LODGENET ENTERTAINMENT CORPORATION
LODGENET 2003 STOCK OPTION AND INCENTIVE PLAN
(as amended and adopted by the stockholders May 10, 2006)
Section 1. Purpose.
     The purpose of the LodgeNet Entertainment Corporation (“LodgeNet”) 2003
Stock Option and Incentive Plan (the “Plan”) is to benefit LodgeNet by
recognizing the contributions made to LodgeNet by officers and other employees
(“Employees”) (including Directors of LodgeNet who are also Employees) of
LodgeNet and its subsidiaries, to provide such persons with additional incentive
to devote themselves to the future success of LodgeNet, and to improve the
ability of LodgeNet to attract, retain and motivate individuals, by providing
such persons with a favorable opportunity to acquire or increase their
proprietary interest in LodgeNet over a period of years through receipt of
options and other awards relating to the common stock of LodgeNet. In addition,
the Plan is intended as an additional incentive to members of the Board of
Directors of LodgeNet (“Board”) who are not Employees of LodgeNet (“Non-Employee
Directors”) to serve on the Board and to devote themselves to the future success
of LodgeNet by providing them with a favorable opportunity to acquire or
increase their proprietary interest in LodgeNet through receipt of options to
acquire common stock of LodgeNet or shares of Restricted Stock.
     LodgeNet may grant stock options that constitute “incentive stock options”
(“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, and any Regulations issued thereunder (the “Code”), stock options
that do not constitute ISOs (“NSOs”) (ISOs and NSOs being hereinafter
collectively referred to as “Options”), Restricted Stock Awards, Stock
Appreciation Rights (“SARs”) and Phantom Stock Units (Options and other types of
specified grants being hereinafter collectively referred to as “Awards”).
Subsequent amendments to the Code or Regulations governing ISOs shall be
automatically incorporated into the Plan. Except as otherwise provided in the
Plan, the terms and conditions of Awards need not be identical with respect to
each Participant, each Award, or both.
Section 2. Eligibility.
     Non-Employee Directors shall participate in the Plan only in accordance
with the provisions of Sections 5 and 10 of the Plan. The Plan Administrator (as
defined in Section 3) shall initially, and from time to time thereafter,
(a) select those Employees to participate in the Plan on the basis of the
special importance of their services in the management, development and
operations of LodgeNet and (b) recommend to the Board of Directors Awards for
the Non-Employee Directors (each such Non-Employee Director and Employee
receiving Awards granted under the Plan is referred to herein as a
“Participant”).
Section 3. Administration.
     3.1 The Committee. The Plan shall be administered by the Board or a
committee authorized by the Board (the “Plan Administrator”). If the Board does
not delegate administration to a committee, the Board shall function as the Plan
Administrator, subject to other requirements of this

 

--------------------------------------------------------------------------------

 

Section 3.1. All grants to LodgeNet’s covered employees, as that term is defined
in Treasury Regulation 1.162-27(c)(2), of qualified performance-based
compensation, as described in Treasury Regulation 1. 162-27(e)(2), and the
performance goals for such covered employees, shall be established, if the Board
so determines, by a committee comprised of at least two “outside directors”
within the meaning of Section 162(m) of the Code. If required by the rules of
NASDAQ (or any other stock market or exchange on which LodgeNet’s securities are
traded), the members of the Plan Administrator shall, in addition, for all
applicable grants, satisfy such rules. Grants to LodgeNet’s officers and
Directors who are subject to Section 16 of the Securities Exchange Act of 1934,
as amended (“Exchange Act”), shall be administered by a committee authorized by
the Board that satisfies the “non-employee directors” requirements of
Rule 16b-3, promulgated under the Exchange Act.
     3.2 Authority of the Plan Administrator. No person, other than the Plan
Administrator, shall have any authority concerning decisions regarding the Plan.
Subject to the express provisions of the Plan, including but not limited to
Sections 5 and 10, the Plan Administrator shall have sole discretion concerning
all matters relating to the Plan and Awards granted hereunder. The Plan
Administrator in its sole discretion shall determine the Non-Employee Directors
and Employees of LodgeNet to whom, and the time or times at which, Awards will
be granted, the type of Award to be granted, the number of shares to be subject
to each Award, the expiration date of each Award, the time or times within which
the Award may be exercised, the cancellation of the Award (with the consent of
the holder thereof), and the other terms and conditions of the grant of the
Award; provided, however, that the Plan Administrator shall have no authority to
reprice existing Options under the Plan. Without limiting the generality of the
foregoing, the Plan Administrator may grant Options which have exercise prices
which increase over time.
     The Plan Administrator may, subject to the provisions of the Plan,
establish such rules and regulations as it deems necessary or advisable for the
proper administration of the Plan, and may make determinations and may take such
other action in connection with or in relation to the Plan as it deems necessary
or advisable. Each determination or other action made or taken pursuant to the
Plan, including interpretation of the Plan and the specific terms and conditions
of the Awards granted hereunder by the Plan Administrator shall be final and
conclusive for all purposes and upon all persons including, but without
limitation, LodgeNet, the Board, officers and the affected Participants and
their respective successors in interest.
     No individual serving as a member of the Plan Administrator shall, in the
absence of bad faith, be liable for any act or omission with respect to his or
her service. Such service shall constitute service as a Director of LodgeNet so
that he or she shall be entitled to indemnification pursuant to LodgeNet’s
Certificate of Incorporation and By-Laws.
     3.3 Limitations. Without the approval of LodgeNet’s stockholders, the
exercise price of Options granted hereunder shall not, subsequent to the date of
grant, be modified or reduced in any way, other than in connection with a stock
split or comparable adjustment in connection with a recapitalization, plan of
exchange, acquisition, or similar event.

-2-

--------------------------------------------------------------------------------

 

     In any fiscal year, no Participant shall be granted more than $1,000,000 in
value of Restricted Stock or more than 100,000 Options.
Section 4. Shares of Common Stock Subject to Plan.
     4.1 The total number of shares of common stock, par value $.01 per share,
of LodgeNet (the “Common Stock”), that may be issued under the Plan initially
shall be 1,500,000. Any shares of Common Stock subject to issuance upon exercise
of Awards but which are not issued because of a surrender (other than pursuant
to Sections 8.2 or 17 of the Plan), forfeiture, expiration, termination or
cancellation of any such Award, shall once again be available for issuance
pursuant to subsequent Awards. If either the purchase price of the shares of
Common Stock upon exercise of any Award or the tax withholding requirement is
satisfied by tendering or withholding of shares of Common Stock or by tendering
exercisable Awards, only the number of shares of Common Stock issued net of the
shares of Common Stock tendered or withheld shall be deemed delivered for
purposes of determining the number of shares of Common Stock available for
Awards under the Plan.
     4.2 The number of shares of Common Stock subject to the Plan and to Awards
granted under the Plan, the exercise price with respect to Options and Tandem
SARs (as defined below) and the base price with respect to Nontandem SARs and
Non-Option Stock Appreciation Rights (each as defined below) shall be adjusted
as follows: (a) in the event that the number of outstanding shares of Common
Stock is changed by any stock dividend, stock split or combination of shares,
the number of shares subject to the Plan and to Awards previously granted
thereunder shall be proportionately adjusted; (b) in the event of any merger,
consolidation or reorganization of LodgeNet with any other corporation or
corporations, there shall be substituted on an equitable basis as determined by
the Board, in its sole discretion, for each share of Common Stock then subject
to the Plan and for each share of Common Stock then subject to an Award granted
under the Plan, the number and kind of shares of stock, other securities, cash
or other property to which the holders of Common Stock of LodgeNet are entitled
pursuant to the transaction; and (c) in the event of any other change in the
capitalization of LodgeNet, the Committee, in its sole discretion, shall provide
for an equitable adjustment in the number of shares of Common Stock then subject
to the Plan and to each share of Common Stock then subject to an Award granted
under the Plan. In the event of any such adjustment, the exercise price per
share shall be proportionately adjusted. Adjustments to this Section 4.2 shall
be made by the Plan Administrator whose decision as to the amount and timing of
any such adjustment shall be conclusive and binding on all persons.
Section 5. Grant of Options to Non-Employee Directors.
     5.1 Grants. Each individual who becomes a Non-Employee Director of LodgeNet
shall, if the Plan Administrator so determines, be granted an Award on the date
of his or her initial election or appointment to the Board and may also receive
an Award on each anniversary of such election. Non-Employee Directors shall also
be eligible to receive discretionary Awards as determined by the Plan
Administrator from time to time.

-3-

--------------------------------------------------------------------------------

 

     5.2 Exercise Price and Period. The per share exercise price of each NSO
granted to a Non-Employee Director shall be the Fair Market Value (as defined
below), on the date on which the NSO is granted, of the Common Stock subject to
the NSO.
     In addition to the terms and conditions set forth in this Section 5, NSOs
also shall be subject to such terms and conditions applicable to Options
according to Sections 6.2, 6.3, 6.4, 6.5 and 8, provided, however, such
additional terms and conditions are not inconsistent with the terms and
conditions set forth in this Section 5.
     5.3 Payment of Non-Employee Directors’ Fees in Common Stock.
     A Non-Employee Director shall receive fifty percent (50%) of his or her
annual retainer payments from LodgeNet in the form of shares of Common Stock.
The grants described in Section 5.1 of the Plan shall not be counted towards the
fifty percent (50%) in this Section 5.3.
Section 6. Grants of Options to Employees.
     6.1 Grant. Subject to the terms of the Plan, the Plan Administrator may
from time to time grant Options, which may be ISOs or NSOs, to Employees of
LodgeNet. Unless otherwise expressly provided at the time of the grant, Options
granted under the Plan to Employees will be ISOs.
     6.2 Option Agreement. Each Option shall be evidenced by a written Option
Agreement specifying the type of Option granted, the exercise price, the terms
for payment of the exercise price, the expiration date of the Option, the number
of shares of Common Stock to be subject to each Option, the time frame in which
an Option shall become vested and exercisable, the circumstances under which an
Option which has not become vested and exercisable can be forfeited, the
circumstances under which an Option which has not become vested and exercisable
can become immediately vested and exercisable, the effect on any outstanding
Options of an Employee’s termination of employment with LodgeNet, and such other
terms and conditions established by the Plan Administrator, in its sole
discretion, not inconsistent with the Plan.
     6.3 Expiration. Except to the extent otherwise provided in an Option
Agreement, each Option shall expire, and all rights to purchase shares of Common
Stock shall expire, on the tenth anniversary of the date on which the Option was
granted.
     6.4 Required Terms and Conditions of ISOs. Each ISO granted to an Employee
shall be in such form and subject to such restrictions and other terms and
conditions as the Plan Administrator may determine, in its sole discretion, at
the time of grant, subject to the general provisions of the Plan, the applicable
Option Agreement, and the following specific rules:
     (a) Except as provided in Section 6.4(c), the per share exercise price of
each ISO shall be the Fair Market Value of the shares of Common Stock on the
date such ISO is granted.

-4-

--------------------------------------------------------------------------------

 

     (b) The aggregate Fair Market Value (determined with respect to each ISO at
the time such Option is granted) of the shares of Common Stock with respect to
which ISOs are exercisable for the first time by an individual during any
calendar year (under all incentive stock option plans of LodgeNet) shall not
exceed $100,000. If the aggregate Fair Market Value (determined at the time of
grant) of the Common Stock subject to an Option, which first becomes exercisable
in any calendar year exceeds the limitation of this Section 6.4(b), so much of
the Option that does not exceed the applicable dollar limit shall be an ISO and
the remainder shall be a NSO; but in all other respects, the original Option
Agreement shall remain in full force and effect.
     (c) Notwithstanding anything herein to the contrary, if an ISO is granted
to an individual who owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of LodgeNet, within the
meaning of Section 422(b)(6) of the Code, (i) the exercise price of each share
of Common Stock subject to the ISO shall be not less than one hundred ten
percent (110%) of the Fair Market Value of the Common Stock on the date the ISO
is granted, and (ii) the ISO shall expire and all rights to purchase shares
thereunder shall cease no later than the fifth anniversary of the date the ISO
was granted.
     (d) No ISOs may be granted under the Plan after May 13, 2013.
     6.5 Required Terms and Conditions of NSOs. Each NSO granted to an Employee
shall be in such form and subject to such restrictions and other terms and
conditions as the Plan Administrator may determine, in its sole discretion, at
the time of grant, subject to the general provisions of the Plan and the
applicable Option Agreement; provided, however, that the per share exercise
price of each NSO shall not be less than the Fair Market Value of the shares of
Common Stock on the date such NSO is granted.
     6.6 “Fair Market Value.” Unless modified by the Plan Administrator, for
purposes of the Plan, including but not limited to the grant of Non-Option Stock
Appreciation Rights and Option Appreciation Rights, and any Option Agreement,
“Fair Market Value” shall mean the higher of the average of the closing price
for the Common Stock at the close of trading as reported by the NASDAQ stock
market (or such other stock market or exchange on which LodgeNet’s securities
may be traded) for the ten consecutive trading days immediately preceding such
given date or the closing price for the Common Stock as so reported for the day
on which a grant is made. If no trades occur on such given date, the closing
price for the last preceding day on which trading occurred will be used as the
closing price for that date. Notwithstanding any provision of the Plan to the
contrary, no determination made with respect to the Fair Market Value of Common
Stock subject to an ISO shall be inconsistent with Section 422 of the Code or
Regulations issued thereunder.
Section 7. Expiration of Options Granted to Employees; Termination of
Employment, Disability, Death, Retirement, or Occurrence of Specified Events.

-5-

--------------------------------------------------------------------------------

 

     (a) General Rule. Except with respect to Options expiring pursuant to
subsection 7(b), (c) or (d) below, each Option granted to an Employee shall
expire on the expiration date or dates set forth in the applicable Option
Agreement. Each Option expiring pursuant to subsection 7(b), (c) or (d) below
shall expire on the date set forth in subsection 7(b), (c) or
(d) notwithstanding any restrictions and conditions that may be contained in an
Employee’s Option Agreement.
     (b) Expiration Upon Termination of Employment. An Option granted to an
Employee shall expire on the first to occur of (i) the applicable date or dates
determined pursuant to subsection 7(a) or (ii) the date that the employment of
the Employee with LodgeNet terminates for any reason other than death or
disability pursuant to subsection 7(c) or retirement pursuant to subsection
7(d). Notwithstanding the preceding provisions of this subsection 7(b), the Plan
Administrator, in its sole discretion, may permit an Employee (i) to exercise an
Option that is exercisable immediately prior to the termination of employment,
notwithstanding any restrictions and conditions that may be contained in his or
her Option Agreement, during a period not to exceed ninety days following his or
her termination of employment, and/or (ii) to exercise an Option that becomes
exercisable after termination of employment and prior to the termination of such
ninety-day period, during such period. In no event, however, may the Plan
Administrator permit such Employee to exercise an Option under this subsection
7(b) after the expiration date or dates set forth in the applicable Option
Agreement and in no event may the unvested portion of an Option be exercised
during such period.
     (c) Expiration Upon Disability or Death. If the employment of an Employee
with LodgeNet terminates by reason of disability (as determined by the Plan
Administrator) or death, his or her unexpired Options or portions thereof, if
any, held on the date of disability or death that would expire pursuant to the
terms of his or her Option Agreement during the twelve month period commencing
on the date of disability or death, shall expire on the last day of such
twelve-month period. During such twelve-month period, any such Option or portion
thereof referred to in the preceding sentence may be exercised by such Employee,
or pursuant to Section 12.2, with respect to the same number of shares and in
the same manner and to the same extent as if the Employee had continued as a
full-time employee of LodgeNet during such twelve-month period; provided, that
the Employee may not exercise any Option or portion thereof which has not vested
prior to or during such twelve-month period. Any unexpired Option or portion
thereof held by the Employee on the date of disability or death, that would
expire pursuant to the terms of his or her Option Agreement on a date more than
twelve months after the date of disability or death, shall expire unexercised on
the date of disability or death.
     (d) Expiration Upon Retirement. If the employment of an Employee with
LodgeNet terminates due to retirement under any qualified retirement plan
maintained by LodgeNet, his or her Option shall expire on the earlier to occur
of (i) the applicable expiration date or dates set forth in the applicable
Option

-6-

--------------------------------------------------------------------------------

 

Agreement(s) or (ii) the third anniversary of the date of such termination of
employment. If an Employee who has so retired dies prior to exercising in full
an Option that has not expired pursuant to the preceding sentence, then
notwithstanding the preceding sentence, such Option shall expire on the first
anniversary of the date of the Employee’s death. During the period commencing on
the date of retirement or death, as the case may be, and ending on the
applicable later expiration date, the Options may be exercised by such Employee
with respect to the same number of shares and in the same manner and to the same
extent as if the Employee had continued as a full-time employee of LodgeNet
during such period; provided, that no Option or portion thereof which has not
vested prior to or during such period may be exercised.
Section 8. Exercise of Options.
     8.1 Notice. A person entitled to exercise an Option may do so by delivery
of a written notice to that effect specifying the number of shares of Common
Stock with respect to which the Option is being exercised and any other
information the Plan Administrator may prescribe. The notice shall be
accompanied by payment as described in Section 8.2. The notice of exercise shall
be accompanied by the Optionee’s copy of the writing or writings evidencing the
grant of the Option. All notices or requests provided for herein shall be
delivered to the Corporate Secretary of LodgeNet.
     8.2 Exercise Price. Except as otherwise provided in the Plan or in any
Option Agreement, the Participant shall pay the exercise price of the shares of
Common Stock upon exercise of any Option: (a) in cash; (b) in cash received from
a broker-dealer to whom the Participant has submitted an exercise notice
consisting of a fully endorsed Option (however, in the case of an Participant
subject to Section 16 of the Exchange Act, this payment option shall only be
available to the extent such person complies with Regulation T issued by the
Federal Reserve Board); (c) by delivering (either actual delivery or by
attestation procedures established by LodgeNet) previously owned shares of
Common Stock (which the Participant has held for at least six months prior to
the delivery of such shares or which the Participant purchased on the open
market and in each case for which the Participant has good title, free and clear
of all liens and encumbrances) having an aggregate Fair Market Value on the date
of exercise equal to the exercise price; (d) by directing LodgeNet to withhold
such number of shares of Common Stock otherwise issuable upon exercise of such
Option having an aggregate Fair Market Value on the date of exercise equal to
the exercise price; (e) by agreeing to surrender Options then exercisable valued
at the excess of the aggregate Fair Market Value of the shares of Common Stock
subject to such Options on the date of exercise over the aggregate exercise
price of such shares; (f) by such other medium of payment as the Plan
Administrator, in its discretion, shall authorize at the time of grant; or
(g) by any combination of (a), (b), (c), (d) (e) and (f). In the case of an
election pursuant to (a) or (b) above, cash shall mean cash or a check issued by
a federally insured bank or savings and loan, and made payable to LodgeNet.
LodgeNet shall issue, in the name of the Participant, stock certificates
representing the total number of shares of Common Stock issuable pursuant to the
exercise of any Option as soon as reasonably practicable after such exercise,
provided that any shares of Common Stock purchased by an Participant through a
broker-dealer pursuant to clause (b) above shall be delivered to such
broker-dealer in accordance with 12 C.F.R. § 220.3(e)(4) or other applicable
provision of law.

-7-

--------------------------------------------------------------------------------

 

Section 9. Stock Appreciation Rights.
     The Plan Administrator may grant either Non-Option Stock Appreciation
Rights or Option Stock Appreciation Rights as outlined below.
     9.1 Grant of Non-Option Stock Appreciation Rights. If an Award is
designated by the Plan Administrator as a Non-Option Stock Appreciation Right,
the value of such Non-Option Stock Appreciation Right shall be related to the
appreciation in the value of the Common Stock. If any Non-Option Stock
Appreciation Rights awarded under the Plan shall be forfeited or canceled, such
Non-Option Stock Appreciation Rights may again be awarded under the Plan.
Non-Option Stock Appreciation Rights shall be granted at such time or times and
shall be subject to such terms and conditions, in addition to the terms and
conditions set forth in the Plan, as the Plan Administrator shall determine.
     The receipt of the value of Non-Option Stock Appreciation Rights may be
contingent upon either performance or employment standards as determined by the
Committee.
     9.2 Non-Option Stock Appreciation Rights Agreements. Non-Option Stock
Appreciation Rights issued to an Employee under the Plan shall be governed by a
Non-Option Stock Appreciation Rights Agreement that shall set forth the
performance or employment standards applicable to the award of Non-Option Stock
Appreciation Rights and such other provisions as the Plan Administrator shall
determine.
     9.3 Payment for Non-Option Stock Appreciation Rights. Except as otherwise
set forth in a Non-Option Stock Appreciation Rights Agreement, upon termination
of employment of an Employee with LodgeNet for any reason, the Employee shall be
entitled to receive an amount in a lump sum cash payment equal to the number of
Non-Option Stock Appreciation Rights Units granted to him with respect to which
the applicable employment and/or performance standards have been satisfied,
multiplied by the Fair Market Value of a share of Common Stock of LodgeNet
determined pursuant to the provisions of Section 6.6.
     9.4 Grant of Option Stock Appreciation Rights. Option Stock Appreciation
Rights (“SARs”) will be granted, if at all, at the time of granting of an Option
and may be granted either in addition to the related Option (“Nontandem SAR”) or
in tandem with the related Option (“Tandem SAR”). At the time of grant of a
Nontandem SAR, the Plan Administrator shall specify the base price of Common
Stock to be used in connection with the calculation described in Section 9.5
below. The base price of a Nontandem SAR shall be 100% of the Fair Market Value
of a share of Common Stock on the date of grant. The number of shares of Common
Stock subject to a Tandem SAR shall be one for each share of Common Stock
subject to the Option. The number of shares of Common Stock subject to a
Nontandem SAR shall be one for each share of Common Stock subject to the Option.
No Tandem SAR may be granted to an Employee in connection with an ISO in a
manner that will disqualify the ISO under Section 422 of the Code unless the
Employee consents thereto.

-8-

--------------------------------------------------------------------------------

 

     9.5 Value of SARs. Upon exercise, a SAR shall entitle the Employee to
receive from LodgeNet the number of shares of Common Stock having an aggregate
Fair Market Value equal to the following:
     (a) in the case of a Nontandem SAR, the excess of the Fair Market Value of
one share of Common Stock as of the date on which the SAR is exercised over the
base price specified in such SAR, multiplied by the number of shares of Common
Stock then subject to the SAR, or the portion thereof being exercised.
     (b) in the case of a Tandem SAR, the excess of the Fair Market Value of one
share of Common Stock as of the date on which the SAR is exercised over the
exercise price per share specified in such Option, multiplied by the number of
shares then subject to the Option, or the portion thereof as to which the SAR is
being exercised.
     Cash shall be delivered in lieu of any fractional shares. The Committee, in
its discretion, shall be entitled to cause LodgeNet to elect to settle any part
or all of its obligation arising out of the exercise of an SAR by the payment of
cash in lieu of all or part of the shares of Common Stock it would otherwise be
obligated to deliver in an amount equal to the Fair Market Value of such shares
on the date of exercise.
     9.6 Exercise of Tandem SARs. A Tandem SAR shall be exercisable during such
time, and be subject to such restrictions and conditions and other terms, as the
Plan Administrator shall specify in the applicable Option Agreement at the time
such Tandem SAR is granted. Notwithstanding the preceding sentence, the Tandem
SAR shall be exercisable only at such time as the Option to which it relates is
exercisable and shall be subject to the restrictions and conditions and other
terms applicable to such Option. Upon the exercise of a Tandem SAR, the
unexercised Option, or the portion thereof to which the exercised portion of the
Tandem SAR is related, shall expire. The exercise of any Option shall cause the
expiration of the Tandem SAR related to such Option, or portion thereof, that is
exercised.
     9.7 Exercise of Nontandem SARs.
     (a) A Nontandem SAR granted under the Plan shall be exercisable during such
time, and be subject to such restrictions and conditions and other terms, as the
Plan Administrator shall specify in the Option Agreement at the time the
Nontandem SAR is granted, which restrictions and conditions and other terms need
not be the same for all Employees. Without limiting the generality of the
foregoing, the Plan Administrator may specify a minimum number of full shares
with respect to which any exercise of a Nontandem SAR must be made.
     (b) A Nontandem SAR granted under the Plan shall expire on the date
specified by the Plan Administrator in the Option Agreement, provided that such
date shall not be more than ten years after the date of grant. The Plan
Administrator shall specify in the Option Agreement at the time each Nontandem
SAR is granted, the time during which the Nontandem SAR may be exercised prior
to its expiration and other provisions relevant to the

-9-

--------------------------------------------------------------------------------

 

SAR. The Committee, in its discretion, shall have the power to accelerate the
dates for exercise of any or all Nontandem SARs or any part thereof, granted
under the Plan.
     9.8 Parties Entitled to Exercise SARs. A SAR may be exercised only by the
Employee (or by a legatee or legatees of such SAR under his last will, by his
executors, personal representatives or distributees, or by an assignee or
assignees pursuant to Section 12 below).
     9.9 Settlement of SARs. As soon as is reasonably practicable after the
exercise of an SAR, LodgeNet shall (i) issue, in the name of the Employee, stock
certificates representing the total number of full shares of Common Stock to
which the Employee is entitled pursuant to Section 9.5 hereof and cash in an
amount equal to the Fair Market Value, as of the date of exercise, of any
resulting fractional shares, and (ii) if the Plan Administrator causes LodgeNet
to elect to settle all or part of its obligations arising out of the exercise of
the SAR in cash, deliver to the Employee an amount in cash equal to the Fair
Market Value, as of the date of exercise, of the shares of Common Stock it would
otherwise be obligated to deliver.
Section 10. Restricted Stock Awards To Employees and Non-Employee Directors.
     The Plan Administrator may from time to time cause LodgeNet to grant shares
of Restricted Stock under the Plan to such Employees and Non-Employee Directors,
and subject to such restrictions and conditions and other terms, as the Plan
Administrator may determine at the time of grant, subject to the general
provisions of the Plan, the applicable Restricted Stock Agreement, and the
following specific rules:
     10.1 Performance or Employment Standards. The restrictions applicable to
Restricted Stock may be based either on performance or employment or Board
service standards. If the restrictions are based upon the performance of
LodgeNet, the performance standards shall relate to corporate or business
segment performance and may be established in terms including but not limited to
growth of gross revenue, cash flow, earnings per share, return on assets,
increase in the market price of LodgeNet’s common stock, or return on investment
or utilization of assets. Multiple standards may be used and may have the same
or different weighting and may relate to absolute performance or relative
performance as measured against comparable companies.
     10.2 Restricted Stock Agreements. Shares of Restricted Stock issued to an
Employee or Non-Employee Director under the Plan shall be governed by a
Restricted Stock Agreement which shall set forth the restrictions applicable to
the Award of Restricted Stock and such other provisions as the Plan
Administrator shall determine.
     10.3 Issuance of Restricted Stock. LodgeNet shall issue, in the name of the
Employee or Non-Employee Director, stock certificates representing the total
number of shares of Restricted Stock granted to the Employee or Non-Employee
Director, as soon as may be reasonably practicable after such grant, which shall
be held by the Corporate Secretary of LodgeNet as provided in Section 10.7
hereof.

-10-

--------------------------------------------------------------------------------

 

     10.4 Rights of Stockholders. Subject to the provisions of Sections 10.3 and
10.5 hereof and Section 11.2, and the restrictions set forth in the related
Restricted Stock Agreement, the Employee or Non-Employee Director receiving a
grant shall thereupon be a stockholder with respect to all of the shares
represented by such certificate or certificates and shall have the rights of a
stockholder with respect to such shares, including the right to vote such shares
and to receive dividends and other distributions paid with respect to such
shares.
     10.5 Restrictions; Forfeiture. Any share of Restricted Stock granted to an
Employee or Non-Employee Director pursuant to the Plan shall be forfeited, and
such shares shall revert to LodgeNet, if (i) the Employee or Non-Employee
Director violates a non-competition or confidentiality agreement or other
condition set forth in the Restricted Stock Agreement, (ii) the Employee’s
employment with LodgeNet, or the service of the Non-Employee Director on the
Board, terminates prior to a date or dates for expiration of the forfeiture,
(iii) the date on which performance standards set forth in the Restricted Stock
Agreement fail to be satisfied, or (iv) the date there occurs a violation of any
provision of the Restricted Stock Agreement. LodgeNet shall require a forfeiture
of Restricted Stock pursuant to this Section 10.5, by giving notice to the
Employee or Non-Employee Director at any time within the 30-day period following
the applicable date of forfeiture. Upon receipt of such notice, the Corporate
Secretary of LodgeNet shall promptly cancel shares of Restricted Stock that are
forfeited to LodgeNet.
     10.6 Acceleration. The Plan Administrator, in its discretion, shall have
the power to accelerate the date on which the restrictions of this Section 10 or
contained in any Restricted Stock Agreements shall lapse with respect to any or
all shares of Restricted Stock granted under the Plan.
     10.7 Restricted Stock Certificates. The Corporate Secretary of LodgeNet
shall hold the certificate or certificates representing shares of Restricted
Stock issued under the Plan on behalf of each Participant who holds such shares
until such time as the Restricted Stock is forfeited or the restrictions lapse.
     10.8 Terms and Conditions. The Plan Administrator may prescribe such other
restrictions and conditions and other terms applicable to the shares of
Restricted Stock issued to an Employee or Non-Employee Director under the Plan
that are neither inconsistent with nor prohibited by the Plan or any Restricted
Stock Agreement, including, without limitation, terms providing for a lapse of
the restrictions of this Section 10 or in any Restricted Stock Agreement, in
installments.
Section 11. Terms and Conditions of Awards.
     11.1 Each Participant shall agree to such restrictions and conditions and
other terms in connection with the grant and exercise of an Award, including
restrictions and conditions on the disposition of the Common Stock acquired upon
the exercise, grant or sale thereof, as the Plan Administrator may deem
appropriate and as is set forth in the applicable Award Agreement. The
certificates delivered to a Participant or to the Corporate Secretary of
LodgeNet evidencing the shares of Common Stock acquired upon exercise of an
Award may, and upon the grant of Restricted Stock to an Employee or Non-Employee
Director shall, bear a legend referring to the restrictions and conditions and
other terms contained in the respective Award Agreement and the Plan, and
LodgeNet

-11-

--------------------------------------------------------------------------------

 

may place a stop transfer order with its transfer agent against the transfer of
such shares. If requested to do so by the Plan Administrator at the time of
exercise of an Option or sale of Restricted Stock, each Participant shall
execute a written instrument stating that he is purchasing the Common Stock for
investment and not with any present intention to sell the same.
     11.2 The obligation of LodgeNet to sell and deliver Common Stock under the
Plan shall be subject to all applicable laws, regulations, rules and approvals,
including, but not by way of limitation, the effectiveness of a registration
statement under the Securities Act of 1933, as amended (the “Act”), if deemed
necessary or appropriate by the Committee, of the Common Stock, Options, SARs,
Restricted Stock, and other securities reserved for issuance or that may be
offered under the Plan.
Section 12. Nontransferability.
     12.1 Except in connection with unrestricted Common Stock issued pursuant to
an Award, Awards granted under the Plan and any rights and privileges pertaining
thereto, may not be transferred, assigned, pledged or hypothecated in any
manner, by operation of law or otherwise, other than by will or by the laws of
descent and distribution and shall not be subject to execution, attachment or
similar process. The granting of an Award shall impose no obligation upon the
applicable Participant to exercise such Award.
Section 13. Rights as Shareholder.
     A Participant or an assignee of a Participant pursuant to Section 12 shall
have no rights as a shareholder with respect to any Common Stock covered by an
Award or receivable upon the exercise of an Award until the Participant or
transferee shall have become the holder of record of such Common Stock, and,
except as provided in Section 14, no adjustments shall be made for dividends in
cash or other property or other distributions or rights in respect to such
Common Stock for which the record date is prior to the date on which the
Participant shall have in fact become the holder of record of the shares of
Common Stock acquired pursuant to the Award.
Section 14. Postponement of Exercise.
     The Plan Administrator may postpone any exercise of an Award for such time
as the Plan Administrator in its sole discretion may deem necessary in order to
permit LodgeNet (a) to effect, amend or maintain any necessary registration of
the Plan or the shares of Common Stock issuable upon the exercise of an Award
under the Act, or the securities laws of any applicable jurisdiction, (b) to
permit any action to be taken in order to (i) list such shares of Common Stock
on a stock exchange if shares of Common Stock are then listed on such exchange
or (ii) comply with restrictions or regulations incident to the maintenance of a
public market for shares of Common Stock, including any rules or regulations of
any stock exchange on which the shares of Common Stock are listed, or (c) to
determine that such shares of Common Stock and the Plan are exempt from such
registration or that no action of the kind referred to in (b)(ii) above needs to
be taken; and LodgeNet shall not be obligated by virtue of any terms and
conditions of any Award or any provision of the Plan to

-12-

--------------------------------------------------------------------------------

 

recognize the exercise of an Award or to sell or issue shares of Common Stock in
violation of the Act or the law of any government having jurisdiction thereof.
Any such postponement shall not extend the term of an Award and neither LodgeNet
nor its directors or officers shall have any obligation or liability to a
Participant, to the Participant’s successor or assignee, or any other person,
with respect to any shares of Common Stock as to which the Award shall lapse
because of such postponement.
Section 15. Withholding Taxes.
     Whenever LodgeNet proposes or is required to issue or transfer shares of
Common Stock to a Participant under the Plan, LodgeNet shall have the right to
require the Participant to remit to LodgeNet an amount sufficient to satisfy all
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such shares. If such certificates have been
delivered prior to the time a withholding obligation arises, LodgeNet shall have
the right to require the Participant to remit to LodgeNet an amount sufficient
to satisfy all federal, state or local withholding tax requirements at the time
such obligation arises and to withhold from other amounts payable to the
Participant, as compensation or otherwise, as necessary. Whenever payments under
the Plan are to be made to a Participant in cash, such payments shall be net of
any amounts sufficient to satisfy all federal, state and local withholding tax
requirements. In connection with an Award in the form of shares of Common Stock,
a Participant may elect to satisfy his tax withholding obligation incurred with
respect to the Taxable Date (as defined below) of the Award by (a) directing
LodgeNet to withhold a portion of the shares of Common Stock otherwise
distributable to the Participant, or (b) by transferring to LodgeNet a certain
number of shares (either subject to a Restricted Stock Award or previously
owned), such shares being valued at the Fair Market Value thereof on the Taxable
Date. Notwithstanding any provisions of the Plan to the contrary, a
Participant’s election pursuant to the preceding sentence (a) must be made on or
prior to the Taxable Date with respect to such Award, and (b) must be
irrevocable. In lieu of a separate election on each Taxable Date of an Award, a
Participant may make a blanket election with the Plan Administrator that shall
govern all future Taxable Dates until revoked by the Participant. If the holder
of shares of Common Stock purchased in connection with the exercise of an ISO
disposes of such shares within two years of the date such an ISO was granted or
within one year of such exercise, he shall notify LodgeNet of such disposition
and remit an amount necessary to satisfy applicable minimum withholding
requirements including those arising under federal income tax laws. If such
holder does not remit such amount, LodgeNet may withhold all or a portion of any
salary or other amounts then or in the future owed to such holder as necessary
to satisfy such minimum requirements. Taxable Date means the date a Participant
recognizes income with respect to an Award under the Code or any applicable
state or local income tax law.

-13-

--------------------------------------------------------------------------------

 

Section 16. Leave of Absence.
     The Plan Administrator shall be entitled to make such rules, regulations
and determinations as it deems appropriate under the Plan in respect of any
leave of absence taken by any Participant. Without limiting the generality of
the foregoing, the Plan Administrator shall be entitled to determine (i) whether
or not any such leave of absence shall constitute a termination of employment or
service on the Board within the meaning of the Plan, and (ii) the impact, if
any, of any such leave of absence on Awards under the Plan theretofore granted
to any Participant who takes such leave of absence.
Section 17. Termination or Amendment of Plan.
     The Plan Administrator may correct any defect or supply an omission or
reconcile any inconsistency in the Plan or in any Award granted hereunder in the
manner and to the extent it shall deem desirable, in its sole discretion, to
effectuate the Plan. The Plan Administrator may only materially alter or suspend
the Plan or any Award granted hereunder or terminate the Plan without further
action on the part of the shareholders of LodgeNet to the extent permitted by
law, regulation, and stock exchange or interdealer quotation system
requirements. With respect to ISOs, the Plan Administrator may not effect a
change inconsistent with Section 422 of the Code or regulations issued
thereunder.
     No amendment or termination of the Plan shall in any manner affect any
Award theretofore granted without the consent of the Participant, except that
the Plan Administrator may amend the Plan in a manner that does affect Awards
theretofore granted upon a finding by the Plan Administrator that such amendment
is in the best interest of holders of outstanding Awards affected thereby.
Section 18. Effective Date.
     The Plan shall be effective upon the date of approval of the Plan by an
affirmative vote of a majority of the shares of the voting stock of LodgeNet
entitled to be voted by the holders of stock represented at a duly held
shareholders’ meeting, within 12 months after the date of adoption of the Plan
by the Board.
Section 19. Requirements of Law.
     The granting of Awards under the Plan shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges or national securities associations as may be
required, including, but not limited to, the requirements of Section 304 of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes Act”) relating to the mandatory
forfeiture of certain incentive-based and equity-based compensation, which may
also be Awards under the Plan, by an issuer’s (as that term is defined in the
Sarbanes Act) chief executive officer and chief financial officer.

-14-

--------------------------------------------------------------------------------

 

Section 20. Governing Law.
     The Plan and all agreements hereunder shall be construed in accordance with
and governed by the laws of the State of South Dakota, to the extent not
inconsistent with Section 422 of the Code.
Section 21. Notice.
     Every direction, revocation or notice authorized or required by the Plan
shall be deemed delivered to LodgeNet (a) on the date it is personally delivered
to the Corporate Secretary of LodgeNet at its principal executive offices or
(b) three business days after it is sent by registered or certified mail;
postage prepaid, addressed to the Corporate Secretary at such offices; and shall
be deemed delivered to a Participant or assignee (a) on the date it is
personally delivered to him or (b) three business days after it is sent by
registered or certified mail, postage prepaid, or (c) one business day after it
is sent by a nationally recognized overnight courier service, such as Federal
Express, in each of (b) and (c), addressed to him at the last address shown on
the records of LodgeNet.
Section 22. Successors.
     In the event of a sale of substantially all of the assets of LodgeNet, or a
merger, consolidation or share exchange involving LodgeNet, or a change of
control reportable under Item 1 of Form 8-K, the Board may, in its sole
discretion, do any of the following or a combination thereof: 1) terminate the
Plan and cash out vested Awards; 2) provide for the successor to assume all
Awards and credit all service or provide for all vested Awards under this Plan
to be exchanged for equivalent Awards under an incentive plan of the successor;
or 3) accelerate the vesting of any non-vested Awards at the time of a
transaction described in this Section.
Section 23. Indemnification of the Plan Administrator.
     In addition to such other rights of indemnification as they may have as
members of the Board, or as individuals serving as members of the Plan
Administrator, the members of the Plan Administrator shall be indemnified by
LodgeNet against (a) the reasonable expenses (as such expenses are incurred),
including attorneys’ fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding (or in connection with any appeal
therein), to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any Award
granted hereunder; and (b) against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by LodgeNet) or paid by them in satisfaction of a judgment in such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Plan Administrator
member is liable for gross negligence or misconduct in the performance of his
duties; provided that within 60 days after institution of such action, suit or
proceeding a Plan Administrator member shall in writing offer LodgeNet the
opportunity, at its own expense, to handle and defend the same.

-15-

--------------------------------------------------------------------------------

 

Section 24. No Contract of Employment or Service on the Board.
     Neither the adoption of the Plan, nor the amendment and the restatement of
the Plan, nor the grant of any Award shall be deemed to obligate LodgeNet to
continue the employment or service on the Board of any Participant for any
particular period, nor shall the granting of an Award constitute a request or
consent to postpone the retirement date of any Participant.
Section 25. Gender.
     Except when otherwise required by the context, any masculine terminology in
this document shall include the feminine, and any singular terminology shall
include the plural.
Section 26. Forms.
     The Plan Administrator shall approve the forms, and terms, of all Awards
granted under this Plan.

-16-