Exhibit 10.1


MOCON, INC.


2006 STOCK INCENTIVE PLAN


 


1.                                       Purpose
of Plan.


 


The
purpose of the MOCON, Inc. 2006 Stock Incentive Plan (the “Plan”) is to
advance the interests of MOCON, Inc. (the ”Company”) and its
shareholders 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’s 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 “cause” 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, non-compete
or non-solicitation agreement entered into with the Company or any Subsidiary.


 


2.4                                 “Change
in Control” means an event described in Section 14.1 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 (including, when the
context requires, all regulations, interpretations and rulings issued
thereunder).


 


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 $0.10 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


 


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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
non-employee directors, 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: (i) the
mean between the reported high and low sale prices of the Common Stock at the
end of the regular trading session, as reported on the Nasdaq National Market
System or on any national exchange (or, if no shares were traded on such date,
as of the next preceding date on which there was such a trade); or (ii) if
the Common Stock is not so listed, admitted to unlisted trading privileges, or
reported on any national exchange or on the Nasdaq National Market System, the
closing sale price as of such date at the end of the regular trading session,
as reported by the Nasdaq SmallCap Market, OTC Bulletin Board, the Bulletin
Board Exchange (BBX) or the Pink Sheets LLC, or other comparable service (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); or (iii) if the Common Stock is
not so listed or reported, such price as the Committee determines in good
faith, and consistent with the definition of “fair market value” under Section 409A
of the Code.


 


2.12                           “Good
Reason,” unless otherwise defined in an agreement evidencing an Incentive
Award, means the occurrence of any of the following in connection with a Change
in Control: (i) a substantial diminution in the Participant’s
authority, duties or responsibilities as in effect prior to the Change in
Control, (ii) a reduction by the Company in the Participant’s
base salary, or an adverse change in the form or timing of the
payment thereof, as in effect immediately prior to the Change in Control
or as thereafter increased, or (iii) the Company’s requiring the
Participant to be based at any office or location that is more than fifty
(50) miles further from the office or location thereof immediately
preceding the Change in Control; provided, however, Good Reason shall not
include any of the circumstances or events described above unless (A) the
Participant has first provided written notice of such circumstance
or event to the Company or its successor and the Company or such successor
has not corrected such circumstance or event within thirty (30) days
thereafter; and (B) the Participant has not otherwise consented to the
occurrence in writing.


 


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


 


2.14                           “Incentive
Stock Option” means a right to purchase shares of 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.


 


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


 


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


 


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


 


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, a number of shares of Common Stock,
or a combination of both, contingent upon achievement of specified objectives
during a specified period.


 


2.19                           “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 to
the Participant upon the grant, exercise or vesting of such Incentive Award.


 


2.20                           “Restricted
Stock Award” means an award of shares of Common Stock granted to an
Eligible Recipient pursuant to Section 8 of the Plan that are subject to
restrictions on transferability and/or a risk of forfeiture.


 


2.21                           “Retirement”
means termination of employment or service at age 55 or older and completion of
at least ten years of continuous service.


 


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
Bonus” means an award of shares of Common Stock granted to an Eligible
Recipient pursuant to Section 11 of the Plan.


 


2.25                           “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
specified objectives.


 


2.26                           “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.


 


2.27                           “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 and who are “independent” as required by the listing standards
of the Nasdaq Stock Market (or other applicable market or exchange on which the
Company’s Common Stock may be quoted or traded). Such a committee, if
established, will act by majority approval of the members (but may also
take action by the written consent of a majority of the members of such
committee), and a majority of the members of such a


 


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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
conclusive and binding for all purposes and on all persons, and no member of
the Committee will be liable for any action or determination made in good faith
with respect to the Plan or any Incentive Award granted under the Plan.


 


3.2                                 Authority
of the Committee.


 


(a)                                  In accordance with and subject to the
provisions of the Plan, the Committee will have the authority to determine all
provisions of Incentive Awards as the Committee may deem necessary or
desirable and as consistent with the terms of the Plan, including, without
limitation, the following:  (i) the
Eligible Recipients to be selected as Participants; (ii) the nature and
extent of the Incentive Awards to be made to each Participant (including the
number of shares of Common Stock to be subject to each Incentive Award, any
exercise price, the manner in which Incentive Awards will vest or become exercisable
and whether Incentive Awards will be granted in tandem with other Incentive
Awards) and the form of written agreement, if any, evidencing such
Incentive Award; (iii) the time or times when Incentive Awards will be
granted; (iv) the duration of each Incentive Award; and (v) the
restrictions and other conditions to which the payment or vesting of Incentive
Awards may be subject; provided, however, that notwithstanding any other
provision of the Plan: (A) any Incentive Award other than an Option or
Stock Appreciation Right will not vest or become payable over a period of less
than three (3) years from the date of grant, if vesting or payment is
based solely upon the passage of time, and will have a performance measurement
period of not less than one (1) year, if vesting or payment is based upon
satisfaction of specified objectives; and (B) all Incentive Awards granted
to non-employee directors shall be granted pursuant to bona fide formulas or
policies established by the Committee from time to time for the compensation of
such directors, as a group, in respect of service as a non-employee director, a
member of a committee of the Board or chair of the Board or a committee of the
Board, and the Committee shall not discriminate among individual non-employee directors
in granting or establishing the terms of Incentive Awards (except to the extent
such formulas or policies may be modified from time to time). 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) of the
Plan, 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.


 


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(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 similar 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 shareholders 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
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 shareholders, seek to effect any re-pricing of any
previously granted, “underwater” Option or Stock Appreciation Right by:  (i) amending or modifying the terms of
the Option or Stock Appreciation Right to lower the exercise price; (ii) canceling
the underwater Option or Stock Appreciation Right and granting either (A) replacement
Options or Stock Appreciation Rights having a lower exercise price; (B) Restricted
Stock Awards; or (C) Stock Unit Awards, Performance Awards or Stock
Bonuses in exchange; or (iii) repurchasing the underwater Options or Stock
Appreciation Rights and granting new Incentive Awards under this Plan. For
purposes of this Section 3.2(d), Options and Stock Appreciation Rights
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 or Stock
Appreciation Right.


 


(e)                                  In addition to the authority of the Committee
under Section 3.2(b) of the Plan 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 of the Plan; (ii) to effect any re-pricing in
violation of Section 3.2(d) of the Plan; (iii) to grant Options
or Stock Appreciation Rights having an exercise price in violation of Section 6.2
or 7.2 of the Plan, as the case may be; or (iv) for which shareholder
approval would then be required pursuant to Section 422 of the Code or the
rules of the Nasdaq Stock Market (or other applicable market or exchange
on which the Company’s Common Stock may be quoted or traded).


 


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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 the sum of:


 


(a)                                  550,000;


 


(b)                                 the number of shares issued or Incentive
Awards granted under the Plan in connection with the settlement, assumption or
substitution of outstanding awards or obligations to grant future awards as a
condition of the Company and/or any Subsidiary(ies) acquiring, merging or
consolidating with another entity; and


 


(c)                                  the number of shares that are unallocated and
available for grant under a stock plan assumed by the Company or any
Subsidiary(ies) in connection with the merger, consolidation, or acquisition of
another entity by the Company and/or any of its Subsidiaries, based on the
applicable exchange ratio and other transaction terms, but only to the extent
that such shares may be utilized by the Company or its Subsidiaries
following the transaction pursuant to the rules and regulations of the
Nasdaq Stock Market (or other applicable market or exchange on which the
Company’s Common Stock may be quoted or traded).


 


Notwithstanding any other provisions of the Plan to the contrary, (i) no
Participant in the Plan may be granted Options and Stock Appreciation
Rights relating to more than 200,000 shares of Common Stock in the aggregate
during any calendar year; (ii) no Participant in the Plan may be
granted Restricted Stock Awards, Stock Unit Awards, Performance Awards and
Stock Bonuses relating to more than 200,000 shares of Common Stock in the
aggregate during any calendar year; (iii) no more than 500,000 shares of
Common Stock may be issued pursuant to the exercise of Incentive Stock
Options granted under the Plan; and (iv) no more than 300,000 shares of
Common Stock may be issued or issuable under the Plan in connection with
the grant of Incentive Awards, other than Options or Stock Appreciation Rights;
provided, however, that the limits in clauses (i) and (ii), above, will be
250,000 shares and 250,000 shares,
respectively, as to a Participant who, during the calendar year, is first
appointed or elected as an officer, hired as an employee, elected as a director
or retained as a consultant by the Company or who receives a promotion that
results in an increase in responsibilities or duties. All of the foregoing
share limits are subject, in each case, to adjustment as provided in Section 4.3
of the Plan. The limits in clauses (i), (ii) and (iii) will not
apply, however, to the extent Incentive Awards are granted as a result of the
Company’s assumption or substitution of like awards issued by any acquired,
merged or consolidated entity pursuant to the applicable transaction terms, nor
will any Incentive Stock Options issued in any such assumption or substitution
pursuant to applicable provisions of the Code count towards the limit in clause
(iii).


 


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. 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) of the Plan or the tender or
attestation as to ownership of Previously Acquired Shares pursuant to Section 6.4(a) of
the Plan 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.


 


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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 similar 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.


 


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 (or portion
thereof) 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 (or portion thereof) 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 (or 110% of the Fair Market Value of one share of Common
Stock on the date of grant of an Incentive Stock Option 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). Notwithstanding
the foregoing, to the extent that Options are granted under the Plan as a
result of the Company’s assumption or substitution of options issued by any
acquired, merged or consolidated entity, the exercise price for such Options
shall be the price determined by the Committee pursuant to the conversion terms
applicable to the transaction.


 


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 specified
objectives; 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 seven (7) years
from its date of grant (five years from its date of grant in the case of an
Incentive Stock Option if, at the time the Incentive Stock Option is granted,
the Participant owns, directly or indirectly, more than 10%


 


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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.


 


(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 are 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 on the exercise date 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 13.1
of the Plan.


 


(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 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.


 


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, shares of 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 of
the Plan. Notwithstanding the foregoing, to the extent that Stock Appreciation Rights
are granted under the Plan as a result of the Company’s assumption or
substitution of stock appreciation rights issued by any acquired, merged or
consolidated entity, the exercise price for such Stock Appreciation Rights
shall be the price determined by the Committee pursuant to the conversion terms
applicable to the transaction.


 


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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 seven (7) 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.


 


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 specified objectives; 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 Shareholder; Transferability. Except as provided in Sections 8.1, 8.3,
8.4 and 15.3 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. 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

















 


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 specified objectives; 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 to a “substantial risk of forfeiture” within the
meaning of Section 409A of the Code, unless otherwise determined by the
Committee pursuant to Section 3.2(f) of the Plan.


 


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 specified objectives; 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, unless
otherwise determined by the Committee pursuant to Section 3.2(f) of
the Plan.


 


11.                                 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, 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 specified objectives; provided, however,
that in all cases payment of the Stock Bonus 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 Bonus is no longer subject to a “substantial risk of
forfeiture” within the meaning of Section 409A of the Code, unless
otherwise determined by the Committee pursuant to Section 3.2(f) of
the Plan.


 


12.                                 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 12.3 of the Plan.


 


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


 


(a)                                  All outstanding Options and Stock
Appreciation Rights then held by the Participant will, to the extent
exercisable as of such termination, remain exercisable in full for a period of
twelve 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.


 


10

















 


(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 but unpaid Stock Unit Awards,
Performance Awards and Stock Bonuses then held by the Participant will be
terminated and forfeited.


 


12.2                           Termination for Reasons Other than Death,
Disability or Retirement.
Subject to Section 12.4 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 but unpaid Stock Unit Awards,
Performance Awards and Stock Bonuses then held by the Participant will be
terminated and forfeited.


 


12.3                           Modification of Rights Upon Termination. Notwithstanding the other provisions of
this Section 12, 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, Performance Awards
or Stock Bonuses 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 12.3 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 14 of the Plan).


 


12.4                           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 of the Plan, irrespective of
whether such action or the Committee’s determination occurs before or after
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, Performance Award or Stock Bonus 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

















 


12.5                           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, director 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, director 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, director 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
or service (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 or other service, such
termination must also constitute a “separation from service” within the meaning
of Section 409A of the Code.


 


12.6                           Breach of Employment, Service,
Confidentiality, Non-Compete or Non-Solicitation Agreements. Notwithstanding anything in the Plan to the
contrary and in addition to the rights of the Committee under Section 12.4
of the Plan, in the event that a Participant materially breaches the terms of
any employment, service, confidentiality, non-compete or non-solicitation agreement
entered into with the Company or any Subsidiary (including an employment,
service, confidentiality, non-compete or non-solicitation agreement made in
connection with the grant of an Incentive Award), 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 require
the Participant to surrender shares of Common Stock received, and to disgorge
any profits (however defined by the Committee), made or realized by the
Participant in connection with any Incentive Awards or any shares issued upon
the exercise or vesting of any Incentive Awards.


 


13.                                 Payment
of Withholding Taxes.


 


13.1                           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 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. Shares of


 


12

















 


Common
Stock issued or otherwise issuable to the Participant in connection with an
Incentive Award that gives rise to the tax withholding obligation that are
withheld for purposes of satisfying the Participant’s withholding or
employment-related tax obligation will be valued at their Fair Market Value on
the Tax Date.


 


13.2                           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 13.1 of the Plan by electing to
tender, or by attestation as to ownership of, Previously Acquired Shares, 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 on the Tax Date.


 


14.                                 Change
in Control.


 


14.1                           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)                                  the sale, lease, exchange or other transfer,
directly or indirectly, of substantially all of the assets of the Company (in
one transaction or in a series of related transactions) to a person or
entity that is not controlled by the Company;


 


(b)                                 the approval by the shareholders of the
Company of any plan or proposal for the liquidation or dissolution of the
Company;


 


(c)                                  any person becomes after the effective date
of the Plan the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of (A) 20% or more, but not 50% or
more, of the combined voting power of the Company’s outstanding securities
ordinarily having the right to vote at elections of directors, unless the
transaction resulting in such ownership has been approved in advance by the
Incumbent Directors, or (B) 50% or more of the combined voting power of
the Company’s outstanding securities ordinarily having the right to vote at
elections of directors (regardless of any approval by the Incumbent Directors);


 


(d)                                 a merger or consolidation to which the
Company is a party if the shareholders of the Company immediately prior to effective
date of such merger or consolidation have “beneficial ownership” (as defined in
Rule 13d-3 under the Exchange Act), immediately following the effective
date of such merger or consolidation, of securities of the surviving
corporation representing (A) more than 50%, but less than 80%, of the
combined voting power of the surviving corporation’s then outstanding
securities ordinarily having the right to vote at elections of directors,
unless such merger or consolidation has been approved in advance by the
Incumbent Directors (as defined below), or (B) 50% or less of the combined
voting power of the surviving corporation’s then outstanding securities
ordinarily having the right to vote at elections of directors (regardless of
any approval by the Incumbent Directors);


 


(e)                                  the Incumbent Directors cease for any reason
to constitute at least a majority of the Board; or


 


(f)                                    any other change in control of the Company of
a nature that would be required to be reported pursuant to Section 13 or
15(d) of the Exchange Act, whether or not the Company is then subject to
such reporting requirements.


 


13

















 


For purposes of this Section 14, “Incumbent Directors” of
the Company will mean any individuals who are members of the Board on the
Effective Date and any individual who subsequently becomes a member of the
Board whose election, or nomination for election by the Company’s shareholders,
was approved by a vote of at least a majority of the Incumbent Directors
(either by specific vote or by approval of the Company’s proxy statement in
which such individual is named as a nominee for director without objection to
such nomination).


 


14.2                           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, Performance Awards and Stock
Bonuses will lapse. The Committee may make any such acceleration subject
to further conditions, including, but not limited to, conditions relating to (i) the
failure of any successor to assume the Incentive Awards in connection with a
Change in Control, or (ii) the Participant’s involuntary termination,
other than for Cause, or voluntary termination for Good Reason, in each case
within a specified period of time following a Change in Control.


 


14.3                           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.


 


14.4                           Limitation on Change in Control Payments. Notwithstanding anything in Section 14.2
or 14.3 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 14.2
of the Plan or the payment of cash in exchange for all or part of an
Incentive Award as provided in Section 14.3 of the Plan (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 14.2 or 14.3 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, that such reduction shall be made only if the aggregate amount of the
payments after such reduction exceeds the difference between (A) the
amount of such payments absent such reduction minus (B) the aggregate
amount of the excise tax imposed under Section 4999 of the Code
attributable to any such excess parachute payments. Notwithstanding the
foregoing sentence, 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


 


14

















 


be
reduced, that such “payments” will not be reduced or that such “payments” will
be “grossed up” for tax purposes), then this Section 14.4 will not apply,
and any “payments” to a Participant pursuant to Section 14.2 or 14.3 of
the Plan will be treated as “payments” arising under such separate agreement.


 


15.                                 Rights
of Eligible Recipients and Participants; Transferability.


 


15.1                           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.


 


15.2                           Rights as a Shareholder; Dividends. As a holder of Incentive Awards (other than
Restricted Stock Awards), a Participant will have no rights as a shareholder
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.


 


15.3                           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 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 or Stock Appreciation Rights
(to the extent permitted pursuant to Section 12 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 or Stock Appreciation Rights (to the extent permitted
pursuant to Section 12 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 or Stock Appreciation Rights, then such payments will be
made to, and the exercise of such Options or Stock Appreciation Rights 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


 


15

















 


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.


 


15.4                           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.


 


16.                                 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
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.


 


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 the requirements of Section 409A of the Code, including any
exceptions to such requirements. 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) of
the Plan, 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
Company; provided, however, that no such amendments to the Plan will be
effective without approval of the Company’s shareholders if: (i) shareholder
approval of the amendment is then required pursuant to Section 422 of the
Code or the rules of the Nasdaq Stock Market (or other applicable market
or exchange on which the Company’s Common Stock may be quoted or traded);
or (ii) such amendment seeks to increase the number of shares authorized
for issuance


 


16

















 


hereunder
(other than by virtue of an adjustment under Section 4.3 of the Plan) or
to modify Section 3.2(d) of the Plan. 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 14 of the Plan.


 


19.                                 Effective
Date and Duration of the Plan.


 


The
Plan will be effective as of May 18, 2006, or such later date on which the
Plan is initially approved by the Company’s shareholders (the “Effective Date”).
The Plan will terminate at midnight on the day before the tenth (10th)
anniversary of the 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.


 


20.                                 Miscellaneous.


 


20.1                           Governing
Law. The validity, construction, interpretation, administration and effect
of the Plan and any rules, regulations and actions relating to the Plan will be
governed by and construed exclusively in accordance with the laws of the State
of Minnesota, notwithstanding the conflicts of laws principles of any
jurisdictions.


 


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.


 


20.3                           Construction.
Wherever possible, each provision of the Plan and any agreement evidencing an
Incentive Award granted under the Plan will be interpreted so that it is valid
under the applicable law. If any provision of the Plan or any agreement
evidencing an Incentive Award granted under the Plan is to any extent invalid
under the applicable law, that provision will still be effective to the extent
it remains valid. The remainder of the Plan and the Incentive Award agreement
also will continue to be valid, and the entire Plan and Incentive Award
agreement will continue to be valid in other jurisdictions.


 


17