Exhibit 10(A)


 


ECOLAB INC.


2005 STOCK INCENTIVE PLAN


 


1.                                       Purpose
of Plan.


 


The purpose of the Ecolab Inc. 2005 Stock Incentive Plan (the “Plan”)
is to advance the interests of Ecolab Inc. (the “Company”) and its stockholders
by enabling the Company and its Subsidiaries to attract and retain qualified
individuals through opportunities for equity participation in the Company, and
to reward those individuals who contribute to the achievement of the Company’
economic objectives.


 


2.                                       Definitions.


 


The following terms will have the meanings 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 to deliver stock certificates to be issued upon
such exercise directly to such broker or dealer or their nominee.


 


2.3                                 “Cause” means (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 confidentiality or noncompete agreement entered into
with the Company or any Subsidiary.


 


2.4                                 “Change in Control” means an event described in Section 13.1
of the Plan; provided, however, if distribution of an Incentive Award subject
to Section 409A of the Code is triggered by a Change in Control, the term
Change in Control will mean a change in the ownership or effective control of
the Company, or in the ownership of a substantial portion of the assets of the
Company, as such term is defined in Section 409A of the Code and the
regulations and rulings issued thereunder.


 


2.5                                 “Code” means the Internal Revenue Code of 1986, as
amended.


 


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


 





















 


2.7                                 “Common Stock” means the common stock of the Company,
par value $1.00 per share, or the number and kind of shares of stock or other
securities into which such Common Stock may be changed in accordance with Section 4.3
of the Plan.


 


2.8                                 “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; provided, however, if
distribution of an Incentive Award subject to Section 409A of the Code is
triggered by an Eligible Recipient’s Disability, such term will mean that the
Eligible Recipient is disabled as defined by Section 409A of the Code and
the regulations and rulings issued thereunder.


 


2.9                                 “Eligible Recipients” means all employees (including,
without limitation, officers and directors who are also employees) of the
Company or any Subsidiary and any consultants, advisors and independent
contractors of the Company or any Subsidiary.


 


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


 


2.11                           “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) the mean between the reported high and
low sale prices of the Common Stock during the regular daily trading session,
as quoted in the WALL STREET JOURNAL reports of the New York Stock Exchange -
Composite Transactions.


 


2.12                           “Incentive Award” means an Option, Stock Appreciation
Right, Restricted Stock Award, Stock Unit Award or Performance Award granted to
an Eligible Recipient pursuant to the Plan.


 


2.13                           “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.


 


2.14                           “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 an Incentive Stock Option.


 


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


 


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


 


2.17                           “Performance Criteria” means the performance criteria
that may be used by the Committee in granting Incentive Awards contingent upon
achievement of performance goals, consisting of net sales, operating income,
income before income taxes, net income, net income per share (basic or
diluted), profitability as measured by return ratios (including return on
assets, 


 


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return on equity, return on investment
and return on sales), cash flows, market share, cost reduction goals, margins
(including one or more of gross, operating and net income margins), stock
price, total return to stockholders, economic value added, working capital and
strategic plan development and implementation. 
The Committee may select one criterion or multiple criteria for
measuring performance, and the measurement may be based upon Company,
Subsidiary or business unit performance, either absolute or by relative
comparison to other companies or any other external measure of the selected
criteria.


 


2.18                           “Performance Award” means a right granted to an
Eligible Recipient pursuant to Section 10 of the Plan to receive an amount
of cash, shares of Common Stock, or a combination of both, contingent upon
achievement of Performance Criteria or other objectives during a specified
period.


 


2.19                           “Previously Acquired Shares” means shares of Common
Stock that are already owned by the Participant.


 


2.20                           “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 restrictions on transferability and a risk of forfeiture.


 


2.21                           “Retirement” means termination of employment or service
at an age and length of service such that the Participant would be eligible to
an immediate commencement of benefit payments under the final average
compensation formula of the Company’s defined benefit pension plan available
generally to its employees, whether or not such individual actually elects to
commence such payments (provided that, (i) if the Participant is not
covered by the Company’s defined benefit pension plan, or (ii) if the
Participant is covered under the cash balance formula of such plan, then the
Participant will be deemed to be covered by the final average compensation
formula of such plan for purposes of this Plan).


 


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


 


2.23                           “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 shares of Common Stock, cash or a
combination of both, equal to the difference between the Fair Market Value of
one or more shares of Common Stock and a specified exercise price of such
shares.


 


2.24                           “Stock Unit Award” means a right granted to an
Eligible Recipient pursuant to Section 9 of the Plan to receive the Fair
Market Value of one or more shares of Common Stock, payable in cash, shares of
Common Stock, or a combination of both, the payment, issuance, retention and
/or vesting of which is subject to the satisfaction of specified conditions,
which may include achievement of Performance Criteria or other objectives.


 


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2.25                           “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.


 


2.26                           “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.  So long as
the Company has a class of its equity securities registered under Section 12
of the Exchange Act, any committee administering the Plan will consist solely
of two or more members of the Board who are “non-employee directors” within the
meaning of Rule 16b-3 under the Exchange Act, who are “independent”
as required by the listing standards of the New York Stock Exchange and who are
“outside directors” within the meaning of Section 162(m) of the Code.  Such a committee, if established, will act by
majority approval of the members (unanimous approval with respect to action by
written consent), and a majority of the members of such a committee will
constitute a quorum.   As used in the
Plan, “Committee” will refer to the Board or to such a committee, if
established.  To the extent consistent
with applicable corporate law of the Company’s jurisdiction of incorporation,
the Committee may delegate to any officers of the Company the duties, power and
authority of the Committee under 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 or
whose compensation in the fiscal year may be subject to the limits on
deductible compensation pursuant to Section 162(m) of the Code.  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 


 


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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 in its sole discretion to pay the economic value of
any Incentive Award in the form of cash, Common Stock or any combination of
both.


 


(b)                                 Subject to Section 3.2(d), below, 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 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.


 


(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, disposition or write-down
of a significant amount of assets or a significant business; (iii) any
change in accounting principles or practices, tax laws or other such laws or
provisions affecting reported results; (iv) any uninsured catastrophic
losses or extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 or in management’s discussion and analysis
of financial performance appearing in the Company’s annual report to
stockholders for the applicable year; or (v) any other similar change, in
each case with respect to the Company or any other entity whose performance is
relevant to the grant or vesting of an Incentive Award, the Committee (or, if
the Company is not the surviving corporation in any such transaction, the board
of directors of the surviving corporation) may, without the consent of any
affected Participant, amend or modify the vesting criteria (including
Performance Criteria) of any outstanding Incentive Award that is based in whole
or in part on the financial performance of the Company (or any Subsidiary or
division or other subunit thereof) or such other entity so as equitably to
reflect such event, with the desired result that the criteria for evaluating
such financial performance of the Company or such other entity will be
substantially the same (in the sole discretion of the Committee or the board of
directors of the surviving corporation) following such event as prior to such
event; provided, however, that the amended or modified terms are permitted by
the Plan as then in effect.


 


(d)                                 Notwithstanding any other provision of this Plan other than Section 4.3,
the Committee may not, without prior approval of the Company’s stockholders,
seek to effect any re-pricing of any previously granted, “underwater” Option
by:  (i) amending or modifying the
terms of the Option to lower the exercise price; (ii) canceling the 


 


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underwater
Option and granting either (A) replacement Options or Stock Appreciation
Rights having a lower exercise price; (B) Restricted Stock Awards; or (C) Stock
Unit Awards or Performance Awards in exchange; or (iii) repurchasing the
underwater Options and granting new Incentive Awards under this Plan.  For purposes of this Section 3.2(d), an
Option will be deemed to be “underwater” at any time when the Fair Market Value
of the Common Stock is less than the exercise price of the Option.


 


(e)                                  In addition to the authority of the Committee under Section 3.2(b) and
notwithstanding any other provision of the Plan, the Committee may, in its sole
discretion, amend the terms of the Plan or Incentive Awards with respect to
Participants resident outside of the United States or employed by a non-U.S.
Subsidiary in order to comply with local legal requirements, to otherwise
protect the Company’s or Subsidiary’s interests, or to meet objectives of the
Plan, and may, where appropriate, establish one or more sub-plans (including
the adoption of any required rules and regulations) for the purposes of
qualifying for preferred tax treatment under foreign tax laws.  The Committee shall have no authority,
however, to take action pursuant to this Section 3.2(e): (i) to
reserve shares or grant Incentive Awards in excess of the limitations provided
in Section 4.1; (ii) to effect any re-pricing in violation of Section 3.2(d);
(iii) to grant Options having an exercise price less than 100% of the Fair
Market Value of one share of Common Stock on the date of grant in violation of Section 6.2;
or (iv) for which stockholder approval would then be required pursuant to Section 422
of the Code or Section 162(m) of the Code or the rules of the New
York Stock Exchange.


 


(f)                                    Notwithstanding anything in this Plan to the contrary, the
Committee will determine whether an Incentive Award is subject to the
requirements of Section 409A of the Code and, if determined to be subject
to Section 409A of the Code, the Committee will make such Incentive Award
subject to such written terms and conditions determined necessary or desirable
to cause such Incentive Award to comply in form with the requirements of Section 409A
of the Code.  Further, the Plan, as it
relates to Incentive Awards that are subject to Section 409A of the Code,
will be administered in a manner that is intended to comply with the
requirements of Section 409A of the Code and any regulations or rulings
issued thereunder.


 


4.                                       Shares
Available for Issuance.


 


4.1                                 Maximum Number of Shares Available; Certain Restrictions on
Awards.  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 12,000,000.  The shares available for issuance under the Plan may, at the
election of the Committee, be either treasury shares or shares authorized but
unissued, and, if treasury shares are used, all references in the Plan to the
issuance of shares will, for corporate law purposes, be deemed to mean the
transfer of shares from treasury. 
Notwithstanding any other provisions of the Plan to the contrary, (i) no
Participant in the Plan may be granted Incentive Awards denominated in shares
of Common Stock relating to more than 2,000,000 shares of Common Stock in the
aggregate during any calendar year; (ii) no Participant in the Plan may be
granted Incentive Awards denominated in 


 


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cash in an amount in excess of
$3,000,000 in the aggregate during any calendar year; and (iii) no more
than 12,000,000 shares of Common Stock may be issued pursuant to the exercise
of Incentive Stock Options granted under the Plan, with the foregoing share
limits subject, in each case, to adjustment as provided in Section 4.3 of
the Plan.


 


4.2                                 Accounting for Incentive Awards.  Shares of Common
Stock that are issued under the Plan or that are potentially issuable pursuant
to outstanding Incentive Awards will be applied to reduce the maximum number of
shares of Common Stock remaining available for issuance under the Plan;
provided, however, that the total number of shares that may be issued under the
Plan shall be reduced by one additional share for each share issued pursuant to
an Incentive Award other than an Option or a Stock Appreciation Right, or
potentially issuable pursuant to an outstanding Incentive Award other than an
Option or a Stock Appreciation Right. 
All shares so subtracted from the amount available under the Plan with
respect to an Incentive Award that lapses, expires, is forfeited (including
issued shares forfeited under a Restricted Stock Award) or for any reason is
terminated unexercised or unvested or 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; provided, however, that (i) any shares which
would have been issued upon any exercise of an Option but for the fact that the
exercise price was paid by a “net exercise” pursuant to Section 6.4(b) or
the tender or attestation as to ownership of Previously Acquired Shares will
not again become available for issuance under the Plan; and (ii) shares
covered by a Stock Appreciation Right, to the extent exercised, will not again
become available for issuance under the Plan.


 


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


 


5.                                       Participation.


 


Participants in 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 in its sole discretion. 
Incentive Awards will be deemed to be granted as of the date specified
in the grant resolution of the Committee, which date will be the date of any
related agreement with the Participant.


 


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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 in its sole discretion.  The Committee may designate whether an Option
is to be considered an Incentive Stock Option or a Non-Statutory Stock
Option.  To the extent that any Incentive
Stock Option granted under the Plan ceases for any reason to qualify as an “incentive
stock option” for purposes of Section 422 of the Code, such Incentive
Stock Option will continue to be outstanding for purposes of the Plan but will
thereafter be deemed to be 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 such price will
not be less than 100% of the Fair Market Value of one share of Common Stock on
the date of grant.


 


6.3                                 Exercisability and Duration.  An Option will become exercisable at such
times and in such installments and upon such terms and conditions as may be
determined by the Committee in its sole discretion at the time of grant
(including without limitation (i) the achievement of one or more of the
Performance Criteria; and/or that (ii) the Participant remain in the
continuous employ or service of the Company or a Subsidiary for a certain
period; provided, however, that no Option may be exercisable after 10 years
from its date of grant.


 


6.4                                 Payment of Exercise Price.


 


(a)                                  The total purchase price of the shares to be purchased upon
exercise of an Option will be paid entirely in cash (including check, bank
draft or money order); provided, however, that the Committee, in its sole
discretion and upon terms and conditions established by the Committee, may
allow such payments to be made, in whole or in part, by (i) tender of a
Broker Exercise Notice; (ii) by tender, or attestation as to ownership, of
Previously Acquired Shares that have been held for the period of time necessary
to avoid a charge to the Company’s earnings for financial reporting purposes
and that are otherwise acceptable to the Committee; (iii) by a “net
exercise of the Option (as further described in paragraph (b), below);  or  (iv) by
a combination of such methods.


 


(b)                                 In the case of a “net exercise” of an Option, the Company
will not require a payment of the exercise price of the Option from the
Participant but will reduce the number of shares of Common Stock issued upon
the exercise by the largest number of whole shares that has a Fair Market Value
that does not exceed the aggregate exercise price for the shares exercised
under this method. Shares of Common Stock will no longer be outstanding under
an Option (and will therefore not thereafter be exercisable) following the
exercise of such Option to the extent of (i) shares used to pay the
exercise price of an Option under the “net exercise,” (ii) shares actually
delivered to the Participant as a result of such exercise and (iii) any
shares withheld for purposes of tax withholding pursuant to Section 12.1.


 


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


 


6.5                                 Manner of Exercise.  An Option may be exercised by a Participant
in whole or in part from time to time, subject to the conditions contained in
the Plan and in the agreement evidencing such Option, by delivery in person, by
facsimile or electronic transmission or through the mail of written notice of
exercise to the Company at its principal executive office in St. Paul,
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.


 


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 will be subject to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee in its sole
discretion.  The Committee will have the
sole discretion to determine the form in which payment of the economic value of
Stock Appreciation Rights will be made to a Participant (i.e., cash, Common
Stock or any combination thereof) or to consent to or disapprove the election
by a Participant of the form of such payment.


 


7.2                                 Exercise Price.  The exercise price of a Stock Appreciation
Right will be determined by the Committee, in its discretion, at the date of
grant but may not be less than 100% of the Fair Market Value of one share of
Common Stock on the date of grant, except as provided in Section 7.4,
below.


 


7.3                                 Exercisability and Duration.  A Stock Appreciation Right will become
exercisable at such time and in such installments as may be determined by the
Committee in its sole discretion at the time of grant; provided, however, that
no Stock Appreciation Right may be exercisable after 10 years from its date of
grant.  A Stock Appreciation Right will
be exercised by giving notice in the same manner as for Options, as set forth
in Section 6.5 of the Plan.


 


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


 


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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 in its sole
discretion.  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, (i) the achievement of one or more of the
Performance Criteria; and/or that (ii) the Participant remain in the
continuous employ or service of the Company or a Subsidiary for a certain
period.  


 


8.2                                 Rights as a Stockholder; Transferability.  Except as provided
in Sections 8.1, 8.3, 8.4 and 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.


 


8.3                                 Dividends and Distributions.  Unless the Committee determines otherwise in
its sole discretion (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 (other than 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.  The Committee will determine in its sole
discretion whether any interest will be paid on such dividends or
distributions.


 


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.                                       Stock
Unit Awards.  


 


An
Eligible Recipient may be granted one or more Stock Unit Awards under the
Plan, and such Stock Unit Awards will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion.  The Committee may impose such restrictions or
conditions, not inconsistent with the provisions of the Plan, to
the payment, issuance, retention and/or vesting of such Stock Unit
Awards as it deems appropriate, including, without limitation, (i) the
achievement of one or more of the Performance Criteria; and/or that (ii) the
Participant remain in the continuous employ or service of the Company or a
Subsidiary for a certain period; provided, however, that in all cases payment
of a Stock Unit Award will be made within two and one-half months following the
end of the Eligible Recipient’s tax year during which receipt of the Stock Unit
Award is no longer subject 


 


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to
a “substantial risk of forfeiture” within the meaning of Section 409A of
the Code.


 


10.                                 Performance
Awards.


 


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


 


11.                                 Effect
of Termination of Employment or Other Service.  The following provisions shall apply upon
termination of a Participant’s employment or other service with the Company and
all Subsidiaries, except to the extent that the Committee provides otherwise in
an agreement evidencing an Incentive Award at the time of grant or determines pursuant
to Section 11.4. 


 


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


 


(a)                                  All outstanding Options and Stock Appreciation Rights then
held by the Participant will become immediately exercisable in full and will
remain exercisable for a period of one year after such termination (but in no
event after the expiration date of any such Option or Stock Appreciation
Right);


 


(b)                                 All Restricted Stock Awards then held by the Participant
will become fully vested; and


 


(c)                                  Any conditions with respect to the payment of Stock Unit
Awards and Performance Awards will lapse.


 


11.2                           Termination of Employment Due to Retirement.  Subject to Section 11.5
of the Plan, in the event a Participant’s employment or other service with the
Company and all Subsidiaries is terminated by reason of Retirement:


 


(a)                                  All outstanding Options and Stock Appreciation Rights then
held by the Participant will terminate, vest or continue to vest to the extent
provided in the applicable agreement evidencing such Incentive Award (but in no
event will Options or Stock Appreciation Rights remain exercisable after their
expiration date);


 


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


 


11





















 


(c)                                  All outstanding Stock Unit Awards and Performance Awards
then held by the Participant will be terminated and forfeited.


 


11.3                           Termination of Employment for Reasons Other than Death,
Disability or Retirement.
Subject to Section 11.5 of the Plan, in the event a Participant’s
employment or other service is terminated with the Company and all Subsidiaries
for any reason other than death, Disability or Retirement, or a Participant is
in the employ or service of a Subsidiary and the Subsidiary ceases to be a
Subsidiary of the Company (unless the Participant continues in the employ or
service of the Company or another Subsidiary):


 


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


 


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


 


(c)                                  All outstanding Stock Unit Awards and Performance Awards
then held by the Participant will be terminated and forfeited.


 


11.4                           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 sole discretion (which may be exercised at any time on or
after the date of grant, including following such termination), except as
provided in clause (ii), below, cause Options or Stock Appreciation Rights (or
any part thereof) then held by such Participant to terminate, become or
continue to become exercisable and/or remain exercisable following such
termination of employment or service, and Restricted Stock Awards, Stock Unit
Awards or Performance Awards then held by such Participant to terminate, vest
and/or continue to vest or become free of restrictions and conditions to
payment, as the case may be, following such termination of employment or
service, in each case in the manner determined by the Committee; provided,
however, that (i) no Incentive Award may remain exercisable or continue to
vest for more than two years beyond the date such Incentive Award would have
terminated if not for the provisions of this Section 11.4 but in no event
beyond its expiration date; and (ii) any such action adversely affecting
any outstanding Incentive Award will not be effective without the consent of
the affected Participant (subject to the right of the Committee to take
whatever action it deems appropriate under Sections 3.2(c), 4.3 and 13 of the
Plan).


 


11.5                           Effects of Actions Constituting Cause.  Notwithstanding
anything in the Plan to the contrary, in the event that a Participant is
determined by the Committee, acting in its sole discretion, to have committed
any action which would constitute Cause as defined in Section 2.3,
irrespective of whether such action or the Committee’s determination occurs
before or after 


 


12





















 


termination of such Participant’s
employment with the Company or any Subsidiary, all rights of the Participant
under the Plan and any agreements evidencing an Incentive Award then held by
the Participant shall terminate and be forfeited without notice of any
kind.  The Company may defer the exercise
of any Option, the vesting of any Restricted Stock Award or the payment of any
Stock Unit Award or Performance Award for a period of up to forty-five (45)
days in order for the Committee to make any determination as to the existence
of Cause.


 


11.6                           Determination of Termination of Employment or Other Service.


 


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


 


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


 


(c)                                  Unless the Committee otherwise determines in its sole
discretion, a Participant’s employment or other service will, for purposes of
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 in its
sole discretion based upon such records; provided, however, if distribution of
an Incentive Award subject to Section 409A of the Code is triggered by a
termination of a Participant’s employment, such termination must also
constitute a “separation from service” within the meaning of Section 409A
of the Code.


 


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, foreign, state and local withholding
and employment-related tax requirements attributable to an Incentive Award,
including, without limitation, the grant, exercise or vesting of, or payment of
dividends with respect to, an Incentive Award or a disqualifying disposition of
stock received upon exercise of an Incentive Stock Option; (b) withhold
cash paid or payable or shares of Common Stock from the shares issued or
otherwise issuable to the Participant in connection with an Incentive Award; or
(c) require the 


 


13





















 


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, in its sole discretion and
upon terms and conditions established by the Committee, permit or require a
Participant to satisfy, in whole or in part, any withholding or employment-related
tax obligation described in Section 12.1 of the Plan by electing to
tender, or by attestation as to ownership of, Previously Acquired Shares that
have been held for the period of time necessary to avoid a charge to the
Company’s earnings for financial reporting purposes and that are otherwise
acceptable to the Committee, by delivery of a Broker Exercise Notice or a
combination of such methods.  For
purposes of satisfying a Participant’s withholding or employment-related tax
obligation, Previously Acquired Shares tendered or covered by an attestation
will be valued at their Fair Market Value.


 


13.                                 Change
in Control.


 


13.1                           A “Change in Control” shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:


 


(a)                                  any “person” as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan of the Company, or
any corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company), is or becomes, including pursuant to a tender or exchange offer for
shares of Common Stock pursuant to which purchases are made, the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company’s then outstanding securities, other than
in a transaction arranged or approved by the Board prior to its occurrence;
provided, however, that if any such person will become the beneficial owner,
directly or indirectly, of securities of the Company representing 34% or more
of the combined voting power of the Company’s then outstanding securities, a
Change in Control will be deemed to occur whether or not any or all of such
beneficial ownership is obtained in a transaction arranged or approved by the
Board prior to its occurrence, and other than in a transaction in which such
person will have executed a written agreement with the Company (and approved by
the Board) on or prior to the date on which such person becomes the beneficial
owner of 25% or more of the combined voting power of the Company’s then
outstanding securities, which agreement imposes one or more limitations on the
amount of such person’s beneficial ownership of shares of Common Stock, if, and
so long as, such agreement (or any amendment thereto approved by the Board
provided that no such amendment will cure any prior breach of such agreement or
any amendment thereto) continues to be binding on such person and such person
is in compliance (as determined by the Board in its sole discretion) with the
terms of such agreement (including such amendment); provided, however, that if
any such person will become the beneficial owner, directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company’s then outstanding securities, a Change in Control will be
deemed to occur


 


14





















 


whether
or not such beneficial ownership was held in compliance with such a binding
agreement, and provided further that the provisions of this subparagraph (a) shall
not be applicable to a transaction in which a corporation becomes the owner of
all the Company’s outstanding securities in a transaction which complies with
the provisions of subparagraph (c) of this Section 13.1 (e.g., a
reverse triangular merger); or


 


(b)                                 during any thirty-six consecutive calendar months, the
individuals who constitute the Board on the first day of such period or any new
director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for election
by the Company’s stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on the first day of such period, or whose appointment, election or
nomination for election was previously so approved or recommended shall for any
reason cease to constitute at least a majority thereof; or


 


(c)                                  there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior to such merger
or consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof) more than 50% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, and in which no “person” (as defined under
subparagraph (a) above) acquires 50% or more of the combined voting power
of the securities of the Company or such surviving entity or parent thereof
outstanding immediately after such merger or consolidation; or


 


(d)                                 the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an agreement
for the sale or disposition by the Company of all or substantially all of the
Company’s assets, other than a sale or disposition by the Company of all or
substantially all of the Company’s assets to an entity, more than 50% of the
combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.


 


13.2                           Acceleration of Vesting.  Without limiting the authority of the
Committee under Sections 3.2 and 4.3 of the Plan, if a Change in Control of the
Company occurs, then, if approved by the Committee in its sole discretion
either in an agreement evidencing an Incentive Award at the time of grant or at
any time after the grant of an Incentive Award: (a) all Options and Stock
Appreciation Rights will become immediately exercisable in full and will remain
exercisable in accordance with their terms; (b) all Restricted Stock
Awards will become immediately fully vested and non-forfeitable; and (c) any
conditions to the payment of Stock Unit Awards and Performance Awards will
lapse.


 


15





















 


13.3                           Cash Payment.  If a Change in Control of the Company occurs,
then the Committee, if approved by the Committee in its sole discretion either
in an agreement evidencing an Incentive Award at the time of grant or at any
time after the grant of an Incentive Award, and without the consent of any
Participant affected thereby, may determine that: (i) 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 (or, in the event that there is no excess, that such
Options will be terminated); and (ii) some or all Participants holding
Performance Awards will receive, with respect to some or all of the shares of
Common Stock subject to such Performance Awards, as of the effective date of
any such Change in Control of the Company, cash in an amount equal the Fair
Market Value of such shares immediately prior to the effective date of such
Change in Control.


 


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; Dividends.  As a holder of
Incentive Awards (other than Restricted Stock Awards), a Participant will have
no rights as a stockholder unless and until such Incentive Awards are exercised
for, or paid in the form of, shares of Common Stock and the Participant becomes
the holder of record of such shares. 
Except as otherwise provided in the Plan or otherwise provided by the
Committee, no adjustment will be made in the amount of cash payable or in the
number of shares of Common Stock issuable under Incentive Awards denominated in
or based on the value of shares of Common Stock as a result of cash dividends
or distributions paid to holders of Common Stock prior to the payment of, or
issuance of shares of Common Stock under, such Incentive Awards.  In its discretion, the Committee may provide
in an agreement evidencing an Incentive Award that the Participant will be
entitled to receive dividend equivalents, in the form of a cash credit to an
account for the benefit of the Participant, for any such dividends and
distributions.  The terms of any rights
to dividend equivalents will be determined by the Committee and set forth in
the agreement evidencing the Incentive Award, including the time and form of
payment and whether such equivalents will be credited with interest or deemed
to be reinvested in Common Stock; provided,
however, that dividend equivalents in respect of Options and Stock
Appreciation Rights will only be paid out in cash.


 


14.3                           Restrictions on Transfer.


 


(a)                                  Except pursuant to testamentary will or the laws of descent
and distribution or as otherwise expressly permitted by subsections (b) and
(c) below, no right or interest of any Participant in an Incentive Award
prior to the exercise (in the case of Options) or vesting or issuance (in the
case of Restricted Stock Awards and Performance 


 


16





















 


Awards)
of such Incentive Award will be assignable or transferable, or subjected to any
lien, during the lifetime of the Participant, either voluntarily or
involuntarily, directly or indirectly, by operation of law or otherwise.


 


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


 


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


 


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.


 


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 


 


17





















 


securities laws of a state or
foreign jurisdiction or an exemption from such registration under the
Securities Act and applicable state or foreign securities laws, and (b) there
has been obtained any other consent, approval or permit from any other U.S. or
foreign regulatory body which the Committee, in its sole discretion, deems
necessary or advisable.  The Company may
condition such issuance, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the placement of
any legends on certificates representing shares of Common Stock, as may be
deemed necessary or advisable by the Company in order to comply with such
securities law or other restrictions.


 


16.                                 Performance-Based
Compensation Provisions. 


 


The Committee, when it is comprised solely of two or more outside
directors meeting the requirements of Section 162(m) of the Code (“Section 162(m)”),
in its sole discretion, may designate whether any Incentive Awards are intended
to be “performance-based compensation” within the meaning of Section 162(m).  Any Incentive Awards so designated will, to
the extent required by Section 162(m), be conditioned upon the achievement
of one or more Performance Criteria, and such Performance Criteria will be
established by the Committee within the time period prescribed by, and will
otherwise comply with the requirements of, Section 162(m) giving due
regard to the disparate treatment under Section 162(m) of Options and
Stock Appreciation Rights (where compensation is determined based solely on an
increase in the value of the underlying stock after the date of grant or
award), as compared to other forms of compensation, including Restricted Stock
Awards, Stock Unit Awards and Performance Awards.  The Committee shall also certify in writing
that such Performance Criteria have been met prior to payment of compensation
to the extent required by Section 162(m).


 


17.                                 Compliance
with Section 409A.


 


It is
intended that the Plan and all Incentive Awards hereunder be administered in a
manner that will comply with Section 409A of the Code, including proposed,
temporary or final regulations or any other guidance issued by the Secretary of
the Treasury and the Internal Revenue Service with respect thereto.  The Committee is authorized to adopt rules or
regulations deemed necessary or appropriate to qualify for an exception from or
to comply with the requirements of Section 409A of the Code (including any
transition or grandfather rules relating thereto).  Notwithstanding anything in this Section 17
to the contrary, with respect to any Incentive Award subject to Section 409A
of the Code, no amendment to or payment under such Incentive Award will be made
unless permitted under Section 409A and the regulations or rulings issued
thereunder.


 


18.                                 Plan
Amendment, Modification and Termination.


 


The Board may suspend or terminate the Plan or any portion thereof at
any time.  In addition to the authority
of the Committee to amend the Plan under Section 3.2(e), the Board 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 


 


18





















 


Company; provided, however,
that no such amendments to the Plan will be effective without approval of the
Company’s stockholders if: (i) stockholder approval of the amendment is
then required pursuant to Section 422 of the Code or Section 162(m)
of the Code or the rules of the New York Stock Exchange; or (ii) such
amendment seeks to modify Section 3.2(d) hereof.  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 it deems
appropriate under Sections 3.2(c), 4.3 and 13 of the Plan.


 


19.                                 Effective
Date and Duration of the Plan.


 


The Plan will be effective as of May 6, 2005, or such later date
on which the Plan is initially approved by the Company’s stockholders.  The Plan will terminate at midnight on the
tenth (10th) anniversary of such effective date, and may be terminated prior to
such time by Board action.  No Incentive
Award will be granted after termination of the Plan.  Incentive Awards outstanding upon termination
of the Plan may continue to be exercised, earned or become free of
restrictions, according to their terms.


 


19





















 


20.                                 Miscellaneous.


 


20.1                           Governing Law.  Except to the extent expressly provided
herein or in connection with other matters of corporate governance and
authority (all of which shall be governed by the laws of the Company’s
jurisdiction of incorporation), the validity, construction, interpretation,
administration and effect of 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.


 


20.2                           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.


 


20