Document:

exv10w6

 

Exhibit 10.6

Amendment

to

Separation Agreement dated August 13, 2004

between Restore Medical Inc. and Susan L. Critzer

     Pursuant to Paragraph 14 of the Separation Agreement between Restore Medical Inc. (“RMI”) and
Susan L. Critzer (“Critzer”) dated August 13, 2004 (“Separation Agreement”), RMI and Critzer agree
pursuant to this Amendment to Separation Agreement (“Amendment Agreement”) that Section 1 and
Section 3(d) shall be amended as set forth below:

     1. Separation from Employment. Effective as of June 30, 2005, or upon an alternative
mutually agreed upon date for the termination of Critzer’s employment from RMI, whichever is
earlier; or upon the date of an involuntary termination of Critzer’s employment by RMI, if any; or
upon the date of Critzer’s unilateral resignation from RMI, if any (all such alternative dates may
be the “Separation Date”), Critzer’s employment with RMI will terminate. Following the Separation
Date, all Critzer’s benefits and privileges of employment will end except as provided in Paragraph
3 of the Separation Agreement as amended by the Amendment Agreement. Critzer and RMI further agree
that the Change in Control and Severance Agreement dated March 30, 2004, by and between RMI and
Critzer is terminated and superceded by this Agreement and is null and void.

     3. Payments and Benefits to Critzer. Provided this Agreement is executed and Critzer
has not revoked and/or rescinded it in accordance with Paragraph 7, RMI will provide the following
payments and benefits to Critzer:

	 	(d)	 	Pursuant to the terms and conditions set forth in Critzer’s
applicable stock option agreements with RMI, RMI agrees that, notwithstanding
anything to the contrary set forth in such stock option agreements or RMI’s
1999 Omnibus Stock Plan, as amended, during the five-year period following the
Separation Date, Critzer shall be permitted to exercise 100% of all stock
options granted to Critzer prior to December 31, 2004, and not yet exercised
(i. e., 502,000 shares of RMI common stock); provided, however, in the event
Critzer unilaterally resigns from RMI prior to June 30, 2005, and prior to
RMI’s hiring of a new President and Chief Executive Officer and Critzer’s
completion of her transition assistance duties described in Paragraph 2 of this
Agreement, during the five-year period following the Separation Date, Critzer
shall be permitted to exercise 100% of all stock options granted to Critzer
prior to March 30, 2004 (i.e., 150,000 shares of RMI common stock) and 50% of
all options granted on or after March 30, 2004 (i.e., 176,000 shares of RMI
common stock). The parties hereto agree and acknowledge that, with respect to
any stock options previously granted to Critzer that were intended by the
parties to be treated as “incentive stock options” within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, such stock
options, to the extent they may be exercised by Critzer more than 90 days
following the Separation Date shall be treated as non-qualified stock

 

 

	 	 	 	options, notwithstanding any provision in Critzer’s stock option agreements
to the contrary

	 	 	 	 	 
	 	 	 
	Dated:          February 2, 2005 	/s/ Susan L. Critzer
 	 
	 	Susan L. Critzer 	 
	 	 	 
	 

	 	 	 	 	 
	Dated:          February 2, 2005 	RESTORE MEDICAL INC.

 	 
	 	By  /s/ Mark B. Knudson
 	 
	 	Its  Chair Person 	 
	 	 	 
	 

2exv10w7

 

Exhibit 10.7

RESTORE MEDICAL, INC.

1999 OMNIBUS STOCK PLAN

Section 1. Purpose.

     The purpose of this Plan is to promote the interests of the Company and its stockholders by
aiding the Company in attracting, retaining and incentivizing employees, officers, consultants,
independent contractors and non-employee directors.

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, Dividend Equivalent, 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.

     (d) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any
regulations promulgated thereunder.

     (e) “Committee” shall mean either the Board of Directors of the Company or a committee of the
Board of Directors appointed by the Board of Directors to administer the Plan. The Company expects
to have the Plan administered in accordance with the requirements for the award of “qualified
performance-based compensation” within the meaning of Section 162(m) of the Code.

     (f) “Company” shall mean Restore Medical, Inc., a Delaware corporation, and any successor
corporation.

     (g) “Dividend Equivalent” shall mean any right granted under Section 6(e) of the Plan.

     (h) “Eligible Person” shall mean any employee, officer, consultant, independent contractor or
director providing services to the Company or any Affiliate whom the Committee determines to be an
Eligible Person.

     (i) “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, unless otherwise determined by the Committee, the Fair Market

 

 

Value of Shares on a given date for purposes of the Plan shall not be less than (i) the
closing price as reported for composite transactions, if the Shares are then listed on a national
securities exchange, (ii) the last sale price, if the Shares are then quoted on the Nasdaq National
Market or (iii) the average of the closing representative bid and asked prices of the Shares in all
other cases, on the date as of which fair market value is being determined. If on a given date the
Shares are not traded in an established securities market, the Committee shall make a good faith
attempt to satisfy the requirements of this clause and in connection therewith shall take such
action as it deems necessary or advisable.

     (j) “Incentive Stock Option” shall mean an option granted under Section 6(a) of the Plan that
is intended to meet the requirements of Section 422 of the Code or any successor provision.

     (k) “Non-Qualified Stock Option” shall mean an option granted under Section 6(a) of the Plan
that is not intended to be an Incentive Stock Option.

     (l) “Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option, and shall
include Reload Options.

     (m) “Other Stock Grant” shall mean any right granted under Section 6(f) of the Plan.

     (n) “Other Stock-Based Award” shall mean any right granted under Section 6(g) of the Plan.

     (o) “Participant” shall mean an Eligible Person designated to be granted an Award under the
Plan.

     (p) “Performance Award” shall mean any right granted under Section 6(d) of the Plan.

     (q) “Person” shall mean any individual, corporation, partnership, association or trust.

     (r) “Plan” shall mean the Restore Medical, Inc. 1999 Omnibus Stock Plan, as amended from time
to time.

     (s) “Reload Option” shall mean any Option granted under Section 6(a)(iv) of the Plan.

     (t) “Restricted Stock” shall mean any Shares granted under Section 6(c) of the Plan.

     (u) “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.

     (v) “Shares” shall mean shares of Common Stock, $0.01 par value, 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.

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     (w) “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 with respect to which payments, rights or other matters are to be
calculated 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 Options or the lapse of restrictions relating to Restricted Stock, Restricted
Stock Units or other Awards; (vi) determine whether, to what extent and under what circumstances
Awards may be exercised in cash, Shares, other securities, other Awards or other property, or
canceled, forfeited or suspended; (vii) determine whether, to what extent and under what
circumstances cash, Shares, other securities, other Awards, other property and other amounts
payable with respect to an Award under the Plan shall be deferred either automatically or at the
election of the holder thereof or the Committee; (viii) interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan; (ix) 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 (x) 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
Participant, any holder or beneficiary of any Award.

     (b) Delegation. The Committee may delegate its powers and duties under the Plan to
one or more officers of the Company or any Affiliate or a committee of such officers, subject to
such terms, conditions and limitations as the Committee may establish in its sole discretion.

Section 4. Shares Available for Awards.

     (a) Shares Available. Subject to adjustment as provided in Section 4(c), the
aggregate number of Shares that may be issued under all Awards under the Plan shall be 3,875,000.
Shares to be issued under the Plan shall be newly issued. 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. Notwithstanding the
foregoing, the number of Shares available for granting Incentive Stock Options under the Plan shall
not exceed 3,875,000, subject to adjustment as provided in the Plan and Section 422 or 424 of the
Code or any successor provision.

     (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

3

 

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.

     (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 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 Awards is based solely on an increase in the value of the
Shares after the date of grant of such Awards, for more than 100,000 Shares (subject to adjustment
as provided for in Section 4(c)), in the aggregate in any calendar year. The foregoing annual
limitation specifically includes the grant of any Awards representing “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code.

Section 5. Eligibility.

     Any Eligible Person of the Company or any Affiliate, 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 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 Participants 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 the purchase price of an

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Incentive Stock Option 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;
provided, however, that the term of an Incentive Stock Option may not extend more than ten
years from the date of grant of such Incentive Stock Option.

     (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, other securities,
other Awards or other property, or any combination thereof, having a Fair Market Value on
the exercise date equal to the relevant exercise price; provided, however, Options granted
to employees shall not include “cash-less” exercise provisions) in which, payment of the
exercise price with respect thereto may be made or deemed to have been made.

     (iv) Reload Options. The Committee may grant Reload Options, separately or
together with another Option, pursuant to which, subject to the terms and conditions
established by the Committee, the Participant would be granted a new Option when the payment
of the exercise price of a previously granted option is made by the delivery of Shares owned
by the Participant pursuant to Section 6(a)(iii) hereof or the relevant provisions of
another plan of the Company, and/or when Shares are tendered or forfeited as payment of the
amount to be withheld under applicable income tax laws in connection with the exercise of an
Option, which new Option would be an Option to purchase the number of Shares not exceeding
the sum of (A) the number of Shares so provided as consideration upon the, exercise of the
previously granted option to which such Reload Option relates and (B) the number of Shares,
if any, tendered or withheld as payment of the amount to be withheld under applicable tax
laws in connection with the exercise of the option to which such Reload Option relates
pursuant to the relevant provisions of the plan or agreement relating to such option.
Reload Options may be granted with respect to Options previously granted under the Plan or
any other stock option plan of the Company, and may be granted in connection with any Option
granted under the Plan or any other stock option plan of the Company at the time of such
grant. Such Reload Options shall have a per share exercise price equal to the Fair Market
Value as of the date of grant of the new Option. Any Reload Option shall be subject to
availability of sufficient Shares for grant under the Plan. Shares surrendered as part or
all of the exercise price of the Option to which it relates that have been owned by the
optionee less than six months will not be counted for purposes of determining the number of
Shares that may be purchased pursuant to a Reload Option.

     (v) Ten Percent Shareholder Rule. Notwithstanding any other provision in the
Plan, if at the time an Option is otherwise to be granted pursuant to the Plan to a
Participant who owns, directly or indirectly (within the meaning of Section 424(d) of the
Code), Common Stock of the Company possessing more than 10% of the total combined voting
power of all classes of stock of the Company or its parent or any subsidiary, then any
Incentive Stock Option to be granted to such Participant pursuant to the Plan shall satisfy
the requirements of Section 422(c)(5) of the Code, and the exercise price of such

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Option shall be not less than 110% of the Fair Market Value of the Shares covered, and
such Option by its terms shall not be exercisable after the expiration of five years from
the date such Option is granted.

     (b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock
Appreciation Rights to Participants subject to the terms of the Plan and any applicable Award
Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a
right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the
date of exercise (or, if the Committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as
specified by the Committee, which 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 and
any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be
as determined by the Committee. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it may deem appropriate.

     (c) Restricted Stock and Restricted Stock Units. The Committee is hereby authorized
to grant Restricted Stock and Restricted Stock Units to Participants 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) Restrictions. Shares of Restricted Stock and Restricted Stock Units shall
be subject to such restrictions as the Committee may impose (including, without limitation,
a waiver by the Participant of the right to vote or 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 shall be registered in the name
of the Participant and shall bear an appropriate legend referring to the terms, conditions
and restrictions applicable to such Restricted Stock. In the case of Restricted Stock
Units, no Shares shall be issued at the time such Awards are granted.

     (iii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment (as determined under criteria established by the Committee) during
the applicable restriction period, all Shares of Restricted Stock and all 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. Upon the lapse or waiver
of restrictions and the restricted period relating to Restricted Stock Units evidencing the
right to receive Shares, such Shares shall be issued and delivered to the holders of the
Restricted Stock Units.

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     (d) Performance Awards. The Committee is hereby authorized to grant Performance
Awards to Participants subject to the terms of the Plan and any applicable Award Agreement. 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 and any
applicable Award Agreement, 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) Dividend Equivalents. The Committee is hereby authorized to grant Dividend
Equivalents to Participants, subject to the terms of the Plan and any applicable Award Agreement,
under which such Participants shall be entitled to receive payments (in cash, Shares, other
securities, other Awards or other property as determined in the discretion of the Committee)
equivalent to the amount of cash dividends paid by the Company to holders of Shares with respect to
a number of Shares determined by the Committee.

     (f) Other Stock Grants. The Committee is hereby authorized, subject to the terms of
the Plan and any applicable Award Agreement, to grant to Participants Shares without restrictions
thereon as are deemed by the Committee to be consistent with the purpose of the Plan.

     (g) Other Stock-Based Awards. The Committee is hereby authorized to grant to
Participants subject to the terms of the Plan and any applicable Award Agreement, 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 pursuant to a purchase right granted under this Section 6(g) 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, other securities, other Awards or other
property or any combination thereof), as the Committee shall determine.

     (h) General.

     (i) No Cash Consideration for Awards. Awards shall be granted for no cash
consideration or for such minimal cash consideration as may be 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 other than the Plan. 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.

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     (iii) Forms of Payment under Awards. Subject to the terms of the Plan and of
any applicable Award Agreement, 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, other
securities, other Awards or other property or any combination thereof; provided, however,
Options granted to employees shall not include “cash-less” exercise provisions), 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 or the grant or crediting of
Dividend Equivalents with respect to 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; provided, however, that, if so determined
by the Committee, a Participant may, in the manner established by the Committee, transfer
Options (other than Incentive Stock Options) or 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. Each Award or right under any 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. No Award or
right under any such Award may be pledged, alienated, attached or otherwise encumbered, and
any purported pledge, alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.

     (v) Term of Awards. 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 restrictions as the Committee may deem advisable under the Plan, applicable federal or
state securities laws and regulatory requirements, and the Committee may cause appropriate
entries to be made or legends to be affixed to reflect such restrictions. If the Shares or
other securities are listed on a securities exchange, the Company shall not be required to
deliver any Shares or other securities covered by an Award until such Shares or other
securities have been listed on such securities exchange.

Section 7. Amendment and Termination; Adjustments.

     Except to the extent prohibited by applicable law and unless otherwise expressly provided in
an Award Agreement or in the Plan:

     (a) Amendments to the Plan. The Board of Directors of the Company may amend, alter,
suspend, discontinue or terminate the Plan; provided, however, that, notwithstanding any other
provision of the Plan or any Award Agreement, without the approval of the shareholders of

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the Company, no such amendment, alteration, suspension, discontinuation or termination shall
be made that, absent such approval:

     (i) would cause Rule 16b-3 or Section 162(m) of the Code to become unavailable with
respect to the Plan;

     (ii) would violate the rules or regulations of the NASDAQ National Market, any other
securities exchange or the National Association of Securities Dealers, Inc. that are
applicable to the Company; or

     (iii) would cause the Company to be unable, under the Code, to grant Incentive Stock
Options under the Plan.

     (b) Amendments to Awards. The Committee may waive any conditions of or rights of the
Company under any outstanding Award, prospectively or retroactively. The Committee may not amend,
alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively,
without the consent of the Participant or holder or beneficiary thereof, except as otherwise herein
provided or in the Award Agreement.

     (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; Tax Bonuses.

     (a) Withholding. In order to comply with all applicable federal or state income tax
laws or regulations, the Company may take such action as it deems appropriate to ensure that all
applicable federal or state 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 and state 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 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.

     (b) Tax Bonuses. The Committee, in its discretion, shall have the authority, at the
time of grant of any Award under this Plan or at any time thereafter, to approve cash bonuses to
designated Participants to be paid upon their exercise or receipt of (or the lapse of restrictions
relating to) Awards in order to provide funds to pay all or a portion of federal and state taxes
due as a result of such exercise or receipt (or the lapse of such restrictions). The Committee
shall have full authority in its discretion to determine the amount of any such tax bonus.

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Section 9. General Provisions.

     (a) No Rights to Awards. No Eligible Person, Participant 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, Participants 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) 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.

     (d) 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 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 free from any liability or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement.

     (e) 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 laws of the State of Minnesota.

     (f) 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.

     (g) 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 a Participant 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.

     (h) 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.

10

 

     (i) 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.

     (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.

Section 10. Effective Date of the Plan.

     The Plan shall be effective as of the date of its approval and adoption by the Company’s
shareholders. If the Company’s shareholders do not approve the Plan, the Plan shall be null and
void.

Section 11. Term of the Plan.

     Awards shall only be granted under the Plan during a 10-year period beginning on the effective
date of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable
Award Agreement, any Award theretofore granted may extend beyond the end of such 10-year period,
and the authority of the Committee provided for hereunder with respect to the Plan and any Awards,
and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond
the termination of the Plan.

11

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