exv10w1



 








Exhibit 10.1




NASH-FINCH COMPANY

2000 STOCK INCENTIVE PLAN

(as amended February 22, 2005)




1. Purpose of Plan.




     The purpose of the Nash-Finch Company 2000 Stock Incentive Plan (the “Plan”) is to support the
maximization of long-term value creation for Nash-Finch Company (the “Company”) and its
stockholders by enabling the Company and its Subsidiaries to attract and retain persons of ability
to perform services for the Company and its Subsidiaries by providing an incentive to such
individuals through equity participation in the Company and by rewarding such individuals who
contribute to the achievement by the Company of its economic objectives.



2. Definitions.




     The following terms will have the 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.



     2.3 “Change in Control” means an event described in Section 13.1 of the Plan.



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



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



     2.6 “Common Stock” means the common stock of the Company, $1.66-2/3 par value, or the
number and kind of shares of stock or other securities into which such common stock may be changed
in accordance with Section 4.3 of the Plan.



     2.7 “Disability” means the disability of the Participant such as would entitle the
Participant to receive disability income benefits pursuant to the long-term disability plan of the
Company or Subsidiary then covering the Participant or, if no such plan exists or is applicable to
the Participant, the permanent and total disability of the Participant within the meaning of
Section 22(e)(3) of the Code.



     2.8 “Eligible Recipients” means all employees of the Company or any Subsidiary and any
non-employee directors, consultants and independent contractors of the Company or any Subsidiary.



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



     2.10 “Fair Market Value” means, with respect to the Common Stock, as of any date (or,
if no shares were traded or quoted on such date, as of the next preceding date on which there was
such a trade or quote) (a) the mean between the reported high and low sale prices of the Common
Stock during the regular trading session if the Common Stock is listed, admitted to unlisted
trading privileges or reported on any foreign or national securities exchange or on the Nasdaq
National Market or an equivalent foreign



 









 





market on which sale prices are reported; (b) if the Common Stock is not so listed, admitted
to unlisted trading privileges or reported, the closing bid price as reported by the Nasdaq
SmallCap Market, OTC Bulletin Board or the National Quotation Bureau, Inc. or other comparable
service; or (c) if the Common Stock is not so listed or reported, such price as the Committee
determines in good faith in the exercise of its reasonable discretion.



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



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



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



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



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



     2.16 “Performance Criteria” means the performance criteria that may be used by the
Committee in granting Performance Units or Restricted Stock Awards contingent upon achievement of
performance goals, consisting of specified levels of, or relating to:




	 	§  	customer satisfaction as measured by a Company sponsored customer survey;
	 
	 	§  	employee engagement or employee relations as measured by a Company sponsored survey;
	 
	 	§  	employee safety;
	 
	 	§  	employee diversity;
	 
	 	§  	financial performance as measured by net sales, operating income, income before
income taxes, net income, net income per share (basic or diluted), earnings before
interest, taxes depreciation and amortization (EBITDA) (with or without adjustments
prescribed in any Company credit facility), profitability as measured by return ratios
(including return on assets, 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 productivity improvements;
	 
	 	§  	retail store performance as determined by independent assessment; and
	 
	 	§  	operational performance as measured by on-time delivery, fill rate, selector
accuracy, cost per case, sales per square foot, sales per labor hour and other,
similar, objective productivity measures.





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.


     2.17
“ Performance Unit” means a right granted to an Eligible Recipient pursuant to
Section 9 of the Plan to receive a payment from the Company, in the form of stock, cash or a
combination of both, upon the achievement of Performance Criteria or other established employment,
service, performance or other goals during a specified period.



 









 











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



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



     2.20 “Retirement” means termination of employment or service pursuant to and in
accordance with the regular (or, if approved by the Board for purposes of the Plan, early)
retirement/pension plan or practice of the Company or Subsidiary then covering the Participant,
provided that if the Participant is not covered by any such plan or practice, the Participant will
be deemed to be covered by the Company’s plan or practice for purposes of this determination.



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



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



     2.23 “Stock Bonus” means an award of Common Stock granted to an Eligible Recipient
pursuant to Section 10 of the Plan.



     2.24 “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.



     2.25 “Tax Date” means the date any withholding tax obligation arises under the Code or
other applicable tax statute 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 and, if the Board so determines in its sole discretion, 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 (but may also take action with the written consent of all of the
members of such committee), and a majority of the members of such a committee will constitute a
quorum. As used in 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. 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 final, conclusive and binding for
all purposes and on all persons, including, without limitation, the Company, the stockholders of
the Company, the participants and their respective successors-in-interest. No member of the
Committee will be liable for any action or determination made in good faith with respect to the
Plan or any Incentive Award granted under the Plan.



 









 





3.2 Authority of the Committee.




     (a) In accordance with and subject to the provisions of the Plan, the Committee will
have the authority to determine all provisions of Incentive Awards as the Committee may deem
necessary or desirable and as consistent with the terms of the Plan, including, without
limitation, the following: (i) the Eligible Recipients to be selected as Participants; (ii)
the nature and extent of the Incentive Awards to be made to each Participant (including the
number of shares of Common Stock to be subject to each Incentive Award, any exercise price,
the manner in which Incentive Awards will vest or become exercisable and whether Incentive
Awards will be granted in tandem with other Incentive Awards) and the form of written
agreement, if any, evidencing such Incentive Award; (iii) the time or times when Incentive
Awards will be granted; (iv) the duration of each Incentive Award; and (v) the restrictions
and other conditions to which the payment or vesting of Incentive Awards may be subject. In
addition, the Committee will have the authority under the Plan 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) 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 or accelerate the exercisability or vesting or
otherwise terminate any restrictions relating to an Incentive Award; provided, however, that
the amended or modified terms are permitted by the Plan as then in effect and that any
Participant adversely affected by such amended or modified terms has consented to such
amendment or modification. No amendment or modification to an Incentive Award, whether
pursuant to this Section 3.2 or any other provisions of the Plan, will be deemed to be a
re-grant of such Incentive Award for purposes of this Plan.



     (c) In the event of (i) any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of shares, rights
offering, extraordinary dividend or divestiture (including a spin-off) or any other change
in corporate structure or shares; (ii) any purchase, acquisition, sale, 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
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 underwater Option and
granting either (A) replacement Options having a lower exercise price; (B) Restricted Stock
Awards; or (C) Performance Units 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.



4. Shares Available for Issuance.




     4.1 Maximum Number of Shares Available. 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 2,100,000 shares of Common Stock, plus any shares of Common Stock which, as
of the date the Plan is approved by the stockholders of the Company, are reserved for issuance
under the Company’s 1994 Stock Incentive Plan, as amended, and which are not thereafter issued or
which have been issued but are subsequently forfeited and which would otherwise have been available
for further issuance under such plan. Notwithstanding any other provisions of the Plan to the
contrary, (i) no Participant in the Plan may be granted any Options or Stock Appreciation Rights,
or any other Incentive Awards with a value based solely on an increase in the value of the Common
Stock after the date of grant, relating to more than 120,000 shares of Common Stock in the
aggregate in any fiscal year of the Company; provided, however, that a Participant who is first
appointed or elected as an officer, hired as an employee or retained as a consultant by the Company
or who receives a promotion that results in an increase in responsibilities or duties may be
granted, during the fiscal year of such appointment, election, hiring, retention or promotion,
Options relating to up to 200,000 shares of Common Stock; (ii) no more than an aggregate of
1,220,000 shares of Common Stock may be granted pursuant to Restricted Stock Awards, Performance
Units or Stock Bonuses under the Plan, other than in exchange for full value at the time of grant
or as an incentive to the Participant to accept payment of other compensation in the form of shares
of Common Stock; and (iii) the 1,000,000 additional shares of Common Stock reserved for issuance
under the Plan as of February 22, 2005 shall be granted solely pursuant to Performance Units and
will consist of shares of the Company’s treasury stock. All of the foregoing limitations in
clauses (i), (ii) and (iii) are subject 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 subject to outstanding Incentive Awards will be applied to reduce the maximum
number of shares of Common Stock remaining available for issuance under the Plan. Any shares of
Common Stock that are subject to an Incentive Award that lapses, expires, is forfeited in whole or
part (including shares subject to the Incentive Award that are withheld to satisfy withholding or
employment-related tax obligations) or for any reason is terminated unexercised or unvested and any
shares of Common Stock that are subject to an Incentive Award that is settled or paid in cash or
any form other than shares of Common Stock will automatically again become available for issuance
under the Plan.



     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 Options, and (b) the exercise price of outstanding Options.



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 creation of
value for the Company and its stockholders. Eligible Recipients may be granted from time to time
one or more Incentive Awards, singly or in combination or in tandem with other Incentive Awards, as
may be determined by the Committee



 









 





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



6. Options.




     6.1 Grant. An Eligible Recipient may be granted one or more Options under 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, however, that such price will not be less than 100% of the Fair Market Value of one share
of Common Stock on the date of grant or, with respect to an Incentive Stock Option, 110% of the
Fair Market Value if, at the time the Incentive Stock Option is granted, the Participant owns,
directly or indirectly, more than 10% of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation of the Company).



     6.3 Exercisability and Duration. An Option will become exercisable at such times and
in such installments as may be determined by the Committee in its sole discretion at the time of
grant; provided, however, that no Option may be exercisable prior to six months from its date of
grant (other than in connection with a Participant’s death or Disability) and no Option may be
exercisable after 10 years from its date of grant (or, in the case of an Incentive Stock Option,
five years from its date of grant if, at the time the Incentive Stock Option is granted, the
Participant owns, directly or indirectly, more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary corporation of the Company).



     6.4 Payment of Exercise Price. The total purchase price of the shares to be purchased
upon exercise of an Option will be paid entirely in cash (including check, bank draft or money
order); provided, however, that the Committee, 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 tender of
a Broker Exercise Notice, Previously Acquired Shares (including through delivery of a written
attestation of ownership of such Previously Acquired Shares if permitted, and on terms acceptable,
to the Committee in its sole discretion), a promissory note (on terms acceptable to the Committee
in its sole discretion) or by a combination of such methods.



     6.5 Manner of Exercise. An Option may be exercised by a Participant in whole or in
part from time to time, subject to the conditions contained in the Plan and in the agreement
evidencing such Option, by delivery in person, by facsimile or electronic transmission or through
the mail of written notice of exercise to the Company (Attention: Secretary) at its principal
executive office in Minneapolis, Minnesota and by paying in full the total exercise price for the
shares of Common Stock to be purchased in accordance with Section 6.4 of the Plan.



     6.6 Aggregate Limitation of Stock Subject to Incentive Stock Options. To the extent
that the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is
granted) of the shares of Common Stock with respect to which incentive stock options (within the
meaning of Section 422 of the Code) are exercisable for the first time by a Participant during any
calendar year (under the Plan and any other incentive stock option plans of the Company or any
subsidiary or parent corporation of the Company (within the meaning of the Code))


 









 





exceeds $100,000
(or such other amount as may be prescribed by the Code from time to time), such excess Options will be treated as
Non-Statutory Stock Options. The determination will be made by taking incentive stock options into
account in the order in which they were granted. If such excess only applies to a portion of an
Incentive Stock Option, the Committee, in its discretion, will designate which shares will be
treated as shares to be acquired upon exercise of an Incentive Stock Option.



7. Stock Appreciation Rights.




     7.1 Grant. An Eligible Recipient may be granted one or more Stock Appreciation Rights
under the Plan, and such Stock Appreciation Rights 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.



     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 prior
to six months from its date of grant (other than in connection with a Participant’s death or
Disability) or after 10 years from its date of grant. A Stock Appreciation Right will be exercised
by giving notice in the same manner as for Options, as set forth in Section 6.5 of the Plan.



8. Restricted Stock Awards.




     8.1 Grant. An Eligible Recipient may be granted one or more Restricted Stock Awards
under the Plan, and such Restricted Stock Awards will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the Committee 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; provided, however, that no Restricted Stock Award may vest prior
to six months from its date of grant other than in connection with a Participant’s death or
Disability.



     8.2 Rights as a Stockholder; Transferability. Except as provided in Sections 8.1, 8.3
and 14.3 of the Plan, a Participant will have all voting, dividend, liquidation and other rights
with respect to shares of Common Stock issued to the Participant as a Restricted Stock Award under
this Section 8 upon the Participant becoming the holder of record of such shares as if such
Participant were a holder of record of shares of unrestricted Common Stock.



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



 









 







     8.4 Enforcement of Restrictions. To enforce the restrictions referred to in this
Section 8, the Committee may place a legend on the stock certificates referring to such
restrictions and may require the Participant, until the restrictions have lapsed, to keep the stock
certificates, together with duly endorsed stock powers, in the custody of the Company or its
transfer agent or to maintain evidence of stock ownership, together with duly endorsed stock
powers, in a certificateless book-entry stock account with the Company’s transfer agent.



9. Performance Units.




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



10. Stock Bonuses.




     An Eligible Recipient may be granted one or more Stock Bonuses under the Plan, and such Stock
Bonuses will be subject to such terms and conditions, consistent with the other provisions of the
Plan, as may be determined by the Committee, including, without limitation, (i) the achievement of
one or more of the Performance Criteria; and/or that (ii) that the Participant remain in the
continuous employ or service of the Company or any Subsidiary for a certain period. The
Participant will have all voting, dividend, liquidation and other rights with respect to the shares
of Common Stock issued to a Participant as a Stock Bonus under this Section 10 upon the Participant
becoming the holder of record of such shares; provided, however, that the Committee may impose such
restrictions on the assignment or transfer of a Stock Bonus as it deems appropriate.



11. Effect of Termination of Employment or Other Service.




     11.1 Termination Due to Death, Disability or Retirement. Unless otherwise provided by
the Committee in its sole discretion in the agreement evidencing an Incentive Award:




     (a) In the event a Participant’s employment or other service with the Company and all
Subsidiaries is terminated by reason of death or Disability:




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




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




        (iii) All Performance Units and Stock Bonuses then held by the Participant will
vest and/or continue to vest in the manner determined by the Committee and set forth
in the agreement evidencing such Performance Units or Stock Bonuses.



 









 






     (b) In the event a Participant’s employment or other service with the Company and all
Subsidiaries is terminated by reason of Retirement:




        (i) All outstanding Options and Stock Appreciation Rights then held by the
Participant will remain exercisable, to the extent exercisable as of the date of
such termination, for a period of three years after such termination (but in no
event after the expiration date of any such Option or Stock Appreciation Right);




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




        (iii) All Performance Units and Stock Bonuses then held by the Participant will
vest and/or continue to vest in the manner determined by the Committee and set forth
in the agreement evidencing such Performance Units or Stock Bonuses.



     11.2 Termination for Reasons Other than Death, Disability or Retirement.




     (a) Unless otherwise provided by the Committee in its sole discretion in the agreement
evidencing an Incentive Award, 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), all rights of the Participant under
the Plan and any agreements evidencing an Incentive Award will immediately terminate without
notice of any kind, and no Options or Stock Appreciation Rights then held by the Participant
will thereafter be exercisable, all Restricted Stock Awards then held by the Participant
that have not vested will be terminated and forfeited, and all Performance Units and Stock
Bonuses then held by the Participant will vest and/or continue to vest in the manner
determined by the Committee and set forth in the agreement evidencing such Performance Units
or Stock Bonuses; provided, however, that if such termination is due to any reason other
than voluntary termination by the Participant or termination by the Company or any
Subsidiary for “cause,” all outstanding Options and Stock Appreciation Rights then held by
such Participant will remain exercisable, to the extent exercisable as of such termination,
for a period of three months after such termination (but in no event after the expiration
date of any such Option or Stock Appreciation Right).




     (b) For purposes of this Section 11.2, “cause” (as determined by the Committee) will be
as defined in any employment or other agreement or policy applicable to the Participant or,
if no such agreement or policy exists, will mean (i) dishonesty, fraud, misrepresentation,
embezzlement or deliberate injury or attempted injury, in each case related to the Company
or any Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any
intentional and deliberate breach of a duty or duties that, individually or in the
aggregate, are material in relation to the Participant’s overall duties, or (iv) any
material breach of any employment, service, confidentiality or non-compete agreement entered
into with the Company or any Subsidiary.



     11.3 Modification of Rights Upon Termination. Notwithstanding the other provisions of
this Section 11, upon a Participant’s termination of employment or other service with the Company
and all Subsidiaries, the Committee may, in its sole discretion (which may be exercised at any time
on or after the date of grant, including following such termination), cause Options and Stock
Appreciation Rights (or any part thereof) then held by such Participant to become or continue to
become exercisable and/or remain exercisable following such termination of employment or service
and Restricted Stock Awards, Performance Units and Stock Bonuses then held by such Participant to
vest and/or continue to vest or become free of transfer restrictions, as the case may be, following
such termination of employment or service, in each case in the manner determined by the Committee;
provided, however, that no Option or Restricted Stock Award may become exercisable or vest prior to
six months from its date of grant (other than in connection with a
Participant’s death or Disability) or remain exercisable or continue
to vest beyond its expiration date.



 









 







     11.4 Exercise of Incentive Stock Options Following Termination. Any Incentive Stock
Option that remains unexercised more than one year following termination of employment by reason of
Disability or more than three months following termination for any reason other than death or
Disability will thereafter be deemed to be a Non-Statutory Stock Option.



     11.5 Date of Termination of Employment or Other Service. 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.



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 foreign, federal, state and local withholding and
employment-related tax requirements attributable to an Incentive Award, including, without
limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an
Incentive Award or a disqualifying disposition of stock received upon exercise of an Incentive
Stock Option, or (b) require the Participant promptly to remit the amount of such withholding to
the Company before taking any action, including issuing any shares of Common Stock, with respect to
an Incentive Award.



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



13. Change in Control.




     13.1 Change in Control. For purposes of this Section 13, a “Change in Control” of the
Company will mean the following:




     (a) the sale, lease, exchange or other transfer, directly or indirectly, of
substantially all of the assets of the Company (in one transaction or in a series of related
transactions) to any Person (as defined below);




     (b) consummation of any stockholder approved plan for the liquidation or dissolution of
the Company;




     (c) any Person, other than a Bona Fide Underwriter (as defined below), becoming after
the effective date of the Plan the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of (i) 20% or more, but not more than 50%, of the
combined voting power of the Company’s outstanding securities ordinarily having the right to
vote at elections of directors, unless the transaction resulting in such ownership has been
approved in advance by the Continuity Directors (as defined below), or (ii) more than 50% of
the combined voting power of the Company’s outstanding securities ordinarily having the
right to vote at elections of directors (regardless of any approval by the Continuity
Directors);



 









 






     (d) a merger or consolidation to which the Company is a party if the stockholders of
the Company immediately prior to effective time of such merger or consolidation have, solely
on account of ownership of securities of the Company at such time, “beneficial ownership”
(as defined in Rule 13d-3 under the Exchange Act), immediately following the effective time
of such merger or consolidation, of securities of the surviving corporation representing (i)
50% or more, but not more than 80%, of the combined voting power of the surviving
corporation’s then outstanding securities ordinarily having the right to vote at elections
of directors, unless such merger or consolidation has been approved in advance by the
Continuity Directors, or (ii) less than 50% of the combined voting power of the surviving
corporation’s then outstanding securities ordinarily having the right to vote at elections
of directors (regardless of any approval by the Continuity Directors); or




     (e) the Continuity Directors cease for any reason to constitute at least a majority of
the Board.



     13.2 Change in Control Definitions. For purposes of this Section 13:




     (a) “Continuity Director” means any individual who was a member of the Board on the
effective date of the Plan, while he or she is a member of the Board, and any individual who
subsequently becomes a member of the Board whose election or nomination for election by the
Company’s stockholders was approved by a vote of at least a majority of the directors who
are Continuity Directors (either by a specific vote or by approval of the proxy statement of
the Company in which such individual is named as a nominee for director without objection to
such nomination). For example, assuming that nine individuals comprise the entire Board as
of the effective date of the Plan, if a majority of such individuals approved a proxy
statement in which two different individuals were nominated to replace two of the
individuals who were members of the Board as of the effective date of the Plan, these two
newly elected directors would join the remaining seven directors who were members of the
Board as of the effective date of the Plan as Continuity Directors. Similarly, if
subsequently a majority of these directors approved a proxy statement in which three
different individuals were nominated to replace three other directors who were members of
the Board as of the effective date of the Plan, these three newly elected directors would
also become, along with the other six directors, Continuity Directors. Individuals
subsequently joining the Board could become Continuity Directors under the principles
reflected in this example.




     (b) “Bona Fide Underwriter” means a Person engaged in business as an underwriter of
securities that acquires securities of the Company from the Company through such Person’s
participation in good faith in a firm commitment underwriting until the expiration of 40
days after the date of such acquisition.




     (c) “Person” means any individual, corporation, partnership, group, association or
other “person,” as such term is used in Section 13(d) or Section 14(d) of the Exchange Act,
other than the Company, any affiliate or any benefit plan sponsored by the Company or any
affiliate. For this purpose, an affiliate is (i) any corporation at least a majority of
whose outstanding securities ordinarily having the right to vote at elections of directors
is owned directly or indirectly by the Company or (ii) any other form of business entity in
which the Company, by virtue of a direct or indirect ownership interest, has the right to
elect a majority of the members of such entity’s governing body.



     13.3 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, unless
otherwise provided by the Committee in its sole discretion either in the 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 that have been


 









 





outstanding for at least six
months will
become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the Participant to
whom such Options or Stock Appreciation Rights have been granted remains in the employ or service
of the Company or any Subsidiary; (b) all Restricted Stock Awards that have been outstanding for at
least six months will become immediately fully vested and non-forfeitable; and (c) all outstanding
Performance Units and Stock Bonuses then held by the Participant will vest and/or continue to vest
in the manner determined by the Committee and set forth in the agreement evidencing such Stock
Bonuses.



     13.4 Cash Payment for Options. 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 effected thereby, may determine that some or all
Participants holding outstanding Options will receive, with respect to some or all of the shares of
Common Stock subject to such Options, as of the effective date of any such Change in Control of the
Company, cash in an amount equal to the excess of the Fair Market Value of such shares immediately
prior to the effective date of such Change in Control of the Company over the exercise price per
share of such Options.



     13.5 Limitation on Change in Control Payments. Notwithstanding anything in Section
13.3 or 13.4 of the Plan to the contrary, if, with respect to a Participant, the acceleration of
the vesting of an Incentive Award as provided in Section 13.3 or the payment of cash in exchange
for all or part of an Incentive Award as provided in Section 13.4 (which acceleration or payment
could be deemed a “payment” within the meaning of Section 280G(b)(2) of the Code), together with
any other “payments” that such Participant has the right to receive from the Company or any
corporation that is a member of an “affiliated group” (as defined in Section 1504(a) of the Code
without regard to Section 1504(b) of the Code) of which the Company is a member, would constitute a
“parachute payment” (as defined in Section 280G(b)(2) of the Code), then the “payments” to such
Participant pursuant to Section 13.3 or 13.4 of the Plan will be reduced to the largest amount as
will result in no portion of such “payments” being subject to the excise tax imposed by Section
4999 of the Code; provided, however, that if a Participant is subject to a separate agreement with
the Company or a Subsidiary that expressly addresses the potential application of Sections 280G or
4999 of the Code (including, without limitation, that “payments” under such agreement or otherwise
will be reduced, that the Participant will have the discretion to determine which “payments” will
be reduced, that such “payments” will not be reduced or that such “payments” will be “grossed up”
for tax purposes), then this Section 13.5 will not apply, and any “payments” to a Participant
pursuant to Section 13.3 or 13.4 of the Plan will be treated as “payments” arising under such
separate agreement.



14. Rights of Eligible Recipients and Participants; Transferability.




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



     14.2 Rights as a Stockholder. As a holder of Incentive Awards (other than Restricted
Stock Awards and Stock Bonuses), a Participant will have no rights as a stockholder unless and
until such Incentive Awards are exercised for, or paid in the form of, shares of Common Stock and
the Participant becomes the holder of record of such shares. Except as otherwise provided in the
Plan, no adjustment will be made for dividends or distributions with respect to such Incentive
Awards as to which there is a record date preceding the date the Participant becomes the holder of
record of such shares, except as the Committee may determine in its discretion.



     14.3 Restrictions on Transfer. Except pursuant to testamentary will or the laws of
descent and distribution or as otherwise expressly permitted by the Plan, unless approved by the
Committee in its sole discretion, no right or interest of any Participant in an Incentive Award
prior to the exercise or vesting of such Incentive Award will be assignable or transferable, or
subjected to any lien, during the lifetime of


 









 





the Participant, either voluntarily or involuntarily, directly or indirectly, by operation of
law or otherwise. A Participant will, however, be entitled to designate a beneficiary to receive
an Incentive Award upon such Participant’s death, and in the event of a Participant’s death,
payment of any amounts due under the Plan will be made to, and exercise of any Options (to the
extent permitted pursuant to Section 11 of the Plan) may be made by, the Participant’s legal
representatives, heirs and legatees.



     14.4 Breach of Confidentiality or Non-Compete Agreements. Notwithstanding anything in
the Plan to the contrary, in the event that a Participant materially breaches the terms of any
confidentiality or non-compete agreement entered into with the Company or any Subsidiary, whether
such breach occurs before or after termination of such Participant’s employment or other service
with the Company or any Subsidiary, the Committee in its sole discretion may immediately terminate
all rights of the Participant under the Plan and any agreements evidencing an Incentive Award then
held by the Participant without notice of any kind.



     14.5 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 state or foreign
securities laws 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 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,
Performance Units and Stock Bonuses. 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. Deferrals and Settlements.




     The Committee may permit Participants to elect to defer the issuance of shares or the
settlement of Incentive 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.



 









 







18. Plan Amendment, Modification and Termination.




     The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend
the Plan from time to time in such respects as the Board may deem advisable in order that Incentive
Awards under the Plan will conform to any change in applicable laws or regulations or in any other
respect the Board may deem to be in the best interests of the Company; provided, however, that no
amendments to the Plan will be effective without approval of the stockholders of the Company if
stockholder approval of the amendment is then required pursuant to Section 422 of the Code or the
rules of the Nasdaq Stock Market or any other stock exchange, if applicable at such time. 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, 4.3 and 13 of the Plan.



19. Effective Date and Duration of the Plan.




     The Plan is effective as of February 22, 2000, the date it was adopted by the Board. The Plan
will terminate at midnight on February 22, 2010, and may be terminated prior to such time to by
Board action, and no Incentive Award will be granted after such termination. Incentive Awards
outstanding upon termination of the Plan may continue to be exercised, or become free of
restrictions, in accordance with their terms.



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.