Exhibit 10.1


 


FARGO ELECTRONICS, INC.


2003 STOCK INCENTIVE PLAN


(as amended May 21, 2006)


 


1.                                       Purpose
of Plan.


 


The purpose of the Fargo
Electronics, Inc. 2003 Stock Incentive Plan (the “Plan”) is to advance the
interests of Fargo Electronics, Inc. (the “Company”) and its stockholders
by enabling the Company and its Subsidiaries to attract and retain qualified
individuals through opportunities for equity participation in the Company, and
to reward those individuals who contribute to the Company’s achievement 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 Company’s Board of Directors.


 


2.2                                 “Broker
Exercise Notice” means a written notice pursuant to which a Participant,
upon exercise of an Option, irrevocably instructs a broker or dealer to sell a
sufficient number of shares or loan a sufficient amount of money to pay all or
a portion of the exercise price of the Option and/or any related withholding
tax obligations and remit such sums to the Company and directs the Company to
deliver stock certificates to be issued upon such exercise directly to such
broker or dealer or their nominee.


 


2.3                                 “Cause”
means (i) dishonesty, fraud, misrepresentation, embezzlement or deliberate
injury or attempted injury, in each case related to the Company or any
Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any
intentional and deliberate breach of a duty or duties that, individually or in
the aggregate, are material in relation to the Participant’s overall duties, or
(iv) any material breach of any confidentiality or noncompete agreement
entered into with the Company or any Subsidiary.


 


2.4                                 “Change
in Control” means an event described in Section 10.1 of the Plan.


 


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


 


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


 


2.7                                 “Common
Stock” means the common stock of the Company, par value $0.01 per share, or
the number and kind of shares of stock or other securities into which such
Common Stock may be changed in accordance with Section 4.3 of the
Plan.


 


2.8                                 “Disability”
means the disability of the Participant such as would entitle the Participant
to receive disability income benefits pursuant to the long-term disability plan
of the 


 

















 


Company or Subsidiary then covering the Participant
or, if no such plan exists or is applicable to the Participant, the permanent and
total disability of the Participant within the meaning of Section 22(e)(3) of
the Code.


 


2.9                                 “Effective
Date” means May 1, 2003 or such later date as the Plan is initially
approved by the Company’s stockholders.


 


2.10                           “Eligible
Recipients” means all employees (including, without limitation, officers
and directors who are also employees) of the Company or any Subsidiary and all
non-employee directors.


 


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


 


2.12                           “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, if the Common Stock is listed, admitted to unlisted trading
privileges, or reported on any national securities exchange or on the Nasdaq
National Market on such date (or, if no shares were traded on such day, as of
the next preceding day 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, the closing
bid 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 National Quotation Bureaus, Inc., or other
comparable service; or (iii) 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.


 


2.13                           “Incentive
Award” means an Option or Restricted Stock Award granted to an Eligible
Recipient pursuant to the Plan.


 


2.14                           “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.


 


2.15                           “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.


 


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


 


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


 


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.


 


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2.19                           “Restricted
Stock Award” means an award of Common Stock granted to an Eligible
Recipient pursuant to Section 7 of the Plan that is subject to the
restrictions on transferability and the risk of forfeiture imposed by the
provisions of such Section 7.


 


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


 


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


 


2.22                           “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.


 


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. Such a committee, if established, will act by majority
approval of the members (unanimous approval with respect to action by written
consent), and a majority of the members of such a committee will constitute a
quorum. As used in the Plan, “Committee” will refer to the Board or to such a
committee, if established. To the extent consistent with applicable corporate
law of the Company’s jurisdiction of incorporation, the Committee may delegate
to any officers of the Company the duties, power and authority of the Committee
under the Plan pursuant to such conditions or limitations as the Committee may establish;
provided, however, that only the Committee may exercise such duties, power
and authority with respect to Eligible Recipients who are subject to Section 16
of the Exchange Act. 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 


 


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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)                                 Subject
to Section 3.2(d), below, the Committee will have the authority under the
Plan to amend or modify the terms of any outstanding Incentive Award in any
manner, including, without limitation, the authority to modify the number of
shares or other terms and conditions of an Incentive Award, extend the term of
an Incentive Award, accelerate the exercisability or vesting or otherwise
terminate any restrictions relating to an Incentive Award, accept the surrender
of any outstanding Incentive Award or, to the extent not previously exercised
or vested, authorize the grant of new Incentive Awards in substitution for surrendered
Incentive Awards; provided, however that the amended or modified terms are
permitted by the Plan as then in effect and that any Participant adversely
affected by such amended or modified terms has consented to such amendment or
modification.


 


(c)                                  In
the event of (i) any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, extraordinary dividend or divestiture
(including a spin-off) or any other change in corporate structure or shares; (ii) any
purchase, acquisition, sale, disposition or write-down of a significant amount
of assets or a significant business; (iii) any change in accounting
principles or practices, tax laws or other such laws or provisions affecting
reported results; or (iv) any other similar change, in each case with
respect to the Company or any other entity whose performance is relevant to the
grant or vesting of an Incentive Award, the Committee (or, if the Company is
not the surviving corporation in any such transaction, the board of directors
of the surviving corporation) may, without the consent of any affected
Participant, amend or modify the vesting criteria of any outstanding Incentive
Award that is based in whole or in part on the financial performance of
the Company (or any Subsidiary or division or other subunit thereof) or such
other entity so as equitably to reflect such event, with the desired result
that the criteria for evaluating such financial performance of the Company or
such other entity will be substantially the same (in the sole discretion of the
Committee or the board of directors of the surviving corporation) following
such event as prior to such event; provided, however, that the amended or
modified terms are permitted by the Plan as then in effect.


 


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


 


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Awards;  in exchange; or (iii) repurchasing
the underwater Options and granting new Incentive Awards under this Plan. For
purposes of this Section 3.2(d) and Section 10.4, 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; 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 1,000,000. The shares available for issuance under the Plan may, at the
election of the Committee, be either treasury shares or shares authorized but unissued,
and, if treasury shares are used, all references in the Plan to the issuance of
shares will, for corporate law purposes, be deemed to mean the transfer of
shares from treasury. Notwithstanding any other provisions of the Plan to the
contrary, (i) no Participant in the Plan may be granted any Incentive
Awards relating to more than 200,000 shares of Common Stock in the aggregate
during any fiscal year of the Company and (ii) no more than 100,000 shares
of Common Stock may be granted as Restricted Stock Awards under the Plan;
provided, however, that a Participant who is first appointed or elected as an
officer, hired as an employee 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,
Incentive Awards relating to up to 400,000 shares of Common Stock (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; provided, however, that shares subject 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. To the
extent that the exercise price of any Option and/or associated tax withholding
obligations are paid by tender or attestation as to ownership of Previously
Acquired Shares, or to the extent that such tax withholding obligations are
satisfied by withholding of shares otherwise issuable upon exercise of the
Option, only the number of shares of Common Stock issued net of the number of
shares tendered, attested to or withheld will be applied to reduce the maximum
number of shares of Common Stock remaining 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, 


 


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the number and kind of securities or other property
(including cash) subject to outstanding Incentive Awards and 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 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 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 with respect
to any Option (110% of the Fair Market Value with respect to an Incentive Stock
Option if, at the time such 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 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 that 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 prior to six months from its date of grant
(other than as provided in Section 8.1 of the Plan) or after 10 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% 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 


 


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established by the Committee, may allow such
payments to be made, in whole or in part, by tender of a Broker Exercise
Notice, by tender, or attestation as to ownership, of Previously Acquired
Shares that have been held for the period of time necessary to avoid a charge
to the Company’s earnings for financial reporting purposes and that are
otherwise acceptable to the Committee, or by a combination of such methods. For
purposes of such payment, Previously Acquired Shares tendered or covered by an
attestation 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 Eden Prairie,
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.                                       Restricted
Stock Awards.


 


7.1                                 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, that the Participant remain in the continuous
employ or service of the Company or a Subsidiary for a certain period;
provided, however, that other than as provided in Section 8.1 of the Plan,
no Restricted Stock Award may vest prior to six months from its date of
grant.


 


7.2                                 Rights
as a Stockholder; Transferability. Except as provided in Sections 7.1, 7.3,
7.4 and 11.3 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 7 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.


 


7.3                                 Dividends
and Distributions. Unless the Committee determines otherwise in its sole
discretion (either in the agreement evidencing the Restricted Stock Award at
the time of grant or at any time after the grant of the Restricted Stock
Award), any dividends or distributions (other than regular quarterly cash
dividends) paid with respect to shares of Common Stock subject to the unvested
portion of a Restricted Stock Award will be subject to the same restrictions as
the shares to which such dividends or distributions relate. The Committee will
determine in its sole discretion whether any interest will be paid on such
dividends or distributions.


 


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7.4                                 Enforcement
of Restrictions. To enforce the restrictions referred to in this Section 7,
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.


 


8.                                       Effect
of Termination of Employment or Other Service.


 


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


 


(a)                                  All
outstanding Options then held by the Participant will become immediately
exercisable in full and will remain exercisable for a period of one (1) year
after such termination (but in no event after the expiration date of any such
Option); and


 


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


 


8.2                                 Termination
Due to Retirement. Subject to Section 8.5 of the Plan, in the event a
Participant’s employment or other service with the Company and all Subsidiaries
is terminated by reason of Retirement:


 


(a)                                  All
outstanding Options then held by the Participant will, to the extent
exercisable as of such termination, remain exercisable in full for a period of
three (3) months after such termination (but in no event after the
expiration date of any such Option). Options not exercisable as of such
Retirement will be forfeited and terminate; and


 


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


 


8.3                                 Termination
for Reasons Other than Death, Disability or Retirement. Subject to Section 8.5
of the Plan, in the event a Participant’s employment or other service is
terminated with the Company and all Subsidiaries for any reason other than
death, Disability or Retirement, or a Participant is in the employ of a
Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless
the Participant continues in the employ of the Company or another Subsidiary):


 


(a)                                  All
outstanding Options 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). Options not exercisable as of such termination will be
forfeited and terminate; and


 


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


 


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8.4                                 Modification
of Rights Upon Termination. Notwithstanding the other provisions of this Section 8,
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 (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 then held by such Participant to vest and/or continue to vest or become
free of restrictions and conditions to issuance, 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 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 8.4
but in no event beyond its expiration date.


 


8.5                                 Effects
of Actions Constituting Cause. Notwithstanding anything in the Plan to the
contrary, in the event that a Participant is determined by the Committee,
acting in its sole discretion, to have committed any action which would
constitute Cause as defined in Section 2.3, irrespective of whether such
action or the Committee’s determination occurs before or after termination of
such Participant’s employment or service 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 or the vesting of any Restricted Stock Award for a period of up to
forty-five (45) days in order for the Committee to make any determination as to
the existence of Cause.


 


8.6                                 Determination
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 service, as
determined by the Committee in its sole discretion based upon such records.


 


9.                                       Payment
of Withholding Taxes.


 


9.1                                 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, 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.


 


9.2                                 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 9.1 of the Plan by 


 


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electing to tender, or by attestation as to ownership
of, Previously Acquired Shares that have been held for the period of time
necessary to avoid a charge to the Company’s earnings for financial reporting
purposes and that are otherwise acceptable to the Committee, by delivery of a
Broker Exercise Notice or a combination of such methods. For purposes of
satisfying a Participant’s withholding or employment-related tax obligation,
Previously Acquired Shares tendered or covered by an attestation will be valued
at their Fair Market Value. 


 


10.                                 Change
in Control.


 


10.1                           A “Change
in Control” shall be deemed to have occurred if the event set forth in any one
of the following paragraphs has 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 any Successor;


 


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


 


(c)                                  any
Successor, other than a Bona Fide Underwriter, becomes after the effective date
of the Plan the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of (i) 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 Continuity
Directors (as defined in Section 10.2 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 date of such merger or consolidation
have “beneficial ownership” (as defined in Rule 13d-3 under the Exchange
Act), immediately following the effective date of such merger or consolidation,
of securities of the surviving corporation representing (i) 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.


 


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10.2                           Change
in Control Definitions. For purposes of this Section 10:


 


(a)                                  “Continuity
Directors” of the Company will mean any individuals who are members of the
Board on the effective date of the Plan and any individual who subsequently
becomes a member of the Board whose election, or nomination for election by the
Company’s stockholders, was approved by a vote of at least a majority of the
Continuity 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).


 


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


 


(c)                                  “Successor”
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” (as defined below) or
any benefit plan(s) sponsored by the Company or any affiliate that succeeds to,
or has the practical ability to control (either immediately or solely with the
passage of time), the Company’s business directly, by merger, consolidation or
other form of business combination, or indirectly, by purchase of the
Company’s outstanding securities ordinarily having the right to vote at the
election of directors or all or substantially all of its assets or otherwise. 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.


 


10.3                           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, 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, all Incentive Awards then outstanding will become
immediately exercisable in full and will remain exercisable in accordance with
their terms.


 


10.4                           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:


 


(a)                                  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; and


 


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(b)                                 any
Options which, as of the effective date of any such Change in Control, are “underwater”
(as defined in Section 3.2(d)) shall terminate as of the effective date of
any such Change in Control.


 


10.5                           Limitation
on Change in Control Payments. Notwithstanding anything in Section 10.3
or 10.4 of the Plan to the contrary, if, with respect to a Participant, the
acceleration of the exercisability of an Option as provided in Section 10.3
or the payment of cash in exchange for all or part of an Option as
provided in Section 10.4 (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 10.3 or 10.4 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 which specifically provides that payments
attributable to one or more forms of employee stock incentives or to payments
made in lieu of employee stock incentives will not reduce any other payments
under such agreement, even if it would constitute an excess parachute payment,
or provides that the Participant will have the discretion to determine which
payments will be reduced in order to avoid an excess parachute payment, then
the limitations of this Section 10.4 will, to that extent, not apply.


 


11.                                 Rights
of Eligible Recipients and Participants; Transferability.


 


11.1                           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.


 


11.2                           Rights
as a Stockholder. As a holder of Incentive Awards (other than Restricted
Stock Awards), a Participant will have no rights as a stockholder unless and
until such Incentive Awards are exercised for, or paid in the form of,
shares of Common Stock and the Participant becomes the holder of record of such
shares. Except as otherwise provided in the Plan, 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.


 


11.3                           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 (in the case of Restricted Stock
Awards) of such Incentive Award will be assignable or 


 


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transferable, or subjected to any lien, during the lifetime of the
Participant, either voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise.


 


(b)                                 A
Participant will be entitled to designate a beneficiary to receive an Incentive
Award upon such Participant’s death, and in the event of such Participant’s
death, payment of any amounts due under the Plan will be made to, and exercise
of any Options (to the extent permitted pursuant to Section 8 of the Plan)
may be made by, such beneficiary. If a deceased Participant has failed to
designate a beneficiary, or if a beneficiary designated by the Participant
fails to survive the Participant, payment of any amounts due under the Plan
will be made to, and exercise of any Options (to the extent permitted pursuant
to Section 9 of the Plan) may be made by, the Participant’s legal
representatives, heirs and legatees. If a deceased Participant has designated a
beneficiary and such beneficiary survives the Participant but dies before
complete payment of all amounts due under the Plan or exercise of all
exercisable Options, then such payments will be made to, and the exercise of
such Options may be made by, the legal representatives, heirs and legatees
of the beneficiary.


 


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


 


11.4                           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.


 


12.                                 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 


 


13

















 


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.


 


13.                                 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 such
amendments to the Plan will be effective without approval of the Company’s
stockholders if: (i) stockholder approval of the amendment is then
required pursuant to Section 422 of the Code or the rules of any
stock exchange or Nasdaq or similar regulatory body; or (ii) such
amendment seeks to modify Section 3.2(d) hereof. No termination,
suspension or amendment of the Plan may adversely affect any outstanding
Incentive Award without the consent of the affected Participant; provided,
however, that this sentence will not impair the right of the Committee to take
whatever action it deems appropriate under Sections 3.2(c), 4.3 and 10 of the
Plan.


 


14.                                 Effective
Date and Duration of the Plan.


 


The Plan is effective as
of the Effective Date. The Plan will terminate at midnight on April 30,
2013, 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, or
become free of restrictions, according to their terms.


 


15.                                 Miscellaneous.


 


15.1                           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.


 


15.2                           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.


 


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