the exercise of an Option
(or any related surrender right) or a SAR or the satisfaction of the forfeiture conditions under a Stock Agreement for Restricted Stock, the Employee or Director shall, if so requested by Alarion, hold such shares of Stock for investment and not
with a view of resale or distribution to the public and, if so requested by Alarion, shall deliver to Alarion a written statement satisfactory to Alarion to that effect. As for Stock issued pursuant to this Plan, Alarion at its expense shall take
such action as it deems necessary or appropriate to register the original issuance of such Stock to an Employee or Director under the Securities Act of 1933, as amended, or under any other applicable securities laws or to qualify such Stock for an
exemption under any such laws prior to the 

 
issuance of such Stock to an Employee or Director; however, Alarion shall have no obligation whatsoever to take any such action in connection with the
transfer, resale or other disposition of such Stock by an Employee. 
 SECTION 10 
 LIFE OF PLAN 
 No Option or SAR or
Restricted Stock or Stock Unit shall be granted under this Plan on or after the earlier of: (1) the tenth anniversary of the date the Board adopts this Plan, in which event this Plan otherwise thereafter shall continue in effect until all
outstanding Options (and any related surrender rights) and SARs have been exercised in full or no longer are exercisable and all Restricted Stock and Stock Unit grants under this Plan have been forfeited or the forfeiture conditions on the related
Stock or cash payments have been satisfied in full; or (2) the date on which all of the Stock reserved under Section 3 of this Plan has (as a result of the exercise of all Options (and any related surrender rights) and all SARs granted
under this Plan and the satisfaction of the forfeiture conditions on Restricted Stock) been issued or no longer is available for use under this Plan, and all cash payments due under any Stock Unit grants have been paid or forfeited, in which event
this Plan also shall terminate on such date. 
 SECTION 11 
 ADJUSTMENT 
 11.1. Capital Structure. The number, kind or class (or any combination
thereof) of shares of Stock reserved under Section 3 of this Plan, the grant limitations described in Section 7.3 and Section 8.1 of this Plan, the number, kind or class (or any combination thereof) of shares of Stock subject to
Options or SARs granted under this Plan and the Option Price of such Options and the SAR Share Value of such SARs, as well as the number, kind or class of shares of Stock subject to Restricted Stock grants and the number, kind or class of shares of
Stock described in Stock Unit grants under this Plan shall be adjusted by the Board in an equitable manner to reflect any change in the capitalization of Alarion, including, but not limited to, such changes as stock dividends or stock splits.

 11.2. Acquisitions. The Board as part of any corporate transaction described in Code Section 424(a) shall have the
right (in any manner which the Board in its discretion deems consistent with Code Section 424[a] and without regard to the grant limitations described in Section 7.3 or Section 8.1 of this Plan) to make Restricted Stock, Stock Unit,
Option and SAR grants to effect the assumption of, or the substitution for, restricted stock, stock unit, option and stock appreciation right grants previously made by any other corporation to the extent that such corporate transaction calls for
such substitution or assumption of such restricted stock, stock unit, option or stock appreciation rights grants. 
 11.3. Fractional
Shares. If any adjustment under this Section 11 would create a fractional share of Stock or a right to acquire a fractional share of Stock, such fractional share shall be disregarded and the number of shares of Stock reserved under this
Plan and the number subject to any Options, SAR grants and Restricted Stock grants shall be the next lower number of shares of Stock, rounding all fractions downward. Any adjustment made under this Section 11 by the Board shall be conclusive
and binding on all affected persons. 
  

 SECTION 12 
 CHANGE IN CONTROL 
 Upon a Change in Control, all Options, SARs, Restricted Stock and Stock Units
shall become immediately exercisable, non-forfeitable or otherwise vest and become irrevocable. 
 SECTION 13 
 AMENDMENT OR TERMINATION 
 This Plan
may be amended by the Board from time to time to the extent that the Board deems necessary or appropriate; provided, however, no such amendment shall be made absent the approval of the shareholders of Alarion to the extent such approval is required
under applicable law, Code Section 422, Rule 16b-3 or any applicable stock exchange rule. The Board also may suspend the granting of Options, SARs, Restricted Stock and Stock Units under this Plan at any time and may terminate this Plan at any
time. The Board or the Committee shall have the right to modify, amend or cancel (retroactively or prospectively) any Option, SAR, Restricted Stock or Stock Unit granted before such suspension or termination if: (1) the Employee or Director
consents in writing to such modification, amendment or cancellation (except that in no case can Options be repriced either by cancellation and regrant or by lowering the exercise price of a previously granted award); or (2) there is a
dissolution or liquidation of Alarion or a transaction described in Section 11 or Section 12 of this Plan. Suspension or termination of the Plan shall not affect the Committee’s ability to exercise the powers granted to it with
respect to Options, SARs or surrender rights, Restricted Stock or Stock Units granted under this Plan prior to the date of such suspension or termination. 
 SECTION 14 
 MISCELLANEOUS 
 14.1. Shareholder Rights. No Employee or Director shall have any rights as a shareholder of Alarion as a result of the grant of an Option
or a SAR under this Plan or his or her exercise of such Option or SAR pending the actual delivery of the Stock subject to such Option to such Employee or Director. Subject to Section 8.4, an Employee’s or Director’s rights as a
shareholder in the shares of Stock related to a Restricted Stock grant which is effective shall be set forth in the related Stock Agreement. 
 14.2. No Contract of Employment or Director Status. The grant of an Option, SAR, Restricted Stock or Stock Unit to an Employee or a Director under this Plan shall not constitute a contract of employment or an agreement to
continue his or her status as an Employee or a Director, and shall not confer on an Employee or Director any rights in addition to those rights, if any, expressly set forth in the Option Agreement which evidences his or her Option, the SAR Agreement
which evidences his or her SAR or the Stock Agreement related to his or her Restricted Stock or Stock Unit grant. 
 14.3.
Withholding. The exercise of any Option or SAR granted under this Plan and the acceptance of a Restricted Stock or Stock Unit grant shall constitute an Employee’s or Director’s full and complete consent to whatever action the
Committee deems necessary to satisfy the minimum federal tax withholding requirements, if any, which the Committee acting in its discretion deems applicable to such exercise or such Restricted Stock or Stock Unit grant. The Committee also shall have
the right to provide in an Option 

 
Agreement, SAR Agreement or Stock Agreement that an Employee or Director may elect to satisfy minimum federal tax withholding requirements, if any, through a
reduction in the number of shares of Stock actually transferred, or the cash payments to be made, to him or to her under this Plan, and any such election and any such reduction shall be effected so as to satisfy the conditions to the exemption under
Rule 16b-3. 
 14.4 Construction. 
 (a) Governing Law and Venue. This Plan shall be construed under the laws of the State of Florida (excluding its choice-of-law rules) to the extent not superseded by federal law. Venue for the enforcement of any
provision of this Plan or Option Agreement shall be in Marion County, Florida. 
 (b) Invalid Provisions. In the event
any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not
been included. 
 (c) Conflicts. In the event of a conflict between the terms of this Plan and any Option Agreement,
Stock Agreement or SAR Agreement, the terms of the Plan shall prevail.Secured Subordinated Revolving Promissory Note

 Exhibit 10.1 
 SECURED SUBORDINATED REVOLVING PROMISSORY NOTE 
  

			
	$2,000,000	 	January 17, 2007

 FOR VALUE RECEIVED, the undersigned, OPTEX SYSTEMS, INC., a Texas corporation
(“Maker”), promises to pay to the order of TWL GROUP, LP, a Texas limited partnership (“Payee”), whose address is 4306 Savannah, Parker, TX 75002 the sum of Two Million Dollars ($2,000,000) or so much thereof as may
be advanced by Payee to Maker and be outstanding hereunder, together with interest on the unpaid principal balance from time to time remaining at a rate per annum (calculated on the basis of actual days elapsed, but computed as if each calendar year
consisted of 360 days) which shall from day to day be equal to 10%. 
 The principal balance of this note shall be due and payable on the
earlier of (i) February 27, 2009 and (ii) 60 days after the date the Senior Debt (hereinafter defined) is paid in full or refinanced. Accrued interest on this note shall be due and payable in arrears on the first anniversary of the
date of this note and on the date this note becomes due and payable in full or is otherwise paid in full. Payment shall be deemed made at the time the holder of this note receives such payment, subject to the condition subsequent that any check or
similar instrument is honored as drawn on sufficient funds. All amounts paid hereunder shall be applied first to accrued and unpaid interest and then to principal. 
 All past due principal of and accrued interest on this note shall bear interest from maturity (stated, by acceleration, or otherwise) until paid at the rate of 18% per annum (the “Default Rate”).

 1. No Commitment. Payee shall have no obligation to make any advance under this note, and each advance under this note shall be
made in the sole discretion of Payee. 
 2. Prepayments and Reborrowings. The unpaid principal balance of this note may be prepaid by
Maker in whole or in part at any time without premium or penalty; provided that each prepayment of principal shall be accompanied by the payment of accrued interest on the amount of such prepayment. Subject to Paragraph 1 of this note, principal
amounts prepaid by Maker may be reborrowed, and, to the extent principal amounts are prepaid and reborrowed, this note is a revolving note. 
 3. [Intentionally Omitted]. 
 4. Collateral. The payment of this note is secured by the liens and security interests
created by that certain Subordinated Security Agreement (the “Security Agreement”) dated as of the date hereof, executed by Maker in favor of Payee. 
 5. Representations and Warranties. On the date hereof and on the date of each advance made hereunder, Maker represents and warrants to Payee as follows: 
 (a) Existence, Etc. Maker is a corporation duly organized validly existing and in good standing under the laws of the state of its
organization and is duly qualified to do business and is in good standing in each other state where the failure to be so qualified and in good standing could reasonably be expected to have a material adverse effect on the business, operations or
condition (financial or otherwise) of Maker or on the ability of Maker to perform or comply with the terms and conditions of this note, the Security Agreement or the Subordination Agreement (hereinafter defined) (collectively the “Loan
Documents”) (such a material adverse effect being herein called a “Material Adverse Effect”). 
 Secured
Subordinated Promissory Note 
  

 (b) Power and Authority. Maker has all requisite power and authority to own or
lease its properties, to conduct its business as now conducted and to execute, deliver and perform the Loan Documents. 
 (c)
Authorization and Enforceability. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary corporate action of Maker and require no consent of any person or entity that has not been obtained,
and the Loan Documents constitute valid and binding obligations of Maker, enforceable in accordance with their terms, except as such enforceability may be limited by Debtor Relief Laws (hereinafter defined) and by general principles of equity.

 (d) No Violation. The execution, delivery and performance of the Loan Documents do not and will not violate
Maker’s charter, bylaws, or other organizational documents, any laws applicable to Maker or any agreement to which Maker is a party or by which Maker is bound, except for violations of laws or agreements that could not reasonably be expected to
have a Material Adverse Effect. No consent or approval of any person or entity is required in connection with such execution, delivery and performance, except as has been obtained and is in full force and effect. 
 (e) Financial Statements. The financial statements of Maker and Irvine Sensors Corporation, a Delaware corporation
(“Parent”) most recently delivered to Payee have been prepared in accordance with generally accepted accounting principles (“GAAP”) and fairly present the financial condition and results of operations of Maker and
Parent as of the date thereof and for the period covered thereby, and no material adverse change has occurred in such financial condition since the date of the financial statements most recently delivered to Payee prior to the date of this note.

 (f) Litigation. Except as disclosed in financial statements (or the notes thereto) or other writings heretofore
delivered to Payee, there is no litigation pending or, to the knowledge of Maker, threatened against Maker that could reasonably be expected to have a Material Adverse Effect. 
 (g) General. All financial statements, reports and other information heretofore delivered by Maker to Payee, taken as a whole, do
not contain any untrue statements of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 
 6. Covenants. Unless and until this note has been paid in full or Lender otherwise agrees in writing, Maker agrees as follows: 
 (a) Financial Statements, etc. Maker will deliver to Payee, (i) as soon as available, but in any event within 30 days after
the end of each calendar month, a company prepared consolidated and consolidating balance sheet and income statement covering Parent’s operations during such period, in a form reasonably acceptable to Payee and certified by the president, any
vice president or the treasurer of Parent, together with a certificate executed by the president, any vice president or the treasurer of Maker certifying that Maker is in compliance with the terms and conditions of the Loan Documents; (ii) as
soon as available, but in any event not later than the date on which Parent is obligated to file its Form 10-K with the Securities and Exchange Commission, audited consolidated and consolidating financial statements of Parent prepared in accordance
with GAAP, consistently applied, together with an opinion which is unqualified or otherwise consented to in writing by Payee on such financial statements of an independent 
 Secured Subordinated Promissory Note 
  

 
certified public accounting firm reasonably acceptable to Payee; (iii) if applicable, copies of all statements, reports and notices sent or made
available generally by Parent to its security holders or to any holders of its debt and all reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (iv) promptly upon receipt of notice thereof, notice of the occurrence
of any Default under this Note and a report of any legal actions pending or threatened against Maker that could result in damages or costs to Maker of $100,000 or more; (v) promptly upon receipt, each management letter prepared by Parent’s
independent certified public accounting firm regarding Parent’s management control systems; and (vi) such budgets, sales projections, operating plans or other financial information generally prepared by Parent or Maker in the ordinary
course of business as Payee may reasonably request from time to time; 
 (b) Books and Records. Maker will keep its
financial books and records in accordance with GAAP and permit Payee to inspect and to discuss with its officers, directors and accountants such books and records and its properties and business operations during reasonable business hours.

 (c) Existence and Qualification. Maker will maintain its corporate existence and its qualification to do business
and good standing where necessary and all permits and licenses necessary for the conduct of its business, except to the extent a failure to so maintain could not reasonably be expected to have a Material Adverse Effect. 
 (d) Obligations, etc. Maker will timely pay and perform all of its material taxes and other obligations, except to the extent being
contested by appropriate proceedings; Maker will maintain insurance (including self insurance) in such amounts with such deductibles, and against such risks as is customary for similarly situated businesses; and Maker will observe and comply with
all material applicable laws (including environmental laws) and all material agreements to which it is a party or by which it is bound. 
 (e) Dividends and Distributions, Loans and Investments, etc. If any indebtedness is then outstanding under this note, without the prior written consent of Payee, which shall not be unreasonably withheld, Maker
will not make any dividend or distribution on its capital stock, or redeem or purchase any of its capital stock, or make any loan or advance to Parent or any other person or entity, or transfer any assets to Parent or otherwise make any payment to
Parent, other than dividends, distributions, loans, advances, transfers or other payments made by Maker to Parent in an aggregate amount not to exceed $2,250,000 per annum. 
 (f) Indebtedness. If any indebtedness is then outstanding under this note, without the prior written consent of Payee, which shall
not be unreasonably withheld, Maker will not incur or suffer to exist for itself any indebtedness for borrowed money or under capital leases or for the purchase price of property, except (i) indebtedness owing to or held by Longview Fund, L.P.
and Alpha Capital Anstalt (collectively, “Senior Lender”) under or pursuant to that certain Term Loan and Security Agreement dated as of December 29, 2006, among Parent and Senior Lender (the “Term Loan and Security
Agreement”), or other indebtedness owing or to be owing to or held or to be held by Senior Lender; (ii) indebtedness evidenced by this note; (iii) unsecured indebtedness of Maker existing on the date hereof and disclosed in the
financial statements, most recently delivered to Payee, provided that none of such indebtedness shall be renewed, extended or otherwise modified in any material respect; (iv) unsecured current liabilities (not the result of borrowing) incurred
in the ordinary course of business and not overdue; (v) capital leases and other purchase money financing of capital assets; (vi) other indebtedness that is subordinated in right of payment to the indebtedness evidenced by this note; and
(vii) extensions, refinancings and renewals of any items above, provided that, with respect to items (iii) through (vi) above, the principal amount is not increased or the terms modified to impose more burdensome terms upon Maker.

 Secured Subordinated Promissory Note 
  

 (g) Liens. If any indebtedness is then outstanding under this note, without the
prior written consent of Payee, which shall not be unreasonably withheld, Maker will not incur or suffer to exist any liens or security interests on any of its property, except (i) landlords’, carriers’, warehousemen’s,
mechanics’ and other similar liens arising by operation of law in the ordinary course of Maker’s business; provided, however, that all such liens shall be discharged or bonded off within sixty (60) days from the filing thereof;
(ii) liens arising out of pledge or deposits under worker’s compensation, unemployment insurance, old age pension, social security, retirement benefits or other similar legislation; (iii) liens in favor of Senior Lender (including not
only the liens created by the Term Loan and Security Agreement but also any other liens in favor of Senior Lender now existing or hereafter granted or incurred) and of Payee; (iv) liens for taxes (excluding any lien imposed pursuant to any
provision of ERISA) not yet due or which are being contested in good faith by appropriate proceedings and Maker maintains appropriate reserves in respect thereto provided that in Payee’s judgment such lien does not adversely affect Payee’s
rights or the priority of Payee’s lien in the collateral securing this note; (v) easements, rights of way, restrictions and other similar charges or liens relating to real property and not interfering in a material way with the ordinary
conduct of Maker’s business; (vi) other liens outstanding on the date of this note; (v) liens to secure purchase money financing of capital assets provided that the liens only secure payment of the indebtedness so incurred and extend
only to the capital asset purchased; (vi) liens subordinated to the liens securing this note on terms and conditions reasonably satisfactory to Payee; and (vi) liens renewing and extending liens permitted by this subparagraph. 

(h) Sales of Assets. If any indebtedness is then outstanding under this note, without the prior written consent of Payee, which
shall not be unreasonably withheld, Maker will not sell any assets, except (i) sales of inventory in the ordinary course of Maker’s business; (ii) dispositions of obsolete or worn out equipment or equipment no longer used in its
business; (iii) sales of other equipment, provided such equipment is promptly replaced with equipment of equal or greater value and utility to Maker), (iv) licenses and similar arrangements for the use of the property of Maker in the
ordinary course of business; and (v) other assets of Maker that do not in the aggregate exceed $100,000 during any fiscal year. 
 (i) Fundamental Changes. If any indebtedness is then outstanding under this note, without the prior written consent of Payee, Maker will not liquidate or dissolve or merge or consolidate with any other person or entity. 

(j) Use of Proceeds. If any indebtedness is then outstanding under this note, without the prior written consent of Payee, Maker
will not use the proceeds of any advance made by Payee to Maker hereunder, except for working capital. 
 Notwithstanding anything to the
contrary stated in this paragraph 6.(e) – (j), if a Default or an Event of Default (or an event or occurrence which, with notice or lapse of time or both, would, if not cured or waived, become an Event of Default) is then existing with respect
to the Senior Debt, Payee waives its rights to withhold consent in subparagraphs 6.(e) – (j). 
 7. Subordination.
Notwithstanding anything contained herein that may be to the contrary, the payment of this note and the rights and remedies of Payee and any other holder of this note under this note and the other Loan Documents are subordinate to the indefeasible
payment in full of the Senior Debt as defined in that certain Subordination Agreement (herein so called) of even date herewith, among 
 Secured Subordinated Promissory Note 
  

 
Payee, Longview Fund L.P. and Alpha Credit Anstalt, and are otherwise subordinate to the rights of Senior Lender as set forth in the Subordination Agreement
and are otherwise subject to such Subordination Agreement. 
 8. Default and Remedies. Any one or more of the following events or
occurrences shall constitute a default (a “Default”) under this note: 
 (a) The failure or refusal of Maker
to pay all or any part of the principal of or accrued interest on this note as and when same becomes due and payable in accordance with the terms hereof, and such failure or refusal is not cured within ten (10) days after notice of such failure
or refusal is given to Maker in accordance with Paragraph 12 below; or 
 (b) A breach by Maker of any provision of this
note, and such breach is not cured within twenty (20) days after notice of such breach is given to Maker in accordance with Paragraph 12 below. 
 (c) Maker shall (i) become insolvent within the meaning of the Bankruptcy Code of the United States, as amended, (ii) admit in writing its inability to pay or otherwise fail to pay its debts generally as
they become due, (iii) voluntarily seek consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law, or (iv) be made the subject of any proceeding provided for by any Debtor Relief Law that could suspend or otherwise
affect any of the rights of the holder hereof and such proceeding shall continue for sixty (60) days without dismissal or discharge. As used herein, “Debtor Relief Laws” means the Bankruptcy Code of the United States, as amended and
all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time in effect affecting the rights of creditors generally; or 

(d) The nonpayment when due of any material indebtedness exceeding $250,000 owed by Maker (including the Senior Debt), or the
occurrence of any event under any document or instrument evidencing, securing, or executed in connection with any such indebtedness which could give the holder thereof the right to declare such indebtedness or any part thereof due prior to its
scheduled maturity; or 
 (e) The occurrence of a default or event of default under any other Loan Document. 
 Upon the occurrence of a Default, the holder of this note may, subject to the subordination provisions set forth in and the terms of the Subordination
Agreement referenced in Paragraph 7, (a) by written notice to Maker, declare the entire unpaid principal balance of this note, together with any accrued and unpaid interest, immediately due and payable, (b) offset against this note any sum
or sums owed by the holder hereof to Maker, (c) foreclose any or all liens or security interests given to secure the repayment of the indebtedness evidenced by this note, and (d) proceed to protect and enforce its rights either by suit in
equity and/or by action at law, or by other appropriate proceedings, whether for the specific performance of any covenant or agreement contained in this note or any other Loan Document or in aid of the exercise of any power or right granted by this
note or any other Loan Document or to enforce any other legal or equitable right of the holder of this note or any other Loan Document. 
 9.
Cumulative Rights. No delay on the part of the holder of this note in the exercise of any power or right under this note, or under any other Loan Document, shall operate as a waiver thereof, nor shall a single or partial exercise of any other
power or right. Enforcement by the holder of this note of any security for the payment hereof shall not constitute any election by it of remedies so as to preclude the exercise of any other remedy available to it. 
 Secured Subordinated Promissory Note 
  
  

 10. Waiver. Maker, and each other surety, endorser, guarantor, and other party ever liable for the
payment of any sum of money payable on this note, jointly and severally waive demand, presentment, protest, notice of nonpayment, notice of intention to accelerate, notice of acceleration, notice of protest, and any and all lack of diligence or
delay in collection or the filing of suit hereon which may occur, and agree that their liability on this note shall not be affected by any renewal or extension in the time of payment hereof, by 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. 
 11. Attorneys’ Fees and Costs. In the event a Default shall occur, and in the event that thereafter this note is placed in the hands of an
attorney for collection and subject to the subordination provisions set forth in and the terms of the Subordination Agreement referenced in Paragraph 7, or in the event this note is collected in whole or in part through legal proceedings of any
nature, then and in any such case Maker promises to pay all costs of collection, including, but not limited to, reasonable attorneys’ fees incurred by the holder hereof on account of such collection, whether or not suit is filed. In addition,
concurrently with the execution and delivery of the Loan Documents, Maker agrees to pay reasonable attorneys fees incurred by Payee in connection with the negotiation, execution and delivery of this note and the other Loan Documents. 
 12. Notices. Any notice or demand given hereunder by the holder shall be deemed to have been given and received (a) when actually received by
Maker, if delivered in person or by courier or messenger, or (b) two Business Days (hereinafter defined) after a letter containing such notice, certified or registered, with postage prepaid, addressed to Maker, is deposited in the United States
Mail. The address of Maker is 1420 Presidential Drive, Richardson, Texas 75081, or such other address as Maker shall advise the holder hereof by certified or registered letter. 
 13. Governing Law; Jurisdiction; Waiver of Jury Trial. This note is being executed and delivered and is intended to be performed, in the State of
Texas, and the laws of such state shall govern the construction, validity, enforcement and interpretation hereof, except to the extent federal laws otherwise govern the validity, construction, enforcement and interpretation hereof. Maker hereby
irrevocably (a) submits to the non-exclusive jurisdiction of any United States Federal or State court sitting in Dallas, Texas in any action or proceeding arising out of or relating to this note, and (b) waives to the fullest extent
permitted by law, any defense asserting an inconvenient forum in connection therewith. Service of process by the holder of this note in connection with such action or proceeding shall be binding on Maker if sent to Maker as provided in
Paragraph 12 of this note. TO THE EXTENT ALLOWED BY LAW, MAKER AND PAYEE EACH WAIVE JURY TRIAL IN ANY ACTION OR PROCEEDING RELATING TO THIS NOTE. 
 14. Headings. The headings of the sections of this note are inserted for convenience only and shall not be deemed to constitute a part hereof. 
 15. Successors and Assigns. All of the covenants, stipulations, promises and agreements in this note contained by or on behalf of Maker shall bind
its successors and assigns, whether so expressed or not; provided, however, that Maker may not, without the prior written consent of the holder hereof, assign any rights, duties, or obligations under this note. 
 16. Maximum Interest Rate. Regardless of any provision contained herein, or in any other document executed in connection herewith, the holder
hereof shall never be entitled to receive, collect or apply, as interest hereon, any amount in excess of the maximum rate of interest permitted to be charged from time to time by applicable law, and in the event the holder hereof ever receives,
collects or applies, as interest, any such excess, such amount which would be excessive interest shall be deemed a partial 
 Secured
Subordinated Promissory Note 
  

 
prepayment of the principal hereof and treated hereunder as such; and, if the principal hereof 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 specified contingency, exceeds the highest lawful rate, Maker and the holder hereof shall, to the maximum extent permitted under applicable law, (a) characterize
any nonprincipal payment as an expense, fee, or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, and (c) spread the total amount of interest throughout the entire contemplated term hereof;
provided that if the indebtedness evidenced hereby is paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the maximum lawful rate, the
holder hereof shall refund to Maker the amount of such excess or credit the amount of such excess against the principal hereof, and in such event, the holder hereof shall not be subject to any penalties provided by any laws for contracting for,
charging, or receiving interest in excess of the maximum lawful rate. 
 17. Business Day; Payments. As used herein, the expression
(a) “Business Day” means every day on which banks located in the State of Texas are generally open for business, and (b) “Nonbusiness Day” means every day which is not a Business Day. Each payment of the principal of or
accrued interest on this note shall be due and payable in lawful money of the United States of America. In any case where a payment of principal or interest hereon is due on a Nonbusiness Day, Maker shall be entitled to delay such payment until the
next succeeding Business Day, but interest shall continue to accrue until the payment is, in fact, made. 
 18. Modifications in
Writing. No waiver or modification of any of the terms or provisions of this note shall be valid or binding unless set forth in a writing signed by Maker and Payee, and then only to the extent therein specifically set forth. 
 THIS NOTE, TOGETHER WITH THE OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. 
 [Remainder of Page Left Blank. 
 Signature Page Follows.] 
 Secured Subordinated Promissory Note 
  
  

 IN WITNESS WHEREOF, the undersigned has executed this note as of the day and year first above written.

  

			
	MAKER:
	
	OPTEX SYSTEMS, INC.
		
	By:	 	/s/ JOHN J. STUART, JR.
		 	Name: John J. Stuart,
Jr.                                       
 
		 	Title: Chief Financial
Officer                                

 ACKNOWLEDGED AND AGREED: 
 PAYEE: 
  

			
	TWL GROUP, LP
		
	By:	 	TWL Group Management, LLC,
		 	General Partner
		
		 	By: /s/ TIMOTHY W.
LOONEY                        
		 	 Timothy W. Looney, President

 Signature Page to Secured Subordinated Revolving Promissory Note

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