**Exhibit 10.3**

 

**MESABAHOLDINGS, INC.2000 STOCK INCENTIVE PLAN**

 

# **SECTION 1DEFINED TERMS**

 

In addition to the other definitions contained herein,the following definitions shall apply:

 

## 1.1                                 ***Award Agreement***.  The term “Award Agreement” means the documentthat evidences an Award and which sets forth the terms, conditions, andlimitations relating to such Award.

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## 1.2                                 ***Award***.  The term “Award” shall mean any award orbenefit granted in accordance with the terms of the Plan.  Awards under the Plan may be in the form of (i) StockOptions; (ii) Restricted Stock; (iii) Stock Appreciation Rights; (iv) OtherStock Based Awards and/or (v) Tax Offset Payments.  The terms and conditions of the Award shallbe set forth in an Award Agreement.

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## 1.3                                 ***Board***.  The term “Board” shall mean the Board ofDirectors of the Company.

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## 1.4                                 ***Code***.  The term “Code” shall mean the InternalRevenue Code of 1986, as amended.  Areference to any provision of the Code shall include reference to any successorprovision of the Code.

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## 1.5                                 ***Committee***.  The term “Committee” shall mean a committeedescribed in Section 11.

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## 1.6                                 ***Company***.  The term “Company” shall mean Mesaba Holdings, Inc.

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## 1.7                                 ***Covered******Shares***. The term “Covered Shares” shall mean the number of shares of Stock thatan Eligible Individual may purchase pursuant to an Option.

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## 1.8                                 ***Director***.  The term “Director” shall mean a member ofthe Company’s Board.

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## 1.9                                 ***Eligible******Individual***. The term “Eligible Individual” shall mean (a) any common lawemployee, prospective employee, or officer of the Company, (b) members ofthe Company’s Board, (c) consultants and advisors to the Company, and (d) employeesof any Related Company or business partner of the Company.  All Eligible Individuals must be naturalpersons who provide bona fide services to the Company or a RelatedCompany.  In addition, the servicesprovided to the Company or Related Company must not be in connection with anoffer or sale of securities in a capital raising transaction and must notdirectly or indirectly promote or maintain a market for the Company’sStock.  An Award may be granted to anEligible Individual prior to the date the Eligible Individual performs servicesfor the Company or Related Company, provided that such Award shall not becomevested prior to the date the Eligible Individual first performs such services.

 

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## 1.10                           ***Exchange******Act***.  Theterm “Exchange Act” shall mean the Securities Act of 1934, as amended.

 

## 1.11                           ***Exercise******Price***.  Theterm “Exercise Price” shall mean the exercise price of each Option grantedunder Section 4 established by the Committee and determined by anyreasonable method established by the Committee at the time the Option isgranted.  Options granted pursuant to Section 4of the Plan shall not have an Exercise Price of less than 100% of the FairMarket Value of the Company’s Stock on the date the Option is granted.

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## 1.12                           ***Fair******Market****Value***.  The term “Fair Market Value” of a share ofStock on a given date shall mean the closing price of the share of Stock asreported on the****Nasdaq Stock Market on such date,if the share of Stock is then quoted on the Nasdaq Stock Market or, if themarket is closed on that date, the closing price of the share of Stock on theprevious trading day.  If the Stock isnot listed on the Nasdaq Stock Market, Fair Market Value shall be determined ingood faith by the Board or Committee.

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## 1.13                           ***Incentive******Stock****Option***.  The term “Incentive Stock Option” or “ISO”shall mean an Option that is intended to satisfy the requirements of Section 422(b) ofthe Code.

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## 1.14                           ***Non-Employee Director***.  The term “Non-Employee Director” shall mean a“non-employee director” as defined in Rule 16b-3(b)(3)(i) of theExchange Act.

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## 1.15                           ***Non-Qualified Stock Option****.*  The term “Non-QualifiedStock Option” or “NSO” shall mean an Option that is not intended to satisfy therequirements applicable to an “incentive stock option” described in Section 422(b) ofthe Code.  NSO grants may be awarded toany Eligible Individual.

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## 1.16                           ***Option****.*  The term “Option” or “Stock Option” shallmean an ISO or NSO granted pursuant to the Plan.  The grant of an Option entitles the EligibleIndividual to purchase shares of Stock at an Exercise Price established by theCommittee.

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## 1.17                           ***Other Stock Based Award****.*  The term “OtherStock Based Award” shall mean an Award, granted pursuant to Section 8,other than on Option, Restricted Stock or SAR, that is paid with, valued inwhole or in part by reference to, or is otherwise based on Stock.

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## 1.18                           ***Performance Award***.  The term “Performance Award” shall mean anaward or grant of shares based upon the achievement of performance objectives,as contemplated by Section 5.

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## 1.19                           ***Plan****.*  The term “Plan” shall mean this 2000 StockIncentive Plan.

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## 1.20                           ***Related Company***.  The term “Related Company” shall mean anycorporation other than the Company and any partnership, joint venture or otherentity in which the Company owns, directly or indirectly, at least a 20%beneficial ownership interest.  A RelatedCompany includes a subsidiary of the Company and an unbroken chain of corporationsbeginning with the

 

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## Company if each ofthe corporations other than the last corporation in the unbroken chain owns 50%or more of the voting stock in one of the other corporations in such chain.

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## 1.21                           ***Stock***.  The term “stock” shall mean shares of commonstock, $.01 par value, of the Company.

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## 1.22                           ***Stock Appreciation Right***.  The term “Stock Appreciation Right” or “SAR”shall mean the grant, pursuant to Section 7, of a right to receive apayment from the Company, in the form of Stock, cash or a combination of both,equal to the excess of the Fair Market Value of one or more shares of Stockover the exercise price of such shares under the terms of such StockAppreciation Right.

 

# **SECTION 2PURPOSE**

 

The Mesaba Holdings, Inc. 2000 Stock IncentivePlan has been established by Mesaba Holdings, Inc. to (i) attract andretain individuals eligible to participate in the Plan; (ii) motivateEligible Individuals, by means of appropriate incentives, to achieve long-rangegoals; (iii) provide incentive compensation opportunities that arecompetitive with those of other similar companies; and (iv) furtheridentify Eligible Individuals’ interests with those of the Company’s othershareholders through compensation that is based on the Company’s common stock;and thereby promote the long-term financial interest of the Company and anyRelated Company, including the growth in value of the Company’s equity andenhancement of long-term shareholder return.

 

# **SECTION 3PARTICIPATION**

 

Subject to the terms and conditions of the Plan, theCommittee may determine and designate, from time to time, Eligible Individualswho will be granted one or more Awards under the Plan at the ExercisePrice.  In its sole discretion andwithout shareholder approval, the Committee may grant to an Eligible Individualany Award or Awards permitted under the provisions of the Plan. Awards may begranted as alternatives to or replacement of Awards outstanding under the Plan,or any other plan or arrangement of the Company or Related Company (including aplan or arrangement of a business or entity, all or a portion of which isacquired by the Company or a Related Company). Only employees are eligible to be granted Incentive Stock Options.

 

# **SECTION 4STOCK OPTIONS**

 

## 4.1                                 ***General***.  The grant of an Option entitles the EligibleIndividual to purchase shares of Stock at an Exercise Price established by theCommittee.  Any Option awarded toEligible Individuals under this Section 4 may be either NSOs or ISOs, asdetermined in the discretion of the Committee. To the extent that any Stock Option does not qualify as an ISO, it shallconstitute an NSO.

 

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## 4.2                                 ***Option Awards***.  Subject to the following provisions, Optionsawarded under the Plan shall be in such form and shall have such terms as theCommittee may determine and specify in an Award Agreement entered into betweenthe Eligible Individual and the Company.

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### (a)                                  *Exercise of an Option.* An Option shall be exercisable in accordance with such terms and conditionsand during such periods as may be established by the Committee.  In no event shall any fraction of a share ofStock be issued upon the exercise of an Option. An Option must be exercised for at least 100 shares of Stock, or suchlesser number of shares of Stock if the remaining portion of an Option is forfewer than 100 shares of Stock.

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### (b)                                 *Exercise Price*. * *The Exercise Price of an Optiongranted under this Section 4 shall be established by the Committee orshall be determined by a method established by the Committee at the time theOption is granted, except that the Exercise Price for an ISO shall not be lessthan 100% of the Fair Market Value of the Company’s Stock on the date of grant.

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### (c)                                  *Payment of Option Exercise Price*.  The payment of the Exercise Price of anOption granted under this Section 4 shall be subject to the following:

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#### (1)                                  Subjectto the following provisions of this Subsection 4.2(c), the full ExercisePrice for shares of Stock purchased upon the exercise of any Option shall be paidat the time of such exercise or such other time as approved by the Committee.

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#### (2)                                  Paymentof the Exercise Price shall be made in such manner as the Committee may providein the Award, which may include cash (including cash equivalents), tendering ofshares of Stock acceptable to the Committee and either already owned by theEligible Individual or subject to Awards hereunder (so-called “cashless” or “immaculate”exercise methods), and any other manner permitted by law and approved by theCommittee, or any combination of the foregoing. If the Company determines that a Stock Option may be exercised usingshares of Restricted Stock, then unless the Committee provides otherwise, theshares received upon the exercise of a Stock Option which are paid for usingRestricted Stock shall be restricted in accordance with the original terms ofthe Restricted Stock Award.  In the caseof any deferred payment arrangement, interest shall be compounded at leastannually and shall be charged at the minimum rate of interest necessary toavoid the treatment as interest, under any applicable provisions of the Code,of any amounts other than amounts stated to be interest under the deferredpayment arrangement.

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#### (3)                                  AnEligible Individual may elect to pay the Exercise Price upon the exercise of anOption by irrevocably authorizing a third party

 

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#### to sell shares ofStock (or a sufficient portion of the shares) acquired upon exercise of theOption and remit to the Company a sufficient portion of the sale proceeds topay the entire Exercise Price and any tax withholding resulting from suchexercise.

 

### (d)                                 *Settlement of Option*. Shares of Stock delivered pursuant to the exercise of an Option shall besubject to such conditions, restrictions and contingencies as the Committee, inits discretion,  may establish inaddition to such conditions, restrictions, and contingencies set forth in theAward Agreement.

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### (e)                                  *Reload Options*. The Committee may grant “reload” options,pursuant to the terms and conditions established by the Committee and anyapplicable requirements of Rule 16b-3 of the Exchange Act (“Rule 16b-3”)or any other applicable law.  TheEligible Individual would be granted a new Option when the payment of theExercise Price of a previously granted Option is made by the delivery of sharesof the Company’s Stock owned by the Eligible Individual pursuant to Section 4.2(c)(2) hereofand/or when shares of the Company’s Stock are tendered or forfeited as paymentof the amount to be withheld under applicable income tax laws in connectionwith the exercise of an Option.  The newOption would be an Option to purchase the number of shares not exceeding thesum of (i) the number of shares of the Company’s Stock provided asconsideration upon the exercise of the previously granted Option to which such “reload”option relates and (ii) the number of shares of the Company’s Stocktendered or forfeited as payment of the amount to be withheld under applicableincome tax laws in connection with the exercise of the Option to which such “reload”option relates.  “Reload” options may begranted with respect to Options granted under this Plan.  Such “reload” options shall have a per shareexercise price equal to the Fair Market Value as of the date of grant of thenew Option.

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### (f)                                    *Vesting*.  EligibleIndividuals shall vest in all Options in accordance with the terms andconditions of the Award Agreement entered into by and between the EligibleIndividual and the Company.  The totalnumber of shares of Stock subject to an Option may, but need not, vest andtherefore become exercisable in periodic installments that may, but need not,be equal.

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### (g)                                 *Option Term*.  The termof each Option shall be fixed by the Committee. In the event that the Plan is terminated pursuant to terms andconditions of Section 12, the Plan shall remain in effect as long as anyAwards under it are outstanding.

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### (h)                                 *Termination of Employment*. Following the termination of Eligible Individual’s employment with theCompany or a Related Company, the

 

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### Option shall beexercisable to the extent determined by the Committee and specified in theAward Agreement.  The Committee mayprovide different post-termination exercise provisions with respect totermination of employment for different reasons.

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### (i)                                     *Incentive Stock Options. *ISOgrants may only be awarded to employees of the Company, a “parent corporation,”or a “subsidiary corporation” as those terms are defined in Sections 424(e) and424(f) of the Code.  In order for anemployee to be eligible to receive an ISO grant, the employee must be employedby the Company, parent corporation, or subsidiary corporation during the periodbeginning on the date the Option is granted and ending on the day three monthsprior to the date such Option is exercised.* *Notwithstanding the provisions of Section 4.2,no ISO shall (i) have an Exercise Price which is less than 100% of theFair Market Value of the Stock on the date of the ISO Award, (ii) beexercisable more than ten (10) years after the ISO is awarded, or (iii) beawarded more than ten (10) years after the Effective Date of thisPlan.  No ISO awarded to an employee whoowns more than 10% of the total combined voting power of all classes of Stockof the Company, its “parent corporation” or any “subsidiary corporation” shall (i) havean Exercise Price of less than 110% of the Fair Market Value of the Stock onthe date of the ISO Award or (ii) be exercisable more than five (5) yearsafter the date of the ISO Award. Notwithstanding Section 10.7, no ISO shall be transferable otherthan by will and the laws of descent and distribution.  To the extent that the aggregate fair marketvalue (determined at the time of grant) of shares of Stock with respect to ISOsare exercisable for the first time by the employee during any calendar year, incombination with shares first exercisable under all other plans of the Companyand any Related Company, exceeds $100,000, such Options shall be treated asNSOs.

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### (j)                                     *Early Exercise*.  TheOption may, but need not, include a provision whereby the Eligible Individualmay elect at any time prior to his or her termination of employment with theCompany to exercise the Option as to any part or all of the shares of Stocksubject to the Option prior to the full vesting of the Option.  Any unvested shares of Stock so purchased maybe subject to a repurchase option in favor of the Company or to any otherrestrictions the Committee determines to be appropriate.

 

# **SECTION 5PERFORMANCE AWARDS**

 

The Committee shall have the right to designate Awardsas “Performance Awards.”  The grant orvesting of a Performance Award shall be subject to the achievement ofperformance objectives established by the Committee based on one or more of thefollowing criteria, in each case applied to the Company on a consolidated basisor to a business unit, as specified by the Committee in an Award Agreement, andwhich the Committee may use as an absolute measure, as a measure of improvementrelative to prior performance, or as a measure of comparable

 

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performance relative to a peer group of companies:  sales, operating profits, operating profitsbefore interest expenses and taxes, net earnings, earnings per share, return onequity, return on assets, return on invested capital, total shareholder return,cash flow, debt to equity ratio, market share, stock price, economic valueadded, and market value added.  The termsand conditions of a Performance Award shall be set forth in an Award Agreemententered into between the Company and the Eligible Individual.

 

# **SECTION 6RESTRICTED STOCK**

 

Subject to the following provisions, the Committee maygrant Awards of Restricted Stock to an Eligible Individual in such form and onsuch terms and conditions as the Committee may determine and specify in aRestricted Stock Award Agreement entered into between the Company and theEligible Individual:

 

### (a)                                  TheRestricted Stock Award shall specify the number of shares of Restricted Stockto be awarded, the price, if any, to be paid by the Eligible Individual and thedate or dates on which, or the conditions upon the satisfaction of which, theRestricted Stock will vest.  The grantand/or the vesting of Restricted Stock may be conditioned upon the completionof a specified period of service with the Company or a Related Company, uponthe attainment of specified performance objectives or upon such other criteriaas the Committee may determine.

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### (b)                                 Stockcertificates representing the Restricted Stock awarded to an EligibleIndividual shall be registered in the Eligible Individual’s name, but theCommittee may direct that such certificates be held by the Company or itsdesignee on behalf of the Eligible Individual. Except as may be permitted by the Committee, no share of RestrictedStock may be sold, transferred, assigned, pledged or otherwise encumbered by anEligible Individual until such share has vested in accordance with the terms ofthe Restricted Stock Award.  At the timethe Restricted Stock vests, a certificate for such vested shares shall bedelivered to the Eligible Individual (or his or her designated beneficiary inthe event of death), free from the restrictions imposed thereon except that anyrestrictions under federal or state securities laws shall continue to apply.

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### (c)                                  TheCommittee may provide that the Eligible Individual shall have the right to voteor receive dividends on Restricted Stock. Unless the Committee provides otherwise, Stock received as a dividendon, or in connection with a stock split of, Restricted Stock shall be subjectto the same restrictions as the Restricted Stock.

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### (d)                                 Exceptas may be provided by the Committee, in the event of an Eligible Individual’stermination of employment or relationship with the Company prior to all of hisor her Restricted Stock becoming vested, or in the event any conditions to thevesting of Restricted Stock have not been satisfied

 

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### prior to anydeadline for the satisfaction of such conditions as set forth in the RestrictedStock Award, the shares of Restricted Stock which have not vested shall beforfeited, and the Committee may provide that (i) any purchase price paidby the Eligible Individual be returned to the Eligible Individual or (ii) acash payment equal to the Restricted Stock’s fair market value on the date offorfeiture, if lower, be paid to the Eligible Individual.

 

### (e)                                  TheCommittee may waive, in whole or in part, any or all of the conditions toreceipt of, or restrictions with respect to, any or all of the EligibleIndividual’s Restricted Stock.

 

# **SECTION 7**STOCK APPRECIATION RIGHTS

 

SARs may be granted at a price determined by theCommittee, and may be granted in tandem with an Option or independently of anyOption.  If granted in tandem with anOption, the exercise of the SAR or related Option will result in a forfeitureof the right to exercise the related Option for an equivalent number of shares.

 

An SAR may be exercised at such times as may bespecified in an Award Agreement, in whole or in installments, which may becumulative and shall expire at such time as the Committee shall determine atthe time of grant; provided that no SAR shall be exercisable later than ten (10) yearsafter the date granted.  The Committeemay amend any SAR to accelerate the dates after which the SAR may be executedin whole or in part.

 

SARs shall be exercised by the delivery of a writtennotice of exercise to the Company setting forth the number of shares of Stockwith respect to which the SAR is to be exercised.

 

# **SECTION 8**OTHER STOCK BASED AWARDS

 

The Committee shall have complete discretion indetermining the number of shares of Stock subject to Other Stock Based Awards,the consideration for such Awards and the terms, conditions and limitationspertaining to same including, without limitation, restrictions based upon theachievement of specific business objectives, tenure, and other measurements ofindividual or business performance, and/or restrictions under applicablefederal or state securities laws, and conditions under which such Awards willlapse.

 

Payment of Other Stock Based Awards may be in the formof cash, shares, other Awards, or in such combinations thereof as the committeeshall determine at the time of grant, and with such restrictions as it mayimpose.  Payment may be made in a lumpsum or in installments as prescribed by the Committee.  The Committee may also require or permitEligible Individuals to elect to defer the issuance of Stock or the settlementof Awards in cash under such rules and procedures as it may establishunder the Plan.  The Committee may alsoprovide that deferred settlements include the payment or crediting of intereston the deferred amounts or the payment of crediting of dividends equivalent todeterred amounts denominated in Stock.

 

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The Committee may, at its sole discretion, direct theCompany to issue Stock subject to such restrictive legends and/or stocktransfer instructions as the Committee deems appropriate.

 

# **SECTION 9TAX OFFSET PAYMENTS**

 

The Committee may provide for a Tax Offset Payment tobe made by the Company to an Eligible Individual with respect to one or moreAwards granted under the Plan.  The TaxOffset Payment shall be in an amount specified by the Committee, which shallnot exceed the amount necessary to pay the federal, state, local and othertaxes payable with respect to the applicable Award, assuming that the EligibleIndividual is taxed at the maximum tax rate applicable to such income.  The Tax Offset Payment shall be paid solely incash.  No Eligible Individual shall begranted a Tax Offset Payment for any fiscal year with respect to more than thenumber of shares of Stock covered by Awards granted to such Eligible Individualin such fiscal year.  The terms andconditions of a Tax Offset Payment Award shall be set forth in an AwardAgreement entered into between the Company and the Eligible Individual.

 

# **SECTION 10OPERATION AND ADMINISTRATION**

 

## 10.1                           ***General***.  The operation and administration of thisPlan, including any Awards granted under this Plan, shall be subject to theprovisions of Section 10.

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## 10.2                           ***Effective Dat****e*.  Subject to the approval of the shareholdersof the Company, the Plan shall be effective as of July 24, 2000 (the “EffectiveDate”) provided, however, that to the extent that Awards are granted under thePlan prior to its approval by the shareholders of the Company, the Awards shallbe subject to the approval of the Plan by the shareholders of the Company.  The term of the Plan shall be limited induration to ten (10) years from the earlier of (a) the Effective Dateor (b) the date the Plan is approved by the Company’s shareholders.

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## 10.3                           ***Shares Subject to Plan***.  The shares of Stock for which Awards may begranted under this Plan shall be subject to the following:

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### (a)                                  Subjectto the following provisions of this Section 10.3, the maximum aggregatenumber of shares of Stock that may be issued and sold under the Plan shall bethe sum of (i) 1,000,000 shares of Stock, (ii) any shares of Stockavailable for future awards under the Company’s 1994 Stock Option Plan and 1996Director Stock Option Plan, in each case on the date such plan terminates onits own terms or by action of the Board and (iii) any shares of Stockcovered by options granted under the Company’s 1994 Stock Option Plan and 1996Director Stock Option Plan which expire or are canceled without delivery ofshares of Stock.  The number of shares ofStock so reserved for issuance shall be subject to adjustment pursuant toSections 10.3 (b) and 10.3(d).  Theshares of Stock may be authorized, but unissued, or reacquired Stock.

 

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### (b)                                 OnSeptember 1st of each year, commencing with year 2001, the aggregatenumber of shares of Stock that may be awarded under the Plan shallautomatically increase by the lesser of (i) 300,000 shares of Stock, (ii) 1%of the outstanding shares of Stock on such date, or (iii) a lesser amountdetermined by the Committee.

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### (c)                                  Tothe extent an Award terminates without having been exercised, or shares awardedare forfeited, such shares shall again be available issue under the Plan.  Shares of Stock surrendered in payment of theExercise Price and shares of Stock which are withheld in order to satisfy federal,state or local tax liability, shall not count against the maximum aggregatenumber of shares authorized to be issued pursuant to this Plan, and shall againbe available for issuance pursuant to the terms of the Plan.

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### (d)                                 Inthe event of any merger, reorganization, consolidation, sale of substantiallyall assets, recapitalization, stock dividend, stock split, combination orreverse stock split, spin-off, split-up, split-off, distribution of assets orother change in corporate structure affecting the Stock, a substitution oradjustment, as may be determined to be appropriate by the Committee or theBoard in its sole discretion, shall be made in the aggregate number of sharesreserved for issuance under the Plan.  TheBoard or Committee may make such other adjustments to participants’ Awards asit deems appropriate to prevent substantial dilution or enlargement of therights granted to, or available for, participants in the Plan.

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### (e)                                  NoEligible Individual shall be granted Awards with respect to more than 400,000shares of Stock in any fiscal year and up to an additional 750,000 shares ofStock upon the initial hiring of such Eligible Individual (subject toadjustment as provided in Section 10.3(d)).

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## 10.4                           ***Securities Laws Restrictions***.  Issuance of shares of Stock or other amountsunder the Plan shall be subject to the following:

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### (a)                                  Ifat any time the Committee determines that the issuance of Stock under the Planis or may be unlawful under the laws of any applicable jurisdiction, the rightto exercise any Stock Option or receive any Restricted Stock shall be suspendeduntil the Committee determines that such issuance is lawful.  The Company shall have no obligation toeffect any registration of qualification of the Stock under federal or statelaws.

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### (b)                                 Anyperson exercising a Stock Option or receiving Restricted Stock shall make suchrepresentations (including representations to the effect that such person willnot dispose of the Stock so acquired in violation of federal and statesecurities laws) and furnish such information as may, in the opinion of counselfor the Company, be appropriate to permit the

 

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### Company to issuethe Stock in compliance with applicable federal and state securities laws.  The Committee may refuse to permit theexercise of a Stock Option or issuance of Restricted Stock until suchrepresentations and information have been provided.

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### (c)                                  TheCompany may place an appropriate legend evidencing any transfer restrictions onall shares of Stock issued under the Plan and may issue stop transferinstructions in respect thereof.

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### (d)                                 Tothe extent that the Plan provides for issuance of stock certificates to reflectthe issuance of shares of Stock, the issuance may be effected on a non-certificatedbasis, to the extent not prohibited by applicable law or the applicable rules ofany stock exchange.

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## 10.5                           ***Tax Withholding***.  Each Eligible Individual shall, no later thanthe date as of which the value of an Award first becomes includible in such person’sgross income for applicable tax purposes, pay, pursuant to such arrangements asthe Company may establish from time to time, any federal, state, local or othertaxes of any kind required by law to be withheld with respect to the Award.  The obligations of the Company under the Planshall be conditional on such payment, and the Company (and, where applicable,any Related Company), shall, to the extent permitted by law, have the right todeduct any such taxes from any payment of any kind otherwise due to theEligible Individual.

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## 10.6                           ***Payments***.  Awards may be settled in any of the methodsdescribed in Section 4.2(c).  AnyAward settlement, including payment deferrals, may be subject to suchconditions, restrictions and contingencies as the Committee shalldetermine.  The Committee may permit orrequire the deferral of any Award payment, subject to such rules andprocedures as it may establish, which may include provisions for the payment orcrediting of interest, or dividend equivalents, including converting suchcredits into deferred Stock equivalents. Each Related Company shall be liable for payment of cash due under thePlan with respect to any Eligible Individual to the extent that such benefitsare attributable to the services rendered for that Related Company by theEligible Individual.  Any disputesrelating to liability of a Related Company for cash payments shall be resolvedby the Committee.

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## 10.7                           ***Transferability***.  Except as otherwise provided by theCommittee, Awards under the Plan may not be sold, pledged, assigned,hypothecated, transferred, or disposed of in any manner other than bybeneficiary designation, will or by the laws of descent and distribution.  If the Committee makes an Award transferable,the Award Agreement shall set forth such additional terms and conditionsregarding transferability as the Committee deems appropriate.

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## 10.8                           ***Form and Time of Elections***.  Unless otherwise specified herein, eachelection required or permitted to be made by any Eligible Individual or otherperson entitled to benefits under the Plan, and any permitted modification, orrevocation thereof, shall be in writing filed with the Committee at such times,in such form, and subject to such restrictions and limitations, notinconsistent with the terms of the Plan, as the Committee shall require.

 

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## 10.9                           ***Agreement With Company***.  Any Award under the Plan shall be subject tosuch terms and conditions, not inconsistent with the Plan, as the Committeeshall, in its sole discretion, prescribe. The terms and conditions of any Award shall be reflected in an AwardAgreement.  A copy of the Award Agreementshall be provided to the Eligible Individual, and the Committee may, but neednot require, the Eligible Individual to sign the Award Agreement.

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## 10.10                     ***Limitation of Implied Rights***.

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### (a)                                  Neitheran Eligible Individual nor any other person shall, by reason of participationin the Plan, acquire any right in or title to any assets, funds or property ofthe Company or any Related Company whatsoever, including, without limitation,any specific funds, assets, or other property which the Company or any RelatedCompany, in its sole discretion, may set aside in anticipation of a liabilityunder the Plan.  An Eligible Individualshall have only a contractual right to the Stock or amounts, if any, payableunder the Plan, unsecured by any assets of the Company or any Related Company,and nothing contained in the Plan shall constitute a guarantee that the assetsof the Company or any Related Company shall be sufficient to pay any benefitsto any Eligible Individual.

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### (b)                                 ThisPlan does not constitute a contract of employment, and selection as a EligibleIndividual will not give the Eligible Individual the right to be retained inthe employ of the Company or any Related Company, nor any right or claim to anyfuture grants or to any benefit under the Plan, unless such right or claim hasspecifically accrued under the terms of the Plan.  Except as otherwise provided in the Plan, noAward under the Plan shall confer upon an Eligible Individual any rights of ashareholder of the Company prior to the date on which the Eligible Individualfulfills all conditions for receipt of such rights.

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## 10.11                     ***Termination for Cause***.  If the employment of an Eligible Individualis terminated by the Company or a Related Company for “cause,” then theCommittee shall have the right to cancel any Options granted to the EligibleIndividual under the Plan.  The term “cause”shall mean (1) the Eligible Individual’s violation of any provision of anynon-competition agreement or confidentiality agreement with the Company; (2) anillegal or negligent action by the Eligible Individual that materially andadversely affects the Company; (3) the Eligible Individual’s failure or refusalto perform his/her duties (except when prevented by reason of illness ordisability); or (4) conviction of the Eligible Individual of a felonyinvolving moral turpitude.

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## 10.12                     ***Evidence***.  Evidence required of anyone under the Planmay be by certificate, affidavit, document or other information which theperson acting on it considers pertinent and reliable, and signed, made orpresented by the proper party or parties.

 

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# **SECTION 11COMMITTEE**

 

## 11.1                           ***Administration***.  The Plan shall be administered by theCompensation Committee of the Board or such other committee of Directors as theBoard shall designate, which shall consist of not less than two Non-EmployeeDirectors.  The members of the Committeeshall be Non-Employee Directors and shall serve at the pleasure of theBoard.  To the extent that the Boarddetermines it to be desirable to qualify Awards granted hereunder as “performance-basedcompensation” within the meaning of Section 162(m) of the Code, the Planshall be administered by a Committee of two or more “outside directors” withinthe meaning of Section 162(m) of the Code. To the extent that the Board determines it to be desirable to qualifyAwards as exempt under Rule 16b-3, the Award transactions contemplatedhereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.  All determinations made by the Committeepursuant to the provisions of the Plan shall be final and binding on allpersons, including the Company and Eligible Individuals.  The Board may administer the Plan or exerciseany or all of the administration duties of the Committee at any time when aCommittee meeting the requirements of this Section has not been appointed,and the Board may exempt Awards pursuant to Rule 16b-3(d)(1) of theExchange Act.

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## 11.2                           ***Powers of Committee***.  The Committee shall have the followingauthority with respect to Awards under the Plan: to grant Awards; to adopt,alter and repeal such administrative rules, guidelines and practices governingthe Plan as it shall deem advisable; to interpret the terms and provisions ofthe Plan and any Award granted under the Plan; and to otherwise supervise theadministration of the Plan.  Inparticular, and without limiting its authority and powers, the Committee shallhave the authority:

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### (a)                                  todetermine whether and to what extent any Award or combination of Awards will begranted hereunder;

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### (b)                                 toselect the Eligible Individuals to whom Awards will be granted;

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### (c)                                  todetermine the number of shares of Stock to be covered by each Award grantedhereunder subject to the limitations contained herein;

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### (d)                                 todetermine the terms and conditions of any Award granted hereunder, including,but not limited to, any vesting or other restrictions based on such performanceobjectives and such other factors as the Committee may establish, to determinethe acceleration of any vesting restrictions under certain circumstances suchas a change in control of the Company, and to determine whether the performanceobjectives and other terms and conditions of the Award are satisfied;

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### (e)                                  todetermine the treatment of Awards upon the Eligible Individual’s retirement,disability, death, termination for cause or other termination of employment orservice;

 

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### (f)                                    todetermine that amounts equal to the amount of any dividends declared withrespect to the number of shares covered by an Award (i) will be paid tothe Eligible Individual currently or (ii) will be deferred and deemed tobe reinvested or (iii) will otherwise be credited to the EligibleIndividual or that the Eligible Individual has no rights with respect to suchdividends; and

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### (g)                                 toamend the terms of any Award, prospectively or retroactively; provided,however, that no amendment shall impair the rights of the Eligible Individualwithout his or her written consent.

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Determinations by the Committee under the Planrelating to the form, amount, and terms and conditions of Awards need not beuniform, and may be made selectively among Eligible Individuals who receiveAwards under the Plan, whether or not such Eligible Individuals are similarlysituated.  The Committee shall have thepower to accelerate the time at which an Award may first be exercised or thetime during which an Award or any part thereof will vest in accordance with thePlan, notwithstanding any provisions in an Award Agreement stating the time atwhich the Award may first be exercised or the time during which the Award willvest.

 

## 11.3                           ***Delegation by Committee***.  Except to the extent prohibited by applicablelaw or the applicable rules of a stock exchange, the Committee mayallocate all or any portion of its responsibilities and powers to any one ormore of its members and may delegate all or any part of its responsibilitiesand powers to any person or persons selected by it.  Any such allocation or delegation may berevoked by the Committee at any time.

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## 11.4                           ***Information to be Furnished to Committee***.  The Company and any Related Company shallfurnish the Committee with such data and information as it determines may berequired for it to discharge its duties. The records of the Company and any Related Company as to an EligibleIndividual’s employment, termination of employment, leave of absence,reemployment and compensation shall be conclusive on all persons unlessdetermined to be incorrect.  EligibleIndividuals and other persons entitled to benefits under the Plan must furnishthe Committee such evidence, data or information as the Committee considersdesirable to carry out the terms of the Plan.

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## 11.5                           ***Non-Liability of Board and Committee***.  No member of the Board or the Committee, norany officer or employee of the Company acting on behalf of the Board or theCommittee, shall be personally liable for any action, determination orinterpretation taken or made with respect to the Plan, and all members of theBoard or the Committee and all officers or employees of the Company acting ontheir behalf shall, to the extent permitted by law, be fully indemnified and protectedby the Company with respect to any such action, determination orinterpretation.

 

# **SECTION 12AMENDMENT AND TERMINATION**

 

The Board may, at any time, amend or terminate thePlan, provided that no amendment or termination may, in the absence of writtenconsent to the change by the affected Eligible

 

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Individual (or, if the Eligible Individual is not then living, theaffected beneficiary), adversely affect the rights of any Eligible Individualor beneficiary under any Award granted under the Plan prior to the date suchamendment is adopted by the Board; provided that adjustments made pursuant toSubsection 10.3(d) shall not be subject to the foregoing limitationsof this Section 12.  An amendmentshall be subject to approval by the Company’s shareholders only to the extentrequired by applicable laws, regulations or rules of a stock exchange orsimilar entity.

 

# **SECTION 13GENERAL PROVISIONS**

 

## 13.1                           ***Award Agreements***.  No Eligible Individual will have rights underan Award granted to such Eligible Individual unless and until an AwardAgreement has been duly executed on behalf of the Company and the EligibleIndividual.

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## 13.2                           ***No Limit on Other Compensation Arrangements***.  Nothing contained in the Plan shall preventthe Company or any Related Company from adopting or continuing in effect otheror additional compensation arrangements, and such arrangements may be eithergenerally applicable or applicable only in specific cases.

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## 13.3                           ***Headings***.  The headings of the sections and subsectionsof this Plan are intended for the convenience of the parties only and shall inno way be held to explain, modify, construe, limit, amplify or aid in theinterpretation of the provisions hereof.

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## 13.4                           ***Beneficiaries****. *An Eligible Individual may, fromtime to time, name any beneficiary or beneficiaries (who may be namedcontingently or successively) to whom any benefit under the Plan may be paid ortransferred in case of death.  Eachdesignation will revoke all prior designations, shall be in a form prescribedby the Committee, and will be effective only when filed by the EligibleIndividual in writing with the Committee during his or her lifetime.  In the absence of any such designation,benefits outstanding at the Eligible Individual’s death shall be paid ortransferred to his or her estate.  Thereshall be no third party beneficiaries of or to this Plan.  Any beneficiary of the Eligible Individualshall have only a claim to such benefits as may be determined to be payablehereunder, if any, and shall not, under any circumstances other than the rightto claim such benefits, be deemed a third party beneficiary of or to this Plan.

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## 13.5                           ***Repurchase Option***.  The terms of any repurchase option shall bespecified in the Award Agreement.

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## 13.6                           ***Governing Law***.  The Plan, and all agreements hereunder, shallbe construed in accordance with and governed by the laws of the State ofMinnesota, except to the extent preempted by federal law, without regard to theprinciples of comity or the conflicts of law provisions of any jurisdiction.

 

**[ENDOF PLAN.]**

 

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