EXHIBIT 10.1
IKONICS CORPORATION
1995 STOCK INCENTIVE PLAN
(AS AMENDED AS OF NOVEMBER 18, 2010)

1.   Purpose of Plan.

     The purpose of the IKONICS Corporation 1995 Stock Incentive Plan (the
“Plan”) is to advance the interests of the IKONICS Corporation (the “Company”)
and its stockholders by enabling the company and its subsidiaries to attract and
retain persons of ability to perform services for the Company and its
subsidiaries by providing an incentive to such individuals through equity
participation in the Company and by rewarding such individuals who contribute to
the achievement by the Company of its economic objectives.

2.   Definitions.

     The following terms will have the meaning set forth below, unless the
context clearly otherwise requires:
2.1 “Board” means the Board of Directors of the Company.
2.2 “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 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 or deliver stock certificates to be issued upon such
exercise directly to such broker or dealer.
2.3 “Change in Control” means an event described in Section 13.1 of the Plan.
2.4 “Code” means the Internal Revenue Code of 1986, as amended.
2.5 “Committee” means the group of individuals administering the Plan, as
provided in Section 3 of the Plan.
2.6 “Common Stock” means the common stock of the Company’s $.10 par value, 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 the Plan.
2.7 “Disability” 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.
2.8 “Eligible Recipients” means all directors (including non-employee
directors), officers and employees of the Company or any Subsidiary.
2.9 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
2.10 “Fair Market Value” means, with respect to the Common Stock, as of any date
(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):

 

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a. If the Common Stock is listed (or admitted to unlisted trading privileges) on
an exchange or reported on the NASDAQ National Market System or bid and asked
prices are reported on the NASDAQ system or a comparable reporting service, the
closing sale price or the mean of the closing bid and asked prices, as the case
may be.
b. If the Common Stock is not so listed or reported, such price as the Committee
determines in good faith in the exercise of its reasonable discretion.
2.11 “Incentive Award” means an Option, Stock Appreciation Right, Restricted
Stock Award, Performance Unit or Stock Bonus granted to an Eligible Recipient
pursuant to the Plan.
2.12 “Incentive Stock Option” means a right to purchase Common Stock granted to
an Eligible Recipient pursuant to Section 6 of the Plan that qualifies as an
“incentive stock option” within the meaning of Section 422 of the Code.
2.13 “Non-Statutory Stock Option” means a right to purchase Common Stock granted
to an Eligible Recipient pursuant to Section 6 of the Plan that does not qualify
as a Incentive Stock Option.
2.14 “Option” means an Incentive Stock Option or a Non-Statutory Stock Option.
2.15 “Participant” means an Eligible Recipient who receives one or more
Incentive Awards under the Plan.
2.16 “Performance Unit” means a right granted to an Eligible Recipient pursuant
to Section 9 of the Plan to receive a payment from the Company, in the form of
stock, cash or a combination of both, upon the achievement of established
performance goals.
2.17 “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 upon the grant, exercise or vesting of such Incentive Award.
2.18 “Restricted Stock Award” means an award of Common Stock granted to an
Eligible Recipient pursuant to Section 8 of the Plan that is subject to the
restrictions on transferability and the risk of forfeiture imposed by the
provisions of such Section 8.
2.19 “Retirement” means normal or approved early termination of employment or
service pursuant to and in accordance with the regular 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’s plan or practice for
purposes of this determination.
2.20 “Securities Act” means the Securities Act of 1933, as amended.
2.21 “Stock Appreciation Right” means a right granted to an Eligible Recipient
pursuant to Section 7 of the Plan to receive a payment from the Company, in the
form of 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 the exercise
price of such shares under the terms of such Stock Appreciation Right.
2.22 “Stock Bonus” means an award of Common Stock granted to an Eligible
Recipient pursuant to Section 10 of the Plan.

 

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2.23 “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.
2.24 “Tax Date” means the date any withholding tax obligation arises under the
Code for a Participant with respect to an Incentive Award.

3.   Plan Administration.

3.1 The Committee. The Plan will be administered by the Board or by a committee
of the Board consisting of not less than two persons; provided, however, that
from and after the date on which the Company first registers a class of its
equity securities under Section 12 of the Exchange Act, the Plan will be
administered by the Board, all of whom will be “disinterested persons” within
the meaning of Rule 16b-3 under the Exchange Act, or by a committee consisting
solely of not fewer than two members of the Board who are such “disinterested
persons.” As used in this Plan, the term “Committee” will refer to the Board or
to such a committee, if established. To the extent consistent with corporate
law, the Committee may delegate to any officers of the Company the duties, power
and authority of the Committee under the 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 the Plan in its sole and absolute
discretion without the consent of any Participant or other party, unless the
Plan specifically provides otherwise. Each determination, interpretation or
other action made or taken by the Committee pursuant to the provisions of the
Plan will be 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 the Plan or any Incentive Award granted under the
Plan.
3.2 Authority of the Committee.
a. In accordance with and subject to the provisions of the Plan, the Committee
will have the authority to determine all provisions of Incentive Awards as the
Committee may deem necessary or desirable and as consistent with the terms of
the Plan, including, without limitation, the following: (i) the Eligible
Recipients to be selected as Participants; (ii) 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 written agreement, if any, evidencing such Incentive Award; (iii) the
time or times when Incentive Awards will be granted; (iv) the duration of each
Incentive Award; and (v) the restrictions and other conditions to which the
payment or vesting of Incentive Awards may be subject. In addition, the
Committee will have the authority under the Plan to pay the economic value of
any Incentive Award in the form of cash, Common Stock or any combination of
both.
b. The Committee will have the authority under the 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 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

 

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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 the Plan as then in
effect and that any Participant adversely affected by such amended or modified
terms has consented to such amendment or modification. No amendment or
modification to an Incentive Award, however, whether pursuant to this
Section 3.2 or any other provisions of the Plan, will be deemed to be a regrant
of such Incentive Award for purposes of this Plan.
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 change in corporate structure or shares,
(ii) any purchase, acquisition, sale or disposition of a significant amount of
assets or a significant business; (iii) any change in accounting principles or
practices, or (iv) 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 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 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 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 the Plan as then in
effect.

4.   Shares Available for Issuance.

4.1 Maximum Number of Shares. Subject to adjustment as provided in Section 4.3
of the Plan, the maximum number of shares of Common Stock that will be available
for issuance under the Plan will be 442,750 shares. The shares available for
issuance under the Plan shall be shares authorized but unissued, under the
Company’s Articles of Incorporation.
4.2 Accounting for Incentive Awards. Shares of Common Stock that are issued
under the 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 the Plan. Any shares of Common Stock that are
subject to an Incentive Award that lapses, expires, is forfeited or for any
reason is terminated unexercised or unvested and any shares of Common Stock that
are subject to an Incentive Award that is settled or paid in cash or any form
other than shares of Common Stock will automatically again become available for
issuance under the Plan. Any shares of Common Stock that constitute the
forfeited portion of a Restricted Stock Award, however, will not become
available for further issuance under the Plan.
4.3 Adjustments to Shares of 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

 

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spin-off) or any other 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 available for issuance under the Plan and, in
order to prevent dilution or enlargement of the rights of Participants, the
number, kind and, where applicable, exercise price of securities subject to
outstanding Incentive Awards.

5.   Participation.

     Participants in the 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. 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 agreements with the Participant.

6.   Options.

6.1 Grant. An Eligible Recipient may be granted one or more Options under the
Plan, and such Options will be subject to such terms and conditions, consistent
with the other provisions of the Plan, as may be determined by the Committee.
The Committee may designate whether an Option is to be considered an Incentive
Stock Option or a Non-Statutory Stock Option.
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 (a) such price will not be less than
100% of the Fair Market Value of one share of Common Stock on the date of grant
with respect to an Incentive Stock Option (110% of the Fair Market Value 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),
and (b) such price will not be less than 85% of the Fair Market Value of one
share of Common Stock on the date of grant with respect to a Non-Statutory Stock
Option.
6.3 Exercisability and Duration. An Option will become exercisable at such times
and in such installments as may be determined by the Committee at the time of
grant; provided, however, that no Incentive Stock Option may be exercisable
after 10 years from its date of grant (five years from its date of grant 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).
6.4 Payment of Exercise Price. 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 may
allow such payments to be made, in whole or in part and upon such terms and
conditions as may be established by the Committee, by tender of a Broker
Exercise Notice, Previously Acquired Shares, a promissory note or by a
combination of such methods.
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 the Plan and
in the agreement

 

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evidencing such Option, by delivery in person, by facsimile or electronic
transmission or through the mail of written notice of exercise to the Company
(Attention: Chief Financial Officer) at its principal executive office in
Duluth, 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 the Plan.
6.6 Aggregate Limitation of Stock Subject to Incentive Stock Options. To the
extent that the aggregate Fair Market Value (determined as of the date an
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which incentive stock options (within the meaning of Section 422 of the Code)
are exercisable for the first time by a Participant during any calendar year
(under the Plan and any other incentive stock option plans of the Company or any
subsidiary or parent corporation of the Company (within the meaning of the
Code)) exceeds $100,000 (or such other amount as may be prescribed by the Code
from time to time), such excess Options will be treated as Non-Statutory Stock
Options. The determination will be made by taking incentive stock options into
account in the order in which they were granted. If such excess only applies to
a portion of an incentive stock option, the Committee will designate which
shares will be treated as shares to be acquired upon exercise of an incentive
stock option.

7.   Stock Appreciation Rights.

7.1 Grant. An Eligible Recipient may be granted one or more Stock Appreciation
Rights under the Plan, and such Stock Appreciation Rights shall be subject to
such terms and conditions, consistent with the other provisions of the Plan, as
will be determined by the Committee.
7.2 Exercise Price. The exercise price of a Stock Appreciation Right will be
determined by the Committee at the date of grant but will not be less than 85%
of the Fair Market Value of one share of Common Stock on the date of grant.
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 at the time of grant; provided, however, that no Stock Appreciation
Right may be exercisable prior to six months or 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 the Plan.

8.   Restricted Stock Awards.

8.1 Grant. An Eligible Recipient may be granted one or more Restricted Stock
Awards under the Plan, and such Restricted Stock Awards will be subject to such
terms and conditions, consistent with the other provisions of the Plan, as may
be determined by the Committee. The Committee may impose such restrictions or
conditions, not inconsistent with the provisions of the Plan, to the vesting of
such Restricted Stock Awards as it deems appropriate, including, without
limitation, that the Participant remain in the continuous employ or service of
the Company or a subsidiary for a certain period or that the Participant or the
Company (or any subsidiary or division thereof) satisfy certain performance
goals or criteria.
8.2 Rights as a Stockholder; Transferability. Except as provided in Sections
8.1, 8.3 and 14.3 of the 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.

 

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8.3 Dividends and Distributions. Unless the Committee determines otherwise
(either in the agreement evidencing the Restricted Stock Award 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 whether any interest will be paid on such dividends or
distributions. In addition, the Committee 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.
8.4 Enforcement of Restrictions. 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.

9.   Performance Units.

     An Eligible Recipient may be granted one or more Performance Units under
the Plan, and such Performance Units will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee. The Committee may impose such restrictions or
conditions, not inconsistent with the provisions of the Plan, to the vesting of
such Performance Units as it deems appropriate, including, without limitation,
that the Participant remain in the continuous employ or service of the Company
or any subsidiary for a certain period or that the Participant or the Company
(or any Subsidiary or division thereof) satisfy certain performance goals or
criteria. The Committee will have the discretion either to determine the form in
which payment of the economic value of vested Performance Units will be made to
the Participant (i.e., cash, Common Stock or any combination thereof) or to
consent to or disapprove the election by the Participant of the form of such
payment.

10.   Stock Bonuses.

     An Eligible Recipient may be granted one or more Stock Bonuses under the
Plan, and such Stock Bonuses will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee. The Participant will have all voting, dividend, liquidation and other
rights with respect to the shares of Common Stock issued to a Participant as a
Stock Bonus under this Section 10 upon the Participant becoming the holder of
record of such shares; provided, however, that the Committee may impose such
restrictions on the assignment or transfer of a Stock Bonus as it deems
appropriate.

11.   Effect of Termination of Employment or Other Service.

11.1 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 remain exercisable to the extent exercisable as of such
termination for a period of 30 days after such termination (but in no event
after the expiration date of any such Option or Stock Appreciation Right);

 

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b. All outstanding Restricted Stock Awards then held by the Participant that
have not vested will be terminated and forfeited; and
c. All outstanding Performance Units and Stock Bonuses then held by the
Participant will vest and/or continue to vest in the manner determined by the
Committee and set forth in the agreement evidencing such Performance Units or
Stock Bonuses.
11.2 Termination for Reasons Other than Death, Disability or Retirement.
a. In the event a Participant’s employment or other service is termination 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), all
rights of the Participant under the Plan and any agreements evidencing an
Incentive Award will immediately terminate without notice of any kind, and no
Options or Stock Appreciation Rights then held by the Participant will
thereafter be exercisable, all Restricted Stock Awards then held by the
Participant that have not vested will be terminated and forfeited, and all
Performance Units and Stock Bonuses then held by the Participant will vest
and/or continue to vest in the manner determined by the Committee and set forth
in the agreement evidencing such Performance Units or Stock Bonuses; provided,
however, that if such termination is due to any reason other than termination by
the Company or any subsidiary for “cause,” all outstanding Options and Stock
Appreciation Rights then held by such Participant will remain exercisable to the
extent exercisable as of such termination for a period of 30 days after such
termination (but in no event after the expiration date of any such Option or
Stock Appreciation Right).
b. For purposes of this Section 11.2, “cause” (as determined by the Committee)
will be a defined in any employment or other agreement or policy applicable to
the Participant or, if no such agreement or policy exists, will mean
(i) dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or
attempted injury, in each case related to the Company or any subsidiary,
(ii) any unlawful or criminal activity of a serious nature, (iii) 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
(iv) any material breach of any employment, service, confidentiality or
non-compete agreement entered into with the Company or any subsidiary.
11.3 Modification of Rights Upon Termination. Notwithstanding the other
provisions of this Section 11, upon a Participant’s termination of employment or
other service with the Company and all subsidiaries, the Committee may in its
discretion (which may be exercised at any time on or after the date of grant,
including following such termination) cause Options and Stock Appreciation
Rights (or any part thereof) then held by such Participant to become or continue
to become exercisable and/or remain exercisable following such termination of
employment or service and Restricted Stock Awards, Performance Units and Stock
Bonuses then held by such Participant to vest and/or continue to vest or become
free of transfer restrictions, as the case may be, following such termination of
employment or service, in each casein the manner determined by the Committee;
provided, however, that no Option or Stock Appreciation Right may remain
exercisable beyond its expiration date.

 

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11.4 Breach of Confidentiality or Non-Compete Agreements. Notwithstanding
anything in this Plan to the contrary, in the event that a Participant
materially breaches the terms of any confidentiality or non-compete agreement
entered into with the Company or any subsidiary, whether such breach occurs
before or after termination of such Participant’s employment or other service
with the Company or any subsidiary, the Committee may immediately terminate all
rights of the Participant under the Plan and any agreements evidencing an
Incentive Award then held by the Participant without notice of any kind.
11.5 Date of Termination of Employment or Other Service. Unless the Committee
otherwise determines, a Participant’s employment or other service will, for
purposes of the 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
based upon such records.

12.   Payment of Withholding Taxes.

12.1 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, 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
Stock Option, or (b) 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.
12.2 Special Rules. The Committee may, 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 12.1
of the Plan by electing to tender Previously Acquired Shares, a Broker Exercise
Notice or a promissory note (on terms acceptable to the Committee in its sole
discretion), or by a combination of such methods.

13.   Change in Control.

13.1 Change in Control. For purposes of this Section 13.1, a “Change in Control”
of the Company will mean the following:
a. the sale, lease, exchange or other transfer, directly or indirectly, of
substantially all of the assets of the Company (in one transaction or in a
series of related transactions) to a person or entity that is not controlled by
the Company;
b. the approval by the stockholders of the Company of any plan or proposal for
the liquidation or dissolution of the Company;
c. a merger or consolidation to which the Company is a party if the stockholders
of the Company immediately prior to the effective date of such merger or
consolidation have “beneficial ownership” (as defined in Rule 13d-3 under the
Exchange Act), immediately following the effective date of such merger or
consolidation, of securities of the surviving corporation representing (i) more
than 50%, but not more than 80% of the combined voting power of the surviving
corporation’s then outstanding securities ordinarily having the right to vote at
elections of directors, unless such merger or consolidation has been approved in
advance by the Incumbent Directors (as defined in Section 13.2 below), or
(ii) 50% or

 

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less of the combined voting power of the surviving corporation’s then
outstanding securities ordinarily having the right to vote at elections of
directors (regardless of any approval by the Incumbent Directors);
d. any person becomes after the effective date of the Plan the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of (i) 40% or more, but not 50% or more, of the combined voting
power of the Company’s outstanding securities ordinarily having the right to
vote at elections of directors, unless the transaction resulting in such
ownership has been approved in advance by the Incumbent Directors, or (ii) 50%
or more of the combined voting power of the Company’s outstanding securities
ordinarily having the right to vote at elections of directors (regardless of any
approval by the Incumbent Directors);
e. the Incumbent Directors cease for any reason to constitute at least a
majority of the Board; or
f. 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.
13.2 Incumbent Directors. For purposes of this Section 13, “Incumbent Directors”
of the Company means any individuals who are members of the Board on the
effective date of the Plan and any individual who subsequently becomes a member
of the Board whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the Incumbent
Directors (either by specific vote or by approval of the Company’s proxy
statement in which such individual is named as a nominee for director without
objection to such nomination).
13.3. Acceleration of Vesting. Without limiting the authority of the Committee
under Section 3.2 of the Plan, if a Change in Control of the Company occurs,
then unless the Committee otherwise determines and sets forth in the agreement
evidencing an Incentive Award at the time of grant of such Incentive Award,
(a) all outstanding Options and Stock Appreciation Rights will become
immediately exercisable in full and will remain exercisable for the remainder of
their terms, regardless of whether the Participant to whom such Options or Stock
Appreciation Rights have been granted remains 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
Performance Units and Stock Bonuses then held by the Participant will vest
and/or continue to vest in the manner determined by the Committee and set forth
in the agreement evidencing such Performance Unites or Stock Bonuses.
13.4 Cash Payment for Options. If a Change of Control of the Company occurs,
then the Committee, if approved by the Committee either in an agreement
evidencing an Incentive Award at the time of grant or at any time after the
grant of an Incentive Award, may determine that some or all Participants holding
outstanding Options will receive, with respect to some or all of the shares of
Common Stock subject to such Options, as of the effective date of any such
Change in Control of the Company, cash in an amount equal to the excess of the
Fair Market Value of such shares immediately prior to the effective date of such
Change in Control of the Company over the exercise price per share of such
Options.
13.5 Limitation on Change in Control Payments. Notwithstanding anything in
Section 13.3 or 13.4 of the Plan to the contrary, if, with respect to a
Participant, the

 

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acceleration of the vesting of an Incentive Award as provided in Section 13.3 or
the payment of cash in exchange for all or part of an Incentive Award as
provided in Section 13.4 (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 which such Participant has the right to receive from the
Company or any corporation that is a member of an “affiliate group” (as defined
in Section 1504(a) of the Code without regarding 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 13.3 or 13.4 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, however, that if such
Participant is subject to a separate agreement with the Company or a subsidiary
that specifically provides that payments attributable to one or more forms to
employee stock incentives or to payments made in lieu of employee stock
incentives will not reduce any other payments under such agreement, event if it
would constitute an excess parachute payment, or provides that the Participant
will have the discretion to determine which payment will be reduced in order to
avoid an excess parachute payment, then the limitations of this Section 13.5
will, to that extent, not apply.

14.   Rights of Eligible Recipients and Participants; Transferability.

14.1 Employment or Service. Nothing in the 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.
14.2 Rights as a Stockholder. As a holder of Incentive Awards (other than
Restricted Stock Awards and Stock Bonuses), 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 the Plan, no adjustment
will be made for dividends or distributions with respect to such Incentive
Awards as to which there is a record date preceding the date the Participant
becomes the holder of record of such shares, except as the Committee may
determine.
14.3 Restrictions on Transfer. Except pursuant to testamentary will or the laws
of descent and distribution or as otherwise expressly permitted by the Plan, no
right or interest of any Participant in an Incentive Award prior to the exercise
or vesting 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. A Participant will, however, be entitled to designate a beneficiary
to receive an Incentive Award upon such Participant’s death, and in the event of
a Participant’s death, payment of any amounts due under the Plan will be made
to, and exercise of any Options (to the extent permitted pursuant to Section 11
of the Plan) may be made by, the Participant’s legal representatives, heirs and
legatees.
14.4 Non-Exclusivity of the Plan. Nothing contained in the 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.

 

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15.   Securities Law and Other Restrictions.

     Notwithstanding any other provision of the Plan or any agreements entered
into pursuant to the 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 the Plan, unless (a) there is in effect with
respect to such shares a registration statement under the Securities Act and any
applicable state securities laws or an exemption from such registration under
the Securities Act and applicable state securities laws, and (b) there has been
obtained any other consent, approval or permit from any other regulatory body
which the Committee 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.

16.   Plan Amendment, Modification and Termination.

     The Board may suspend or terminate the Plan or any portion thereof at any
time, and may amend the Plan from time to time in such respects as the Board may
deem advisable in order that Incentive Awards under the 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
amendments to the Plan will be effective without approval of the stockholders of
the Company if stockholder approval of the amendment is then required pursuant
to Rule 16b-3 under the Exchange Act, Section 422 of the Code or the rules of
the NASD or any stock exchange. No termination, suspension or amendment of the
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 is deems appropriate under
Sections 3.2(c), 4.3 and 13 of the Plan.

17.   Effective Date and Duration of the Plan

     The Plan is effective as of February 19, 2009, the date it was adopted by
the Board in its current form. The Plan will terminate at midnight on
February 18, 2019, and may be terminated prior to such time by Board action, and
no Incentive Award will be granted after such termination. Incentive Awards
outstanding upon termination of the Plan may continue to be exercised, or become
free of restrictions, in accordance with their terms.

18.   Miscellaneous

18.1 Governing Law. The validity, construction, interpretation, administration
and effect of the Plan and any rules, regulations and actions relating to the
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.
18.2 Successors and Assigns. The Plan will be binding upon and inure to the
benefit of the successors and permitted assigns of the Company and the
Participants.