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LOANS TO EMPLOYEES§ 23.602 23-117 APPENDIX A EXECUTIVE/DIRECTOR LOAN PLAN Hathaway Instruments, Inc. (the "Company"), a Colorado corporation, adopts the following loan plan for executives and directors (the "Plan": 1. Objective. The objective of the Plan is to provide additional incentive to executives and directors by granting interest-free or low-interest loans (the "Loans"). The Plan is intended to assist the Company in attracting and retaining qualified executives and directors. Companies with which the Company competes for executives and directors have loan plans, and the Plan is intended to place the Company in a better competi tive position with these other companies. The Plan also is intended to help improve the quality of work and provide an incentive to remain with the Company. To the extent Loan proceeds may be used for the acquisition of common stock of the Company, the interests of the Company also are better served in that participants wi ll have further incentive to promote the long-term interests of the Company. 2. Eligibility. Persons eligible for participation under this Plan are (i) Directors of the Company, (2) the President of the Company, and (3) such other executive personnel as are designated by the Company's Board of Directors (the "Board") upon the recommendation of the Compensation Committee (the "Committee"). Eligibility confers no vested right to the grant of any Loans under this Plan. 3. Granting of Loans. From time to time during each fiscal year of the Company during the term of this Plan, the Committee may make recommendations to the Board concerning the granting of Loans under the Plan to eligible participants. The Board will meet to consider the recommendations of the Committee (or will act by resolution) and will make a final determination as to the granting of Loans under the Plan to eligible persons. The Board's determination may vary from the Committee's recommendations, and the Board may choose to make no Loans at all. Immediately after the action of the Board, the Committee will noti fy persons to whom the Loans have been granted and will permit such persons to borrow money upon the execution and delivery of the 23-118 ©1985 jEFREN promissory note described in the following paragraph. 4. Terms of Loans. Each Loan will be evidenced by an unsecured promissory note in the form which is attached to this Plan as Exhibit A, and no funds will be advanced until the grantee has executed and delivered a copy of such promissory note to the Committee. The notes are payable 30 days after the Company makes demand for payment and will provide for the payment of interest at such rate as the Board determines upon the recommendation of the Committee, although it is expected that the notes will bear no interest or low inte rest rates in most cases. The Board will have sole discretion concerning when demand for payment of the Loans will be made, but the Board will consider the following factors: A. Whether the Company's needs for cash flow or financing make the calling of the Loans advisable; B. Whether the grantee has terminated employment with the Company; and C. Whether the grantee is able to repay the Loan without undue difficulty. Upon directions from the Board, the Committee will make demand for payment and will seek to collect on ea ch Loan not later than five years from the date funds are advanced under such Loan. 5. Additional Conditions to Loans. The Board may impose as additional conditions to the granting of any Loan to a participant that the participant use some or all of the proceeds for a particular purpose specified by the Board, including the purchase of common stock of the Company. The Board may require the participant to execute and deliver to the Company any appropriate or necessary agreements, representations, or documents in this regard. 6. Limitation on Loans. The total amount of Loans outstanding at any time to the account of any person eligible for participation under this Plan will not exceed the annual salary then paid by the Company to such person or $50,000 (whichever is greater), and the total Loans outstanding under this Plan at any time during the term of this Plan will not exceed $1,000,000. LOANS TO EMPLOYEES§ 23.602 23-119 7. Term of Plan. This Plan will be effective until December 31, 1986, at which time no further Loans will be made and the determination of when demand for payment of the Loans will be made will be vested in the Board (subject to the restriction that all Loans must be paid within five years from the date funds are advanced, as set forth in Paragraph 4 above.) 8. Disinterested Persons. All actions by the Committee regarding a loan to a member of the Committee will be taken without the participation of the Committee member and all actions by the Board regarding a Loan to a m ember of the Board will be taken without the participation of the Board member, but the Committee member and the Board member, respectively, may be counted for purposes of a quorum. 9. Administration. The Plan will be administered by the Board upon the recommendations of the Committee. § 23.602PROXY STATEMENTS : STRATEGY & FORMS 23-120 ©1985 Jefren Publishing Company, Inc. EXHIBIT A PROMISSORY NOTE $__________________________ _________________, 198___ Denver, Colorado For good and valuable consideration, the undersigned ("Maker") promises to pay to Hathaway Instruments, Inc., the sum of $___________________, payable within thirty days after Hathaway Instruments, Inc., makes demand for payment upon Maker, plus interest from the date of this Note on the unpaid principal, payable at the time principal on this Note becomes payable, at the rate of _______ percent per annum. If Maker fails to pay principal or interest when due, the Note will bear interest at a rate of __________ percent per annum as long as any principal or accrued interest remains outstanding. Maker may prepay all or any portion of this Note at any time and from time to time without penalty. Maker waives diligence, presentment, protest, and notice and agrees to pay all reasonable costs of collection, including reasonable attorneys' fees, incurred in the collection of this Note. ______________________________________Maker