Exhibit 10.4

 

THE ST. PAUL TRAVELERS COMPANIES, INC.

2004 STOCK INCENTIVE PLAN

 

 

                1.             Purpose.  The purposes of The St. Paul Travelers
Companies, Inc. 2004 Stock Incentive Plan (the “Plan”) are (i) to attract and
retain Employees by providing competitive compensation opportunities, (ii) to
provide Employees with incentive-based compensation in the form of Company
Common Stock, (iii) to attract and compensate non-employee directors for service
as Board and committee members, (iv) to encourage decision making based upon
long-term goals, and (v) to align the interest of Employees and non-employee
directors with that of the Company’s shareholders by encouraging such persons to
acquire a greater ownership position in the Company.

                2.             Definitions.  Wherever used herein, the following
terms shall have the respective meanings set forth below:

                “Award” means an award to a Participant made in accordance with
the terms of the Plan.

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

                “Code” means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.

                “Company” means The St. Paul Travelers Companies, Inc.

                                                                “Committee”
means the Compensation Committee of the Board, or a subcommittee of that
committee, consisting of no less than two directors, all of whom shall qualify
as “independent directors” within the meaning of Rule 303A of the New York Stock
Exchange, as “outside directors” within the meaning of Section 162(m) of the
Code, and as “non-employee directors” within the meaning of Rule 16b-3 under the
Exchange Act.

                                                                “Common Stock”
means the common stock of the Company.

                                                                “Change of
Control” means the first to occur of (i) any “person” within the meaning of
Section 14(d) of the Exchange Act, other than the Company, a subsidiary or any
employee benefit plan(s) sponsored by the Company or any subsidiary, is or
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of fifty percent (50%) or more of the Common
Stock, other than pursuant to a purchase of Common Stock from the Company; (ii)
individuals who constitute the Board on the effective date of this Plan, cease
for any reason to constitute at least a majority thereof, provided that any
person becoming a director subsequent to the effective date of this Plan, whose
election, or nomination for election by the Company’s shareholders, was approved
by a vote of at least three quarters of the directors comprising the Board on
the effective date of this Plan (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without

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objection to such nomination) shall be, for purposes of this clause (ii),
considered as though such person were a member of the Board on the effective
date of this Plan; (iii) any plan or proposal for the liquidation of the Company
is adopted by the stockholders of the Company; (iv) all or substantially all of
the assets of the Company are sold, liquidated or distributed; or (v) there
occurs a reorganization, merger, consolidation or other corporate transaction
involving the Company (a “Transaction”), in each case, with respect to which the
shareholders of the Company immediately prior to such Transaction do not,
immediately after the Transaction, own more than fifty percent (50%) of the
combined voting power of the Company or other entity resulting from such
Transaction in substantially the same proportion as their ownership of the
voting power of the Company immediately prior to such Transaction.

                                                                “Employee” means
an employee, including non-employee directors, as defined in General Instruction
A to the Registration Statement on Form S-8 promulgated under the Securities Act
of 1933, as amended, or any successor form or statute, as determined by the
Committee.

                                                                “Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time, and any
successor thereto.

                                                                “Fair Market
Value” means, as of a specified date, one of the following as determined by the
Committee, each of which shall be based on trading prices of a share of Common
Stock on the New York Stock Exchange or on any national securities exchange on
which the shares of Common Stock are then listed, or if the shares were not
traded on such date, then on the next preceding date on which such shares of
Common Stock were traded, all as reported by such source as the Committee may
select:  (i) the average of the high and low trading prices on such date, (ii)
the closing price on such date or (iii) the closing price on the next preceding
trading day.

                                                “ISO” means an incentive stock
option as defined in Section 422 of the Code.

“Option Proceeds” means the cash actually received by the Company for the
exercise price in connection with the exercise of a stock option granted under
the Plan or the Prior Plans that is exercised after the effective date of the
Plan plus the tax benefit that could be realized by the Company as a result of
such stock option exercise, which tax benefit shall be determined by multiplying
(a) the amount that is deductible for federal income tax purposes as a result of
such stock option exercise (currently, equal to the amount upon which the
Participant’s withholding tax obligation is calculated) times (b) the maximum
federal corporate income tax rate for the year of exercise. To the extent a
Participant pays the exercise price and/or withholding taxes with shares of
Common Stock, Option Proceeds shall not be calculated with respect to the
amounts so paid with shares.

                “Participant” means an Employee who is selected by the Committee
to participate in the Plan.

                                                                “Performance
Conditions” may, for purposes of Awards under the Plan, include one or more of:
earnings per share, earnings before interest and tax, net income, adjusted net
income, operating income, stock price, total shareholder return, market share,
return on equity, cash return

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on equity, achievement of profit, loss and/or expense ratio, revenue targets,
cash flows, book value, return on assets or return on capital.  Such Performance
Conditions may be based on the attainment of levels set for such financial
measures with respect to the Company or any subsidiary, division, business unit,
or any combination thereof and may be set as an absolute measure or relative to
a designated peer group or index of comparable companies.  Such Performance
Conditions shall be set and defined by the Committee within the time period
prescribed by Section 162(m) of the Code.  Unless specifically determined by the
Committee at the time a Performance Condition is set, the satisfaction of any
Performance Condition shall be determined without regard to any change in
accounting rules which becomes effective following the time such Performance
Condition is set.

                                                                “Prior Plans”
means The St. Paul Companies, Inc. Amended and Restated 1994 Stock Incentive
Plan and the Travelers Property Casualty Corp. 2002 Stock Incentive Plan
(including the Travelers Property Casualty Corp. Compensation Plan for
Non-Employee Directors).

                3.             Shares Subject to the Plan.  Subject to
adjustment as provided in Section 20, the number of shares of Common Stock which
shall be available and reserved for grant of Awards under the Plan shall be
35,000,000.  The shares of Common Stock issued under the Plan may come from
authorized and unissued shares or shares purchased in the open market.  No
Participant may, in any consecutive thirty-six (36) month period, be granted
Awards of stock options and stock appreciation rights under Sections 7 and 8 of
the Plan, respectively, with respect to more than 3,000,000 shares of Common
Stock or more than 1,000,000 shares of restricted stock under Section 9 of the
Plan, each of which numbers shall be subject to adjustment as provided in
Section 20.

                Shares of Common Stock subject to an Award that expires
unexercised, that is forfeited, terminated or canceled, that is settled in cash
or other forms of property, or otherwise does not result in the issuance of
shares of Common Stock, in whole or in part, shall thereafter again be available
for grant under the Plan.  If the exercise price of any stock option is
satisfied by delivering shares of Common Stock to the Company (by tender of such
shares or attestation) or by authorizing the Company to retain shares of Common
Stock, only the number of shares of Common Stock delivered to the Participant
net of shares of Common Stock delivered to the Company (by tender or
attestation) or retained by the Company shall be deemed delivered for purposes
of determining the maximum number of shares of Common Stock available for grant
under the Plan.  To the extent any shares of Common Stock subject to an Award
are not delivered to a Participant because such shares are used to satisfy an
applicable tax or other withholding obligations, such shares shall not be deemed
to have been delivered for purposes of determining the maximum number of shares
of Common Stock available for grant under the Plan. Shares of Common Stock
purchased by the Company on the open market using Option Proceeds shall also be
available for grant under the Plan; provided, however, that the increase in the
number of shares of Common Stock available for grant pursuant to such market
purchases shall not be greater than the number that could be repurchased at Fair
Market Value on the date of exercise of the stock option giving rise to such
Option Proceeds.  The provisions of this paragraph shall also apply to any
awards granted under the Prior Plans that are outstanding on the effective date
of the Plan.  In addition, the number of shares of Common Stock available for
grant under the Plan shall not be reduced by shares subject to Awards granted
upon the

 

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assumption of or in substitution for awards granted by a business or entity that
is merged into or acquired by (or whose assets are acquired by) the Company.

                4.             Administration.

                4.1           Committee Authority. The Committee shall have full
and exclusive power to administer and interpret the Plan, to grant Awards and to
adopt such administrative rules, regulations, procedures and guidelines
governing the Plan and the Awards as it may deem necessary in its discretion,
from time to time. The Committee’s authority shall include, but not be limited
to, the authority to:

 

                (i)            determine the type of Awards to be granted under
the Plan;

 

                (ii)           select Award recipients and determine the extent
of their participation; and

 

                (iii)          establish all other terms, conditions,
restrictions and limitations applicable to Awards and the shares of Common Stock
issued pursuant to Awards, including, but not limited to, those relating to a
Participant’s retirement, death, disability, leave of absence or termination of
employment.

 

                The Committee’s right to make any decision, interpretation or
determination under the Plan shall be in its sole and absolute discretion.

 

                4.2           Administration of the Plan. The administration of
the Plan shall be managed by the Committee.  The Committee shall have the power
to prescribe and modify, as necessary, the form of Award document, to correct
any defect, supply any omission or clarify any inconsistency in the Plan and/or
in any Award document and to take such actions and make such administrative
determinations that the Committee deems appropriate in its discretion.  Any
decision of the Committee in the administration of the Plan, as described
herein, shall be final, binding and conclusive on all parties concerned,
including the Company, its shareholders and subsidiaries and all Participants.

                4.3           Delegation of Authority. The Committee may at any
time delegate to a committee of the Board or one or more officers of the Company
some or all of its authority over the administration of the Plan, with respect
to persons who are not subject to the reporting requirements of Section 16(a) of
the Exchange Act or “covered employees” described in Section 162(m) of the Code.

 

                5.             Eligibility.  The Committee shall determine which
Employees shall be eligible to receive Awards. No Employee shall have at any
time the right to receive an Award, or having been selected for an Award, to
receive any further Awards.

                The Committee may also grant stock options, stock appreciation
rights, restricted stock, performance awards or other Awards under the Plan in
substitution for, or in connection with the assumption of, existing options,
stock appreciation rights, restricted stock, performance awards or other awards
granted, awarded or issued by another entity and assumed or otherwise agreed to
be provided for by the Company pursuant to or by reason of a transaction
involving a merger, consolidation, plan of exchange, acquisition of property or
stock, separation, reorganization or liquidation to which the Company or any
subsidiary is a party.  The terms and conditions of the

 

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substitute Awards may vary from the terms and conditions set forth in the Plan
to the extent the Committee at the time of the grant may deem appropriate to
conform, in whole or in part, to the provisions of the awards in substitution
for which they are granted.

 

                6.             Awards.  Awards under the Plan may consist of:
non-qualified stock options, ISOs, stock appreciation rights, restricted stock,
performance awards and any other stock-based award, including deferred stock
units.

                7.             Stock Options.

                7.1           Types of Options.  Stock options granted under the
Plan may be non-qualified stock options, ISOs or any other type of stock option
permitted under the Code, as determined by the Committee and evidenced by the
document governing the Award.

                7.2           ISOs. The terms and conditions of any ISO shall be
subject to the provisions of Section 422 of the Code and the terms, conditions,
limitations and administrative procedures established by the Committee.  At the
discretion of the Committee, ISOs may be granted to any Employee of the Company
and its subsidiaries, as such term is defined in Section 424(f) of the Code.  No
ISO may be granted to any Participant who, at the time of such grant, owns more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any Subsidiary, unless (i) the exercise price for
such ISO is at least one-hundred and ten percent (110%) of the Fair Market Value
of a share of Common Stock on the date the ISO is granted, and (ii) the date on
which such ISO terminates is a date not later than the day preceding the fifth
anniversary of the date on which the ISO is granted.   Any Participant who
disposes of shares acquired upon the exercise of an ISO either within two years
after the date of grant of such ISO or within one year after the transfer of
such shares to the Participant, shall notify the Company of such disposition and
of the amount realized upon such disposition.  The maximum number of shares of
Common Stock available under the Plan for issuance as ISOs shall be 35,000,000.

 

                All stock options granted under the Plan are intended to be
nonqualified stock options, unless the applicable Award Agreement expressly
states that the stock option is intended to be an ISO.  If an stock option is
intended to be an ISO, and if for any reason such stock option (or portion
thereof) shall not qualify as an ISO, then, to the extent of such
nonqualification, such stock option (or portion thereof) shall be regarded as a
nonqualified stock option granted under the Plan; provided that such stock
option (or portion thereof) otherwise complies with the Plan’s requirements
relating to nonqualified stock options.

                7.3           Exercise Price and Period.  The Committee shall
establish the exercise price, which price (other than for substitute options
pursuant to Section 5) shall be no less than the Fair Market Value of a share of
the Common Stock on the date of grant.  Each stock option may be exercised in
whole or in part on the terms provided in the Award document.  The Committee
also shall establish the period during which a stock option is exercisable,
provided that in no event may a stock option be exercisable for a period of more
than ten (10) years after the date of grant, and in no event may a stock option
become exercisable earlier than one year after the date of grant, except in the
case of:

                (i)            an earlier date specifically approved by the
Committee to attract a key executive to join the Company;

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                (ii)           a Change of Control if so provided by the
Committee; or

                (iii)          a stock option issued as a substitute option
pursuant to Section 5.

                When a stock option is no longer exercisable, it shall be deemed
to have lapsed or expired.

                7.4           Manner of Exercise.  The exercise price of each
share as to which a stock option is exercised and, if requested, the amount of
any federal, state, local or foreign withholding taxes, shall be paid in full at
the time of such exercise.  The exercise of any stock option shall be contingent
on and subject to such payment of the exercise price and withholding taxes, or
the arrangement for the satisfaction of such payments in a manner satisfactory
to the Committee. Such payment shall be made in any of the following forms:

                (i)            in cash (including check, bank draft or money
order),

                (ii)           by delivery of shares of Common Stock owned by
the Participant (by tender of such shares or by attestation) having a Fair
Market Value as of the date of exercise equal to the exercise price for the
total number of shares as to which the option is exercised, subject to (i) the
shares so delivered being “mature shares” for purposes of the applicable
accounting rules then in effect, or otherwise having such characteristics as are
required, if necessary in order to avoid adverse accounting consequences to the
Company on account of use of such shares to pay the exercise price and (ii) such
other guidelines for the tender of Common Stock as the Committee may establish,

                (iii)          if approved by the Committee in the related
agreement or other action by the Committee, authorization of the Company to
retain from the total number of shares of Common Stock as to which the option is
exercised that number of shares of Common Stock having a Fair Market Value as of
the date of exercise equal to the exercise price for the total number of shares
as to which the option is exercised, plus applicable taxes, if requested, and

                (iv)          such other consideration as the Committee deems
appropriate, or by a combination of cash, shares of Common Stock, retention of
shares and such other consideration.

                The Committee may, with the consent of the Participant, cancel
any outstanding stock option in consideration of a cash payment in an amount not
greater than the excess, if any, of the aggregate Fair Market Value (on the date
of such cancellation) of the shares subject to the stock option over the
aggregate exercise price of such stock option; provided, however, that the
Participant’s consent is not required for such a cancellation pursuant to
Section 13(ii) hereof.

                8.             Stock Appreciation Rights.  An Award of a stock
appreciation right shall entitle the Participant, subject to terms and
conditions determined by the Committee, to receive upon exercise of the stock
appreciation right all or a portion of the excess of the Fair Market Value of a
specified number of shares of Common Stock as of the date of exercise of the
stock appreciation right over a specified strike price, which price shall be no
less than the Fair Market Value of a share of the Common Stock on the date of
grant of the stock appreciation right or the date of grant of a previously
granted related stock option, as determined by the Committee in its

 

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discretion.  A stock appreciation right may be granted in connection with a
previously or contemporaneously granted stock option, or independent of any
stock option.  If issued in connection with a stock option, the Committee may
impose a condition that the exercise of a stock appreciation right cancels the
stock option with which it is connected and exercise of the connected stock
option cancels the stock appreciation right.  Each stock appreciation right may
be exercised in whole or in part on the terms provided in the Award document. 
Stock appreciation rights granted independent of any stock option shall be
exercisable for such period as specified by the Committee, but in no event may
stock appreciation rights become exercisable less than one year after the date
of grant, except in the case of:

 

                (i)            a shorter exercise period specifically approved
by the Committee to attract a key executive to join the Company;

                (ii)           a stock appreciation right issued as a substitute
stock appreciation right pursuant to Section 5; or

 

                (iii)          a stock appreciation right that vests pursuant to
the terms of Section 13.

 

In addition, in no event may a stock appreciation right be exercisable for a
period of more than ten (10) years.  When a stock appreciation right is no
longer exercisable, it shall be deemed to have lapsed or terminated.  Except as
otherwise provided in the applicable agreement, upon exercise of a stock
appreciation right, payment to the Participant shall be made in the form of
cash, shares of Common Stock or a combination of cash and shares of Common Stock
as promptly as practicable after such exercise.  The agreement may provide for a
limitation upon the amount or percentage of the total appreciation on which
payment (whether in cash and/or shares of Common Stock) may be made in the event
of the exercise of a stock appreciation right.  The Committee may, with the
consent of the Participant, cancel any outstanding stock appreciation right in
consideration of a cash payment in an amount not in excess of the difference
between the aggregate Fair Market Value (on the date of such cancellation) of
any shares subject to the stock appreciation right and the aggregate strike
price of such Shares; provided, however, that the Participant’s consent is not
required for such a cancellation in connection with the purchase of such stock
appreciation right pursuant to Section 13(ii) hereof.

 

                9.             Restricted Stock.  Restricted stock may be
granted in the form of actual shares of Common Stock, which shall be evidenced
by a certificate with an appropriate legend, or in uncertificated direct
registration form, registered in the name of the Participant but held by the
Company until the end of the restricted period, or share units, as determined by
the Committee.  As a condition to the receipt of an award of restricted stock in
the form of actual shares of Common Stock, a Participant may be required to
execute any stock powers, escrow agreements or other documents as may be
determined by the Committee.  Any conditions, limitations, restrictions, vesting
and forfeiture provisions shall be established by the Committee in its
discretion.  In order to reflect the impact of the restrictions on the value of
the restricted stock, as well as the possibility of forfeiture of the restricted
stock, the Fair Market Value may be discounted at a rate to be determined by the
Committee, for purposes of determining the number of shares allocable to an
Award.  No portion of an Award of restricted stock may vest as to any of the
shares subject to the Award earlier than one year from the date of grant, except
in the case of:

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                (i)            a Change of Control if so provided by the
Committee;

                (ii)           death, retirement or disability if so provided by
the Committee; or

                (iii)          restricted stock issued as a substitute Award
pursuant to Section 5.

The Committee may, on behalf of the Company, approve the purchase by the Company
of any shares subject to an Award of restricted stock, to the extent vested, for
an amount equal to the aggregate Fair Market Value of such shares on the date of
purchase.  Awards of restricted stock may provide the Participant with dividends
or dividend equivalents (pursuant to Section 16) and voting rights, if in the
form of actual shares, prior to vesting.  With respect to Awards of restricted
stock intended to qualify as “performance-based compensation” under Section
162(m) of the Code, the Committee shall establish and administer Performance
Conditions in the manner described in Section 162(m) and Treasury Regulations
promulgated thereunder as an additional condition to the vesting or payment, as
applicable, of such Awards.

                10.           Performance Awards.  Performance awards may be in
the form of performance shares valued with reference to a share of Common Stock
or performance units valued with reference to an amount of property (including
cash) other than shares of Common Stock.  Performance awards may also be granted
in the form of any other stock-based Award.  Performance awards shall entitle a
Participant to future payments based upon the attainment of Performance
Conditions established in writing by the Committee.  Payment shall be made in
cash, shares of Common Stock or any combination thereof, as determined by the
Committee.  The agreement establishing a performance award may establish that a
portion of a Participant’s Award will be paid for performance that exceeds the
minimum target but falls below the maximum target available to the Award.  With
respect to Awards of restricted stock intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, the Committee shall establish
and administer Performance Conditions in the manner described in Section 162(m)
and Treasury Regulations promulgated thereunder as an additional condition to
the vesting or payment, as applicable, of such performance awards.  The
agreement shall also provide for the timing of payment, which shall not be
earlier than one year from date of grant, except in the case of:

 

                (i)            a Change of Control if so provided by the
Committee;

                (ii)           an earlier date specifically approved by the
Committee to attract a key executive to join the Company; or

                (ii)           a performance award issued as a substitute Award
pursuant to Section 5.

 

                Following the conclusion or acceleration of the period of time
designated for attainment of the Performance Conditions, the Committee shall
determine the extent to which the Performance Conditions have been attained and
shall then cause to be delivered to the Participant (i) a number of shares of
Common Stock equal to the number of performance shares or the value of such
performance units determined by the Committee to have been earned, and/or (ii)
cash equal to the Fair Market Value of such number of performance shares or the
value of performance units, as the Committee shall elect or as shall have been
stated in the applicable agreement.  In no event may performance awards be
granted to a single Participant in any 12-month period (i) in respect of more
than 250,000 shares of Common Stock (if the Award is

 

 

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denominated in shares of Common Stock) or (ii) having a maximum payment with a
value greater than $10,000,000 (if the Award is denominated in other than shares
of Common Stock).

 

                11.  Other Stock-Based Awards.  The Committee may issue
unrestricted shares of Common Stock, or other awards denominated in Common Stock
(including but not limited to phantom stock and deferred stock units), to
Participants, alone or in tandem with other Awards, in such amounts and subject
to such terms and conditions as the Committee shall from time to time in its
sole discretion determine.  With respect to such Awards intended to qualify as
“performance-based compensation” under Section 162(m) of the Code, the Committee
shall establish and administer Performance Conditions in the manner described in
Section 162(m) and Treasury Regulations promulgated thereunder as an additional
condition to the vesting and payment of such Awards.  In no event may other
stock-based Awards described in this Section 11 be granted to a single
Participant in respect of more than 250,000 shares of Common Stock in any
12-month period.  The terms and conditions of any such other stock-based Awards
subject to time-based restrictions on vesting will be limited as specified in
Section 9 for Awards of restricted stock.

 

                12.           Award Documents.  Each Award under the Plan shall
be evidenced by an Award document (which may consist of a term sheet or an
agreement, and may be provided in electronic form) setting forth the terms and
conditions, as determined by the Committee, which shall apply to such Award, in
addition to the terms and conditions specified in the Plan.  The Committee may,
in its discretion, place terms in the Award Documents that provide for the
acceleration of any time periods relating to the exercise or realization of any
Awards so that such Awards may be exercised or realized in full on or before a
date fixed by the Committee, in connection with a Change in Control.

                13.           Change of Control. The Committee may, in its
discretion, at the time an Award is made hereunder or at any time prior to,
coincident with or after the time of a Change of Control:

(i)            provide for the purchase of such Awards, upon the Participant’s
consent, for an amount of cash equal to the amount which could have been
obtained upon the exercise or realization of such rights had such Awards been
currently exercisable or payable;

 

(ii)           make such adjustment to the Awards then outstanding as the
Committee deems appropriate to reflect such transaction or change; and/or

 

(iii)          cause the Awards then outstanding to be assumed, or new rights
substituted therefore, by the surviving corporation in such Change of Control.

 

The Committee may, in its discretion, include such further provisions and
limitations in any Award document as it may deem equitable and in the best
interests of the Company.

 

                14.           Withholding.  The Company and its subsidiaries
shall have the right to deduct from any payment to be made pursuant to the Plan,
or to require prior to the issuance or delivery of any shares of Common Stock or
the payment of cash under the Plan, any taxes (whether federal, state, local or
foreign) to be withheld therefrom.  The Committee may, in its discretion,

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permit a Participant to elect to satisfy such withholding obligation by any of
the methods pursuant to which the exercise price of a stock option may be paid
pursuant to Section 7.  Any satisfaction of tax obligations through the
withholding of shares may only be up to the statutory minimum tax rate. Any
fraction of a share of Common Stock required to satisfy such obligation shall be
disregarded and the amount due shall instead be paid in cash to the Participant.

                15.           Transferability.  Except as provided in this
Section, during the lifetime of a Participant to whom an Award is granted, only
that Participant (or that Participant’s legal representative in the case of
disability) may exercise a stock option or stock appreciation right, or receive
payment with respect to restricted stock, a performance award or any other
Award.  The Committee may permit (on such terms, conditions and limitations as
it determines), an Award of restricted stock, stock options, stock appreciation
rights, performance shares or performance units or other Awards to be
transferred or transferable to the extent permissible by law and, in the case of
an ISO, to the extent permissible under Section 422 of the Code.  Other than as
stated in the preceding sentence, no Award may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a Participant otherwise
than by will or by the laws of descent and distribution, and any such purported
assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall
be void and unenforceable against the Company.

                16.           DEFERRALS AND SETTLEMENTS.  THE COMMITTEE MAY
REQUIRE OR PERMIT PARTICIPANTS TO ELECT TO DEFER THE ISSUANCE OF SHARES OR THE
SETTLEMENT OF AWARDS IN CASH UNDER SUCH RULES AND PROCEDURES AS IT MAY ESTABLISH
UNDER THE PLAN.  IT MAY ALSO PROVIDE THAT DEFERRED SETTLEMENTS INCLUDE THE
PAYMENT OR CREDITING OF INTEREST OR DIVIDEND EQUIVALENTS ON THE DEFERRAL
AMOUNTS.

17.           Dividends and Dividend Equivalents.  An Award (including without
limitation a stock option or stock appreciation right Award) may, if so
determined by the Committee, provide the Participant with the right to receive
dividend payments or dividend equivalent payments with respect to Common Stock
subject to the Award (both before and after the Common Stock subject to the
Award is earned, vested or acquired), which payments may be either made
currently or credited to an account for the Participant, and may be settled in
cash or Common Stock, as determined by the Committee.  Any such settlements, and
any such crediting of dividends or dividend equivalents or reinvestment in
shares of Common Stock, may be subject to such conditions, restrictions and
contingencies as the Committee shall establish, including the reinvestment of
such credited amounts in Common Stock equivalents.

                18.           No Right to Employment.  No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continue in the employ of the
Company or its subsidiaries. Further, the Company and its subsidiaries expressly
reserve the right at any time to dismiss a Participant without any liability, or
any claim under the Plan, except as provided herein or in any agreement entered
into hereunder.

                19.           Rights as a Shareholder.  Unless the Committee
determines otherwise, a Participant shall not have any rights as a shareholder
with respect to shares of Common Stock covered by an Award until the date the
Participant becomes the holder of record with respect to such shares.  No
adjustment will be made for dividends or other rights for which the record date
is prior to such date, except as provided in Section 17.

 

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                20.           Adjustment of and Changes in Common Stock.  In the
event of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, combination or exchange of shares or other change in the corporate
structure or shares of stock of the Company, or any distributions to common
shareholders other than cash dividends, the Committee may make such substitution
or adjustment, if any, as it deems to be equitable, as to the number and kind of
shares of Common Stock or other securities issued or reserved for issuance
pursuant to the Plan and to outstanding Awards (including but not limited to the
number and kind of shares of Common Stock or other securities to which such
Awards are subject, and the exercise or strike price of such Awards).

                21.           Amendment; Repricing.  The Board may amend,
suspend or terminate the Plan or any portion thereof at any time, provided that
(i) no amendment shall be made without shareholder approval if such approval is
necessary in order for the Plan to continue to comply with the rules of the New
York Stock Exchange or if such approval is necessary in order for the Company to
avoid being denied a tax deduction under Section 162(m) of the Code, and (ii) no
amendment, suspension or termination may adversely affect any outstanding Award
without the consent of the Participant to whom such Award was made.  Except for
adjustments pursuant to Section 20, in no event may any stock option or stock
appreciation right granted under the Plan be amended to decrease the exercise
price or strike price thereof, as the case may be, or be cancelled in
conjunction with the grant of any new stock option or stock appreciation right
with a lower exercise price or strike price, as the case may be, or otherwise be
subject to any action that would be treated, for accounting purposes or under
the rules of the New York Stock Exchange, as a “repricing” of such stock option
or stock appreciation right, unless such amendment, cancellation or action is
approved by the Company’s shareholders in accordance with applicable law and
rules of the New York Stock Exchange.

                22.           Government and Other Regulations.  The obligation
of the Company to settle Awards in Common Stock shall be subject to all
applicable laws, rules, and regulations, and to such approvals by governmental
agencies as may be required.  Notwithstanding any terms or conditions of any
Award to the contrary, the Company shall be under no obligation to offer to sell
or to sell and shall be prohibited from offering to sell or selling any shares
of Common Stock pursuant to an Award unless such shares have been properly
registered for sale pursuant to the Securities Act or 1933 with the Securities
and Exchange Commission or unless the Company has received an opinion of
counsel, satisfactory to the Company, that such shares may be offered or sold
without such registration pursuant to an available exemption therefrom and the
terms and conditions of such exemption have been fully complied with.  The
Company shall be under no obligation to register for sale under the Securities
Act of 1933 any of the shares of Common Stock to be offered or sold under the
Plan.  If the shares of Common Stock offered for sale or sold under the Plan are
offered or sold pursuant to an exemption from registration under the Securities
Act of 1933, the Company may restrict the transfer of such shares and may legend
the Common Stock certificates representing such shares in such manner as it
deems advisable to ensure the availability of any such exemption.

                23.           Relationship to Other Benefits.  No payment under
the Plan shall be taken into account in determining any benefits under any
pension, retirement, profit sharing, group insurance or other benefit plan of
the Company or any subsidiary or affiliate of the Company except as otherwise
specifically provided in such other plan.

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                24.           Governing Law.  The Plan shall be construed and
its provisions enforced and administered in accordance with the laws of the
State of Minnesota applicable to contracts made and performed wholly within such
state by residents thereof.

                25.           Effective Date.  The Plan shall be effective as of
the date of approval by the Company’s shareholders in a manner intended to
comply with the shareholder approval requirements of the New York Stock Exchange
and Section 162(m) of the Code.  Subject to earlier termination pursuant to
Section 21, the Plan shall have a term of ten (10) years from its effective
date.

                26.           Foreign Employees.  Awards may be granted to
Participants who are foreign nationals or employed outside the United States, or
both, on such terms and conditions different from those applicable to Awards to
Participants employed in the United States as may, in the judgment of the
Committee, be necessary or desirable in order to recognize differences in local
law or tax policy. The Committee also may impose conditions on the exercise or
vesting of Awards in order to minimize the Company’s obligation with respect to
tax equalization for Employees on assignments outside their home country.

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