Document:

exv10w1

 

Exhibit 10.1

FORM OF

CHANGE IN CONTROL AGREEMENT

     AGREEMENT dated as of January 31, 2007, between RAVEN INDUSTRIES, INC., a South Dakota
corporation (the “Company”), and                                         (the “Executive”).

WITNESSETH:

     WHEREAS, the Board of Directors of the Company (the “Board”) recognizes that the Executive’s
contribution to the growth and success of the Company and its subsidiaries has been substantial.

     WHEREAS, the Board has determined that it is appropriate and in the best interests of the
Company and its stockholders to reinforce and encourage the continued attention and dedication of
members of the Company’s management, including the Executive, to their assigned duties.

     WHEREAS, this Agreement sets forth the severance compensation which the Company agrees it will
pay to the Executive if the Executive’s employment with the Company or a Subsidiary of the Company,
as defined in Section 5(a), terminates under one of the circumstances described herein following a
Change in Control (as defined herein).

     WHEREAS, the Company and Executive agree that it is in the best interests of the Company and
Executive to enter into this Agreement to supersede the [(Moquist & Iacarella) Change in Control
Agreement dated                     between the Company and Executive] [(Other Executives) 2001 Change of
Control Severance Benefit Plan].

     NOW THEREFORE, in consideration of the mutual covenants and conditions herein contained and in
further consideration of services performed and to be performed by the Executive for the Company,
the parties hereto agree as follows:

     1. Certain Definitions. For purposes of this Agreement, the following terms have the
meanings indicated:

     (a) Cause. “Cause” shall mean termination of the Executive by the Company for any of
the following reasons:

     (i) Executive is terminated from employment for willful misconduct that
materially injures or causes a material loss to the Company and a material benefit
to Executive or third parties, as for example, by embezzlement, appropriation of
corporate opportunity, conversion of tangible or intangible corporate property or
the making of agreements with third parties in which Executive or anyone related
to or associated with him has a direct or indirect
interest; the term “Cause” does not include a termination occasioned by
ill-advised good faith judgment or negligence in connection with the Company’s
business; or

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     (ii) The determination by the Company in good faith that Executive has
violated paragraph [(Moquist & Iacarella): 8 (Confidentiality) or 9
(Non-Competition) of the Senior Executive Employment Agreement] [(Other Executives):
7 (Confidentiality) or 8 (Non-Competition) of the Employment Agreement for Senior
Management].

     (b) Change in Control. A “Change in Control” shall mean:

     (i) The acquisition (other than from the Company directly) by any person,
entity or “group”, within the meaning of Section 13(d) or 14(d) of the ’34 Act, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the ’34
Act) of 25% or more of the then outstanding shares of the Company’s common stock;
or

     (ii) Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for election
by the Company’s shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company, under Rule 14a-12(c) of Regulation 14A promulgated under
the ’34 Act) shall be, for purposes of this Agreement, considered as though such
person were a member of the Incumbent Board; or

     (iii) Approval by the shareholders of the Company of (A) a reorganization,
merger or consolidation, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 50% of the combined
voting power of the reorganized, merged or consolidated company’s then outstanding
voting securities entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company, or (B) a liquidation or dissolution
of the Company or (C) the sale of all or substantially all of the assets of the
Company. If Executive is employed by a Subsidiary, a sale of the assets, stock or
business of the Subsidiary will not, in and of itself, be considered a “Change in
Control” with respect to Raven Industries, Inc.

     (c) Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (d) Constructive Termination.

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     (i) “Constructive Termination” shall mean:

     (a) a material, adverse change of Executive’s responsibilities,
authority, status, position, offices, titles, or duties; provided, that (1)
the fact that the Company is a subsidiary of an acquirer or a division of an
acquirer, or (2) a change in Executive’s employment from a Subsidiary to the
Company or another Subsidiary shall in either event not, in and of itself,
be considered a material change to the Employee’s responsibilities,
authority, status, position, offices, titles or duties, and any appropriate
change in title related to such events shall not, in and of itself, be
considered a material change to the Employee’s responsibilities, authority,
status, position, offices, titles or duties;

     (b) an adverse change in Executive’s annual compensation or benefits;

     (c) a requirement to relocate in excess of fifty (50) miles from
Executive’s then current place of employment without Executive’s consent; or

     (d) the breach by the Company of any material provision of this
Agreement or failure to fulfill any other material contractual duties owed
to the Executive.

For the purposes of this definition, Executive’s responsibilities, authority,
status, position, offices, titles and duties are to be determined as of the date of
this Agreement.

     (ii) Notwithstanding the provisions of subsection (i) above, no termination
by the Executive will constitute a Constructive Termination unless the Executive
shall have provided written notice to the Company of his intention to so terminate
this Agreement, which notice sets forth in reasonable detail the conduct that the
Executive believes to be the basis for the Constructive Termination, and the
Company will thereafter have failed to correct such conduct (or commence action to
correct such conduct and diligently pursue such correction to completion) within
30 days following the Company’s receipt of such notice.

     (e) Date of Termination.

“Date of Termination” shall mean:

     (i) if the Executive voluntarily terminates his employment with the Company,
the date on which the Executive delivers a Notice of Termination to the Company; or

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     (ii) if the Executive’s employment is terminated by the Company, the date on
which the Company delivers a Notice of Termination to the Executive.

     (f) Notice of Termination. A “Notice of Termination” shall mean a written notice which
shall indicate those specific termination provisions in this Agreement that are being relied
upon. Any termination by the Company or the Executive shall be communicated by a Notice of
Termination.

     (g) ‘34 Act. “‘34 Act” shall mean the Securities Exchange Act of 1934, as amended.

     2. Term. This Agreement shall commence on the date first above written and shall
continue in effect until January 31, 2008. Commencing on January 31, 2008, and each January 31
thereafter, the term of this Agreement shall automatically be extended for one additional year to
January 31, 2009 and each January 31, thereafter, unless at least sixty days immediately preceding
such January 31, the Company shall have given the Executive written notice that the Company does
not wish to extend this Agreement; provided that this Agreement shall continue in effect beyond the
term provided herein if a Change in Control shall have occurred during such term or if any
obligation of the Company hereunder remains unpaid as of such time.

     3. Severance Compensation upon a Change in Control and Termination of Employment. If
(a) a Change in Control of the Company shall have occurred while the Executive is an employee of
the Company, and (b) within two (2) years after the date of such Change in Control (i) the Company,
except in the case of the Executive’s death, terminates the Executive’s employment without Cause,
or (ii) there is a Constructive Termination, then

     (a) the Company shall pay the Executive any earned and accrued but unpaid installment
of base salary through the Date of Termination at the rate in effect at the time Notice of
Termination is given and all other unpaid amounts to which the Executive is entitled as of
the Date of Termination under any compensation plan or program of the Company, including,
without limitation, all accrued vacation time; such payments to be made in a lump sum on or
before the fifth day following the Date of Termination;

     (b) in lieu of any further salary payments to the Executive for periods subsequent to
the Date of Termination, the Company shall pay to the Executive an amount equal to the
product of (A) the sum of (i) the Executive’s annual base salary in effect as of the Date of
Termination and (ii) 60% of the maximum target or goal amount under the Management Incentive
Plan for the year in which such Date of Termination occurs and (B) the number [2.0 for
Moquist, Iacarella and Rykhus, 1.0 for all others]; such payment to be made in a lump sum on
or before the fifth calendar day following the Date of Termination;

     (c) the Executive shall, effective on the Date of Termination, be deemed a
“Participant” and vested in all respects under the Company’s Senior Executive or Senior
Management Retirement Benefits Policy, regardless of whether the Executive otherwise then
satisfies the

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requirements for eligibility under such Policy; provided that the benefits
specified under this Subsection 3(c) shall (A) not become payable until when the Executive
reaches age 65 unless such benefits are payable at Executive’s age at that time under the
terms of the Policy, and (B) not be provided to the extent such benefits are provided to the
Executive by another employer at no cost to the Executive;

     (d) in the event a Change in Control of the Company shall have occurred while the
Executive is an employee of the Company and, within two (2) years after the date of such
Change in Control the Executive shall die while still an employee of the Company, the amount
specified in Subsection 3(a) shall be paid by the Company to such Executive’s estate, and
such deceased Executive’s spouse and eligible dependents shall be entitled to all of the
benefits specified in the Company’s Senior Executive or Senior Management Retirement
Benefits Policy as if such deceased Executive had delivered a Notice of Termination to the
Company immediately prior to such death;

     (e) the Company’s obligations to provide the payments and benefits in this Section 2
are conditioned on Executive signing a general release of legal claims and covenant not to
sue in form and content satisfactory to the Company; and

     (f) the Company and Executive hereby agree to cooperate in good faith in preparing and
executing any written amendments to this Agreement (such as restrictions on the timing of
severance pay or deferred compensation payments) that are reasonably necessary to timely
comply with Code Section 409A, to the extent that any compensation, severance pay or other
benefits payable to Executive under this Agreement are deemed to constitute a nonqualified
deferred compensation plan under Code Section 409A. All parties acknowledge that such any
amendment must be completed by the end of 2007, pursuant to guidance yet to be issued by the
Internal Revenue Service, unless the Internal Revenue Service extends the time for such
amendments to a later date. Executive also acknowledges that, if any such amendments are not
completed before the earlier of December 31, 2007, or the date any such payments are due, a
20% tax penalty may be assessed against Executive under Code Section 409A.

     4. No Obligation to Mitigate Damages; No Effect on Other Contractual Rights.

     (a) The Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by any
compensation earned by the Executive as the result of employment by another employer after
the Date of Termination, or otherwise, except as provided in Subsection 3(e)(B).

     (b) The provisions of this Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish the Executive’s existing
rights, including post-retirement benefits or any other rights which would accrue solely as
a result of the passage of time, under any benefit plan, employment agreement or other
contract, Company policy, plan or arrangement.

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     5. Successor to the Company.

     (a) The Company will require any successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. As used in this Agreement,
“Company” shall mean the Company as hereinbefore defined and any successor or assign to its
business and/or assets as aforesaid which executes and delivers the agreement provided for
in this Section 5 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law. If at any time during the term of this Agreement the
Executive is employed by any corporation a majority of the voting securities of which is
then owned by the Company (a “Subsidiary”), (1) “Company” as used in this Agreement shall in
addition include such Subsidiary, (2) the Company agrees that it shall pay or shall cause
such Subsidiary to pay any amounts owed to the Executive pursuant to Section 3 hereof and
(3) a transfer of Executive between the Subsidiary and the Company or another Subsidiary
shall not be deemed a termination of employment.

     (b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal and legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any amounts are
still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or
other designee or, if there be no such designee, to the Executive’s estate.

     6. Notice. For purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered or when mailed by United States registered mail, return receipt requested, postage
prepaid, as follows:

If to the Company:

Raven Industries, Inc.

205 East 6th Street

P.O. Box 5107

Sioux Falls, South Dakota 57117

Attention: President

If to the Executive:

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(Address currently on file with the Company)

or such other address as either party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon receipt.

     7. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing signed by the
Executive and such officer of the Company as may be specifically designated by the Board. No
waiver by either party hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provision or conditions at the same or at any prior or
subsequent time. This Agreement shall be governed by and construed in accordance with the laws of
the State of South Dakota.

     8. Entire Agreement. This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings between the parties with respect to
benefits payable upon a change in control, including the [(Moquist & Iacarella): Change In Control
Agreement dated                     between the Company and Executive] [Other Executives): 2001 Change
Of Control Severance Benefit Plan], provided, that this Agreement shall not affect or reduce any
benefit to which Executive shall be otherwise entitled under the 2000 Stock Plan, Employment
Agreement dated                     , or any other plan, agreement or policy of or with the
Company. No modification, termination or attempted waiver of this Agreement shall be valid unless
in writing and signed by the party against whom the same is sought to be enforced.

     9. Validity. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

     10. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.

     11. Fees and Expenses. The Company shall pay all fees and expenses (including
attorney’s fees) which the Executive may incur as a result of the Company’s contesting the
validity, enforceability or the Executive’s interpretation of, or determinations under, this
Agreement, regardless of whether the Company is successful in such contest.

     12. Confidentiality. The Executive shall retain in confidence any and all
confidential information known to the Executive concerning the Company and its business so long as
such information is not otherwise publicly disclosed.

     13. Company’s Right to Terminate. Notwithstanding anything contained in this
Agreement to the contrary, the Company may terminate

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the Executive’s employment at any time, for
any reason or no reason, and no provision contained herein shall affect the Company’s ability to
terminate the Executive’s employment at any time, with or without cause. Nothing in this Agreement
shall in any way require the Company to provide any of the benefits specified in this Agreement
prior to a Change in Control, nor shall this Agreement be construed in any way to establish any
policies or other benefits for the Executive or any other employee of the Company whose employment
with the Company is terminated prior to a Change in Control.

[Signature Page Follows]

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[Signature Page to Change In Control Agreement]

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first
above written.

	 	 	 	 	 	 	 	 	 	 	 
	ATTEST:	 	RAVEN INDUSTRIES, INC.
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	 	 	 	 	By	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	ATTEST:	 	EXECUTIVE:
	 
	 	 	 	 	 	 	 	 	 	 
	By
	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 

9exv10w3

 

Exhibit 10.3

G & K SERVICES, INC.

2006 EQUITY INCENTIVE PLAN

	1.	 	Purpose. The purpose of G & K Services, Inc. 2006 Equity Incentive Plan (the “Plan”)
is to motivate directors, key employees and advisors to produce a superior return to the
stockholders of G & K Services, Inc. by offering them an opportunity to participate in
stockholder gains, by facilitating stock ownership and by rewarding them for achieving a high
level of corporate financial performance. The Plan is also intended to facilitate recruiting
and retaining talented executives for key positions by providing an attractive capital
accumulation opportunity. The Plan was adopted by the Board (as defined below) on August 23,
2006, subject to the approval of stockholders at the annual meeting of stockholders scheduled
for November 16, 2006.
	 
	2.	 	Definitions.

	 	2.1.	 	The following terms, whenever used in this Plan, shall have the meanings set
forth below:

	 	(a)	 	“Affiliate” means any corporation or limited liability company,
a majority of the voting stock or membership interests of which is directly or
indirectly owned by the Company, and any partnership or joint venture
designated by the Committee in which any such corporation or limited liability
company is a partner or joint venturer.
	 
	 	(b)	 	“Award” means a grant made under this Plan in the form of
Performance Shares, Restricted Stock, Restricted Stock Units, Options,
Performance Units, Stock Appreciation Rights, or Stock Awards.
	 
	 	(c)	 	“Award Agreement” means a written agreement or other
communication evidencing the terms and conditions of an Award in the form of
either an agreement to be executed by both the Participant and the Company (or
an authorized representative of the Company) or a certificate, notice, term
sheet or similar communication.
	 
	 	(d)	 	“Beneficiary” means the person or persons determined in
accordance with Section 13.
	 
	 	(e)	 	“Board” means the Board of Directors of the Company.
	 
	 	(f)	 	“Change in Control” means the occurrence of any of the
following events:

	 	(i)	 	any “Person” within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Act”)
(other than the Company or any company owned, directly or indirectly,
by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company) becomes the
“Beneficial Owner” within the meaning of Rule 13d-3 promulgated under
the Act of 30% or more of the combined voting

 

 

	 	 	 	power of the then outstanding securities of the Company entitled to
vote generally in the election of directors; excluding, however, any
circumstance in which such beneficial ownership resulted from any
acquisition by an employee benefit plan (or related trust) sponsored
or maintained by the Company or by any corporation controlling,
controlled by, or under common control with, the Company;
	 
	 	(ii)	 	a change in the composition of the Board since
August 23, 2006, (the “Effective Date”), such that the individuals who,
as of such date, constituted the Board (the “Incumbent Board”) cease
for any reason to constitute at least a majority of such Board;
provided that any individual who becomes a director of the Company
subsequent to the Effective Date whose election, or nomination for
election by the Company’s stockholders, was approved by the vote of at
least a majority of the directors then comprising the Incumbent Board
shall be deemed a member of the Incumbent Board; and provided further
that any individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as
such terms are used in Rule 14a-12 of Regulation 14A promulgated under
the Act, or any other actual or threatened solicitation of proxies or
consents by or on behalf of any person or entity other than the Board
shall not be deemed a member of the Incumbent Board;
	 
	 	(iii)	 	a reorganization, recapitalization, merger or
consolidation (a “Corporate Transaction”) involving the Company, unless
securities representing 60% or more of the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors of the Company or the corporation resulting from
such Corporate Transaction (or the parent of such corporation) are held
subsequent to such transaction by the person or persons who were the
beneficial holders of the outstanding voting securities entitled to
vote generally in the election of directors of the Company immediately
prior to such Corporate Transaction, in substantially the same
proportion as their ownership immediately prior to such Corporate
Transaction; or
	 
	 	(iv)	 	the sale, transfer or other disposition of all
or substantially all of the assets of the Company.

	 	(g)	 	“Code” means the Internal Revenue Code of 1986, as amended from
time to time, and the rulings and regulations issued thereunder.
	 
	 	(h)	 	“Committee” has the meaning set forth in Section 3.
	 
	 	(i)	 	“Company” means G & K Services, Inc., a Minnesota corporation.

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	 	(j)	 	“Deferred Stock Units” has the meaning set forth in Section 9.
	 
	 	(k)	 	“Employee” means an individual who is a common law employee
(including an officer or director who is also an employee) of the Company or an
Affiliate.
	 
	 	(l)	 	“Fair Market Value” means, on a given date, (i) if there should
be a public market for the Shares on such date, the price at which a Share was
last sold (i.e., closing market price) on the principal United States market
for the Shares, or, if no sale of Shares shall have been reported on such
principal United States market on such date, then the immediately preceding
date on which sales of the Shares have been so reported shall be used, and (ii)
if there should not be a public market for the Shares on such date, the Fair
Market Value shall be the value established by the Committee in good faith.
	 
	 	(m)	 	“Incentive Stock Option” means any Option designated as such
and granted in accordance with the requirements of Section 422 of the Code.
	 
	 	(n)	 	“Non-Qualified Stock Option” means an Option other than an
Incentive Stock Option.
	 
	 	(o)	 	“Option” means a right to purchase Stock awarded under Section
10.
	 
	 	(p)	 	“Other Stock-Based Awards” means Awards granted pursuant to
Section 12.
	 
	 	(q)	 	“Participant” means a person described in Section 5 designated
by the Committee to receive an Award under the Plan.
	 
	 	(r)	 	“Performance Cycle” means the period of time as specified by
the Committee over which Performance Shares or Performance Units are to be
earned.
	 
	 	(s)	 	“Performance Shares” means an Award made pursuant to Section 6
which entitles a Participant to receive Shares, their cash equivalent, or a
combination thereof, based on the achievement of performance targets during a
Performance Cycle.
	 
	 	(t)	 	“Performance Units” means an Award made pursuant to Section 6
which entitles a Participant to receive cash, Stock, or a combination thereof,
based on the achievement of performance targets during a Performance Cycle.
	 
	 	(u)	 	“Plan” means this 2006 Equity Incentive Plan, as amended from
time to time.

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	 	(v)	 	“Qualifying Performance Criteria” has the meaning set forth in
Section 16.2.
	 
	 	(w)	 	“Restricted Stock” means Stock granted under Section 7 that is
subject to restrictions imposed pursuant to said Section.
	 
	 	(x)	 	“Restricted Stock Unit” means a grant under Section 9 of the
right to receive a Share subject to vesting and such other restrictions imposed
pursuant to said Section, together with dividend equivalents with respect to
such Share if and as so determined by the Committee.
	 
	 	(y)	 	“Share” means a share of Stock.
	 
	 	(z)	 	“Stock” means the Class A Common Stock, $.50 par value per
share, of the Company, as such class of Stock may be redesignated or renamed
from time to time.
	 
	 	(aa)	 	“Stock Appreciation Right” means a right awarded to a
Participant pursuant to Section 11 that entitles the Participant to receive, in
cash, Stock or a combination thereof, as determined by the Committee, an amount
equal to or otherwise based on the excess of (a) the Fair Market Value of a
Share at the time of exercise over (b) the exercise price of the right, as
established by the Committee on the date the Award is granted.
	 
	 	(bb)	 	“Stock Award” means an award of Stock granted to a Participant
pursuant to Section 8.
	 
	 	(cc)	 	“Term” means the period during which an Option or Stock
Appreciation Right may be exercised or the period during which the restrictions
placed on a Restricted Stock Unit or Restricted Stock are in effect.

	 	2.2.	 	Gender and Number. Except when otherwise indicated by context,
reference to the masculine gender shall include, when used, the feminine gender and any
term used in the singular shall also include the plural.

	3.	 	Administration.

	 	3.1.	 	Administration of the Plan. The Plan shall be administered by the
Compensation Committee of the Board or such other committee selected by the Board and
consisting of two or more members of the Board (the “Committee”). Any power of the
Committee may also be exercised by the Board, except to the extent that the grant or
exercise of such authority would cause any Award or transaction to become subject to
(or lose an exemption under) the short-swing profit recovery provisions of Section 16
of the Act, or cause an Award not to qualify for treatment as “performance based
compensation” under Section 162(m) of the Code. To the extent that any permitted action
taken by the Board conflicts with action taken by the Committee, the Board action shall
control. The Committee may delegate any or all aspects of the day-to-day administration
of the Plan to one or more officers or employees of the Company or any Affiliate, and/or to one or more
agents.

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	 	3.2.	 	Powers of the Committee. Subject to the express provisions of this
Plan, the Committee shall be authorized and empowered to take all actions that it
determines to be necessary or appropriate in connection with the administration of this
Plan, including, without limitation: (i) to prescribe, amend and rescind rules and
regulations relating to this Plan and to define terms not otherwise defined herein;
(ii) to determine which persons are eligible to be granted Awards under Section 5, to
which of such persons, if any, Awards shall be granted hereunder and the timing of any
such Awards; (iii) to grant Awards to Participants and determine the terms and
conditions of Awards, including the number of Shares subject to Awards, the exercise or
exercise price of such Shares, and the circumstances under which Awards become
exercisable or vested or are forfeited or expire, which terms may but need not be
conditioned upon the passage of time, continued employment, the satisfaction of
performance criteria, the occurrence of certain events, or other factors; (iv) to
establish and certify the extent of satisfaction of any performance goals or other
conditions applicable to the grant, issuance, exercisability, vesting, and/or ability
to retain any Award; (v) to prescribe and amend the terms of Award Agreements or other
documents relating to Awards made under this Plan (which need not be identical) and the
terms of or form of any document or notice required to be delivered to the Company by
Participants under this Plan; (vi) to determine whether, and the extent to which,
adjustments are required pursuant to Section 25; (vii) to interpret and construe this
Plan, any rules and regulations under this Plan, and the terms and conditions of any
Award granted hereunder, and to make exceptions to any such provisions in good faith
and for the benefit of the Company; and (viii) to make all other determinations deemed
necessary or advisable for the administration of this Plan.
	 
	 	3.3.	 	Determinations by the Committee. All decisions, determinations and
interpretations by the Committee regarding the Plan, any rules and regulations under
the Plan, and the terms and conditions of or operation of any Award granted hereunder,
shall be final and binding on all Participants, Beneficiaries, heirs, assigns or other
persons holding or claiming rights under the Plan or any Award. The Committee shall
consider such factors as it deems relevant, in its sole and absolute discretion, to
making such decisions, determinations and interpretations including, without
limitation, the recommendations or advice of any officer or other employee of the
Company and such attorneys, consultants and accountants as it may select.

	4.	 	Shares Available Under the Plan; Limitation on Awards.

	 	4.1.	 	Aggregate Limits. Subject to adjustment as provided in Section 25, the
aggregate number of Shares issuable pursuant to all Awards under this Plan shall not
exceed 2,000,000 Shares. Awards of Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Deferred Stock Units, and Stock cannot exceed 667,000 Shares of
the 2,000,000 Shares authorized. Said amounts may be increased by the

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	 	 	 	number of adjusted Company Shares available for issuance under any equity incentive
plan assumed by the Company in connection with a merger or other acquisition but
only if and to the extent determined by the Committee in its sole discretion. The
Shares issued pursuant to Awards granted under this Plan may consist, in whole or in
part, of authorized but unissued Stock or treasury Stock not reserved for any other
purpose.
	 
	 	4.2.	 	Issuance of Shares. For purposes of this Section 4, the aggregate
number of Shares available for Awards under this Plan at any time shall not be reduced
by Shares subject to Awards that have been canceled, expired, or forfeited, but shall
be reduced by the portion of Awards settled in cash or withheld in connection with the
exercise or settlement of an Award. Net Share counting shall not be used to determine
the number of Shares available for Awards, nor shall Shares tendered in connection with
the exercise of an Award affect the number of Awards available for issuance under the
Plan.
	 
	 	4.3.	 	Tax Code Limits. No Participant may be awarded in any calendar year
Awards covering an aggregate of more than 250,000 Shares, which limits shall be
calculated and adjusted pursuant to Section 25 only to the extent that such calculation
or adjustment will not affect the status of any Award theretofore issued or that may
thereafter be issued as “performance based compensation” under Section 162(m) of the
Code. The maximum amount payable pursuant to that portion of a Performance Unit granted
under this Plan in any calendar year to any Participant that is intended to satisfy the
requirements for “performance based compensation” under Section 162(m) of the Code
shall be a dollar amount not to exceed $5,000,000.

	5.	 	Participation. Participation in the Plan shall be limited to Employees, prospective
employees, directors or advisors of the Company or an Affiliate selected by the Committee.
Options intending to qualify as Incentive Stock Options may only be granted to Employees of
the Company or any subsidiary within the meaning of the Code. Participation is entirely at the
discretion of the Committee, and is not automatically continued after an initial period of
participation.

	6.	 	Performance Shares and Performance Units. An Award of Performance Shares or
Performance Units, under the Plan shall entitle the Participant to future payments or Shares
or a combination thereof based upon the level of achievement with respect to one or more
pre-established performance criteria (including Qualifying Performance Criteria) established
for a Performance Cycle.

	 	6.1.	 	Amount of Award. The Committee shall establish a maximum amount of a
Participant’s Award, which amount shall be denominated in Shares in the case of
Performance Shares or in dollars in the case of Performance Units.
	 
	 	6.2.	 	Communication of Award. Each Award Agreement evidencing an Award of
Performance Shares or Performance Units shall contain provisions regarding (i) the
target and maximum amount payable to the Participant pursuant to the Award,

6

 

(ii) the performance criteria and level of achievement versus the criteria that
shall determine the amount of such payment, (iii) the Performance Cycle as to which
performance shall be measured for determining the amount of any payment, (iv) the
timing of any payment earned by virtue of performance, (v) restrictions on the
alienation or transfer of the Award prior to actual payment, (vi) forfeiture
provisions and (vii) such further terms and conditions, in each case not
inconsistent with this Plan, as may be determined from time to time by the
Committee.

	 	6.3.	 	Performance Criteria. Performance criteria established by the Committee
shall relate to corporate, group, unit or individual performance, and may be
established in terms of earnings, growth in earnings, ratios of earnings to equity or
assets, or such other measures or standards determined by the Committee; provided,
however, that the performance criteria for any portion of an Award of Performance
Shares or Performance Units that is intended by the Committee to satisfy the
requirements for “performance-based compensation” under Code Section 162(m) shall be a
measure based on one or more Qualifying Performance Criteria selected by the Committee
and specified at the time the Award is granted. Multiple performance targets may be
used and the components of multiple performance targets may be given the same or
different weighting in determining the amount of an Award earned, and may relate to
absolute performance or relative performance measured against other groups, units,
individuals or entities.
	 
	 	6.4.	 	Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the amount paid under an Award of Performance Shares or Performance
Units on account of either financial performance or personal performance evaluations
may be reduced by the Committee on the basis of such further considerations as the
Committee shall determine.
	 
	 	6.5.	 	Payment of Awards. Following the conclusion of each Performance Cycle,
the Committee shall determine the extent to which performance criteria have been
attained, and the satisfaction of any other terms and conditions with respect to an
Award relating to such Performance Cycle. The Committee shall determine what, if any,
payment is due with respect to an Award and whether such payment shall be made in cash,
Stock or a combination thereof. Payment shall be made in a lump sum or installments, as
determined by the Committee at the time the Award is granted, commencing as promptly as
practicable following the end of the applicable Performance Cycle, subject to such
terms and conditions and in such form as may be prescribed by the Committee. Payment in
Stock may be in Restricted Stock or Restricted Stock Units, as determined by the
Committee at the time the Award is granted.
	 
	 	6.6.	 	Termination of Employment. Unless the Committee provides otherwise:

	 	(a)	 	Due to Death or Disability. If a Participant who is an
Employee ceases to be an Employee or if a Participant who is a director ceases
to be a director before the end of a Performance Cycle, in either case by
reason of death or

7

 

	 	 	 	permanent disability, the Performance Cycle for such Participant for the
purpose of determining the amount of Award payable shall end at the end of
the calendar quarter immediately preceding the date on which said
Participant ceased to be an Employee or director, as the case may be. The
amount of an Award payable to a Participant (or the Beneficiary of a
deceased Participant) to whom the preceding sentence is applicable shall be
paid at the end of the Performance Cycle, and shall be that fraction of the
Award computed pursuant to the preceding sentence, the numerator of which is
the number of calendar quarters during the Performance Cycle during all of
which said Participant was an Employee or director and the denominator of
which is the number of full calendar quarters in the Performance Cycle.
	 
	 	(b)	 	Due to Reasons Other Than Death or Disability. Upon any
other termination of employment as an Employee or director of a Participant
during a Performance Cycle, participation in the Plan shall cease and all
outstanding Awards of Performance Shares or Performance Units to such
Participant shall be cancelled.

	7.	 	Restricted Stock Awards. An Award of Restricted Stock under the Plan shall consist of
Shares the grant, issuance, retention, vesting and/or transferability of which are subject,
during specified periods of time, to such conditions and terms as the Committee deems
appropriate. Restricted Stock granted pursuant to the Plan need not be identical, but each
grant of Restricted Stock must contain and be subject to the terms and conditions set forth
below.

	 	7.1.	 	Award Agreement. Each Award of Restricted Stock shall be evidenced by
an Award Agreement. Each Award Agreement shall contain provisions regarding (i) the
number of Shares subject to the Award or a formula for determining such number, (ii)
the purchase price of the Shares, if any, and the means of payment, (iii) such terms
and conditions on the grant, issuance, vesting and/or forfeiture of the Restricted
Stock as may be determined from time to time by the Committee, (iv) restrictions on the
transferability of the Award and (v) such further terms and conditions, in each case
not inconsistent with this Plan, as may be determined from time to time by the
Committee. Shares issued under an Award of Restricted Stock may be issued in the name
of the Participant and held by the Participant or held by the Company, in each case as
the Committee may provide.
	 
	 	7.2.	 	Vesting and Lapse of Restrictions. The grant, issuance, retention,
vesting and/or settlement of Shares of Restricted Stock shall occur at such time and in
such installments as determined by the Committee or under criteria established by the
Committee. The Committee shall have the right to make the timing of the grant and/or
the issuance, ability to retain, vesting and/or settlement of Shares of Restricted
Stock subject to continued employment, passage of time and/or such performance criteria
as deemed appropriate by the Committee.

8

 

	 	7.3.	 	Rights as a Stockholder. Unless otherwise determined by the Committee,
a Participant shall have all voting, dividend, liquidation and other rights with
respect to Restricted Stock held by such Participant as if the Participant held
unrestricted Stock; provided that the unvested portion of any award of Restricted Stock
shall be subject to any restrictions on transferability or risks of forfeiture imposed
pursuant to Sections 7.1, 7.2 and 7.4. Unless the Committee otherwise determines or
unless the terms of the applicable Award Agreement or grant provides otherwise, any
non-cash dividends or distributions paid with respect to shares of unvested Restricted
Stock shall be subject to the same restrictions and vesting schedule as the Shares to
which such dividends or distributions relate.
	 
	 	7.4.	 	Termination of Employment. Unless the Committee provides otherwise:

	 	(a)	 	Due to Death or Disability. If a Participant who is an
Employee ceases to be an Employee or if a Participant who is a director ceases
to be a director prior to the lapse of restrictions on Shares of Restricted
Stock, in either case by reason of death or permanent disability, all
restrictions on Shares of Restricted Stock held for the Participant’s benefit
shall immediately lapse.
	 
	 	(b)	 	Due to Reasons Other Than Death or Disability. Upon any
other termination of employment as an Employee or director prior to the lapse
of restrictions, participation in the Plan shall cease and all Shares of
Restricted Stock held for the benefit of a Participant shall be forfeited by
the Participant.

	 	7.5.	 	Certificates. The Committee may require that certificates representing
Shares of Restricted Stock be retained and held in escrow by a designated employee or
agent of the Company or any Affiliate until any restrictions applicable to Shares of
Restricted Stock so retained have been satisfied or lapsed. Each certificate issued in
respect to an Award of Restricted Stock may, at the election of the Committee, bear the
following legend:
	 
	 	 	 	“This certificate and the shares of stock represented hereby are subject to the
terms and conditions (including forfeiture provisions and restrictions against
transfer) contained in the 2006 Equity Incentive Plan and the Restricted Stock
Award. Release from such terms and conditions shall obtain only in accordance with
the provisions of the Plan and the Award, a copy of each of which is on file in the
office of the Secretary of G & K Services, Inc.”

	8.	 	Stock Awards.

	 	8.1.	 	Grant. A Participant may be granted one or more Stock Awards under the
Plan. Stock Awards shall be subject to such terms and conditions, consistent with the
other provisions of the Plan, as may be determined by the Committee.
	 
	 	8.2.	 	Rights as a Stockholder. A Participant shall have all voting, dividend,
liquidation and other rights with respect to Shares issued to the Participant as a
Stock Award

9

 

	 	 	 	under this Section 8 upon the Participant becoming the holder of record of the
Shares granted pursuant to such Stock Award; provided that the Committee may impose
such restrictions on the assignment or transfer of Shares awarded pursuant to a
Stock Award as it considers appropriate.

	9.	 	Restricted Stock Units. Restricted Stock Units are Awards denominated in units under
which the issuance of Shares is subject to such conditions and terms as the Committee deems
appropriate. Restricted Stock Units granted pursuant to the Plan need not be identical, but
each grant of Restricted Stock Units must contain and be subject to the terms and conditions
set forth below. Restricted Stock Units may be granted without vesting or forfeiture
restrictions. Such Restricted Stock Units may also be called “Deferred Stock Units,” in the
discretion of the Committee.

	 	9.1.	 	Award Agreement. Each Award of Restricted Stock Units shall be
evidenced by an Award Agreement. Each Award Agreement shall contain provisions
regarding (i) the number of Restricted Stock Units subject to such Award or a formula
for determining such number, (ii) the purchase price of the Shares subject to the
Award, if any, and the means of payment, (iii) such terms and conditions on the grant,
issuance, vesting and/or forfeiture of the Restricted Stock Units as may be determined
from time to time by the Committee, (iv) restrictions on the transferability of the
Award, and (v) such further terms and conditions in each case not inconsistent with
this Plan as may be determined from time to time by the Committee.
	 
	 	9.2.	 	Vesting and Lapse of Restrictions. The grant, issuance, retention,
vesting and/or settlement of Restricted Stock Units shall occur at such time and in
such installments as determined by the Committee or under criteria established by the
Committee. The Committee shall have the right to make the timing of the grant and/or
the issuance, ability to retain, vesting and/or settlement of Restricted Stock Units
subject to continued employment, passage of time and/or such performance criteria as
deemed appropriate by the Committee.
	 
	 	9.3.	 	Rights as a Stockholder. Participants shall have no voting rights with
respect to Shares underlying Restricted Stock Units unless and until such Shares are
reflected as issued and outstanding shares on the Company’s stock ledger. Shares
underlying Restricted Stock Units shall be entitled to dividends or dividend
equivalents only to the extent provided by the Committee. If an Award of Restricted
Stock Units includes dividend equivalents, an amount equal to the dividends that would
have been paid if the Restricted Stock Units had been issued and outstanding Shares as
of the record date for the dividends shall be paid to the Participant in cash subject
to applicable withholding taxes in accordance with the terms of the Award as determined
by the Committee, consistent with Section 409A of the Code.

10

 

	 	9.4.	 	Termination of Employment. Unless the Committee provides otherwise:

	 	(a)	 	Due to Death or Disability. If a Participant who is an
Employee ceases to be an Employee or if a Participant who is a director ceases
to be a director, in either case by reason of the Participant’s death or
permanent disability, all restrictions on the Restricted Stock Units of the
Participant shall lapse in accordance with the terms of the Award as determined
by the Committee.
	 
	 	(b)	 	Due to Reasons Other Than Death or Disability. For
Awards designated Restricted Stock Units by the Committee, if a Participant
ceases employment as an Employee or director for any reason other than death or
permanent disability, all Restricted Stock Units of the Participant and all
rights to receive dividend equivalents thereon shall immediately terminate
without notice of any kind and shall be forfeited by the Participant. The
forgoing sentence shall not apply to an Award designated as a Deferred Stock
Unit by the Committee unless the Committee provides to the contrary in the
Award.

	10.	 	Options. The Committee may grant an Option or provide for the grant of an Option,
either from time-to-time in the discretion of the Committee or automatically upon the
occurrence of specified events, including, without limitation, the achievement of performance
goals (which may include Qualifying Performance Criteria). Except to the extent provided
herein, no Participant (or Beneficiary of a deceased Participant) shall have any rights as a
stockholder with respect to any Shares subject to an Option granted hereunder until said
Shares have been issued. Options granted pursuant to the Plan need not be identical, but each
Option must contain and be subject to the terms and conditions set forth below.

	 	10.1.	 	Type of Option; Number of Shares. Each Option shall be evidenced by an
Award Agreement identifying the Option represented thereby as an Incentive Stock Option
or Non-Qualified Stock Option, as the case may be, and the number of Shares to which
the Option applies.
	 
	 	10.2.	 	Exercise Price. The exercise price under each Option shall be
established by the Committee and shall not be less than the Fair Market Value of the
Shares subject to the Option on the date of grant; provided, however, that the exercise
price per Share with respect to an Option that is granted in connection with a merger
or other acquisition as a substitute or replacement award for options held by optionees
of the acquired entity may be less than 100% of the Fair Market Value on the date such
Option is granted.
	 
	 	10.3.	 	Exercisability. The Committee shall have the right to make the timing
of the ability to exercise any Option subject to continued employment, the passage of
time and/or such performance requirements as deemed appropriate by the Committee.

11

 

	 	10.4.	 	Exercise Term. Each Option shall have a Term established by the
Committee, provided that no Incentive Stock Option shall be exercisable after ten years
from the date of grant.
	 
	 	10.5.	 	Payment for Shares. The exercise price of the Shares with respect to
which an Option is exercised shall be payable at the time of exercise in accordance
with procedures established by the Company. The exercise price of any Option may be
paid in cash or, to the extent allowed by the Committee, an irrevocable commitment by a
broker to pay over such amount from a sale of the Shares issuable under an Option, the
delivery (either physically or by attestation) of previously-owned Shares, or a
combination thereof.
	 
	 	10.6.	 	No Repricing. Other than in connection with a change in the Company’s
capitalization (as described in Section 25), an Option may not be re-priced without
stockholder approval (including canceling previously awarded Options and re-granting
them with a lower exercise price).
	 
	 	10.7.	 	No Reload Grants. Stock Options shall not be granted under the Plan in
consideration for and shall not be conditioned upon the delivery of Shares to the
Company in payment of the exercise price and/or tax withholding obligation under any
other employee stock option or stock appreciation right.
	 
	 	10.8.	 	Incentive Stock Options. In the case of an Incentive Stock Option,
each Option shall be subject to any terms, conditions and provisions as the Committee
determines necessary or desirable in order to qualify the Option as an Incentive Stock
Option. Notwithstanding anything to the contrary in this Section 10, in the case of an
Incentive Stock Option (a) if the Participant owns stock possessing more than 10
percent of the combined voting power of all classes of stock of the Company (a “10%
Stockholder”), the exercise price of such Option must be at least 110 percent of the
Fair Market Value of the Common Stock on the date of grant, and the Option must expire
within a period of not more than five years from the date of grant, and (b) termination
of employment will be deemed to occur when the person to whom an Award was granted
ceases to be an employee (as determined in accordance with Section 3401(c) of the Code
and the regulations promulgated thereunder) of the Company and its subsidiaries.
Notwithstanding anything in this Section 10 to the contrary, Options designated as
Incentive Stock Options shall not be eligible for treatment under the Code as Incentive
Stock Options (and shall be deemed Non-Qualified Stock Options) to the extent that
either (i) the aggregate Fair Market Value of Shares (determined as of the time of
grant) with respect to which such Options are exercisable for the first time by the

12

 

	 	 	 	Participant during any calendar year (under all plans of the Company and any
Affiliate) exceeds $100,000, taking Options into account in the order in which they
were granted, and (ii) such Options otherwise remain exercisable but are not
exercised within three months of termination of employment (or such other period of
time provided in Section 422 of the Code).
	 
	 	10.9.	 	Termination of Employment.

	 	(a)	 	Due to Death or Disability. If a Participant who is an
Employee ceases to be an Employee or if a Participant who is a director ceases
to be a director in either case by reason of death or permanent disability,
each outstanding Option shall become exercisable to the extent and for such
period or periods determined by the Committee but not beyond the expiration
date of said Option. If a Participant dies before exercising all outstanding
Options, the outstanding Options shall be exercisable by the Participant’s
Beneficiary.
	 
	 	(b)	 	Other Than Death or Disability. Unless the Committee
provides otherwise, upon any other termination of employment as an Employee or
director, all rights of the Participant under this Plan shall immediately
terminate without notice of any kind.

	11.	 	Stock Appreciation Rights.

	 	11.1.	 	General. An Award of a Stock Appreciation Right shall entitle the
Participant, subject to terms and conditions determined by the Committee to receive
upon exercise of the right an amount equal to or otherwise based on the excess of (a)
the Fair Market Value of a Share at the time of exercise over (b) the exercise price of
the right, as established by the Committee on the date the Award is granted. Stock
Appreciation Rights may be granted to Participants from time to time either in tandem
with, or as a component of, an Option granted under Section 10, other Awards granted
under the Plan or stock options granted under any other Company equity compensation
plan (“tandem SARs”) or without reference to other Awards or stock options
(“freestanding SARs”). Any Stock Appreciation Right granted in tandem with an Option
may be granted at the same time such Option is granted or at any time thereafter before
exercise or expiration of such Option. The Committee may provide that the exercise of a
tandem SAR will be in lieu of the exercise of the stock option or Award in connection
with which the tandem SAR was granted. A tandem SAR may not be exercised at any time
when the per Share Fair Market Value of the Shares to which it relates does not exceed
the exercise price of the Option associated with the tandem SAR. The provisions of
Stock Appreciation Rights need not be the same with respect to each grant or each
recipient. All freestanding SARs shall be granted subject to the same terms and
conditions applicable to Options as set forth in Section 10, and all tandem SARs shall
have the same vesting, exercisability, forfeiture and termination provisions as such
Award or stock option to which they relate. Subject to the foregoing sentence and the
terms of the Plan, the Committee may impose such other

13

 

	 	 	 	conditions or restrictions on any Stock Appreciation Right as it shall deem
appropriate.
	 
	 	11.2.	 	Exercise Price. The per Share price for exercise of Stock Appreciation
Rights shall be determined by the Committee, but shall be a price that is equal to or
greater than 100% of the Fair Market Value of the Shares subject to the Award on the
date of grant; provided, however, that the per Share exercise price with respect to a
Stock Appreciation Right that is granted in connection with a merger or other
acquisition as a substitute or replacement award for stock appreciation rights held by
awardees of the acquired entity may be less than 100% of the Fair Market Value on the
date such Award is granted.
	 
	 	11.3.	 	No Repricing. Other than in connection with a change in the Company’s
capitalization (as described in Section 25), a Stock Appreciation Right may not be
re-priced without stockholder approval (including canceling previously awarded Stock
Appreciation Rights and re-granting them with a lower exercise price).

However, the Committee may, at any time or from time
to time authorize the Company, in the case of a Stock
Appreciation Rights exchange without shareholder approval,
and with the consent of the respective Participants, to issue
new Awards in exchange for the surrender and cancellation of any,
or all, outstanding Awards. The Committee may at any time buy from
a Participant a Stock Appreciation Right previously granted with payment
in cash, Shares or other consideration, based on such terms and
conditions as the Committee and the Participant shall agree.

	 
	 	11.4.	 	No Reload Grants. Stock Appreciation Rights shall not be granted under
the Plan in consideration for and shall not be conditioned upon the delivery of Shares
to the Company in payment of the exercise price and/or tax withholding obligation under
any other employee stock option or stock appreciation right.
	 
	 	11.5.	 	Termination of Employment.

	 	(a)	 	Due to Death or Disability.

	 	(i)	 	If a Participant who is an Employee ceases to
be an Employee or if a Participant who is a director ceases to be a
director, in either case by reason of death or permanent disability,
each outstanding freestanding SAR shall become exercisable to the
extent and for such period or periods determined by the Committee but
not beyond the expiration date of said Stock Appreciation Right.
	 
	 	(ii)	 	If a Participant who is an Employee ceases to
be an Employee or if a Participant who is a director ceases to be a
director, in either case by reason of death or permanent disability,
each outstanding tandem SAR shall become exercisable to the extent and
for such period or periods determined by the Committee but not beyond
the expiration date of said Stock Appreciation Right. If a Participant

14

 

	 	 	 	dies before exercising all tandem SARs, the outstanding tandem SARs
shall be exercisable by the Participant’s Beneficiary.

	 	(b)	 	Other Than Death or Disability. Unless the Committee
provides otherwise, upon any other termination of employment as an Employee or
director, all rights of the Participant under this Plan shall immediately
terminate without notice of any kind.

	 	11.6	 	Payment. Upon exercise of a Stock Appreciation Right, payment shall be
made in the form of cash, Shares or a combination thereof as determined by the
Committee at the time the Award is granted. However, notwithstanding any other
provisions of this Plan, in no event may the payment (whether in cash or Stock) upon
exercise of a Stock Appreciation Right exceed an amount equal to 100% of the Fair
Market Value of the Shares subject to the Stock Appreciation Right at the time of
grant.

	12.	 	Other Stock-Based Awards. The Committee, in its sole discretion, may grant or sell
Awards of Shares and Awards that are valued in whole or in part by reference to, or are
otherwise based on the Fair Market Value of, Shares. Such Other Stock-Based Awards shall be in
such form, and dependent on such conditions, as the Committee shall determine, including,
without limitation, the right to receive, or vest with respect to, one or more Shares (or the
equivalent cash value of such Shares) upon the completion of a specified period of service,
the occurrence of an event and/or the attainment of performance objectives. Other Stock-Based
Awards may be granted alone or in addition to any other Awards granted under the Plan. Subject
to the provisions of the Plan, the Committee shall determine the number of Shares to be
awarded to a Participant under (or otherwise related to) such Other Stock-Based Awards;
whether such Other Stock-Based Awards shall be settled in cash, Shares or a combination of
cash and Shares; and all other terms and conditions of such Awards (including, without
limitation, the vesting provisions thereof and provisions ensuring that all Shares so awarded
and issued shall be fully paid and non-assessable).

	13.	 	Nontransferability of Rights. Unless the Committee provides otherwise, (i) no rights
under any Award will be assignable or transferable and no Participant or Beneficiary will have
any power to anticipate, alienate, dispose of, pledge or encumber any rights under any Award,
and (ii) the rights and the benefits of any Award may be exercised and received during the
lifetime of the Participant only by the Participant or by the Participant’s legal
representative. The Participant may, by completing and signing a written beneficiary
designation form which is delivered to and accepted by the Company, designate a beneficiary to
receive any payment and/or exercise any rights with respect to outstanding Awards upon the
Participant’s death. If at the time of the Participant’s death there is not on file a fully
effective beneficiary designation form, or if the designated beneficiary did not survive the
Participant, the person or persons surviving at the time of the Participant’s death in the
first of the following classes of beneficiaries in which there is a survivor, shall have the
right to receive any payment and/or exercise any rights with respect to outstanding Awards:

15

 

	 	(a)	 	Participant’s surviving spouse;
	 
	 	(b)	 	Equally to the Participant’s children, except that if any of the Participant’s
children predecease the Participant but leave descendants surviving, such descendants
shall take by right of representation the share their parent would have taken if
living;
	 
	 	(c)	 	Participant’s surviving parents equally;
	 
	 	(d)	 	Participant’s surviving brothers and sisters equally; or
	 
	 	(e)	 	The legal representative of the Participant’s estate.

	 	 	If a person in the class surviving dies before receiving any payment and/or exercising any
rights with respect to outstanding Awards (or the person’s share of any payment and/or
rights in case of more than one person in the class), that person’s right to receive any
payment and/or exercise any rights with respect to outstanding Awards will lapse and the
determination of who will be entitled to receive any payment and/or exercise any rights with
respect to outstanding Awards will be determined as if that person predeceased the
Participant.
	 
	14.	 	Termination of Employment.

	 	14.1.	 	Transfers of employment between the Company and an Affiliate, or between
Affiliates, will not constitute termination of employment for purposes of any Award.
	 
	 	14.2.	 	Subject to compliance with applicable law, the Committee may specify whether
any authorized leave of absence or absence for military or government service or for
any other reasons will constitute a termination of employment for purposes of the Award
and the Plan.

	15.	 	Change in Control. In the event of a Change in Control after the Effective Date, the
Committee may (subject to Section 25), but shall not be obligated to, (a) accelerate, vest or
cause the restrictions to lapse with respect to, all or any portion of an Award, (b) cancel
Awards for fair value (as determined in the sole discretion of the Committee) which, in the
case of Options and Stock Appreciation Rights, may equal the excess, if any, of the value of
the consideration to be paid in the Change in Control transaction to holders of the same
number of Shares subject to such Options or Stock Appreciation Rights (or, if no consideration
is paid in any such transaction, the Fair Market Value of the Shares subject to such Options
or Stock Appreciation Rights) over the aggregate exercise price of such Options or Stock
Appreciation Rights, and which for Performance Shares and Performance Units may be determined
as if the Performance Cycle ended as of the close of the calendar quarter preceding the
consummation of the Corporate Transition, with a pro rata portion of the Award payable based
upon the number of completed calendar quarters in the Performance Cycle, (c) provide for the
issuance of substitute Awards that will substantially preserve the otherwise applicable terms
of any affected Awards previously granted hereunder as determined by the Committee in its sole
discretion, or (d) provide that for a period of at least 30 days prior to the Change in

16

 

	 	 	Control, Options or Awards shall be exercisable as to all Shares subject thereto and that
upon the occurrence of the Change in Control, such Option or Awards shall terminate and be
of no further force and effect.
	 
	16.	 	Qualifying Performance-Based Compensation.

	 	16.1.	 	General. The Committee may specify that all or a portion of any Award
is intended to satisfy the requirements for “performance-based compensation” under
Section 162(m) of the Code; provided that the performance criteria for any portion of
an Award that is intended by the Committee to satisfy the requirements for
“performance-based compensation” under Section 162(m) of the Code shall be a measure
based on one or more Qualifying Performance Criteria selected by the Committee and
specified at the time such Award is granted. The Committee shall certify the extent to
which any Qualifying Performance Criteria has been satisfied, and the amount payable as
a result thereof, prior to payment, settlement or vesting of any Award that is intended
to satisfy the requirements for “performance-based compensation” under Section 162(m)
of the Code. Notwithstanding satisfaction of any performance goals, the number of
Shares issued or the amount paid under an Award may be reduced by the Committee on the
basis of such further considerations as the Committee shall determine.
	 
	 	16.2.	 	Qualifying Performance Criteria. For purposes of this Plan, the term
“Qualifying Performance Criteria” shall mean any one or more of the following
performance criteria, either individually, alternatively or in any combination, applied
to either the Company as a whole or to a business unit or Affiliate, either
individually, alternatively or in any combination, and measured either annually or
cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years’ results or to a designated comparison group,
in each case as specified and determined by the Committee: (a) cash flow, (b) earnings
per share of the Company, (c) earnings before interest, taxes and amortization, (d)
share price performance, (e) return on capital, (f) return on assets or net assets, (g)
revenue, (h) net earnings or net income, (i) operating income or net operating income,
(j) operating profit or net operating profit, (k) operating margin or profit margin,
(l) return on operating revenue, (m) return on invested capital, (n) market segment
share, (o) brand recognition/acceptance, (p) customer satisfaction, (q) return on
equity or (r) total stockholder return. The Committee may appropriately adjust any
evaluation of performance under a Qualifying Performance Criteria to exclude any of the
following events that occurs during a Performance Cycle: (i) asset write-down, (ii)
litigation or claim judgments or settlements, (iii) the effect of changes in or under
provisions under tax laws, accounting principles or other such laws or provisions
affecting reported results, (iv) accruals for reorganizations or restructuring
programs, and (v) any extraordinary nonrecurring items as described in Accounting
Principles Board Opinion No. 30 and/or in management’s discussion and analysis of
financial condition and results of operations appearing in the Company’s annual report
to stockholders for the applicable year. Any Qualifying Performance Criteria must be
objectively determinable, must be established by the Committee while the outcome for
the

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	 	 	 	Performance Cycle is substantially uncertain and while no more than 90 days, or if
less, 25 percent of the number of days in the Performance Cycle have passed, and
must otherwise meet the requirements of Section 162(m) of the Code.

	17.	 	Effective Date of the Plan. The Plan was adopted by the Board on August 23, 2006,
subject to approval of the shareholders of the Company at the next annual meeting. If this
Plan is not approved by the shareholders in accordance with Minnesota Statute Section
302A.437, at the next annual meeting, this Plan shall be void. The Plan shall remain available
for the grant of Awards until all shares available for grant have been awarded and all Awards
have been settled. Notwithstanding the foregoing, the Plan may be terminated at such earlier
time as the Board may determine. Termination of the Plan will not affect the rights and
obligations of the Participants and the Company arising under Awards theretofore granted and
then in effect.
	 
	18.	 	Right to Terminate Employment. Nothing in the Plan shall confer upon any Participant
the right to continue in the employment of the Company or any Affiliate or affect any right
which the Company or any Affiliate may have to terminate employment of the Participant.
	 
	19.	 	Compliance With Laws; Listing and Registration of Shares. All Awards granted under
the Plan (and all issuances of Stock or other securities under the Plan) shall be subject to
all applicable laws, rules and regulations, and to the requirement that if at any time the
Committee shall determine that the listing, registration or qualification of the Shares
covered thereby upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a condition of,
or in connection with, the grant of such Award or the issue or purchase of Shares thereunder,
such Award may not be exercised in whole or in part, or the restrictions on such Award shall
not lapse, unless and until such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to the Committee.
	 
	20.	 	Conditions and Restrictions Upon Securities Subject to Awards. The Committee may
provide that the Shares issued upon exercise of an Option or Stock Appreciation Right or
otherwise subject to or issued under an Award shall be subject to such further agreements,
restrictions, conditions or limitations as the Committee in its discretion may specify prior
to the exercise of such Option or Stock Appreciation Right or the grant, vesting or settlement
of such Award, including without limitation, conditions on vesting or transferability,
forfeiture or repurchase provisions and method of payment for the Shares issued upon exercise,
vesting or settlement of such Award (including the actual or constructive surrender of Shares
already owned by the Participant) or payment of taxes arising in connection with an Award.
Without limiting the foregoing, such restrictions may address the timing and manner of any
re-sales by the Participant or other subsequent transfers by the Participant of any Shares
issued under an Award, including without limitation (a) restrictions under an insider trading
policy or pursuant to applicable law, (b) restrictions designed to delay and/or coordinate the
timing and manner of sales by Participant and holders of other Company equity compensation
arrangements, and (c) restrictions as to the use of a specified brokerage firm for such
re-sales or other transfers.

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	21.	 	Withholding Taxes. The Company or an Affiliate shall be entitled to: (a) withhold
and deduct from future wages of a Participant (or from other amounts that may be due and owing
to a Participant from the Company or an Affiliate), including all payments under this Plan, or
make other arrangements for the collection of (including through the sale of Shares otherwise
issuable pursuant to the applicable Award), all legally required amounts necessary to satisfy
any and all federal, state, local and foreign withholding and employment-related tax
requirements attributable to an Award, including, without limitation, the grant, exercise or
vesting of, or payment of dividends with respect to, an Award or a disqualifying disposition
of Common Stock received upon exercise of an Incentive Stock Option; or (b) require a
Participant promptly to remit the amount of such withholding to the Company before taking any
action with respect to an Award. To the extent specified by the Committee, withholding may be
satisfied by withholding Stock to be received upon exercise or vesting of an Award or by
delivery to the Company of previously owned Stock. In addition, the Company may reasonably
delay the issuance or delivery of Shares pursuant to an Award as it determines appropriate to
address tax withholding and other administrative matters.
	 
	22.	 	Deferral of Payments. The Committee may, in an Award Agreement or otherwise, provide
for the deferred delivery of Shares upon settlement, vesting or other events with respect to
Restricted Stock or Restricted Stock Units, or in payment or satisfaction of an Award of
Performance Shares or Performance Units. Notwithstanding anything herein to the contrary, in
no event will any deferral of the delivery of Shares or any other payment with respect to any
Award be allowed if the Committee determines, in its sole discretion, that the deferral would
result in the imposition of additional tax under Section 409A(1)(B) of the Code. Shares that
are allocated after the Effective Date in connection with the deferral of an Award under the
Director Deferred Compensation Plan (which includes dividend equivalents that are to be
allocated under that plan after the Effective Date in connection with deferrals under the 1996
Director Stock Option Plan) or Shares that are allocated after the Effective Date under any
other deferred compensation plan allowing for payment in Shares that refers specifically to
this Plan, shall be issued under this Plan. Such issuances shall reduce the number of Shares
available for Awards under this Plan.
	 
	23.	 	No Liability of Company. The Company and any Affiliate which is in existence or
hereafter comes into existence shall not be liable to a Participant, Beneficiary or any other
person as to: (a) the non-issuance or sale of Stock as to which the Company has been unable
to obtain from any regulatory body having jurisdiction over the matter, the authority deemed
by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares
hereunder; (b) any tax consequence to any Participant, Beneficiary or other person due to the
receipt, exercise or settlement of any Award granted hereunder; or (c) any provision of law or
legal restriction that prohibits or restricts the transfer of Shares issued pursuant to any
Award.
	 
	24.	 	Amendment, Modification and Termination of the Plan. The Board or Committee may at
any time terminate, suspend or modify the Plan, except that the Board or Committee will not,
without authorization of the stockholders of the Company, effect any change (other

19

 

	 	 	than through adjustment for changes in capitalization as provided in Section 25) which will:

	 	(a)	 	increase the total amount of Stock which may be awarded under the Plan;
	 
	 	(b)	 	increase the individual maximum limits in Section 4.3;
	 
	 	(c)	 	change the class of persons eligible to participate in the Plan;
	 
	 	(d)	 	reduce the exercise price of outstanding Options or Stock Appreciation Rights;
or
	 
	 	(e)	 	otherwise amend the Plan in any manner requiring stockholder approval by law or
under listing requirements of any exchange or interdealer quotation system on which the
Shares are listed.

	 	 	No termination, suspension, or modification of the Plan will adversely affect any right
acquired by any Participant or any Beneficiary under an Award granted before the date of
termination, suspension, or modification, unless otherwise agreed to by the Participant;
but, it will be conclusively presumed that any adjustment for changes in capitalization
provided for in Section 25 does not adversely affect any right.
	 
	25.	 	Adjustment for Changes in Capitalization.

	 	(a)	 	In the event that the number of Shares shall be increased or decreased through
a reorganization, reclassification, combination of shares, stock split, reverse stock
split, spin-off, dividend (other than regular, quarterly cash dividends), or otherwise,
then each Share that has been authorized for issuance under the Plan, whether such
Share is then currently subject to or may become subject to an Award under the Plan, as
well as the per share limits set forth in Section 4, shall be appropriately adjusted by
the Committee to reflect such increase or decrease, unless the Company provides
otherwise under the terms of such transaction. The terms of any outstanding Award shall
also be adjusted by the Committee as to price, number of Shares subject to such Award
and other terms to reflect the foregoing events.
	 
	 	(b)	 	In the event there shall be any other change in the number or kind of
outstanding Shares, or any stock or other securities into which such Shares shall have
been changed, or for which it shall have been exchanged, whether by reason of a merger,
consolidation or otherwise, then the Committee shall, in its sole discretion, determine
the appropriate adjustment, if any, to be effected. In addition, in the event of such
change described in this paragraph, the Committee may accelerate the time or times at
which any Award may be exercised and may provide for cancellation of such accelerated
Awards that are not exercised within a time prescribed by the Committee in its sole
discretion. Notwithstanding anything to the contrary herein, any adjustment to Options
granted pursuant to this Plan intended to qualify as Incentive Stock Options shall
comply with the requirements, provisions and restrictions of the Code.

20

 

	 	(c)	 	No right to purchase fractional Shares shall result from any adjustment in
Awards pursuant to this Section 25. In case of any such adjustment, the Shares subject
to the Award shall be rounded down to the nearest whole Share. Notice of any adjustment
shall be given by the Company to each Participant, which shall have been so adjusted
and such adjustment (whether or not notice is given) shall be effective and binding for
all purposes of the Plan.

	26.	 	Transferability. Unless the Award Agreement (or an amendment thereto authorized by
the Committee) expressly states that the Award is transferable, no Award granted under this
Plan, nor any interest in such Award, may be sold, assigned, conveyed, gifted, pledged,
hypothecated or otherwise transferred in any manner, other than by will or the laws of descent
and distribution. The Committee may grant an Award or amend an outstanding Award to provide
that the Award is transferable or assignable (a) in the case of a transfer without the payment
of any consideration, to any “family member” as such term is defined in Section A.1(a)(5) of
the General Instructions to Form S-8 under the Securities Act of 1933, as such may be amended
from time to time, and (b) in any transfer described in clause (ii) of Section A.1(a)(5) of
the General Instructions to Form S-8 under the 1933 Act as amended from time to time, provided
that following any such transfer or assignment the Award will remain subject to substantially
the same terms applicable to the Award while held by the Participant to whom it was granted,
as modified as the Committee shall determine appropriate, and as a condition to such transfer
the transferee shall execute an agreement agreeing to be bound by such terms; provided
further, that an Incentive Stock Option may be transferred or assigned only to the extent
consistent with Section 422 of the Code. Any purported assignment, transfer or encumbrance
that does not qualify under this Section 26 shall be void and unenforceable against the
Company.
	 
	27.	 	International Participants. With respect to Participants who reside or work outside
the United States of America and who are not (and who are not expected to be) “covered
employees” within the meaning of Section 162(m) of the Code, the Committee may, in its sole
discretion, amend the terms of the Plan or Awards with respect to such Participants in order
to conform such terms with the requirements of local law or to obtain more favorable tax or
other treatment for a Participant, the Company or an Affiliate.
	 
	28.	 	Other Benefit Plans. All Awards shall constitute a special incentive payment to the
Participant and shall not be taken into account in computing the amount of salary or
compensation of the Participant for the purpose of determining any benefits under any pension,
retirement, profit-sharing, bonus, life insurance or other benefit plan of the Company or
under any agreement between the Company and the Participant, unless such plan or agreement
specifically provides otherwise.
	 
	29.	 	Choice of Law. The Plan shall be governed by and construed in accordance with the
laws of the State of Minnesota without regard to conflicts of laws, and except as otherwise
provided in the pertinent Award agreement, any and all disputes between a Participant and the
Company or any Affiliate relating to an Award shall be brought only in a state or federal
court of competent jurisdiction sitting in Minneapolis, Minnesota.

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	30.	 	Section 409A. Notwithstanding other provisions of the Plan or any Award agreements
thereunder, no Award shall be granted, deferred, accelerated, extended, paid out or modified
under this Plan in a manner that would result in the imposition of an additional tax under
Section 409A of the Code upon a Participant. In the event that it is reasonably determined by
the Committee that, as a result of Section 409A of the Code, payments in respect of any Award
under the Plan may not be made at the time contemplated by the terms of the Plan or the
relevant Award agreement, as the case may be, without causing the Participant holding such
Award to be subject to taxation under Section 409A of the Code, the Company will make such
payment on the first day that would not result in the Participant incurring any tax liability
under Section 409A of the Code.

22

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