Document:

Exhibit 10.3

 

SEPARATION AND RELEASE AGREEMENT

 

This Separation and Release Agreement (“Agreement”),
dated July 21, 2015, by and between Lumber Liquidators Services, LLC (“LL”) and William K. Schlegel (“Employee”),
states as follows:

 

RECITALS:

 

WHEREAS,
Employee has been employed by the Company; 

 

WHEREAS,
Employee’s employment with the Company has concluded; and

 

WHEREAS,
Employee and Company desire to settle any and all matters arising out of Employee’s employment with the Company, and the
cessation of Employee’s employment with the Company, in a mutually satisfactory and confidential manner;

 

NOW, THEREFORE,
in consideration of the promises and of the mutual covenants contained in the herein contained and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties do hereby covenant and agree as follows:

 

AGREEMENT:

 

1.          Termination
of Employment. Employee acknowledges that his employment by LL and/or its affiliated entity(ies) (collectively, the “Company”)
ended on June 19, 2015 (the “Separation Date”).

 

2.          Separation
Pay. In consideration of Employee’s acceptance of this Agreement, and expressly subject to Employee's ongoing compliance
with the Agreement, including but not limited to Sections 4, 6, 8-10 and 13 herein, the Company shall:

 

i.            pay
to Employee fifty-two (52) weeks of pay (the “Separation Pay”) at Employee’s regular base rate of pay of $7,447.77
per week. The Separation Pay shall be paid in fifty-two (52) equal weekly installments pursuant to the Company’s normal payroll
procedures. The first of the Separation Pay installments shall be made on the first regular pay period following the Effective
Date of this Agreement;

 

ii.           if
Employee is enrolled the Company’s health, dental and vision insurance plans as of the Separation Date and elects to continue
health, dental and vision insurance through COBRA continuation coverage, pay on behalf of Employee, for a period of up to fifty-two
(52) weeks, the employer portion of the premium provided, however, that Employee shall be responsible for and pay Employee’s
share of such premiums;

 

iii.         pay
to Employee a lump sum payment on or before the first regular pay period following the Effective Date of this Agreement in an amount
equal to the sum to which Employee is entitled for unused paid time off, if any, that Employee accrued in 2015 pursuant to the
Company’s policies prior to the Separation Date; and

 

    	 

    	 

    

 

iv.         Employee
agrees that, in the event that (a) Employee is convicted of, or pleads “guilty” or “no contest” to, a felony
under the laws of the United States or any state thereof, or any crime of moral turpitude, in each case connected with, or in any
way related to, his employment with the Company, (b) LL’s Board of Directors determines in good faith that Employee has engaged
in willful dishonesty, fraud or gross negligence with respect to the business or affairs of the Company or Employee is otherwise
found ineligible for indemnification pursuant to Article IX of LL’s Bylaws , (c) the Company issues a restatement because
of Employee’s material noncompliance, due to misconduct, with financial reporting requirements under federal securities laws,
or (d) Employee breaches this Agreement, expressly including but not limited to Sections 4, 6, 8-10 and 13 herein; then,
in each such instance, in addition to compensation for any damages incurred by the Company, and/or any injunctive relief provided
for herein or otherwise, Employee shall be liable for the repayment of all amounts paid to Employee pursuant to this Section 2,
and he agrees to repay all such amounts in full. Employee shall have no duty to mitigate damages with respect to the termination
of his employment under this Agreement by seeking other employment and no amounts received from such other employment shall offset
the amounts due hereunder.

 

v.           Employee
agrees that the Company will deduct from the payments under this Section 2 all withholding taxes and other payroll deductions that
the Company is required by law to make from wage payments to employees.

 

3.          
Consideration/Complete Payment. Employee hereby agrees and acknowledges that the benefits set forth in Section 2 of this Agreement
are more than Company is required to do under its normal policies and procedures and that they are in addition to anything of value
to which Employee already is entitled. Employee further agrees that the payments and performances described in this Agreement are
all that Employee shall be entitled to receive from the Company except for vested qualified retirement benefits, if any, to which
Employee may be entitled under the Company's ERISA plans. The equity granted to Employee by the Company, if any, pursuant to the
Lumber Liquidators Holdings, Inc. Equity Compensation Plan (or its predecessor plan) shall vest, if at all, and otherwise continue
to be governed according to the terms of that plan and the applicable grant agreements, if any, until the Separation Date; provided,
however, that Employee acknowledges that the Separation Date was his final date of employment, and that any non-qualified stock
options or shares of common stock, if any, whether provided for under the Lumber Liquidators Holdings, Inc. Equity Compensation
Plan or otherwise, which did not vest as of the Separation Date are forever forfeited. Except as expressly provided herein or required
by law, the Company shall not be required to make any payments of any kind to Employee upon termination or expiration the Agreement.
Employee further agrees and acknowledges that he shall have no right or claim to any bonus payment from the Company including,
but not limited to, any bonus under the Lumber Liquidators Holdings, Inc. Annual Bonus Plan for Executive Management. Notwithstanding
the termination, expiration or nonrenewal of this Agreement, the parties shall be required to carry out any provisions of this
Agreement which contemplate performance by them after such termination, expiration or nonrenewal, expressly including Sections
4, 6, 8-10 and 13.

 

    	2

    	 

    

 

4.          Return
of Company Property. Employee will promptly deliver to the Company all Company property, including but not limited to, all
computers, phones, correspondence, manuals, letters, notes, notebooks, reports, flow charts, programs, proposals, third party equipment
that Company is authorized to represent, and any documents concerning the Company’s customers, operations, products or processes
(actual or prospective) or concerning any other aspect of the Company’s business (actual or prospective) and, without limiting
the foregoing, will promptly deliver to the Company any and all other documents or materials containing or constituting Confidential
Information as defined in Section 8, except that

Employee may retain personal papers relating to his employment,
compensation and benefits.

 

5.          Complete
Release. Employee hereby knowingly and voluntarily releases and forever discharges the Company, any related companies, and
the former and current employees, officers, agents, directors, shareholders, investors, attorneys, affiliates, successors and assigns
of any of them (the “Released Parties”) from all liabilities, claims, demands, rights of action or causes of action
Employee had, has or may have against any of the Released Parties, including but not limited to, any claims or demands based upon
or relating to Employee’s employment with the Company or the termination of that employment. This includes, but is not limited
to, a release of any rights or claims Employee may have under the Age Discrimination in Employment Act of 1967, Title VII of the
Civil Rights Act of 1964, the Equal Pay Act, the Americans with Disabilities Act, the Family and Medical Leave Act, or any other
federal, state or local laws or regulations prohibiting employment discrimination or retaliation. This also includes, but is not
limited to, a release by Employee of any claims for wrongful discharge, breach of contract, or any other statutory, common law,
tort, contract, or negligence claim that Employee had, has or may have against any of the Released Parties. This release covers
both claims that Employee knows about and those claims Employee may not know about. Employee further acknowledges that Employee
has received compensation for all hours worked in accordance with applicable state and federal laws.

 

This release does not include, however, (i) a release of Employee’s
right, if any, to payment of vested qualified retirement benefits under the Company’s ERISA plans; (ii) Employee’s
right, if any, to benefits under the Company’s health, dental and vision insurance plans that arose or vested on or before
the Separation Date; (iii) the right, if any, to continuation in the Company’s medical plans as provided by COBRA;
(iv) Employee’s eligibility, if any, for indemnification and/or advancement of expenses in accordance with any applicable
Company Bylaws; (v) Employee’s rights, if any, to coverage under directors’ and officers’ liability insurance
policy or policies of the Company and its subsidiaries and affiliates; (vi) Employee’s rights, if any, under the Equity Documents
consistent with Section 3 herein; (vii) Employee’s rights, if any, as a stockholder of the Company consistent with Section
3 herein or (viii) Employee’s rights under this Agreement. Nothing in this Section 5, nor any other provision of this Agreement,
waives or affects Employee’s right to file a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”)
or to provide information to, or participate as a witness in, an investigation undertaken or a proceeding initiated by the EEOC.
However, Employee waives Employee’s right to monetary or other recovery, including attorney’s fees, should Employee
or any federal, state or local administrative agency pursue any claims on Employee’s behalf arising out of Employee’s
employment or the conclusion of his employment with the Company.

 

    	3

    	 

    

 

Notwithstanding the foregoing, the parties agree that nothing
in this Agreement shall be construed to prohibit the exercise of any rights by either party that such party may not waive as a
matter of law.

 

6.          No
Future Lawsuits. To the fullest extent allowed by law, Employee promises never to file a lawsuit asserting any claims that
are released in Section 5. In the event Employee breaches this Section 6, Employee shall pay to the Company all of its expenses
incurred as a result of such breach, including but not limited to, reasonable attorney’s fees and expenses. Notwithstanding
the foregoing, this Agreement does not waive or release any rights or claims that Employee may have under the Age Discrimination
in Employment Act which may arise after the date that Employee signs this Agreement. Further notwithstanding the foregoing, the
parties acknowledge and agree that this Agreement and this Section 6 shall not be construed to prohibit the exercise of any rights
by Employee that Employee may not waive or forego as a matter of law.

 

7.          Disclaimer
of Liability. This Agreement and the payments and performances hereunder are made solely to assist Employee in making the transition
from employment with Company, and are not and shall not be construed to be an admission of liability, an admission of the truth
of any fact, or a declaration against interest on the part of Company.

 

8.          Confidentiality.
Employee shall not disclose or use at any time for a period of five (5) years after the Separation Date, or as otherwise protected
by applicable law including the Virginia Uniform Trade Secrets Act, whichever is longer, any Confidential Information (as defined
below) of which Employee is aware, whether or not such information was developed by him, except to the extent that such disclosure
or use is directly related to and required by this Agreement or is required to be disclosed by law, court order, or similar compulsion;
provided, however, that such disclosure shall be limited to the extent so required or compelled; and provided, further, that Employee
shall give the Company notice of such disclosure and cooperate with the Company in seeking suitable protection. Employee shall
take reasonable and appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage,
loss and theft. Employee acknowledges and agrees that all Confidential Information, which Employee had access to, received or generated
in the course of providing, directly or indirectly, services to the Company, is the sole property of the Company. Employee shall
deliver to the Company all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data
(and copies thereof regardless of the form thereof, including electronic and tangible copies) containing Confidential Information
(as defined below) of the Company which Employee possesses or has under his control. Notwithstanding anything herein to the contrary,
Employee may retain personal papers relating to his employment, compensation and benefits.

 

    	4

    	 

    

 

As used in this Agreement, the term “Confidential Information”
means any data or information related to the Company’s business operations and is not generally known by the public, and
that was made known to Employee or acquired by Employee in the course of his employment with the Company or directly or indirectly
providing services to the Company, including business and trade secrets and the following: (i) reports, pricing, sales manuals
and training manuals, selling, purchasing, and pricing procedures, and financing methods of the Company, together with any proprietary
techniques utilized by the Company in designing, developing, testing or marketing its products, product mix and supplier information
or in performing services for clients, customers and accounts of the Company; (ii) the business plans and financial statements,
reports and projections of the Company; (iii) research or development projects or results; (iv) identities and addresses of consultants,
customers or clients and prospective clients, or any other Confidential Information relating to or dealing with the business operations
or activities of the Company; (v) trade secrets and other intellectual property of the Company; and (vi) existing or contemplated
software, products, databases, services, technology, designs, processes and research or product developments of the Company. Notwithstanding
the foregoing or any other provision herein, Confidential Information shall not include any information that (A) is generally known
to the public at the time of disclosure or becomes generally known through no wrongful act on the part of Employee, (B) becomes
known to Employee through disclosure by independent third-party sources having a legal right to disclose such information, or (C) is
independently developed by Employee without reference to Confidential Information.

 

Nothing in this Section 8, or in Section 13, or in any other
provision of this Agreement, prohibits Employee or the Company from reporting possible violations of federal law or regulation
to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission,
the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions
of federal or state law or regulation. Employee does not need the prior authorization of the Company to make any such reports or
disclosures and Employee is not required to notify the Company that he has made such reports or disclosures.

 

9.          Restrictive
Covenants.

 

A.         Definitions.

 

		   i.	“Business” means the sale and provision of
hardwood, engineered, bamboo, cork, laminate, resilient or tile flooring and related products and services.

 

		  ii.	“Competing Business” means Home Depot, Lowe’s,
Floor & Décor, The Tile Shop, Menards and/or any Person that earns more than 50% of its gross revenues from, individually
or in combination, the sale or installation of hardwood, engineered, bamboo, cork, laminate, resilient or tile flooring or related
flooring products and services.

 

		iii.	“Competing Position” means a position held
by Employee with a Competing Business that involves duties within the Restricted Territory that are the same as or substantially
similar to the duties Employee performed for the Company within the twelve (12) months prior to the Separation Date.

 

    	5

    	 

    

 

		 iv.	“Customer” means any Person to whom or which
Employee has provided, or is providing, any products or services related to the Business during the twelve (12)-month period preceding
the Separation Date.

 

		  v.	“Material Contact” means: (a) for purposes
of the Customer non-solicitation provision below, contact between Employee and any Customer within twelve (12) months prior to
the Separation Date; provided, however, that: (i) Employee communicated directly with such Customer on behalf of the Company during
that twelve (12) month period; or (ii) Employee obtained confidential information about such Customer in the ordinary course of
business as a result of Employee’s association with the Company; and (b) for purposes of the employee, Contractor and Vendor
non-recruit and non-solicitation provisions below, contact in person, by telephone, or by paper or electronic correspondence,
in furtherance of the Business, within the twelve (12) month period preceding the Separation Date.

 

		 vi.	“Person” means a governmental body or any
individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other
entity.

 

		vii.	“Restricted Period” means the twelve (12)
months following the Separation Date. Nothing herein is intended to relieve Employee of Employee’s fiduciary duties under
applicable law.

 

		viii.	“Restricted Territory” means the continental
United States and Ontario, Canada.

 

		 ix.	“Vendor” or “Contractor” means
any Person who or which has provided products or services to the Company in exchange for compensation of over $10,000 within twelve
(12) months prior to the Separation Date.

 

B.           Non-Competition.
Employee acknowledges that, in the course of his employment with the Company, he has become familiar
with the Company’s trade secrets and other Confidential Information and that his services have been of special, unique and
extraordinary value to the Company. Therefore, Employee agrees that he shall not, during the Restricted Period, directly
or indirectly work in a Competing Position or supervise, manage or control a Competing Business, where Employee’s primary
duty is to provide the same or substantially similar products or services as the Company within the Restricted Territory. For the
avoidance of doubt, nothing herein shall prohibit Employee from being a passive owner of not more than three percent (3%) of the
outstanding stock of any Competing Business which is publicly traded, so long as Employee has no active participation in the business
of such company.

 

    	6

    	 

    

 

C.           Non-Piracy
of Employees. During the Restricted Period, Employee shall not directly or indirectly through another Person, whether on Employee’s
own behalf or on behalf of another Person: (i) induce or attempt to induce any employee of the Company with whom Employee had Material
Contact to terminate or lessen such employment with the Company for the purpose of performing services or selling products for
a Competing Business; or (ii) hire or cause to be hired by a Competing Business any person who was employed by the Company within
the twelve (12) month period preceding the Separation Date.

 

D.           Non-Solicitation
of Customers. During the Restricted Period, Employee shall not directly or indirectly through another Person, whether on Employee’s
own behalf or on behalf of another Person: (i) induce or attempt to induce any Customer with whom Employee had Material Contact
for the purpose of selling to the Customer any products or services for a Competing Business; or (ii) sell or offer to sell products
or services on behalf of a Competing Business to any Customer of the Company with whom Employee had Material Contact.

 

E.           Non-Interference
With Contracts. During the Restricted Period, Employee shall not directly or indirectly through another Person, whether on
Employee’s own behalf or on behalf of another Person, induce or attempt to induce any Contractor to or Vendor of the Company
with whom Employee had Material Contact to terminate, diminish or lessen their relationship with the Company.

 

F.           Employee
understands that the foregoing restrictions will not limit his ability to earn a livelihood and that he has received
and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder
to clearly justify such restrictions (given his education, skills and ability). Employee further understands that
(i) the Company would not have consummated this Agreement but for the covenants contained in this Section 9 and (ii) the provisions
of Sections 8 and 9 are reasonable and necessary to preserve the business of the Company.

 

G.           Employee
shall inform any prospective employer that engages in any business similar to the Business of any and all restrictions contained
in this Section 9 of the Agreement during any period when such restrictions remain effective and provide such employer with a copy
of such restrictions prior to the commencement of that employment.

 

    	7

    	 

    

 

10.         Cooperation. Employee
agrees that for a period of seven (7) years following the Separation Date (the “Cooperation Period”), Employee shall
have a continuing duty to fully and promptly cooperate with the Company and its legal counsel by providing any and all requested
information and assistance concerning any legal or business matters that in any way relate to Employee’s actions or responsibilities
as an employee of the Company, or to the period during Employee’s employment with the Company.  Such cooperation shall
include but not be limited to truthfully and in a timely manner participating and consulting concerning facts, responding to questions,
providing pertinent information, providing affidavits and statements, preparing for and attending depositions, and preparing for
and attending trials, hearings and other proceedings.  Such cooperation shall include meeting with representatives of the
Company upon reasonable notice at reasonable times and locations. The Company shall not require Employee to attend or participate
in meetings or consultations, pursuant to this Section 10, in excess of a total of two-thousand (2000) hours over the course of
the Cooperation Period; provided, however, that this Paragraph notwithstanding, Employee may be required by subpoena or other legal
process to testify or otherwise participate in litigation or other proceedings involving the Company to the fullest extent permitted
by law, and such testimony or participation shall not count towards or against that two-thousand hour total. The Company shall
use its reasonable efforts to coordinate with Employee the time and place at which Employee's reasonable cooperation shall be provided
with the goal of minimizing the impact of such reasonable cooperation on any other material pre-scheduled business or professional
commitments that Employee may have. The coordination and communication from the Company to Employee regarding Employee’s
cooperation shall come through the Company’s General Corporate Counsel. The Company shall reimburse Employee for reasonable
out-of-pocket expenses incurred by Employee in compliance with this Section, including any reasonable travel expenses incurred
by Employee in providing such assistance. As part of the consideration provided to Employee under this Agreement, Employee shall
provide cooperation to the Company at no additional cost to the Company.  At no time subsequent to the Separation Date shall
Employee be deemed to be a contractor or employee of the Company.

 

11.         Enforcement.
Employee agrees that the Company has a legitimate business interest to protect justifying the covenants set forth in Sections
8, 9 and 10. Such legitimate business interests include: (i) trade secrets, (ii) valuable Confidential Information that does not
otherwise qualify as a trade secret, (iii) substantial relationships with prospective or existing Customers, (iv) Customer goodwill,
and (v) preservation of the brands with which Employee has operated. For purposes of the Company obtaining specific performance
and/or injunctive relief, Employee acknowledges that irreparable injuries shall be presumed in the event that Employee violates
his covenants herein contained. Because Employee’s services are unique and because Employee has access to Confidential Information,
the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event
of a breach or threatened breach of Sections 8, 9 or 10 of this Agreement, the Company and its successors or assigns may, in addition
to other rights and remedies existing in their favor at law or in equity, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions in Sections 8,
9 or 10 hereof. In addition to the foregoing, if any action should have to be brought by the Company against Employee to enforce
the provisions of this Agreement, Employee recognizes, acknowledges and agrees that the Company may be entitled (without limitation)
to (a) preliminary and permanent injunctive relief restraining Employee from unauthorized disclosure or use of any trade secret
or Confidential Information, in whole or in part, or otherwise violating any of the restrictive covenants set forth herein, and
(b) actual damages. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other legal or equity
remedies available for breach or threatened breach to the provisions of this Agreement, which may otherwise be available. In the
event of an alleged breach or violation by Employee of Sections 8, 9 or 10 of this Agreement, the parties agree that the court,
in its discretion, may toll the Restricted Period during the period of the breach.

 

    	8

    	 

    

 

12.         Claim
for Reinstatement. Employee agrees to waive and abandon any claim to reinstatement with Company.

 

13.         Statements
Regarding Company and/or Employment.

 

A.          For
a period of seven (7) years following the Separation Date, Employee agrees not to do or say anything, directly or indirectly, that
reasonably may be expected to have the effect of criticizing or disparaging Company, any director of Company, any of Company’s
employees, officers or agents, or diminishing or impairing the goodwill and reputation of Company or the products and services
it provides. Employee further agrees not to assert that any current or former employee, agent, director or officer of Company has
acted improperly or unlawfully with respect to Employee or any other person regarding employment.

 

B.          For a period of seven (7) years following
the Separation Date, the Company agrees not to issue, approve or authorize any oral or written public statement by its directors
and/or officers that reasonably may be expected to have the effect of criticizing or disparaging Employee.

 

C.          Notwithstanding the foregoing provisions
of this Section 13, the Parties agree that nothing in this Agreement shall be construed to prohibit the exercise of any rights
by either party that such party may not waive as a matter of law nor does this Agreement prohibit Employee, Company or Company's
officers, employees and/or directors from testifying truthfully in response to a subpoena, inquiry or order by a court or governmental
body with appropriate jurisdiction or as otherwise required by law.

 

14.         Period
for Review and Consideration of Agreement. Employee understands that Employee has been given a period of twenty one (21)
days to review and consider this Agreement before signing it. Employee further understands that Employee may use as much of this
21-day period as Employee wishes prior to signing.

 

15.         Employee’s
Right to Revoke Agreement. Employee may revoke this Agreement within seven (7) days of Employee’s signing
it. Revocation can be made by delivering a written notice of revocation to Sandra Whitehouse, Senior Vice President, Human Resources,
3000 John Deere Road, Toano, Virginia 23168. For this revocation to be effective, written notice must be received by Ms. Whitehouse
no later than the close of business on the seventh day after Employee signs this Agreement. If Employee has not revoked the Agreement,
the eighth (8th) day after Employee signs this Agreement shall be the Effective Date for purposes of this Agreement.

 

16.         Encouragement
to Consult with Attorney. Employee is encouraged to consult with an attorney before signing this Agreement.

 

17.         Execution
of Documents. Each of the parties hereto shall execute any and all further documents and perform any and all further acts reasonably
necessary or useful in carrying out the provisions of this Agreement.

 

    	9

    	 

    

 

18.         Invalid
Provisions. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the validity
or enforceability of any other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable
provision were omitted.

 

19.         Acknowledgment.
Employee acknowledges that Employee has signed this Agreement freely and voluntarily without duress of any kind. Employee has
conferred with an attorney or has knowingly and voluntarily chosen not to confer with an attorney about the Agreement.

 

20.         Entire
Agreement. This Agreement contains the entire understanding of the parties concerning the separation benefits being provided
to Employee herein. This Agreement may not be modified or supplemented except by a subsequent written agreement signed by all parties.

 

21.         Successorship.
It is the intention of the parties that the provisions hereof are binding upon, and inure to the benefit of, the parties, their
employees, affiliates, agents, heirs, estates, successors and assigns forever.

 

22.         Governing
Law. This Agreement shall be governed by the laws of the Commonwealth of Virginia, without regard to its conflict of laws principles.

 

23.         Arbitration
of Disputes. Except as to a request for an injunction or similar equitable relief as provided in Section 11, any controversy
or claim arising out of or relating to this Agreement, or the breach thereof, shall be fully and finally settled by arbitration
administered by the American Arbitration Association in accordance with its National Rules for the Arbitration of Employment Disputes
then in effect (“AAA Rules”), and judgment on the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitration shall be conducted by one arbitrator either mutually agreed upon by the Company and Employee
or chosen in accordance with the AAA Rules. The place of arbitration shall be the City of Richmond, Virginia. Except as may be
required by law, neither a party nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder
without the prior written consent of both parties.

 

EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS
READ THIS AGREEMENT, UNDERSTANDS IT, AND IS VOLUNTARILY ENTERING INTO IT. PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE
OF ALL KNOWN AND UNKNOWN CLAIMS.

 

[SIGNATURE PAGE FOLLOWS]

 

    	10

    	 

    

 

IN WITNESS WHEREOF, the parties have freely
and voluntarily executed this Agreement in a manner so as to be binding on the dates stated below.

 

	 	 	EMPLOYEE
	 	 	 
	July 24, 2015	 	/s/ William K. Schlegel
	Date	 	William K. Schlegel
	 	 	 
	 	 	
        LUMBER LIQUIDATORS SERVICES,

        LLC

	 	 	 	 
	July 21, 2015	 	By: 	/s/ E. Livingston B. Haskell
	Date	 	 	 
	 	 	Its:  	General Corporate Counsel

 

    	11td8k08052015ex101.htm

  

  

  

Exhibit 10.1

TWIN DISC, INCORPORATED

2010 LONG-TERM INCENTIVE COMPENSATION PLAN

(AMENDED AND RESTATED AS OF JULY 31, 2015)

ARTICLE I

PURPOSE

1.1           Purpose.  The purpose of the Twin Disc, Incorporated 2010 Long-Term Incentive Compensation Plan (the "Plan") is to promote the overall financial objectives of Twin Disc, Incorporated (the "Company") and its majority owned subsidiaries ("Subsidiaries") by providing opportunities for the officers and key employees selected to participate in the Plan (each a “Participant”) to acquire Common Stock of the Company ("Common Stock"), and to receive Common Stock or cash bonuses upon attainment of specified financial goals of the Company or its Subsidiaries.  The Plan gives the Compensation and Executive Development Committee of the Company's Board of Directors, or such other committee as the Board of Directors shall designate (the "Committee"), the authority and discretion to award stock options, stock appreciation rights, restricted stock awards, cash-settled restricted stock unit awards, performance stock awards, performance stock unit awards, and/or performance unit awards (collectively, "Awards") to eligible employees of the Company.

ARTICLE II

EFFECTIVE DATE AND TERM

2.1           Effective Date.  The Plan became effective on October 15, 2010 (the “Effective Date), the date that it was approved by a majority of the outstanding shares of Common Stock of the Company.  The Plan was amended and restated effective July 31, 2015 (the “Restatement Date”).  For purposes of the Company’s continuing compliance with Section 162(m) of the Internal Revenue Code (the “Code”), the terms of the amended and restated Plan, including the performance goals hereunder, shall be submitted for approval by the Company’s shareholders at the Company’s annual shareholders’ meeting to be held on October 23, 2015 (or any adjournment thereof).  If the amended and restated Plan is not approved by the Company’s shareholders, the terms of the amended and restated Plan shall remain effective, but any Award made after October 15, 2015 that is intended to qualify as “performance-based” compensation under Code Section 162(m) shall not so qualify.

2.2           Term.  No Award may be granted more than ten years after the Effective Date.

2.3           Post-Term Activity.  Awards granted within the term of the Plan as set forth in Section 2.2, subject to the all other terms and conditions of the Plan and the agreement(s) governing the grant of the Awards, may be exercised, paid out, or modified more than ten years after the adoption of the Plan.  Restrictions on Restricted Stock and Cash-Settled Restricted Stock Units may lapse more than ten (10) years after the Effective Date.

ARTICLE III

STOCK SUBJECT TO PLAN

3.1           Maximum Number.  The maximum number of shares of Common Stock that may be issued pursuant to Awards under the Plan from and after the Effective Date is 650,000, subject to the adjustments provided in Article X, below.  Such shares may be newly-issued shares, authorized but unissued shares or shares reacquired by the Company on the open market or otherwise.  Because Cash-Settled Restricted Stock Units and Performance Stock Units are payable only in cash, the number of such Cash-Settled Restricted Stock Units and Performance Stock Units shall not count against the 650,000 maximum described in this paragraph.

3.2           Availability of Shares for Award.  Shares of Common Stock that are subject to issuance pursuant to an Award may thereafter be subject to a new Award:

	
  

	
(a)

	
if the prior Award to which such shares were subject lapses, expires or terminates without the issuance of such shares; or

	
  

	
(b)

	
shares issued pursuant to an Award are reacquired by the Company pursuant to rights reserved by the Company upon the issuance of such shares; provided, that shares reacquired by the Company may only be subject to new Awards if the Participant received no benefit of ownership from the shares.

Notwithstanding the foregoing, shares of Common Stock that are received by the Company in connection with the exercise of an Award, including shares tendered in payment of a Stock Option’s or an SAR’s exercise price or shares tendered to the Company for the satisfaction of any tax liability or the satisfaction of a tax withholding obligation, may not be made subject to issuance pursuant to a later Award.  In the event that only net shares are issued upon exercise of a Stock Option, the gross number of shares associated with such Award shall be counted against the 650,000 maximum described in Section 3.1.  In no event will shares that are repurchased on the open market using stock option exercise proceeds be added back to the Plan.

ARTICLE IV

ADMINISTRATION

4.1           General Administration.  The Committee shall supervise and administer the Plan.  The Committee shall have discretionary authority to determine all issues with respect to the interpretation of the Plan and Awards granted under the Plan, and with respect to all Plan administration issues.

4.2           Powers of the Committee.  Subject to the terms of the Plan and applicable law (including but not limited to the Sarbanes-Oxley Act of 2002, as amended), the Committee shall have the authority, in its discretion: (i) to prescribe, amend and rescind rules and regulations relating to the Plan; (ii) to select the eligible employees who shall receive Awards under the Plan; (iii) to grant Awards under the Plan and to determine the terms and conditions of such Awards, including without limitation the authority to determine the number of shares subject to issuance with respect to any Award, the vesting or exercise schedule of any Award, and the specific performance goals that shall cause an Award to vest or become payable; (iv) to determine the terms and conditions of the respective agreements (which need not be identical) pursuant to which Awards are granted, and (with the consent of the holder thereof) to modify or amend any Award; (v) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of any Award; (vi) to determine the exercise price per share of options granted under the Plan; (vii) to determine the permissible methods of Award exercise and payment, including cashless exercise arrangements; (viii) to decide whether a Stock Appreciation Right Award shall be settled in cash or Common Stock; (ix) to determine the remaining number of shares of Common Stock available for issuance under the Plan; (x) to appoint and compensate agents, counsel, auditors or other specialists to aid it in the discharge of its duties; (xi) to interpret the Plan and/or any agreement entered into under the Plan; and (xii) to make all other determinations necessary or advisable for the administration of the Plan.

4.3           Committee.  The Committee shall consist of at least three directors, each of whom shall be a "non-employee director" as that term is defined in Rule 16b-3(b)(3) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 (the "Exchange Act").  A majority of the members of the Committee shall constitute a quorum at any meeting thereof (including telephone conference), and all determinations of the Committee shall be made by a majority of the members present, or by a writing by a majority of the members of the entire Committee without notice or meeting.

4.4           Compliance with Code Section 409A.  All Awards under this Plan shall be structured in a manner to comply with the requirements of Code Section 409A, or to be exempt from the application of Code Section 409A.

ARTICLE V

ELIGIBILITY

5.1           Eligibility.  An Award may be granted under the Plan to those key employees (including officers) of the Company or its present or future Subsidiaries who, in the opinion of the Committee, are mainly responsible for the success and future growth of the Company and/or any of its Subsidiaries.

ARTICLE VI

AWARDS

6.1           Types of Awards.  Awards under the Plan may be granted in any one or a combination of the following:

	
  

	
(a)

	
Stock Options.  An Option shall entitle the Participant to receive shares of Common Stock upon exercise of such Option, subject to the Participant's satisfaction in full of any conditions, restrictions or limitations imposed in accordance with the Plan or the agreement between the Company and the Participant governing the award of such Option.  The agreement governing the award of an option shall designate whether such option is intended to be an incentive stock option or a non-qualified stock option, and to the extent that any stock option is not designated as an incentive stock option (or even if so designated does not qualify as an incentive stock option), it shall constitute a non-qualified stock option.  The maximum number of Options that may be granted to any Participant during any fiscal year of the Company is 50,000, subject to the adjustments provided in Article X, below.

	
  

	
(i)

	
Exercise Price.  The exercise price per share of the Common Stock purchasable under an Option shall be determined by the Committee, but shall not be less than the fair market value per share of Common Stock on the date the option is granted (or, if the Option is intended to qualify as an incentive stock option, not less than 110% of the such fair market value if the option is granted to an individual who owns or is deemed to own stock possessing more than 10% of the combined voting power of all classes of stock or the Company, a corporation which is the parent of the Company or and subsidiary of the Company (each as defined in Section 424 of the Code) (a "10% Shareholder")).  For this and all other purposes under the Plan, the fair market value shall be the mean between the highest and lowest quoted selling prices per share of Common Stock on the NASDAQ Stock Market on the date of grant; provided, that if the Common Stock ceases to be listed on the NASDAQ Stock Market, the Committee shall designate an alternative method of determining the fair market value of the Common Stock.

	
  

	
(ii)

	
Option Period.  An Option shall be exercisable at such time and subject to such terms and conditions as shall be determined by the Committee.  An option that is intended to qualify as an incentive stock option shall not be exercisable more than ten years after the date it is granted (or five years after the date it is granted, if granted to a 10% Shareholder).

	
  

	
(iii)

	
No Repricings or Repurchases of Underwater Options Permitted.  Except in connection with a transaction or event described in Article X, in no event shall:

	
  

	
(A)

	
any outstanding Option be cancelled for the purpose of reissuing the Option to the Participant with a lower exercise price;

	
  

	
(B)

	
the exercise price of an outstanding Option be reduced; or

	
  

	
(C)

	
any outstanding Option be exchanged for cash, securities, or other Awards where the exercise price of such Option is greater than the then-current fair market value of the Company’s Common Stock;

	
  

	
without the approval of the Company’s shareholders.

	
  

	
(b)

	
Stock Appreciation Rights.  A Stock Appreciation Right shall entitle the Participant to surrender to the Company the Stock Appreciation Right and to be paid therefor the amount described in Section 6.1(b)(i)(3) or 6.1(b)(ii) below, subject to the Participant's satisfaction in full of any conditions, restrictions or limitations imposed in accordance with the Plan or the agreement between the Company and the Participant governing the award of such Stock Appreciation Right.  Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option under this Plan ("Tandem SAR's"), or may be granted on a stand-alone basis ("Stand Alone SAR's").  The maximum number of Stock Appreciation Rights that may be granted to any Participant during any fiscal year of the Company is 50,000, subject to the adjustments provided in Article X, below.

(i)           Tandem SAR's.

	
  

	
(1)

	
Grant.  Tandem SAR's may be granted in connection with non-qualified or incentive stock options, but may only be granted at the time of grant of such associated Options.

	
  

	
(2)

	
Term.  A Tandem SAR shall have the same term as the Stock Option to which it relates and shall be exercisable only at such time or times and to the extent the related Stock Option would be exercisable.

	
  

	
(3)

	
Exercise.  Upon the exercise of a Tandem SAR, the Participant shall be entitled to receive an amount in cash equal in value to the excess of the fair market value per share of Common Stock on the date of exercise over the exercise price per share of Common Stock as specified in the agreement governing the Tandem SAR, multiplied by the number of shares in respect to which the Tandem SAR is exercised.  The exercise of Tandem SAR's shall require the cancellation of a corresponding number of Stock Options to which the Tandem SAR's relate, and the exercise of Stock Options shall require the cancellation of a corresponding number of Tandem SAR's to which the Stock Options relate.

 

 

	
  

	
(4)

	
Expiration or Termination.  A Tandem SAR shall expire or terminate at such time as the Stock Option to which it relates expires or terminates, unless otherwise provided in the agreement governing the grant of the Tandem SAR.

	
  

	
(ii)

	
Stand Alone SAR's.  A Stand Alone SAR may be granted at such time and for such term as the Committee shall determine, and shall be exercisable at such time as specified in the agreement governing the grant of the Stand Alone SAR.  Upon exercise of a Stand Alone SAR, the Participant shall be entitled to receive, in cash, Common Stock, or a combination of both (as determined by the Committee), an amount equal to the fair market value per share of Common Stock over an exercise price specified in the agreement governing the grant of the Stand Alone SAR (which exercise price shall not be less than the fair market value per share of Common Stock on the date the Stand Alone SAR is awarded), multiplied by the number of shares in respect to which the Stand Alone SAR is exercised.

	
  

	
(iii)

	
No Repricings or Repurchases of Underwater SARs Permitted.  Except in connection with a transaction or event described in Article X, in no event shall:

	
  

	
(A)

	
any outstanding SAR be cancelled for the purpose of reissuing the SAR to the Participant with a lower exercise price;

	
  

	
(B)

	
the exercise price of an outstanding SAR be reduced; or

	
  

	
(C)

	
any outstanding SAR be exchanged for cash, securities, or other Awards where the exercise price of such SAR is greater than the then-current fair market value of the Company’s Common Stock ;

	
  

	
without the approval of the Company’s shareholders.

	
  

	
(c)

	
Restricted Stock Awards.  Restricted Stock consists of shares of Common Stock that are transferred or sold to the Participant, but which carry restrictions such as a prohibition against disposition or an option to repurchase in the event of employment termination.  The minimum restriction on shares of Restricted Stock shall be one year of continued service by the Participant, although the Committee may impose longer service requirements and/or additional restrictions.  Until such restrictions lapse, the Participant may not sell, assign, pledge or otherwise transfer, whether voluntarily or involuntarily, the Restricted Stock.  A sale of Restricted Stock to a Participant shall be at such price as the Committee determines, which price may be substantially below the fair market value of the Common Stock at the date of grant.

	
  

	
(i)

	
Lapse of Restrictions.  The Committee shall establish the conditions under which the restrictions applicable to shares of Restricted Stock shall lapse. Lapse of the restrictions may be conditioned upon continued employment of the Participant for a specified period of time, satisfaction of performance goals of the Company or a Subsidiary, or any other factors as the Committee deems appropriate.

	
  

	
(ii)

	
Rights of Holder of Restricted Stock.  Except for the restrictions on transfer and/or the Company's option to repurchase the Restricted Shares, the Participant shall have, with respect to shares of Restricted Stock, all of the rights of a shareholder of Common Stock, including, if applicable, the right to vote the shares and the right to receive any cash or stock dividends.  Unless otherwise determined by the Committee and subject to the terms of the Plan, cash or stock dividends on shares of Restricted Stock shall be automatically deferred, and shall be paid to the Participant as soon as practicable after the restrictions on the shares of Restricted Stock to which such dividends relate lapse (but no later than the 15th day of the third month of calendar year after the calendar year in which such restrictions lapse).  Cash dividends shall be paid with an appropriate rate of interest, as determined by the Committee.

	
  

	
(iii)

	
Certificates.  The Company may require that the certificates evidencing shares of Restricted Stock be held by the Company until the restrictions thereon have lapsed.  If and when such restrictions lapse, certificates for such shares shall be delivered to the Participant.  Such shares may have further restrictions on transfer if they have not been registered under the Exchange Act, but shall no longer be subject to a substantial risk of forfeiture.

	
  

	
(d)

	
Cash-Settled Restricted Stock Unit Awards.  Cash-Settled Restricted Stock Units consist of the right to receive a cash payment upon the lapse of a substantial risk of forfeiture.  The minimum restriction on Cash-Settled Restricted Stock Units shall be one year of continued service by the Participant, although the Committee may impose longer service requirements and/or additional restrictions.  The cash payment for each Cash-Settled Restricted Stock Unit that vests upon the lapse of the substantial risk of forfeiture shall be equal to the fair market value of a share of Common Stock as of the date the substantial risk of forfeiture lapses.

	
  

	
(i)

	
Lapse of Restrictions.  The Committee shall establish the conditions under which the restrictions applicable to Cash-Settled Restricted Stock Units shall lapse. Lapse of the restrictions may be conditioned upon continued employment of the Participant for a specified period of time, satisfaction of performance goals of the Company or a Subsidiary, or any other factors as the Committee deems appropriate.

	
  

	
(ii)

	
Timing of Payments.  Payments of amounts due under Cash-Settled Restricted Stock Units shall be made as soon as practicable after the applicable restrictions lapse, but no later than the 15th day of the third month of the calendar year after the calendar year in which such restrictions lapse.

	
  

	
(e)

	
Performance Stock Awards.  Performance Stock Awards are artificial shares that are contingently granted to a Participant, which entitle the Participant to actual shares of Common Stock, if predetermined objectives are met.  Because the payment of a Performance Stock Award is based on a predetermined number of shares of Common Stock, the value of the award may increase or decrease depending on the fair market value of the Common Stock after the date of grant. The maximum number of shares of Performance Stock that may be granted to any Participant during any fiscal year of the Company is 100,000, subject to the adjustments provided in Article X, below.

	
  

	
(i)

	
Performance Goals.  The Committee shall establish one or more performance goals with respect to each grant of a Performance Stock Award. The performance goals may be tailored to meet specific objectives.  The performance criteria upon which payment or vesting of a Performance Stock Award intended to qualify for the exemption under Code Section 162(m) will be based upon one or more of the following, whether in absolute, relative or comparative terms, as determined by the Committee:  gross revenues, sales, net asset turnover, earnings per share, cash flow, cash flow from operations, return on investment in excess of cost of capital (i.e., net operating profit after taxes minus the Company’s capital charge), net operating profit after taxes as a percentage of the Company’s capital charge, operating profit or income, EBITDA as a percent of sales, debt to EBITDA ratios (including but not limited to the ratio of total funded debt to four quarter EBITDA, as defined in loan covenants of the Company), net income, operating income, net income margin, return on net assets, return on total sales, return on common equity, return on total capital, or total shareholder return.  The Committee may establish targets under one or more of the foregoing performance goals based on single year or multi year periods.  In the case of Performance Stock Awards that are not intended to qualify for the exemption under Code Section 162(m), the Committee shall designate performance criteria from among the foregoing or such other business criteria as it shall determine in its sole discretion.  In addition, performance goals may relate to attainment of specified objectives by the Participant or by the Company or an affiliate, including a division or a department of the Company or an affiliate, or upon any other factors or criteria as the Committee shall determine.

	
  

	
(ii)

	
Certification of Satisfaction of Performance Goals.  Following the completion of a period for which performance goals have been established, the Committee shall certify the extent to which such goals have been achieved.  Such certification shall occur, and any applicable transfer of shares of Common Stock shall be made, as soon as practicable following the completion of the performance period, but no later than the 15th day of the third month of the calendar year after the calendar year in which such period ends.

	
  

	
(f)

	
Performance Stock Unit Awards.  A Performance Stock Unit shall entitle the Participant to receive a cash payment equal to the fair market value of a share of Common Stock of the Company as of the Vesting Date, if predetermined objectives are met.  The “Vesting Date” shall be the last day of the performance period for which a performance goal is established.  The maximum number of Performance Stock Units that may be granted to any Participant during any fiscal year of the Company is 200,000, subject to the adjustments provided in Article X, below.

	
  

	
(i)

	
Performance Goals.  The Committee shall establish one or more performance goals with respect to each grant of a Performance Stock Unit.  The performance goals may be tailored to meet specific objectives. The performance criteria upon which payment or vesting of a Performance Stock Unit intended to qualify for the exemption under Code Section 162(m) will be based upon one or more of the following, whether in absolute, relative or comparative terms, as determined by the Committee:  gross revenues, sales, net asset turnover, earnings per share, cash flow, cash flow from operations, return on investment in excess of cost of capital (i.e., net operating profit after taxes minus the Company’s capital charge), net operating profit after taxes as a percentage of the Company’s capital charge, operating profit or income, EBITDA as a percent of sales, debt to EBITDA ratios (including but not limited to the ratio of total funded debt to four quarter EBITDA, as defined in loan covenants of the Company), net income, operating income, net income margin, return on net assets, return on total sales, return on common equity, return on total capital, or total shareholder return.  The Committee may establish targets under one or more of the foregoing performance goals based on single year or multi year periods.  In the case of Performance Stock Units that are not intended to qualify for the exemption under Code Section 162(m), the Committee shall designate performance criteria from among the foregoing or such other business criteria as it shall determine in its sole discretion.  In addition, performance goals may relate to attainment of specified objectives by the Participant or by the Company or an affiliate, including a division or a department of the Company or an affiliate, or upon any other factors or criteria as the Committee shall determine.

	
  

	
(ii)

	
Certification of Satisfaction of Performance Goals.  Following the completion of a period for which performance goals have been established, the Committee shall certify the extent to which such goals have been achieved. Such certification shall occur, and any applicable payments shall be made, as soon as practicable following the completion of the performance period, but no later than the 15th day of the third month of the calendar year after the calendar year in which such period ends.

	
  

	
(g)

	
Performance Unit Awards.  Performance Unit Awards entitle the participant to cash payments (or, at the election of the Committee, their equivalent in shares of Common Stock), if predetermined objectives are met.  Because the payment of a Performance Unit Award is based on a predetermined cash amount, the value of each unit remains constant and does not fluctuate with changes in the market value of the Common Stock.  The maximum amount that may be paid to any Participant in any fiscal year of the Company pursuant to an award of Performance Units shall be $500,000.00.

	
  

	
(i)

	
Performance Goals.  The Committee shall establish one or more performance goals with respect to each grant of a Performance Unit Award. The performance goals may be tailored to meet specific objectives.  The performance criteria upon which payment or vesting of a Performance Unit Award intended to qualify for the exemption under Code Section 162(m) will be based upon one or more of the following, whether in absolute, relative or comparative terms, as determined by the Committee:  gross revenues, sales, net asset turnover, earnings per share, cash flow, cash flow from operations, return on investment in excess of cost of capital (i.e., net operating profit after taxes minus the Company’s capital charge), net operating profit after taxes as a percentage of the Company’s capital charge, operating profit or income, EBITDA as a percent of sales, debt to EBITDA ratios (including but not limited to the ratio of total funded debt to four quarter EBITDA, as defined in loan covenants of the Company), net income, operating income, net income margin, return on net assets, return on total sales, return on common equity, return on total capital, or total shareholder return.  The Committee may establish targets under one or more of the foregoing performance goals based on single year or multi year periods.  In the case of Performance Unit Awards that are not intended to qualify for the exemption under Code Section 162(m), the Committee shall designate performance criteria from among the foregoing or such other business criteria as it shall determine in its sole discretion.  In addition, performance goals may relate to attainment of specified objectives by the participant or by the Company or an affiliate, including a division or a department of the Company or an affiliate, or upon any other factors or criteria as the Committee shall determine.

	
  

	
(ii)

	
Certification of Satisfaction of Performance Goals.  Following the completion of a period for which performance goals have been established, the Committee shall certify the extent to which such goals have been achieved. Such certification shall occur, and any applicable payments shall be made, as soon as practicable following the completion of the performance period, but no later than the 15th day of the third month of the calendar year after the calendar year in which such period ends.

6.2           Written Agreements.  Each Award granted under the Plan shall be evidenced by a written agreement, the form of which shall be consistent with the terms and conditions of the Plan and applicable law, which shall be signed by an officer of the Company and the Participant.  Until such agreement has been entered into between the Company and the Participant, the Participant shall have no rights in any Award approved by the Committee.

6.3           Application of Code Section 162(m).  Code Section 162(m) prohibits a publicly-held corporation from taking a deduction for remuneration paid to certain employees in excess of $1,000,000.  Code Section 162(m)(4)(C) provides that remuneration payable solely on account of the attainment of one or more performance goals is not counted toward this limitation, but only if certain conditions are satisfied.  To the extent that any Award is intended to satisfy the exception contained in Code Section 162(m)(4)(C), the following shall apply to such Award:

	
  

	
(a)

	
Determination of Performance Goals.  The performance goals pursuant to which an Award is made must be determined by a committee of the Board comprised solely of two or more "outside directors," as that term is defined under Code Section 162 and the regulations thereunder (the "Outside Directors Committee").  The Committee may serve as the Outside Directors Committee if it meets these requirements.  The performance goals established by the Outside Directors Committee must be objective, and remuneration intended to be excepted under Code Section 162(m)(4)(C) must be contingent upon the attainment of the performance goals.  Performance objectives may be established on a Company-wide basis or with respect to one or more business units, divisions or departments of the Company or subsidiaries; and either in absolute terms, relative to the performance of one or more similarly situated companies, or relative to the performance of an index covering a peer group of companies. When establishing performance objectives for a performance period, the Outside Directors Committee may exclude any or all "extraordinary items" as determined under U.S. generally accepted accounting principals including, without limitation, the charges or costs associated with restructurings of the Company, discontinued operations, other unusual or non-recurring items, and the cumulative effects of accounting changes, and as identified in the Company's financial statements and notes thereto or management's discussion and analysis of financial condition and results of operations contained in the Company's most recent annual report filed with the U.S. Securities and Exchange Commission pursuant to the Exchange Act; provided, that the Outside Directors Committee shall have no discretion with respect to any Award intended to qualify as "performance-based" compensation under Code Section 162(m) if the exercise of such discretion or the ability to exercise such discretion would cause such Award to fail to qualify as "performance-based" compensation under Code Section 162(m).  Without limiting the generality of the foregoing proviso:

	
  

	
(i)

	
neither the Outside Directors Committee nor the Board may exercise discretion to increase any amount payable with respect to any Award intended to qualify as “performance-based” compensation under Code Section 162(m); and

	
  

	
(ii)

	
if a change is made to accelerate the payment of such an Award after the attainment of the performance goal(s), the amount of the payment shall be reduced to the extent necessary to comply with Treasury Regulation Section 1.162-27(e)(2)(iii) to reasonably reflect the time value of money.

	
  

	
(b)

	
Approval of Performance Goals.  The material terms under which the remuneration is to be paid, including the performance goals, are disclosed to shareholders and approved by a majority of the vote in a separate shareholder vote before the payment of such remuneration.

	
  

	
(c)

	
Certification of Satisfaction of Performance Goals.  The Outside Directors Committee must certify that the performance goals and any other material terms and conditions were in fact satisfied.

	
  

	
(d)

	
Satisfaction of Code Section 162(m).  In all other respects, the requirements of Code Section 162(m)(4)(C) and the regulations thereunder must be satisfied.

ARTICLE VII

PAYMENT FOR AWARDS

7.1           General.  Payments required, if any, upon a Participant's exercise of an Award under the Plan may be made in the form of: (i) cash; (ii) Company stock; (iii) a combination of cash and Company stock; or (iv) such other forms or means that the Committee shall determine in its discretion and in such manner as is consistent with the Plan's purpose and the Code, the Exchange Act, or other applicable laws or regulations.

ARTICLE VIII

EFFECT OF TERMINATION OF EMPLOYMENT ON BENEFITS

8.1           Termination by Reason of Death.  Unless otherwise provided in an agreement governing the grant of an Award or as determined by the Committee, if a Participant incurs termination of employment due to death:

	
  

	
(a)

	
Any unexpired and unexercised Options and/or Stock Appreciation Rights held by such Participant shall thereafter be fully exercisable (whether or not such Options or Stock Appreciation Rights were fully vested at the time of the Participant's death) by the deceased Participant’s estate or by a person who acquired the right to exercise the Option or Stock Appreciation Right by bequest or inheritance for a period of one year immediately following the date of death, or until the expiration of the Option or Stock Appreciation Right if shorter.

	
  

	
(b)

	
Any restrictions on shares of Restricted Stock shall lapse and the Participant’s designated beneficiary (or in the absence of such beneficiary, the Participant’s estate) shall be fully vested in the Restricted Stock.

	
  

	
(c)

	
Any restrictions on Cash-Settled Restricted Stock Units shall lapse, and the Participant’s designated beneficiary (or in the absence of such beneficiary, the Participant’s estate) shall receive a cash payment for each Cash-Settled Restricted Stock Unit equal to the fair market value per share of Common Stock on the NASDAQ Stock Market as of the date of the Participant’s death.

	
  

	
(d)

	
The Participant’s designated beneficiary (or in the absence of such beneficiary, the Participant’s estate) shall receive a prorated payout of any Performance Stock Awards, Performance Stock Unit Awards and Performance Unit Awards.  The prorated payout shall be based upon the length of time that the Participant held such Awards prior to his or her death relative to the period for which performance is measured, and shall be determined as if the maximum performance objective had been attained.  Such payment shall be made as soon as practicable following the Participant’s death, but no later than the 15th day of the third month of the calendar year after the calendar year in which the Participant’s death occurs.

8.2           Termination by Reason of Disability.  Unless otherwise provided in an agreement governing the grant of an Award or as determined by the Committee, if a Participant incurs termination of employment due to disability:

	
  

	
(a)

	
Any unexpired and unexercised Options and/or Stock Appreciation Rights held by such Participant shall thereafter be fully exercisable (whether or not such Options or Stock Appreciation Rights were fully vested at the time the Participant became disabled) for a period of three years (except for incentive stock options, in which case the period shall be one year) immediately following the date of such termination of employment, or until the expiration of the Option or Stock Appreciation Right if shorter.  The Participant's death at any time following such termination due to disability shall not affect the foregoing.  In the event of termination due to disability, if an incentive stock option is exercised more than one year after such termination of employment (or such other time period as may apply under Section 422 of the Code), such Option shall thereafter be treated as a non-qualified stock option.

	
  

	
(b)

	
Any restrictions on shares of Restricted Stock shall lapse and the Participant shall be fully vested in the Restricted Stock.

	
  

	
(c)

	
Any restrictions on Cash-Settled Restricted Stock Units shall lapse, and the Participant shall receive a cash payment for each Cash-Settled Restricted Stock Unit equal to the fair market value per share of Common Stock on the NASDAQ Stock Market as of the date of the Participant’s termination of employment.

	
  

	
(d)

	
The Participant shall receive a prorated payout of any Performance Stock Awards, Performance Stock Unit Awards and Performance Unit Awards.  The prorated payout shall be based upon the length of time that the Participant held such Awards prior to his or her termination of employment due to disability relative to the period for which performance is measured, and shall be determined as if the maximum performance objective had been attained. Such payment shall be made as soon as practicable following the Participant’s termination of employment, but no later than the 15th day of the third month of the calendar year after the calendar year in which the Participant terminates employment.

Unless otherwise defined in the agreement governing the grant of an Award, "disability" shall mean a mental or physical illness or injury that entitles the Participant to receive benefits under the long term disability plan of the Company or a Subsidiary, or if the Participant is not covered by such a plan, a mental or physical illness that renders a Participant totally and permanently incapable of performing the Participant's duties for the Company or a Subsidiary.  Notwithstanding the foregoing, a "disability" shall not qualify under the Plan if it is the result of: (i) a willfully self-inflicted injury or willfully self-induced sickness; or (ii) an injury or disease contracted, suffered or incurred, while participating in a criminal offense.  The determination of disability shall be made by the Committee.  The determination of disability for purposes of the Plan shall not be construed as an admission of disability for any other purpose.

8.3           Voluntary Termination Before Retirement or Termination for Cause.  Unless otherwise provided in an agreement governing the grant of an Award or as determined by the Committee, if a Participant voluntarily terminates his or her employment before retirement or is terminated for cause:

	
  

	
(a)

	
Any unexpired and unexercised Options and/or Stock Appreciation Rights held by such Participant shall immediately terminate.  The death or disability of the Participant after such a termination of employment shall not renew the exercisability of any Option or Stock Appreciation Right.

	
  

	
(b)

	
All shares of Restricted Stock still subject to restriction shall be forfeited by the Participant, except the Committee shall have the discretion in whole or in part to waive any or all remaining restrictions with respect to any or all of such Participant's shares of Restricted Stock.

	
  

	
(c)

	
All Cash-Settled Restricted Stock Units still subject to restriction shall be forfeited by the Participant, except the Committee shall have the discretion in whole or in part to waive any or all remaining restrictions with respect to any or all of such Participant's Cash-Settled Restricted Stock Units.

	
  

	
(d)

	
All Performance Stock Awards, Performance Stock Unit Awards and Performance Unit Awards shall be forfeited by the Participant to the Company.

Unless otherwise defined in the agreement governing the grant of an Award, "termination for cause" shall mean termination because of (i) any act or failure to act deemed to constitute cause under the Company's established practices policies or guidelines applicable to the Participant or (ii) the Participant's act or omission constituting gross misconduct with respect to the Company or a Subsidiary in any material respect.

8.4           Other Termination.  Unless otherwise provided in an agreement governing the grant of an Award or as determined by the Committee, if a Participant's employment terminates for any reason (including retirement) other than the reasons listed in Section 8.1 through 8.3 above:

	
  

	
(a)

	
Any unexpired and unexercised Options and/or Stock Appreciation Rights held by such Participant shall thereupon terminate, except that any such Option or Stock Appreciation Right, to the extent vested on the date of the Participant's termination, may be exercised by the Participant for a period of three years (except for incentive stock options, in which case the period shall be (3) three months) immediately following the date of such termination of employment, or until the expiration of the Option or Stock Appreciation Right if shorter.  The death or disability of the Participant after such a termination of employment shall not extend the time permitted to exercise an Option or Stock Appreciation Right.

	
  

	
(b)

	
All shares of Restricted Stock still subject to restriction shall be forfeited by the Participant, except the Committee shall have the discretion in whole or in part to waive any or all remaining restrictions with respect to any or all of such Participant's shares of Restricted Stock.

	
  

	
(c)

	
All Cash-Settled Restricted Stock Units still subject to restriction shall be forfeited by the Participant, except the Committee shall have the discretion in whole or in part to waive any or all remaining restrictions with respect to any or all of such Participant's Cash-Settled Restricted Stock Units.

	
  

	
(d)

	
The Participant shall receive a prorated payout of any Performance Stock Awards, Performance Stock Unit Awards and Performance Unit Awards if and when the performance goals are achieved.  The prorated payout shall be based upon the length of time that the Participant held such Awards prior to his or her termination of employment relative to the period for which performance is measured, and the extent to which the performance goals are achieved as certified by the Committee.  Such payment shall be made as soon as practicable following the completion of the of the period for which performance goals have been established, but no later than the 15th day of the third month of the calendar year after the calendar year in which such period ends.

	
  

	
.

Unless otherwise defined in the agreement governing the grant of an Award, "retirement" shall mean the Participant's termination of employment after attaining either age 65, or age 60 with the accrual of 10 years of service.

ARTICLE IX

NONTRANSFERABILITY

9.1           General.  Unless otherwise provided in an agreement governing the grant of an Award, a Participant's rights shall be exercisable during the Participant's lifetime only by the Participant, and no Award may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated; provided, that Options and Stock Appreciation Rights are transferable by will or pursuant to the laws of descent and distribution.

ARTICLE X

ADJUSTMENT PROVISIONS

10.1           Changes in Capitalization.  If the Company shall at any time change the number of issued shares of Common Stock without new consideration to the Company (by stock dividends, stock splits, split-up, spin-off, or similar transactions):

	
  

	
(a)

	
the total number of shares reserved for issuance under this Plan, the number of shares covered by or subject to each outstanding Award, the number of outstanding Cash-Settled Restricted Stock Units and the number of outstanding Performance Stock Units, shall be adjusted so that the aggregate consideration payable to the Company, if any, and the value of each such Award shall not be changed; and

	
  

	
(b)

	
the maximum number of Options, Stock Appreciation Rights, Performance Stock Units and shares of Performance Stock that may be granted to any Participant in any fiscal year of the Company shall be proportionately adjusted to reflect the increase or decrease in the issued shared of Common Stock.

10.2           Reorganization, Sale, etc..  Awards granted hereunder may also contain provisions for their continuation, acceleration, immediate vesting, or for other equitable adjustments after changes in the Common Stock resulting from reorganization, sale, merger, consolidation, dissolution, liquidation or similar circumstances.

10.3           Substitutions and Assumptions.  If the Company acquires an entity which has issued and outstanding stock options or other rights, the Company may substitute stock options or rights for options or rights of such entity, including options or other rights to acquire stock at less than 100% of the fair market price of the stock at grant.  The number and kind of such stock options and other rights shall be determined by the Committee and the total number of shares reserved for issuance under this Plan shall be appropriately adjusted consistent with such determination and in such manner as the Committee may deem equitable to prevent substantial dilution or enlargement of the Awards granted to, or available for, present or future Participants of this Plan.  The number of shares reserved for issuance pursuant to Article III may be increased by the corresponding number of options or other benefits assumed, and, in the case of a substitution, by the net increase in the number of shares subject to options or other benefits before and after the substitution.

ARTICLE XI

AMENDMENT AND TERMINATION OF PLAN AND CLAWBACKS OF AWARDS

11.1           Amendment and Termination of Plan.  The Board, without further approval of the Company's shareholders, may amend the Plan from time to time or terminate the Plan at any time, provided that:

	
  

	
(a)

	
no action authorized by this Article shall reduce the amount of any existing Award or change the terms and conditions thereof without the Participant's consent; and

	
  

	
(b)

	
no amendment of the Plan shall, without the approval of the Company's shareholders, (i) increase the total number of shares of Common Stock that may be issued under the Plan or increase the amount or type of Awards that may be granted under the Plan; (ii) change the minimum purchase price, if any, of shares of Common Stock that may be made subject to Awards under the Plan; (iii) modify the requirements as to eligibility for an Award under the Plan; (iv) extend the term of the Plan; or (v) constitute a material revision of the Plan under the listing standards of the NASDAQ Stock Market (or such other listing standards then applicable to the Company).

11.2           Clawback of Awards.  To the extent required by applicable law or the listing standards of the NASDAQ Stock Market (or such other listing standards then applicable to the Company), including but not limited to Section 304 of the Sarbanes-Oxley Act of 2002, Awards and amounts paid or payable with respect to Awards shall be subject to clawback as determined by the Committee, which clawback may include forfeitures, repurchase, reimbursement and/or recoupment of Awards and amounts paid or payable pursuant to or with respect to Awards, in each instance in accordance with applicable law or listing standards.  All Awards granted under this Plan, any property (including shares of Common Stock) received in connection with any exercise or vesting of any Awards, and any proceeds received from the disposition of any such property, shall be subject to such applicable law or listing standards, as well as any clawback policy adopted, and amended from time to time, by the Committee.  The Committee shall have discretion with respect to any clawback to determine whether the Company shall effect such recovery:

	
  

	
(a)

	
by seeking repayment from the Participant;

	
  

	
(b)

	
by reducing amounts that would otherwise be payable to the Participant under any compensatory plan, program or arrangement maintained by the Company or any subsidiary or affiliate of the Company (subject to applicable law and the terms and conditions of the applicable plan, program or arrangement);

	
  

	
(c)

	
by withholding payment of future increases in compensation (including the payment of any discretionary bonus amounts) or grants of compensatory awards that would have otherwise been made in accordance with the Company’s applicable compensation practices; or

	
  

	
(d)

	
by any combination of the above.

ARTICLE XII

MISCELLANEOUS

12.1           Unfunded Status of Plan.  It is intended that the Plan constitute an "unfunded" plan for incentive and deferred compensation.  The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or make payments; provides, however, that unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the "unfunded" status of the Plan.

12.2           Withholding Taxes.  No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to any Award or with respect to any exercise of any Option or Stock Appreciation Right granted under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the Company or other entity identified by the Committee regarding the payment of any federal, state, local or foreign taxes of any kind required by law to be withheld.  Such withholding obligations may be settled with Common Stock, including Common Stock that is part of the Award or that is received upon the exercise of the Award that gives rise to the withholding requirement.  The obligations of the Company under the Plan shall be conditional upon such payment or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant.  If the Participant disposes of shares of Common Stock acquired pursuant to an incentive stock option in any transaction considered to be a disqualifying transaction under the Code, the Participant must give written notice of such transfer and the Company shall have the right to deduct any taxes required by law to be withheld from any amounts otherwise payable to the Participant.

12.3           No Guaranty of Employment.  Nothing herein shall be construed to constitute a contract of employment between the Company or Subsidiary and the Participant.  Except as may be provided in a written contract, the Company or Subsidiary and each of the Participants continue to have the right to terminate the employment relationship at any time for any reason.

12.4           Controlling Law.  The Plan and all Awards made and actions taken hereunder shall be governed by and construed in accordance with the laws of the State of Wisconsin (other than its law respecting choice of law).  The Plan shall be construed to comply with all applicable law and to avoid liability to the Company or a Subsidiary, including, without limitation, liability under Section 16(b) of the Exchange Act.

12.5           Headings.  The headings contained in the Plan are for reference purposes only, and shall not affect the meaning or interpretation of the Plan.

12.6           Severability.  If any provision of the Plan shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereby, and this Plan shall be construed as if such invalid or unenforceable provision were omitted.

12.7           Successors and Assigns.  This Plan shall inure to the benefit of and be binding upon each successor and assign of the Company.  All obligations imposed upon a Participant, and all rights granted to the Company hereunder, shall be binding upon the Participant's heirs, legal representatives and successors.

12.8           Entire Agreement.  This Plan and any agreements governing the grant of Awards hereunder to any Participant constitute the entire agreement with respect to the subject matter hereof with respect to such Participant, provided that in the event of any inconsistency between the Plan and any such agreement(s), the terms and conditions of the Plan shall control.

 

25602569_3.doc

	
19

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00248-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00248-of-00352.parquet"}]]