# **Exhibit 10.6**

 

# **DAKOTAGROWERS PASTA COMPANY, INC.AMENDED AND RESTATED 2003 STOCK OPTION PLAN**

 

1.                                       Purpose.  The purpose of the DakotaGrowers Pasta Company, Inc. 2003 Amended and Restated Stock Option Plan is toprovide a continuing, long-term incentive to selected eligible officers,directors and key employees, vendors or consultants of Dakota Growers PastaCompany, Inc. (“Dakota Growers”) and of any subsidiary company of DakotaGrowers, as herein defined; to provide a means of rewarding outstanding performance;and to enable Dakota Growers to maintain a competitive position to attract andretain key personnel necessary for continued growth and profitability.  Options granted under the Plan may beincentive stock options (as defined under Section 422 of the Code) ornon-qualified stock options, as determined by the Administrator at the time ofgrant of an option and subject to the applicable provisions of Section 422 ofthe Code, as amended, and the regulations promulgated thereunder.

 

2.                                       Definitions.  The following words andphrases as used herein shall have the meanings set forth below:

 

a.                                       “Board” shall mean the Board of Directors ofDakota Growers as it may be comprised from time to time.

 

b.                                      “Change in Control” shall mean any of thefollowing

 

(1)                                  any “person” (as such term is used inSections 13(d) and 14(d) of the Securities Exchange Act of 1934) becomes a“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directlyor indirectly, of securities of Dakota Growers representing 50% or more of thecombined voting power of Dakota Growers’ then outstanding securities; or

 

(2)                                  a business combination, following whichshareholders of Dakota Growers do not continue to own at least 50% of thevoting power of the resulting entity or the members of Dakota Growers’ Board ofDirectors prior to the transaction do not constitute a majority of theresulting entity’s Board of Directors; or

 

(3)                                  a liquidation, dissolution or sale of all orsubstantially all of the assets of Dakota Growers, and immediately thereafter,there is no substantial continuity of ownership with respect to Dakota Growersand the entity to which such assets have been transferred.

 

c.                                       “Code” shall mean the Internal Revenue Codeof 1986, as amended from time to time or any successor statute.

 

d.                                      “Committee” shall mean a committee of theBoard as may be designated by the Board, from time to time, for the purpose ofadministering this plan as contemplated by Article 4 hereof.  If at any time no Committee shall be inoffice, then the functions of the Committee specified in the Plan shall beexercised by the Board.

 

e.                                       “Common Stock” shall mean the common stock,$.01 par value, of Dakota Growers.

 

f.                                         “Consultant” means any person, including anadvisor, engaged by Dakota Growers or any Parent Corporation or Subsidiary ofDakota Growers to render services, who is not an employee of Dakota Growers orany Subsidiary of Corporation.

 

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g.                                      “Non-Employee Directors” shall mean a“Non-Employee Director” within the meaning of Rule 16b-3(b)(3) under theSecurities Exchange Act, as amended, or any successor rule.

 

h.                                      “Fair Market Value” of any security on anygiven date shall be determined by the Committee as follows:  (a) if the security is listed for trading onone or more national securities exchanges, or is traded on the Nasdaq NationalMarket System or the Nasdaq Small Cap Market, the last reported sales price onthe principal such exchange or Nasdaq System on the date in question, or ifsuch security shall not have been traded on such principal exchange on suchdate, the last reported sales price on such principal exchange or the NasdaqSystem on the first day prior thereto on which such security was so traded; or(b) if the security is not listed for trading on a national securities exchangeor the Nasdaq System, but is traded in the over-the-counter market, includingthe Nasdaq OTC Bulletin Board System, closing bid price for such security onthe date in question, or if there is no such bid price for such security onsuch date, the closing bid price on the first day prior thereto on which suchprice existed; or (c) if neither (a) nor (b) is applicable, by any means deemedfair and reasonable by the Committee, which determination shall be final andbinding on all parties.

 

i.                                          “Incentive Stock Option” shall mean any stockoption granted pursuant to this Plan as an “incentive stock option” within themeaning of Section 422 of the Code.

 

j.                                          “Non-Qualified Stock Option” shall mean anystock option granted pursuant to this Plan that is not an Incentive StockOption.

 

k.                                       “Option” shall mean any stock option grantedpursuant to this Plan, whether an Incentive Stock Option or a Non-QualifiedStock Option.

 

l.                                          “Optionee” shall mean any person who is theholder of an Option granted pursuant to this Plan.

 

m.                                    “Outside Director” shall mean a director who(a) is not a current employee of Dakota Growers or any member of an affiliatedgroup which includes Dakota Growers; (b) is not a former employee of DakotaGrowers who receives compensation for prior services (other than benefits undera tax-qualified retirement plan) during the taxable year; (c) has not been anofficer of Dakota Growers; (d) does not receive remuneration from DakotaGrowers, either directly or indirectly, in any capacity other than as adirector, except as otherwise permitted under Code Section 162(m) andregulations thereunder.  For thispurpose, remuneration includes any payment in exchange for goods or services.  This definition shall be further governed bythe provisions of Code Section 162(m) and regulations promulgated thereunder.

 

n.                                      “Plan” shall mean this Amended and Restated2003 Stock Option Plan of Dakota Growers.

 

o.                                      “Subsidiary” shall mean any corporation(other than Dakota Growers) which at the time qualifies as a subsidiary ofDakota Growers under Section 425(f) of the Code.

 

p.                                      “Tax Date” shall mean the date on which theamount of tax to be withheld is determined under the Code.

 

q.                                      “Vendor” shall mean any entity that providesgoods or services, or any combination thereof, to Dakota Growers or anySubsidiary of Corporation.

 

3.                                       Shares Available Under Plan.  Thenumber of shares which may be issued pursuant to Options granted under thisPlan shall not exceed 500,000 shares of the Common Stock of Dakota Growers;provided, however, that shares which become avail­able as a result of canceled,unexercised, lapsed or terminated Options granted under this Plan shall beavailable for issuance pursuant to Options subsequently granted under this Planunder a

 

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stock for stock exercise of a stock option orthe withholding of stock for the payment of taxes, only the net number ofshares issued to the optionee shall be used to calculate the number of shares remainingfor distribution under the Plan.  Theshares issued upon exercise of Options granted under this Plan may beauthorized and unissued shares or shares previously acquired or to be acquiredby Dakota Growers.

 

4.                                       Administration.

 

4.1.                              The Plan will be administered by a Committee of at least two directors,all of whom shall be Outside Directors and Non-Employee Directors, or, if aCommittee is not appointed, by the Board. The Committee may be the Compensation Committee or a subcommittee of theCompensation Committee of the Board.

 

4.2.                              The Committee will have plenary authority, subject to provisions of thePlan, to determine when and to whom Options will be granted, the term of eachOption, the number of shares covered by it, the participation by the Optioneein other plans, and any other terms or conditions of each Option.  The Committee shall determine with respectto each grant of an Option whether a participant shall receive an IncentiveStock Option or a Non-Qualified Stock Option. The number of shares, the term and the other terms and conditions of aparticular kind of Option need not be the same, even as to Options granted atthe same time.  The Committee’s recom­menda­tionsregarding Option grants and terms and conditions thereof will be conclusive.

 

4.3.                              The Committee will have the sole responsi­bility for construing andinterpreting the Plan, for establishing and amending any rules and regulationsas it deems necessary or desirable for the proper administration of the Plan,and for resolving all questions arising under the Plan.  Any decision or action taken by theCommittee arising out of or about the construction, administration,interpretation and effect of the Plan and of its rules and regulations will, tothe extent permitted by law, be within its absolute discretion, except asotherwise specifically provided herein, and will be conclusive and binding onall Optionees, all successors, and any other person, whether that person isclaiming under or through any Optionee or otherwise.

 

4.4.                              The Committee will designate one of its members as chairman.  It will hold its meetings at the times andplaces as it may determine.  A majorityof its members will constitute a quorum, and all determinations of theCommittee will be made by a majority of its members.  Any determination reduced to writing and signed by all memberswill be fully as effective as if it had been made by a majority vote at ameeting duly called and held.  TheCommittee may appoint a secretary, who need not be a member of the Committee,and may make such rules and regulations for the conduct of its business as itmay deem advisable.

 

4.5.                              No member of the Committee will be liable, in the absence of bad faith,for any act or omission with respect to his services on the Committee.  Service on the Committee will constituteservice as a member of the Board, so that the members of the Committee will beentitled to indemnification and reimbursement as Board members pursuant to itsBylaws.

 

4.6.                              The Committee will regularly inform the Board as to its actions withrespect to all Options granted under the Plan and the terms and conditions andany such Options in a manner, at any times, and in any form as the Board mayreasonably request.

 

4.7.                              Any other provision of the Plan to the contrary notwithstanding, theCommittee is authorized to take such action as it, in its discretion, may deemnecessary or advisable and fair and equitable to Optionees in the eventof:  a Change in Control of DakotaGrowers; a tender, exchange or similar offer for all or any part of the CommonStock made by any entity, person or group (other than Dakota Growers, anySubsidiary of Dakota Growers or any savings, pension or other benefit plan forthe benefit of employees of Dakota Growers or its Subsidiaries); a merger ofDakota Growers into, a consoli-

 

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dation of Dakota Growerswith, or an acquisition of Dakota Growers by another corporation; or a sale ortransfer of all or substan­tially all of Dakota Growers’ assets.  Such action, in the Committee’s discretion,may include (but shall not be deemed limited to):  establishing, amending or waiving the forms, terms, conditions orduration of Options so as to provide for earlier, later, extended or additionalterms for exercise of the whole, or any installment, thereof; alternate formsof payment; or other modifications.  TheCommittee may take any such actions pursuant to this Section 4.7 by adoptingrules or regulations of general applicability to all Optionees, or to certaincategories of Optionees; by amending or waiving terms and conditions in stockoption agreements; or by taking action with respect to individualOptionees.  The Committee may take anysuch actions before or after the public announcement of any such Change inControl, tender offer, exchange offer, merger, consolidation, acquisition orsale or transfer of assets.

 

5.                                       Participants.

 

5.1.                              Participation in this Plan shall be limited to officers, employees orConsultants, either of Dakota Growers or of a Subsidiary, and to all Directorsof the Company.

 

5.2.                              Subject to other provisions of this Plan, Options may be granted to thesame participants on more than one occasion.

 

5.3.                              The Committee’s determination under the Plan including, withoutlimitation, determination of the persons to receive Options, the form, amountand type of such Options, and the terms and provisions of Options, need not beuniform and may be made selectively among otherwise eligible participants,whether or not the participants are similarly situated.

 

6.                                       Terms and Conditions.

 

6.1.                              Each Option granted under the Plan shall be evidenced by a writtenagreement, which shall be subject to the provisions of this Plan and to suchother terms and conditions as Dakota Growers may deem appropriate.

 

6.2.                              Each Option agreement shall specify the period for which the Optionthereunder is granted (which in no event shall exceed ten years from the dateof the grant for any Option granted pursuant to Section 6.3(a) hereof, fiveyears from the date of grant for any Option granted pursuant to 6.3(b) hereofand ten years and one day from the date of grant for any Option designated bythe Committee as a Non-Qualified Stock Option) and shall provide that theOption shall expire at the end of such period; provided, however, the term ofeach Option shall be subject to the power of the Committee, among other things,to accele­rate or otherwise adjust the terms for exercise of Options pursuantto Section 4.7 hereof in the event of the occurrence of any of the events setforth therein.

 

6.3.                              The exercise price per share shall be determined by the Committee atthe time any Option is granted; provided, however, that the exercise price pershare purchasable under an Incentive Stock Option, shall be determined asfollows:

 

(a)                                  For employees who do not own stock possessingmore than ten percent (10%) of the total combined voting power of all classesof stock of Dakota Growers or of any Subsidiary, the Incentive Stock Optionexercise price per share shall not be less than one hundred percent (100%) ofFair Market Value of the Common Stock of Dakota Growers on the date the Optionis granted, as determined by the Committee.

 

(b)                                 For employees who own stock possess­ing morethan ten percent (10%) of the total combined voting power of all classes ofstock of Dakota Growers or of any Subsidiary, the Incentive Stock Optionexercise price per share shall not be less than one hundred ten percent

 

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(110%)of the Fair Market Value of the Common Stock of Dakota Growers on the date theOption is granted, as determined by the Committee.

 

6.4.                              The aggregate Fair Market Value (determined as of the time the Optionis granted) of the Common Stock with respect to which an Incentive Stock Optionunder this Plan or any other plan of Dakota Growers or its Subsidiaries isexercisable for the first time by an Optionee during any calendar year shallnot exceed $100,000.

 

6.5.                              An Option shall be exercisable at such time or times, and with respectto such minimum number of shares, as may be determined by Dakota Growers at thetime of the grant.  The Option agreementmay require, if so determined by Dakota Growers, that no part of the Option maybe exercised until the Optionee shall have remained in the employ of DakotaGrowers or of a Subsidiary for such period after the date of the Option asDakota Growers may specify. Notwithstanding the foregoing and subject to the discretionaryacceleration rights of the Committee, an Option granted to a director, officeror 10% shareholders of Dakota Growers shall not be exercisable for a period ofsix (6) months unless the Option has been approved by a majority ofdisinterested members of the Board, the Committee or the shareholders of DakotaGrowers.

 

6.6.                              Any and all shares of Common Stock issued upon exercise of an Optiongranted hereunder shall be uncertificated when originally issued and shall beoriginally issued, recorded and transferred by electronic means, in accordancewith the Bylaws of Dakota Growers.  Anysuch uncertificated shares of Common Stock shall be subject to such repurchaseagreements and restrictions on the sale or transfer thereof as are prescribedby Dakota Growers.  In the event thatany such shares of Common Stock are subsequently certificated in accordancewith the Bylaws of Dakota Growers, Dakota Growers may prescribe the form oflegend which shall be affixed to the stock certificate representing suchcertificated shares and such certificated shares shall be subject to theprovisions of any repurchase agreement or other agreement restricting the saleor transfer thereof.  Such agreements orrestrictions shall be noted on the certificate representing certificated sharesso issued.

 

7.                                       Exercise of Option.

 

7.1.                              Each exercise of an Option granted hereunder, whether in whole or inpart, shall be by written notice thereof, delivered to the Secretary of DakotaGrowers (or such other person as he may designate).  The notice shall state the number of shares with respect to whichthe Options are being exercised and shall be accompanied by payment in full forthe number of shares so designated. Shares shall be registered in the name of the Optionee unless theOptionee otherwise directs in his or her notice of election.

 

7.2.          Paymentshall be made to Dakota Growers either (i) in cash, including certified check,bank draft or money order, (ii) at the discretion of Dakota Growers, bydelivering Common Stock of Dakota Growers already owned by the participant andheld by such participant for at least 6 months; (iii) if the Option is not anIncentive Stock Option, at the discretion of Dakota Growers, by deduction fromthe number of shares to be delivered upon exercise of the Option a number ofshares, the aggregate Fair Market Value of which, as of the same date theExercise Price is determined, shall equal the exercise price, or a combinationof (i), (ii) and (iii).  With respect to(ii) the Fair Market Value of stock so delivered shall be determined as of thedate immediately preceding the date of exercise.

 

7.3.                              Upon notification of the amount due and prior to, or concurrently with,the issuance to the Optionee of uncertificated shares of Common Stock purchased pursuant to the exerciseof an Option, the Optionee shall promptly pay to Dakota Growers any amount necessaryto satisfy applicable federal, state or local withholding tax requirements.

 

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7.4.                              If the terms of an Option so permit, an Optionee, other than a memberof the Committee, may elect by written notice to the Secretary of DakotaGrowers (or such other person as he may designate), to satisfy the withholdingtax requirements associated with the exercise of an Option by authorizingDakota Growers to retain from the number of shares of Common Stock that wouldotherwise be deliverable to the Optionee that number of shares having anaggregate Fair Market Value on the Tax Date equal to the tax payable by theOptionee under Section 7.3.  Any suchelection shall be in accordance with, and subject to, applicable tax andsecurities laws, and regulations and rulings and in the event shares arewithheld, the amount withheld may not exceed the minimum required federal,state and FICA withholding amounts. Where shares are transferred to an Optionee prior to the Tax Date, theOptionee shall agree in any such election to surrender that number of shareshaving an aggregate Fair Market Value on the Tax Date equal to the tax payableby the Optionee under Section 7.3.  Inaddition, any election to have shares withheld pursuant to this Section 7.4will be irrevocable by the Optionee and will in any event be subject to thedisapproval of the Committee.

 

8.                                       Adjustments of Option Stock.  Incase the shares issuable upon exercise of any Option granted under the Plan atany time outstanding shall be subdivided into a greater or combined into alesser number of shares (whether with or without par value), the number ofshares purchasable upon exercise of such Option immediately prior thereto shallbe adjusted so that the Optionee shall be entitled to receive a number ofshares which he or she would have owned or have been entitled to receive afterthe happening of such event had such Option been exercised immediately prior tothe happening of such subdivision or combination or any record date withrespect thereto.  An adjust­ment madepursuant to this paragraph shall become effective immediately after theeffective date of such subdivision or combination retroactive to the recorddate, if any, for such subdivision or combination.  The Option price (as such amount may have theretofore beenadjusted pursuant to the provisions hereof) shall be adjusted by multiplyingthe Option price immediately prior to the adjustment of the number of sharespurchasable under the Option by a fraction, of which the numerator shall be thenumber of shares purchasable upon the exercise of the Option imme­di­atelyprior to such adjustment, and of which the denominator shall be the number ofshares so purchasable immediately thereafter. Substituted shares of stock shall be deemed shares under Section 3 ofthe Plan.

 

9.                                       Assignments.  Any Option granted under thisPlan shall be exercisable only by the Optionee to whom granted during his orher lifetime and shall not be assignable or transferable otherwise than by willor by the laws of descent and distribution.   Notwithstanding the foregoing, the Board or the Committee may, in itsdiscretion, determine that an Option may be exercised by a person other thanthe Optionee and that an Option may be transferable based on the tax andfederal securities law considerations then in effect for such Options.

 

10.                                 Severance; Death; Disability.  AnOption shall terminate, and no rights thereunder may be exercised, if theperson to whom it is granted ceases to be employed by Dakota Growers or by aSubsidiary except that:

 

10.1.                        If the employment of the Optionee is termi­nated by any reason otherthan his or her death or disability, the Optionee may at any time within notmore than three months after termination of his or her employment, exercise hisor her Incentive Stock Option rights but only to the extent they wereexercisable by the Optionee on the date of termination of his or heremployment.  If the employment of theOptionee is terminated by any reason other than his or her death or disability,the Optionee may at any time within 90 days after termination of his or heremployment, exercise his or her Non-Qualified Stock Option rights, but only tothe extent they were exercisable by the Optionee on the date of termination ofhis or her employment.  Provided,however, that if the employment is terminated by deliberate, willful or grossmisconduct as determined by the Committee or for cause as defined under theemployee’s employment agreement with Dakota Growers as determined by thecommittee, all rights under any Option shall terminate and expire upon suchtermination.

 

10.2.                        If the Optionee dies while in the employ of Dakota Growers or aSubsidiary, or within not more than three months after termination of his orher employment, the Optionee’s rights under the Option may be exercised at anytime within one year following such death by his or her personal

 

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representativeor by the person or persons to whom such rights under the Option shall pass bywill or by the laws of descent and distribution, but only to the extent theywere exercisable by the Optionee on the date of death.

 

10.3.                        If the employment of the Optionee is termi­nated because of disability,the Optionee, or his or her legal representative, may at any time within notmore than one year after termination of his or her employment, exercise his orher Option rights but only to the extent they were exercisable by the Optioneeon the date of termination of his or her employment.

 

10.4.                        Notwithstanding anything contained in Sections 10.1, 10.2 and 10.3 tothe contrary, no Option rights shall be exercisable by anyone after theexpiration of the term of the Option. Further, notwithstanding anything contained in Sections 10.1, 10.2 and10.3 to the contrary, in the event of termination of employment, if anIncentive Stock Option is exercised after the expiration of the exerciseperiods that apply for purposes of Section 422 of the Code, the Option willthereafter be treated as a Non-Qualified Stock Option.

 

10.5.                        Transfers of employment between Dakota Growers and a Subsidiary, orbetween Subsidiaries, will not constitute termination of employment forpurposes of any Option granted under this Plan.  The Committee may specify in the terms and conditions of anOption whether any authorized leave of absence or absence for military orgovernment service or for any other reasons will constitute a termination ofemployment for purposes of the Option and the Plan.

 

10.6.                        If the Optionee is a Vendor or Consultant of Dakota Growers or aSubsidiary and such relationship shall terminate for any reason whatsoever, theVendor or Consultant may exercise his, her, or its Option rights, but only tothe extent that they were exercisable by the Vendor or Consultant as of thedate of termination of the relationship.

 

11.                                 Rights of Participants. Neither the participant nor the personal representatives, heirs, orlegatees of such participant shall be or have any of the rights or privilegesof a shareholder of Dakota Growers in respect of any of the shares issuableupon the exercise of an Option granted under this Plan unless and until suchshares are electronically recorded, in uncertificated form, on the stocktransfer books of the Company as having been issued to the participant or tosuch personal representatives, heirs or legatees.

 

12.                                 Securities Registration.  Ifany law or regulation of the Securities and Exchange Commission or of any otherbody having jurisdiction shall require Dakota Growers or the parti­ci­pant totake any action in connection with the exercise of an Option, thennotwithstanding any contrary provision of an Option agreement or this Plan, thedate for exercise of such Option and the delivery of the shares purchasedthereunder shall be deferred until the completion of the necessary action.  In the event that Dakota Growers shall deemit necessary, Dakota Growers may condition the grant or exercise of an Optiongranted under this Plan upon the receipt of a satisfactory certificate that theOptionee is acquiring the Option or the shares obtained by exercise of theOption for investment purposes and not with the view or intent to resell orotherwise distribute such Option or shares. In such event, such shares shall be subject to applicable lawsrestricting the transfer of such shares and, if such shares are in certificatedform, the stock certificate evidencing such shares shall bear a legendreferring to applicable laws restricting transfer of such shares.  In the event that Dakota Growers shall deemit necessary to register under the Securities Act of 1933, as amended, or anyother applicable statute, any Options or any shares with respect to which anOption shall have been granted or exercised, then the participant shallcooperate with Dakota Growers and take such action as is necessary to permitregistration or qualification of such Options or shares.

 

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13.                                 Duration and Amendment.

 

13.1.                        There is no express limitation upon the duration of the Plan, exceptfor the requirement of the Code that all Incentive Stock Options must begranted within ten years from the date the Plan is approved by theshareholders.

 

13.2.                        The Board may terminate or may amend the Plan at any time, provided, however,that the Board may not, without approval of the shareholders of Dakota Growersby a majority of the voting power of shares issued and outstanding, (i)increase the maximum number of shares as to which options may be granted underthe Plan, (ii) permit the granting of Incentive Stock Options at less than 100%of Fair Market Value at time of grant, or (iii) permit any change which resultsin any repricing of any award or option heretofore granted hereunder.

 

14.                                 Approval of Shareholders. This Plan expressly is subject to approval of holders of a majority ofthe outstanding shares of Common Stock of Dakota Growers, and if it is not soapproved on or before one year after the date of adoption of this Plan by theBoard, the Plan shall not come into effect, and any Options granted pursuant tothis Plan shall be deemed canceled.

 

15.                                 Conditions of Employment.  Thegranting of an Option to a participant under this Plan who is an employee shallimpose no obligation on Dakota Growers to continue the employ­ment of anyparticipant and shall not lessen or affect the right of Dakota Growers toterminate the employment of the participant.

 

16.                                 Other Options. Nothing in the Plan will be construed to limit the authority of DakotaGrowers to exercise its corporate rights and powers, including, by way of illu­stra­tionand not by way of limitation, the right to grant options for proper corporatepurposes otherwise than under the Plan to any employee or any other person,firm, corporation, association, or other entity, or to grant Options to, orassume Options of, any person for the acquisition by purchase, lease, merger,consolidation, or otherwise, of all or any part of the business and assets ofany person, firm, corporation, association, or other entity.

 

 
| Originally  adopted by Board of Directors:   |   | November  21, 2002 |
|----------------------------------------------|--------|--------------------|
| Approved  by Shareholders:                   |   | January  11, 2003  |
| Amended  and Restated by Board of Directors: |   | January  10, 2004  |

 

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