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Exhibit 10.6 LIFECORE BIOMEDICAL, INC. 2003 STOCK INCENTIVE PLAN SEPTEMBER 24, 2003




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Table of Contents Section 1.
    
    Purpose
    
    
    1Section 2.
    
    Definitions
    
    
    1Section 3.
    
    Administration
    
    
    3(a)
    
    Power and Authority of the Committee
    
    
    3(b)
    
    Delegation
    
    
    3(c)
    
    Power and Authority of the Board
    
    
    4Section 4.
    
    Shares Available for Awards
    
    
    4(a)
    
    Shares Available
    
    
    4(b)
    
    Accounting for Awards
    
    
    4(c)
    
    Adjustments
    
    
    4(d)
    
    Award Limitations Under the Plan
    
    
    4Section 5.
    
    Eligibility
    
    
    5Section 6.
    
    Awards
    
    
    5(a)
    
    Options
    
    
    5(b)
    
    Stock Appreciation Rights
    
    
    6(c)
    
    Restricted Stock and Restricted Stock Units
    
    
    6(d)
    
    Performance Awards
    
    
    7(e)
    
    Other Stock Grants
    
    
    7(f)
    
    Other Stock-Based Awards
    
    
    7(g)
    
    General
    
    
    8Section 7.
    
    Amendment and Termination; Adjustments
    
    
    9(a)
    
    Amendments to the Plan
    
    
    9(b)
    
    Amendments to Awards
    
    
    10(c)
    
    Correction of Defects, Omissions and Inconsistencies
    
    
    10Section 8.
    
    Income Tax Withholding
    
    
    10Section 9.
    
    General Provisions
    
    
    11(a)
    
    No Rights to Awards
    
    
    11(b)
    
    Award Agreements
    
    
    11(c)
    
    Plan Provisions Control
    
    
    11(d)
    
    No Rights of Shareholders
    
    
    11(e)
    
    No Limit on Other Compensation Arrangements
    
    
    11(f)
    
    No Right to Employment
    
    
    11(g)
    
    Governing Law
    
    
    12(h)
    
    Severability
    
    
    12(i)
    
    No Trust or Fund Created
    
    
    12
 ii




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(j)
    
    Other Benefits
    
    
    12(k)
    
    No Fractional Shares
    
    
    12(l)
    
    Headings
    
    
    12(m)
    
    Section 16 Compliance; Section 162(m) Administration
    
    
    12(n)
    
    Conditions Precedent to Issuance of Shares
    
    
    13Section 10.
    
    Effective Date of the Plan
    
    
    13Section 11.
    
    Term of the Plan
    
    
    13
 iii




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LIFECORE BIOMEDICAL, INC.
2003 STOCK INCENTIVE PLAN Section 1. Purpose The purpose of the Plan is to promote the interests of the Company and its
shareholders by aiding the Company in attracting and retaining employees,
officers, consultants, independent contractors and directors capable of
assuring the future success of the Company, to offer such persons incentives to
put forth maximum efforts for the success of the Companys business and to
afford such persons an opportunity to acquire a proprietary interest in the
Company. Section 2. Definitions As used in the Plan, the following terms shall have the meanings set forth
below: (a) Affiliate shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, in each case as
determined by the Committee. (b) Award shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Other Stock Grant or Other
Stock-Based Award granted under the Plan. (c) Award Agreement shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan. Each Award
Agreement shall be subject to the applicable terms and conditions of the Plan
and any other terms and conditions (not inconsistent with the Plan) determined
by the Committee. (d) Board shall mean the Board of Directors of the Company. (e) Code shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder. (f) Committee shall mean a committee of Directors designated by the
Board to administer the Plan, which shall initially be the Companys
compensation committee. The Committee shall be comprised of not less than such
number of Directors as shall be required to permit Awards granted under the
Plan to qualify under Rule 16b-3 and Section 162(m) of the Code, and each
member of the Committee shall be a Non-Employee Director. (g) Company shall mean Lifecore Biomedical, Inc., a Minnesota
corporation, and any successor corporation. (h) Director shall mean a member of the Board, including any
Non-Employee Director.




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(i) Eligible Person shall mean any employee, officer, consultant,
independent contractor or director providing services to the Company or any
Affiliate who the Committee determines to be an Eligible Person. (j) Exchange Act shall mean the Securities Exchange Act of 1934, as
amended. (k) Fair Market Value shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair
market value of such property determined by such methods or procedures as shall
be established from time to time by the Committee. Notwithstanding the
foregoing and unless otherwise determined by the Committee, the Fair Market
Value of a Share as of a given date shall be, if the Shares are then listed on
the Nasdaq National Market, the closing sale price of one Share as reported on
the Nasdaq National Market on such date or, if the Nasdaq National Market is
not open for trading on such date, on the most recent preceding date when it is
open for trading. (l) Incentive Stock Option shall mean an option granted under Section
6(a) of the Plan that is intended to qualify as an incentive stock option in
accordance with the terms of Section 422 of the Code or any successor
provision. (m) Non-Employee Director shall mean any Director who is not also an
employee of the Company or an Affiliate within the meaning of Rule 16b-3 and an
outside director within the meaning of Section 162(m) of the Code. (n) Non-Qualified Stock Option shall mean an option granted under
Section 6(a) of the Plan that is not an Incentive Stock Option. (o) Option shall mean an Incentive Stock Option or a Non-Qualified Stock
Option. (p) Other Stock Grant shall mean any right granted under Section 6(e) of
the Plan. (q) Other Stock-Based Award shall mean any right granted under Section
6(f) of the Plan. (r) Participant shall mean an Eligible Person designated to be granted
an Award under the Plan. (s) Performance Award shall mean any right granted under Section 6(d) of
the Plan. (t) Person shall mean any individual or entity, including a corporation,
partnership, limited liability company, association, joint venture or trust. (u) Plan shall mean the Lifecore Biomedical, Inc. 2003 Stock Incentive
Plan, as amended from time to time, the provisions of which are set forth
herein. (v) Restricted Stock shall mean any Share granted under Section 6(c) of
the Plan. 2




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(w) Restricted Stock Unit shall mean any unit granted under Section 6(c)
of the Plan evidencing the right to receive a Share (or a cash payment equal to
the Fair Market Value of a Share) at some future date. (x) Rule 16b-3 shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, or
any successor rule or regulation. (y) Securities Act shall mean the Securities Act of 1933, as amended. (z) Share or Shares shall mean a share or shares of common stock, $.01
par value per share, of the Company or such other securities or property as may
become subject to Awards pursuant to an adjustment made under Section 4(c) of
the Plan. (aa) Stock Appreciation Right shall mean any right granted under Section
6(b) of the Plan. Section 3. Administration (a) Power and Authority of the Committee. The Plan shall be administered
by the Committee. Subject to the express provisions of the Plan and to
applicable law, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be
granted to each Participant under the Plan; (iii) determine the number of
Shares to be covered by (or the method by which payments or other rights are to
be determined in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of any Option
or waive any restrictions relating to any Award; (vi) determine whether, to
what extent and under what circumstances Awards may be exercised in cash,
Shares, promissory notes (provided, however, that the acceptance of such
promissory notes does not conflict with Section 402 of the Sarbanes-Oxley Act
of 2002) other securities, other Awards or other property, or canceled,
forfeited or suspended; (vii) interpret and administer the Plan and any
instrument or agreement, including an Award Agreement, relating to the Plan;
(viii) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (ix) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan. Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive and binding upon any
Eligible Person and any holder or beneficiary of any Award. (b) Delegation. The Committee may delegate to one or more officers or
Directors of the Company, subject to such terms, conditions and limitations as
the Committee may establish in its sole discretion, the authority to grant
Options; provided, however, that the Committee shall not
delegate such authority (i) with regard to grants of Options to be made to
officers or directors of the Company or any Affiliate who are subject to
Section 16 of the Exchange Act or (ii) in such a manner as would cause the Plan
not to comply with the requirements of Section 162(m) of 3




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the Code or (iii) in
such a manner as would contravene Section 409 of the Minnesota Business
Corporation Act. (c) Power and Authority of the Board. Notwithstanding anything to the
contrary contained herein, the Board may, at any time and from time to time,
without any further action of the Committee, exercise the powers and duties of
the Committee under the Plan. Section 4. Shares Available for Awards (a) Shares Available. Subject to adjustment as provided in Section 4(c)
of the Plan, the aggregate number of Shares that may be issued under the Plan
shall be 1,000,000. Notwithstanding the foregoing, (i) the number of Shares
available for granting Incentive Stock Options under the Plan shall not exceed
1,000,000, subject to adjustment as provided in Section 4(c) of the Plan and
subject to the provisions of Section 422 or 424 of the Code or any successor
provision and (ii) the number of Shares available for granting Restricted Stock
and Restricted Stock Units shall not exceed 500,000, subject to adjustment as
provided in Section 4(c) of the Plan. (b) Accounting for Awards. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of Shares available
for granting Awards under the Plan. If any Shares covered by an Award or to
which an Award relates are not purchased or are forfeited, or if an Award
otherwise terminates without delivery of any Shares, then the number of Shares
counted against the aggregate number of Shares available under the Plan with
respect to such Award, to the extent of any such forfeiture or termination,
shall again be available for granting Awards under the Plan. (c) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and type of
Shares (or other securities or other property) that thereafter may be made the
subject of Awards, (ii) the number and type of Shares
(or other securities or other property) subject to outstanding Awards and
(iii) the purchase price or exercise price with respect to any Award; provided,
however, that the number of Shares covered by any Award or to which such Award
relates shall always be a whole number. (d) Award Limitations Under the Plan. No Eligible Person may be granted
any Award or Awards under the Plan, the value of which Award or Awards is based
solely on an increase in the value of the Shares after the date of grant of
such Award or Awards, for more 4




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than 100,000 Shares (subject to adjustment as
provided for in Section 4(c) of the Plan), in the aggregate in any taxable
year. The foregoing annual limitation specifically includes the grant of any
Award or Awards representing qualified performance-based compensation within
the meaning of Section 162(m) of the Code. Section 5. Eligibility Any Eligible Person shall be eligible to be designated a Participant. In
determining which Eligible Persons shall receive an Award and the terms of any
Award, the Committee may take into account the nature of the services rendered
by the respective Eligible Persons, their present and potential contributions
to the success of the Company or such other factors as the Committee, in its
discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive
Stock Option may only be granted to full-time or part-time employees (which
term as used herein includes, without limitation, officers and directors who
are also employees), and an Incentive Stock Option shall not be granted to an
employee of an Affiliate unless such Affiliate is also a subsidiary
corporation of the Company within the meaning of Section 424(f) of the Code or
any successor provision. Section 6. Awards (a) Options. The Committee is hereby authorized to grant Options to
Eligible Persons with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the
Plan as the Committee shall determine: (i) Exercise Price. The purchase price per Share purchasable under
an Option shall be determined by the Committee; provided, however, that
such purchase price shall not be less than 100% of the Fair Market Value
of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be fixed by the
Committee at the time of grant. (iii) Time and Method of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part
and the method or methods by which, and the form or forms (including,
without limitation, cash, Shares, promissory notes (provided, however,
that the acceptance of such promissory notes does not conflict with
Section 402 of the Sarbanes-Oxley Act of 2002) other securities, other
Awards or other property, or any combination thereof, having a Fair
Market Value on the exercise date equal to the applicable exercise price)
in which, payment of the exercise price with respect thereto may be made
or deemed to have been made. (iv) Incentive Stock Options. Notwithstanding anything in the Plan
to the contrary, the following additional provisions shall apply to the
grant of stock options which are intended to qualify as Incentive Stock
Options: (A) The Committee will not grant Incentive Stock Options in
which the aggregate Fair Market Value (determined as of the time
the option is granted) of 5




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the Shares with respect to which
Incentive Stock Options are exercisable for the first time by any
Participant during any calendar year (under this Plan and all other
plans of the Company and its Affiliates) shall exceed $100,000. (B) All Incentive Stock Options must be granted within ten
years from the earlier of the date on which this Plan was adopted
by the Board or the date this Plan was approved by the shareholders
of the Company. (C) Unless sooner exercised, all Incentive Stock Options shall
expire and no longer be exercisable no later than 10 years after
the date of grant; provided, however, that in the case of a grant
of an Incentive Stock Option to a Participant who, at the time such
Option is granted, owns (within the meaning of Section 422 of the
Code) stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of its Affiliate,
such Incentive Stock Option shall expire and no longer be
exercisable no later than five years from the date of grant. (D) The purchase price per Share for an Incentive Stock Option
shall be not less than 100% of the Fair Market Value of a Share on
the date of grant of the Incentive Stock Option; provided, however,
that, in the case of the grant of an Incentive Stock Option to a
Participant who, at the time such Option is granted, owns (within
the meaning of Section 422 of the Code) stock possessing more than
10% of the total combined voting power of all classes of stock of
the Company or of its Affiliate, the purchase price per Share
purchasable under an Incentive Stock Option shall be not less than
110% of the Fair Market Value of a Share on the date of grant of
the Incentive Stock Option. (E) Any Incentive Stock Option authorized under the Plan shall
contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain
all provisions required in order to qualify the Option as an
Incentive Stock Option. (b) Stock Appreciation Rights. The Committee is hereby authorized to
grant Stock Appreciation Rights to Eligible Persons subject to the terms of the
Plan. Each Stock Appreciation Right granted under the Plan shall confer on the
holder upon exercise the right to receive, as determined by the Committee,
cash or a number of Shares equal to the excess of (i) the Fair Market
Value of one Share on the date of exercise over (ii) the grant price of the
Stock Appreciation Right as determined by the Committee, which grant price
shall not be less than 100% of the Fair Market Value of one Share on the date
of grant of the Stock Appreciation Right. Subject to the terms of the Plan,
the grant price, term, methods of exercise, dates of exercise, methods of
settlement and any other terms and conditions (including conditions or
restrictions on the exercise thereof) of any Stock Appreciation Right shall be
as determined by the Committee. (c) Restricted Stock and Restricted Stock Units. The Committee is hereby
authorized to grant Restricted Stock and Restricted Stock Units to Eligible
Persons with the following terms and conditions and with such additional terms 6




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and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine: (i) Restrictions. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, a restriction on or prohibition against
the right to receive any dividend or other right or property with respect
thereto), which restrictions may lapse separately or in combination at
such time or times, in such installments or otherwise as the Committee
may deem appropriate. (ii) Stock Certificates. Any Restricted Stock granted under the
Plan shall be evidenced by the issuance of a stock certificate or
certificates, which shall be held by the Company. Such certificate or
certificates shall be registered in the name of the Participant and shall
bear an appropriate legend referring to the applicable Award Agreement
and possible forfeiture of such shares of Restricted Stock. (iii) Forfeiture. Except as otherwise determined by the Committee,
upon a Participants termination of employment (as determined under
criteria established by the Committee) during the applicable restriction
period, all applicable Shares of Restricted Stock and Restricted Stock
Units at such time subject to restriction shall be forfeited and
reacquired by the Company; provided, however, that the Committee may,
when it finds that a waiver would be in the best interest of the Company,
waive in whole or in part any or all remaining restrictions with respect
to Shares of Restricted Stock or Restricted Stock Units. (d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Eligible Persons subject to the terms of the Plan. A
Performance Award granted under the Plan (i) may be denominated or payable in
cash, Shares (including, without limitation, Restricted Stock and Restricted
Stock Units), other securities, other Awards or other property and (ii) shall
confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan,
the performance goals to be achieved during any performance period, the length
of any performance period, the amount of any Performance Award granted, the
amount of any payment or transfer to be made pursuant to any Performance
Award and any other terms and conditions of any Performance Award shall be
determined by the Committee. (e) Other Stock Grants. The Committee is hereby authorized, subject to
the terms of the Plan, to grant to Eligible Persons Shares without restrictions
thereon as are deemed by the Committee to be consistent with the purpose of the
Plan. (f) Other Stock-Based Awards. The Committee is hereby authorized to grant
to Eligible Persons, subject to the terms of the Plan, such other Awards that
are denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares), as are deemed by the Committee to be
consistent with the purpose of the Plan. Shares or other securities delivered 7




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pursuant to a purchase right granted under this Section 6(f) shall be purchased
for such consideration, which may be paid by such method or methods and in such
form or forms (including, without limitation, cash, Shares, promissory notes
(provided, however, that the acceptance such promissory notes does not conflict
with Section 402 of the Sarbanes-Oxley Act of 2002) other securities, other
Awards or other property or any combination thereof), as the Committee shall
determine, the value of which consideration, as established by the Committee,
shall not be less than 100% of the Fair Market Value of such Shares or other
securities as of the date such purchase right is granted. (g) General. (i) Consideration for Awards. Awards may be granted for no cash
consideration or for any cash or other consideration as determined by the
Committee and required by applicable law. (ii) Awards May Be Granted Separately or Together. Awards may, in
the discretion of the Committee, be granted either alone or in addition
to, in tandem with or in substitution for any other Award or any award
granted under any plan of the Company or any Affiliate. Awards granted
in addition to or in tandem with other Awards or in addition to or in
tandem with awards granted under any such other plan of the Company or
any Affiliate may be granted either at the same time as or at a different
time from the grant of such other Awards or awards. (iii) Forms of Payment under Awards. Subject to the terms of the
Plan, payments or transfers to be made by the Company or an Affiliate
upon the grant, exercise or payment of an Award may be made in such form
or forms as the Committee shall determine (including, without limitation,
cash, Shares, promissory notes (provided, however, that the acceptance of
such promissory notes does not conflict with Section 402 of the
Sarbanes-Oxley Act of 2002), other securities, other Awards or other
property or any combination thereof), and may be made in a single payment
or transfer, in
installments or on a deferred basis, in each case in accordance with
rules and procedures established by the Committee. Such rules and
procedures may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments. (iv) Limits on Transfer of Awards. No Award (other than Other Stock
Grants) and no right under any such Award shall be transferable by a
Participant otherwise than by will or by the laws of descent and
distribution and the Company shall not be required to recognize any
attempted assignment of such rights by any Participant; provided,
however, that, if so determined by the Committee, a Participant may, in
the manner established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the Participant and receive any
property distributable with respect to any Award upon the death of the
Participant; provided, further, that, if so determined by the Committee,
a Participant may transfer a Non-Qualified Stock Option to any Family
Member (as such term is defined in the General Instructions to Form S-8
(or successor to such Instructions or such Form)) at any time that such
Participant holds such Option, 8




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providedthat the Participant may not
receive any consideration for such transfer, the Family Member may not
make any subsequent transfers other than by will or by the laws of
descent and distribution and the Company receives written notice of such
transfer, provided, further, that, if so determined by the Committee and
except in the case of an Incentive Stock Option, Awards may be
transferable as determined by the Committee. Except as otherwise
determined by the Committee, each Award (other than an Incentive Stock
Option) or right under any such Award shall be exercisable during the
Participants lifetime only by the Participant or, if permissible under
applicable law, by the Participants guardian or legal representative.
Except as otherwise determined by the Committee, no Award (other than an
Incentive Stock Option) or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or other encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate. (v) Term of Awards. Subject to Section 6(a)(iv)(C) of the Plan, the
term of each Award shall be for such period as may be determined by the
Committee. (vi) Restrictions; Securities Exchange Listing. All Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan,
applicable federal or state securities laws and regulatory requirements,
and the Committee may direct appropriate stop transfer orders and cause
other legends to be placed on the certificates for such Shares or other
securities to reflect such restrictions. If the Shares or other
securities are traded on a securities exchange, the Company shall not be
required to deliver any Shares or other securities covered by an Award
unless and until such Shares or other securities have been admitted for
trading on such securities exchange. (vii) Prohibition on Repricing. Except as provided in Section 4(c)
of the Plan, no Option or Stock Appreciation Right may be amended to
reduce its initial exercise
price and no Option or Stock Appreciation Right shall be canceled
and replaced with Options or Stock Appreciation Rights having a lower
exercise price, without the approval of the stockholders of the Company
or unless there would be no material adverse effect on the Companys
financial statements as prepared in accordance with Generally Accepted
Accounting Principles. Section 7. Amendment and Termination; Adjustments (a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue or terminate the Plan at any time; provided, however, that,
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the shareholders of the Company, no such amendment, alteration,
suspension, discontinuation or termination shall be made that, absent such
approval: (i) violates the rules or regulations of the National Association of
Securities Dealers, Inc. or of any other securities exchange that are
applicable to the Company; 9




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(ii) causes the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan; (iii) increases the number of shares authorized under the Plan as
specified in Section 4(a) of the Plan; (iv) permits the award of Options or Stock Appreciation Rights at a
price less than 100% of the Fair Market Value of a Share on the date of
grant of such Option or Stock Appreciation Right, as prohibited by
Sections 6(a)(i) and 6(b)(ii) of the Plan or the repricing of Options or
Stock Appreciation Rights, as prohibited by Section 6(g)(vii) of the
Plan; or (v) would prevent the grant of Options or Stock Appreciation Rights
that would qualify under Section 162(m) of the Code. (b) Amendments to Awards. The Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively. Except as otherwise provided herein or in an Award Agreement,
the Committee may not amend, alter, suspend, discontinue or terminate any
outstanding Award, prospectively or retroactively, if such action would
adversely affect the rights of the holder of such Award, without the consent of
the Participant or holder or beneficiary thereof. (c) Correction of Defects, Omissions and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable
to carry the Plan into effect. Section 8. Income Tax Withholding In order to comply with all applicable federal, state or local income tax
laws or regulations, the Company may take such action as it deems appropriate
to ensure that all applicable federal, state or local payroll, withholding,
income or other taxes, which are the sole and absolute responsibility of a
Participant, are withheld or collected from such Participant. In order to
assist a Participant in paying all or a portion of the federal, state and local
taxes to be withheld or collected upon exercise or receipt of (or the lapse of
restrictions relating to) an Award, the Committee, in its discretion and
subject to such additional terms and conditions as it may adopt, may permit the
Participant to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the Shares otherwise to be delivered upon exercise or
receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes (but only to the extent of the
minimum amount required to be withheld under applicable laws or regulations) or
(ii) delivering to the Company Shares other than Shares issuable upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes. The election, if any, must be
made on or before the date that the amount of tax to be withheld is determined. 10




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Section 9. General Provisions (a) No Rights to Awards. No Eligible Person or other Person shall have
any claim to be granted any Award under the Plan, and there is no obligation
for uniformity of treatment of Eligible Persons or holders or beneficiaries of
Awards under the Plan. The terms and conditions of Awards need not be the same
with respect to any Participant or with respect to different Participants. (b) Award Agreements. No Participant will have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company and, if requested by the Company, signed
by the Participant. (c) Plan Provisions Control. In the event that any provision of an Award
Agreement conflicts with or is inconsistent in any respect with the terms of
the Plan as set forth herein or subsequently amended, the terms of the Plan
shall control. (d) No Rights of Shareholders. Except with respect to Shares of
Restricted Stock as to which the Participant has been granted the right to
vote, neither a Participant nor the Participants legal representative shall
be, or have any of the rights and privileges of, a shareholder of the Company
with respect to any Shares issuable to such Participant upon the exercise or
payment of any Award, in whole or in part, unless and until such Shares have
been issued in the name of such Participant or such Participants legal
representative without restrictions thereto. (e) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases. (f) No Right to Employment. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ, or as giving a
director of the Company or an Affiliate the right to continue as a director or
an Affiliate of the Company or any Affiliate, nor will it affect in any way the
right of the Company or an Affiliate to terminate such employment at any time,
with or without cause. In addition, the Company or an Affiliate may at any
time dismiss a Participant from employment, or terminate the term of a director
of the Company or an Affiliate, free from any liability or any claim under the
Plan or any Award, unless otherwise expressly provided in the Plan or in any
Award Agreement. Nothing in this Plan shall confer on any person any legal or
equitable right against the Company or any Affiliate, directly or indirectly,
or give rise to any cause of action at law or in equity against the Company or
an Affiliate. The Awards granted hereunder shall not form any part of the
wages or salary of any Eligible Person for purposes of severance pay or
termination indemnities, irrespective of the reason for termination of
employment. Under no circumstances shall any person ceasing to be an employee
of the Company or any Affiliate be entitled to any compensation for any loss of
any right or benefit under the Plan which such employee might otherwise have
enjoyed but for termination of employment, whether such compensation is claimed
by way of damages for wrongful or unfair dismissal, breach of contract or
otherwise. By participating in the Plan, each 11




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Participant shall be deemed to
have accepted all the conditions of the Plan and the terms and conditions of
any rules and regulations adopted by the Committee and shall be fully bound
thereby. (g) Governing Law. The validity, construction and effect of the Plan or
any Award, and any rules and regulations relating to the Plan or any Award,
shall be determined in accordance with the internal laws, and not the law of
conflicts, of the State of Minnesota. (h) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent
of the Plan or the Award, such provision shall be stricken as to such
jurisdiction or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect. (i) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a
trust or separate fund of any kind or a fiduciary relationship between the
Company or any Affiliate and an Eligible Person or any other Person. To the
extent that any Person acquires a right to receive payments from the Company or
any Affiliate pursuant to an Award, such right shall be no greater than the
right of any unsecured general creditor of the Company or any Affiliate. (j) Other Benefits. No compensation or benefit awarded to or realized by
any Participant under the Plan shall be included for the purpose of computing
such Participants compensation under any compensation-based retirement,
disability, or similar plan of the Company unless required by law or otherwise
provided by such other plan. (k) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated. (l) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or interpretation
of the Plan or any provision thereof. (m) Section 16 Compliance; Section 162(m) Administration. The Plan is
intended to comply in all respects with Rule 16b-3 or any successor provision,
as in effect from time to time, and in all events the Plan shall be construed
in accordance with the requirements of Rule 16b-3. If any Plan provision does
not comply with Rule 16b-3 as hereafter amended or interpreted, the provision
shall be deemed inoperative. The Board of Directors, in its absolute
discretion, may bifurcate the Plan so as to restrict, limit or condition the
use of any provision of the Plan with respect to persons who are officers or
directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other Eligible Persons. With
respect to Options and Stock Appreciation Rights, the Company intends to have
the Plan 12




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administered in accordance with the requirements for the award of
qualified performance-based compensation within the meaning of Section 162(m)
of the Code. (n) Conditions Precedent to Issuance of Shares. Shares shall not be
issued pursuant to the exercise or payment of the purchase price relating to an
Award unless such exercise or payment and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act, the Exchange Act, the rules
and regulations promulgated thereunder, the requirements of any applicable
Stock Exchange and the Minnesota Business
Corporation Act. As a condition to the exercise or payment of the
purchase price relating to such Award, the Company may require that the person
exercising or paying the purchase price represent and warrant that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation and warranty is required by law. Section 10. Effective Date of the Plan The Plan shall be effective upon its adoption by the Board, provided,
however, that in the event the Plan is not approved by the shareholders of the
Company within one year thereafter, the Plan will be terminated and all Awards
granted under the Plan will be terminated and deemed null and void, provided,
further, that no Award may vest and no Shares (including Shares of Restricted
Stock) may be issued under the Plan prior to approval of the Plan by the
Shareholders of the Company. Section 11. Term of the Plan No Award shall be granted under the Plan after ten years from earlier of
date of adoption of Plan by Board or date of shareholder approval or any
earlier date of discontinuation or termination established pursuant to Section
7(a) of the Plan. However, unless otherwise expressly provided in the Plan or
in an applicable Award Agreement, any Award theretofore granted may extend
beyond such date, and the authority of the Committee provided for hereunder
with respect to the Plan and any Awards, and the authority of the Board to
amend the Plan, shall extend beyond the termination of the Plan. 13