EXHIBIT 10.1

 

INSIGNIA SYSTEMS, INC.
2013 OMNIBUS STOCK AND INCENTIVE PLAN

(Adopted by Board of Directors on February 26, 2013)

(Approved by Shareholders on May 22, 2013)

Section 1.                 Purpose

The purpose of the Plan is to attract, retain and motivate capable and loyal
employees, officers, consultants, advisors and directors by offering such
persons incentives to strive for the success of the Company’s business through
various stock-based compensation arrangements, thereby aligning the interests of
such persons with the Company’s shareholders.

Section 2.                 Definitions

As used in the Plan, the following terms shall have the meanings set forth
below:

(a)                 “Affiliate” shall mean (i) any entity that, directly or
indirectly through one or more intermediaries, is controlled by the Company and
(ii) any entity in which the Company has a significant equity interest, in each
case as determined by the Committee.

(b)                 “Award” shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award or Other Stock Grant
granted under the Plan.

(c)                 “Award Agreement” shall mean any written agreement, contract
or other instrument or document evidencing an Award granted under the Plan. Each
Award Agreement shall be subject to the applicable terms and conditions of the
Plan and any other terms and conditions (not inconsistent with the Plan)
determined by the Committee.

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

(e)                 “Change in Control” means a transaction involving any of the
following:

(i)                   the occurrence of (1) any sale, lease, exchange or other
transfer of all or substantially all of the assets of the Company (in one
transaction or in a series of related transactions) to a corporation that is not
controlled by the Company, or (2) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which Shares would be converted into cash, securities or other property, other
than a merger of the Company in which shareholders immediately prior to the
merger have the same proportionate ownership of stock of the surviving
corporation immediately after the merger;

(ii)                 the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant to
Section 13(d) of the Exchange Act) by the Company or any Person that such Person
has become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company’s then outstanding securities;

(iii)                the election to the Company’s board of directors of persons
who constitute a majority of the board of directors and who were not nominated
for election by the then-current board of directors, including, but not limited
to, the occurrence of any transaction whereby individuals who constitute the
board of directors of the Company prior to the transaction cease for any reason
to constitute at least a majority thereof following the transaction; or

 

 

 

(iv)               the approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

(f)                  “Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated thereunder.

(g)                 “Committee” shall mean the Compensation Committee of the
Board or any other committee of the Board designated by the Board to administer
the Plan. The Committee shall be comprised of not less than such number of
Directors as shall be required to permit Awards granted under the Plan to
qualify under Rule 16b-3 and Section 162(m), and each member of the Committee
shall be a “Non-Employee Director.”

(h)                 “Company” shall mean Insignia Systems, Inc., a Minnesota
corporation, including any subsidiaries, and any successor corporation.

(i)                   “Director” shall mean a member of the Board, including any
Non-Employee Director.

(j)                  “Eligible Person” shall mean any employee, officer,
consultant, advisor or director providing services to the Company or any
Affiliate who the Committee determines to be an Eligible Person. An Eligible
Person must be a natural person.

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

(l)                   “Fair Market Value” means the closing price for the common
stock on the NASDAQ Stock Market (including the NASDAQ National Market System)
during a regular session trading for a single trading day as reported for such
day on www.nasdaq.com or such other source the Committee deems reliable. The
applicable trading day for determining Fair Market Value (1) in connection with
the grant of Awards shall be the date of grant and (2) otherwise shall be as
determined by the Committee in its sole discretion. If no reported price for the
common stock exists on the NASDAQ Stock Market for the applicable trading day,
then such price shall be determined by the Committee as follows:

(i)                   If the common stock is listed for trading on one of more
national securities exchanges, or is traded on the NASDAQ Stock Market, then the
price shall be the last reported sales price on such national securities
exchange or the NASDAQ Stock Market, or if such common stock shall not have been
traded on such principal exchange on such date, the last reported sales price on
such principal exchange on the first day prior thereto on which such common
stock was so traded; or

(ii)                 If the common stock is not listed for trading on a national
securities exchange or the NASDAQ Stock Market, but is traded in the
over-the-counter market, including the NASDAQ OTC Bulletin Board, then the price
shall be the closing bid price for such common stock, or if there is no closing
bid price for such common stock on such date, the closing bid price on the first
day prior thereto on which such price existed; or

(iii)                If neither (i) nor (ii) is applicable, by any means fair
and reasonable by the Committee in good faith in the exercise of its reasonable
discretion based upon a reasonable application of a reasonable valuation method
within the meaning of Code Section 409A and treasury regulations or other
authority promulgated thereunder, which determination shall be final and binding
on all parties.

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(m)               “Incentive Stock Option” shall mean an option granted under
Section 6(a) of the Plan that is intended to qualify as an “incentive stock
option” in accordance with the terms of Section 422 of the Code or any successor
provision.

(n)                 “Non-Employee Director” shall mean any Director who is a
“non-employee director” as defined under subparagraph (b)(3) of Rule 16b-3 and
is an “outside director” within the meaning of Section 162(m).

(o)                 “Non-Qualified Stock Option” shall mean an option granted
under Section 6(a) of the Plan that is not an Incentive Stock Option.

(p)                 “Option” shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.

(q)                 “Other Stock Grant” shall mean any right granted under
Section 6(e) of the Plan.

(r)                  “Participant” shall mean an Eligible Person designated to
be granted an Award under the Plan.

(s)                  “Performance Award” shall mean any right granted under
Section 6(d) of the Plan.

(t)                  “Performance Goal” shall mean one or more of the following
performance goals, either individually, alternatively or in any combination,
applied on a corporate, subsidiary or business unit basis: revenue, cash flow,
gross profit, earnings before interest and taxes, earnings before interest,
taxes, depreciation and amortization, and net earnings, earnings per share,
margins (including one or more of gross, operating and net income margins),
returns (including one or more of return on assets, equity, investment, capital
and revenue and total shareholder return), stock price, working capital, market
share, cost reductions, customer satisfaction, completion of key projects, and
strategic plan development and implementation. Such goals may reflect an
absolute standard of entity or business unit performance or a relative
comparison to the performance of a peer group of entities or other external
measure of the selected performance criteria. Pursuant to rules and conditions
adopted by the Committee on or before the 90th day of the applicable performance
period for which Performance Goals are established, the Committee may
appropriately adjust any evaluation of performance under such goals to exclude
the effect of certain events, including any of the following events: asset
write-downs; litigation or claim judgments or settlements; changes in tax law,
accounting principles or other such laws or provisions affecting reported
results; severance, contract termination and other costs related to exiting
certain business activities; and gains or losses from the disposition of
businesses or assets or from the early extinguishment of debt.

(u)                 “Person” shall mean any individual or entity, including a
corporation, partnership, limited liability company, association, joint venture
or trust.

(v)                 “Plan” shall mean the Insignia Systems, Inc. 2013 Omnibus
Stock and Incentive Plan, as amended from time to time, the provisions of which
are set forth herein.

(w)                “Restricted Stock” shall mean any Share granted under
Section 6(c) of the Plan.

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(x)                 “Restricted Stock Unit” shall mean any unit granted under
Section 6(c) of the Plan evidencing the right to receive a Share (or a cash
payment equal to the Fair Market Value of a Share) at some future date.

(y)                 “Rule 16b-3” shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act, or any successor rule
or regulation.

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

(aa)             “Share” or “Shares” shall mean a share or shares of common
stock, $.01 par value per share, of the Company or such other securities or
property as may become subject to Awards pursuant to an adjustment made under
Section 4(c) of the Plan.

(bb)             “Specified Employee” shall mean a specified employee as defined
in Section 409A(a)(2)(B) of the Code.

(cc)              “Stock Appreciation Right” shall mean any right granted under
Section 6(b) of the Plan.

Section 3.                 Administration

(a)                 Power and Authority of the Committee. The Plan shall be
administered by the Committee. Subject to the express provisions of the Plan and
to applicable law, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be granted
to each Participant under the Plan; (iii) determine the number of Shares to be
covered by (or the method by which payments or other rights are to be determined
in connection with) each Award; (iv) determine the terms and conditions of any
Award or Award Agreement; (v) amend the terms and conditions of any Award or
Award Agreement and accelerate the exercisability of any Option or waive any
restrictions relating to any Award; (vi) determine whether, to what extent and
under what circumstances Awards may be exercised in cash, Shares, other
securities or other Awards, or canceled, forfeited or suspended; (vii) determine
whether, to what extent and under what circumstances cash, Shares, other
securities or other Awards and other amounts payable with respect to an Award
under the Plan shall be deferred either automatically or at the election of the
holder thereof or the Committee; (viii) interpret and administer the Plan and
any instrument or agreement, including any Award Agreement, relating to the
Plan; (ix) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (x) make any other determination and take any other action that
the Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award or Award Agreement shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon any Eligible Person and any holder or beneficiary of any Award.

(b)                 Delegation of Authority. The Committee may delegate all or
any part of its authority under this Plan to: (i) one or more subcommittees
which may consist solely of Non-Employee Directors and (ii) persons who are not
non-employee directors for purposes of determining and administering Awards
solely to Employees who are not then subject to the reporting requirements of
Section 16 of the Exchange Act, provided, however, that the Committee shall not
delegate its authority to amend or modify the Plan pursuant to the provisions of
Section 7.

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(c)                 Indemnification. To the full extent permitted by law, each
member and former member of the Committee and each person to whom the Committee
delegates or has delegated authority under this Plan shall be entitled to
indemnification by the Company against and from any loss, liability, judgment,
damages, cost and reasonable expense incurred by such member, former member or
other person by reason of any action taken, failure to act or determination made
in good faith under or with respect to this Plan.

(d)                 Evidence of Awards. Awards granted under the Plan shall be
evidenced by a written instrument, an Award Agreement, that shall contain such
terms, conditions, limitations and restrictions as the Committee shall deem
advisable and are not inconsistent with the Plan.

Section 4.                 Shares Available for Awards

(a)                 Shares Available. Subject to adjustment as provided in
Section 4(c) of the Plan, the aggregate number of Shares that may be issued
under the Plan shall be 250,000.

(b)                 Accounting for Awards. For purposes of this Section 4, if an
Award entitles the holder thereof to receive or purchase Shares, the number of
Shares covered by such Award or to which such Award relates shall be counted on
the date of grant of such Award against the aggregate number of Shares available
for granting Awards under the Plan. If an Award terminates or is forfeited or
cancelled without the issuance of any Shares, or if any Shares covered by an
Award or to which an Award relates are not issued for any other reason, then the
number of Shares counted against the aggregate number of Shares available under
the Plan with respect to such Award, to the extent of any such termination,
forfeiture, cancellation or other event, shall again be available for granting
Awards under the Plan. If Shares of Restricted Stock are forfeited or otherwise
reacquired by the Company prior to vesting, whether or not dividends have been
paid on such Shares, then the number of Shares counted against the aggregate
number of Shares available under the Plan with respect to such Award of
Restricted Stock, to the extent of any such forfeiture or reacquisition by the
Company, shall again be available for granting Awards under the Plan. Shares
that are withheld in full or partial payment to the Company of the purchase or
exercise price relating to an Award or in connection with the satisfaction of
tax obligations relating to an Award (other than an Incentive Stock Option)
shall again be available for granting Awards under the Plan. Any previously
issued Shares that are used by a Participant as full or partial payment to the
Company of the purchase or exercise price relating to an Award or in connection
with the satisfaction of tax obligations relating to an Award shall again be
available for granting Awards under the Plan.

(c)                 Adjustments. If a Participant exercises or receives all or
any portion of an Award subsequent to any change in the number of outstanding
common stock of the Company occurring by reason of any stock dividend, split,
reverse split, reclassification, combination, exchange of common stock or other
similar recapitalization of the Company, there shall be an appropriate
adjustment to the number of shares of common stock underlying the Award and,
where applicable, to the per unit exercise price of the Award so that the
Participant shall then receive for the aggregate price paid by him or her on
such exercise of an Option or termination of restrictions for any Restricted
Stock or Restricted Stock Unit all shares of common stock subject to the Award
to the same extent prior to such stock dividend, split, reverse split or other
similar recapitalization. No adjustment shall be made under this Section upon
the issuance by the Company of any warrants, rights or options to acquire
additional common stock or of securities convertible into common stock unless
such warrants, rights, options or convertible securities are issued to all
shareholders of the Company on a proportionate basis.

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(d)                 Award Limitations Under the Plan.

(i)                   Section 162(m) Limitation for Certain Types of Awards. No
Eligible Person may be granted Options, Stock Appreciation Rights or any other
Award or Awards under the Plan, the value of which Award or Awards is based
solely on an increase in the value of the Shares after the date of grant of such
Award or Awards, for more than 500,000 Shares (subject to adjustment as provided
in Section 4(c) of the Plan) in the aggregate in any taxable year.

(ii)                 Section 162(m) Limitation for Performance Awards. If a
Participant is a “covered employee” as defined under Section 162(m) (a “Covered
Employee”) for any taxable year of the Participant in which a Performance Award
(or portion thereof) is payable to the Participant, the maximum amount payable
in the aggregate to the Participant during that year pursuant to all Performance
Awards, shall be $1,000,000 in value, whether payable in cash, Shares or other
property; and such amount shall be increased annually (as of each January 1st
after the effective date of the Plan) at a fixed percentage rate of 5% (the
“Annual Performance Award Limit”). The Annual Performance Award Limit does not
apply to any Award subject to the limitation contained in Section 4(d)(i) of the
Plan. Further, the Annual Performance Award Limit applies only to Performance
Awards granted under this Plan. Any limitations on awards granted to the
Participant under any other executive incentive plan maintained by the Company
(a “Non-Plan Award”) will be governed solely by the terms of such other plan;
provided, however, that, if any amount is payable to the Participant during a
given year under a Non-Plan Award that is subject to Code Section 409A, and the
terms of the Non-Plan Award permit or require the Company or any Affiliate (or
its delegate) to delay beyond that year the payment of any portion of such
Non-Plan Award to comply with Section 162(m), the Company shall cause payment of
such portion to be delayed for that purpose.

If the Committee reasonably anticipates, on or before any date on which a
Performance Award (or portion thereof) is payable to a Participant, that the
Participant will be a Covered Employee for the taxable year in which that amount
is payable, the Committee will apply the Annual Performance Award Limit to that
amount and any other Performance Award amount otherwise payable to the
Participant during that year; provided, however, that if the Committee
determines at any later time during the year that the Participant is not a
Covered Employee for that year, due to a termination of employment or for any
other reason, the Committee will direct payment to the Participant of any
portion of a Performance Award or Performance Awards that would have been
payable during that year or any prior year, but was deferred to comply with the
Annual Performance Award Limit, as set forth in this Section 4(d)(ii); and such
payment of deferred Performance Award amounts shall be made no later than the
last day of the Participant’s first taxable year for which the Participant is
not a Covered Employee, unless that payment is delayed beyond that year under
Section 7(b) of this Plan, to the extent permitted by or as required to comply
with Code Section 409A.

(iii)                Plan Limitation on Restricted Stock, Restricted Stock Units
and Other Stock Grants. No more than 500,000 Shares, subject to adjustment as
provided in Section 4(c) of the Plan, shall be available under the Plan for
issuance pursuant to grants of Restricted Stock, Restricted Stock Units and
Other Stock Grants; provided, however, that if any Awards of Restricted Stock
Units terminate or are forfeited or cancelled without the issuance of any Shares
or if Shares of Restricted Stock are forfeited or otherwise reacquired by the
Company prior to vesting, whether or not dividends have been paid on such
Shares, then the Shares subject to such termination, forfeiture, cancellation or
reacquisition by the Company shall again be available for grants of Restricted
Stock, Restricted Stock Units and Other Stock Grants for purposes of this
limitation on grants of such Awards.

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(iv)               Limitation on Awards Granted to Non-Employee Directors.
Directors who are not also employees of the Company or an Affiliate may not be
granted Awards in the aggregate for more than 25% of the Shares available for
Awards under the Plan, subject to adjustment as provided in Section 4(c) of the
Plan.

(v)                 Limitation on Incentive Stock Options. The number of Shares
available for granting Incentive Stock Options under the Plan shall not exceed
5,000,000, subject to adjustment as provided in Section 4(c) of the Plan and
subject to the provisions of Section 422 or 424 of the Code or any successor
provision.

Section 5.                 Eligibility

Any Eligible Person shall be eligible to be designated a Participant, so long
as: (a) Awards are not made to such Persons in connection with the offer and
sale of the Company’s securities in a capital-raising transaction, and (b) such
Persons do not directly or indirectly promote or maintain a market for the
Company’s securities. In determining which Eligible Persons shall receive an
Award and the terms of any Award, the Committee may take into account the nature
of the services rendered by the respective Eligible Persons, their present and
potential contributions to the success of the Company or such other factors as
the Committee, in its discretion, shall deem relevant. Notwithstanding the
foregoing, an Incentive Stock Option may only be granted to full-time or
part-time employees (which term as used herein includes, without limitation,
officers and Directors who are also employees), and an Incentive Stock Option
shall not be granted to an employee of an Affiliate unless such Affiliate is
also a “subsidiary corporation” of the Company within the meaning of
Section 424(f) of the Code or any successor provision.

Section 6.                 Awards

(a)                 Options. The Committee is hereby authorized to grant Options
to Eligible Persons with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:

(i)                   Exercise Price. The purchase price per Share purchasable
under an Option shall be determined by the Committee; provided, however, that
such purchase price shall not be less than 100% of the Fair Market Value of a
Share on the date of grant of such Option.

(ii)                 Option Term; Vesting. The term of each Option shall be
fixed by the Committee at the time of grant, but shall not be longer than 10
years (except as provided in Section 6(a)(iv)) from the date of grant. In
addition, the Committee may adopt a policy regarding standard vesting terms for
Option grants, or if one is not adopted or inapplicable, vesting terms shall be
fixed by the Committee at the time of grant.

(iii)                Time and Method of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms (which may include,
without limitation, cash, or cashless exercise, having a Fair Market Value on
the exercise date equal to the applicable exercise price) in which, payment of
the exercise price with respect thereto may be made or deemed to have been made.
Unless otherwise provided in the agreement evidencing the Option, any
Non-Qualified Option may be exercised by instructing the Company to withhold
from the Shares issuable upon exercise of the Option Shares in payment of all or
any part of the exercise price and/or any related withholding obligations
consistent with Section 8, which Shares shall be valued for this purpose at
their Fair Market Value or in such other manner as may be authorized from time
to time by the Committee.

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(iv)               Restrictions. In addition to the foregoing provisions of this
Section 6, Options that are intended to constitute Incentive Stock Options shall
be subject to the following additional provisions of this Section 6(a)(iv).

A.               Eligible Participants. Incentive Stock Options may be granted
only to persons who are employees of the Company or an Affiliate.

B.               Limit on Exercisability. The aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of Common Stock
with respect to which Incentive Stock Options are exercisable by the Participant
for the first time during any calendar year, under this Plan or any other plan
of the Company or any Affiliate, shall not exceed $100,000. To the extent an
Incentive Stock Option exceeds this $100,000 limit, the portion of the Incentive
Stock Option in excess of such limit shall be deemed a Non-Statutory Option.

C.               Limit on Term. Subject to the provisions of Section
6(a)(iv)(D), an Incentive Stock Option shall not be exercisable more than ten
(10) years after the date on which it is granted.

D.               Restrictions for Certain Shareholders. The purchase price of
shares of common stock that are subject to an Incentive Stock Option granted to
an employee of the Company or any Affiliate who, at the time such Option is
granted, owns 10% or more of the total combined voting power of all classes of
stock of the Company or of any Affiliate, shall not be less than 110% of the
Fair Market Value of such shares on the date such Option is granted, and such
Option may not be exercisable more than five (5) years after the date on which
it is granted. For the purposes of this subparagraph, the rules of Section
424(d) of the Code shall apply in determining the stock ownership of any
employee of the Company or any Affiliate.

(v)                 Payment of Exercise Price. The exercise price for Shares
purchased under an Option shall be paid in full to the Company by delivery of
consideration equal to the product of the Option exercise price and the number
of Shares purchased. Such consideration must be paid before the Company will
issue the Shares being purchased and must be in a form or a combination of forms
acceptable to the Committee for that purchase, which forms may include: (a)
cash; (b) check or wire transfer; (c) tendering Shares already owned by the
Participant, provided that the Shares have been held for the minimum period
required by applicable accounting rules to avoid a charge to the Company’s
earnings for financial reporting purposes or were not acquired from the Company
as compensation; (d) to the extent permitted by applicable law, delivery of a
properly executed exercise notice, together with irrevocable instructions to a
brokerage firm designated by the Company to deliver promptly to the Company the
aggregate amount of sale or loan proceeds to pay the Option exercise price and
any withholding tax obligations that may arise in connection with the exercise,
all in accordance with the regulations of the Federal Reserve Board; or (e) such
other consideration as the Committee may permit in its sole discretion.

(vi)               Cashless Exercise. The Committee, in its sole discretion, may
also permit the “cashless exercise” of an Option. In the event of a cashless
exercise, the Participant shall surrender the Option to the Company, and the
Company shall issue the Participant the number of Shares determined as follows:

X = Y (A-B) /A where:

X = the number of Shares to be issued to the Participant.

Y = the number of Shares with respect to which the Option is being exercised.

A = the Fair Market Value on the date of exercise.

B = the Option exercise price.

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(b)                 Stock Appreciation Rights. The Committee is hereby
authorized to grant Stock Appreciation Rights to Eligible Persons subject to the
terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right
granted under the Plan shall confer on the holder thereof a right to receive
upon exercise thereof the excess of (i) the Fair Market Value of one Share on
the date of exercise (or, if the Committee shall so determine, at any time
during a specified period before or after the date of exercise) over (ii) the
grant price of the Stock Appreciation Right as determined by the Committee,
which grant price shall not be less than 100% of the Fair Market Value of one
Share on the date of grant of the Stock Appreciation Right. Subject to the terms
of the Plan, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions (including conditions
or restrictions on the exercise thereof) of any Stock Appreciation Right shall
be as determined by the Committee.

(c)                 Restricted Stock and Restricted Stock Units. The Committee
is hereby authorized to grant Restricted Stock and Restricted Stock Units to
Eligible Persons with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:

(i)                   Restrictions. Shares of Restricted Stock and Restricted
Stock Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote a Share of
Restricted Stock or the right to receive any dividend or other right or property
with respect thereto), which restrictions may lapse separately or in combination
at such time or times, in such installments or otherwise as the Committee may
deem appropriate. The Committee may adopt a policy regarding standard vesting
terms for Restricted Stock and Restricted Stock Units grants, or if one is not
adopted or inapplicable, vesting terms shall be fixed by the Committee at the
time of grant. In addition, the Committee may permit acceleration of vesting of
such Awards in the event of the Participant’s death, disability or retirement or
a Change in Control of the Company.

(ii)                 Issuance and Delivery of Shares. Any Restricted Stock
granted under the Plan shall be issued at the time such Awards are granted and
may be evidenced in such manner as the Committee may deem appropriate, which
shall be, unless otherwise required by law or the Award Agreement by book-entry
registration, but may be by issuance of a stock certificate or certificates,
which certificate or certificates shall be held by the Company. Such certificate
or certificates shall be registered in the name of the Participant and shall
bear an appropriate legend referring to the restrictions applicable to such
Restricted Stock. Shares representing Restricted Stock that is no longer subject
to restrictions shall be delivered to the Participant promptly after the
applicable restrictions lapse or are waived. In the case of Restricted Stock
Units, no Shares shall be issued at the time such Awards are granted. Upon the
lapse or waiver of restrictions and the restricted period relating to Restricted
Stock Units evidencing the right to receive Shares, such Shares shall be issued
and delivered to the holder of the Restricted Stock Units.

(iii)                Forfeiture. Except as otherwise determined by the
Committee, upon a Participant’s termination of employment or resignation or
removal as a Director (in either case, as determined under criteria established
by the Committee) during the applicable restriction period, all Shares of
Restricted Stock and Restricted Stock Units held by the Participant at such time
subject to restriction shall be forfeited and reacquired by the Company;
provided, however, that the Committee may, when it finds that a waiver would be
in the best interest of the Company, waive in whole or in part any or all
remaining restrictions with respect to Shares of Restricted Stock or Restricted
Stock Units.

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(iv)               Except as otherwise provided in Section 6(f)(viii), any Award
Agreement granting Restricted Stock Units shall contain provisions that are
intended to allow the Restricted Stock Units to satisfy the requirements of (or
be exempt from) Code Section 409A and any applicable provisions of Section
6(f)(viii) of this Plan.

(d)                 Performance Awards. The Committee is hereby authorized to
grant to Eligible Persons Performance Awards which are intended to be “qualified
performance-based compensation” within the meaning of Section 162(m). A
Performance Award granted under the Plan may be payable in cash or in Shares
(including, without limitation, Restricted Stock). Performance Awards shall, to
the extent required by Section 162(m), be conditioned solely on the achievement
of one or more objective Performance Goals, and such Performance Goals shall be
established by the Committee within the time period prescribed by, and shall
otherwise comply with the requirements of, Section 162(m). Subject to the terms
of the Plan and any applicable Award Agreement, the Performance Goals to be
achieved during any performance period, the length of any performance period,
the amount of any Performance Award granted, the amount of any payment or
transfer to be made pursuant to any Performance Award and any other terms and
conditions of any Performance Award shall be determined by the Committee. The
Committee shall also certify in writing that such Performance Goals have been
met prior to payment of the Performance Awards to the extent required by Section
162(m). Except as otherwise provided in Section 6(f)(viii), any Award Agreement
granting a Performance Award shall contain provisions that are intended to allow
the Performance Award to satisfy the requirements of (or be exempt from) Code
Section 409A and any applicable provisions of Section 6(f)(viii) of this Plan.

(e)                 Other Stock Grants. The Committee is hereby authorized,
subject to the terms of the Plan, to grant to Eligible Persons Shares without
restrictions thereon as are deemed by the Committee to be consistent with the
purpose of the Plan. Subject to the terms of the Plan and any applicable Award
Agreement, such Other Stock Grant may have such terms and conditions as the
Committee shall determine.

(f)                  General.

(i)                   Consideration for Awards. Awards may be granted for no
cash consideration, or for any cash or other consideration as determined by the
Committee or required by applicable law.

(ii)                 Awards May Be Granted Separately or Together. Awards may,
in the discretion of the Committee, be granted either alone or in addition to,
in tandem with or in substitution for any other Award or any award granted under
any other plan of the Company or any Affiliate. Awards granted in addition to or
in tandem with other Awards or in addition to or in tandem with awards granted
under any such other plan of the Company or any Affiliate may be granted either
at the same time as or at a different time from the grant of such other Awards
or awards.

(iii)                Forms of Payment under Awards. Subject to the terms of the
Plan, including Section 6(a)(v), and of any applicable Award Agreement, payments
or transfers to be made by the Company or an Affiliate upon the grant, exercise
or payment of an Award shall be made in such form or forms as the Committee
shall determine, including, without limitation: cash, Shares, other securities,
other Awards or any combination thereof; and shall be made in a single payment,
in each case in accordance with rules and procedures established by the
Committee. Except as otherwise provided in Section 6(f)(viii), any change in the
timing of payment of an Award shall satisfy the requirements of (or be exempt
from) Code Section 409A and any applicable provisions of Section 6(f)(viii) of
this Plan.

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(iv)               Limits on Transfer of Awards. Except as otherwise provided by
the Committee or the terms of this Plan, no Award (other than Shares that are
not Restricted Stock), and no right under any such Award, shall be transferable
by a Participant either (A) for any consideration or (B) without consideration
other than by will or by the laws of descent and distribution. The Committee may
establish procedures as it deems appropriate for a Participant to designate a
Person or Persons, as beneficiary or beneficiaries, to exercise the rights of
the Participant and receive any property distributable with respect to any Award
in the event of the Participant’s death. Each Option, Stock Appreciation Right
or right under any other Award shall be exercisable during the Participant’s
lifetime only by the Participant (except as provided herein or in an Award
Agreement or amendment thereto relating to a Non-Qualified Stock Option) or, if
permissible under applicable law, by the Participant’s guardian or legal
representative. No Award or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate; provided, however, that this sentence
shall apply to an Other Stock Grant only to the extent provided under the terms
of the Award Agreement for the Other Stock Grant.

(v)                 Term of Awards. Subject to earlier termination in accordance
with the terms of the Plan and the instrument evidencing the Award, the maximum
term of an Award shall be as established for that Award by the Committee, which
shall not be more than ten years from the date of grant, or, if not so
established, shall be ten (10) years from the date of grant.

(vi)               Restrictions; Securities Exchange Listing. All Shares or
other securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the Plan, applicable federal or state
securities laws and regulatory requirements, and the Committee may direct
appropriate stop transfer orders and cause other legends to be placed on the
certificates for such Shares or other securities to reflect such restrictions.
If the Shares or other securities are traded on a securities exchange, the
Company shall not be required to deliver any Shares or other securities covered
by an Award unless and until such Shares or other securities have been and
continue to be admitted for trading on such securities exchange.

(vii)              Prohibition on Repricing. Except as provided in Section 4(c)
of the Plan, no Option or Stock Appreciation Right may be amended to reduce its
initial exercise or grant price and no Option or Stock Appreciation Right shall
be canceled, exchanged and replaced with Options or Stock Appreciation Rights or
other Awards having a lower exercise or grant price, without the prior approval
of the shareholders of the Company.

(viii)            Code Section 409A Provisions. Notwithstanding anything in the
Plan or any Award Agreement to the contrary, to the extent that any amount or
benefit that constitutes “deferred compensation” to a Participant under Section
409A of the Code and applicable guidance thereunder is otherwise payable or
distributable to a Participant under the Plan or any Award Agreement solely by
reason of the occurrence of a Change in Control or due to the Participant’s
disability or separation from service, such amount or benefit will not be
payable or distributable to the Participant by reason of such circumstance
unless the Committee determines in good faith that (A) the circumstances giving
rise to such Change in Control, disability or separation from service meet the
definition of a change in ownership or control, disability or separation from
service, as the case may be, in Section 409A(a)(2)(A) of the Code; or (B) the
payment or distribution of such amount or benefit would be exempt from the
application of Section 409A of the Code by reason of the short-term deferral
exemption or otherwise. Any payment or distribution that otherwise would be made
to a Participant who is a Specified Employee (as determined by the Committee in
good faith) on account of separation from service may not be made before the
date which is six (6) months after the date of the Specified Employee’s
separation from service unless the payment or distribution is exempt from the
application of Section 409A of the Code by reason of the short-term deferral
exemption or otherwise. Notwithstanding the foregoing provisions of this
Section 6(f)(viii), Award Agreements may be written or amended in a manner that
does not satisfy the requirements of Code Section 409A (or any exemption
therefrom), but only if and to the extent that the Committee specifically
provides in written resolutions that the Award Agreement or amendment is not
intended to comply with Code Section 409A.

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(ix)               Book-entry registration. Any Awards granted under the Plan
may be evidenced in such manner as the Committee may deem appropriate, but
shall, unless otherwise required or specified by the applicable Award Agreement
or applicable law, be evidenced through book-entry registration.

(x)                 Death of Participant. Upon the death of a Participant, an
Award, or any portion thereof, may be exercised to the extent the Participant
was entitled to do so at the time of the Participant’s death, by his or her
executor or administrator or other person entitled by law to the Participant’s
rights under the Award, at any time within one year subsequent to the date of
death. The Award shall automatically expire one (1) year after the Participant’s
death to the extent not exercised.

(xi)               Disability of Participant. If a Participant is an employee of
the Company, and if the Participant’s employment is terminated due to his or her
disability, the Participant may, within one year of such termination, exercise
any unexercised portion of an Award to the extent he or she was entitled to do
so at the time of such termination. The Award shall automatically expire one (1)
year after such termination to the extent not exercised.

(xii)              Other Termination of Employment. If a Participant is an
employee of the Company, and if the Participant’s employment is terminated other
than by death, disability, or conduct which is contrary to the best interests of
his or her employer, the Participant may, within 90 days of such termination,
exercise any unexercised portion of an Award to the extent he or she was
entitled to do so at the time of such termination. The Award shall automatically
expire 90 days after such termination to the extent not exercised. If the
Participant’s employment is terminated by his or her employer for conduct which
is contrary to the best interests of his or her employer, or if the Participant
violates any written nondisclosure agreement with his or her employer, as
determined in either case by the Participant’s employer in its sole discretion,
the unexercised portion of the Participant’s Award shall automatically expire at
the time of termination. Inter-company transfers and approved leaves of absence
for up to 90 days shall not be considered termination of employment.

Section 7.                 Amendment and Termination; Adjustments

(a)                 Amendments to the Plan. The Board or the Committee may
amend, suspend or terminate the Plan or any portion of the Plan at any time and
in such respects as it shall deem advisable; provided, however, that, to the
extent required by applicable law, regulation or rule, including, but not
limited to the rules and regulations of the NASDAQ Stock Market, shareholder
approval shall be required for any amendment, suspension, or termination to the
Plan.

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(b)                 Amendments to Awards. The Committee may waive any conditions
of or rights of the Company under any outstanding Award, prospectively or
retroactively. Except as otherwise provided by the terms of the Plan, including,
without limitation, Section 9(g), or an Award Agreement, the Committee may not
amend, alter, suspend, discontinue or terminate any outstanding Award,
prospectively or retroactively, if such action would adversely affect the rights
of the holder of such Award, without the consent of the Participant or holder or
beneficiary thereof. The Company intends that Awards under the Plan shall
satisfy the requirements of Section 409A of the Code to avoid any adverse tax
results thereunder and the Committee shall administer and interpret the Plan and
all Award Agreements in a manner consistent with that intent. In this regard, if
any provision of the Plan or an Award Agreement would result in adverse tax
consequences under Section 409A of the Code, the Committee may amend that
provision (or take any other action reasonably necessary) to avoid any adverse
tax results and no action taken to comply with Section 409A of the Code shall be
deemed to impair or otherwise adversely affect the rights of any holder of an
Award or beneficiary thereof.

(c)                 Correction of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any Award or Award Agreement in the manner and
to the extent it shall deem desirable to implement or maintain the effectiveness
of the Plan.

Section 8.                 Income Tax Withholding

In order to comply with all applicable federal, state, local or foreign income
tax laws or regulations, the Company may take such action as it deems
appropriate to ensure that all applicable federal, state, local or foreign
payroll, withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all or a portion of
applicable taxes to be withheld or collected upon exercise or receipt of (or the
lapse of restrictions relating to) an Award, the Committee, in its discretion
and subject to such additional terms and conditions as it may adopt, may permit
the Participant to satisfy such tax obligation by (i) electing to have the
Company withhold a portion of the Shares otherwise to be delivered upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes or (ii) delivering to the Company
Shares other than Shares issuable upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes.

Section 9.                 General Provisions

(a)                 No Rights to Awards. No Eligible Person or other Person
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Eligible Persons or holders or
beneficiaries of Awards under the Plan. The terms and conditions of Awards need
not be the same with respect to any Participant or with respect to different
Participants.

(b)                 Award Agreements. No Participant will have rights under an
Award granted to such Participant unless and until an Award Agreement shall have
been duly executed on behalf of the Company and, if requested by the Company,
signed by the Participant.

(c)                 Plan Provisions Control. In the event that any provision of
an Award Agreement conflicts with or is inconsistent in any respect with the
terms of the Plan as set forth herein or subsequently amended, the terms of the
Plan shall control.

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(d)                 No Rights of Shareholders. Unless otherwise provided by the
Committee or in the instrument evidencing the Award or in any other written
agreement between a Participant and the Company, no Award shall entitle the
Participant to any voting or other right of a shareholder unless and until the
date of issuance under the Plan of the Shares that are the subject of such
Award.

(e)                 Issuance of Shares. Notwithstanding any other provision of
the Plan, the Company shall have no obligation to issue or deliver any Shares
under the Plan or make any other distribution of benefits under the Plan unless,
in the opinion of the Company’s counsel, such issuance, delivery or distribution
would comply with all applicable laws (including, without limitation, the
requirements of the Securities Act of 1933, as amended, or the laws of any state
or foreign jurisdiction) and the applicable requirements of any securities
exchange or similar entity.

The Company shall be under no obligation to any Participant to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under the laws of any state or foreign jurisdiction, any
Shares, security or interest in a security paid or issued under, or created by,
the Plan, or to continue in effect any such registrations or qualifications if
made. The Company may issue certificates for Shares with such legends and
subject to such restrictions on transfer and stop-transfer instructions as
counsel for the Company deems necessary or desirable for compliance by the
Company with federal, state and foreign securities laws. The Company may also
require such other action or agreement by the Participants as may from time to
time be necessary to comply with applicable securities laws.

As further set forth under Section 6(f)(ix), to the extent the Plan or any
instrument evidencing an Award provides for issuance of stock certificates to
reflect the issuance of Shares, the issuance shall be effected on a
non-certificated basis, to the extent not prohibited by applicable law or the
applicable rules of any stock exchange.

(f)                  No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.

(g)                 Change in Control. Notwithstanding anything to the contrary
set forth in the Plan, upon any Change in Control, the Committee may, in its
sole and absolute discretion and without the need for the consent of any
Participant, take one or more of the following actions contingent upon the
occurrence of that Change in Control:

(i) cause any or all outstanding Awards to become vested and immediately
exercisable (as applicable), in whole or in part;

(ii) cause any outstanding Option to become fully vested and immediately
exercisable for a reasonable period in advance of the Change in Control and, to
the extent not exercised prior to that Change in Control, cancel that Option
upon closing of the Change in Control;

(iii) cancel any unvested Award or unvested portion thereof, with or without
consideration;

(iv) cancel any Award in exchange for a substitute award;

(v) redeem any Restricted Stock or Restricted Stock Unit for cash and/or other
substitute consideration with value equal to Fair Market Value of an
unrestricted Share on the date of the Change in Control;

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(vi) cancel any Option in exchange for cash and/or other substitute
consideration with a value equal to: (A) the number of Shares subject to that
Option, multiplied by (B) the difference, if any, between the Fair Market Value
per Share on the date of the Change in Control and the exercise price of that
Option; provided, that if the Fair Market Value per Share on the date of the
Change in Control does not exceed the exercise price of any such Option, the
Committee may cancel that Option without any payment of consideration therefor;

(vii) take such other action as the Committee shall determine to be reasonable
under the circumstances; and/or

(viii) notwithstanding any provision of this Section 9(g), in the case of any
Award subject to Section 409A of the Code, such Award shall vest and be
distributed only in accordance with the terms of the applicable Award Agreement
and the Committee shall only be permitted to use discretion to the extent that
such discretion would be permitted under Section 409A of the Code.

In the discretion of the Committee, any cash or substitute consideration payable
upon cancellation of an Award may be subjected to (i) vesting terms
substantially identical to those that applied to the cancelled Award immediately
prior to the Change in Control, or (ii) earn-out, escrow, holdback or similar
arrangements, to the extent such arrangements are applicable to any
consideration paid to shareholders in connection with the Change in Control.

(h)                 No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained as an employee of the
Company or any Affiliate, or a Director to be retained as a Director, nor will
it affect in any way the right of the Company or an Affiliate to terminate a
Participant’s employment at any time, with or without cause. In addition, the
Company or an Affiliate may at any time dismiss a Participant from employment
free from any liability or any claim under the Plan or any Award, unless
otherwise expressly provided in the Plan or in any Award Agreement.

(i)                   Successors and Assigns. All obligations of the Company
under the Plan with respect to Awards shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all the business and/or assets of the Company.

(j)                  Governing Law. The validity, construction and effect of the
Plan or any Award, and any rules and regulations relating to the Plan or any
Award, shall be determined in accordance with the internal laws, and not the law
of conflicts, of the State of Minnesota.

(k)                 Severability. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the purpose
or intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect.

(l)                   No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and an Eligible
Person or any other Person. To the extent that any Person acquires a right to
receive payments from the Company or any Affiliate pursuant to an Award, such
right shall be no greater than the right of any unsecured general creditor of
the Company or any Affiliate.

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(m)               No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.

(n)                 Headings. Headings are given to the Sections and subsections
of the Plan or any Award Agreement solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way material or relevant to
the construction or interpretation of the Plan or any provision thereof.

(o)                 Code Interpretation. Each reference in the Plan to a section
of the Code will be interpreted to include the section itself, any successor
provision thereto, the Treasury regulations thereunder (or under a successor
provision), and all applicable administrative or judicial guidance relating
thereto.

Section 10.             Effective Date of the Plan

The Plan became effective on February 26, 2013, upon its adoption by the Board,
subject to the approval of the shareholders of the Company at the annual meeting
of shareholders of the Company held on May 22, 2013.

Section 11.             Term of the Plan

The Plan shall terminate at midnight on February 26, 2023, unless terminated
before then by the Board. Awards may be granted under the Plan until the Plan
terminates or until all Shares available for Awards under the Plan have been
purchased or acquired; provided, however, that Incentive Stock Options may not
be granted following the 10-year anniversary of the Board’s adoption of the Plan
on February 26, 2013. The Plan shall remain in effect as long as any Awards are
outstanding.

 

 

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