Document:

Stock Award Plan

          Bandag, Incorporated

          (As amended August 24, 1999)

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Contents

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Article 1. Establishment, Objectives, and Duration                            1

Article 2. Definitions                                                        1

Article 3. Administration                                                     4

Article 4. Shares Subject to the Plan and Maximum Awards                      4

Article 5. Eligibility and Participation                                      5

Article 6. Stock Options                                                      5

Article 7. Restricted Stock                                                   6

Article 8. Performance Measures                                               8

Article 9. Beneficiary Designation                                            9

Article 10. Deferrals                                                         9

Article 11. Rights of Employees/Directors                                     9

Article 12. Change in Control                                                 9

Article 13. Amendment, Modification, and Termination                         10

Article 14. Withholding                                                      10

Article 15. Indemnification                                                  11

Article 16. Successors                                                       11

Article 17. Legal Construction                                               11

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Bandag, Incorporated
Stock Award Plan

Article 1. Establishment, Objectives, and Duration

      1.1 Establishment of the Plan. Bandag, Incorporated, an Iowa corporation
(hereinafter referred to as the "Company"), hereby establishes a compensation
reward plan to be known as the "Bandag, Incorporated Stock Award Plan"
(hereinafter referred to as the "Plan"), as set forth in this document. The Plan
permits the grant of Nonqualified Stock Options, Incentive Stock Options, and
Restricted Stock.

      Subject to approval by the Company's shareholders, the Plan shall become
effective as of February 8, 1999 (the "Effective Date") and shall remain in
effect as provided in Section 1.3 hereof.

      1.2 Objectives of the Plan. The objectives of the Plan are to 1) create a
better link between the interests of the Participants and the Company's
shareholders; 2) promote teamwork and provide Participants with rewards for
excellence in the Company's performance; 3) provide flexibility to the Company
in its ability to compensate, attract, and retain the services of individuals
who make significant contributions to the Company's success; and 4) allow
Participants to further share in the success of the Company.

      1.3 Duration of the Plan. The Plan shall commence on the Effective Date,
as described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 13 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions.

Article 2. Definitions

      Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:

      2.1     "Award" means, individually or collectively, a grant under this
              Plan of Nonqualified Stock Options, Incentive Stock Options, or
              Restricted Stock.

      2.2     "Award Agreement" means an agreement entered into by the Company
              and a Participant setting forth the terms and provisions
              applicable to Awards granted to the Participant under this Plan.

      2.3     "Board" or "Board of Directors" means the Board of Directors of
              the Company.

      2.4     "Change in Control" of the Company shall be deemed to have
              occurred as of the first day that any one or more of the
              following conditions shall have been satisfied:

              (a) A sale, exchange, transfer, or other disposition of any
                  ownership interest in the Company which results in the "Carver
                  Family" as defined in Section 4. (f). (iv) of the Restated
                  Articles of Incorporation of the Company, owning, in the
                  aggregate, directly or indirectly, less

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                  than 51% voting control of the Company; provided that the
                  conversion of Class B Common Stock into Common Stock pursuant
                  to Section 4. (f) of Article IV of the Company's Restated
                  Articles of Incorporation shall not be deemed to be a "sale,
                  exchange, transfer or other disposition" for purposes of this
                  Section 2.4;

              (b) The consummation of a transaction that results in a sale,
                  exchange, transfer, or other disposition of all, or
                  substantially all, of the assets of the Company; or

              (c) The consummation of a transaction that results in the merger
                  or consolidation of the Company with or into any other
                  corporation under circumstances where the shareholders of the
                  Company immediately prior to such merger or consolidation,
                  will own, directly or indirectly, after such merger or
                  consolidation, securities representing less than 51% voting
                  control of the corporation surviving any such merger or
                  consolidation.

      2.5     "Code" means the Internal Revenue Code of 1986, as amended from
              time to time.

      2.6     "Committee" means any committee appointed by the Board to
              administer the Plan, as specified in Article 3 herein, except for
              any Awards to Directors which shall only be granted by the Board.
              Any such committee shall be comprised entirely of Directors.

      2.7     "Company" means Bandag, Incorporated, an Iowa corporation,
              including any and all Subsidiaries, and any successor thereto as
              provided in Article 16 herein.

      2.8     "Director" means any individual who is a member of the Board of
              Directors of the Company or any Subsidiary and who is not an
              employee of the Company or any Subsidiary.

      2.9     "Disability" shall have the meaning ascribed to such term in the
              Company's or Subsidiary's long-term disability plan governing a
              Participant, or if no such plan exists, at the discretion of the
              Board.

      2.10    "Effective Date" shall have the meaning ascribed to such term in
              Section 1.1 hereof.

      2.11    "Employee" means any employee of the Company or a Subsidiary.

      2.12    "Exchange Act" means the Securities Exchange Act of 1934, as
              amended from time to time, or any successor act thereto.

      2.13    "Fair Market Value" of a Share shall be determined on the basis of
              the average of the opening and closing sale prices on the
              principal securities exchange or market on which the Shares are
              traded or, if no such sale prices are available on the relevant
              date, then on the last previous day on which a sale was reported.
              If the above methods are otherwise

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              inapplicable, then the Fair market Value of the Shares shall be
              determined in good faith by the Board.

      2.14    "Incentive Stock Option" or "ISO" means an option to purchase
              Shares granted under Article 6 herein and which is designated as
              an Incentive Stock Option and which is intended to meet the
              requirements of Code Section 422.

      2.15    "Nonqualified Stock Option" or "NQSO" means an option to purchase
              Shares granted under Article 6 herein and which is not intended
              to meet the requirements of Code Section 422.

      2.16    "Option" means an Incentive Stock Option or a Nonqualified Stock
              Option, as described in Article 6 herein.

      2.17    "Option Price" means the price at which a Share may be purchased
              by a Participant pursuant to an Option.

      2.18    "Participant" means an Employee or Director who has been selected
              to receive an Award or who has outstanding an Award granted under
              the Plan.

      2.19    "Performance-Based Exception" means the performance-based
              exception from the tax deductibility limitations of Code Section
              162(m).

      2.20    "Period of Restriction" means the period during which the transfer
              of Shares of Restricted Stock is limited in some way (based on the
              passage of time, the achievement of performance goals, or upon the
              occurrence of other events as determined by the Board, at its
              discretion), and the Shares are subject to a substantial risk of
              forfeiture, as provided in Article 7 herein.

      2.21    "Restricted Stock" means an Award granted to a Participant
              pursuant to Article 7 herein.

      2.22    "Retirement" means the Participant's termination of employment
              (other than due to death or Disability) on or after age 60 with
              ten or more years of service for vesting purposes as determined
              under any qualified retirement plan of the Company or any
              Subsidiary covering the Participant.

      2.23    "Shares" means the shares of Class A common stock of the Company.

      2.24    "Subsidiary" means any company during any period in which it is a
              "subsidiary corporation" (as that term is defined in Code Section
              424(f)) with respect to the Company.

Article 3. Administration

      3.1 General. The Plan shall be administered by the Board, or (subject to
the following) by any Committee appointed by the Board. The members of the
Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors. The Board may delegate

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to the Committee any or all of the administration of the Plan; provided,
however, that the administration of the Plan with respect to Awards granted to
Directors may not be so delegated. To the extent that the Board has delegated to
the Committee any authority and responsibility under the Plan, all applicable
references to the Board in the Plan shall be to the Committee.

      3.2 Authority of the Board. Except as limited by law or by the Restated
Articles of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Board shall have full power to select Employees and
Directors who shall participate in the Plan; determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent with
the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend, or waive rules and regulations
for the Plan's administration; and (subject to the provisions of Article 13
herein) amend the terms and conditions of any outstanding Award as provided in
the Plan. Further, the Board shall make all other determinations which may be
necessary or advisable for the administration of the Plan. As permitted by law
(and subject to Section 3.1 herein), the Board may delegate its authority as
identified herein.

      3.3 Decisions Binding. All determinations and decisions made by the Board
pursuant to the provisions of the Plan and all related orders and resolutions of
the Board shall be final, conclusive and binding on all persons, including the
Company, its stockholders, Directors, Employees, Participants, and their estates
and beneficiaries.

Article 4. Shares Subject to the Plan and Maximum Awards

      4.1 Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be nine hundred thousand
(900,000), no more than three hundred thousand (300,000) of which may be granted
in the form of Restricted Shares. The Shares may be authorized, but unissued, or
reacquired Shares. The Board shall determine the appropriate methodology for
calculating the number of shares issued pursuant to the Plan. If any Shares
covered by an Award are forfeited or if any Award otherwise terminates, expires
or is cancelled prior to the delivery of all the Shares, then the number of
Shares counted against the number of Shares available under the Plan in
connection with the grant of such Award, to the extent of any such forfeiture,
termination, expiration or cancellation, shall again be available for granting
of additional Awards under the Plan. Unless and until the Board determines that
an Award shall not be designed to comply with the Performance-Based Exception,
the following rules shall apply to grants of such Awards under the Plan:

              (a)    Stock Options: The maximum aggregate number of Shares that
                     may be granted in the form of Stock Options, pursuant to
                     any Award granted in any one fiscal year to any one single
                     Participant shall be ninety thousand (90,000).

              (b)    Restricted Stock: The maximum aggregate grant with respect
                     to Awards of Restricted Stock granted in any one fiscal
                     year to any one single Participant shall be thirty
                     thousand (30,000).

      4.2 Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code

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Section 368) or any partial or complete liquidation of the Company, such
adjustment shall be made in the number and class of Shares which may be
delivered under Section 4.1, in the number and class of and/or price of Shares
subject to outstanding Awards granted under the Plan, and in the Award limits
set forth in subsections 4.1(a) and 4.1(b), as may be determined to be
appropriate and equitable by the Board, in its sole discretion, to prevent
dilution or enlargement of rights; provided, however, that the number of Shares
subject to any Award shall always be a whole number.

Article 5. Eligibility and Participation

      5.1 Eligibility. Persons eligible to participate in this Plan shall
be all Employees and Directors.

      5.2 Actual Participation. Subject to the provisions of the Plan, the Board
may, from time to time, select from all Employees and Directors, those to whom
Awards shall be granted and shall determine the nature and amount of each Award.

Article 6. Stock Options
      6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Board.

      6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Board shall determine. The Award Agreement also shall specify whether the Option
is intended to be an ISO within the meaning of Code Section 422, or an NQSO
whose grant is intended not to fall under the provisions of Code Section 422.

      6.3 Option Price. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.

      6.4 Duration of Options. Each Option granted to a Participant shall expire
at such time as the Board shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.

      6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Board shall in each instance approve, which need not be the same for each
grant or for each Participant.

      6.6 Payment. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares, except that, in the case of a
cashless exercise as described below, payment shall be made as soon as
practicable after exercise.

      The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired shares of stock of the Company having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price

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(provided that the shares of stock of the Company which are tendered must have
been held by the Participant for at least six (6) months prior to their tender
to satisfy the Option Price), or (c) by a combination of (a) and (b).

      The Board also may allow cashless exercises as permitted under the Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Board determines to be consistent with the
Plan's purpose and applicable law.

      Subject to any governing rules or regulations, as soon as practicable
after receipt of a written notification of exercise and full payment, the
Company shall deliver to the Participant, in the Participant's name, Share
certificates in an appropriate amount based upon the number of Shares purchased
under the Option(s).

      6.7 Restrictions on Share Transferability. The Board may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.

      6.8 Termination of Employment/Directorship. Each Participant's Award
Agreement shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment or directorship with the Company. Such provisions shall be determined
in the sole discretion of the Board, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Options issued
pursuant to this Article 6, and may reflect distinctions based on the reasons
for termination.

      6.9  Nontransferability of Options.

              (a) Incentive Stock Options. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all ISOs
granted to a Participant under the Plan shall be exercisable during his or her
lifetime by only such Participant.

              (b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all NQSOs granted to a
Participant under this Article 6 shall be exercisable during his or her lifetime
by only such Participant, or the Participant's legal representative.

Article 7. Restricted Stock

      7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Board, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Board shall determine.
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      7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Board shall determine.

      7.3 Transferability. Except as provided in this Article 7, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Board and specified in the Restricted Stock Award
Agreement, or upon earlier satisfaction of any other conditions, as specified by
the Board in its sole discretion and set forth in the Restricted Stock Award
Agreement. All rights with respect to the Restricted Stock granted to a
Participant under the Plan shall be available during his or her lifetime to only
such Participant.

      7.4 Other Restrictions. Subject to Article 9 herein, the Board shall
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock, restrictions based upon the achievement of
specific performance goals (Company-wide, divisional, etc.), time-based
restrictions on vesting following the attainment of the performance goals,
and/or restrictions under applicable federal or state securities laws.

      The Company may retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.

      Except as otherwise provided in this Article 7, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.

      7.5 Voting Rights. To the extent applicable, Participants holding Shares
of Restricted Stock granted hereunder may be granted the right to exercise full
voting rights with respect to those Shares during the Period of Restriction.

      7.6 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
entitled to receive regular cash dividends paid with respect to the underlying
Shares while they are so held. The Board may apply any restrictions to the
dividends that the Board deems appropriate. Without limiting the generality of
the preceding sentence, if the grant or vesting of Restricted Shares is designed
to comply with the requirements of the Performance-Based Exception, the Board
may apply any restrictions it deems appropriate to the payment of dividends
declared with respect to such Restricted Shares, such that the dividends and/or
the Restricted Shares maintain eligibility for the Performance-Based Exception.

      The Board may also approve payments by the Company to Participants in cash
or its equivalent, amounts of which the Board deems appropriate to be sufficient
remuneration for all or a portion of the resulting income tax consequences to
the Participant of the Restricted Shares. The conditions under which such
payments, if any, shall be made shall be set forth in the Participant's Award
Agreement.
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      7.7 Termination of Employment/Directorship. Each Restricted Stock Award
Agreement shall set forth the extent to which the Participant shall have the
right to receive unvested Restricted Shares following termination of the
Participant's employment or directorship with the Company. Such provisions shall
be determined in the sole discretion of the Board, shall be included in the
Award Agreement entered into with each Participant, need not be uniform among
all Shares of Restricted Stock issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination; provided, however that,
except in the cases of terminations connected with a Change in Control and
terminations by reason of death or Disability, the vesting of Shares of
Restricted Stock which qualify for the Performance-Based Exception shall occur
at the time they otherwise would have, but for the termination.

Article 8. Performance Measures

      Unless and until the Board proposes for shareholder vote and shareholders
approve a change in the general performance measures set forth in this Article
8, the attainment of which may determine the degree of payout and/or vesting
with respect to Awards which are designed to qualify for the Performance-Based
Exception, the performance measure(s) to be used for purposes of such grants
shall be chosen from among:

      (a)     Earnings per share;

      (b)     Net income (before or after taxes);

      (c)     Return measures (including, but not limited to, return on assets,
              equity, or sales);

      (d)     Cash flow return on investments which equals net cash flows
              divided by owners equity;

      (e)     Earnings before or after taxes;

      (f)     Gross revenues;

      (g)     Share price (including, but no limited to, growth measures and
              total shareholder return); and

      (h)     Economic profit (generally defined as, but not limited to,
              after-tax operating profit less the cost of capital).

      The Board shall have the discretion to adjust the amount of the Award
depending upon the degree of attainment of the preestablished performance goals;
provided, however, that no discretion may be exercised with respect to Awards
which are designed to qualify for the Performance-Based Exception (other than
discretion by the Board to decrease the amount of the Award otherwise payable
upon attainment of the preestablished performance goals).

      In the event that applicable tax laws change to permit Board discretion to
alter the governing performance measures without obtaining shareholder approval
of such changes, the Board shall have sole discretion to make such changes
without obtaining shareholder approval. In addition, in the event that the Board
determines that it is advisable to grant Awards which shall not qualify for the

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Performance-Based Exception, the Board may make such grants without satisfying
the requirements of Code Section 162(m).

Article 9. Beneficiary Designation

      Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.

Article 10. Deferrals

      The Board may permit or require a Participant to defer such Participant's
receipt of the delivery of Shares that would otherwise be due to such
Participant by virtue of the exercise of an Option or the lapse or waiver of
restrictions with respect to Restricted Stock. If any such deferral election is
required or permitted, the Board shall, in its sole discretion, establish rules
and procedures for such payment deferrals.

Article 11. Rights of Employees/Directors

      11.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.

      11.2 Participation. No Employee or Director shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.

Article 12. Change in Control

      12.1 Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:

              (a)    Any and all Options granted hereunder shall become
                     immediately exercisable, and shall remain exercisable
                     throughout their entire term;

              (b)    Any restriction periods and restrictions imposed on
                     Restricted Stock which are not performance-based shall
                     lapse;

      12.2 Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan (but subject to the
limitations of Section 12.3 hereof) or any Award Agreement provision, the
provisions of this Article 12 may not be terminated, amended, or modified on or
after the date of a Change in Control to affect adversely any Award theretofore
granted under the Plan without the prior written consent of the Participant with
respect to said Participant's outstanding Awards; provided, however, the Board
may terminate, amend, or modify this Article 12 at any time and from time to
time prior to the date of a Change in Control.

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      12.3 Pooling of Interests Accounting. Notwithstanding any other provision
of the Plan to the contrary, in the event that the consummation of a Change in
Control is contingent on using pooling of interests accounting methodology, the
Board may take any action necessary to preserve the use of pooling of interests
accounting, including, but not limited to, unilateral amendment of existing
Award Agreements.

Article 13. Amendment, Modification, and Termination

      13.1    Amendment, Modification, and Termination. Subject to the terms of
the Plan, the Board may at any time and from time to time, alter, amend,
 suspend or terminate the Plan in whole or in part.

      13.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Board may make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Board determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; provided that, unless the Board determines
otherwise at the time such adjustment is considered, no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan's meeting the requirements of Section 162(m) of the Code, as from time to
time amended.

      13.3 Awards Previously Granted. Notwithstanding any other provision of the
Plan to the contrary (but subject to Section 12.3 hereof), no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan, without the written consent of
the Participant holding such Award.

      13.4 Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Board determines that such compliance is not desired with respect to any Award
or Awards available for grant under the Plan, then compliance with Code Section
162(m) will not be required. In addition, in the event that changes are made to
Code Section 162(m) to permit greater flexibility with respect to any Award or
Awards available under the Plan, the Board may, subject to this Article 13, make
any adjustments it deems appropriate.

Article 14. Withholding

      14.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.

      14.2 Share Withholding. With respect to withholding required upon the
exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon
any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Board, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All such elections shall be irrevocable, made in writing,

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signed by the Participant, and shall be subject to any restrictions or
limitations that the Board, in its sole discretion, deems appropriate.

Article 15. Indemnification

      Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgement in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his
or her own behalf. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

Article 16. Successors

      All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase of
all or substantially all of the business and/or assets of the Company, or the
result of a merger, consolidation or otherwise.

Article 17. Legal Construction

      17.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

      17.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

      17.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

      17.4 Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the state of Iowa.Bandag, Incorporated Stock Award Plan
Restricted Stock Award Agreement

      You have been selected to be a Participant in the Bandag, Incorporated
Stock Award Plan (the "Plan"), as specified below:

      Participant:
                  --------------------------------------------------------------

      Date of Award:
                    ------------------------------------------------------------

      Number of Shares of Restricted Stock Awarded:
                                                   -----------------------------

      Lapse of Restrictions Date:
                                 -----------------------------------------------

      THIS AGREEMENT, effective as of the Date of Award set forth above,
represents the award of Restricted Stock by Bandag, Incorporated, an Iowa
corporation, to the Participant named above, pursuant to the provisions of the
Plan. The Restricted Stock granted hereunder represents shares of Class A common
stock of the Company ("Shares").

      The Plan provides a complete description of the terms and conditions
governing the Restricted Stock. If there is any inconsistency between the terms
of this Agreement and the terms of the Plan, the Plan's terms shall completely
supersede and replace the conflicting terms of this Agreement. All capitalized
terms shall have the meanings ascribed to them in the Plan, unless specifically
set forth otherwise herein. The parties hereto agree as follows:

      1. Employment by the Company. The Restricted Stock granted hereunder are
awarded on the condition that the Participant remains employed by the Company
from the Date of Award through (and including) the Lapse of Restrictions Date,
as specified above (this time period is referred to herein as the "Restriction
Period").

      However, neither such condition nor the award of the Restricted Stock
shall impose upon the Company any obligation to retain the Participant in its
employ for any given period or upon any specific terms of employment.

      2. Removal of Restrictions. Except as may otherwise be provided herein and
in the Plan, the Restricted Stock awarded pursuant to this Agreement shall
become freely transferable by the Participant upon the Lapse of Restrictions
Date set forth above. The stock certificates issued in respect of Shares of
Restricted Stock shall be registered in the name of the Participant and shall be
deposited in a bank designated by the Committee. The Grant of Restricted Stock
is conditioned upon the Participant endorsing in blank a stock power for the
Restricted Stock. Once the Restricted Stock is no longer subject to any
restrictions, the Participant shall be entitled to receive Share certificates
representing the Shares of Restricted Stock granted to the Participant for which
such restrictions have lapsed.

<PAGE>

      3. Voting Rights and Dividends. During the Restriction Period, to the
extent applicable, the Participant may exercise full voting rights and is
entitled to receive any or all dividends and other distributions paid with
respect to the Shares of Restricted Stock while they are held, as determined by
the Committee. If any such dividends or distributions are paid in Shares of
common stock of the Company, the Shares shall be subject to the same
restrictions on transferability as are the Shares of Restricted Stock with
respect to which they were paid.

      4. Termination of Employment Due to Death, Disability, or Retirement. In
the event the employment of the Participant is terminated due to death,
Disability, or Retirement (as such terms are defined in the Plan) prior to the
Lapse of Restrictions Date, all Shares of Restricted Stock then unvested shall
immediately vest one hundred percent (100%), and thereafter such Shares shall be
freely transferable by the Participant, subject to applicable federal and state
securities laws.

      5. Termination of Employment for Other Reasons. In the event the
employment of the Participant is terminated for any reason other than those
reasons set forth in Section 5 prior to the lapse of Restrictions Date, the
Participant shall forfeit the Restricted Stock as of the Participant's date of
termination; provided, however, that the Committee, in its sole discretion,
shall have the right to permit the vesting of all or any portion of the unvested
Shares of Restricted Stock held by the Participant at the time of such
employment termination, subject to such terms as the Committee, in its sole
discretion, deems appropriate.

      6. Change in Control. In the event of a Change in Control (as defined in
the Plan), all Shares of Restricted Stock then unvested shall immediately vest
one hundred percent (100%), and thereafter such Shares shall be freely
transferable by the Participant, subject to applicable federal and state
securities laws.

      7. Nontransferability. During the Restriction Period, Shares of Restricted
Stock awarded pursuant to this Agreement may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated ("a Transfer"), except as
provided in the Plan. If any Transfer, whether voluntary or involuntary, of
Restricted Stock is made, or if any attachment, execution, garnishment, or lien
shall be issued against or placed upon the Restricted Stock, the Participant's
right to such Restricted Stock shall be immediately forfeited by the Participant
to the Company, and this Agreement shall lapse.

      8. Recapitalization. In the event there is any change in the Company's
Shares through the declaration of stock dividends or through recapitalization
resulting in stock split-ups or through merger, consolidation, exchange of
Shares, or otherwise, the Committee may make such adjustments to the number of
Shares of Restricted Stock subject to this Agreement that it deems necessary in
order to prevent dilution or enlargement of the Participant's rights.

      9. Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require the Participant or beneficiary to remit to the
Company, an amount sufficient to satisfy federal, state, and local taxes,
domestic or foreign, required by law or regulation to be withheld with respect
to any taxable event arising as a result of this Agreement.

<PAGE>

      10. Share Withholding. With respect to withholding required upon any other
taxable event arising as a result of Awards granted hereunder, the Participant
may elect, subject to the approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares having a
Fair Market Value on the date the tax is to be determined equal to the minimum
statutory total tax which could be withheld on the transaction. All such
elections shall be irrevocable, made in writing, signed by the Participant, and
shall be subject to any restrictions or limitations that the Committee, in its
sole discretion, deems appropriate.

      11. Beneficiary Designation. The Participant may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently or successively)
to whom any benefit under this Agreement is to be paid in case of his or her
death before he or she receives any or all of such benefit. Each such
designation shall revoke all prior designations by the Participant, shall be in
a form prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Stock Plan Administrator during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.

      12. Administration. This Agreement and the rights of the Participant
hereunder are subject to all the terms and conditions of the Plan, as the same
may be amended from time to time, as well as to such rules and regulations as
the Committee may adopt for administration of the Plan. It is expressly
understood that the Committee is authorized to administer, construe, and make
all determinations necessary or appropriate to the administration of the Plan
and this Agreement, all of which shall be binding upon the Participant. Any
inconsistency between the Agreement and the Plan shall be resolved in favor of
the Plan.

      13. Continuation of Employment. This Agreement shall not confer upon
the Participant any right to continuation of employment by the Company, nor
shall this Agreement interfere in any way with the Company's right to terminate
his or her employment at any time.

      14. Miscellaneous.

              (a) The Participant agrees to take all steps necessary to comply
with all applicable provisions of federal and state securities and tax laws in
exercising his or her rights under this Agreement.

              (b) This Agreement shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

              (c) All obligations of the Company under the Plan and this
Agreement, with respect to this Restricted Stock shall be binding on any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase of all or substantially all of the business
and/or assets of the Company, or the result of a merger, consolidation or
otherwise.

              (d) To the extent not preempted by federal law, this Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Iowa.

<PAGE>
                            Agreement to Participate

          By signing a copy of this Agreement and returning it to the
          Secretary of the Company, I agree to participate in the Plan,
          subject to all of the provisions contained therein. I
          understand that my right to acquire these Shares of Restricted
          Stock is conditioned upon my continued employment with the
          Company unless otherwise specified herein. I further
          understand that a copy of the Plan will be made available to
          me upon request to the Secretary of the Company.

                                                -----------------------------

                                                Participant

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