Exhibit 10.1

 

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

2019 STOCK INCENTIVE PLAN

 

1.                   Purpose of Plan.

 

The purpose of the Northern Technologies International Corporation 2019 Stock
Incentive Plan (this “Plan”) is to advance the interests of Northern
Technologies International Corporation (the “Company”) and its stockholders by
enabling the Company and its Subsidiaries to attract and retain qualified
individuals through opportunities for equity participation in the Company, and
to reward those individuals who contribute to the achievement of the Company’s
economic objectives. This Plan is intended to replace the Northern Technologies
International Corporation Amended and Restated 2007 Stock Incentive Plan (the
“Prior Plan”); provided, however, that awards outstanding under the Prior Plan
as of the Effective Date will remain outstanding in accordance with their terms.
After the Effective Date, no more grants of awards will be made under the Prior
Plan.

 

2.                   Definitions.

 

The following terms will have the meanings set forth below, unless the context
clearly otherwise requires:

 

2.1.             “Adverse Action” means any action or conduct by a Participant
that the Committee, in its sole discretion, determines to be injurious,
detrimental, prejudicial or adverse to the interests of the Company or any
Subsidiary, including: (a) disclosing confidential information of the Company or
any Subsidiary to any person not authorized by the Company or Subsidiary to
receive it, (b) engaging, directly or indirectly, in any commercial activity
that in the judgment of the Committee competes with the business of the Company
or any Subsidiary or (c) interfering with the relationships of the Company or
any Subsidiary and their respective employees, independent contractors,
customers, prospective customers and vendors.

 

2.2.             “Board” means the Board of Directors of the Company.

 

2.3.             “Broker Exercise Notice” means a written notice pursuant to
which a Participant, upon exercise of an Option, irrevocably instructs a broker
or dealer to sell a sufficient number of shares of Common Stock or loan a
sufficient amount of money to pay all or a portion of the exercise price of the
Option and/or any related withholding tax obligations and remit such sums to the
Company and directs the Company to deliver shares of Common Stock to be issued
upon such exercise directly to such broker or dealer or their nominee.

 

2.4.             “Cause” means (a) “Cause” as defined in any Individual
Agreement; or (b) dishonesty, fraud, misrepresentation, embezzlement or other
act of dishonesty with respect to the Company or any Subsidiary, (c) any
unlawful or criminal activity of a serious nature, (d) any intentional and
deliberate breach of a duty or duties that, individually or in the aggregate,
are material in relation to the Participant’s overall duties, or (e) any
material breach of any employment, service, confidentiality or non-compete
agreement entered into with the Company or any Subsidiary.

 

2.5.             “Change in Control” means an event described in Section 14.1 of
this Plan; provided, however, if distribution of an Incentive Award subject to
Section 409A of the Code is triggered by a Change in Control, the term Change in
Control will mean a change in the ownership or effective control of the Company,
or in the ownership of a substantial portion of the assets of the Company, as
defined in Section 409A of the Code and the regulations and rulings issued
thereunder.

 

 

2.6.             “Code” means the Internal Revenue Code of 1986, as amended
(including, when the context requires, all regulations, interpretations and
rulings issued thereunder).

 

2.7.             “Committee” means the group of individuals administering this
Plan, as provided in Section 3 of this Plan.

 

2.8.             “Common Stock” means the common stock of the Company, par value
$0.02 per share, or the number and kind of shares of stock or other securities
into which such Common Stock may be changed in accordance with Section 4.3 of
this Plan.

 

2.9.             “Disability” means, with respect to a Participant who is a
party to an Individual Agreement, which agreement contains a definition of
“disability” or “permanent disability” (or words of like import) for purposes of
termination of employment thereunder by the Company, “disability” or “permanent
disability” as defined in the most recent of such agreements; or in all other
cases, means the disability of the Participant such as would entitle the
Participant to receive disability income benefits pursuant to the long-term
disability plan of the Company or Subsidiary then covering the Participant or,
if no such plan exists or is applicable to the Participant, the permanent and
total disability of the Participant within the meaning of Section 22(e)(3) of
the Code; provided, however, if distribution of an Incentive Award subject to
Section 409A of the Code is triggered by an Eligible Recipient’s Disability,
such term will mean that the Eligible Recipient is disabled as defined by
Section 409A of the Code and the regulations and rulings issued thereunder.

 

2.10.          “Dividend Equivalents” means a credit, made at the discretion of
the Committee, to the account of a Participant in an amount equal to the cash
dividends paid on one share of Common Stock for each share of Common Stock
represented by an Incentive Award held by such Participant, subject to Section
11 of this Plan and any other provision of this Plan and which Dividend
Equivalents may be subject to the same conditions and restrictions as the
Incentive Awards to which they attach and may be settled in the form of cash,
shares of Common Stock, or in any combination of both.

 

2.11.          “Effective Date” means January 18, 2019 or such later date as
this Plan is approved by the Company’s stockholders.

 

2.12.          “Eligible Recipients” means (a) for the purposes of granting
Incentive Stock Options, all employees (including, without limitation, officers
and directors who are also employees) of the Company or any Subsidiary and (b)
for the purposes of granting Non-Statutory Stock Options and other Incentive
Awards, all employees (including, without limitation, officers and directors who
are also employees) of the Company or any Subsidiary and any non-employee
directors, consultants, advisors and independent contractors of the Company or
any Subsidiary; provided, however, that an Eligible Recipient shall not include
any person engaged to provide consulting or advisory services (other than as an
employee or a director) to the Company or any Subsidiary that are in connection
with the offer and sale of the Company’s securities in a capital raising
transaction or directly or indirectly promote or maintain a market for the
Company’s securities.

 

2.13.          “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

 

2.14.          “Fair Market Value” means, with respect to the Common Stock, as
of any date: (a) the mean between the reported high and low sale prices of the
Common Stock as of such date during the regular daily trading session, as
reported on the Nasdaq Global Select Market, Nasdaq Global Market, Nasdaq Stock
Market, the New York Stock Exchange, NYSE American or any other national
securities exchange on which the Common Stock is then listed or quoted (or, if
no shares were traded or quoted on such date, as of the next preceding date on
which there was such a trade or quote); or (b) if the Common Stock is not so
listed, admitted to unlisted trading privileges, or reported on any national
securities exchange, the mean between the reported high and low sale prices as
of such date during the regular daily trading session, as reported by the OTC
Bulletin Board, OTC Markets or other comparable quotation service (or, if no
shares were traded or quoted on such date, as of the next preceding date on
which there was such a trade or quote); or (c) if the Common Stock is not so
listed or reported, such price as the Committee determines in good faith, and
consistent with the definition of “fair market value” under Section 409A of the
Code. If determined by the Committee, such determination will be final,
conclusive and binding for all purposes and on all persons, including the
Company, the stockholders of the Company, the Participants and their respective
successors-in-interest. No member of the Committee will be liable for any
determination regarding the fair market value of the Common Stock that is made
in good faith.

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2.15.          “Incentive Award” means an Option, Stock Appreciation Right,
Restricted Stock Award, Restricted Stock Unit, Performance Award or Other
Stock-Based Award granted to an Eligible Recipient pursuant to this Plan.

 

2.16.          “Incentive Award Agreement” means either: (a) a written or
electronic agreement entered into by the Company and a Participant setting forth
the terms and provisions applicable to an Incentive Award granted under this
Plan, including any amendment or modification thereof, or (b) a written or
electronic statement issued by the Company to a Participant describing the terms
and provisions of an Incentive Award, including any amendment or modification
thereof.

 

2.17.          “Incentive Stock Option” means a right to purchase shares of
Common Stock granted to an Eligible Recipient pursuant to Section 6 of this Plan
that qualifies as an “incentive stock option” within the meaning of Section 422
of the Code.

 

2.18.          “Individual Agreement” means any employment, consulting,
severance or similar agreement between the Participant and the Company or one of
its Subsidiaries.

 

2.19.          “Non-Employee Director” means a member of the Board who is not an
employee of the Company or any of its subsidiaries.

 

2.20.          “Non-Statutory Stock Option” means a right to purchase shares of
Common Stock granted to an Eligible Recipient pursuant to Section 6 of this Plan
that does not qualify as an Incentive Stock Option.

 

2.21.          “Option” means an Incentive Stock Option or a Non-Statutory Stock
Option.

 

2.22.          “Other Stock-Based Award” means an award of shares of Common
Stock granted to an Eligible Recipient pursuant to Section 10 of this Plan.

 

2.23.          “Participant” means an Eligible Recipient who receives one or
more Incentive Awards under this Plan.

 

2.24.          “Performance Award” means a right granted to an Eligible
Recipient pursuant to Section 9 of this Plan to receive an amount of cash, a
number of shares of Common Stock, or a combination of both, contingent upon and
the value of which at the time it is payable is determined as a function of the
extent of the achievement of one or more Performance Criteria during a specified
performance period or the achievement of other objectives during a specified
period.

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2.25.          “Performance Criteria” means the performance criteria that may be
used by the Committee in granting Incentive Awards contingent upon achievement
of performance goals, including, without limitation, net sales; operating
income; income before income taxes; income before interest, taxes, depreciation
and amortization; income before income taxes; income before interest, taxes,
depreciation and amortization and other non-cash items; net income; net income
per share (basic or diluted); profitability as measured by return ratios
(including return on assets, return on equity, return on capital, return on
investment and return on sales); cash flows; market share; cost of sales; sales,
general and administrative expense, cost reduction goals; margins (including one
or more of gross, operating and net income margins); stock price; total return
to stockholders; economic value added; working capital and strategic plan
development and implementation. The Committee may select one criterion or
multiple criteria for measuring performance, and the measurement may be based
upon Company, Subsidiary or business unit performance, either absolute or by
relative comparison to prior periods or other companies or any other external
measure of the selected criteria.

 

2.26.          “Previously Acquired Shares” means shares of Common Stock that
are already owned by the Participant or, with respect to any Incentive Award,
that are to be issued to the Participant upon the grant, exercise or vesting of
such Incentive Award.

 

2.27.          “Prior Plan” means the Northern Technologies International
Corporation Amended and Restated 2007 Stock Incentive Plan.

 

2.28.          “Restricted Stock Award” means an award of shares of Common Stock
granted to an Eligible Recipient pursuant to Section 8 of this Plan that are
subject to restrictions on transferability and a risk of forfeiture imposed by
the provisions of such Section 8.

 

2.29.          “Restricted Stock Unit” means an award denominated in shares of
Common Stock granted to an Eligible Recipient pursuant to Section 8 of this
Plan.

 

2.30.          “Retirement” means termination of employment or service pursuant
to and in accordance with the regular (or, if approved by the Board for purposes
of this Plan, early) retirement/pension plan or practice of the Company or
Subsidiary then covering the Participant, provided that if the Participant is
not covered by any such plan or practice, the Participant will be deemed to be
covered by the Company plan or practice for purposes of this
determination/termination of employment or if the Company does not have any such
retirement/pension plan or practice, service at age 55 or older and completion
of at least 10 years of continuous service.

 

2.31.          “Securities Act” means the Securities Act of 1933, as amended.

 

2.32.          “Separation from Service” has the meaning set forth in Section
12.4(c) of this Plan.

 

2.33.          “Stock Appreciation Right” means a right granted to an Eligible
Recipient pursuant to Section 7 of this Plan to receive a payment from the
Company, in the form of shares of Common Stock, cash or a combination of both,
equal to the difference between the Fair Market Value of one or more shares of
Common Stock and a specified exercise price of such shares.

 

2.34.          “Subsidiary” means any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a significant
equity interest, as determined by the Committee provided the Company has a
“controlling interest” in the Subsidiary as defined in Treas. Reg. Sec.
1.409A-1(b)(5)(iii)(E)(1).

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2.35.          “Tax Date” means the date any withholding tax obligation arises
under the Code for a Participant with respect to an Incentive Award.

 

2.36.          Tax Laws” has the meaning set forth in Section 21.9 of this Plan.

 

3.                   Plan Administration.

 

3.1.             The Committee. This Plan will be administered by the Board or
by a committee of the Board. So long as the Company has a class of its equity
securities registered under Section 12 of the Exchange Act, any committee
administering this Plan will consist solely of two or more members of the Board
who are “non-employee directors” within the meaning of Rule 16b-3 under the
Exchange Act and who are “independent directors” under the Listing Rules of the
Nasdaq Stock Market (or other applicable market or exchange on which the
Company’s Common Stock may be quoted or traded). Such a committee, if
established, will act by majority approval of the members (but may also take
action by the written consent of all of the members of such committee), and a
majority of the members of such a committee will constitute a quorum. As used in
this Plan, “Committee” will refer to the Board or to such a committee, if
established. To the extent consistent with applicable corporate law of the
Company’s jurisdiction of incorporation, the Committee may delegate to any
officers of the Company the duties, power and authority of the Committee under
this Plan pursuant to such conditions or limitations as the Committee may
establish; provided, however, that only the Committee may exercise such duties,
power and authority with respect to Eligible Recipients who are subject to
Section 16 of the Exchange Act. The Committee may exercise its duties, power and
authority under this Plan in its sole and absolute discretion without the
consent of any Participant or other party, unless this Plan specifically
provides otherwise. Each determination, interpretation or other action made or
taken by the Committee pursuant to the provisions of this Plan will be final,
conclusive and binding for all purposes and on all persons, and no member of the
Committee will be liable for any action or determination made in good faith with
respect to this Plan or any Incentive Award granted under this Plan.

 

3.2.             Authority of the Committee.

 

(a)                In accordance with and subject to the provisions of this
Plan, the Committee will have full and exclusive discretionary power and
authority to take such actions as it deems necessary and advisable with respect
to the administration of this Plan, including the following:

 

(i)                 To designate the Eligible Recipients to be selected as
Participants;

 

(ii)              To determine the nature and extent of the Incentive Awards to
be made to each Participant (including the number of shares of Common Stock to
be subject to each Incentive Award, any exercise price, the manner in which
Incentive Awards will vest or become exercisable and whether Incentive Awards
will be granted in tandem with other Incentive Awards) and the form of an
Incentive Award Agreement;

 

(iii)            To determine the time or times when Incentive Awards will be
granted;

 

(iv)             To determine the duration of each Incentive Award;

 

(v)               To determine the terms, restrictions and other conditions to
which the payment or vesting of Incentive Awards may be subject;

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(vi)             To pay the economic value of any Incentive Award in the form of
cash, Common Stock or any combination of both;

 

(vii)          To construe and interpret this Plan and Incentive Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration and in so doing, to correct any defect, omission, or
inconsistency in this Plan or in an Incentive Award Agreement, in a manner and
to the extent it will deem necessary or expedient to make this Plan fully
effective;

 

(viii)        To determine Fair Market Value in accordance with Section 2.14 of
this Plan;

 

(ix)             To amend this Plan or any Incentive Award Agreement, as
provided in this Plan;

 

(x)               To adopt subplans or special provisions applicable to
Incentive Awards regulated by the laws of a jurisdiction other than, and outside
of, the United States, which except as otherwise provided in this Plan, such
subplans or special provisions may take precedence over other provisions of this
Plan;

 

(xi)             To authorize any person to execute on behalf of the Company any
Incentive Award Agreement or any other instrument required to effect the grant
of an Incentive Award previously granted by the Committee;

 

(xii)          To determine whether Incentive Awards will be settled in shares
of Common Stock, cash or in any combination thereof;

 

(xiii)        To determine whether Incentive Awards will be adjusted for
Dividend Equivalents; and

 

(xiv)         To impose such restrictions, conditions or limitations as it
determines appropriate as to the timing and manner of any resales by a
Participant or other subsequent transfers by the Participant of any shares of
Common Stock, including restrictions under an insider trading policy, stock
ownership guidelines, restrictions as to the use of a specified brokerage firm
for such resales or other transfers and other restrictions designed to increase
equity ownership by Participants or otherwise align the interests of
Participants with the Company’s stockholders.

 

(b)                Subject to Section 3.2(d) of this Plan, the Committee will
have the authority under this Plan to amend or modify the terms of any
outstanding Incentive Award in any manner, including, without limitation, the
authority to modify the number of shares of Common Stock or other terms and
conditions of an Incentive Award, extend the term of an Incentive Award,
accelerate the exercisability or vesting or otherwise terminate any restrictions
relating to an Incentive Award, accept the surrender of any outstanding
Incentive Award or, to the extent not previously exercised or vested, authorize
the grant of new Incentive Awards in substitution for surrendered Incentive
Awards; provided, however that the amended or modified terms are permitted by
this Plan as then in effect and that any Participant adversely affected by such
amended or modified terms has consented to such amendment or modification.

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(c)                In the event of (i) any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, extraordinary dividend or
divestiture (including a spin-off) or any other similar change in corporate
structure or shares; (ii) any purchase, acquisition, sale, disposition or
write-down of a significant amount of assets or a significant business; (iii)
any change in accounting principles or practices, tax laws or other such laws or
provisions affecting reported results; (iv) any uninsured catastrophic losses or
extraordinary non-recurring items as described in management’s discussion and
analysis of financial performance appearing in the Company’s annual report to
stockholders for the applicable year; or (v) any other similar change, in each
case with respect to the Company or any other entity whose performance is
relevant to the grant or vesting of an Incentive Award, the Committee (or, if
the Company is not the surviving corporation in any such transaction, the board
of directors of the surviving corporation) may, without the consent of any
affected Participant, amend or modify the vesting criteria (including
Performance Criteria) of any outstanding Incentive Award that is based in whole
or in part on the financial performance of the Company (or any Subsidiary or
division or other subunit thereof) or such other entity so as equitably to
reflect such event, with the desired result that the criteria for evaluating
such financial performance of the Company or such other entity will be
substantially the same (in the sole discretion of the Committee or the board of
directors of the surviving corporation) following such event as prior to such
event; provided, however, that the amended or modified terms are permitted by
this Plan as then in effect.

 

(d)                Notwithstanding any other provision of this Plan other than
Section 4.3, the Committee may not, without prior approval of the Company’s
stockholders, seek to effect any re-pricing of any previously granted,
“underwater” Option or Stock Appreciation Right by: (i) amending or modifying
the terms of the Option or Stock Appreciation Right to lower the exercise price;
(ii) canceling the underwater Option or Stock Appreciation Right in exchange for
(A) cash; (B) replacement Options or Stock Appreciation Rights having a lower
exercise price; or (C) other Incentive Awards; or (iii) repurchasing the
underwater Options or Stock Appreciation Rights and granting new Incentive
Awards under this Plan. For purposes of this Section 3.2(d), an Option or Stock
Appreciation Right will be deemed to be “underwater” at any time when the Fair
Market Value of the Common Stock is less than the exercise price of the Option
or Stock Appreciation Right.

 

(e)                In addition to the authority of the Committee under Section
3.2(a) of this Plan and notwithstanding any other provision of this Plan, the
Committee may, in its sole discretion, amend the terms of this Plan or Incentive
Awards with respect to Participants resident outside of the United States or
employed by a non-U.S. Subsidiary in order to comply with local legal
requirements, to otherwise protect the Company’s or Subsidiary’s interests, or
to meet objectives of this Plan, and may, where appropriate, establish one or
more sub-plans (including the adoption of any required rules and regulations)
for the purposes of qualifying for preferred tax treatment under foreign tax
laws. The Committee shall have no authority, however, to take action pursuant to
this Section 3.2(e) of this Plan: (i) to reserve shares of Common Stock or grant
Incentive Awards in excess of the limitations provided in Section 4.1 of this
Plan; (ii) to effect any re-pricing in violation of Section 3.2(d) of this Plan;
(iii) to grant Options or Stock Appreciation Rights having an exercise price
less than 100% of the Fair Market Value of one share of Common Stock on the date
of grant in violation of Section 6.2 or 7.2 of this Plan, as the case may be; or
(iv) for which stockholder approval would then be required pursuant to Section
422 of the Code or the Listing Rules of the Nasdaq Stock Market (or other
applicable market or exchange on which the Company’s Common Stock may be quoted
or traded).

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4.                   Shares Available for Issuance.

 

4.1.             Maximum Number of Shares Available; Incentive Award
Limitations. Subject to adjustment as provided in Section 4.3 of this Plan, the
maximum number of shares of Common Stock that will be available for issuance
under this Plan will be the sum of:

 

(a)                400,000;

 

(b)                the number of shares of Common Stock subject to Incentive
Awards outstanding under the Prior Plan as of the Effective Date but only to the
extent that such outstanding Incentive Awards are forfeited, expire or otherwise
terminate without the issuance of such shares of Common Stock;

 

(c)                the number of shares issued or Incentive Awards granted under
this Plan in connection with the settlement, assumption or substitution of
outstanding awards or obligations to grant future awards as a condition of the
Company and/or any Subsidiary(ies) acquiring, merging or consolidating with
another entity; and

 

(d)                the number of shares that are unallocated and available for
grant under a stock plan assumed by the Company or any Subsidiary(ies) in
connection with the merger, consolidation, or acquisition of another entity by
the Company and/or any of its Subsidiaries, based on the applicable exchange
ratio and other transaction terms, but only to the extent that such shares may
be utilized by the Company or its Subsidiaries following the transaction
pursuant to the Listing Rules of the Nasdaq Stock Market (or other applicable
market or exchange on which the Company’s Common Stock may be quoted or traded).

 

Notwithstanding any other provisions of this Plan to the contrary, (i) no more
than 400,000 shares of Common Stock may be issued pursuant to the exercise of
Incentive Stock Options granted under this Plan; (ii) no more than 200,000
shares of Common Stock may be issued or issuable under this Plan in connection
with the grant of Incentive Awards, other than Options or Stock Appreciation
Rights; and (iii) no more than 75,000 shares of Common Stock may be granted to
any Non-Employee Director in any one calendar year; provided that such limit
will not apply to any election of a Non-Employee Director to receive shares of
Common Stock in lieu of all or a portion of any annual Board, committee, chair
or other retainer, or any meeting fees otherwise payable in cash. All of the
foregoing share limits are subject, in each case, to adjustment as provided in
Section 4.3 of this Plan. The limit in clause (ii) will not apply, however, to
the extent Incentive Awards are granted as a result of the Company’s assumption
or substitution of like awards issued by any acquired, merged or consolidated
entity pursuant to the applicable transaction terms, nor will any Incentive
Stock Options issued in any such assumption or substitution pursuant to
applicable provisions of the Code count towards the limit in clause (i).

 

4.2.             Accounting for Incentive Awards. Shares of Common Stock that
are issued under this Plan or that are subject to outstanding Incentive Awards
will be applied to reduce the maximum number of shares of Common Stock remaining
available for issuance under this Plan only to the extent they are used;
provided, however, that; (a) any shares which would have been issued upon any
exercise of an Option but for the fact that the exercise price was paid by a
“net exercise” pursuant to Section 6.4(b) of this Plan or the tender or
attestation as to ownership of Previously Acquired Shares pursuant to Section
6.4(a) of this Plan will not again become available for issuance under this
Plan; and (b) the full number of shares of Common Stock subject to a Stock
Appreciation Right granted that are settled by the issuance of shares of Common
Stock will be counted against the shares authorized for issuance under this
Plan, regardless of the number of shares actually issued upon settlement of such
Stock Appreciation Right, and will not again become available for issuance under
this Plan. Furthermore, any shares of Common Stock withheld to satisfy tax
withholding obligations on Incentive Awards issued under this Plan, any shares
of Common Stock withheld to pay the exercise price of Incentive Awards under
this Plan and any shares of Common Stock not issued or delivered as a result of
the “net exercise” of an outstanding Option pursuant to Section 6.4 or
settlement of a Stock Appreciation Right in shares of Common Stock pursuant to
Section 7.1 will be counted against the shares of Common Stock authorized for
issuance under this Plan and will not be available again for grant under this
Plan. Any shares of Common Stock repurchased by the Company on the open market
using the proceeds from the exercise of an Incentive Award will not increase the
number of shares of Common Stock available for future grant of Incentive Awards.
Any shares of Common Stock related to Incentive Awards granted under this Plan
or under the Prior Plan that terminate by expiration, forfeiture, cancellation
or otherwise without the issuance of the shares of Common Stock, or are settled
in cash in lieu of shares of Common Stock, or are exchanged with the Committee’s
permission, prior to the issuance of shares of Common Stock, for Incentive
Awards not involving shares of Common Stock, will be available again for grant
under this Plan and correspondingly increase the total number of shares of
Common Stock available for issuance under this Plan under Section 4.1.

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4.3.             Adjustments to Shares and Incentive Awards. In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a spin-off) or any
other similar change in the corporate structure or shares of the Company, the
Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) will make
appropriate adjustment (which determination will be conclusive) as to the number
and kind of securities or other property (including cash) available for issuance
or payment under this Plan and, in order to prevent dilution or enlargement of
the rights of Participants, (a) the number and kind of securities or other
property (including cash) subject to outstanding Incentive Awards, and (b) the
exercise price of outstanding Options and Stock Appreciation Rights.

 

5.                   Participation.

 

Participants in this Plan will be those Eligible Recipients who, in the judgment
of the Committee, have contributed, are contributing or are expected to
contribute to the achievement of economic objectives of the Company or its
Subsidiaries. Eligible Recipients may be granted from time to time one or more
Incentive Awards, singly or in combination or in tandem with other Incentive
Awards, as may be determined by the Committee in its sole discretion. Incentive
Awards will be deemed to be granted as of the date specified in the grant
resolution of the Committee, which date will be the date of any related
agreement with the Participant.

 

6.                   Options.

 

6.1.             Grant. An Eligible Recipient may be granted one or more Options
under this Plan, and such Options will be subject to such terms and conditions,
consistent with the other provisions of this Plan, as may be determined by the
Committee in its sole discretion. The Committee may designate whether an Option
is to be considered an Incentive Stock Option or a Non-Statutory Stock Option.
To the extent that any Incentive Stock Option (or portion thereof) granted under
this Plan ceases for any reason to qualify as an “incentive stock option” for
purposes of Section 422 of the Code, such Incentive Stock Option (or portion
thereof) will continue to be outstanding for purposes of this Plan but will
thereafter be deemed to be a Non-Statutory Stock Option. Options may be granted
to an Eligible Recipient for services provided to a Subsidiary only if, with
respect to such Eligible Recipient, the underlying shares of Common Stock
constitute “service recipient stock” within the meaning of Treas. Reg. Section
1.409A-1(b)(5)(iii).

 9 

 

6.2.             Exercise Price. The per share price to be paid by a Participant
upon exercise of an Option will be determined by the Committee in its discretion
at the time of the Option grant, provided that such price will not be less than
100% of the Fair Market Value of one share of Common Stock on the date of grant
(or 110% of the Fair Market Value of one share of Common Stock on the date of
grant of an Incentive Stock Option if, at the time the Incentive Stock Option is
granted, the Participant owns, directly or indirectly, more than 10% of the
total combined voting power of all classes of stock of the Company or any parent
or subsidiary corporation of the Company). Notwithstanding the foregoing, to the
extent that Options are granted under this Plan as a result of the Company’s
assumption or substitution of options issued by any acquired, merged or
consolidated entity, the exercise price for such Options shall be the price
determined by the Committee pursuant to the conversion terms applicable to the
transaction.

 

6.3.             Exercisability and Duration. An Option will become exercisable
at such times and in such installments and upon such terms and conditions as may
be determined by the Committee in its sole discretion at the time of grant
(including without limitation (a) the achievement of one or more of the
Performance Criteria; and/or that (b) the Participant remain in the continuous
employ or service of the Company or a Subsidiary for a certain period);
provided, however, that no Option may be exercisable after 10 years from its
date of grant (five years from its date of grant in the case of an Incentive
Stock Option if, at the time the Incentive Stock Option is granted, the
Participant owns, directly or indirectly, more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company). Notwithstanding the foregoing, if the exercise of
an Option that is exercisable in accordance with its terms is prevented by the
provisions of Section 16 of this Plan, the Option will remain exercisable until
thirty (30) days after the date such exercise first would no longer be prevented
by such provisions, but in any event no later than the expiration date of such
Option.

 

6.4.             Payment of Exercise Price.

 

(a)                The total purchase price of the shares to be purchased upon
exercise of an Option will be paid entirely in cash (including check, bank draft
or money order); provided, however, that the Committee, in its sole discretion
and upon terms and conditions established by the Committee, may allow such
payments to be made, in whole or in part, by (i) tender of a Broker Exercise
Notice; (ii) by tender, or attestation as to ownership, of Previously Acquired
Shares that are acceptable to the Committee; (iii) by a “net exercise” of the
Option (as further described in paragraph (b), below); or (iv) by a combination
of such methods. Notwithstanding any other provision of this Plan to the
contrary, no Participant who is a director or an “executive officer” of the
Company within the meaning of Section 13(k) of the Exchange Act will be
permitted to make payment with respect to any Incentive Awards granted under
this Plan, or continue any extension of credit with respect to such payment with
a loan from the Company or a loan arranged by the Company in violation of
Section 13(k) of the Exchange Act.

 

(b)                In the case of a “net exercise” of an Option, the Company
will not require a payment of the exercise price of the Option from the
Participant but will reduce the number of shares of Common Stock issued upon the
exercise by the largest number of whole shares that has a Fair Market Value on
the exercise date that does not exceed the aggregate exercise price for the
shares exercised under this method. Shares of Common Stock will no longer be
outstanding under an Option (and will therefore not thereafter be exercisable)
following the exercise of such Option to the extent of (i) shares used to pay
the exercise price of an Option under the “net exercise,” (ii) shares actually
delivered to the Participant as a result of such exercise and (iii) any shares
withheld for purposes of tax withholding pursuant to Section 13.1 of this Plan.

 10 

 

(c)                Previously Acquired Shares tendered or covered by an
attestation as payment of an Option exercise price will be valued at their Fair
Market Value on the exercise date.

 

6.5.             Manner of Exercise. An Option may be exercised by a Participant
in whole or in part from time to time, subject to the conditions contained in
this Plan and in the Incentive Award Agreement relating to such Option, by
delivery in person, by facsimile or electronic transmission or through the mail
of written notice of exercise to the Company at its principal executive office
in Circle Pines, Minnesota and by paying in full the total exercise price for
the shares of Common Stock to be purchased in accordance with Section 6.4 of
this Plan.

 

6.6.             Early Exercise. An Option may, but need not, include a
provision whereby the Participant may elect at any time before the Participant’s
employment or service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased shall be subject to a repurchase option in favor of
the Company and to any other restriction the Committee determines to be
appropriate.

 

7.                   Stock Appreciation Rights.

 

7.1.             Grant. An Eligible Recipient may be granted one or more Stock
Appreciation Rights under this Plan, and such Stock Appreciation Rights will be
subject to such terms and conditions, consistent with the other provisions of
this Plan, as may be determined by the Committee in its sole discretion. The
Committee will have the sole discretion to determine the form in which payment
of the economic value of Stock Appreciation Rights will be made to a Participant
(i.e., cash, shares of Common Stock or any combination thereof) or to consent to
or disapprove the election by a Participant of the form of such payment. Stock
Appreciation Rights may be granted to an Eligible Recipient for services
provided to a Subsidiary only if, with respect to such Eligible Recipient, the
underlying shares of Common Stock constitute “service recipient stock” within
the meaning of Treas. Reg. Section 1.409A-1(b)(5)(iii).

 

7.2.             Exercise Price. The exercise price of a Stock Appreciation
Right will be determined by the Committee, in its discretion, at the date of
grant but may not be less than 100% of the Fair Market Value of one share of
Common Stock on the date of grant, except as provided in Section 7.4 of this
Plan. Notwithstanding the foregoing, to the extent that Stock Appreciation
Rights are granted under this Plan as a result of the Company’s assumption or
substitution of stock appreciation rights issued by any acquired, merged or
consolidated entity, the exercise price for such Stock Appreciation Rights shall
be the price determined by the Committee pursuant to the conversion terms
applicable to the transaction.

 

7.3.             Exercisability and Duration. A Stock Appreciation Right will
become exercisable at such time and in such installments as may be determined by
the Committee in its sole discretion at the time of grant; provided, however,
that no Stock Appreciation Right may be exercisable after 10 years from its date
of grant. A Stock Appreciation Right will be exercised by giving notice in the
same manner as for Options, as set forth in Section 6.5 of this Plan.
Notwithstanding the foregoing, if the exercise of a Stock Appreciation Right
that is exercisable in accordance with its terms is prevented by the provisions
of Section 16 of this Plan, the Stock Appreciation Right will remain exercisable
until thirty (30) days after the date such exercise first would no longer be
prevented by such provisions, but in any event no later than the expiration date
of such Stock Appreciation Right.

 11 

 

7.4.             Grants in Tandem with Options. Stock Appreciation Rights may be
granted alone or in addition to other Incentive Awards, or in tandem with an
Option, either at the time of grant of the Option or at any time thereafter
during the term of the Option. A Stock Appreciation Right granted in tandem with
an Option shall cover the same number of shares of Common Stock as covered by
the Option (or such lesser number as the Committee may determine), shall be
exercisable at such time or times and only to the extent that the related Option
is exercisable, have the same term as the Option and shall have an exercise
price equal to the exercise price for the Option. Upon the exercise of a Stock
Appreciation Right granted in tandem with an Option, the Option shall be
canceled automatically to the extent of the number of shares covered by such
exercise; conversely, upon exercise of an Option having a related Stock
Appreciation Right, the Stock Appreciation Right shall be canceled automatically
to the extent of the number of shares covered by the Option exercise.

 

8.                   Restricted Stock Awards and Restricted Stock Units.

 

8.1.             Grant. An Eligible Recipient may be granted one or more
Restricted Stock Awards or Restricted Stock Units under this Plan, and such
Incentive Awards will be subject to such terms and conditions, consistent with
the other provisions of this Plan, as may be determined by the Committee in its
sole discretion. Restricted Stock Units will be similar to Restricted Stock
Awards except that no shares of Common Stock are actually awarded to the
Participant on the date of grant of the Restricted Stock Units and will be
denominated in shares of Common Stock but paid in cash, shares of Common Stock
or a combination of cash and shares of Common Stock as the Committee, in its
sole discretion, will determine, and as provided in the Incentive Award
Agreement. The Committee may impose such restrictions or conditions, not
inconsistent with the provisions of this Plan, to the vesting of such Restricted
Stock Awards or Restricted Stock Units as it deems appropriate, including,
without limitation, (a) the achievement of one or more of the Performance
Criteria; and/or that (b) the Participant remain in the continuous employ or
service of the Company or a Subsidiary for a certain period.

 

8.2.             Rights as a Stockholder; Transferability. Except as provided in
Sections 8.1, 8.3, 8.4 and 15.3 of this Plan, a Participant will have all
voting, dividend, liquidation and other rights with respect to shares of Common
Stock issued to the Participant as a Restricted Stock Award under this Section 8
upon the Participant becoming the holder of record of such shares as if such
Participant were a holder of record of shares of unrestricted Common Stock. A
Participant will have no voting rights to any Restricted Stock Units granted
hereunder.

 

8.3.             Dividends and Distributions.

 

(a)                Unless the Committee determines otherwise in its sole
discretion (either in an Incentive Award Agreement at the time of grant or at
any time after the grant of the Restricted Stock Award), any dividends or
distributions (including regular quarterly cash dividends) paid with respect to
shares of Common Stock subject to the unvested portion of a Restricted Stock
Award will be subject to the same restrictions as the shares to which such
dividends or distributions relate. In the event the Committee determines not to
pay such dividends or distributions currently, the Committee will determine in
its sole discretion whether any interest will be paid on such dividends or
distributions. In addition, the Committee in its sole discretion may require
such dividends and distributions to be reinvested (and in such case the
Participants consent to such reinvestment) in shares of Common Stock that will
be subject to the same restrictions as the shares to which such dividends or
distributions relate.

 

(b)                Unless the Committee determines otherwise in its sole
discretion (either in a Participant’s Incentive Award Agreement or at any time
after the grant of the Restricted Stock Unit), to the extent permitted or
required by applicable law, as determined by the Committee, prior to settlement
or forfeiture, any Restricted Stock Units awarded under this Plan may, at the
Committee’s discretion, carry with it a right to Dividend Equivalents. Such
right entitles the Participant to be credited with an amount equal to all cash
dividends paid on one share of Common Stok while the Restricted Stock Unit is
outstanding. Dividend Equivalents may be converted into additional Restricted
Stock Units and may (and will, to the extent required below) be made subject to
the same conditions and restricted as the Restricted Stock Units to which they
attach. Settlement of Dividend Equivalents may be made in the form of cash, in
the form of shares of Common Stock, or in a combination of both. Dividend
Equivalents as to Restricted Stock Units will be subject to forfeiture and
termination to the same extent as the corresponding Restricted Stock Units as to
which the Dividend Equivalents relate. In no event will Participants holding
Restricted Stock Units receive any Dividend Equivalents on such Restricted Stock
Units until the vesting provisions of such Restricted Stock Units lapse.

 12 

 

8.4.             Enforcement of Restrictions on Restricted Stock Awards. To
enforce the restrictions referred to in this Section 8, the Committee may place
a legend on the stock certificates referring to such restrictions and may
require the Participant, until the restrictions have lapsed, to keep the stock
certificates, together with duly endorsed stock powers, in the custody of the
Company or its transfer agent, or to maintain evidence of stock ownership,
together with duly endorsed stock powers, in a certificateless book-entry stock
account with the Company’s transfer agent. Alternatively, Restricted Stock
Awards may be held in non-certificated form pursuant to such terms and
conditions as the Company may establish with its registrar and transfer agent or
any third-party administrator designated by the Company to hold Restricted Stock
Awards on behalf of Participants.

 

9.                   Performance Awards.

 

An Eligible Recipient may be granted one or more Performance Awards under this
Plan, and such Performance Awards will be subject to such terms and conditions,
if any, consistent with the other provisions of this Plan, as may be determined
by the Committee in its sole discretion, including, but not limited to, the
achievement of one or more of the Performance Criteria; provided, however, that
in all cases payment of the Performance Award will be made within two and
one-half months following the end of the Eligible Recipient’s tax year during
which receipt of the Performance Award is no longer subject to a “substantial
risk of forfeiture” within the meaning of Section 409A of the Code, except to
the extent an Eligible Recipient has properly elected to defer the income that
may be attributable to a Performance Award under a Company or Subsidiary
deferred compensation plan.

 

10.               Other Stock-Based Awards.

 

An Eligible Recipient may be granted one or more Other Stock-Based Awards under
this Plan, and such Other-Stock Based Awards will be subject to such terms and
conditions, consistent with the other provisions of this Plan, as may be
determined by the Committee in its sole discretion, not otherwise described by
the terms of this Plan (including the grant or offer for sale of unrestricted
shares of Common Stock) in such amounts and subject to such terms and conditions
as the Committee will determine. Such Other-Stock Based Awards may involve the
transfer of actual shares of Common Stock to Participants as a bonus or in lieu
of obligations to pay cash or deliver other property under this Plan or under
other plans or compensatory arrangements, or payment in cash or otherwise of
amounts based on the value of shares of Common Stock, and may include Incentive
Awards designed to comply with or take advantage of the applicable local laws of
jurisdictions other than the United States; provided, however, that in all cases
payment of the Other Stock-Based Award will be made within two and one-half
months following the end of the Eligible Recipient’s tax year during which
receipt of the Other Stock-Based Award is no longer subject to a “substantial
risk of forfeiture” within the meaning of Section 409A of the Code, except to
the extent an Eligible Recipient has properly elected to defer the income that
may be attributable to an Other Stock-Based Award under a Company or Subsidiary
deferred compensation plan.

 13 

 

11.               Dividend Equivalents

 

Subject to the provisions of this Plan and any Incentive Award Agreement, any
Participant selected by the Committee may be granted Dividend Equivalents based
on the dividends declared on shares of Common Stock that are subject to any
Incentive Award, to be credited as of dividend payment dates, during the period
between the date the Incentive Award is granted and the date the Incentive Award
is exercised, vests, settles, is paid or expires, as determined by the
Committee. Such Dividend Equivalents will be converted to cash or additional
shares of Common Stock by such formula and at such time and subject to such
limitations as may be determined by the Committee and the Committee may provide
that such amounts (if any) will be deemed to have been reinvested in additional
shares of Common Stock or otherwise reinvested. Notwithstanding the foregoing,
the Committee may not grant Dividend Equivalents based on the dividends declared
on shares of Common Stock that are subject to an Option or Stock Appreciation
Right; and further, no dividends or Dividend Equivalents will be paid out with
respect to any unvested Incentive Awards, including Performance Awards.

 

12.               Effect of Termination of Employment or Other Service. The
following provisions shall apply upon termination of a Participant’s employment
or other service with the Company and all Subsidiaries, unless otherwise
expressly provided by the Committee in its sole discretion in an Incentive Award
Agreement or the terms of an Individual Agreement or determined by the Committee
pursuant to Section 12.3 of this Plan.

 

12.1.          Termination Due to Death, Disability or Retirement. In the event
a Participant’s employment or other service with the Company and all
Subsidiaries is terminated by reason of death, Disability or Retirement:

 

(a)                All outstanding Options and Stock Appreciation Rights then
held by the Participant will, to the extent exercisable as of such termination,
remain exercisable in full for a period of twelve (12) months after such
termination (but in no event after the expiration date of any such Option or
Stock Appreciation Right). Options and Stock Appreciation Rights not exercisable
as of such termination will be forfeited and terminate.

 

(b)                All Restricted Stock Awards then held by the Participant that
have not vested as of such termination will be terminated and forfeited; and

 

(c)                All outstanding but unpaid and non-vested Restricted Stock
Units, Performance Awards and Other Stock-Based Awards then held by the
Participant will be terminated and forfeited.

 

12.2.          Termination for Reasons Other than Death, Disability or
Retirement. In the event a Participant’s employment or other service is
terminated with the Company and all Subsidiaries for any reason other than
death, Disability or Retirement, or a Participant is in the employ or service of
a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless
the Participant continues in the employ or service of the Company or another
Subsidiary):

 

(a)                All outstanding Options and Stock Appreciation Rights then
held by the Participant will, to the extent exercisable as of such termination,
remain exercisable in full for a period of three (3) months after such
termination (but in no event after the expiration date of any such Option or
Stock Appreciation Right). Options and Stock Appreciation Rights not exercisable
as of such termination will be forfeited and terminate;

 14 

 

(b)                All Restricted Stock Awards then held by the Participant that
have not vested as of such termination will be terminated and forfeited; and

 

(c)                All outstanding but unpaid and non-vested Restricted Stock
Units, Performance Awards and Other Stock-Based Awards then held by the
Participant will be terminated and forfeited.

 

12.3.          Modification of Rights Upon Termination. Notwithstanding the
other provisions of this Section 12, upon a Participant’s termination of
employment or other service with the Company and all Subsidiaries, the Committee
may, in its sole discretion (which may be exercised at any time on or after the
date of grant, including following such termination), except as provided in
clause (ii), below, cause Options or Stock Appreciation Rights (or any part
thereof) then held by such Participant to terminate, become or continue to
become exercisable and/or remain exercisable following such termination of
employment or service (but not beyond the earlier of the original maximum term
of such Option or Stock Appreciation Right or ten (10) years from the original
date of grant of such Option or Stock Appreciation Right), and Restricted Stock
Awards, Restricted Stock Units, Performance Awards or Other Stock-Based Awards
then held by such Participant to terminate, vest and/or continue to vest or
become free of restrictions and conditions to payment, as the case may be,
following such termination of employment or service, in each case in the manner
determined by the Committee; and (ii) any such action adversely affecting any
outstanding Incentive Award will not be effective without the consent of the
affected Participant (subject to the right of the Committee to take whatever
action it deems appropriate under Sections 3.2(c), 4.3 and 14 of this Plan).

 

12.4.          Determination of Termination of Employment or Other Service.

 

(a)                The change in a Participant’s status from that of an employee
of the Company or any Subsidiary to that of a non-employee consultant, director
or advisor of the Company or any Subsidiary will, for purposes of this Plan, be
deemed to result in a termination of such Participant’s employment with the
Company and its Subsidiaries, unless the Committee otherwise determines in its
sole discretion.

 

(b)                The change in a Participant’s status from that of a
non-employee consultant, director or advisor of the Company or any Subsidiary to
that of an employee of the Company or any Subsidiary will not, for purposes of
this Plan, be deemed to result in a termination of such Participant’s service as
a non-employee consultant, director or advisor with the Company and its
Subsidiaries, and such Participant will thereafter be deemed to be an employee
of the Company or its Subsidiaries until such Participant’s employment or
service is terminated, in which event such Participant will be governed by the
provisions of this Plan relating to termination of employment or service
(subject to paragraph (a), above).

 

(c)                Unless the Committee otherwise determines in its sole
discretion, a Participant’s employment or other service will, for purposes of
this Plan, be deemed to have terminated on the date recorded on the personnel or
other records of the Company or the Subsidiary for which the Participant
provides employment or other service, as determined by the Committee in its sole
discretion based upon such records; provided, however, if distribution or
forfeiture of an Incentive Award subject to Section 409A of the Code is
triggered by a termination of a Participant’s employment or other service, such
termination must also constitute a “separation from service” within the meaning
of Section 409A of the Code (a “Separation from Service”) and a Separation from
Service shall constitute a termination of employment or other service.

 15 

 

12.5.          Effect of Actions Constituting Cause or Adverse Action.
Notwithstanding anything in this Plan to the contrary and in addition to the
other rights of the Committee under this Section 12, if a Participant is
determined by the Committee, acting in its sole discretion, to have taken any
action that would constitute Cause or an Adverse Action during or within one (1)
year after the termination of employment or other service with the Company or a
Subsidiary, irrespective of whether such action or the Committee’s determination
occurs before or after termination of such Participant’s employment or other
service with the Company or any Subsidiary and irrespective of whether or not
the Participant was terminated as a result of such Cause or Adverse Action, (a)
all rights of the Participant under this Plan and any Incentive Award Agreements
then held by the Participant will terminate and be forfeited without notice of
any kind, and (b) the Committee in its sole discretion will have the authority
to rescind the exercise, vesting or issuance of, or payment in respect of, any
Incentive Awards of the Participant that were exercised, vested or issued, or as
to which such payment was made, and to require the Participant to pay to the
Company, within ten (10) days of receipt from the Company of notice of such
rescission, any amount received or the amount of any gain realized as a result
of such rescinded exercise, vesting, issuance or payment (including any
dividends paid or other distributions made with respect to any shares subject to
any Incentive Award). The Company may defer the exercise of any Option or Stock
Appreciation Right for a period of up to six (6) months after receipt of the
Participant’s written notice of exercise or the issuance of share certificates
upon the vesting of any Incentive Award for a period of up to six (6) months
after the date of such vesting in order for the Committee to make any
determination as to the existence of Cause or an Adverse Action. The Company
will be entitled to withhold and deduct from future wages of the Participant (or
from other amounts that may be due and owing to the Participant from the Company
or a Subsidiary) or make other arrangements for the collection of all amounts
necessary to satisfy such payment obligations. Unless otherwise provided by the
Committee in an Incentive Award Agreement, this Section 12.5 will not apply to
any Participant following a Change in Control.

 

12.6.          Forfeiture of Incentive Awards. Notwithstanding anything in this
Plan to the contrary and in addition to the other rights of the Committee under
this Section 12, if the Company is required to prepare an accounting restatement
due to the material noncompliance of the Company, as a result of misconduct,
with any financial reporting requirement under the securities laws, then any
Participant who is one of the individuals subject to automatic forfeiture under
Section 304 of the Sarbanes-Oxley Act of 2002 will reimburse the Company for the
amount of any Incentive Award received by such individual under this Plan during
the 12-month period following the first public issuance or filing with the
Securities and Exchange Commission, as the case may be, of the financial
document embodying such financial reporting requirement. The Company also may
seek to recover the amount of any Incentive Award received as required by the
provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or
any other clawback, forfeiture or recoupment provision required by applicable
law or under the requirements of any stock exchange or market upon which the
shares of Common Stock are then listed or traded. In addition, all Incentive
Awards under this Plan will be subject to forfeiture or other penalties pursuant
to any clawback or forfeiture policy of the Company, as in effect from time to
time, and such forfeiture and/or penalty conditions or provisions as determined
by the Committee.

 

13.               Payment of Withholding Taxes.

 

13.1.          General Rules. The Company is entitled to (a) withhold and deduct
from future wages of the Participant (or from other amounts that may be due and
owing to the Participant from the Company or a Subsidiary), or make other
arrangements for the collection of, all legally required amounts necessary to
satisfy any and all federal, foreign, state and local withholding and
employment-related tax requirements attributable to an Incentive Award,
including, without limitation, the grant, exercise or vesting of, or payment of
dividends with respect to, an Incentive Award or a disqualifying disposition of
stock received upon exercise of an Incentive Stock Option; (b) withhold cash
paid or payable or shares of Common Stock from the shares issued or otherwise
issuable to the Participant in connection with an Incentive Award; or (c)
require the Participant promptly to remit the amount of such withholding to the
Company before taking any action, including issuing any shares of Common Stock,
with respect to an Incentive Award. Shares of Common Stock issued or otherwise
issuable to the Participant in connection with an Incentive Award that gives
rise to tax withholding obligations that are withheld for purposes of satisfying
the Participant’s withholding or employment-related tax obligation will be
valued at their Fair Market Value on the Tax Date. When withholding for taxes is
effected under this Plan, it shall be withheld only up to an amount of tax
withholding based on the maximum statutory tax rates in the Participant’s
applicable tax jurisdictions or such other rate that will not trigger a negative
accounting impact on the Company.

 16 

 

13.2.          Special Rules. The Committee may, in its sole discretion and upon
terms and conditions established by the Committee, permit or require a
Participant to satisfy, in whole or in part, any withholding or
employment-related tax obligation described in Section 13.1 of this Plan by
withholding shares of Common Stock underlying an Incentive Award, by electing to
tender, or by attestation as to ownership of, Previously Acquired Shares, by
delivery of a Broker Exercise Notice or a combination of such methods. For
purposes of satisfying a Participant’s withholding or employment-related tax
obligation, shares of Common Stock withheld by the Company or Previously
Acquired Shares tendered or covered by an attestation will be valued at their
Fair Market Value on the Tax Date.

 

14.               Change in Control.

 

14.1.          Definition of Change in Control. Unless otherwise provided in an
Incentive Award Agreement or Individual Agreement, a “Change in Control” shall
be deemed to have occurred if the event set forth in any one of the following
clauses shall have occurred. For purposes of this Section 14.1, a “Change in
Control” of the Company will mean (a) the sale, lease, exchange or other
transfer of substantially all of the assets of the Company (in one transaction
or in a series of related transaction) to a person or entity that is not
controlled, directly or indirectly, by the Company, (b) a merger or
consolidation to which the Company is a party if the stockholders of the Company
immediately prior to effective date of such merger or consolidation do not have
“beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act)
immediately following the effective date of such merger or consolidation of more
than 80% of the combined voting power of the surviving corporation’s outstanding
securities ordinarily having the right to vote at elections of directors, or (c)
a change in control of the Company of a nature that would be required to be
reported pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the
Company is then subject to such reporting requirements, including, without
limitation, such time as (i) any person becomes, after the effective date of
this Plan, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of 40% or more of the combined voting power of the
Company’s outstanding securities ordinarily having the right to vote at
elections of directors, or (ii) individuals who constitute the Board on the
effective date of this Plan cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the effective date of this Plan whose election, or nomination for election by
the Company’s stockholders, was approved by a vote of at least a majority of the
directors comprising the Board on the effective date of this Plan will, for
purposes of this clause (ii), be considered as though such persons were a member
of the Board on the Effective Date of this Plan.

 17 

 

14.2.          Acceleration of Vesting. Without limiting the authority of the
Committee under Sections 3.2 and 4.3 of this Plan, if a Change in Control of the
Company occurs, then, if approved by the Committee in its sole discretion either
in an Incentive Award Agreement at the time of grant or at any time after the
grant of an Incentive Award: (a) all outstanding Options and Stock Appreciation
Rights will become immediately exercisable in full and will remain exercisable
in accordance with their terms, regardless of whether the Participants to whom
such Options or Stock Appreciation Rights have been granted remain in the employ
or service of the Company or any Subsidiary; (b) all outstanding Restricted
Stock Awards will become immediately fully vested and non-forfeitable; and (c)
all outstanding Restricted Stock Units, Performance Awards and Other Stock-Based
Awards then held by the Participant will vest and/or continue to vest in the
manner determined by the Committee and set forth in the Incentive Award
Agreement evidencing such Restricted Stock Units, Performance Awards and Other
Stock-Based Awards.

 

14.3.          Cash Payment. In connection with a Change in Control, the
Committee in its sole discretion, either in an Incentive Award Agreement at the
time of grant of an Incentive Award or at any time after the grant of such an
Incentive Award, may determine that any or all outstanding Incentive Awards
granted under the Plan, whether or not exercisable or vested, as the case may
be, will be canceled and terminated and that in connection with such
cancellation and termination the holder of such Incentive Award will receive for
each share of Common Stock subject to such Incentive Award a cash payment (or
the delivery of shares of stock, other securities or a combination of cash,
stock and securities with a fair market value (as determined by the Committee in
good faith) equivalent to such cash payment) equal to the difference, if any,
between the consideration received by stockholders of the Company in respect of
a share of Common Stock in connection with such Change in Control and the
purchase price per share, if any, under the Incentive Award, multiplied by the
number of shares of Common Stock subject to such Incentive Award (or in which
such Incentive Award is denominated); provided, however, that if such product is
zero ($0) or less or to the extent that the Incentive Award is not then
exercisable, the Incentive Award may be canceled and terminated without payment
therefor. If any portion of the consideration pursuant to a Change in Control
may be received by holders of shares of Common Stock on a contingent or delayed
basis, the Committee may, in its sole discretion, determine the fair market
value per share of such consideration as of the time of the Change in Control on
the basis of the Committee’s good faith estimate of the present value of the
probable future payment of such consideration. Notwithstanding the foregoing,
any shares of Common Stock issued pursuant to an Incentive Award that
immediately prior to the effectiveness of the Change in Control are subject to
no further restrictions pursuant to the Plan or an Incentive Award Agreement
(other than pursuant to the securities laws) will be deemed to be outstanding
shares of Common Stock and receive the same consideration as other outstanding
shares of Common Stock in connection with the Change in Control.

 

14.4.          Limitation on Change in Control Payments. Notwithstanding
anything in Section 14.2 or 14.3 of this Plan to the contrary, if, with respect
to a Participant, the acceleration of the vesting of an Incentive Award as
provided in Section 14.2 of this Plan or the payment of cash in exchange for all
or part of an Incentive Award as provided in Section 14.3 of this Plan (which
acceleration or payment could be deemed a “payment” within the meaning of
Section 280G(b)(2) of the Code), together with any other “payments” that such
Participant has the right to receive from the Company or any corporation that is
a member of an “affiliated group” (as defined in Section 1504(a) of the Code
without regard to Section 1504(b) of the Code) of which the Company is a member,
would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the
Code), then the “payments” to such Participant pursuant to Section 14.2 or 14.3
of this Plan will be reduced to the largest amount as will result in no portion
of such “payments” being subject to the excise tax imposed by Section 4999 of
the Code; provided, that such reduction shall be made only if the aggregate
amount of the payments after such reduction exceeds the difference between (A)
the amount of such payments absent such reduction minus (B) the aggregate amount
of the excise tax imposed under Section 4999 of the Code attributable to any
such excess parachute payments. Notwithstanding the foregoing sentence, if a
Participant is subject to a separate agreement with the Company or a Subsidiary
that expressly addresses the potential application of Sections 280G or 4999 of
the Code (including, without limitation, that “payments” under such agreement or
otherwise will be reduced, that the Participant will have the discretion to
determine which “payments” will be reduced, that such “payments” will not be
reduced or that such “payments” will be “grossed up” for tax purposes), then
this Section 14.4 will not apply, and any “payments” to a Participant pursuant
to Section 14.2 or 14.3 of this Plan will be treated as “payments” arising under
such separate agreement. provided, however, such separate agreement may not
modify the time or form of payment under any Award that constitutes deferred
compensation subject to Section 409A of the Code if the modification would cause
such Incentive Award to become subject to the adverse tax consequences specified
in Section 409A of the Code.

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15.               Rights of Eligible Recipients and Participants;
Transferability.

 

15.1.          Employment or Service. Nothing in this Plan will interfere with
or limit in any way the right of the Company or any Subsidiary to terminate the
employment or service of any Eligible Recipient or Participant at any time, nor
confer upon any Eligible Recipient or Participant any right to continue in the
employ or service of the Company or any Subsidiary.

 

15.2.          No Rights to Incentive Awards. No Participant or Eligible
Recipient will have any claim to be granted any Incentive Award under this Plan.

 

15.3.          Rights as a Stockholder. As a holder of Incentive Awards (other
than Restricted Stock Awards), a Participant will have no rights as a
stockholder unless and until such Incentive Awards are exercised for, or paid in
the form of, shares of Common Stock and the Participant becomes the holder of
record of such shares. Except as otherwise provided in this Plan or otherwise
provided by the Committee, no adjustment will be made in the amount of cash
payable or in the number of shares of Common Stock issuable under Incentive
Awards denominated in or based on the value of shares of Common Stock as a
result of cash dividends or distributions paid to holders of Common Stock prior
to the payment of, or issuance of shares of Common Stock under, such Incentive
Awards.

 

15.4.          Restrictions on Transfer.

 

(a)                Except pursuant to testamentary will or the laws of descent
and distribution or as otherwise expressly permitted by subsections (b) and (c)
below, no right or interest of any Participant in an Incentive Award prior to
the exercise (in the case of Options) or vesting or issuance (in the case of
Restricted Stock Awards, Restricted Stock Units, Performance Awards and Other
Stock-Based Awards) of such Incentive Award will be assignable or transferable,
or subjected to any lien, during the lifetime of the Participant, either
voluntarily or involuntarily, directly or indirectly, by operation of law or
otherwise.

 

(b)                A Participant will be entitled to designate a beneficiary to
receive an Incentive Award upon such Participant’s death, and in the event of
such Participant’s death, payment of any amounts due under this Plan will be
made to, and exercise of any Options or Stock Appreciation Rights (to the extent
permitted pursuant to Section 12 of this Plan) may be made by, such beneficiary.
If a deceased Participant has failed to designate a beneficiary, or if a
beneficiary designated by the Participant fails to survive the Participant,
payment of any amounts due under this Plan will be made to, and exercise of any
Options or Stock Appreciation Rights (to the extent permitted pursuant to
Section 12 of this Plan) may be made by, the Participant’s legal
representatives, heirs and legatees. If a deceased Participant has designated a
beneficiary and such beneficiary survives the Participant but dies before
complete payment of all amounts due under this Plan or exercise of all
exercisable Options or Stock Appreciation Rights, then such payments will be
made to, and the exercise of such Options or Stock Appreciation Rights may be
made by, the legal representatives, heirs and legatees of the beneficiary.

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(c)                Upon a Participant’s request, the Committee may, in its sole
discretion, permit a transfer of all or a portion of a Non-Statutory Stock
Option, other than for value, to such Participant’s child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, any person sharing such Participant’s
household (other than a tenant or employee), a trust in which any of the
foregoing have more than fifty percent (50%) of the beneficial interests, a
foundation in which any of the foregoing (or the Participant) control the
management of assets, and any other entity in which these persons (or the
Participant) own more than fifty percent (50%) of the voting interests. Any
permitted transferee will remain subject to all the terms and conditions
applicable to the Participant prior to the transfer. A permitted transfer may be
conditioned upon such requirements as the Committee may, in its sole discretion,
determine, including, but not limited to execution and/or delivery of
appropriate acknowledgements, opinion of counsel, or other documents by the
transferee.

 

(d)                The Committee may impose such restrictions on any shares of
Common Stock acquired by a Participant under this Plan as it may deem advisable,
including minimum holding period requirements, restrictions under applicable
federal securities laws, under the requirements of any stock exchange or market
upon which the Common Stock is then listed or under any blue sky or state
securities laws applicable to such shares or the Company’s insider trading
policy.

 

15.5.          Non-Exclusivity of this Plan. Nothing contained in this Plan is
intended to modify or rescind any previously approved compensation plans or
programs of the Company or create any limitations on the power or authority of
the Board to adopt such additional or other compensation arrangements as the
Board may deem necessary or desirable.

 

16.               Securities Law and Other Restrictions.

 

Notwithstanding any other provision of this Plan or any agreements entered into
pursuant to this Plan, the Company will not be required to issue any shares of
Common Stock under this Plan, and a Participant may not sell, assign, transfer
or otherwise dispose of shares of Common Stock issued pursuant to Incentive
Awards granted under this Plan, unless (a) there is in effect with respect to
such shares a registration statement under the Securities Act and any applicable
securities laws of a state or foreign jurisdiction or an exemption from such
registration under the Securities Act and applicable state or foreign securities
laws, and (b) there has been obtained any other consent, approval or permit from
any other U.S. or foreign regulatory body which the Committee, in its sole
discretion, deems necessary or advisable. The Company may condition such
issuance, sale or transfer upon the receipt of any representations or agreements
from the parties involved, and the placement of any legends on certificates
representing shares of Common Stock, as may be deemed necessary or advisable by
the Company in order to comply with such securities law or other restrictions.

 

17.               Deferred Compensation; Compliance with Section 409A.

 

It is intended that all Incentive Awards issued under this Plan be in a form and
administered in a manner that will comply with the requirements of Section 409A
of the Code, or the requirements of an exception to Section 409A of the Code,
and the Incentive Award Agreements and this Plan will be construed and
administered in a manner that is consistent with and gives effect to such
intent. The Committee is authorized to adopt rules or regulations deemed
necessary or appropriate to qualify for an exception from or to comply with the
requirements of Section 409A of the Code. With respect to an Incentive Award
that constitutes a deferral of compensation subject to Code Section 409A: (a) if
any amount is payable or forfeited under such Incentive Award upon a termination
of service, a termination of service will be treated as having occurred only at
such time the Participant has experienced a Separation from Service; (b) if any
amount is payable under such Incentive Award upon a Disability, a Disability
will be treated as having occurred only at such time the Participant has
experienced a “disability” as such term is defined for purposes of Code Section
409A; (c) if any amount is payable under such Incentive Award on account of the
occurrence of a Change in Control, a Change in Control will be treated as having
occurred only at such time a “change in the ownership or effective control of
the corporation or in the ownership of a substantial portion of the assets of
the corporation” as such terms are defined for purposes of Code Section 409A,
(d) if any amount becomes payable under such Incentive Award on account of a
Participant’s Separation from Service at such time as the Participant is a
“specified employee” within the meaning of Code Section 409A, then no payment
will be made, except as permitted under Code Section 409A, prior to the first
business day after the earlier of (i) the date that is six (6) months after the
date of the Participant’s Separation from Service or (ii) the Participant’s
death, and (e) no amendment to or payment under such Incentive Award, including
by way of an Individual Agreement, will be made except and only to the extent
permitted under Code Section 409A.

 

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18.               Plan Amendment, Modification and Termination.

 

The Board may suspend or terminate this Plan or any portion thereof at any time.
In addition to the authority of the Committee to amend this Plan under Section
3.2(e) of this Plan, the Board may amend this Plan from time to time in such
respects as the Board may deem advisable in order that Incentive Awards under
this Plan will conform to any change in applicable laws or regulations or in any
other respect the Board may deem to be in the best interests of the Company;
provided, however, that no such amendments to this Plan will be effective
without approval of the Company’s stockholders if: (i) stockholder approval of
the amendment is then required pursuant to Section 422 of the Code or the
Listing Rules of the Nasdaq Stock Market (or other applicable market or exchange
on which the Company’s Common Stock may be quoted or traded); or (ii) such
amendment seeks to increase the number of shares authorized for issuance
hereunder (other than by virtue of an adjustment under Section 4.3 of this Plan)
or to modify Section 3.2(d) of this Plan. No termination, suspension or
amendment of this Plan may adversely affect any outstanding Incentive Award
without the consent of the affected Participant; provided, however, that this
sentence will not impair the right of the Committee to take whatever action it
deems appropriate under Sections 3.2(c), 4.3 and 14 of this Plan.
Notwithstanding any other provision of this Plan to the contrary, the Committee
may amend this Plan, to take effect retroactively or otherwise, as deemed
necessary or advisable for the purpose of conforming this Plan to any present or
future law relating to plans of this or similar nature, and to the
administration regulations and rulings promulgated thereunder. By accepting an
Incentive Award under this Plan, a Participant agrees to any amendment made
pursuant to the preceding sentence to any Incentive Award granted under this
Plan without further consideration or action.

 

19.               Substituted Awards.

 

The Committee may grant Incentive Awards under this Plan in substitution for
stock and stock-based awards held by employees of another entity who become
employees of the Company or a Subsidiary as a result of a merger or
consolidation of the former employing entity with the Company or a Subsidiary or
the acquisition by the Company or a Subsidiary of property or stock of the
former employing corporation. The Committee may direct that the substitute
Incentive Awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.

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20.               Effective Date and Duration of this Plan.

 

This Plan will be effective as of the Effective Date and will terminate at
midnight on the day before the tenth (10th) anniversary of the Effective Date,
and may be terminated prior to such time by Board action. No Incentive Award
will be granted after termination of this Plan. Incentive Awards outstanding
upon termination of this Plan may continue to be exercised, earned or become
free of restrictions, according to their terms.

 

21.               Miscellaneous.

 

21.1.          Usage. In this Plan, except where otherwise indicated by clear
contrary intention, (a) any masculine term used herein also will include the
feminine, (b) the plural will include the singular, and the singular will
include the plural, (c) “including” (and with correlative meaning “include”)
means including without limiting the generality of any description preceding
such term, and (d) “or” is used in the inclusive sense of “and/or”.

 

21.2.          Unfunded Plan. Participants will have no right, title or interest
whatsoever in or to any investments that the Company or its Subsidiaries may
make to aid it in meeting its obligations under this Plan. Nothing contained in
this Plan, and no action taken pursuant to its provisions, will create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Company and any Participant, beneficiary, legal representative, or any other
individual. To the extent that any individual acquires a right to receive
payments from the Company or any Subsidiary under this Plan, such right will be
no greater than the right of an unsecured general creditor of the Company or the
Subsidiary, as the case may be. All payments to be made hereunder will be paid
from the general funds of the Company or the Subsidiary, as the case may be, and
no special or separate fund will be established and no segregation of assets
will be made to assure payment of such amounts except as expressly set forth in
this Plan.

 

21.3.          Relationship to Other Benefits. Neither Incentive Awards made
under this Plan nor shares of Common Stock paid pursuant to such Incentive
Awards under this Plan will be included as “compensation” for purposes of
computing the benefits payable to any Participant under any pension, retirement
(qualified or non-qualified), savings, profit sharing, group insurance, welfare,
or benefit plan of the Company or any Subsidiary unless provided otherwise in
such plan.

 

21.4.          Fractional Shares. No fractional shares of Common Stock will be
issued or delivered under this Plan or any Incentive Award. The Committee will
determine whether cash, other Incentive Awards or other property will be issued
or paid in lieu of fractional shares of Common Stock or whether such fractional
shares of Common Stock or any rights thereto will be forfeited or otherwise
eliminated by rounding up or down.

 

21.5.          Governing Law; Venue. Except to the extent expressly provided
herein or in connection with other matters of corporate governance and authority
(all of which shall be governed by the laws of the Company’s jurisdiction of
incorporation), the validity, construction, interpretation, administration and
effect of this Plan and any rules, regulations and actions relating to this Plan
will be governed by and construed exclusively in accordance with the laws of the
State of Minnesota, notwithstanding the conflicts of laws principles of any
jurisdictions. Unless otherwise provided in an Incentive Award Agreement,
recipients of an Incentive Award under this Plan are deemed to submit to the
exclusive jurisdiction and venue of the federal or state courts of the State of
Minnesota to resolve any and all issues that may arise out of or relate to this
Plan or any Incentive Award Agreement.

 22 

 

21.6.          Successors and Assigns. This Plan will be binding upon and inure
to the benefit of the successors and permitted assigns of the Company and the
Participants.

 

21.7.          Construction. Wherever possible, each provision of this Plan and
any Incentive Award Agreement granted under this Plan will be interpreted so
that it is valid under the applicable law. If any provision of this Plan or any
Incentive Award Agreement granted under this Plan is to any extent invalid under
the applicable law, that provision will still be effective to the extent it
remains valid. The remainder of this Plan and the Incentive Award Agreement also
will continue to be valid, and the entire Plan and Incentive Award Agreement
will continue to be valid in other jurisdictions.

 

21.8.          Delivery and Execution of Electronic Documents. To the extent
permitted by applicable law, the Company may: (a) deliver by email or other
electronic means (including posting on a Web site maintained by the Company or
by a third party under contract with the Company) all documents relating to this
Plan or any Incentive Award hereunder (including prospectuses required by the
Securities and Exchange Commission) and all other documents that the Company is
required to deliver to its security holders (including annual reports and proxy
statements), and (b) permit Participants to use electronic, internet or other
non-paper means to execute applicable Plan documents (including Incentive Award
Agreements) and take other actions under this Plan in a manner prescribed by the
Committee.

 

21.9.          No Representations or Warranties Regarding Tax Effect.
Notwithstanding any provision of this Plan to the contrary, the Company and its
Subsidiaries, the Board, and the Committee neither represent nor warrant the tax
treatment under any federal, state, local, or foreign laws and regulations
thereunder (individually and collectively referred to as the “Tax Laws”) of any
Incentive Award granted or any amounts paid to any Participant under this Plan
including, but not limited to, when and to what extent such Incentive Awards or
amounts may be subject to tax, penalties, and interest under the Tax Laws.

 

21.10.      Indemnification. Subject to any limitations and requirements of
Delaware law, each individual who is or will have been a member of the Board, or
a Committee appointed by the Board, or an officer or employee of the Company to
whom authority was delegated in accordance with Section 3.1 of this Plan, will
be indemnified and held harmless by the Company against and from any loss, cost,
liability or expense that may be imposed upon or reasonably incurred by him or
her in connection with or resulting from any claim, action, suit or proceeding
to which he or she may be a party or in which he or she may be involved by
reason of any action taken or failure to act under this Plan and against and
from any and all amounts paid by him or her in settlement thereof, with the
Company’s approval, or paid by him or her in satisfaction of any judgment in any
such action, suit or proceeding against him or her, provided he or she will give
the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his/her own behalf. The
foregoing right of indemnification will not be exclusive of any other rights of
indemnification to which such individuals may be entitled under the Company’s
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or
pursuant to any agreement with the Company, or any power that the Company may
have to indemnify them or hold them harmless.

 

 

 

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